The European Union (Represented by the European Investment Bank) v The Syrian Arab Republic

JurisdictionEngland & Wales
JudgeMr. Justice Bryan
Judgment Date29 June 2018
Neutral Citation[2018] EWHC 1712 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2017-000508
Date29 June 2018
Between:
(1) The European Union (Represented by the European Investment Bank)
(2) The European Investment Bank
Claimants/Applicants
and
The Syrian Arab Republic
Defendant/Respondent

[2018] EWHC 1712 (Comm)

Before:

Mr. Justice Bryan

Case No: CL-2017-000508

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

The Rolls Building

7 Rolls Buildings

Fetter Lane

London EC4A 1NL

Mr. Adrian Beltrami QC and Ms. Hannah Glover (instructed by Allen & Overy LLP) for the Claimants/Applicants

The Defendant/Respondent did not appear and was not represented.

Mr. Justice Bryan
1

There is before me today the hearing of two applications. First of all, an application by the Claimants, the first Claimant being the European Union, represented by the European Investment Bank, and the second Claimant being the European Investment Bank (“the Bank”), for permission to apply for summary judgment against the Defendant, which is the Syrian Arab Republic (“Syria”), pursuant to CPR 24.4(1), in the absence of an acknowledgment of service or defence and, secondly, an application by the first Claimant, that is the European Union, for summary judgment on its claim pursuant to CPR 24.2.

2

There is an alternative claim made by the second Claimant, the Bank, although in the event that secondary application was not pursued, at least with any vigour, on the basis of the primary submission that the correct claimant was the European Union.

3

The European Union is the guarantor of Syria's repayment obligations under six Loan Agreements entered into between Syria and the Bank between 10th September 2003 and 8th December 2008 (“Loan Agreements”).

4

From at least 23rd July 1996, being the date on which the Council of the European Union adopted Regulation No. 1488/96 the EU has adopted a policy of providing financial assistance to countries in the Mediterranean region to support their economic, social and administrative reform. In furtherance of that policy the Bank entered into six Loan Agreements with Syria (collectively the “Loan Agreements”) in the period 10th September 2003 to 8th September 2008:

(1) By an agreement with number 22193, dated 10th November 2003 and varied on subsequent dates, namely 2nd September 2005, 27th February 2007, 16th October 2007, and by an agreement dated 28th July 2008, the Bank agreed to make €40 million available to Syria for the purpose of co-financing agreed capital investment projects to be carried out by small and medium sized enterprises in Syria (“the First Loan Agreement”).

(2) By an agreement with number 22751, dated 1st November 2004 and varied on 7th May 2008 and 22nd February 2009, the Bank agreed to make €200 million available to Syria for the purposes of co-financing the construction of the Deir Ali power plant located south of Damascus (“the Second Loan Agreement”).

(3) By an agreement with number 23334, dated 16th December 2005 and varied on 21st September 2008, the Bank agreed to make €100 million available to Syria for the purpose of co-financing a telecommunications project extending the fixed line telephone network to rural areas in Syria (“the Third Loan Agreement”).

(4) By an agreement with number 23496, dated 31st May 2006 and varied on 5th November 2009, the Bank agreed to make €45 million available to Syria for the purpose of co-financing the development of a new water and waste water infrastructure in municipalities south of Damascus (“the Fourth Loan Agreement”).

(5) By an agreement with number 24252, dated 6th December 2007 and varied by agreements dated 18th March 2010 and 25th November 2010, the Bank agreed to make an additional €80 million available to Syria for the purpose of co-financing projects to be carried out by private sector entities in Syria (“the Fifth Loan Agreement”).

(6) By an agreement with number 24725, dated 8th December 2008, the Bank agreed to make €275 million available to Syria for the purpose of co-financing the construction of an extension to the Deir Ali power plant (“the Sixth Loan Agreement”).

