CRF I Ltd v Banco Nacional De Cuba
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 04 April 2023 |
| Neutral Citation | [2023] EWHC 774 (Comm) |
| Docket Number | Case No: CL-2020-000092 |
| Court | Queen's Bench Division (Commercial Court) |
| Year | 2023 |
[2023] EWHC 774 (Comm)
Mrs Justice Cockerill
Case No: CL-2020-000092
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
7 Rolls Building
Fetter Lane
London,
EC4A 1NL
Jawdat Khurshid KC and Andrew Pearson (instructed by Rosenblatt for the Claimant
Alison MacDonald KC, Anton Dudnikov and Mark Belshaw (instructed by PCB Byrne LLP) for the Defendants
Hearing dates: 23,24,25,26, 30, 31 January 2023, 1, 2 February 2023
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down remotely by the judge and circulated to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Tuesday 4 April 2023 at 08:45am.
INTRODUCTION
This dispute involves a sovereign debt claim of something over €70 million by the Claimant (“CRF”) against the principal obligor of those debts, Banco Nacional de Cuba (“BNC”) and the guarantor of one of those debts, the Republic of Cuba (“Cuba”). The debts arise out of loan agreements dating to the mid 1980s.
CRF was not the original lender. It is a company which was established to invest in defaulted Cuban debt. It took what it says are valid assignments of the debts from the lenders and their successors, and it has sued the Defendants for those debts.
By a CPR Part 11 challenge issued on 26 May 2020, the Defendants have disputed the jurisdiction of the English Courts to hear this claim under three separate grounds.
i) First, the Defendants say that the Court has no jurisdiction to try the claims because the relevant debt agreements and guarantee were not validly assigned, the consequence of this being that CRF does not have the benefit of the submissions to the jurisdiction of the English courts that were present in those agreements (“Ground 1”).
ii) Second, the Defendants say that they are immune from the jurisdiction of the English courts pursuant to the State Immunity Act 1978 (“SIA”), as, similarly to Ground 1, the relevant debt agreements and guarantee were not validly assigned to CRF, such that CRF cannot take the benefit of the waivers of sovereign immunity present in those agreements (“Ground 2”).
iii) Thirdly, the Defendants contend that the conditions for service of the claim form out of the jurisdiction have not been satisfied because the relevant debt agreements were not validly assigned to CRF, so that CRF cannot take the benefit of the contractual provisions contained in those agreements (“Ground 3”).
As will be readily apparent, in order to determine each ground, the court has to decide the central question as to whether or not the relevant agreements and guarantee were validly assigned to CRF. The issue turns on a provision in the loan agreements and guarantee whereby the parties agreed that the agreements should not be assigned without “prior consent” – and also agreed that such consent was not to be unreasonably withheld.
The issues concern whether such prior consent was validly given, and in particular whether BNC had (under Cuban Law) capacity and/or authority to give such consent either on its own behalf (as regards the debts) or on behalf of Cuba (as regards the Guarantee); as well as a portfolio of contingent issues which arise depending on the answers to those central questions.
FACTUAL BACKGROUND
The legal background to the case goes back as far as 1948. The relevant legal provisions which will be considered are set out and dealt with in detail in the relevant sections of the judgment. However, by way of backdrop it may be useful for the reader to bear in mind the following skeletal timeline:
i) In 1944 and 1948 elections took place in Cuba. In 1948 Carlos Manuel Prío Socarrás was elected President. Under his presidency BNC was established. At this point BNC had authority to grant guarantees on behalf of Cuba and to consent to assignment of such guarantees on behalf of Cuba.
ii) The Cuban Revolution took place shortly thereafter, between 1952 and 1959. It was succeeded by significant legal reforms and changes. The position of BNC did not however materially alter.
iii) In 1976 a national referendum ratified a new constitution. At the same time under Law 1323/1976 (“ Law on Organisation of the Central State Administration”), BNC ceased to be the “Financial Organ of the State” but remained the central bank. Some of the functions it had previously performed moved to the State Finance Committee.
iv) In the 1970s and 1980s Cuba was in economic conflict with the USA and accumulated billions in unpaid loans and debts. Funds were borrowed from inter alia Mexico, Canada, Australia, France, Italy, Japan and the former Soviet Union. Much of this debt remains unpaid. The debts which form part of this claim are amongst these debts. The “Paris Club” (a forum for sovereign debt crisis resolution formed in the 1950s) subsequently entered into formal and informal discussions with Cuba with a view to potential restructuring.
