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The Federal Court of Australia ruled that S&P’s AAA rating of constant proportion debt obligation notes created by banking giant ABN AMRO and sold to the councils of 13 Australian towns, had been “misleading and deceptive”.

It is the first time a ratings agency has faced trial over synthetic derivatives and the case could set an important precedent for future litigation.

“(It is a) decision that is likely to have global implications, and be felt hardest in Europe and the U.S. where similar products were sold to banks and pension funds,” said Piper Alderman, the law firm representing the councils.

“No longer will rating agencies be able to hide behind disclaimers to absolve themselves from liability.”