UK High Court Upholds Freedom Of Contract Over Public Policy Inavlidation Of 'Anti-Deprivation' Clauses In Standard Credit Default Swap Contract

Belmont Park Investments PTY Limited (Respondent) v. BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc (Appellant), 2011 UKSC 38 (Trinity Term July 2011), is a decision by the UK's Supreme Court of England and Wales that involves two important principles of international litigation practice. The decision dismisses an appeal in the case of Perpetual Trustee Company Ltd v. BNY Corporate Trustee Services and provides an exhaustive analysis of the "anti-deprivation" rule. The decision is comprised of several decisions, long, detailed, erudite, lucid, and well-written opinions that, in the end, appear unanimously to agree on a result.

The anti-deprivation rule is aimed at attempts to withdraw an asset on bankruptcy or liquidation or administration, thereby reducing the value of the insolvent estate to the detriment of creditors. Its application is one of a number of instances we have discussed in this blog concerning the limits of freedom of contract in the face of overarching public policy constraints (also see the same struggle in the state law context).

As explained by the Court, the...