Trinity Term [2018] UKSC 34 On appeal from: [2016] EWCA Civ 1092

JUDGMENT
Goldman Sachs International (Appellant) v Novo
Banco SA (Respondent)
Guardians of New Zealand Superannuation Fund
and others (Appellants) v Novo Banco SA
(Respondent)
before
Lord Mance
Lord Sumption
Lord Hodge
Lady Black
Lord Lloyd-Jones
JUDGMENT GIVEN ON
4 July 2018
Heard on 17 and 18 April 2018
Appellant (1) Respondent
Tim Lord QC Richard Salter QC
Thomas Plewman QC Jonathan Mark Phillips
Max Schaefer
(Instructed by
Cadwalader, Wickersham
& Taft LLP)
(Instructed by Pinsent
Masons LLP (London))
Appellants (2)
Laurence Rabinowitz QC
David Caplan
Niranjan Venkatesan
(Instructed by Quinn
Emanuel Urquhart &
Sullivan LLP)
Intervener
(Banco de Portugal)
Mark Howard QC
Oliver Jones
(Instructed by Enyo Law
LLP)
Appellants
(1) Goldman Sachs International
(2) Guardians of New Zealand Superannuation Fund and others
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LORD SUMPTION: (with whom Lord Mance, Lord Hodge, Lady Black and
Lord Lloyd-Jones agree)
1. The financial crisis of 2007-2008 revealed systemic weaknesses in the
European banking system and the lack of an adequate legal framework for rescuing
failing banks in some member states of the European Union. The result, after a long
period of deliberation, was the European Bank Recovery and Resolution Directive
2014/59/EU (or “EBRRD”). The directive required member states to confer on their
domestic “Resolution Authorities” (usually the Central Bank) certain minimum
powers (or “tools”) for reconstructing the businesses of failing credit institutions and
investment firms. One of the “tools” was the “bridge institution tool”, which is dealt
with in section 3 (articles 40-41) of the EBRRD. This required designated national
Resolution Authorities to have the power to transfer to a “bridge institution” any
assets, rights or liabilities of a failing credit institution.
2. The present appeal is about the recognition in the United Kingdom of
measures by a foreign Resolution Authority in accordance with its own national
legislation implementing the EBRRD. Any pan-European scheme for dealing with
the systemic risks of bank failures must depend for its efficacy on the widest possible
recognition of a home state’s measures in other jurisdictions where banks in the
course of reorganisation may have interests or assets or under whose laws it may
have contracted. The EBRRD dealt with this issue mainly by amending the earlier
Directive 2001/24/EC on the Reorganisation and Winding up of Credit Institutions
(which I shall call the “Reorganisation Directive”). The Reorganisation Directive
applied to credit institutions in the course of reorganisation or winding up in a
member state. It provided for their assets and liabilities to be dealt with in a single
process under the law of the home member state, and for the legal consequences to
be recognised in all other member states, irrespective of any other relevant law. The
EBRRD amended the Reorganisation Directive so that it applied to measures taken
in accordance with the new “tools” with which member states were required to equip
themselves. In addition, the EBRRD made supplementary provision for cooperation among member states in giving effect to those measures.
Oak Finance and Banco Espírito Santo SA
3. The appellants sue as the assignees of the rights of Oak Finance Luxembourg
SA. On 30 June 2014, Oak entered into a facility agreement with a Portuguese
commercial bank, Banco Espírito Santo SA (“BES”), through the latter’s
Luxembourg branch, under which it agreed to lend it about $835m. The facility
agreement was governed by English law and provided for the English courts to have
exclusive jurisdiction in respect of “any dispute arising out of or in connection with
this Agreement”. The entire facility was drawn down on 3 July 2014. The first
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scheduled repayment, amounting to $52,860,814.22, was due on 29 December 2014.
It shortly became clear, however, that BES was in serious financial difficulties. On
30 July 2014, BES reported losses for the first half of 2014 exceeding $3.5 billion,
and on the following day applied to Banco de Portugal, the Central Bank of Portugal,
for emergency liquidity assistance.
4. Banco de Portugal is the designated Resolution Authority for Portugal for the
purpose of the EBRRD. The relevant terms of the EBRRD had been incorporated
into Portuguese law by various provisions added by amendment to the Banking Law
(Regime Geral das Instituições de Crédito e Sociedades Financeiras). Articles 145-
G, 145-H and 145-I of the Banking Law (as amended) implemented the provisions
concerning the bridge institution tool.
