BNP Paribas S.A. v Anchorage Capital Europe LLP and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Males,Mr Justice Males |
| Judgment Date | 11 October 2013 |
| Neutral Citation | [2013] EWHC 3073 (Comm) |
| Docket Number | Case No: 2013 Folio 235 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 11 October 2013 |
[2013] EWHC 3073 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Males
Case No: 2013 Folio 235
Mr Bankim Thanki QC and Mr Patrick Goodall (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the Claimant
Mr Paul Greenwood (instructed by Stewarts Law LLP) for the Defendants
Approved Judgment
Hearing dates: 25th & 26th September 2013
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This case is a dispute between a bank and a hedge fund about whether a handful of instant message communications resulted in a binding contract or contracts and, if so, between which parties and on what terms. But the issue presently for decision is whether these issues should be determined in London or New York (or possibly Luxembourg). As is often the case in commercial disputes, particularly in cases where tens of millions of dollars are at stake and it is thought that where the case is fought may well determine the eventual outcome, the parties and their lawyers have left no stone unturned in seeking respectively to establish or to challenge the jurisdiction of the English court over this dispute.
There are two applications to be determined. The first is a challenge by the second to fourth defendants (but not the first defendant, an English LLP) to the jurisdiction of the English court. Those defendants contend that the English court has no jurisdiction over them, or alternatively that any jurisdiction which it may have should not be exercised. The second is an application by the claimant to restrain the second defendant from pursuing proceedings which it has commenced in New York which (as is common ground) raise essentially the same issues as those arising in this action.
The parties
The claimant, BNP Paribas SA ("BNPP"), is a French public limited company (société anonyme) with its headquarters in Paris. It operates globally, providing banking and financial services across 78 countries. However, this dispute concerns the corporate and investment banking activities of the Financial Credits Trading Desk of its registered London branch and has no connection with Paris (where the Desk has no traders). BNPP engages in banking and specialised financial trading business in London, including the buying and selling of high yield distressed debt securities.
The Anchorage group is an investment management group with its principal centre of operations in New York. It provides investment management and trading services, operating through a structure of affiliated companies that provide investment management services or act as portfolio holding companies (ie funds) incorporated across a number of jurisdictions. Its legal, compliance, tax and accountancy functions are located centrally in New York, with the same individuals performing those functions for all group entities.
Four entities within the Anchorage group are defendants to this action. The first defendant, Anchorage Capital Europe LLP ("Anchorage London"), is an English LLP with an office in London. It provides investment management services to funds within the group. It was granted authorisation by the FSA (now the FCA) to act as an investment management business on 22 December 2009. The second defendant, Anchorage Capital Group LLC ("Anchorage New York"), is a Delaware company with its headquarters in New York which acts as an investment manager and adviser to the funds within the group. It is registered with the U.S. Securities and Exchange Commission as an investment adviser. The third and fourth defendants, respectively ACMO Sàrl ("ACMO") and AIO III Sàrl ("AIO"), both Luxembourg companies, are two of the investment funds within the group. I shall refer to "Anchorage" when there is no need to distinguish between the different defendants and to the second to fourth defendants together as "the overseas defendants".
The AIB Notes
This action is concerned with subordinated private placement notes issued by Anglo Irish Bank ("AIB") with a face value of US $95 million ("the Notes"). The Notes were issued pursuant to a Note Purchase Agreement dated 28 September 2005. Under the Note Purchase Agreement, AIB issued a principal amount of US $165 million Subordinated Notes, Series A, due 29 September 2015 (the "A Notes") and US $35 million Subordinated Notes, Series B, due 29 September 2017 (the "B Notes"). The Notes the subject of this action are A Notes. They are not listed on any exchange and are physically certificated.
AIB is a bank incorporated in the Republic of Ireland, which was nationalised by the Irish Government in 2009. On 1 July 2011 it was merged with the Irish Nationwide Building Society, which had also been nationalised, to form the Irish Bank Resolution Corporation Limited ("IBRC"). On 7 February 2013, it was announced that IBRC would be liquidated, rendering the Notes virtually worthless.
