Factual and Procedural Background
The case arises from measures taken by The Central Bank of Portugal, acting as the designated resolution authority under the European Bank Recovery and Resolution Directive 2014/59/EU (EBRRD). In August 2014 the authority created a bridge institution, Respondent, and purported to transfer to it most assets and liabilities of Company B, a Portuguese bank in severe financial difficulty. One of those liabilities was an English-law governed loan of about USD 835 million advanced on 30 June 2014 by Company A; the loan agreement contained an exclusive English jurisdiction clause.
On 22 December 2014 the authority issued a further administrative decision declaring that the loan liability had never been transferred to the bridge bank because the loan was, in substance, advanced on behalf of Appellant 1, an alleged 2 % shareholder in Company B; Portuguese law barred transfer of liabilities to related parties.
The appellants sued Respondent in the High Court of England for repayment, asserting that the August decision bound the bridge bank to the loan and its English jurisdiction clause. Respondent applied to set aside service for want of jurisdiction, relying on the December decision.
Judge [Last Name] held that, for interim purposes, the loan had been transferred and that the English courts therefore had jurisdiction. The Court of Appeal reversed, holding that article 3 of Directive 2001/24/EC (the “Reorganisation Directive”) required English recognition of the December decision. The present judgment is the Supreme Court’s dismissal of the appellants’ further appeal.
Legal Issues Presented
- Whether English courts must recognise, under article 3 of the Reorganisation Directive (as amended by the EBRRD), a subsequent administrative act of the home-state resolution authority that declares a liability never to have been transferred to a bridge institution.
- If such recognition is mandatory, whether the liability was ever transferred to the bridge institution so as to confer English jurisdiction under the loan agreement.
- Whether the December decision should be disregarded as merely provisional while subject to challenge in the courts of the home state.
Arguments of the Parties
Appellants’ Arguments
- The August decision constituted a completed transfer of the loan liability, triggering the English jurisdiction clause; the December decision was either an impermissible re-transfer or an unlawful retrospective amendment and should not be recognised.
- Article 66 of the EBRRD, which focuses on enforcing transfers, does not compel recognition of the December decision because that decision did not itself effect a “transfer”.
- Alternatively, the December decision was provisional and should be ignored pending determination by Portuguese courts.
Respondent’s and Intervener’s Arguments
- Article 3 of the Reorganisation Directive requires host-state courts to recognise the entire restructuring process as it stands under home-state law; the December decision therefore conclusively determines that the loan liability never moved to the bridge bank.
- Allowing the appellants’ approach would undermine the Directive’s objective of a single, universal process administered by the home-state authority.
- The appellants’ provisional-decision theory contradicts article 85 of the EBRRD, which provides that appeals do not suspend resolution decisions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|
| Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192 |
“Good arguable case” test for jurisdiction challenges |
Explained the evidential standard applicable when facts relevant to jurisdiction overlap with the merits |
| Adams v National Bank of Greece SA [1961] AC 255 |
Foreign measures cannot discharge English-law contractual liabilities absent choice-of-law rules |
Cited to show why EU legislation was needed to secure cross-border recognition of bank resolutions |
| National Bank of Greece & Athens SA v Metliss [1958] AC 509 |
Recognition of universal succession under foreign law |
Used to contrast common-law limits with the broader EU recognition regime |
| LBI hf v Kepler Capital Markets SA (C-85/12) |
Article 3 requires host states to give full effect to home-state reorganisation measures |
Relied upon to emphasise unity and universality of bank reorganisations |
| Kotnik v Državni Zbor Republike Slovenije (C-526/14) |
Same principle of universal recognition under Article 3 |
Re-affirmed that member states must accept the effects attributed by home-state law |
| Guaranty Trust of New York v Hannay & Co [1918] 2 KB 623 |
Foreign judgments are evidence of foreign law, not binding determinations |
Distinguished; the December decision was an operative administrative act, not merely evidence |
Court's Reasoning and Analysis
1. Primacy of Article 3. The Court held that article 3 of the Reorganisation Directive governs recognition of all “reorganisation measures”, now expressly defined to include resolution tools under the EBRRD. Its purpose—unity and universality—demands that host-state courts apply the entire suite of home-state measures, not selectively recognise or ignore parts.
2. December decision binds unless annulled. Under agreed Portuguese law, the December decision is a valid administrative act that retrospectively determined the loan liability had never transferred. Unless and until annulled in Portugal, it is conclusive; English courts must give it the same effect.
3. Incompatibility of selective recognition. Recognising the August transfer while disregarding the December clarification would create a paradox: a liability treated as transferred in England but not in Portugal. Such fragmentation is incompatible with the Directive’s objective of a single process.
4. Article 66 not dispositive. While article 66 enforces transfers, article 3 is broader and decisive; therefore it is unnecessary to classify the December act as a “transfer” or not.
5. Provisional-decision argument rejected. The Court found the December decision unequivocal, not provisional, and noted that article 85 of the EBRRD expressly prevents appeals from suspending resolution measures. Host-state courts cannot speculate on how the home-state courts may rule in future.
6. No need for ECJ reference. The relevant EU principles were clear and uncontested; the dispute turned on Portuguese domestic law, which was agreed.
Holding and Implications
APPEAL DISMISSED.
Because the December 2014 administrative act is entitled to recognition, the loan liability was never transferred to Respondent; consequently, the English courts lack jurisdiction under the loan agreement. The decision reinforces the EU scheme of centralised bank-resolution authority by confirming that host-state courts must recognise all operative measures taken by the home-state resolution authority unless and until set aside in that state. No new common-law rule is created, but the judgment underscores the supremacy of the Reorganisation Directive framework within the United Kingdom’s pre-Brexit legal order.