By Steve Slater
LONDON, Sept 20 (Reuters) - India's Unitech must repay a
$150 million loan to Deutsche Bank, but a smaller dispute can go
to trial, a UK judge ruled on Friday, in a case which could set
a precedent for whether a Libor interest-rate rigging scandal
can invalidate some deals.
Deutsche Bank sued Indian property firm Unitech
last year for the repayment of a loan made in 2007 by
a consortium of lenders and also for repayment of $11 million
owed for a related interest-rate swap.
The Indian firm counter-sued, saying the loan and swap deal
were linked to Libor interest rates, which at the time were
being manipulated by some banks.
In a ruling at London's High Court, Justice Teare said
Unitech must repay the loan, adding that just because there was
evidence the Libor rate had been manipulated did not make a loan
However, he said the terms of the swap agreement and its
specific link to a Libor contract were more contentious and that
issue should go to trial next year.
The court case is one of two in the UK that are seen as
tests for whether the manipulation of Libor can invalidate some
deals or if banks mis-sold products based on Libor, which is
used to price millions of financial contracts around the world.
Barclays is being sued for up to 70 million pounds
($112 million) by Guardian Care Homes, a UK residential care
home operator which alleges the bank mis-sold it interest rate
hedging products that were based on Libor.
Barclays, UBS and Royal Bank of Scotland
have been fined by U.S. and UK authorities for manipulating
Libor, and Deutsche is among several other banks under
Deutsche Bank said in a statement: "The defendant's
unfounded allegations about Libor are an attempt to delay
payment and divert attention from its remaining unpaid debt on a
swap agreement tied to the loan."
Richard Gwynne, Unitech's lawyer, declined to comment.
Britain's Court of Appeal is expected to make a ruling next
month on whether Libor manipulation can be used in the cases
against both Barclays and Deutsche Bank. Barclays' case against
Guardian Care Homes has been delayed until April 2014 so the
appeal decision can be heard.