ACE European Group Limited, a London-based insurance company, has been ordered by a Norwegian court to pay 50 million Norwegian kroner (about 8.4 million U.S dollars) in compensation to the Norwegian municipality of Haugesund for its investment loss in U.S. hedge fund.
Haugesund, a municipality in the southwestern Norwegian county of Rogaland, filed a civil lawsuit with the Oslo District Court after it lost all the 130 million kroner (21.8 million U.S. dollars at the current exchange rate) it put in the Norwegian company Terra Securities, investing in a high-risky Citigroup investment program.
The now-bankrupt Terra Securities was ensured by ACE European Group Limited.
In a verdict issued on Monday, the Oslo District Court ruled that Terra Securities has failed to meet the standards "for good professional efforts which could reasonably be expected of the service" and its insurer shall pay 50 million Norwegian kroner in damages to Haugesund.
"The verdict is very clear. Terra Securities has given the municipalities incomplete and partly inaccurate counselling," said Petter Steen jr., major of Haugesund.
ACE European Group Limited was not immediately available for comments on the verdict.
The verdict can be appealed within one month.
The similar claim by the Hattfjelldal, another of the eight Norwegian municipalities involved in the financial scandal which surfaced in 2007, has not won support from the court.
Starting from 2001, eight Norwegian municipalities exploited a legal loophole in the Municipalities Act to make high-risky investments in the Citigroup investment program sold in Norway through Terra Securities.
Over years, a total of 966 million Norwegian kroner had been invested by the municipalities in the program.