Supreme Court rules on recognition of foreign measure for bank reorganisation (Goldman Sachs and others v Novo Banco)

Supreme Court rules on recognition of foreign measure for bank reorganisation (Goldman Sachs and others v Novo Banco)

A Supreme Court ruling recognises that a decision of the Portuguese central bank that, when it incorporated the respondent bank as a bridge institution and transferred to it the assets and liabilities of a failed bank, a liability to the appellants under a loan agreement had not, as a result of Portuguese law, been included in the transfer. Richard Salter QC and Jonathan Mark Phillips, of 3 Verulam Buildings, examine the decision.

Goldman Sachs and others v Novo Banco [2018] UKSC 34, [2018] All ER (D) 18 (Jul)

What are the practical implications of the decision?

The UK Supreme Court, giving judgment in two appeals heard together, has provided clarity and certainty as to the efficacy under English law of measures taken under the laws of other EU states to rescue, reconstruct or preserve the operations of failing financial institutions.

Although the particular circumstances which gave rise to these claims are unlikely to arise again, the principles on which the English court—and courts throughout the EU—are bound to act have been firmly stated. Practitioners should be aware that the rights of their clients against foreign financial institutions, and even those written under English law, may be affected by reorganisation measures or other steps under foreign law and sometimes unfamiliar legal principles. The issue remains highly topical demonstrated by recent events in Italy and the resolution in Spain of the Banco Popular case, Case (2016) C-154/15.

What was the background?

Legislative background

Following the financial crisis of 2007/08, it was apparent that there was a need to enhance the emergency powers available to deal with failing or insolvent banks and financial institutions. The systemic risk to the banking system and the wider economy was too great to allow them simply to fail, but the need to ensure that the bankers were not simply bailed out was an equal economic and political imperative.

In the UK, powers were introduced under the Banking Act 2009. At a European level, steps were taken to

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About the author:

Anna joined the Restructuring and Insolvency team at Lexis®PSL in August 2013 from Berwin Leighton Paisner where she was a senior associate in the Restructuring Team.

Anna has worked on a number of large scale restructurings primarily in the UK market acting on behalf of lending institutions.

Recent transactions include the restructuring of a UK hotel chain and the administration sale of part of the Connaught group. Anna has also spent time on secondment at The Royal Bank of Scotland and trained at Clifford Chance qualifying in 2007.