The rival cases
It is BNPP's case that two binding English law contracts were concluded. The first is said to have been concluded on Friday 7 December 2012, when BNPP sold Notes with a face value of US $50 million. I shall refer to this as "the Friday trade" or "the Friday contract". The second was on the following Monday, 10 December 2012, when BNPP says that a contract for the sale of Notes with a face value of a further US $45 million was concluded ("the Monday trade" or "the Monday contract"). BNPP's primary case is that the Friday contract was concluded with Anchorage New York, while the Monday contract was concluded with Anchorage London, although it says also that both Anchorage companies were acting as agents for undisclosed principals, namely ACMO and AIO, the funds to which it is said that Anchorage had decided to allocate the Notes. However, BNPP has yet to plead its case in detail and Mr Bankim Thanki QC for BNPP reserved the right to plead the case in alternative ways as there is scope for more than one analysis of which Anchorage entity was BNPP's counterparty.
In contrast, Anchorage's case in very brief summary is that no binding contract was concluded on either day because material terms remained to be agreed; that the parties' dealings were governed by New York law and that any agreement reached at that stage was what is known as a "Type II preliminary agreement" under New York law whereby the parties' only obligation is to negotiate final terms in good faith; that as a result of the parties' subsequent conduct they either concluded a binding contract on 14 February 2013 for the first time or varied any existing contract, in either case so as to provide expressly for New York law and for BNPP to give certain representations, of which BNPP is in breach; or if no such binding contract was then concluded, that is because BNPP was in breach of its obligation to negotiate in good faith. However, if (contrary to Anchorage's case), binding commitments for the purchase of the Notes were undertaken as a result of the parties' dealings on 7 and 10 December, it says that there was a single contract concluded on 7 December 2012 between BNPP and Anchorage New York, to which the other defendants were not parties.
The trades
The circumstances in which these issues (and the related issue of where they should be determined) arise were as follows.
In October 2012, a New York investment firm called Fir Tree Partners ("Fir Tree") approached Jonathan Lett, a trader with BNPP in London, with a view to seeing whether it wished to purchase the Notes. BNPP was interested, and explored with a number of market participants, including Matt Hartnett of Anchorage London, the possibility of an on-sale. Although Anchorage's evidence suggested that BNPP's role was merely as a broker to conclude a prospective contract between Fir Tree and Anchorage, before me Anchorage's counsel Mr Paul Greenwood expressly accepted that BNPP was acting as a principal in purchasing the Notes from Fir Tree and was likewise acting as a principal in any contract concluded with any Anchorage entity for the onward sale of the Notes. It was at all times made clear to Anchorage that BNPP was purchasing the Notes from Fir Tree, and that its ability to sell to Anchorage was dependent on lining up a purchase of the Notes from Fir Tree with a sale to Anchorage, on which no doubt BNPP would make its own turn.
Anchorage was interested in purchasing the Notes and carried out due diligence upon them. BNPP was aware that Anchorage was doing this, and there was some discussion about the Notes between analysts employed by the respective parties. Although Anchorage (not surprisingly) did not share with BNPP the results of its due diligence, this was a prospective sale of Irish distressed debt. BNPP would reasonably have concluded, therefore, that Anchorage would identify the major risk associated with the Notes as being a default brought about by the conduct of the Irish government, as in fact it did.
Although the initial contact had been with Matt Hartnett of Anchorage London, negotiations were taken up by Anchorage's New York office. On 5 December 2012 Scott Goodwin of Anchorage New York provided Anchorage's initial offer, saying in an e-mail of that date that "we are good for 60mm face on this at 65" — or in other words, offering to buy Notes with a face value of US $60 million at a price of 65 cents on the dollar.
Further negotiations took place over the next two days, not only on the price, but also on the quantity of Notes to be...
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