Citibank NA, London Branch v Oceanwood Opportunities Master Fund & Ors [2018] EWHC 305 (Ch)

[2018] EWHC 305 (Ch)Case No FL-2018-000001IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OFENGLAND AND WALESFINANCIAL LIST (ChD/QBD Commercial Court)Venue Royal Courts of Justice, Rolls Building, 7 Rolls Buildings, Fetter Lane, London EC4A 1NLDate 19/02/2018
Before
MR JUSTICE MANN
Between
CITIBANK, N.A., LONDON BRANCHClaimant(1) OCEANWOOD OPPORTUNITIES MASTER FUNDDefendants(2) FOXHILL CAPITAL PARTNERS LLCDefendant(3) FOXHILL OPPORTUNITY FUND, L.P.Defendant
Mr Gabriel Moss QC and Mr Adam Al-Attar (instructed by Allen & Overy LLP) for ClaimantMr William Trower QC, Mr Edmund King and Mr Marcus Haywood (instructed by Akin Gump Strauss Hauer & Feld LLP) for First DefendantMr Daniel Margolin QC and Mr Daniel McCarthy (instructed by Paul Hastings (Europe) LLP) for Second and Third DefendantsHearing Hearing dates: 16 th February 2018
Judgment ApprovedMr Justice Mann :Introduction
[1]This case is an application by the claimant, Citibank, for directions as to whether it should, as security trustee and security agent under complex loan arrangements, seek and/or act in accordance with the directions of a body of creditors of which the first defendant, Oceanwood is a majority holder of debt, and whose wishes or vote would therefore govern; or whether provisions of the documentation which exclude from voting those who “control” the debtor mean that Oceanwood’s voice cannot be heard. The matter with which this judgment deals is one of jurisdiction - whether this court or the courts of New York, should be dealing with this matter in the light of the jurisdictional clauses contained in the loan documentation. If I decide in favour of jurisdiction the substantive matter will be dealt with in this court (and by me) in a few days. If I decide against it these proceedings will be stayed in favour of New York, where the second and third defendants (Foxhill) have already commenced proceedings.[2]This matter has been brought on as a matter of urgency because of the insolvent state of the debtor group. The proceedings were started on 4th January 2018, and pursuant to directions given first by Snowden J and then by me these matters have been brought on as swiftly as I have described above. Foxhill does not accept that matters are quite as urgent as Citibank and Oceanwood say they are, but nonetheless the matter has (with the co-operation of the parties) been brought on quickly. Snowden J made directions enabling and requiring all relevant issues to be decided (in effect) by the end of this month. I determined that jurisdiction should be dealt with first, and if that was decided in favour of those asserting it then the substantive dispute would be heard within a week of that decision.[3]Mr Moss QC led for Citibank; Mr Trower QC led for Oceanwood; and Mr Margolin QC led for Foxhill. Citibank took a stance on the jurisdiction question, supporting jurisdiction in England and Wales (not surprisingly, since it had started them here), but it is and will in due course be neutral on the question of “control”.

