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Abstract from

The Collapse of Lehman Brothers and Derivative Disputes: The Relevance of Bankruptcy Cultures to Roles for Courts and Attitudes of Judges

Stacey Steele is a Senior Lecturer at the Melbourne Law School, University of Melbourne, where she has taught Insolvency Law and Corporate Banking and Finance Law. She is also a practising lawyer and researches Japanese law and law reform.

The global financial crisis precipitated calls for a global court capable of dealing with complex financial disputes, including arguments over the application and interpretation of derivatives contracts. Recent experience in the insolvency of Lehman Brothers, however, confirms that there is still great divergence between local insolvency regimes, including in relation to the extent to which a court should be involved in determining disputes and the underlying assumptions made by judges about the primacy of contract versus statutory interpretation. This article examines the impact of bankruptcy cultures on the roles of courts and attitudes of judges. In particular, it examines the case of Metavante, a key derivative case arising from the collapse of Lehman Brothers, and compares the opposite outcome in a similar case from Australia. Bankruptcy cultures underpin court involvement in insolvency law proceedings and impact judicial approaches in those disputes. Although the opposing results from these cases are, on one view, unfortunate, the contrary decisions may lead to market innovation and a lobby for insolvency reform.

(2014) Vol 30 Law in Context p51

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