Portuguese swaps case loss sets precedent

Author: Lizzie Meager | Published: 31 Mar 2016
Tram lines in Lisbon, Portugal

Banco Santander Totta's (BST) English court victory regarding its derivatives contracts is expected to set a precedent - and increase certainty - over local governing law in such disputes.

BST, which is the Portuguese arm of parent company Santander, won the High Court battle with four state-owned Portuguese transport companies on March 7.

The companies entered into nine interest rate swaps with BST between 2006 and 2007. According to a source close to the bank, the swaps performed well until 2009. When interest rates started to fall below the pre-agreed floor during the crisis – and subsequently stayed there – payments rose sharply.

“I can’t say I’m surprised at the result,” said the source. “The transport companies were happy with the contracts when they were producing good results. If there was a problem, they should have said so earlier.”

When the claim was initially brought by BST, no...