US securities law does not apply to foreign markets just because Americans are invited to take part in them, a federal court said, explaining its ruling last week in favour of insurer Lloyd's of London.
An opinion of a federal appellate court in Richmond, Virginia, cited the limits on US law as its reason for not forcing Lloyd's to give American investors more information on a massive reorganisation intended to stabilise the British insurance market.
The court rejected the investors' contention that US securities laws took precedence over their agreement with LLoyd's to litigate disputes in British courts.
The court found that US securities laws should not be "exported and imposed as governing principles on markets conducted entirely in other countries simply because membership in such markets is solicited in the United States."
On Aug. 23, 93 of the 3,000 names, or Lloyd's investors, in the United States successfully urged a federal trial judge in Richmond to enjoin Lloyd's from forcing them to choose whether to participate in the insurance market reorganisation.
Lloyd's set an Aug. 28 deadline for names to elect whether to accept the reorganisation plan, intended to settle many legal claims of malfeasance against Lloyd's managers and administrators in exchange for $ 4.8 billion.
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The plan would also set up a new corporate entity, Equitas Reinsurance Limited, to reinsure the names' pre-1993 underwriting obligations. A series of natural and human disasters made those obligations heavy ones for many names.
After an emergency appellate hearing requested by Lloyd's, three judges of the US Court of Appeals for the 4th Circuit stayed the injunction Aug. 27.