The US Supreme Court has ruled in favour of National Australia Bank, stating that foreign investors cannot proceed with a US lawsuit against NAB.

NAB's former US mortgage unit, HomeSide Lending in Jacksonville, Florida was charged of purposively manipulating the value of its mortgage portfolio to meet over-inflated earnings targets.

The lawsuit had been closely monitored, with many regarding it as a test on foreign shareholders' ability to bring class-action securities claim against foreign businesses in American courts.

However, Supreme Court Justice Antonin Scalia said that the plaintiffs had no claim in US courts because the securities lawsuit was brought by Australian shareholders who bought shares of NAB on an Australian exchange.

The complaining shareholders countered the case should proceed in the US because the HomeSide executives who allegedly committed the fraud were stationed in this country.

HomeSide, once the US's sixth-largest mortgage servicing business, had employed an incorrect mathematical model that resulted in overvaluation of its mortgage-servicing rights, according to NAB.

The bank said in July 2001 that a $US450 million write-down on the value of the HomeSide rights would be incurred. A second write-down of $US1.75 billion was also announced in September 2001. The bank's shares plunged as a result.