Mehmet Omer Arif Aras v National Bank of Greece S.A.
| Jurisdiction | England & Wales |
| Judge | THE HON.,Mr. Justice Picken |
| Judgment Date | 08 June 2018 |
| Neutral Citation | [2018] EWHC 1389 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-000341 |
| Date | 08 June 2018 |
[2018] EWHC 1389 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
SHORTER TRIALS SCHEME
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HON. Mr. Justice Picken
Case No: CL-2017-000341
Ben Valentin QC (instructed by White & Case LLP) for the Claimants
Matthew Parker (instructed by Freshfields Bruckhaus Deringer LLP) for the Defendant
Hearing date: 30 April and 1–2 May 2018
Judgment Approved
Introduction
The Claimants are senior executives of QNB Finansbank AS (‘Finansbank’), which is apparently one of the largest banks in Turkey. The First Claimant, Dr Aras, is its Chairman and one of its co-founders. The Second Claimant, Mr Sahinbas, is its Vice Chairman and a former Chief Executive Officer. The Third Claimant, Mr Guzeloglu, is its current Chief Executive Officer.
This case concerns the Claimants' entitlement to a fee (the ‘Fee’) which they contend became payable by the Defendant, National Bank of Greece SA (‘NBG’), the second largest bank in Greece by market capitalisation, under three agreements, each described as an “Incentive Fee Agreement”, which they separately (but on materially identical terms) entered into with NBG on 30 December 2011 (the ‘IFAs’).
The purpose of the IFAs was described in Clause 1 ( “BACKGROUND”) as being:
“… to incentivize the Executive to use his best efforts to dispose of NBG's interest in the Finansbank Group, directly or indirectly, by providing the Executive with an opportunity to earn an incentive fee (the ‘Fee’) linked to such disposal on the terms and conditions set out in this Agreement.”
Under the IFAs, as explained in more detail later, it was agreed that the Fee would potentially become payable in the event of the disposal by NBG of more than 5% of its shares in Finansbank (defined as an “Exit Event”).
The present dispute comes about by reason of the fact that, on 21 December 2015, NBG entered into an agreement, described as a “Share Sale and Purchase Agreement” (the ‘SSPA’), under which it agreed to sell its shares in Finansbank to Qatar National Bank SAQ (‘QNB’). Upon completion of that sale, on 15 June 2016, QNB paid €2.711 billion to NBG for its shares in Finansbank and the shares were transferred to QNB. Under the SSPA, NBG also agreed separately to sell to QNB the subordinated debt of US$910 million which was due from Finansbank to NBG (the ‘Subordinated Debt’), at a price equal to its par value and accrued but unpaid interest.
It is common ground that, as a result of the sale of the shares to QNB (if not also the sale of the Subordinated Debt and certain other shares in a related company, Finans Finansal Kiralama AS (‘Finans Leasing’)), there has been an “Exit Event” for the purposes of the IFAs. There is a very real controversy, however, as to when precisely the “Exit Event” took place, specifically whether it was on the date when the SSPA was executed (21 December 2015) or on the date when NBG actually disposed of its shares in Finansbank to QNB pursuant to the SSPA (15 June 2016). This is one of the issues which the Court must resolve: the Claimants contend for the former whilst NBG contends for the latter.
That issue turns on the proper construction of the IFAs, including certain wording contained in the Appendix to the IFAs which sets out the formula agreed between the parties to work out what (if any) Fee is payable. So, too, do certain related disputes concerning (a) whether the Subordinated Debt should be taken into account in ascertaining Finansbank's value in accordance with that formula, (b) whether consideration received by NBG in respect of shares in Finans Leasing should similarly be taken into account for that purpose and (c) what is the appropriate exchange rate to take in view of the agreed formula contained in the Appendix.
These are all matters which I shall come on to address but, as regards (b), I should explain straightaway that, as at the date of the SSPA, besides owning almost the entirety of the shares in Finansbank, NBG also held directly a 29.87% shareholding in Finans Leasing. Although those shares did not form part of the “Shares” which were to be sold to QNB under the SSPA, in the negotiation of the sale it had nonetheless been anticipated that those shares would be transferred to Finansbank itself and that QNB would pay NBG for those shares. In the event, however, Finansbank itself paid NBG €38,886,563.04 for its shares in Finans Leasing, so reducing the price payable by QNB for NBG's shares in Finansbank to €2,711,112,659.23 rather than the €2.75 billion identified in the SSPA. For this reason, it was NBG's position that, in operating the formula contained in the Appendix to the IFAs, the Finans Leasing element should not be included. Mr Valentin QC on behalf of the Claimants did not agree, submitting that the fact that between execution of the SSPA and completion Finansbank acquired NBG's 29.87% shareholding in Finans Leasing meant that those shares, together with Finansbank's own 51% stake in Finans Leasing, also formed part of the assets of Finansbank which QNB acquired from NBG on completion, and so the IFAs should be treated as applying to the Finans Leasing shares also.