5. On 3 August 2014, the Central Bank decided to invoke these provisions in
order to protect depositors’ funds. By a “Deliberation” published on that date it
incorporated Novo Banco SA to serve as the bridge institution, and transferred to it
the assets and liabilities of BES specified in Annexes 2 and 2A. Annex 2 specified
all assets and liabilities recorded in its accounts with certain exceptions. Under
article 145-H(2) of the Banking Law, no liability could be transferred to a bridge
institution if it was owed to an entity holding more than 2% of the original credit
institution’s share capital. An exception to that effect was accordingly included as
paragraph (b)(i)(a) of Annex 2 of the Central Bank’s decision. Annex 2A was the
balance sheet of BES as at 30 June 2014 adjusted to the time of transfer to show
what was then understood to be the value of the transferred assets and liabilities. The
Oak liability was not mentioned there by name, but it was included in the totals for
liabilities.
6. There followed a number of further decisions of the Central Bank adjusting
the transfer of both assets and liabilities as investigation of BES’s affairs proceeded.
One of these concerned the Oak liability. On 22 December 2014, a week before the
due date of the first scheduled repayment of the Oak loan, an internal memorandum
addressed to the Board of the Central Bank recorded that although it had originally
been thought that the Oak liability was eligible for transfer to Novo Banco,
subsequent investigations suggested (i) that Oak had entered into the facility
agreement on behalf of Goldman Sachs, and (ii) that Goldman Sachs held more than
2% of BES’s share capital. In these circumstances, the Board of the Central Bank
reached a decision later that day. The document recording the decision recites that:
“there are serious and grounded reasons to justify the
understanding that Oak Finance, in granting this loan, acted on
account of Goldman Sachs International, an entity in relation
to which serious and grounded reasons also exist to consider
that it falls under paragraph a) of no 2 of article 145-H of the
[Banking Law].”
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The operative part of the decision, which follows, is in these terms:
“(a) Banco Espírito Santo’s liability towards Oak Finance
pursuant to the loan agreement of 30 June 2014 was not
transferred to Novo Banco;
(b) This decision is effective as of 3 August 2014;
(c) Novo Banco and Banco Espírito Santo must adapt their
accounting records to the present decision and act in
accordance with it.”
Goldman Sachs objected. They contended that while they had arranged the facility
agreement they were not the true lenders. Nor were they holders of more than 2%
of BES’s share capital. The Central Bank did not accept either point. On 11 February
2015, its Board resolved to maintain its decision of 22 December 2014. The minutes
record Goldman Sachs’ objection and the Central Bank’s view that it disclosed no
grounds for departing from the decision. But it recites that any issue as to the
eligibility of the Oak loan for transfer to Novo Banco would ultimately have to be
resolved by a court of law.
7. There are current administrative law proceedings in Portugal in which the
appellants challenge the Central Bank’s decision of 22 December 2014. These have
not yet been resolved.
The present proceedings
8. On 26 February 2015, the appellants commenced the present actions against
Novo Banco in the High Court in England for sums due in respect of the Oak loan.
The basis of their claims was that liability on the Oak facility had been transferred
to Novo Banco by the Central Bank’s decision of 3 August 2014. On that footing,
Novo Banco was bound by the jurisdiction clause in the facility agreement. Novo
Banco countered by applying to set aside service of the claim forms in both actions
for want of jurisdiction, on the ground that it had not been transferred, principally
because the decision of 22 December 2014 conclusively determined that that was
so.
9. This is, accordingly, a case in which the fact on which jurisdiction depends
is also likely to be decisive of the action itself if it proceeds. For the purpose of
determining an issue about jurisdiction, the traditional test has been whether the
claimant had “the better of the argument” on the facts going to jurisdiction. In
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Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192, para 7, this court
reformulated the effect of that test as follows:
“… (i) that the claimant must supply a plausible evidential
basis for the application of a relevant jurisdictional gateway;
(ii) that if there is an issue of fact about it, or some other reason
for doubting whether it applies, the court must take a view on
the material available if it can reliably do so; but (iii) the nature
of the issue and the limitations of the material available at the
interlocutory stage may be such that no reliable assessment can
be made, in which case there is a good arguable case for the
application of the gateway if there is a plausible (albeit
contested) evidential basis for it.”
It is common ground that the test must be satisfied on the evidence relating to the
position as at the date when the proceedings were commenced.
