15 September 2014


Financial Industry Alert

The Legacy of Lehman

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Stephen Phillips
+44 20 7862 4704
[email protected]

Scott Morrison
+44 20 7862 4747
[email protected]


A series of articles considering the legacy of the collapse of Lehman Brothers on the financial industry across Europe and on the development of legal principles

ARTICLE 1: The EU Bank Recovery and Resolution Directive - Bringing Stability Back to the European Banking Sector

Faced with huge losses in the subprime mortgage market, Lehman Brothers Holdings Inc. (the ultimate parent of the Lehman group) filed for Chapter 11 bankruptcy protection on 15 September 2008, a momentous event which shortly preceded the collapse and break-up of that group, including the filing for administration of Lehman Brothers International (Europe), the main operating subsidiary for the UK and Europe.

Looking back from the perspective of the sixth anniversary of the collapse, its consequences still occupy the English courts with numerous decided, settled, on-going and forthcoming cases. This client update is the first in a series describing and analysing the legal legacy of the Lehman collapse by looking at subsequent changes to financial industry regulation in the UK and across Europe to address the shortcomings highlighted by Lehman's collapse and also considers certain key pieces of Lehman-related litigation in the English courts and the principles which resulted from those cases.

This first update in our 'Legacy of Lehman' series considers the introduction of the EU Bank Recovery and Resolution Directive ("BRRD") which becomes mandatory across Europe on 1 January 2015. The lack of resolution tools available to relevant authorities in order to rescue failing financial institutions was highlighted by the collapse of Lehman and many other banks throughout Europe. The BRRD seeks to address these inadequacies and the disparity with the quality of legislation already implemented in different member states across Europe. The common framework is intended to bring stability and confidence back into the financial sector. To open the client alert, click here.     

Subsequent articles in the 'Legacy of Lehman' series will focus on topics from a European perspective, including:

  • The development of legal principles relating to client assets and the distribution of assets over which clients have proprietary interests
  • Issues relating to client monies litigated in the "CASS 7" litigations
  • The introductions of European Market Infrastructure Regulations
  • The litigation surrounding the correct application of the surplus of funds in the administration of LBIE known as the "waterfall" litigations
  • Developments in relation to the interpretation of ISDA Master Agreements following a number of derivatives-based litigations
  • The Lehman Brothers UK Pension Scheme litigations deciding which group companies should financially support the under-funded scheme
In addition, from the U.S. perspective we will include an alert on aspects of the 'safe harbor' principles and the U.S. bankruptcy court's treatment of derivatives.