The short factual background and an outline of the dispute

[4]In what follows I merely summarise the effect of the contractual documents in this matter both to enable the swift production of this judgment and because an elaborate exposition is not really necessary. Unless it is necessary to do so I shall not distinguish between various companies in the debtor company group.[5]The Norske Skog group (as I shall call it) is a large Norwegian group of manufacturing companies engaged (inter alia) in the paper industry. In 2015 it entered into financing arrangements with certain creditors (acting through trustees) which included the following documents which are relevant to the present dispute, all of which were part of the overall financing transaction:(1) An Indenture, governed by New York law. This was the principal document governing the terms of the debt.(2) An Inter-creditor Agreement (”ICA”), which governed the relationship between creditors, their agent and their trustee. The relevant creditors are the secured creditors under the loan arrangements and certain unsecured creditors. It provides the possibility of accession by future creditors. This is subject to English law.(3) A share pledge agreement by which shares in one of the companies in the group, Norske Skog AS, were pledged as security for the secured part of the lending.[6]Citibank is the security agent and security trustee under those documents. In the events which have happened Oceanwood has become entitled to over 51% of the economic interest in the debt, some of it by relatively recent acquisition. Foxhill is itself interested in 4.6% of the debt but as I understand it is part of an ad hoc committee representing a rather bigger proportion.[7]The group is in financial difficulties. There has been a default under the above funding arrangements. Last year there were discussions about restructuring the debt, but they came to nothing. The board of the relevant holding company has been replaced pursuant to the provisions of the share pledge agreement. It is said by Foxhill that that was procured by Oceanwood and that that is part of what demonstrates its control. As a result of the failure of the refinancing proposals Norske Skog parent companies have filed for insolvency. A public sales process of the shares in Norske Skog AS (representing the real value in the group) is under way, promoted by Citibank as security trustee. Pending that sale taking place, additional moneys have been advanced to keep the group going under a liquidity arrangement, in which Oceanwood has participated.[8]It is said that if the sales process does not yield satisfactory irrevocable offers by the beginning of March there is a risk that creditor and supplier confidence will evaporate, leading to the collapse of the business with the effect there will be no, or less, business to sell. Citibank’s target is to receive irrevocable offers by the end of this month, with a view to entering into a binding agreement at the beginning of March. That sales process cannot be completed until regulatory approvals have been obtained in various jurisdictions, which will take (probably) a couple of months, leading to a completion at about the end of May. If that occurs satisfactorily then the business, or parts of it, will be saved.[9]Oceanwood and an associated company wish to bid in the public sales process. Foxhill’s expressed concern is that Oceanwood is seeking to orchestrate a sale which ends up with its being able to purchase on good terms.[10]Into that situation the present dispute has been introduced. The ICA contains provisions entitling, and in some circumstances obliging, Citibank (as trustee) to seek and act on the directions of the majority directions or consents of the secured creditors. The Indenture contains a provision which removes the votes of those who “control” the debtor companies. Foxhill says that by virtue of Oceanwood’s holding 51% of the debt, and/or by virtue of its influence over the affairs of the group, Oceanwood has control, so it is not entitled to have its views taken into account in the process just referred to. Oceanwood would wish to exercise its vote so as to support the sale process. Citibank wishes to obtain secured creditor approvals for the process and its implementation, but is faced with that dispute between Foxhill and Oceanwood and seeks directions as to who makes up the directing group of creditors. That is the form of the current part 8 proceedings. (Citibank had commenced an earlier set of proceedings joining only Oceanwood; those proceedings were discontinued when these proceedings were started.)[11]The Indenture and the ICA each have jurisidiction provisions conferring jurisdiction on the courts of New York and England and Wales respectively. Citibank and Oceanwood say that the current proceedings are justified by the ICA jurisdiction provision. Foxhill says that the governing provision is that contained in the Indenture and this court does not have the jurisdiction relied on. It started its own proceedings in New York the day after these proceedings were started. In this jurisdiction it has filed an acknowledgement of service indicating that it intends to contest jurisdiction and has issued an application which in effect does so.[12]On a previous occasion when Snowden J gave directions Citibank and Oceanwood gave undertakings intended to protect Foxhill's position as to jurisdiction while the directions were being worked out. The precise scope of the undertakings became a matter of dispute at the hearing before me and I shall deal with that dispute so far as necessary at an appropriate point in this judgment. For the moment I will record them here (taking them from an order dated 12 January 2018):
"AND UPON the Claimant and the First Defendant undertaking to the Court by their respective counsel that neither the taking of any step by the Second and/or Third Defendants after 12 January 2018 and prior to the determination of the Jurisdiction Challenge nor the appointment as representative respondents shall amount to a submission to the jurisdiction of the Court or in any way prejudice the Jurisdiction Challenge AND UPON the Claimant and the First Defendant further undertaking to the Court by their respective counsel that no step taken by the Second and/or Third Defendants after 12 January 2018 and prior to the determination of the Jurisdiction Challenge shall be adduced as evidence against the Second and/or Third Defendants in relation thereto, or referred to in support of any argument in relation to the Jurisdiction Challenge on behalf of the Claimant and/or the First Defendant."
[13]There are therefore two principal issues - the jurisdiction question and the substantive question about control. As I have indicated, it is the jurisdiction issue which has come before me first and which this judgment addresses. The skeleton arguments relied on a huge number of authorities (both English and American) which would have made it impossible to produce this judgment quickly enough if they had all had to be considered. However, many of them contain basic and unchallenged propositions, and generally I do not specifically refer to them. I have taken account of the authorities cited to me as appropriate even if they are not referred to below (which most of them are not).

