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On appeal from: [2016] EWCA Civ 1092

This appeal considered whether the obligation under Directive 2001/24/EC, art 3 to apply reorganisation measures in accordance with the law of their home member state meant that the effect of a reorganisation measure taken by Banco de Portugal in August 2014 to transfer liabilities to the respondent fell to be determined by the effect in Portuguese law of a later decision in December 2014, and/or whether the December 2014 decision was itself a reorganisation measure which required recognition by the English courts.

The Supreme Court unanimously dismissed the appeal. The Court held that the purpose of art 3 of the Reorganisation Directive 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. It is not consistent with the language or the purpose of art 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.

In addition, the Court held that because art 3  does not only give effect to “reorganisation measures” throughout the EU, but requires them to be “applied in accordance with the laws, regulations and procedures applicable in the home member state.  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 its operation. Therefore  the effect of the August decision cannot be recognised without regard to the December decision. Therefore,  it follows from the agreed propositions of Portuguese law and from the requirements of art 3(2) of the Reorganisation Directive that an English court must treat the Oak liability as never having been transferred to Novo Banco. Novo Banco was therefore never party to the jurisdiction clause.

For judgment, please download: [2018] UKSC 34
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (17 Apr 2018 morning session) (17 Apr 2018 afternoon session) (18 Apr 2018 morning session) (18 Apr 2018 afternoon session)