A meltdown in the credit markets could lead to banks, hedge funds and private equity firms finding themselves embroiled in years of costly litigation, lawyers said yesterday. They revealed that clients are “lining up” for advice on their legal exposure to the crisis.
The sheer complexity of financial instruments could make it almost impossible to determine liability and the extent of losses if the worst is to happen, experts said, and predicted that it could take years for the courts to sort out.
In the past few weeks, law firms have received an increasing number of inquiries from clients wanting to know whether they can be held to their commitments if credit markets collapse. At the same time, private equity and corporate clients want to know whether banks can be forced to stand by their lending promises.
John Ogilvie, a litigation partner in Herbert Smith, said that his clients had so far remained calm but that yesterday was a “tipping point” in determining whether the wobble was simply a short-term reaction to problems in the US or something more serious.
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The sheer complexity of financial instruments could make it almost impossible to determine liability and the extent of losses if the worst is to happen, experts said, and predicted that it could take years for the courts to sort out.
In the past few weeks, law firms have received an increasing number of inquiries from clients wanting to know whether they can be held to their commitments if credit markets collapse. At the same time, private equity and corporate clients want to know whether banks can be forced to stand by their lending promises.
John Ogilvie, a litigation partner in Herbert Smith, said that his clients had so far remained calm but that yesterday was a “tipping point” in determining whether the wobble was simply a short-term reaction to problems in the US or something more serious.
Go to full article
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