Goldman Sachs International v NOVO Banco S.A and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 07 August 2015 |
| Neutral Citation | [2015] EWHC 2371 (Comm) |
| Date | 07 August 2015 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case Nos: 2015215 |
[2015] EWHC 2371 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Hamblen
Case Nos: 2015215
2015213
Case No: 2015–215
and
Case No 2015–213
As Manager and Administrator of the New Zealand Superannuation Fund
and
Tim Lord QC and Max Schaefer (instructed by Bird & Bird) for the Claimant/Respondent in Claim 2015–15
Richard Salter QC and Jonathan Mark Phillipps (instructed by Pinsent Masons) for the Defendants/Applicants (in Claims 2015–213 and 2015–215)
Laurence Rabinowitz QC, Tom Smith QC and Adam Sher (Instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Claimants/Respondents in Claim 2015–213
Hearing dates: 27 and 28 July 2015
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
By a Facility Agreement dated 30 June 2014 ("the Facility Agreement"), Oak Finance Luxembourg S.A. ("Oak") agreed to lend approximately US$ 835 million to Banco Espírito Santo S.A. ("BES").
The Claimants in 2015 Folio 213 ("the NZ Claimants") and the Claimant in 2015 Folio 215, Goldman Sachs International ("GSI") (together "the Claimants") make claims for repayment and interest under the Facility Agreement as successors to Oak's rights ("the English proceedings").
The Claimants' claim is made against the Defendant, Novo Banco S.A. ("NB") which they contend has replaced BES as the Borrower under the Facility Agreement by a form of statutory transfer. This is denied by NB.
NB applies to set aside both sets of proceedings on the grounds that the court has no jurisdiction to determine the claims; alternatively it seeks a stay of the proceedings. The applications in both proceedings were heard together.
The evidence at the hearing consisted of witness statements from Mr McNeill of Pinsent Masons LLP for NB; from Mr Baker of Bird & Bird LLP for GSI and Mr Crosby (Head of Portfolio Investments for the First NZ Claimant), Mr Orr (CEO of the First NZ Claimant) and Mr East of Quinn Emanuel Urquhart & Sullivan UK LLP for the NZ Claimants, together with the exhibits thereto. Each of NB, GSI and the NZ Claimants also provided expert reports from a Portuguese Professor of Law.
Outline of the case
On 30 June 2014 the Facility Agreement was entered into between BES and Oak. On 3 July 2014 US$ 784,564,000(being the drawdown amount less certain commissions) was drawn down under that facility by BES.
The Facility Agreement contains an express choice of English law (clause 34) and of English jurisdiction (clause 35). Clause 35.1 ("the Jurisdiction Clause") provides as follows:
"(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including any dispute relating to any non-contractual obligation arising from or in connection with this Agreement and any dispute regarding the existence, validity or termination of this Agreement) (a Dispute).
(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary."
On 3 August 2014 the Bank of Portugal resolved to create NB and certain of the assets and liabilities of BES were transferred to it in accordance with a decision of the Bank of Portugal ("the August decision").
NB is the bridge bank created by the Bank of Portugal as a "resolution measure" pursuant to the Europe-wide scheme for the rescue of banks now reflected in the Bank Recovery and Resolution Directive 2014/59/EU ("EBRRD"). Bank of Portugal is the "resolution authority" under the EBRRD, and NB was created to continue the business of BES, a substantial distressed Portuguese bank.
The transfer of assets and liabilities from BES to NB falls to be recognised under English law by virtue of the Credit Institutions (Reorganisation and Winding up) Regulations 2004 ("the 2004 Regulations"), which implement the EBRRD. The 2004 Regulations direct that certain EEA Insolvency measures are treated as if they were part of the general law of insolvency of the UK. The August decision transferred all liabilities of BES to NB, save for a category of liabilities described as "Excluded Liabilities" (the "Excluded Liabilities"). A central dispute between the parties is whether the liabilities represented by the Facility Agreement (the "Oak Liability") fell within the category of Excluded Liabilities defined by the August decision. If it did not, the Oak Liability was transferred to NB. If it did, then it was not so transferred.