Portuguese law
10. There is, at least for the purposes of the jurisdiction issue, a large measure of
common ground about the powers of the Central Bank and the legal status of its
successive decisions as a matter of Portuguese law. The decisions of 3 August and
22 December 2014 were administrative acts governed by rules of administrative law
which, as in other civil law systems, are distinct from the rules which govern civil
matters. It is agreed that both decisions were valid acts establishing legal rights and
obligations of third parties in accordance with their terms. It is agreed that a public
authority may amend its own administrative act prospectively or interpret it with
effect from the time it was made. It is agreed that a public authority may by a
subsequent decision implement its own administrative act or apply it to a particular
case. Finally, it is agreed that administrative acts are reviewable by the courts of
Portugal, which may annul them on the ground that they were based on an erroneous
factual assumption or on an error of law. But unless and until they are annulled, they
remain binding and directly effective as a matter of law.
11. The parties are not agreed about the meaning of the December decision. They
are, however, agreed that it took effect according to its terms from 3 August 2014
and that subject to annulment by a Portuguese court it conclusively determined as a
matter of Portuguese law that the Oak liability was not transferred to Novo Banco.
The appellants’ case is that while the legal effect of the August decision in Portugal
falls to be recognised in England, the legal effect of the December decision does not.
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Recognition: the Directives
12. The rescue of failing financial institutions commonly involves measures
affecting the rights of their creditors and other third parties. Depending on the law
under which the rescue is being carried out, these measures may include the
suspension of payments, the writing down of liabilities, moratoria on their
enforcement, and transfers of assets and liabilities to other institutions. At common
law measures of this kind taken under a foreign law have only limited effect on
contractual liabilities governed by English law. This is because the discharge or
modification of a contractual liability is treated in English law as being governed
only by its proper law, so that measures taken under another law, such as that of a
contracting party’s domicile, are normally disregarded: Adams v National Bank of
Greece SA [1961] AC 255. By way of exception, however, the assumption of
contractual liabilities by another entity by way of universal succession may be
recognised in England: National Bank of Greece & Athens SA v Metliss [1958] AC
509.
13. The National Bank of Greece litigation arose out of the reconstruction under
Greek law of the liabilities of an insolvent Greek bank which had issued bonds
governed by English law, a context very similar to that of the present appeal. As
regards banks, however, the law declared in those two decisions of the House of
Lords was superseded by the Credit Institutions (Reorganisation and Winding Up)
Regulations (SI 2004/1045), which gave effect in English law to the Reorganisation
Directive, and by the Bank Recovery and Resolution (No 2) Order (SI 2014/3348)
which amended the 2004 order to reflect the changes made to the Reorganisation
Directive by the EBRRD.
14. The purpose of the Reorganisation Directive is apparent from its recitals.
Recitals (6), (7) and (16) are in the following terms:
“(6) The administrative or judicial authorities of the home
member state must have sole power to decide upon and to
implement the reorganisation measures provided for in the law
and practices in force in that member state. Owing to the
difficulty of harmonising member states’ laws and practices, it
is necessary to establish mutual recognition by the member
states of the measures taken by each of them to restore to
viability the credit institutions which it has authorised.
(7) It is essential to guarantee that the reorganisation
measures adopted by the administrative or judicial authorities
of the home member state and the measures adopted by persons
or bodies appointed by those authorities to administer those
reorganisation measures, including measures involving the
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possibility of a suspension of payments, suspension of
enforcement measures or reduction of claims and any other
measure which could affect third parties’ existing rights, are
effective in all member states.

(16) Equal treatment of creditors requires that the credit
institution is wound up according to the principles of unity and
universality, which require the administrative or judicial
authorities of the home member state to have sole jurisdiction
and their decisions to be recognised and to be capable of
producing in all the other member states, without any formality,
the effects ascribed to them by the law of the home member
state, except where this Directive provides otherwise.”
15. The relevant substantive provision is article 3, which provides:
“Article 3
Adoption of reorganisation measures – applicable law
1. The administrative or judicial authorities of the home
member state shall alone be empowered to decide on the
implementation of one or more reorganisation measures in a
credit institution, including branches established in other
member states.
2. The reorganisation measures shall be applied in
accordance with the laws, regulations and procedures
applicable in the home member state, unless otherwise
provided in this Directive.
They shall be fully effective in accordance with the legislation
of that member state throughout the Community without any
further formalities, including as against third parties in other
member states, even where the rules of the host member state
applicable to them do not provide for such measures or make
their implementation subject to conditions which are not
fulfilled.
