Black Diamond Offshore Ltd & Others v Fomento De Construcciones Y Contratas S.A. (Respondent/Claimant)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Asplin |
| Judgment Date | 09 March 2015 |
| Neutral Citation | [2015] EWHC 1035 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2015-000148 |
| Date | 09 March 2015 |
[2015] EWHC 1035 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Mrs Justice Asplin
Case No: HC-2015-000148
Ms Felicity Toube QC and Ms C Cooke (instructed by Boles, Schiller & Flexner) appeared on behalf of the Applicant/Defendant
Mr Richard Gillis QC (instructed by Mishcon de Reya) appeared on behalf of the Respondent/Claimant
(As Approved)
By this application under CPR 11(1) the Applicant/Defendant, Fomento de Construcciones y Contratas S.A. ("FCC") seeks a declaration that the court has no jurisdiction in this matter or alternatively, if it does, that that jurisdiction should not be exercised unless and until a further is made on an application issued by the Claimant/Respondent, after the determination of Homologation Proceedings in Spain.
FCC is a leading publicly quoted Spanish company. It specialises in the provision of, amongst other things, construction and city sanitation services, such as rubbish removal and waste water treatment. FCC has two main types of borrowing. The first is under a €450m at 6.5 per cent unsecured convertible note issued by an Offering Circular dated 27 October 2009 (the "Notes"). But for one immaterial exception, these are subject to English Law and the exclusive jurisdiction of the English courts. The second type of borrowing is under a syndicated finance agreement dated 24 March 2014 (the "Syndicated Finance Agreement") in an amount of €4.5bn. The Syndicated Finance Agreement is subject to Spanish law and the jurisdiction of the courts of Madrid. The Syndicated Finance loan is divided into two tranches. Tranche B being the relevant tranche for present purposes, is convertible into shares in the initial amount of €1.35bn.
The Claimants/Respondents, Black Diamond Offshore Limited, Double Black Diamond Offshore Limited and North Light European Fundamental Credit Fund (to which I shall refer together as the "Creditors") are the holders of Notes. They are also senior Creditors of FCC under the Syndicated Financing Agreement, being the holders of Tranche B debt.
FCC is seeking to restructure the terms of the Tranche B Debt in Spanish restructuring proceedings, which are known as homologation proceedings, which are underway in Barcelona, Spain (the "Homologation Proceedings").
In summary, the restructuring of this debt involves (amongst other things) (a) the prepayment of €900m of the debt for €765m i.e. a reduction of 15 per cent; (b) the extension of the term of the remaining debt by three years; and (c) a reduction in the rate at which the payment in kind (PIK) interest accrues.
The Creditors believe that the Homologation Proceedings have triggered an Event of Default under the Notes which entitles them to accelerate their Notes. In their capacity as holders of Tranche B Debt they disagree with the proposed restructuring. They consider that it imposes disproportionate sacrifice on the holders of the Tranche B Debt and that, correspondingly, a disproportionate benefit will accrue to FCC's junior debt holders, shareholders and other interested parties. They also consider that those creditors who have voted in favour of the restructuring have done so on the basis of a conflict of interest and cross-interests, rather than on the basis of their interest as holders of the relevant debt.
On 16 January 2015 the Creditors and another seven Claimants, who were Tranche B Debt holders, but not Noteholders, issued the proceedings in which this application is made. It is a Part 8 Claim against FCC in which declarations are sought as to whether as a result of the Homologation Proceedings and the facts upon which they are based an Event of Default has occurred under the Notes. At the same time, they also applied for an expedited hearing, because they wished to have the matter heard before the Homologation Proceedings. The application for expedition was heard on 29 January 2015 and Nugee J declined to exercise his discretion to grant an order for expedition.
On 3 February 2015 the seven Claimants who were Tranche B Debt holders but were not Noteholders, filed notices of discontinuance and on the same day FCC filed its Acknowledgement of Service in which it indicated that it intended to dispute the jurisdiction of the English Court. On behalf of the Creditors it was suggested that it had been understood that such a challenge would not be made if the seven non-Noteholders discontinued their claims. Mr Gillis QC on behalf of FCC says that itself is a misunderstanding of the correspondence. In any event, on 6 February 2015 the Creditors issued a summary judgment application and on 17 February 2015 FCC issued its application for a declaration pursuant to CPR 11(1) that the Court has no jurisdiction or alternatively, that the jurisdiction should not be exercised.
As a result of the directions made by Nugee J on 23 February 2015 the jurisdictional challenge was heard on 4 March 2015 and if I dismiss the application the summary judgment application will be heard in a window between 31 March and 1 April 2015. As a result of the short timetable and the need for FCC to know whether to prepare for the summary judgment application I agreed to give judgment by 9 March 2015 and do so today.
