Pre-financial crisis, interest rate derivatives were widely recognized as a valuable part of the municipal issuer’s financial toolkit. Post-crisis, they have been a thorn in the side of many issuers, resulting in expensive litigation with failed swap providers – most notably the Lehman and Ambac derivatives trading subsidiaries – and public criticism of municipal issuers said to have fallen prey to more sophisticated providers.

In its ruling on Wednesday 27 July in the matter of Belmont Park Investments PTY Ltd v BNY Corporate Trustee Services Lte & Anor [2011] UKSC 38 the Supreme Court of the United Kingdom has dismissed the appeal by Lehman Brothers Special Finance Inc. ("LSF") relating to the validity of an alleged anti-deprivation provision known as a 'flip' provision which, has the effect of altering the payment priority order as a result of a bankruptcy of the relevant swap counterparty, in this case Lehman Brothers.