For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current developments.
Recent Developments
The Netherlands—On 6 February 2015, the Dutch
Supreme Court, in a marked departure from previous case law, held
that the bankruptcy of a Dutch partnership does not automatically
result in the bankruptcy of its partners. Even though a
Dutch partnership does not have "legal personality"
(i.e., legal rights and obligations, such as the right to enter
into contracts, to sue and to be sued), it is still considered an
independent and separate legal entity under Dutch law. In its
ruling, the Supreme Court reasoned that, because the bankruptcy of
a partnership does not inherently rule out the possibility that
individual partners may satisfy the partnership's current
obligations, individual partner bankruptcy automatically triggered
by the bankruptcy of the partnership is incongruous with legal and
economic reality. Instead, the Supreme Court explained, if a
partnership is deemed bankrupt because it is insolvent (i.e.,
unable to pay its debts as such debts mature), insolvency
proceedings with respect to individual partners should be commenced
only if the individual partners are also insolvent. Explaining that
Dutch insolvency legislation explicitly provides for a debt
management proceeding (schuldsanering) for natural persons
with commercial debts, the Supreme Court further concluded that
automatic bankruptcy would unjustifiably deprive the partners of a
bankrupt partnership of access to such proceedings. Finally, the
Supreme Court ruled that pre-existing Dutch case law on this issue
is no longer compatible with the European Insolvency Regulation
(Regulation (EC) No 1346/2000 on insolvency proceedings) (31 May
2002), which provides that a European Union court can assert
international jurisdiction over a foreign EU citizen only after
individually assessing such citizen's standing.
Global—On 13 February 2015, the Chancery Division of
the English High Court ruled, in a lawsuit brought by certain
holders of euro-denominated exchange bonds issued by the Republic
of Argentina during 2005 and 2010 debt restructurings seeking to
gain access to €225 million (US$257 million) in interest
payments set aside to make payments on the bonds, that such funds
are governed by English law because the bonds and the governing
trust indenture are governed by English law. However,
although Mr Justice David Richards made a declaration to the effect
that the earmarked funds are held by the Bank of New York Mellon
("BNY Mellon") on trusts governed by English law, the
Judge declined to declare that BNY Mellon's obligations and
liabilities are unaffected by the 2012 US court injunction. Judge
Thomas Griesa of the US District Court for the Southern District of
New York ruled on 23 February 2012 that Argentina was prohibited
from making payments on exchange bonds without also making payments
on bonds held by holdout bondholders. In his injunction, which was
affirmed on appeal and declined review by the US Supreme Court,
Judge Griesa also prohibited any entity from "aiding and
abetting" any violation of his order. The English High
Court's 13 February 2015 ruling effectively shuts Argentina out
of the international debt markets.
Global—At a hearing held before US District Court
Judge Thomas Griesa on 17 February 2015, Citibank NA
("Citibank") claimed that the February 2012 injunction
blocking it from making payments on US$2.3 billion worth of
dollar-denominated bonds governed by Argentine law would lead to
"catastrophic" consequences—including criminal
charges and potentially the loss of its banking license in the
South America country. Both Argentina and the Clearing
House Association LLC—an association of leading commercial
banks dedicated to protecting the integrity of the banking
system—supported Citibank's request for permission to
service the debt, warning that continuation of the payment bar
"would raise anew the question of whether bank customers can
trust their own bank to comply with the most basic banking and
custody obligation: paying customers their money". Holdout
bondholders from Argentina's 2005 and 2010 debt restructurings
countered that, far from being bonds solely governed by Argentine
law, the bonds in question were marketed and sold around the world
and therefore should remain subject to the payment injunction.
Newsworthy
Jones Day successfully obtained the enforcement of an
ICC award in Morocco for a leading French industrial group against
two Moroccan companies following the termination of a contract for
the delivery of a cement plant. The Arbitral Tribunal
seated in Geneva found in an award issued in 2011 that it had
jurisdiction over the mother company in Morocco, given its
involvement in the negotiation, performance and termination of the
contract signed by its subsidiary. The Tribunal also noted that the
mother company had left its subsidiary without sufficient assets to
face a finding of liability after the termination. The Arbitral
Tribunal further found the Moroccan mother company and its
subsidiary jointly liable for damages, and arbitration costs, in
excess of €20 million (US$22.4 million) before interest. The
ICC award dismissed all claims submitted against Jones Day's
client. In December 2012, a first instance court in Casablanca
accepted the recognition of the ICC award against the Moroccan
subsidiary but refused the enforcement against the mother company,
on the ground that it was not a signatory of the contract
containing the arbitration clause. In a landmark decision issued in
January 2015 under the Moroccan arbitration law of 2007, the Court
of Appeal reversed the first instance court decision and fully
granted the recognition of the ICC award against both Moroccan
companies.
Jones Day advised Inflexion Private Equity in connection
with the £105 million (US$162 million) sale of Aspen
Pumps ("Aspen"), a global market leader in the design and
manufacture of air conditioning pumps, to international investment
manager 3i Group plc. Aspen designs, manufactures and
distributes specialised mini pumps that remove condensate water
from air conditioning and refrigeration systems. Based in Hailsham,
Sussex, and established in 1992, Aspen has a strong international
presence, with its products available in more than 100
countries.
Jones Day advised Volkswagen Financial Services
("VFS") and two joint lead managers (Citigroup Global
Markets Limited and Lloyds Bank plc) in connection with VFS's
13th automobile asset backed securities transaction, "Driver
13," with a deal volume of €750 million (US$850
million). The transaction was launched on Volkswagen's
well-established DRIVER platform. VFS, a business division of the
Volkswagen AG group of companies with 10,945 employees worldwide,
is one of the largest repeating issuers in the German, European and
global securitisation markets.
Jones Day is advising NII Holdings in connection with the
sale of its Mexican operations operated by its indirect subsidiary,
Nextel de Mexico, S.A. de C.V., to AT&T for
US$1.875 billion, less the outstanding net debt of the
business at closing. The transaction is being conducted as
a sale under section 363(b) of the US Bankruptcy Code.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.