Goldman Sachs International v Novo Banco SA

Factual and Procedural Background

By a Facility Agreement dated 30 June 2014, Company A agreed to lend approximately US$ 835 million to Company B. The Claimants, successors to Company A's rights, brought claims for repayment and interest under the Facility Agreement against the Defendant, Company C, which the Claimants contend replaced Company B as the Borrower by statutory transfer. Company C denies this. Company C applied to set aside the proceedings for lack of jurisdiction or, alternatively, for a stay. The applications were heard together. Evidence included witness statements and expert reports on Portuguese law. The Facility Agreement contained an express choice of English law and exclusive English jurisdiction.

On 3 August 2014, the national resolution authority created Company C and transferred certain assets and liabilities of Company B to it pursuant to a resolution measure under a Europe-wide bank recovery directive ("the Directive"). The transfer excluded certain liabilities ("Excluded Liabilities"). The central dispute is whether the Facility Agreement liability was excluded or transferred. The Claimants assert it was transferred, making Company C party to the Facility Agreement and jurisdiction clause. The resolution authority later issued a ruling ("the December decision") stating the liability was not transferred and remained with Company B. The Claimants initiated English proceedings for repayment, and also brought administrative proceedings in the national courts challenging the December decision.

Company C contends the English court lacks jurisdiction because the claims effectively challenge administrative acts of the foreign resolution authority, which are non-justiciable, or alternatively seeks a stay pending Portuguese administrative proceedings.

Legal Issues Presented

1. Does the English court have jurisdiction to entertain the claim under the Council Regulation (EU) 1215/2012 (the Judgments Regulation), specifically:
   1. Does the claim fall within the material scope of the Judgments Regulation?
   2. If so, does the English court have jurisdiction pursuant to Article 25?
2. If the English court has jurisdiction, should it decline to exercise that jurisdiction?
3. If the English court should not decline jurisdiction, should it grant a stay of the proceedings?

Arguments of the Parties

Claimants' Arguments

• The claim is a debt claim under the Facility Agreement, a civil and commercial matter within the scope of the Judgments Regulation.
• The August decision transferred the Facility Agreement liability to Company C, making it a party to the jurisdiction clause.
• The December decision is irrelevant to jurisdiction and has no effect under English law.
• The Claimants have the better arguable case that the liability was not an Excluded Liability and was transferred.
• The English court should exercise jurisdiction and not stay proceedings despite pending Portuguese administrative challenges.

Defendant's Arguments

• The claim is essentially an administrative matter challenging public law acts of the national resolution authority and thus outside the scope of the Judgments Regulation.
• The December decision has effect under English law as a directive reorganisation measure or via common law principles of universal succession, negating Company C's status as a party to the Facility Agreement and jurisdiction clause.
• The English court should decline jurisdiction on grounds of non-justiciability or act of state doctrine.
• The proceedings should be stayed pending resolution of Portuguese administrative proceedings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
LTU v Eurocontrol [1976] ECR 1541	Autonomous meaning of "civil and commercial matters" under the Judgments Regulation.	Guided the court in determining the scope of the Regulation.
Gemeente Steenbergen v Baten [2002] ECR 1-10489	Identification of legal relationship and rules governing the action.	Supported analysis of whether claim is private law or administrative.
Pr'servatrice foncière TIARD SA v Netherlands [2003] ECR I-4867	Distinction between private law claims and acts in exercise of public power.	Helped define claim as civil and commercial.
Frahuil SA v Assitalia SPA [2004] ECR I-1543	Private law nature of claims determines Regulation scope.	Confirmed claim falls within Regulation.
Orams v Apostolides [2011] QB 519 (ECJ)	Claims against public authorities in exercise of public power excluded from Regulation.	Confirmed claim against Company C (non-public body) is within scope.
Partenreederei Ms Tilly Russ v Haven & Vervoebedrijf Nova NV [1985] 1 QB 935 (ECJ)	Jurisdiction agreements governed by applicable national law.	Applied English law to determine succession to jurisdiction clause.
Canada Trust v Stolzenberg (No 2) [1998] 1 WLR 547	Standard for assessing enforceability of jurisdiction agreements against successors.	Used to assess relative plausibility of parties' claims.
Rawlinson and Hunter Trustees v Kaupthing [2011] 2 BCLC 682	Recognition of foreign resolution measures under English law.	Supported approach to effect of resolution authority decisions.
Buttes Gas and Oil Co v Hammer [1982] AC 888	Doctrine of non-justiciability and act of state.	Considered and rejected as basis to decline jurisdiction.
Yukos Capital Sarl v OJSC Rosneft Oil Company [2014] QB 458	Limits on English court adjudicating on foreign executive acts.	Distinguished as not applicable to resolution authority acts under Directive.
National Bank of Greece & Athens v Metliss [1958] AC 509	Recognition of foreign universal succession measures.	Supported Claimants' argument on effect of August decision.
Adams v National Bank of Greece & Athens [1961] AC 255	Effect of foreign law measures and subsequent foreign legislative changes.	Supported Claimants' position on irrelevance of December decision under English law.
Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173	Inherent jurisdiction to stay proceedings and its limits.	Guided refusal of stay absent rare and compelling circumstances.
Mazur Media v Mazur Media GmbH [2004] 1 WLR 2966	Exercise of discretion to stay under Judgments Regulation.	Confirmed strict limits on granting stays where jurisdiction clause exists.

Court's Reasoning and Analysis

The court began by confirming that the claim falls within the material scope of the Judgments Regulation as a civil and commercial matter, despite the involvement of public law acts by the resolution authority. The claim is a private law debt claim under an English law contract, not a challenge to the validity of administrative acts. The Defendant's argument that the claim is administrative was rejected because the claim is against a non-public body and the December decision is not a necessary part of the claim.

Jurisdiction under Article 25 was established by considering whether Company C succeeded to the rights and obligations of Company B, including the jurisdiction clause. Applying English law, the court found the Claimants have the better arguable case that the August decision effected a transfer of liabilities to Company C, making it party to the Facility Agreement and the jurisdiction clause. The December decision's effect is a matter for substantive determination under the jurisdiction clause, not a jurisdictional bar.

The court rejected the Defendant's contention that the December decision has effect under English law as a directive reorganisation measure or under common law principles. The court construed "transfer" narrowly under the Directive and found the December decision is not a transfer but a ruling that no transfer occurred. Recognising such a ruling as a transfer would undermine the Directive's mutual recognition framework. The court also rejected the act of state and non-justiciability arguments, noting that the resolution authority acted as a designated authority under the Directive, not as a foreign state actor.

Finally, the court considered the application for a stay pending Portuguese administrative proceedings. It held that the Judgments Regulation does not allow a stay in these circumstances and that the court's inherent jurisdiction to stay is limited to rare and compelling cases, which were not made out here. The risk of inconsistent judgments was not sufficient to justify a stay, especially given the exclusive jurisdiction clause and the urgency related to the Defendant's sale process.

Holding and Implications

The court DISMISSED the Defendant's application to set aside the proceedings for lack of jurisdiction and the alternative application for a stay.

The direct effect is that the English proceedings may continue before the English court, which has jurisdiction pursuant to the exclusive jurisdiction clause in the Facility Agreement as applied to the Defendant by virtue of the August decision. The court did not set any new precedent but reaffirmed the application of the Judgments Regulation and the Directive's mutual recognition regime in the context of bank resolution measures. The decision clarifies that administrative rulings of a foreign resolution authority that are not transfers under the Directive do not automatically bind English courts for jurisdictional purposes.