Bankers Trust New York Corp. will use a London court ruling to bolster its defense in Procter & Gamble Co.'s derivatives lawsuit.
The ruling by the English High Court of Justice rejected a $65 million claim against Bankers Trust's London trading unit by an Indonesian firm, PT Dharmala Sakti Sejahtera.
While noting "enthusiastic" marketing by Bankers Trust, the court rejected Dharmala's claim that Bankers Trust misrepresented the swaps.
It also rejected an argument that the bank had breached its duties to act as an adviser in the transaction, which soured when the London interbank offered rate rose sharply in 1994.
Although the case involved a different set of facts and was tried under different set of laws than the Procter & Gamble case in Cincinnati, a Bankers Trust spokesman said the London court had "looked at many of the issues" raised here by the consumer goods company.
In both cases, for example, the plaintiff asserted it should be free from risk and loss on the transaction.
The judge in the Procter & Gamble case "has asked for precedent, and I'm hopeful (the London court's ruling) will enter his thinking," said Melvin A. Yellin, chief legal officer for the New York bank holding company.
Mr. Yellin hailed the ruling as "good news for the industry" in that it set out for the first time the obligations of sophisticated investors that enter swaps transactions.
Bankers Trust said the London case represents the first derivatives claim to be subjected to an evidentiary hearing. The high court heard three weeks of evidence and arguments before issuing its ruling.
Procter & Gamble is suing over $196 million in losses it suffered in 1994 on interest rate and currency swaps with Bankers Trust.
It has filed transcripts of telephone conversations between Bankers Trust traders to show what it claims is a pattern of deliberate misrepresentation.
Bankers Trust issued a statement acknowledging that "irresponsible and regrettable" statements were made by its employees and emphasizing that the bank did not condone their behavior.