BNP Paribas SA v Trattamento Rifiuti Metropolitani S P A
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 11 September 2020 |
| Neutral Citation | [2020] EWHC 2436 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000583 |
| Date | 11 September 2020 |
Mrs Justice Cockerill DBE
Case No: CL-2016-000583
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice,
Rolls Building
Fetter Lane, London,
EC4A 1NL
Mr Adrian Beltrami Q.C. and Mr Christopher Bond (instructed by Allen & Overy LLP) for the Claimant
Mr Charles Samek Q.C. and Mr James Bickford Smith (instructed by Collyer Bristow LLP) for the Defendant
Hearing dates: 7, 8 July 2020
Draft Judgment sent to Parties: 4 September 2020
Approved Judgment
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 is the trial of a claim for declaratory relief – and at least in part negative declaratory relief — brought by the Claimant (“BNPP”). It concerns the parties' rights under an interest rate hedging arrangement entered into between BNPP and the Defendant (“TRM”) on or shortly after 23 March 2010 (“the Transaction”). The Transaction was entered into in connection with TRM's borrowings from BNPP (among other banks) under a Financing Agreement dated 29 October 2008 (and subsequently amended) (“the FA”). Those borrowings were to provide funding for TRM to design, build and operate a waste-to-energy plant in Gerbido, near Turin.
The Transaction is governed by English Law and, as the courts here have determined, is subject to the jurisdiction of the English Courts. TRM has previously sought to persuade this court that all disputes between the parties should be determined in Italy, where it is based, and which is the country whose law governs the FA between the parties. Proceedings in Italy are currently at the stage of jurisdictional arguments, but if they proceed then BNP will seek to rely on any declarations this court makes in those proceedings. TRM, consistently with its disinclination for these courts and its continuing position in Italy, brings no counterclaim and seeks no relief from this court. Neither side has called evidence.
The Factual Background
Owing to the sensible co-operation of the parties, the factual background can almost completely be taken from the agreed Case Memorandum. I am duly grateful to them.
TRM is a project company established on 24 December 2002. At its incorporation, TRM was wholly owned by the Municipality of Turin. Following changes in the ownership structure of TRM in 2012 and 2016, at present 80% of the shareholding in TRM is ultimately owned by IREN S.p.A. (“IREN”), and the remaining 20% is owned by Italian public bodies. IREN is a multi-utility company incorporated in Italy and listed on the Milan Stock Exchange. 51.29% of IREN's share capital is directly or indirectly owned by the municipalities of Genoa, Turin, Reggio Emilia, Parma, Piacenza, La Spezia and by other municipalities.
TRM was incorporated to design, build and operate a waste-to-energy plant (together with associated facilities, access roads and landfill) in Gerbido, near Turin (“the Project”).
BNPP is a bank incorporated in France and headquartered in Paris with branches in (among other places) London and Milan. It acquired the Banca Nazionale del Lavoro in around 2006. It admits in its Reply that it holds itself out as one of the leading banks in Italy.
On 22 July 2005, TRM received a concession from the Municipality of Turin to deliver the Project. By way of a call for tenders dated 23 January 2006, TRM sought to appoint a financial advisor for the Project.
On 6 July 2006, TRM entered into a financial advisory contract with a consortium of companies led by Banca OPI S.p.A. (“the FAC”). BNPP was not a party to or otherwise involved with the FAC. It had no obligations under the FAC.
In early January 2007, pursuant to the FAC, TRM received a preliminary information memorandum (“the PIM”), with recommendations for TRM's financing needs for the Project. Appended to the PIM was a preliminary term sheet (“the PTS”), setting out proposed terms and conditions for the project financing.
On 17 May 2007, TRM initiated a tendering process for financing the Project. On 31 October 2007, TRM sent a Call for Tender to ten banks, including BNPP. The Call for Tender referred to a further document, the Notes on Tender, which itself referred to the PIM and the PTS.
In response to the Call for Tender, BNPP made a tender. This was expressed by reference to (among other things) its Technical Offer dated 23 November 2007, which set out the services available to TRM. TRM submits that BNPP's Technical Offer outlined a range of activities that it would undertake on TRM's behalf including designing, advising on and implementing the financing structure for the Project. Those activities included “ provision for alternatives for hedging against the risk of interest rate fluctuation and, in accordance with TRM, subsequent definition of the definitive hedging coverage”. In the Technical Offer BNPP stated that “ with regard to TRM, BNPP … will be able to act as a single reference point for all the activities described … which will be carried out entirely by its Italian branch”.
