Bank of Ireland rules out US legal moves on bonds
Bank of Ireland has told US investors they would have very little chance of ever taking successful legal actions against the company in the US courts.
The bank spells out the legal position in a warning to bond investors, after getting legal advise on the issues from Arthur Cox. The bank has issued a €300m bond guaranteed by the Irish Government in recent days.
But it has informed investors in the US that the Irish Government's assets are mainly in Ireland, making enforcing judgments in the US courts extremely remote.
The bank is Irish, and most of its directors are resident outside the US and so are their assets, the bank explains.
"As a result, it may be difficult for investors to effect service of process within the United States upon the bank or these persons,'' the bank makes clear.
Referring to the Government, which is guaranteeing bonds under the Eligible Liabilities Guarantee (ELG) scheme, the bank states: "The guarantor is outside the US. A substantial portion of the guarantor's assets are located outside the US. As a result, it may be difficult for investors to effect service of process within the US upon the guarantor or to enforce against the guarantor in US courts judgments obtained in US courts.''
Arthur Cox has told the bank that judgments made against the bank, based solely on federal securities laws, may not be enforceable in Irish courts.
"The bank has been advised by Arthur Cox that there is doubt as to enforceability in the Irish courts . . . of liabilities predicated solely upon the federal securities laws of the United States.''
Awards of punitive damages in actions brought in the US or elsewhere may not be enforceable in Ireland, the bank adds.
"The enforceability of any judgment in Ireland will depend on the particular facts of the case in effect at the time,'' it explains.
The issue of where disputes about bonds end up is becoming more important after the Government signalled that it will not be paying full face value to holders of subordinated debt in Anglo Irish and Irish Nationwide.
Finance Minister Brian Lenihan has made it clear there are no plans to apply "haircuts'' to bonds at other banks, although voluntary arrangements have not been ruled out.
A group has been set up by UK investors to fight the Government's plans on subordinated Anglo and Irish Nationwide debt. These investors believe they have a case -- that if subordinated investors are to have haircuts applied to them the same should happen to depositors. But the Government is not prepared to do this.