Goldman Sachs International v Novo Banco SA Guardians of New Zealand Superannuation Fund and Others v Novo Banco SA
| Jurisdiction | England & Wales |
| Judge | Lord Mance,Lady Black,Lord Hodge,Lord Sumption,Lord Lloyd-Jones |
| Judgment Date | 04 July 2018 |
| Neutral Citation | [2018] UKSC 34 |
| Court | Supreme Court |
| Date | 04 July 2018 |
[2018] UKSC 34
Lord Mance
Lord Sumption
Lord Hodge
Lady Black
Lord Lloyd-Jones
Appellant (1)
Tim Lord QC
Thomas Plewman QC
Max Schaefer
(Instructed by Cadwalader, Wickersham & Taft LLP)
Appellants (2)
Laurence Rabinowitz QC
David Caplan
Niranjan Venkatesan
(Instructed by Quinn Emanuel Urquhart & Sullivan LLP)
Respondent
Richard Salter QC
Jonathan Mark Phillips
(Instructed by Pinsent Masons LLP (London))
Intervener (Banco de Portugal)
Mark Howard QC
Oliver Jones
(Instructed by Enyo Law LLP)
Appellants
(1) Goldman Sachs International
(2) Guardians of New Zealand Superannuation Fund and others
Heard on 17 and 18 April 2018
( with whom Lord Mance, Lord Hodge, Lady Black and Lord Lloyd-Jones agree)
The financial crisis of 2007–2008 revealed systemic weaknesses in the European banking system and the lack of an adequate legal framework for rescuing failing banks in some member states of the European Union. The result, after a long period of deliberation, was the European Bank Recovery and Resolution Directive 2014/59/EU (or “EBRRD”). The directive required member states to confer on their domestic “Resolution Authorities” (usually the Central Bank) certain minimum powers (or “tools”) for reconstructing the businesses of failing credit institutions and investment firms. One of the “tools” was the “bridge institution tool”, which is dealt with in section 3 (articles 40–41) of the EBRRD. This required designated national Resolution Authorities to have the power to transfer to a “bridge institution” any assets, rights or liabilities of a failing credit institution.
The present appeal is about the recognition in the United Kingdom of measures by a foreign Resolution Authority in accordance with its own national legislation implementing the EBRRD. Any pan-European scheme for dealing with the systemic risks of bank failures must depend for its efficacy on the widest possible recognition of a home state's measures in other jurisdictions where banks in the course of reorganisation may have interests or assets or under whose laws it may have contracted. The EBRRD dealt with this issue mainly by amending the earlier Directive 2001/24/EC on the Reorganisation and Winding up of Credit Institutions (which I shall call the “Reorganisation Directive”). The Reorganisation Directive applied to credit institutions in the course of reorganisation or winding up in a member state. It provided for their assets and liabilities to be dealt with in a single process under the law of the home member state, and for the legal consequences to be recognised in all other member states, irrespective of any other relevant law. The EBRRD amended the Reorganisation Directive so that it applied to measures taken in accordance with the new “tools” with which member states were required to equip themselves. In addition, the EBRRD made supplementary provision for cooperation among member states in giving effect to those measures.
The appellants sue as the assignees of the rights of Oak Finance Luxembourg SA. On 30 June 2014, Oak entered into a facility agreement with a Portuguese commercial bank, Banco Espírito Santo SA (“BES”), through the latter's Luxembourg branch, under which it agreed to lend it about $835m. The facility agreement was governed by English law and provided for the English courts to have exclusive jurisdiction in respect of “any dispute arising out of or in connection with this Agreement”. The entire facility was drawn down on 3 July 2014. The first scheduled repayment, amounting to $52,860,814.22, was due on 29 December 2014. It shortly became clear, however, that BES was in serious financial difficulties. On 30 July 2014, BES reported losses for the first half of 2014 exceeding $3.5 billion, and on the following day applied to Banco de Portugal, the Central Bank of Portugal, for emergency liquidity assistance.