The relevant provisions of the Indenture, the ICA and the share pledge

[14]The Indenture is dated 24 February 2015 and was made between two Norske Skog group companies (one of which is the Issuer and the other of which is the Guarantor), and Citibank in various capacities (including as Trustee and Security Agent). It governs the terms of the Issuer’s 2019 11.75% Senior Secured Notes in an aggregate principal amount of €290m. Oceanwood and Foxhill are “Holders” of notes under this document and bound by its terms in that capacity. Section 2.09 is the provision on which Foxhill relies as disentitling Oceanwood to wield its voting power because of its “control” of the Issuer and/or Guarantor, and lies at the heart of the substantive dispute in this matter. It reads:
“Section 2.09 Treasury Notes In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any Guarantor, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.”
[15]Section 14 contains provisions about (inter alia) service and jurisdiction. The agreement is subject to New York law under section 14.07: “Section 14.07 Governing Law THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.” (The capitalisation is in the original.)[16]Section 14.05 is the jurisdiction clause on which Foxhill pins its case:
“Section 14.05 Agent for Service; Submission to the Jurisdiction; Waiver of Immunities Each of the parties hereto irrevocably agrees that any suit, action or proceeding arising out of, related to, or in connection with this Indenture, the Notes and the Note Guarantees or the transactions contemplated hereby, and any action arising under U.S. federal or state securities laws, may be instituted in any U.S. federal or state court located in the State and City of New York, Borough of Manhattan; irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such proceeding; and irrevocably submits to the jurisdiction of such courts in any such suit, action or proceeding….”
[17]The Indenture acknowledges the existence and significance of the ICA as part of the overall documentation by referring to it in various sections. The detail of that does not matter; what is important is that it acknowledges its existence and the inter-relation between the documents, but it is worth citing section 12.06 on conflicts: “Section 12.06 Conflicts Each of the Issuer, the Guarantors, the Trustee and the Holders acknowledge and agree that the Security Agent is acting as security agent and trustee not just on their behalf but also on behalf of the creditors named in the Intercreditor Agreement and any Additional Intercreditor Agreement and acknowledge and agree that pursuant to the terms of the Intercreditor Agreement and any Additional Intercreditor Agreement, the Security Agent may be required by the terms thereof to act in a manner which may conflict with the interests of the Issuer, the Guarantors, the Trustee and the Holders (including the Holders' interests in the Collateral and the Notes Guarantees) and that it shall be entitled to do so in accordance with the terms of the Intercreditor Agreement and any Additional Intercreditor Agreement."[18]The ICA is also dated 24th February 2015 and was made between various members of the Norske Skog group, Citibank as security agent and security trustee for the Secured Parties, and (upon accession) each Senior Secured Noteholder represented by that trustee, and (upon accession) each Senior Notes Trustee as trustee for and on behalf of each Senior Noteholder represented by such Senior Notes Trustee. For present purposes it is necessary to note that the parties include both secured creditors (of which Oceanwood and Foxhill are examples) and unsecured creditors (Senior Note Holders). Oceanwood and Foxhill are Senior Secured Noteholders. The Senior Noteholders have unsecured debts which benefit from some guarantees.[19]The ICA regulates the relationship between the Holders and Citibank as trustee, and deals with such matters as enforcement, ranking, insolvency, the disposal of the proceeds of realisation and other matters. Citibank, as trustee responsible for (inter alia) enforcement of the security under the main loan, is entitled to look to instructions or directions from an “Instructing Group”, and that expression is defined in clause 1.1:
“Instructing Group” means, at any time: (a) subject to paragraph (b) below, the Majority Super Senior Creditors and the Majority Senior Secured Creditors (in each case acting through its respective Agent (other than in respect of any Hedge Counterparty))…”
[20]Foxhill and Oceanwood are Senior Secured Creditors for this purpose, and it is to an Instructing Group of those creditors that Citibank has looked for instructions in relation to its enforcement of the security by the sale of the assets (shares) which are the subject of the current public sales process. It has done so pursuant to clause 11: “11.2 Enforcement Instructions(a) The Security Agent may refrain from enforcing the Transaction Security unless instructed otherwise by: an Instructing Group;…(b) Subject to the Transaction Security having become enforceable in accordance with its terms: (i) an Instructing Group;... May give or refrain from giving instructions to the Security Agents to enforce or refrain from enforcing the Transaction Security as they see fit provided that the instructions as to Enforcement given by the Instructing Group ... are Qualifying Instructions. ... (d) the Security Agent is entitled to rely on and comply with instructions given in accordance with this Clause 11.2. 11.3 Manner of Enforcement If the Transaction Security is being enforced pursuant to Clause 11.2 (Enforcement Instructions), the Security Agent shall enforce the Transaction Security in such a manner (including, without limitation, the selection of any administrator, examiner or equivalent officer of any Debtor to be appointed by the Security Agent) as: an Instructing Group;… shall instruct (provided any such instructions are consistent with the Security Enforcement Principles) or, in the absence of any such instructions, as the Security Agent sees fit, in each case taking into account the requirements of each relevant Security Document and the Security Enforcement Principles.” an Instructing Group;… (i) an Instructing Group;... May give or refrain from giving instructions to the Security Agents to enforce or refrain from enforcing the Transaction Security as they see fit provided that the instructions as to Enforcement given by the Instructing Group ... are Qualifying Instructions.

