BES funds lose first appeal against Bank of Portugal ruling

The Supreme Administrative Court (STA) has upheld the decision that sided with the Bank of Portugal in transferring more than €2 billion in senior bonds from Novobanco to BES (“bad bank”) in 2015, reports Jornal de Negócios on Monday.

Large funds holding senior BES bonds – including Blackrock, Pimco, Fidelity, and Trinity – have now lost the first of a series of appeals in the Supreme Administrative Court (STA) against the ruling in the pilot case that, in January, sided with the Bank of Portugal (BdP) in transferring those bonds – worth over €2 billion – from Novo Banco to the “bad bank” in December 2015.

The ruling dismantles the funds’ arguments and prevents the case from being sent to the Court of Justice of the European Union (CJEU).

In practice, there are still national appeal avenues – namely to the Constitutional Court – but the case, which even led to a boycott of the purchase of Portuguese public debt by the funds involved, is closer to a favorable outcome for the supervisor.

The first ruling on the appeals filed by the large funds rejects arguments regarding the supervisor’s competence, the alleged discrimination against investors, and the need to send the case to the Court of Justice of the European Union (CJEU), although national appeals may still exist—namely to the Constitutional Court.

This first decision by the Supreme Administrative Court (STA) concerns the appeal filed by the Weiss fund. Following the January ruling, more than a dozen appeals were filed, with about five going to this higher court. One of the points raised by the large investment funds was the Bank of Portugal’s (BdP) authority to transfer those Novo Banco bonds to BES.

Source: Negócios