Law Debenture Trust Corporation Plc v Elektrim Finance BV [ChD]
| Jurisdiction | England & Wales |
| Judge | Mann J |
| Judgment Date | 01 July 2005 |
| Neutral Citation | [2005] EWHC 1412 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC05C00554 |
| Date | 01 July 2005 |
[2005] EWHC 1412 (Ch)
Mr. Justice Mann
Case No: HC05C00554
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MR. I. GLICK Q.C. and MR. A. CLUTTERBUCK (instructed by Simmons & Simmons for the Claimants.
MR. S. AULD Q.C. and MR. J. HOPE (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the First and Second Defendants.
MS. S. PREVEZER Q.C. and MR. S. HOUSEMAN (instructed by Bingham McCutchen LLP) for the Third Defendant.
Hearing dates: 28 th and 29 th June 2005
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.
MR JUSTICE MANN
Mr Justice Mann:
Introduction
In these proceedings, the claimant ("Law Debenture") seeks to enforce the payment of monies due under bonds issued by the first defendant ("the issuer") and guaranteed by the second defendant ("the guarantor") of which Law Debenture is trustee for the various bondholders. I shall call those defendants together "the Elektrim defendants". The trust deed contains provisions which provide for arbitration in certain events. By two applications before me, one issued by Law Debenture and the other by the issuer and the guarantor, the parties raise questions as to the extent to which these proceedings should be stayed to allow for arbitration, and in particular the extent to which this court, rather than the arbitral tribunal, should determine what should and should not go off to arbitration. The third defendant to these proceedings, Concord Trust ("Concord") is a bondholder and has been joined at its own request. It supports the position of Law Debenture.
The Debenture Trust Deed
The original bond trust deed was dated 2 nd July 1999. By virtue of various amendments, the current arrangements as between the issuer and the guarantor on the one hand and Law Debenture on the other is governed by an amended and restated trust deed dated 15 th November 2002, and I do not need to go into the earlier documentation. Nor do I need to deal with or set out many of the provisions in that document. The issuer is the primary obligor under the deed. The amount of the principal and interest said to be currently owing under the bonds exceeds €440m. Clause 12 of the bond conditions provides that in the event of certain specified events of default, Law Debenture, as bond trustees, may demand repayment of the outstanding principal by an acceleration notice. Subject to that, the principal is repayable in December 2005.
The arbitration provisions which lie at the heart of the present dispute are contained in clause 29 of the restated trust deed. Clause 29.1 provides that the deed is governed by English law. The remaining relevant provisions of clause 29 are as follows:
"29.2 Any dispute arising out of or in connection with these presents…… may be submitted by any party to arbitration for final settlement under … (the UNCITRAL Arbitration Rules), which rules are deemed to be incorporated by reference into this Clause 29.2
29.3 The tribunal shall consist of three arbitrators. The Claimant party shall appoint one arbitrator. The Respondent party to the arbitration shall appoint one arbitrator…..The Claimant party or parties and the Respondent party or parties to the arbitration shall jointly appoint the third arbitrator who shall be the chairman of the arbitral tribunal. The LCIA … shall act as the "appointing authority" under the UNICITRAL Arbitral Rules in the event that:
(A) any party or parties to the arbitration fail to appoint an arbitrator; or
(B) the parties to the arbitration fail to appoint jointly the third arbitrator within the time limits specified in the UNICITRAL Arbitration Rules.
29.4 The place of any such arbitration shall be London, and the language of the arbitration shall be English. The decision and award of the arbitrators shall be final and binding and shall be enforceable in any court of competent jurisdiction.
29.5 Save as provided in Clause 29.8 below, the parties exclude the jurisdiction of the courts under Section 45 and 69 of the Arbitration Act 1996.
29.6 The agreement by all the parties to refer all disputes arising out of or in connection with these presents …. to arbitration in accordance with Clause 29.2 above is exclusive such that neither [ESA] nor [EFBV] shall be permitted to bring proceedings in any other court or tribunal other than by way of counterclaim in respect of proceedings brought by the Trustee and/or each of the Bondholders in respect of any of the above documents in such other court or tribunal in accordance with this Clause.
