ISDA®
INTERNATIONAL
SWAPS AND DERIVATIVES ASSOCIATION, INC.
NEWS RELEASE
For Immediate Release, Wednesday, April 1, 2009
For More Information, Please Contact:
Donna
Chan, ISDA Hong Kong, +852 2200 5906, dchan@isda.org
Louise
Marshall, ISDA New York, +1 212-901-6014, lmarshall@isda.org
Cesaltine Gregorio, ISDA New York, +1 212-901-6019, cgregorio@isda.org
ISDA Expresses Concern over KIKO Case Rulings
“ISDA is deeply concerned with the rulings in these lawsuits,” said Keith Noyes, ISDA Regional Director, Asia Pacific. “The Seoul Central District Court rulings could severely inhibit derivatives activity in Korea and in turn risk upsetting financial stability if these decisions are upheld and banks made wary of entering into financial contracts.”
So far, decisions have been made in 11 cases (ten by the Seoul Central District Court and one by the Incheon District Court). In four cases, the Seoul Central District Court, applying the doctrine of "changed circumstances", granted the companies a preliminary injunction allowing the companies to temporarily suspend the performance of the KIKO contracts pending the final verdict of the main cases.
ISDA sees the Court's decisions as a possible result of a fundamental misconception that banks generate profits that are commensurate with the losses of their counterparties.
In ISDA's view, the Court has set dangerous precedents disrupting the fundamental right to enforceability of contracts in the country. This could expose the country to dampening international investor confidence and in turn increase risk.
ISDA has summarized its concerns in detail in a webcast entitled “‘KIKO’ Cases: Misconceptions and Undesirable Legal Precedents” The webcast features Mr. Noyes and includes a brief slide presentation discussing the series of KIKO litigation cases being prosecuted in the Seoul Central District Court. It is available at http://secure.webex.com/g2.asp?id=H8MY4GH2.
About ISDA
ISDA, which represents
participants in the privately negotiated derivatives industry, is among the
world’s largest global financial trade associations as measured by number of
member firms. ISDA was chartered in 1985, and today has over 820 member
institutions from 57 countries on six continents. These members include most of
the world’s major institutions that deal in privately negotiated derivatives,
as well as many of the businesses, governmental entities and other end users
that rely on over-the-counter derivatives to manage efficiently the financial
market risks inherent in their core economic activities. Information
about ISDA and its activities is available on the Association's web site: www.isda.org.
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