BNPP won the tender following a meeting on 19 December 2007. On 1 July 2008, BNPP sent TRM and IREN a presentation on Hedging Products, in advance of a meeting at BNPP's offices on or around 3 July 2008 at which the presentation was given. On 25 July 2008, BNPP sent TRM a MiFID classification letter, informing TRM that it has been classified as a Professional Client.
The FA was entered into on 29 October 2008 between TRM as borrower and a syndicate of lenders led by BNPP. BNPP was party to the FA through its Milan Branch as Mandated Lead Arranger, Financing Bank, Agent Bank and Deposit Bank. The FA also defines BNPP as “Hedging Bank” for the purpose of interest-rate hedging arrangements, but BNPP is not party to the FA in that capacity. The FA is governed by Italian Law and contains a jurisdiction clause in favour of the Court of Turin.
Under the FA, a financing loan of €375m was made available to TRM, consisting of a Linea Base Commerciale (“the Term Loan”) and a Linea Base BEI (“the BEI Facility”). The FA was amended on 21 January 2010 and on 2 July 2010 to remove or add parties other than BNPP and TRM, and was amended again on 30 January 2013.
Under the FA, TRM was to pay a floating interest rate against which interest rate hedging contracts were to be made. In the FA, the Hedging Bank is defined as “ [BNPP] in its capacity as counterparty of [TRM] within the meaning of the Tender Documents and Hedging Contracts” (Article 1.2). Article 17.19 provides that “ [TRM] is committed to sign the Hedging Contracts in accordance with the Strategy of Hedging”. The Strategy of Hedging is defined as “ “the hedging strategy intended to cover the risk of fluctuation of interest on the Loan, as more fully described in Appendix 17.19””.
Appendix 17.19 to the FA provides as follows:
“1. [TRM] must conclude and maintain derivatives contracts covering the risk arising from interest rate fluctuations on 100% of the total amount disbursed from time to time and not reimbursed under the Base Lines (“Hedging Contracts”) from the first Date of Use indicated in the Financing Contract until the Final Expiry date of the Base Lines.
2. [TRM] must conclude Hedging Contracts exclusively with [BNPP] in its capacity as a Hedging Bank.
3. Hedging Contracts shall be concluded by [signing] the relative standard documentation as published from time to time by the International Transactions and Derivatives Association, Inc. (“ISDA”) and shall refer to the 1992 ISDA definitions.
4. Except in the case of Hedging Contracts, [TRM] may not enter into any sort of agreement which constitutes a derivative contract.”
On 30 January 2013, Article 17.19 was subsequently amended to include the following, further obligation on TRM:
“…to comply with its undertakings under the Hedging Contracts and to abstain from perfecting transactions of any kind whatsoever on financial instruments different from the Hedging Contracts”.
Also on 29 October 2008, BNPP and the other Financing Banks (but not TRM) entered into an Intercreditor Agreement (“the ICA”). BNPP was party to the ICA through its Milan Branch as Mandated Lead Arranger, Financing Bank and Agent Bank, and through its Paris Head Office as Hedging Bank. The ICA was agreed to be governed by Italian law, with an exclusive jurisdiction clause in favour of the Courts of Milan. The ICA was also amended at the same time as each amendment to the FA, on 21 January 2010, 2 July 2010 and 30 January 2013.
The Transaction
Following a further period of negotiation in early 2010 (including a Hedging Side Letter dated 26 February 2010 sent by BNPP's London Branch to TRM), on 23 March 2010 BNPP (through its Paris Head Office and in its capacity as Hedging Bank) entered into the Transaction with TRM. That reflected TRM's interest rate hedging obligations to the lenders under the FA. The Transaction documents (together, “the Transaction Documents”) comprise a 1992 ISDA Master Agreement dated 1 March 2010 (“the ISDA Master”) and the Schedule thereto (“the Schedule”), and a final Confirmation dated 23 March 2010.
The ISDA Master provides that:
“Section 1(b) — In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail.
Section 13 — Governing Law and Jurisdiction...
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