29.7 Notwithstanding Clause 29.2, for the exclusive benefit of the Trustee and each of the Bondholders, [EFBV] and [ESA] hereby agree that the Trustee and each of the Bondholders shall have the exclusive right, at their option, to apply to the courts of England, who shall have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with these presents …. and that accordingly any suit, action or proceedings (together referred to as "Proceedings") arising out of or in connection with any of the above may be brought in such courts. ……
29.8 [EFBV] and [ESA] respectively:
(A) waive objection to the English courts on grounds of inconvenient forum or otherwise as regards Proceedings in connection with these presents ….; and
(B) agree that a judgement or order of an English court in connection with any of these presents …. is conclusive and binding on them and may be enforced against them in the courts of any other jurisdiction.
29.9 Each of [EFBV] and [ESA] hereby appoints Law Debenture Corporate Services Limited at its offices for the time being at Fifth Floor, 100 Wood Street, London EC2V 7EX as its agent to receive service of process in any Proceedings in England based on these presents, …"
The background to this dispute
By February 2004 an event had happened which was, or might have been, capable of being an event of default under the bonds. The details of that do not matter, and I will not lengthen this judgment by setting them out here. In that month Law Debenture sought directions as to whether it should take certain steps; the respondent to the application was Concord and other bondholder defendants. On 16 th February 2004 Peter Smith J delivered judgment in relation to that, as a result of which on 17 th February 2004 Law Debenture certified that the event in question was materially prejudicial for the purposes of the "events of default" provisions. There were then further proceedings with Concord as claimant and Law Debenture as defendant in which what was in issue was the extent to which Law Debenture were obliged to issue a notice of acceleration which would accelerate the date of the payment of principal under the bond. The details of those proceedings, which went up to the House of Lords, can be seen in the report of the House of Lords decision in Concord Trust v The Law Debenture Trust Corporation plc [2005] 1 WLR 1591. The effect of that decision was that, given certain requests by bondholders, Law Debenture was obliged to serve an acceleration notice. Judgment was given by the House of Lords on 28 th April 2005. While all this was going on, Law Debenture gave notice of various events of default. Once again, the details do not matter; the dates were 17 th February 2004, 11 th November 2004 and 29 th December 2004. Based on those three events of default, an acceleration notice was served on 18 th January 2005. On 22 nd February 2005 Law Debenture notified a fourth event (a bankruptcy application in Poland) as being a further event of default and served a second acceleration notice.
On 7 th January 2005 the guarantor gave notice of arbitration challenging whether the first three events of default were indeed events of default, saying that they were not and claiming damages. On 21 st January 2005, a supplemental arbitration notice was served, challenging the acceleration notice served on 18 th January 2005. In accordance with the arbitration procedure, the guarantor appointed its arbitrator (a Polish lawyer). Under that procedure, it then falls to Law Debenture to appoint an arbitrator, and for both parties to appoint a third. However, while Law Debenture corresponded with the LCIA, it did not appoint and says that nothing that it did amounted to participation in the arbitration. That being the case, on the application of the guarantor, the LCIA appointed Lord Browne-Wilkinson as second arbitrator. Just to complete that picture, on 26 th May 2005 the guarantor asked the LCIA to initiate a procedure to appoint the third arbitrator. The arbitration proceedings deal with the validity of only the first three alleged events of default, and the acceleration notice served in reliance on those three events. No arbitration proceedings have been commenced in relation to the fourth alleged event of default; as I understand it the reason for that is that the Elektrim parties considered that the relevant event is somehow spent because the bankruptcy proceedings were dismissed.
Law Debenture did not wish to go down the arbitration route in order to have the issues between the parties determined. On 9 th March 2005 it issued a claim form seeking a declaration that the bonds were due and owing, judgment in the full amount due under the bonds, the recovery of certain costs and interest (and costs in the proceedings). The claim form recites that Concord has requested to be joined to the claim as one of the holders of the bonds. No relief is sought against it. Concord was represented before me by counsel who supported Law Debenture and its submissions...
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