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The reorganisation measures shall be effective throughout the
Community once they become effective in the member state
where they have been taken.”
Article 3 governs the recognition of “reorganisation measures”. Article 2, as
amended by article 117(2) of the EBRRD, defines these as follows:
“‘reorganisation measures’ shall mean measures which are
intended to preserve or restore the financial situation of a credit
institution or an investment firm as defined in article 4(1), point
(2) of Regulation (EU) No 575/2013 and which could affect
third parties’ pre-existing rights, including measures involving
the possibility of a suspension of payments, suspension of
enforcement measures or reduction of claims; those measures
include the application of the resolution tools and the exercise
of resolution powers provided for in Directive 2014/59/EU.”
16. Since it is not disputed that Banco de Portugal had power under Portuguese
law to employ the bridge institution tool as it did, it is unnecessary to examine the
detailed provisions of the EBRRD relating to the reconstruction of bank liabilities.
For present purposes, the relevant provisions are those dealing with mutual
recognition of the legal effects of measures taken in accordance with the “tools” and
the provisions dealing with challenges to those measures in the courts of the home
member state.
17. As far as mutual recognition is concerned, recital (119) recites:
“(119) Directive 2001/24/EC of the European Parliament and
of the Council provides for the mutual recognition and
enforcement in all member states of decisions concerning the
reorganisation or winding up of institutions having branches in
member states other than those in which they have their head
offices. That Directive ensures that all assets and liabilities of
the institution, regardless of the country in which they are
situated, are dealt with in a single process in the home member
state and that creditors in the host member states are treated in
the same way as creditors in the home member state. In order
to achieve an effective resolution, Directive 2001/24/EC
should apply in the event of use of the resolution tools both
when those instruments are applied to institutions and when
they are applied to other entities covered by the resolution
regime. Directive 2001/24/EC should therefore be amended
accordingly.”
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Article 66 is a supplementary recognition provision dealing with (among other
things) dispositions of assets and liabilities in the course of a reorganisation of a
credit institution in its home state. It provides:
“Article 66
Power to enforce crisis management measures or crisis
prevention measures by other member states.
1. Member states shall ensure that, where a transfer of
shares, other instruments of ownership, or assets, rights or
liabilities includes assets that are located in a member state
other than the state of the resolution authority or rights or
liabilities under the law of a member state other than the State
of the resolution authority, the transfer has effect in or under
the law of that other member state.

3. Member states shall ensure that shareholders, creditors
and third parties that are affected by the transfer of shares, other
instruments of ownership, assets, rights or liabilities referred to
in paragraph 1 are not entitled to prevent, challenge, or set aside
the transfer under any provision of law of the member state
where the assets are located or of the law governing the shares,
other instruments of ownership, rights or liabilities.”
18. Turning to proceedings to challenge measures taken in accordance with the
“tools”, recitals (88) and (89) of the EBRRD recite the need for the decisions of a
Resolution Authority to be subject to appeal to the courts on the ground (among
others) of insufficient factual basis. Recitals (90) and (91) are in the following terms:
“(90) Since this Directive aims to cover situations of extreme
urgency, and since the suspension of any decision of the
resolution authorities might impede the continuity of critical
functions, it is necessary to provide that the lodging of any
appeal should not result in automatic suspension of the effects
of the challenged decision and that the decision of the
resolution authority should be immediately enforceable with a
presumption that its suspension would be against the public
interest.
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(91) In addition, where necessary in order to protect third
parties who have acquired assets, rights and liabilities of the
institution under resolution in good faith by virtue of the
exercise of the resolution powers by the authorities and to
ensure the stability of the financial markets, a right of appeal
should not affect any subsequent administrative act or
transaction concluded on the basis of an annulled decision. In
such cases, remedies for a wrongful decision should therefore
be limited to the award of compensation for the damages
suffered by the affected persons.”
The corresponding substantive provision is article 85, which provides:
“Article 85
Ex-ante judicial approval and rights to challenge decisions
1. Member states may require that a decision to take a
crisis prevention measure or a crisis management measure is
subject to ex-ante judicial approval, provided that in respect of
a decision to take a crisis management measure, according to
national law, the procedure relating to the application for
approval and the court’s consideration are expeditious. …
3. Member states shall ensure that all persons affected by
a decision to take a crisis management measure, have the right
to appeal against that decision. Member states shall ensure that
the review is expeditious and that national courts use the
complex economic assessments of the facts carried out by the
resolution authority as a basis for their own assessment.