an Instructing Group;…

[21]Clause 16 contains further provisions relating to control by an Instructing Group:
“16.4 Instructions to Security Agent and exercise of discretion (a) The Security Agent shall: (i) subject to paragraphs (d), (e) and (f) below, exercise or refrain from exercising any right, power, authority or discretion vested in it as Security Agent in accordance with any instructions given to it by the Instructing Group (or if this Agreement stipulates the matter is a discretion for any other Creditor or group of Creditors, from that Creditor or Group of Creditors); and (ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above (or if this Agreement stipulates the matter is a decision for any other Creditor or group of Creditors, in accordance with the instructions given to it by that Creditor or group of Creditors).” (i) subject to paragraphs (d), (e) and (f) below, exercise or refrain from exercising any right, power, authority or discretion vested in it as Security Agent in accordance with any instructions given to it by the Instructing Group (or if this Agreement stipulates the matter is a discretion for any other Creditor or group of Creditors, from that Creditor or Group of Creditors); and (ii) not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above (or if this Agreement stipulates the matter is a decision for any other Creditor or group of Creditors, in accordance with the instructions given to it by that Creditor or group of Creditors).”
[22]The significance of an "Instructing Group" appears from those provisions. They are the provisions under which Citibank seeks, and Oceanwood seeks to give, directions relating to the enforcement process. The main issue arising in this litigation is as to whether there is "control" within the meaning of Section 2.09 of the Indenture enjoyed by Oceanwood such that it has no voice in an Instructing Group of the Senior Secured Note Holders.[23]Clause 28 of the ICA makes English law its governing law. Clause 29 deals with "Enforcement" and jurisdiction: "29.1 Jurisdiction(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement (a “Dispute”).(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.(c) This Clause 29.1 is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.”[24]The only other loan-related document to which it is necessary to refer is a share pledge agreement (again dated 24 February 2015) by which shares in Norske Skog AS are pledged as part of the security for the main loan. It is, as I understand it, those shares which are intended to be the subject of the forthcoming sale. Citibank has already exercised rights under this document to replace the directors of that company. That document is governed by Norwegian law and in it the parties (a group holding company and Citibank) submit to the non-exclusive jurisdiction of the Norwegian courts.

The issues arising

[25]As will by now be apparent, Citibank has started to exercise its enforcement rights. The activities of Oceanwood have generated suspicion on the part of Foxhill, who now takes the point that Oceanwood’s “control” disentitles it to be part of an Instructing Group to which Citibank looks for instructions in relation to the sale. Oceanwood disputes that, and Citibank has brought these proceedings in order to have it determined whether or not it should take instructions from an Instructing Group of which Oceanwood forms part and in which its vote is counted.[26]The parties have agreed that the following issues have to be decided in order to determine the question or questions which Citibank have raised. These questions have been formulated by the parties and recorded in two orders of this court thus: “(1) whether any instruction given by a purported instructing group that depends for its status as an Instructing Group on any interest held by Oceanwood Opportunities Master Fund or any other single entity or person or persons acting in concert, as a holder or as holders of the ultimate economic interest in more than 50 per cent of the principal amount of outstanding Seniors Secures Notes Liabilities (as defined in the Intercreditor Agreement), is an instruction provided by an Instructing Group for the purposes of the Intercreditor Agreement; and/or” (2) whether any interest of Oceanwood Opportunities Master Fund or any other single entity or person or persons acting in concert, as a holder or as holders of the ultimate economic interest in more than 50% of the principal amount of outstanding Senior Secured Notes Liabilities (as defined in the Intercreditor Agreement), is to be disregarded pursuant to Section 2.09 of the Senior Secured Notes Indenture; and/or (3) whether any interest of Oceanwood is to be disregarded pursuant to section 2.09 of the Indenture on the basis of the facts and matters relied on by Foxhill, being the facts and matters stated in Part B of Paul Hastings' letter dated 29 January 2018 as may be amended from time to time with the agreement of the parties or the order of the court" (I do not need to set out the facts and matters referred to in (3).)[27]Those are the issues which will be decided in this court if it is determined that there is jurisdiction to do so. It is necessary to understand the nature of those issues for the purposes of the jurisdiction debate because that nature goes to whether or not the dispute embodied in them should be determined in New York pursuant to the jurisdiction provisions of the Indenture or in London pursuant to the jurisdiction provisions of the ICA.

