Cross-border recognition of resolution decisions. Stuart McNeill Pinsent Masons LLP

Transcription

1 Cross-border recognition of resolution decisions Stuart McNeill Pinsent Masons LLP

2 Alternatives to bank resolution

3 English court s approach (pre BRRD) Adams v National Bank of Greece and Athens 1927: mortgage bonds issued, guaranteed by the National Bank of Greece 1953: Merger of National Bank of Greece and Bank of Athens 1956: Greek legislation retrospectively cancels mortgage bonds

4 Adams v National Bank of Greece Greek law cannot create an English right or obligation any more than it can annul an English right or discharge an English obligation. We do not refuse in all cases to recognise a moratorium in force in a foreign country: when an action is brought here for money payable in England we recognise it as affecting rights of which the proper law is the law of that country but we do not recognise it as affecting rights of which the proper law is English.

5 Insolvency: modified universalism The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the 18th century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, cooperate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution.

6 BRRD: Member State prevails Article 3 of 2001 Directive Adoption of reorganisation measures applicable law 1. The administrative or judicial authorities of the home Member State shall alone be empowered to decide on the implementation of one or more reorganisation measures in a credit institution, including branches established in other Member States. 2. The reorganisation measures shall be applied in accordance with the laws, regulations and procedures applicable in the home Member State, unless otherwise provided in this Directive. They shall be fully effective in accordance with the legislation of that Member State throughout the Community without any further formalities, including as against third parties in other Member States, even where the rules of the host Member State applicable to them do not provide for such measures or make their implementation subject to conditions which are not fulfilled. The reorganisation measures shall be effective throughout the Community once they become effective in the Member State where they have been taken.

7 BRRD: Member State prevails Article 66 of BRRD Power to enforce crisis management measures or crisis prevention measures by other Member States 1. Member States shall ensure that, where a transfer of shares, other instruments of ownership, or assets, rights or liabilities includes assets that are located in a Member State other than the State of the resolution authority or rights or liabilities under the law of a Member State other than the State of the resolution authority, the transfer has effect in or under the law of that other Member State Member States shall ensure that shareholders, creditors and third parties that are affected by the transfer of shares, other instruments of ownership, assets, rights or liabilities referred to in paragraph 1 are not entitled to prevent, challenge, or set aside the transfer under any provision of law of the Member State where the assets are located or of the law governing the shares, other instruments of ownership, rights or liabilities.

8 BRRD cases Bayerische Landesbank v Heta Asset Resolution Austrian bank, Hypo Alpe Adria, fails Heta created as the bad bank wind-down vehicle Austrian Financial Market Authority declares 15 month moratorium on liabilities Moratorium purports to be under Austrian implementation of the BRRD German courts refuse to recognise the moratorium it does not fall under the BRRD

9 BRRD cases Tadej Kotnik and Others v Državni zbor Republike Slovenije Referral to ECJ for preliminary ruling, November 2014, so before the implementation date for BRRD Doubt whether burden-sharing measures were reorganisation measures Yes they were. Pre-BRRD

10 Novo Banco - timeline

11 Novo Banco Key issues Only jurisdiction currently being argued Portuguese Banking Law Excluded liabilities on 3 August 2014 Nature and effect of the Bank of Portugal s later decisions Chronological approach v primacy of Portuguese Law

12 BRRD Contractual recognition Article 55 Contractual recognition of bail-in 1. Member States shall require institutions and entities referred to in points (b), (c) and (d) of Article 1(1) to include a contractual term by which the creditor or party to the agreement creating the liability recognises that liability may be subject to the write-down and conversion powers and agrees to be bound by any reduction of the principal or outstanding amount due, conversion or cancellation that is effected by the exercise of those powers by a resolution authority

13 Article 55 extent, exclusions & limits What does it cover? What does it not cover? Absence of standardised wording Provision of legal opinions Use in master agreements A good role model for Ukraine?

14 Further thoughts Brexit The UK s ring-fencing transfer scheme Relevance of politics in resolution decisions Wider impact of litigation on resolution objectives

15 Pinsent Masons LLP is a limited liability partnership, registered in England and Wales (registered number: OC333653) authorised and regulated by the Solicitors Regulation Authority and the appropriate jurisdictions in which it operates. The word 'partner', used in relation to the LLP, refers to a member or an employee or consultant of the LLP, or any firm of equivalent standing. A list of the members of the LLP, and of those non-members who are designated as partners, is available for inspection at our registered office: 30 Crown Place, London, EC2A 4ES, United Kingdom. Pinsent Masons For a full list of the jurisdictions where we operate, see