Court says 'No' to Novo Banco regarding jurisdiction over loan agreements

Court says 'No' to Novo Banco regarding jurisdiction over loan agreements

In the recent conjoined Novo Banco cases the court addressed jurisdiction over a loan agreement with an exclusive English jurisdiction clause and considered the interpretation and effect of the European Directive on Bank Recovery and Resolution.

Adam Sher, commercial barrister at Fountain Court and one of the junior counsel acting in the case, takes a look at what this judgment will do to clarify the law in this area.

Original news

Goldman Sachs International v Novo Banco SA; Guardians of New Zealand Superannuation as manager and administrator of the New Zealand Superannuation Fund v Novo Banco SA [2015] EWHC 2371 (Comm), [2015] All ER (D) 62 (Aug)

In the defendant bridge institution's application to set aside or stay the claimants' proceedings against it as successor of debts, the Commercial Court found that it had jurisdiction, under Regulation (EU) 2015/2012 (Brussels I (recast)), whichit would not decline to exercise by reason of the principle of non-justiciability or act of state. Further, a stay would not be granted pending the decision of the administrative courts in Portugal, on the basis of case management.

What was the background to the application?

The claimants were successors to the rights of a Luxembourg SPV (Oak Finance) whichhad made a $835m loan (governed by English law and with an exclusive jurisdiction clause in favour of the English courts) to a major Portuguese bank, Banco Espirito Santo SA (BES). BES's parent company fell into financial difficulty, whichled to the intervention of the Portuguese Central Bank (the Bank of Portugal), exercising powers conferred on it as a 'resolution authority' under the Bank Recovery and Resolution Directive 2014/59/EU (BRRD). Pursuant to those powers, and by a decision on 3 August 2014 (the August decision) the Bank of Portugal created a 'bridge bank', Novo Banco (literally New Bank) to whichall liabilities of BES were transferred except certain specified categories of liabilities. On 22 December 2014 the Bank of Portugal issued a further decision (the December decision)

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About the author:
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.