Banco de Portugal is the designated Resolution Authority for Portugal for the purpose of the EBRRD. The relevant terms of the EBRRD had been incorporated into Portuguese law by various provisions added by amendment to the Banking Law ( Regime Geral das Instituições de Crédito e Sociedades Financeiras). Articles 145-G, 145-H and 145-I of the Banking Law (as amended) implemented the provisions concerning the bridge institution tool.
On 3 August 2014, the Central Bank decided to invoke these provisions in order to protect depositors' funds. By a “Deliberation” published on that date it incorporated Novo Banco SA to serve as the bridge institution, and transferred to it the assets and liabilities of BES specified in Annexes 2 and 2A. Annex 2 specified all assets and liabilities recorded in its accounts with certain exceptions. Under article 145-H(2) of the Banking Law, no liability could be transferred to a bridge institution if it was owed to an entity holding more than 2% of the original credit institution's share capital. An exception to that effect was accordingly included as paragraph (b)(i)(a) of Annex 2 of the Central Bank's decision. Annex 2A was the balance sheet of BES as at 30 June 2014 adjusted to the time of transfer to show what was then understood to be the value of the transferred assets and liabilities. The Oak liability was not mentioned there by name, but it was included in the totals for liabilities.
There followed a number of further decisions of the Central Bank adjusting the transfer of both assets and liabilities as investigation of BES's affairs proceeded. One of these concerned the Oak liability. On 22 December 2014, a week before the due date of the first scheduled repayment of the Oak loan, an internal memorandum addressed to the Board of the Central Bank recorded that although it had originally been thought that the Oak liability was eligible for transfer to Novo Banco, subsequent investigations suggested (i) that Oak had entered into the facility agreement on behalf of Goldman Sachs, and (ii) that Goldman Sachs held more than 2% of BES's share capital. In these circumstances, the Board of the Central Bank reached a decision later that day. The document recording the decision recites that:
“there are serious and grounded reasons to justify the understanding that Oak Finance, in granting this loan, acted on account of Goldman Sachs International, an entity in relation to which serious and grounded reasons also exist to consider that it falls under paragraph a) of no 2 of article 145-H of the [Banking Law].”
The operative part of the decision, which follows, is in these terms:
“(a) Banco Espírito Santo's liability towards Oak Finance pursuant to the loan agreement of 30 June 2014 was not transferred to Novo Banco;
(b) This decision is effective as of 3 August 2014;
(c) Novo Banco and Banco Espírito Santo must adapt their accounting records to the present decision and act in accordance with it.”
Goldman Sachs objected. They contended that while they had arranged the facility agreement they were not the true lenders. Nor were they holders of more than 2% of BES's share capital. The Central Bank did not accept either point. On 11 February 2015, its Board resolved to maintain its decision of 22 December 2014. The minutes record Goldman Sachs' objection and the Central Bank's view that it disclosed no grounds for departing from the decision. But it recites that any issue as to the eligibility of the Oak loan for transfer to Novo Banco would ultimately have to be resolved by a court of law.
There are current administrative law proceedings in Portugal in which the appellants challenge the Central Bank's decision of 22 December 2014. These have not yet been resolved.
On 26 February 2015, the appellants commenced the present actions against Novo Banco in the High Court in England for sums due in respect of the Oak loan. The basis of their claims was that liability on the Oak facility had been transferred to Novo Banco by the Central Bank's decision of 3 August 2014. On that footing, Novo Banco was bound by the jurisdiction clause in the facility agreement. Novo Banco countered by applying to set aside service of the claim forms in both actions for want of jurisdiction, on the ground that it had not been transferred, principally because the decision of 22 December 2014 conclusively determined that that was so.
This is, accordingly, a case in which the fact on which jurisdiction depends is also likely to be decisive of the action itself if it proceeds. For the purpose of determining an issue about jurisdiction, the traditional test has been whether the claimant had “the better of the argument” on the facts going to jurisdiction. In Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192, para 7, this court reformulated the effect of that test as follows:
“… (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.”
It is common ground that the test must be satisfied on the evidence relating to the position as at the date when the proceedings were commenced.
There is, at least for the purposes of the...
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