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The Court of Appeal has handed down judgment in the case of Lamesa Investments Ltd v Cynergy Bank Ltd [2020] EWCA Civ 281 on 30 June 2020. 

The appeal concerned the interpretation of a Facility Agreement entered into between Lamesa Investments Ltd (“Lamesa”) and Cynergy Bank Ltd (“Cynergy”) in 2017. Lamesa was wholly owned by an individual who was subsequently subject to the imposition of sanctions in the United States. The issue raised in the appeal was whether the terms of the Facility Agreement required Cynergy to make an interest payment to Lamesa, in circumstances where such a payment was likely to result in the imposition of secondary sanctions on Cynergy. This turned on the meaning of an express provision in the Facility Agreement that provided that Cynergy was not required to make any payment where “such sums were not paid in order to comply with any mandatory provision of law” (clause 9.1).

At first instance, HHJ Pelling QC held that Cynergy’s non-payment fell within the scope of clause 9.1. The Court of Appeal (Sir Geoffrey Vos, Lord Justice Males and Lord Justice Arnold) agreed, and dismissed Lamesa’s appeal. In so finding, the Court of Appeal had particular regard to three aspects of admissible context: first, the terms employed by the EU Blocking Regulation, that must be taken to have been known to the parties and to the drafters of the standard clause; secondly, the fact that clause 9.1 is a standard clause; and thirdly, the fact that US secondary sanctions would have been at the relevant time one potential problem affecting parties to agreements for the provision of Tier 2 Capital within the EU. 

According to the Court of Appeal (at §44):

[T]he drafter of clause 9.1 must have intended the borrower to be capable of obtaining relief from default if its reason for non-payment was to ‘comply’ with a foreign statute that would otherwise be triggered. The drafters knew that the Blocking Regulation regarded US secondary sanctions legislation as imposing a ‘requirement or prohibition’ with which EU parties were otherwise required to ‘comply’.”.

A copy of the judgment is available here.

Dinah Rose QC, Brian Kennelly QC and Jason Pobjoy acted for Cynergy Bank Ltd.

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