v) In the 1980s BNC was still seen as the central bank of Cuba and was given functions including “ to oversee and record international credit operations of any nature”.
vi) The 1990s was a period of particular economic difficulty for Cuba, reflecting the changes in Russia, formerly Cuba's major trading partner. A “Special Period in Peacetime” was declared. A number of changes, including austerity measures and the legalization of the use of the US Dollar were introduced in 1994.
vii) In 1997 a new central Bank was formed – the Central Bank of Cuba (“BCC”). It took on a number of the functions of the BNC.
viii) The current legislation which is in issue dates from the period 1997–1999. In particular the following laws come into focus: Decree Law (“DL”) 172/1997 (“ On the Central Bank of Cuba”), DL 181/1998 (“ Of Banco Nacional de Cuba”), and DL 192/1999 (“ On the State Financial Administration”).
The relevant agreements
There are two agreements which CRF are seeking to rely on in order to reclaim the debt owed.
The first, on 24 January 1984, an agreement which was executed between Credit Lyonnais and BNC in which Credit Lyonnais agreed to maintain and extend the maturity of pre-existing deposits made with BNC (the “CL Agreement”). The second, on 30 January 1984, was an agreement executed between Istituto Banco Italiano and BNC on materially the same terms as the CL Agreement (the “IBI Agreement”).
On 30 January 1984, Cuba executed a guarantee dated 30 January 1984 (the “IBI Guarantee”). By the IBI Guarantee, in consideration of the IBI Agreement, Cuba agreed to guarantee that, if BNC failed to make payment of any sum payable under the IBI Agreement, Cuba would pay the same as if it were the sole principal.
In both relevant agreements, the creditor was entitled to assign its rights and obligations under the agreements, provided that prior consent was given by BNC, such consent not to be unreasonably withheld. The relevant clause is Clause 17 in both of the Agreements:
“17. ASSIGNMENT
(A) Benefit and Burden of this letter: This letter shall benefit and be binding on the parties, their respective successors and any permitted assignee or transferee of some or all of a party's rights and obligations under this letter. Any reference in this letter to any party shall be construed accordingly.…
(C) Bank:
(1) The Bank may assign all or part of its rights under this letter to any holding company or subsidiary of the Bank or any other subsidiary of any such holding company without the consent of the Borrower or to any other person with the prior consent of the Borrower, such consent not to be unreasonably withheld. If, as part of the same transaction, the Bank wishes to transfer all or part of its obligations under this letter, that assignment shall only be effective when that transfer becomes effective in accordance with paragraph (2).
(2) The bank may transfer all or part of its obligations under this letter to any holding company or subsidiary of the Bank or any other subsidiary of any such holding company or to any permitted assignee of all or (as the case may be) the corresponding part of its rights under this letter without the consent of the Borrower or to any other person with the prior consent of the Borrower, such consent not to be unreasonably withheld. The transfer shall become effective when the Bank has received from the transferee an undertaking (addressed to the Bank and the Borrower) to be bound by this letter and to perform the obligations transferred to it.
(3) Any such transferee shall be and be treated as the bank for all purposes of this letter and shall be entitled to the full benefit of this letter to the same extent as if it were an original party in respect of the rights or obligations assigned or transferred to it.”
Additionally, both the Agreements and the IBI Guarantee were expressed to be governed by and to be construed in accordance with English law. The Agreements and the IBI Guarantee contained provisions by which both BNC and Cuba submitted to the jurisdiction of the English Court, accepted service in England and agreed to waive any sovereign immunity.
The BNC Statutes
The BNC Statutes were brought into effect following Resolution No 1 of the BNC and pursuant to the provision in Article 2 of DL No. 181 of Banco Nacional de Cuba dated February 23, 1998.
They provide:
“CHAPTER III
ORGANISATION AND GOVERNMENT…
MANAGEMENT LEVELS AND THEIR HEADS …
Article 18: The President, when exercising his/her authority can grant the powers he deem necessary and delegate his/her authority to other managers and officials of the bank.
SECOND...
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