The US Supreme Court has agreed to decide whether Australian investors can use US securities law and American courts to sue an Australia-based bank for fraud.
The justices said on Monday they will use the lawsuit against National Australia Bank (NAB) to clarify whether and when US law can apply to international dealings.
Several Australian shareholders sued the bank in the federal court in New York over alleged financial fraud by a bank-owned mortgage servicing company in the state of Florida.
The shareholders said HomeSide Lending Inc, which the bank had since sold, fraudulently overvalued its assets. The bank later reduced the value of its assets by $US2.2 billion ($A2.4 billion) because of what it called mistakes by HomeSide. The bank's share price dropped sharply as a result.
The investors say American courts should have jurisdiction to hear their lawsuit because the alleged fraud was committed in the United States.
But the federal appeals court in New York threw out the lawsuit, reasoning that the alleged fraud had too tenuous a connection to the United States.
Any losses suffered by investors resulted more from decisions made by the bank in Australia than what happened in Florida, the court said.
The high court agreed to hear the case over the objection of the Obama administration. T
The case - Morrison v National Australia Bank, 08-1191 - will be argued in March or April, with a decision expected by the end of June.
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