Appeals have been launched against a landmark Federal Court ruling in favour of NSW local councils.

The appeal stems from a ruling in 2012, which found that major investment banks had misled 13 New South Wales Councils.

The banks gave a investments an AAA rating, leading councils including Bathurst, Orange, Parkes, Ryde and Eurobodalla to buy into them.

But the councils then lost around $16 million when the value of the product, a Constant Proportion Debt Obligation (CPDO), was decimated during the global financial crisis.

Justice Jayne Jagot granted the group of councils nearly $30 million in compensation, ruling that Standard & Poor's and other banks had misled them in their original assessments.

The compensation has not been paid, meaning most of the councils have seen almost nothing from millions sunk into CPDOs.

Now, the group of banks including S&P, ABN AMRO; the European bank that created the investments, and Local Government Financial Services; which sold the product to the councils, have launched their appeal before the full Federal Court.

Justice Jagot found in her original ruling that S&P made misleading and negligent misrepresentations, the first such ruling against a credit agency anywhere in the world.

She also found that the Constant Proportion Debt Obligations that the council bought into were “grotesquely complicated”.

S&P has made a statement to the ABC claiming it should not be held to account for its assessments despite millions of dollars, in this case of taxpayer’s money, being banked on the outcome.

“It is bad policy to enforce a legal duty against a party like S&P, which has no relationship with investors who use rating opinions, yet impose no responsibility on those investors to conduct their own due diligence,” the statement reads.

“It turns S&P's predictions about the future into guarantees.”

CPDOs are considered high risk by many, though they were sold to the consortium of 12 councils as being a safe investment.

“It turned out to be very risky. It was simply a bet,” said John Walker from Bentham IMF, which financed the case for the councils.

One New South Wales local government at the centre of the case says it say almost nothing in return for its million dollar investment.

Bathurst Regional Council was awarded more than $1 million after it received just $67,043 in return for its original outlay.

Bathurst Regional Council Mayor Gary Rush says if they bank are successful in their appeal, it would be very difficult for most of the councils to pay the money back, especially after they lost so much in the initial investment.

“Having to pay that money back would have a significant impact,” he said.

“It would mean we have to curtail some of the maintenance opportunities or the development of infrastructure opportunities we are currently looking at.”

Researchers from the United States Federal Reserve have previously called the CPDOs the “poster child for the excesses of financial engineering”.

Court documents show a banker from ABN AMRO, which invented CPDOs in 2006, describing them as a game of chance.

“If you win you start again. If you lose, double your bet. Repeat. You have a great chance of winning (99.9 per cent) 1 pound, but a chance of losing the lot (0.10 per cent) if you lose 11 times in a row,” ABN AMRO's David Poet wrote in an email.

Standard & Poor's is also being sued by a group of 90 councils, churches and charities for giving an AAA rating to toxic mortgage bonds sold by the now-defunct investors Lehman Brothers.