As to (c) (currency exchange date), this issue arises because, whereas Finansbank's “Equity Book Value” (as referred to in the Appendix to the IFAs) was denominated in Turkish Lira, NBG's accounts were denominated in Euros which meant that the sum payable by QNB to NBG in respect of the Shares in Finansbank was payable (and paid) in Euros. In addition, the sum payable by QNB to NBG in respect of the Subordinated Debt was payable (and paid) in US Dollars. Mr Valentin's submission was that the correct date for performing the relevant currency exchange is the date of the relevant “Equity Book Value” (30 September 2015), rather than the date of the “Exit Event”. Mr Parker on behalf of NBG, on the other hand, argued that the correct equivalent date is the date of the “Exit Event”, whenever that was (either 15 June 2016 or on 21 December 2015), and not any earlier date.
These are all disputes which need to be resolved. Suffice it to say that, although the Claimants say that they are each entitled to a substantial Fee (over €17 million in the case of Dr Aras and over €5 million in the cases of Mr Sahinbas and Mr Guzeloglu), NBG denies that anything is payable at all.
As I have already mentioned, this is a case which, at least in the first instance, turns on the proper construction of the IFAs. The Claimants, however, advance an alternative case that, if they are wrong on the construction issues which arise, then, nonetheless they are entitled to succeed with their claims because NBG is estopped from contending that a Fee is not payable in the light of how NBG conducted itself in advance of the sale to QNB.
I shall address both these cases (the construction case and the estoppel case) in what follows. First, however, it is important that I should set out some background in order that the issues can be seen in their proper context. That background is very largely, if not quite exclusively, common ground. As a result, I can essentially take it from the helpful summary in Mr Valentin's written closing submissions. However, the extent to which it is all admissible in relation to the construction-related issues which the Court has to determine is not entirely free from controversy.
Background to the IFAs
The Claimants and Finansbank
I start with the Claimants themselves, noting as I do so that Dr Aras and Mr Guzeloglu each gave evidence at trial and that they did so in a straightforward and constructive fashion. So, too, I should observe in the interests of fairness, did Mr Mylonas, Head of the Office of the Chief Executive Officer, Mr Apostolos Tamvakakis, at the time that the IFAs were entered into and now himself NBG's Deputy Chief Executive Officer.
The Claimants have worked together at Finansbank as a team for the last 15 years. They continue to do so to this day: Dr Aras as the Chairman, having co-founded Finansbank in 1987; Mr Sahinbas as the Vice Chairman, having joined Finansbank on graduation in 1990 and, apart from a short spell away in 1997/98, having worked with the bank in various positions in Istanbul and abroad ever since, being appointed Chief Executive Officer and joining the Board in 2003; and Mr Guzeloglu as Finansbank's current Chief Executive Officer, having joined Finansbank in 2004 and become a Board member in 2010.
As for Finansbank itself, Dr Aras's evidence was that as at the end of 2017, the Finansbank Group had consolidated assets of approximately US$35 billion under management and approximately US$3.3 billion of equity, with approximately 550 branches in Turkey and more than 14,000 employees serving 6 million or so active customers.
The events leading up to the IFAs
Turning to the parties' entry into the IFAs in December 2011, earlier that year Dr Aras was approached by Mr Tamvakakis to discuss NBG's plans to sell part of its shareholding in Finansbank. As part of that process, Mr Guzeloglu and Dr Aras travelled to London in March 2011, together with Mr Anthimos Thomopoulos, then NBG's Chief Financial Officer, on a ‘pilot fishing’ roadshow to meet with potential investors. Although well received, investors expressed concern at recent decisions of the Turkish Central Bank to increase the capital reserve requirements for Turkish banks (which would impact adversely on their profitability). In the circumstances, NBG decided to postpone the sale of any part of Finansbank, hoping that it would achieve a better price in the future. As part of this...
To continue reading
Request your trial
-
ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc
...in Blindley Heath Investments Ltd. v Bass [2015] EWCA Civ 1023 and of Picken J in Aras and others v National Bank of Greece SA [2018] EWHC 1389 (Comm). An estoppel by convention arises if (i) there is a relevant assumption of fact or law, either shared by both parties, or made by party B ......
-
First National Trustco (UK) Ltd v Kevin Page (on his own behalf and as representative for all other members of the unincorporated association known as Bahia Blanca Holiday Club)
...The requirement for “ clarity over what comprises the common assumption” was recently emphasised in Aras v National Bank of Greece [2018] EWHC 1389 (comm) per Picken J at 105 In Revenue & Customs Commissioners v Benchdollar Ltd [2010] 1 ALL ER 174, it was argued before Briggs J that there......
-
Geoquip Marine Operations AG v Tower Resources Cameroon SA
...v Gibson [1986] 1 EGLR 1. 124 This possible conflict of opinion was addressed by Picken, J in Aras v National Bank of Greece SA [2018] EWHC 1389 (Comm), at para. 114–115 (see also First National Trustco (UK) Ltd v Page [2019] EWHC 1187 (Ch), para. 104): “ 114. In order to found an estoppe......
-
ABN Amro Bank N.v v. Royal & Sun Alliance Insurance Plc
...referred to Blindley Heath Investments Ltd. v. Bass [2015] EWCA Civ 1023 (“ Blindley Heath”) and Aras v. National Bank of Greece SA [2018] EWHC 1389 (Comm) for the proposition that “[a]n estoppel by convention arises if (i) there is a relevant assumption of fact or law, either shared by b......