4. The right to appeal referred to in paragraph 3 shall be
subject to the following provisions:
(a) the lodging of an appeal shall not entail any
automatic suspension of the effects of the challenged
decision;
(b) the decision of the resolution authority shall be
immediately enforceable and it shall give rise to a
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rebuttable presumption that a suspension of its
enforcement would be against the public interest.”
In paragraphs 3 and 4, a “crisis management measure” includes a “resolution
action”: article 2(102). A “resolution action” includes “the application of a
resolution tool, or the exercise of one or more resolution powers”: article 2(40). A
“resolution power” refers to the powers under national law which are required in
order to apply the resolution “tools”: articles 2(20) and 63.
The judgments below
19. Before Hamblen J, Novo Banco’s case was that the effect of the December
decision fell to be recognised in an English court by virtue of article 66 of the
EBRRD. They did not rely on article 3 of the Reorganisation Directive. The judge
approached the question in two stages: [2015] EWHC 2371 (Comm). He held, first,
that it was sufficiently established for the purpose of jurisdiction (ie the claimants
had “the better of the argument”) that Goldman Sachs held less than 2% of the share
capital of BES and was not the real lender under the facility agreement. It followed
that for the purpose of jurisdiction, it must be assumed that the Oak liability had
been transferred to Novo Banco by the decision of 3 August 2014, there being (on
that footing) no relevant exception covering it. That being so, he considered,
secondly, that Novo Banco became party to the jurisdiction clause in the facility
agreement on 3 August 2014. Novo Banco was therefore bound to submit to the
English court “any dispute arising out of or in connection with this Agreement”,
including the dispute about the effect of the December decision. On that footing he
did not need to decide what the effect of the latter decision was, nor whether it fell
to be recognised under article 66 of the EBRRD. These would be matters for trial.
But in case he was wrong about that, he also held that article 66 did not require the
recognition of the December decision in England because, whatever else it was, the
December decision was not itself a “transfer” of assets.
20. In the Court of Appeal the argument took a different turn as a result of the
intervention of Banco de Portugal. Mr Howard QC, who appeared for them both in
the Court of Appeal and before us, put at the forefront of his case on recognition
article 3 of the Reorganisation Directive, which had received hardly any attention
before Hamblen J. The significance of this is that article 3, unlike article 66 of the
EBRRD, is not limited to requiring the mutual recognition of “transfers”. Mr
Howard’s primary submission was, in summary, that the Directives required the
recognition of the entire process of reorganisation under the EBRRD and that it was
in principle wrong to consider the effect of the August decision independently of the
December decision. Whatever the correct legal analysis of the December decision,
an English court was bound to recognise its effect as a matter of Portuguese law,
which was to determine conclusively that the Oak liability had not been transferred.
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The Court of Appeal allowed the appeal, substantially on that ground: [2016] EWCA
Civ 1092; [2017] 2 BCLC 277.
Application of the recognition provisions of the Directives
21. The first thing that strikes one about the appellants’ submission is its inherent
implausibility. The appellants accept, indeed assert, (i) that the August decision was
a “reorganisation measure” entitled to recognition in England under article 3 of the
Reorganisation Directive and (ii) that it was a “transfer” for the purpose of article
66 of the EBRRD. The result of separating the August decision from the December
decision and giving effect only to the former is that in the eyes of an English court
Portuguese law must be treated as having transferred the Oak liability to Novo
Banco although it would not be so treated in the eyes of a Portuguese court. Since
the ordinary purpose of any choice of law rule is to ascertain which legal rules should
be applied in the relevant foreign jurisdiction, this is a paradoxical result.
22. In assessing the appellants’ submission, the provision which is primarily
relevant is article 3 of the Reorganisation Directive, as amended by the EBRRD to
apply to “reorganisation measures” taken in the exercise of its various “tools”.
Article 3 of the Reorganisation Directive, as its title declares, determines the
applicable law to be applied to a “reorganisation measure” in England. Article 66 of
the EBRRD is a more specific provision. Although its language may suggest some
overlap with article 3 of the Reorganisation Directive it is, as its title declares, about
enforcement. Its main purpose is to require other member states to take active steps
to enforce transfers of assets or liabilities made in the course of a reorganisation in
the home state and to prevent challenges to such transfers in their own jurisdictions.