It was the Claimants' case that the Oak Liability was not an Excluded Liability, that the effect of the August decision was therefore to transfer the Oak Liability to NB and that NB thereby became a party to the Facility Agreement and agreed English jurisdiction in accordance with the Jurisdiction Clause.
On 11 August 2014 the Bank of Portugal made further decisions clarifying and adjusting the assets and liabilities transferred to NB.
Between 7 and 14 August 2014 there were communications between GSI, the Bank of Portugal and NB in which it was stated that the Facility Agreement had been transferred to NB. GSI contended that, if the Jurisdiction Clause had not already been agreed as a result of the August decision, it was agreed thereby.
On 22 December 2014 the Bank of Portugal issued a "ruling" that the Oak Liability had not been transferred to NB pursuant to the August decision, but remained a liability of BES ("the December decision").
It was NB's case that the consequence of the December decision is that, as a matter of Portuguese law there has been no transfer of the Oak Liability from BES to NB and that the English court is bound to recognise this as a matter of English and European law. It is the Claimants' case that the December decision is not relevant to jurisdiction and that, in any event, it has no effect as a matter of English law, being the applicable law.
On 29 December 2014 the first repayment instalment amount payment fell due under the Facility Agreement and was not paid.
On 11 February 2015 the Bank of Portugal affirmed its December decision.
Between 23 and 25 February 2015 Oak assigned the Oak Liability to the NZ Claimants and GSI.
On 26 February 2015 the English proceedings were issued.
In the English proceedings the Claimants contend that the failure to make the first repayment under the Facility Agreement was an event of default which has led to the loan being accelerated such that the entire sum and accrued interest has fallen due. GSI claims approximately US$ 222 million plus interest and the NZ Claimants claim approximately US$ 613 million plus interest.
On 5 March 2015 GSI issued proceedings with the Lisbon administrative court for an injunction to suspend the effect of the December decision. Those proceedings were served on NB on 2 April 2015.
On 13 April 2015 the NZ Claimants issued proceedings with the Lisbon administrative court seeking to annul the December decision.
Proceedings akin to judicial review have accordingly been brought by the Claimants in the Portuguese administrative courts against the Bank of Portugal, in which the Claimants have challenged the legality, validity and effectiveness of the December decision as a matter of Portuguese law ("the Portuguese proceedings").
NB contends that the English court is bound to refrain from exercising any jurisdiction to entertain the Claimants' claim because to do so trespasses on the administrative acts of a foreign executive body (the Bank of Portugal) which the court ought properly to refrain from investigating as non-justiciable acts. Further or alternatively, as a matter of comity, or as a matter of practicality and case management, the court ought not to entertain or allow progress of this claim while the central issue is properly pending before the administrative courts in Portugal.
The EBRRD
The EBRRD establishes a framework for the recovery and resolution of credit institutions and investment firms. Each Member State is to designate a "resolution authority" that has available to it various "resolution tools" that it can apply to failing credit institutions (which become "institutions under resolution").
Its Recitals include the following:
(1) "The financial crisis has shown that there is a significant lack of adequate tools at Union level to deal effectively with unsound or failing credit institutions and investments firms ('institutions'). Such tools are needed, in particular, to prevent insolvency or, when insolvency occurs, to minimise negative repercussions by preserving the systemically important functions of the institution concerned. During the crisis, those challenges were a major factor that forced Member States to save institutions using taxpayers' money. The objective of a credible recovery and resolution framework is to obviate the need for such action to the greatest extent possible.
….
(4) There is currently no harmonisation of the procedures for resolving institutions at Union level. Some Member States apply to institutions the same procedures that they apply to other insolvent enterprises, which in...
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