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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Lamesa Investments Ltd v Cynergy Bank Ltd [2019] EWHC 1877 (Comm) (12 September 2019) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2019/1877.html Cite as: [2019] EWHC 1877 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
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LAMESA INVESTMENTS LIMITED |
Claimant |
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- and - |
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CYNERGY BANK LIMITED |
Defendant |
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Mr Brian Kennelly QC and Ms Harriet Ter-Berg (instructed by Sidley Austin LLP) for the Defendant
Hearing dates: 15 July 2019
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Crown Copyright ©
His Honour Judge Pelling (sitting as a judge of the High Court):
Introduction
Factual Background
"1.2 Construction
(a) Unless a contrary indication appears, any reference in this Agreement to:
(iv) a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental, or supranational body, agency, department or of any regulatory, self-regulatory, or other authority or organisation
9. ENFORCEMENT
9.1 Non-payment
In the event that any principal or interest in respect of the loan has not been paid within 14 days from the due date for payment and such sum has not been duly paid within a further 14 days following written notice from [LIL] to [CBL] requiring the non-payment to be made good, [LIL] may institute proceedings in a court of competent jurisdiction in England for the winding up of [CBL] provided that [CBL] shall not be in default if during the 14 days after [LIL's] notice is satisfies [CBL] that such sums were not paid in order to comply with any mandatory provision of law, regulation or order of any court of competent jurisdiction. Where there is doubt as to the validity or applicability of any such law, regulation or order, [CBL] will not be in default if it acts on the advice given to it during such 14 day period by its independent legal advisers.
16 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties in relation to the Facility and supersedes any previous agreement, whether express or implied, regarding the Facility.
18 GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
19 ENFORCEMENT
19.1 Jurisdiction
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement ".
"(b) FACILITATION OF FINANCIAL TRANSACTIONS ON BEHALF OF SPECIALLY DESIGNATED NATIONALS The President shall impose, unless the President determines that it is not in the national interest of the United States to do so, the sanction prescribed in (c) with respect to a foreign financial institution if the President determines that the foreign financial institution has, on or after the date that is 30 days after the date of the enactment of the Countering Russian Influence in Europe and Eurasia Act of 2017, knowingly facilitated a significant financial transaction on behalf of any person included on the lost of specially designated nationals and blocked persons maintained by [OFAC] pursuant to (2) Executive Order .13662
(c) SANCTIONS DESCRIBED The sanction described in this subsection is, with respect to a foreign financial institution, a prohibition on the opening, and a prohibition or the imposition of strict conditions on the maintaining, in the United States of a correspondent account or a payable through account by the foreign financial institution
(d) NATIONAL SECURITY WAIVER The President may waive the application of sanctions under this section with respect to a foreign financial institution if the President
(1) determines that the waiver is in the national security interest of the United States; and
(2) submits to the appropriate congressional committees a report on the determination and the reasons for the determination "
English Law Principles
Effect of Clause 9.1 of the FA
Applicable Legal principles
i) The court construes the relevant words of a contract in their documentary, factual and commercial context, assessed in the light of (i) the natural and ordinary meaning of the provision being construed, (ii) any other relevant provisions of the contract being construed, (iii) the overall purpose of the provision being construed and the contract or order in which it is contained, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions see Arnold v. Britton [2015] UKSC 36 [2015] AC 1619 per Lord Neuberger PSC at paragraph 15 and the earlier cases he refers to in that paragraph;
ii) A court can only consider facts or circumstances known or reasonably available to both parties that existed at the time that the contract or order was made - see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 20;
iii) In arriving at the true meaning and effect of a contract or order, the departure point in most cases will be the language used by the parties because (a) the parties have control over the language they use in a contract or consent order and (b) the parties must have been specifically focussing on the issue covered by the disputed clause or clauses when agreeing the wording of that provision see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 17;
iv) Where the parties have used unambiguous language, the court must apply it see Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23;
v) Where the language used by the parties is unclear the court can properly depart from its natural meaning where the context suggests that an alternative meaning more accurately reflects what a reasonable person with the parties' actual and presumed knowledge would conclude the parties had meant by the language they used but that does not justify the court searching for drafting infelicities in order to facilitate a departure from the natural meaning of the language used see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 18;
vi) If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other see Rainy Sky SA v. Kookmin Bank (ibid.) per Lord Clarke JSC at paragraph 2 - but commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties, as at the date that the contract was made see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 19;
vii) In striking a balance between the indications given by the language and those arising contextually, the court must consider the quality of drafting of the clause and the agreement in which it appears see Wood v. Capita Insurance Services Limited [2017] UKSC 24 per Lord Hodge JSC at paragraph 11. Sophisticated, complex agreements drafted by skilled professionals are likely to be interpreted principally by textual analysis unless a provision lacks clarity or is apparently illogical or incoherent see Wood v. Capita Insurance Services Limited (ibid.) per Lord Hodge JSC at paragraph 13; and
viii) A court should not reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight, because it is not the function of a court when interpreting an agreement to relieve a party from a bad bargain - see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 20 and Wood v. Capita Insurance Services Limited (ibid.) per Lord Hodge JSC at paragraph 11.
The Parties' Cases in Summary
The Construction Exercise
Aside from clauses 16, 18 and 19.1(a), the only provision within the FA that either party referred to was the definition of the word "regulation". As is apparent from the express definition of regulation, it applies to everything other than either primary legislation or the general law. That much is apparent from the list of instruments covered, which noticeably does not include either any primary legislation or general law. Thus, in my judgment it is clear that the phrase " mandatory provision of law " is designed to bring within the scope of the clause all otherwise relevant primary legislation and general law including, in relation to English law, the common law. It is also apparent from the terms of the definition that it includes any instrument promulgated by any government or any instrument as defined that is promulgated any of the relevant organisations identified. The definition does not include any causative constraint because it does not have to. That is provided by clause 9.1, which requires CBL to establish that sums otherwise payable have not been paid " in order to comply " with either (a) a mandatory provision of law or (b) a regulation or (c) an order of a court of competent jurisdiction. It would be inconsistent with the absence of any territorial qualification from the definition of the word "regulation" and to the courts whose orders can be relied on by CBL to construe the reference to a mandatory provision of law as being confined to English law. This much is common ground see paragraph 17(b) of the List of Issues.
VV was placed on the SDN list on 6 April 2018, just over 3 months after the parties entered into the FA on 19 December 2017. However, Mr. Jordan states in paragraph 5.1 of his first witness statement in these proceedings that CBL was aware in December 2017 that it was possible but not likely that US sanctions would be imposed on LIL. LIL does not challenge this, nor does it suggest that its analysis was any different to that of CBL. This possibility is therefore a circumstance known or assumed by the parties at the time that the document was executed.
LIL's case is that the word 'mandatory" means as LIL put it in its skeleton submissions " a law applying to UK parties, acting in the UK, that have agreed to make a sterling payment pursuant to a contract governed by English law" that (in this context at least) prohibits something. If and to the extent this implies that only an English statute or a rule of common law that prohibits particular conduct will suffice then I do not agree. As I have explained already, when read in its documentary context and together with the word " regulation .", the contractual definition of that word and the phrase " any court of competent jurisdiction " it is clear that no territorial qualification was made or intended. Had the parties wished to qualify those words and phrases in that way they could have done so easily enough. They chose not to do so. To the contrary, in the only definition that matters (that of the word "regulation") it is clear that such a qualification was not intended. If no such qualification was intended for what constituted a relevant regulation, there can be no justification for implying such a qualification to the phrase " mandatory provision of law ".
Conclusions