The UCTA argument—falling short of the standard

The UCTA argument—falling short of the standard

The summary judgment hearing in African Export-Import Bank v Shebah Exploration raised the interesting question of whether there are circumstances in which ‘neutral’ industry standard documents can constitute a contractual party’s standard terms of business within the meaning of section 3 of the Unfair Contract Terms Act 1977 (UCTA 1977). If so, this could have implications for the effectiveness of clauses that seek to exclude or limit liability for breach unless such clauses can be shown to satisfy the reasonableness test under UCTA 1977, s 11. The case also looks at whether a notice to accelerate a loan is valid if acceleration is expressed to be conditional on future events.

Original news

African Export-Import Bank v Shebah Exploration [2016] EWHC 311 (Comm), [2016] All ER (D) 213 (Feb)

The Commercial Court granted the claimant lenders summary judgment on their claim against the defendants for sums outstanding under a syndicated loan facility agreement, along with interest. It ruled that the defendants’ counterclaim for damages against the claimants could not provide them with an arguable defence to the claim because the ‘no set-off’ provisions of the facility agreement, under which the loan had been granted, were not subject to a test of reasonableness, under UCTA 1977, s 3, but applied with full contractual force.

The facts of the case

The three claimant lenders (the lenders) lent $150m in aggregate to the first defendant, Shebah Exploration & Production Company Limited (Shebah), a Nigerian company engaged in oil exploration and production. Shebah used the facility to discharge certain existing borrowing and for working capital purposes. The facility was guaranteed by the second defendant, Allenne Limited (Allenne), and the obligations of both Shebah and Allenne were personally guaranteed by the third defendant, Dr Orjiako.

Shebah made one repayment instalment in 2012 but failed to make any further payments so the lenders issued an application for summary

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.