The U.S. asset management unit of Banco Santander SA will have to hand over documents related to the winding down and subsequent fire sale of Banco Popular Español SA to Santander, according to a ruling by a U.S. appeals court, giving a potential boost to ongoing legal proceedings in European courts.
The court, however, upheld a decision that Santander and two other U.S. subsidiaries, Santander Holdings USA Inc. and Santander Bank NA, would not have to provide access to key documents related to Banco Popular's takeover, which was the first major test of EU rules on tackling bank failures.
Bondholders — Pacific Investment Management Co. LLC and Anchorage Capital Group LLC — and investors who had lost money after Popular's demise had launched legal action in New York to obtain information and documents from Santander to help them in European court proceedings.
They had requested information on the basis that Santander operates in the U.S., including New York. Federal law allows claimants to apply to a U.S. court for evidence in a legal case provided the respondent has a U.S. presence.
A court had earlier ruled that Santander, Santander Holdings and Santander Bank would not have hand over any documents related to the decision because it did not have jurisdiction, but concluded it did have over Santander Investment Securities Inc.
The bondholders, and a group of Mexican investors, who held about 4% of Popular and include former board member Antonio Del Valle, had appealed the previous decision against Santander. Santander, itself, had appealed the decision against its U.S. investment arm.
In a statement, the Mexican investor group said while it was "pleased" with the court's decision about Santander's U.S. investment banking division, but "disappointed" with the U.S. court's decision not to allow discovery against Santander.
The group "will remain committed to ensure that there is full transparency regarding the facts and circumstances that led to the resolution of Banco Popular, so the tribunals considering this matter can take their decisions based on a full understanding of the facts at hand," it said.
Shareholders and bondholders, who lost billions of euros following the winding down of Popular and its subsequent sale to Banco Santander SA for €1, claim the lender's resolution was not transparent and did not take into account plans by the bank to find a buyer or to hold a capital increase.
It was the first banking resolution of its kind, and the European agency in charge of bank failures, the Single Resolution Board, has said it carried out the process transparently.
The Mexican group is currently undertaking an international arbitration against Spain over the sale. It, and the bondholders, have both brought legal proceedings in the European Court of Justice, while the bondholders have joined criminal proceedings in Spain over Popular's failure and its resolution.
