A special provision, added to the currently pending legislation in Congress to overhaul the U.S. Bankruptcy law, aims to prevent Lloyd’s from collecting debts from U.S. “Names”(individual Lloyd’s investors), who have alleged they were the victims of misrepresentation.
Although the proposed amendment doesn’t mention Lloyd’s by name, it covers the time period – 1975 to 1994 – during which many American “Names” have alleged they were the victims of fraudulent misrepresentations, specifically relating to the nondisclosure by Lloyd’s representatives of pending asbestos and environmental claims.
The London High Court found in favor of Lloyd’s in the Jaffray case, which addressed the same allegations, and Lloyd’s has also been successful in U.S. litigation.
Despite this vindication, some U.S. “Names” still feel they were not fully informed of the risks involved when they made their investments, and apparently convinced Sen. Jeff Sessions, R-Alabama, Chairman of the Senate Judiciary subcommittee to support the provision. If it remains part of the Bankruptcy Bill, it would prevent Lloyd’s from executing on judgments against U.S. “Name,” who claim misrepresentation.
Lloyd’s, and British Government representatives, vigorously oppose the inclusion of the provision. In a recent press release Lloyd’s characterized it as, “a badly conceived and unjust piece of legislation that will have repercussions around the world and damage the US’s business relationships with other nations. In effect, this provision could provide a ‘get out of jail free card’ to any US citizen or business seeking to escape payment of debts incurred overseas.”
The provision adds new controversy to the already politically charged Bankruptcy Bill which is heavily supported by the banking community and retail credit providers. Former President Clinton vetoed a similar measure last year, but President Bush has indicated he will sign the current legislation.
Lloyd’s is seeking common cause with the Bill’s opponents in an effort to have the “misrepresentation” provision removed.
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