23. Two points need to be made about the Reorganisation Directive, and in
particular about article 3.
24. The first is that its purpose, as recital (119) of the EBRRD records, is to
ensure that “all assets and liabilities of the institution, regardless of the country in
which they are situated, are dealt with in a single process in the home member state
and that creditors in the host member states are treated in the same way as creditors
in the home member state.” This can be achieved only by taking the process as a
whole and applying the legal effects attaching to it under the law of the home state
in every other member state. It is not consistent with either the language or the
purpose of article 3 that an administrative act such as the December decision, which
affects the operation of a “reorganisation measure” under the law of the home state,
should have legal consequences as regards a credit institution’s debts which are
recognised in the home state but not in other member states.
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25. This was the basis of both of the decisions of the Court of Justice on article
3 of the Reorganisation Directive. LBI hf v Kepler Capital Markets SA (Case C85/12) (Judgment delivered on 24 October 2013) arose out of proceedings in France
brought by a creditor of an insolvent Icelandic bank in the course of winding up in
Iceland to attach a debt owed to the bank by Kepler. One of the questions referred
to the CJEU was whether article 3 applied to an automatic statutory moratorium
retrospectively introduced under the transitional provisions of an Icelandic statute,
given that article 3 referred only to decisions of the home state’s administrative or
judicial authorities. The CJEU answered that question by reference to the purpose
of the Reorganisation Directive. The Court described that purpose as follows at para
22:
“At the outset, it must be borne in mind that, as is apparent from
recital 6 in its preamble, Directive 2001/24 seeks to establish
mutual recognition by the member states of the measures taken
by each of them to restore to viability the credit institutions
which it has authorised. That objective, and that of
guaranteeing equal treatment of creditors, laid down in recital
16 to that directive, require that the reorganisation and
winding-up measures taken by the authorities of the home
member state have, in all the other member states, the effects
which the law of the home member state confers on them.”
The court went on, at para 39, to describe the Directive as establishing
“a system of mutual recognition of national reorganisation and
winding-up measures, without seeking to harmonise national
legislation on that subject.”
It answered the question in the affirmative, because the effect of the transitional
provisions was retrospectively to treat the judicial declaration of insolvency as
ordering the moratorium.
26. Similarly, in Kotnik v Državni Zbor Republike Slovenije (Case C-526/14)
[2017] 1 CMLR 753, one of the issues concerned the application of article 3 to a
decision of the Slovenian central bank reconstructing the share and loan capital of
an insolvent commercial bank. After referring to its analysis of the purpose of the
Reorganisation Directive in LBI, the Court observed, at para 105:
“That objective entails that the reorganisation measures taken
by the administrative or judicial authorities of the home
member state, that is, the member state in which a credit
institution has been authorised, must have, in all the other
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member states, the effects which the law of the home member
state confers on them (see, to that effect, LBI EU:C:2013:697
at para 22).”
27. Secondly, an administrative act such as the August decision does not occur
in a legal vacuum. It occurs in the context of a broader framework of public law.
Article 3 does not only give effect to “reorganisation measures” throughout the
Union. It requires them to be “applied in accordance with the laws, regulations and
procedures applicable in the home member state, unless otherwise provided in this
Directive”, and to be “fully effective in accordance with the legislation of that
member state”. In this legal scheme, it cannot make sense for the courts of another
member state to give effect to a “reorganisation measure” but not to other provisions
of the law of the home state affecting the operation of a “reorganisation measure”.
That is so, whether or not that other provision is itself a “reorganisation measure”.
28. For these reasons I reject the proposition, which was fundamental to both the
Judge’s analysis and the appellants’ case, that the effect of the August decision can
be recognised without regard to the December decision. On the face of it, the
December decision was not an interpretation of the August decision or an
amendment of it, retrospective or otherwise. Nor was it a retransfer of a liability
previously transferred to Novo Banco. It was a ruling that under the terms of article
145-H(2) of the Banking Law and paragraph (b)(i)(a) of Annexe 2 of the August
decision, the Oak liability had never been transferred. But, like the courts below, I
do not think that it matters what the correct analysis of the December decision is,
provided that it is accepted (as it is) that as a matter of Portuguese law it is conclusive
of that point unless and until annulled by a Portuguese administrative court. It
follows from the agreed propositions of Portuguese law and from the requirement
of article 3.2 of the Reorganisation Directive that an English court must treat the
Oak liability as never having been transferred to Novo Banco. It was therefore never
party to the jurisdiction clause.