5

Save in certain identified respects, each the Loan Agreements contained the following terms:

(1) By Articles 1.01, 1.02 and 1.04 the Bank makes the specified sums available to Syria to be disbursed in tranches upon request and upon the satisfaction of specified conditions. A disbursement request is to specify whether the requested tranche is to bear a fixed or floating rate of interest, such rates being set pursuant to Article 3.01, save that the Fourth Loan Agreement makes no provision for floating rate interest;

(2) By Article 2.01 the loan comprises the aggregate of the amounts disbursed by the Bank under the Loan Agreement;

(3) By Article 3.01: (a) interest is payable on the outstanding balance of each fixed rate tranche at the rate specified in the applicable disbursement notice issued by the Bank; and (b) in all the Loan Agreements other than the Fourth Loan Agreement, interest is payable on the outstanding balance of each floating rate tranche at a floating interest rate determined by the Bank;

(4) By Article 3.02, interest shall accrue on any overdue sum from the due date to the date of payment at the higher (for any given relevant period) of: (i) a rate equal to EURIBOR, plus 2%; or (ii) the fixed rate payable under Article 3.01, plus 0.25%. Under the Third Loan Agreement the latter rate is applicable only to overdue fixed rate tranches;

(5) By Article 4.01 Syria is to repay the loan in instalments in accordance with amortisation tables provided by the bank;

(6) By Articles 8.01 and 8.02 Syria is to pay all taxes, duties, fees and professional costs arising out of the execution or implement of the Loan Agreement or any related document;

(7) By Article 10.01 the Loan Agreement shall be governed by English law, and by Article 10.02 all disputes concerning it shall be submitted to the Courts of England. The Bank and Syria waive any immunity from or right to object to the English Court's jurisdiction and a decision of the Court shall be conclusive and binding on both parties without restriction or reservation.

Disbursements to Syria under the Loan Agreements

6

The Bank has disbursed sums to Syria under the Loan Agreements totalling €364,853,821.75, comprising: (a) €27,450,000 under the First Loan Agreement (“the First Loan”); (b) €200 million under the Second Loan Agreement (“the Second Loan”); (c) €54,386,860.75 under the Third Loan Agreement (“the Third Loan”); (d) €1 million under the Fourth Loan Agreement (“the Fourth Loan”); (e) €31,998,961 under the Fifth Loan Agreement (“the Fifth Loan”); and (f) €50 million under the Sixth Loan Agreement (“the Sixth Loan”).

The Guarantees

7

Each of the loans was guaranteed by the EU, the relevant guarantees having been granted pursuant to the decisions of the Council of the European Union (acting together in one instance with the European Parliament).

8

The relevant decisions and guarantees are identified in paragraphs 11 to 53 of the Particulars of Claim, to which I have had regard. In summary:

(1) On 22nd December 1999, the Council of the European Union issued Decision 2000/24/EC (“the 2000 Decision”), by which it determined that the EU would grant the Bank a guarantee for loans made by the bank from its own resources to countries including Syria.

(2) Pursuant to the 2000 Decision, on 24th July 2000 the EU and the Bank entered into a guarantee agreement (“the 2000 Guarantee”). On 2nd September 2005 the EU and the Bank entered into a materially identical guarantee (“the 2005 Guarantee”), which cancelled and replaced the 2000 Guarantee.

(3) On 19th December 2006 the Council of the European Union issued Decision 2006/1016/EC (“the 2006 Decision”), by which it determined that the EU would grant the Bank a further guarantee for loans and guarantees issued by the Bank to countries including Syria between 1st February 2007 and 31st December 2013.

(4) Pursuant to the 2006 Decision, on 29th August 2007, the EU and the Bank entered into a guarantee agreement (“the 2007 Guarantee”).

(5) On 25th October 2011, the Council of the European Union and the European Parliament issued Decision 1080/2011/EU, by which it was determined that the EU would grant the Bank a further guarantee for loans and guarantees issued by the Bank to countries including Syria between the 1st February 2007 and the 31st December 2013, including those within the remit of the 2006 Decision (“the 2011 Decision”).

(6) Pursuant to the 2011 Decision on 22nd November 2011 the EU and the Bank entered into a further guarantee agreement (“the 2011 Guarantee”).

9

It was an express term of each of the Guarantees that, to the extent that the EU made any payment under the Guarantees, the EU would be subrogated to the rights that the Bank held against the relevant guaranteed party.

10

In this action, and in relation to the claim for summary judgment before me today, the European Union now seeks to recover from Syria the sums it has paid out to the Bank on a subrogated basis. In this regard, since November 2011, Syria has failed to make payments to the Bank under Loan Agreements as they have fallen due and the European Union has accordingly indemnified the Bank for its losses under the Loan Agreements. So the claim that is advanced today before me by the European Union is for the sums it has paid out to the Bank on a subrogated basis, together with further contractual interest accruing until the date of payment. As at 16th May 2018 the amount claimed was €189,866,309.83.

11

The claim form and Particulars of Claim were issued on 11th August 2017 and served on...

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