It is not in dispute that by virtue of clause 19(a) for the purposes relevant to this dispute, the Notes are subject to English Law and that the exclusive jurisdiction clause in favour of the English courts, contained in clause 19(b) of the Notes applies. Clause 19(b) is in the following form:
"the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes and accordingly any legal action or proceedings arising out of or in connection with the Notes [ Proceedings] may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is made for the benefit of each of the Noteholders and shall not limit the right in any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in one or more jurisdiction preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not)."
By contrast clauses 28.1 and 28.2 of the Syndicated Financing Agreement, which govern the Tranche B Debt provide that that agreement is governed by Spanish civil law and that the parties "with an express waiver of the right to their own forum, expressly and irrevocably submit to the Courts and Tribunals of the city of Madrid for the resolution of any issues that might arise from the interpretation, validity or performance of [the] agreement." It is also relevant that clause 18 of the Syndicated Financing Agreement provides for the acceleration of the Tranche B Debt in certain circumstances which is said may include the acceleration of the Notes.
As I have already mentioned, under the Part 8 proceedings the Creditors seek a declaration that there has been an Event of Default under the Notes as a result of the Homologation application or in the alternative that such an event will occur upon the formal implementation of the restructuring proposal before the Spanish court if or when it upholds the Homologation Order. They contend that such an event has occurred because the judicial homologation constitutes "an arrangement … with or for the benefit of the relevant Creditors in respect of any of [FCC's] debts", or the proposal of such an arrangement, within the meaning of Condition 10(f) of the Notes and/or, if it is upheld, that the Homologation Order is an "arrangement". However, FCC has refused to accept that there has been an Event of Default and has asserted that Condition 10(f) is only triggered by an arrangement in respect of "all" of FCC's debts.
It is not in dispute that the Homologation Proceedings were commenced before the Part 8 Claim was issued and that the only ground upon which a Homologation Order could be challenged is that of "disproportionate sacrifice". However, the parties' Spanish law experts disagree about whether an Event of Default under the Notes, if such an event has occurred or will occur on the making of a Homologation Order, is relevant to such a challenge. FCC's expert contends that it is of no relevance and accordingly will not be taken into account or considered by the Spanish court whilst the Creditor's expert says that it is relevant and therefore, will be considered.
Despite the opinion of FCC's expert as to the relevance of an Event of Default under the Notes to the making of any Homologation Order, Mr Gillis QC on behalf of FCC contends that the English Court has no jurisdiction in relation to the Part 8 Claim or in the alternative that the jurisdiction should not be exercised, but that a case management stay should be granted over and until the Homologation Proceedings have been determined.
Before turning to the main heads of his arguments, Mr Gillis made clear that it is accepted and agreed that the Homologation Proceedings are of a different nature from the Part 8 Claim, there is no Defendant in such proceedings, the Creditors are not parties to the Homologation Proceedings, qua Noteholders and that accordingly, there will be no determination of...
To continue reading
Request your trial
-
Autoridad Del Canal De Panamá v Sacyr, S.A. and Others
...that the test should not be applied (for a recent example in a case that also involved an exclusive jurisdiction clause, see Black Diamond Offshore Ltd v Fomento [2015] 1 CLC 884 at 159 ACP places great reliance on the exclusive jurisdiction clause, submitting that while the power can in p......
-
Team Y&r Holdings Hong Kong Ltd and Others v Joseph Ghossoub
...This was succinctly summarised by Asplin J in Black Diamond Offshore Limited and Ors v Fomento De Construcciones y Contratas S.A. [2015] EWHC 1035 (Ch) where she said (at [19]): "There is no dispute that the relevant principles which apply to the construction of jurisdiction provisions can......
-
Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc. (Defendant/Applicant)
...(Bermuda) Ltd [1999] 1 All ER 237, p.249G-250A; Bank of New York Mellon v. GV Films [2009] EWHC 2338, [14]; Black Diamond Offshore Ltd v. Fomento de Construciones Y Contratas SA [2015] EWHC 1035, [43]. Some, but not all, of these cases have involved the forerunners of Brussels 1 Recast and......
-
Order 29 of the Grand Court Rules and IGCF SPV 21 Ltd
...This was succinctly summarised by Asplin J in Black Diamond Offshore Limited and Ors v Fomento De Construcciones y Contratas S.A. [2015] EWHC 1035 (Ch) where she said (at [19]): “There is no dispute that the relevant principles which apply to the construction of jurisdiction provisions can......