29. This makes it unnecessary to consider the alternative case advanced by Banco
de Portugal and Novo Banco to the effect that the December decision was itself a
“reorganisation measure” or an implied retransfer of the Oak liability to BES.
A provisional decision?
30. The appellants have an alternative case that even if the December decision is
otherwise entitled to recognition in England, it should be disregarded on the ground
that it was a provisional decision pending the final decision of a Portuguese
administrative court on the questions whether Goldman Sachs was the true lender
or a 2% shareholder in BES. The argument is that an English court should look to
what the Portuguese administrative court would decide about those questions and
not what the Central Bank has actually decided. Mr Rabinowitz QC, who appeared
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for Guardians of New Zealand Superannuation Fund and others, submitted that the
Judge’s finding that the appellants had the better of the argument on those questions
meant that we must assume that a Portuguese administrative court would decide
them in the appellants’ favour.
31. The first point to be made is that the December decision was not in terms a
provisional decision. The Judge thought that Banco de Portugal had not “stated or
purported to find that the Oak liability is an Excluded Liability”. He considered that
the December decision “simply asserted that there are ‘serious and well-grounded
reasons’ so to conclude, while recognising that that was ultimately a matter for a
court of law to determine.” I respectfully disagree. He was referring to the recitals
and not to the operative part of the decision. The minutes recited the Central Bank’s
reasons for the decision, which were based on its current view of the facts. But the
operative section determined that the Oak liability “was not transferred to Novo
Banco” and directed that the accounting records of Novo Banco should be restated
accordingly. It follows that the Appellants’ submission must be based on the mere
fact that like any other administrative decision it was subject to review by a
Portuguese administrative court.
32. The appellants’ submission to this effect is based on the decision of the Court
of Appeal in Guaranty Trust of New York v Hannay & Co [1918] 2 KB 623. The
question at issue in this case was whether as a matter of New York law a particular
bill of exchange was conditional. In previous proceedings on the same issue between
the same parties a New York judge had held on demurrer that it was. Bailhache J
and the Court of Appeal held that it was not. The ground of the decision was that the
judgment was no more than evidence of New York law, and expert evidence put
before the English courts showed it to be mistaken. The point was put with
characteristic clarity by Scrutton LJ at p 667:
“Foreign law is a question of fact to an English Court; the
judgment of a foreign judge is not binding on an English Court,
but is the opinion of an expert on the fact, to be treated with
respect, but not necessarily conclusive.”
33. In my opinion, this decision has no bearing on the present appeal. The issue
in Guaranty Trust was not about the legal status of the New York judgment as a
matter of New York law. The question was what the relevant rule of New York law
was. That was a question of fact. In the present case, there is no issue about either
the relevant content of Portuguese law or the status of the December decision,
because it is agreed that as a matter of Portuguese law it determines creditors’ rights.
The present issue is quite different, namely whether that decision is to be recognised
as affecting rights under an English law contract. That is not a question of fact, but
a question of private international law. True it is that the December decision was
based on a factual premise which is being challenged in Portugal. But it does not
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matter for present purposes whether its factual premise was right or wrong. It is
binding in Portuguese law in either case, unless and until it is set aside by a
Portuguese court.
34. No other conclusion would, as it seems to me, be consistent with the
Directives. In the first place, it is not for an English court to decide what would
amount to an appeal from an administrative act of the Portuguese Central Bank.
Article 3(1) of the Reorganisation Directive provides that the implementation of a
reorganisation measure such as the August decision is a matter for the administrative
or judicial authorities of the home state alone. Consistently with that approach,
article 85 of the EBRRD assigns appeals to the courts of the home state responsible
for the reorganisation. Secondly, article 85(4) provides that an appeal is not to entail
any automatic suspension of the challenged decision. This is because a banking
reconstruction under the EBRRD requires decisive steps to be taken, often as a
matter of urgency, which the authorities in other member states can act on. The
scheme of the Directives would be undermined if the acts of a designated national
Resolution Authority were open to challenge in every other member state simply
because they were open to challenge in the home state.
Reference to the Court of Justice of the European Union
35. The relevant propositions of EU law are to my mind beyond serious
argument. The decisive questions are questions of Portuguese domestic law, on
which the parties are agreed. There is therefore no proper basis for a reference.
Disposal
36. I would dismiss the appeal.