The Libyan Investment Authority High Court Actions

September 1, 2016

The Libyan Investment Authority (“LIA”) is the sovereign wealth fund of Libya. The purpose of the LIA is to create a diversified source of wealth for Libya’s future generations by investing its oil & gas revenues internationally with the sustainable, long-term view. The LIA’s accountability, is ultimately to the Libyan people.

Recently, the LIA have issued cases at the High Court in London against leading bank Goldman Sachs and Société Générale.  The Goldman Sachs case is currently at trial.  The Société Générale case is likely to be at trial later this year or early next year.

Goldman Sachs is one of the largest and oldest Banks in the US. It is viewed as the premier bank for the most exclusive and rich customers.  It suffered during the 2007/08 banking collapse, but has managed to pull through in a slightly altered form.  It may be viewed as the Grandfather of banking in the US.  It was the LIA’s principal investment bank.

Société Générale is a French bank that is situated in each of the major financial districts. It is involved in International Retail Banking, Financial services, Corporate and Investment Banking, Private Banking, Asset Management and Securities Services. Société Générale is France’s third largest bank by total assets, sixth largest in Europe or seventeenth by market capitalization.

The LIA is suing big banks Goldman Sachs and Société Générale after alleging that the banks had ‘intimidated and bribed’ them into making trades between 2007- 2009 causing them huge financial losses.

The claim against Goldman Sachs for £1.2 billion was started after LIA lost almost all of its investment through the trades whereas Goldman Sachs generated an ‘eye watering profit of over more than $200m from the trades’ as reported in the Guardian

Goldman Sachs has denied the claims bought against them simply stating that “the LIA was the victim of an unforeseen financial depression, not of any wrong doings by the bank”. This is, roughly speaking, the same argument that almost every other bank has been issuing in defenses since the start of the worst excesses of the 2004 to 2008 period coming to light.

An advisor of the LIA explained to the High Court that they constantly had products “pushed down our throats left, right and center” and felt pressurized into signing and agreeing with what they were presented with without being given the chance to properly consider the products and legal paperwork. The LIA assumed that the bank was working in its best interests.  Now the Bank defends its actions saying it was only ever protecting itself, and the LIA was supposed to go and seek independent advice.  The LIA had understood that the Bank was there to offer it advice; the Bank says it was not.

The LIA also claim that they were bribed by the banks as a way of taking advantage of their low level of financial literacy. The LIA claimed that the banks would occasionally pay for holidays, and 5 star hotels etc. which they thought of as a nice gesture but now see it as a means of distraction. The LIA produced evidence showing that the bankers would buy executives at the LIA prostitutes and take them to clubs and restaurants, all, apparently, at the expense of the Bank – but ultimately at the expense of the LIA

The LIA has issued an application for the disclosure of information regarding the language used by Société Générale. In many of the disclosed documents the traders and bankers would use phrases and words that make no actual sense unless the conversations use “code words” to discuss inappropriate or illegal things.

Words and phrases indicated to the Court include stating that words such as ‘Pizza, cooking’ were used as code words which are featured in the disclosure documents. Other example of code words given were ‘Baker’ which was the name given for the executive directed of the LIA at the time, Mohammed Layas, the former investment chief Mustafa Zarti was called ‘Zorro’ and Saif Gadaffi was known as ‘the Prince’ as reported in

Both cases are extremely helpful in understanding what the bigger banks really think of their customers. The Banks wanted risk free profits.  They arranged for customers to think that they are offering a service which included advice that would take account of the best interests of the customers.  What the legal documents did was say that the Banks were only selling financial products with no advice.  The contracts, signed by the LIA, confirmed that if the LIA wished to understand the financial products it would seek out independent advice.

To date, banks have won with these contractual arguments. As matters stand, a bank (or anyone) can enter into a contract which sets the basis of the relationship, even if that relationship was actually something else.  Customers right up to the collapse in 2008 and the revelations that have eben coming out since, all thought their banks were there to advise on suitable products.  These customers now all know that the Banks’ paperwork all said that the Banks have no liability and if the customer did not understand the product they must seek out and pay an advisor.  They know that now, when it is too late.

It is for these reasons that you are always advised to seek the most experienced of litigators when considering bringing any claim against a bank. There is no such thing in English law as “mis-selling”.  Many SME businesses lost out in the FCA review into the historic sale of Interest Rate Hedging Products because they went into the process thinking that they had to prove “mis-selling” when in fact the banks and the FCA were looking for something else.  “Mis-selling” is a phrase created by the media.  Lawyers use it because consumers are familiar with what it implies.

In Court however, you must prove many other things.  The contracts that set out the basis of the relationship is where you start looking.  Only experienced solicitors, like those at Muldoon Britton, that have worked in this area for many years are able to assist you fully with such claims.

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