Construction of language used in an undertaking in CBIR proceedings (Sberbank of Russia v Ramljak)

Construction of language used in an undertaking in CBIR proceedings (Sberbank of Russia v Ramljak)

Alan Bennett, partner in the restructuring and insolvency team at Ashfords LLP, who has particular experience in cross-border insolvency, finds in reviewing Sberbank of Russia v Ramljak that precise drafting of a contract is key to determining a dispute.

What are the practical implications of this case?

Re Agrokor D.D.; Sberbank of Russia v Ramljak [2018] EWHC 348 (Ch), [2018] All ER (D) 141 (Feb)

The key point to take away from this case is that the phrase ‘final determination’ is defined as meaning ‘a point in time when determination can no longer be changed’. This indicates that final determination signifies the very last stage of any proceedings.

The judge placed great emphasis on the use of the word ‘final’, and considered what the use of that word added to the undertaking. Without the use of that word it may have been arguable that the recognition application was ‘determined’ when HHJ Paul Matthews made the recognition order.

This judgment emphasises that precise drafting is key. When considering a contract, the court will always look at the words used in the context in which the parties have used them—if Sberbank had referred to ‘determination’ rather than ‘final determination’, the outcome of the case might have been entirely different.

What was the background?

Agrokor DD, Croatia’s largest privately-owned company, and the holding company of a group of companies specialising in agriculture and food production, encountered financial difficulties. The sheer size of the company appeared to have prompted the enactment of new legislation in Croatia allowing the company and its subsidiaries to enter into extraordinary administration.

This created a moratorium on actions within Croatia, but in order for the moratorium to bite in England it was necessary to apply for the extraordinary administration to be recognised in England under the Cross-Border Insolvency Regulations 2006, SI 2006/1030.

The applicant, Sberbank, unusually, wished to contest the recognition application on the grounds that the extraordinary administration did not amount to a ‘foreign proceeding’ under SI 2006/1030. The recognition application was issued on 28 July 2017, and the parties came before Mr Justice Barling on 3 August 2017.

Critically, at that hearing, Sberbank undertook by way of a consent order that, pending the ‘final determination’ of the company’s recognition application, that they would take no further steps in an arbitration at the London Court of International Arbitration against the company and its subsidiaries, or carry on any further arbitration in England and Wales, or make any other application to the court relating to debts arising prior to the commencement of the extraordinary administration

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.