Overview

In this briefing, A&O looks at the case of Belmont Park Investments v BNY Corporate Trustee Services and Lehman Brothers Special Financing [2011].

In this case, the UK Supreme Court concluded that the anti-deprivation rule did not apply to invalidate the contractual 'waterfall' provisions in a Lehman structured finance transaction which operated to make the priority of certain creditor payment rights conditional upon whether or not an event of default had occurred with respect to the relevant creditor - the so-called 'flip clause'.

While the Supreme Court unanimously dismissed the appeal, the Court did not closely follow the reasoning applied in the lower court judgments on the issues and placed significant emphasis on its view that the arrangement in question was a bona fide commercial transaction and that its main purposes did not include an intention to evade insolvency law.

To read more analysis from A&O, click 'View Briefing'.