The contentions of Foxhill

[28]Foxhill contends that the Indenture jurisdiction clause gives the New York courts exclusive or mandatory jurisdiction, with the effect that proceedings which fall within it have to be brought there and cannot and should not be brought in this jurisdiction save in exceptional circumstances. The proceedings are within the clause because the issues in them are “proceedings arising out of, related to or in connection with” the Indenture. The real questions in the case are questions 2 and 3. Those plainly relate to the Indenture. Once they are answered the answer to question 1 is immediately apparent. Question 1 is described as an “extraneous declaration” for these purposes. The “centre of gravity” of the claim is the control point, which lies within the New York jurisdiction clause. So the dispute is one within the Indenture jurisdiction clause and ought to be tried in New York. There is no overlap between that clause and the ICA jurisdiction clause, and the English courts accordingly do not have jurisdiction under the Indenture jurisdiction clause. In the face of the New York jurisdiction clause the facts of this case are not sufficiently exceptional to require or allow the English courts to permit the claim to be brought here.[29]In support of the exclusive or mandatory jurisdiction Foxhill has produced expert evidence from a New York attorney, Prof Adler, as to New York law principles of construction, and a number of authorities going to the question of whether clauses of the kind, and with the terminology, of the Indenture provisions, give rise to exclusive, or mandatory jurisdiction in the courts to which they refer.

The contentions of Citibank and Oceanwood

[30]Citibank and Oceanwood each took the same points, adopting each other’s submissions. They concentrated on the terms of the jurisdiction clause in the ICA and submitted that it undoubtedly gave jurisdiction over this dispute to the English courts. That jurisdiction was exclusive so far as unsecured creditors were concerned, and non-exclusive so far as the secured creditors were concerned, but that distinction was not urged on me as having any significant direct relevance to the present dispute. That clause, in its terms, gives jurisdiction over the present dispute to the English courts. The present dispute concerns the right to give directions under the ICA - question 1. That is a question which arises under the ICA, and only under the ICA. Questions 2 and 3 are not answered purely for their own sake; they are steps to get to the real question, which is question 1. Once one has answered that question in that sense then a combination of Owusu v Jackson [2005] QB 801 and Article 25 of the Recast Brussells Regulation (Regulation 1215/2012) means that the English court had jurisdiction. That was said to be an end of the matter.[31]So far as the exclusive or mandatory nature of the Indenture jurisdiction section is concerned, Citibank and Oceanwood disputed that nature, and they said that on its proper construction it was permissive only. They joined issue (via Oceanwood’s expert US attorney, Mr Smith) with the proposition that the Indenture in this case conferred exclusive or mandatory jurisdiction - they said it did not. Alternatively it did not exclude the jurisdiction in the English courts in relation to the present matters. The jurisdiction clauses should be construed so as to give effect to what a reasonable businessman would expect, which is not to allow a fragmentation of disputes or inconsistent jurisdictional provisions. One can give effect to that by recognising that there are three interlocking agreements here (the Indenture, the ICA and the share pledge agreement) and that conflict is avoided (in the present context) by acknowledging that the New York clause is not exclusive so far as the present dispute is concerned, or does not prevent them bringing proceedings in this jurisdiction.[32]So far as necessary, Oceanwood said that the exceptional facts of this case, including the urgency of the matter, required and justified the maintenance of these proceedings in any event.

The construction of the ICA

[33]The dispute in this case calls for me to construe the English law ICA jurisdiction clause, and the New York law Indenture jurisdiction clause. The relevant principles of construction do not seem to me to be very far apart if they differ at all.[34]I will not lengthen this judgment by elaborately setting out the basic principles of construction to be applied to an English law contract. I have to consider the English law document by considering the words used in their context, including their commercial context, and coming to a conclusion as to their meaning.[35]If one looks at the ICA jurisdiction clause without the context of the Indenture jurisdiction clause for the moment, it is plain to me that the present dispute would fall within it. The ICA contains important provisions governing how the secured creditors can control the security trustee. They do not appear anywhere else. Persons claiming to be entitled to be treated as a secured creditor for these purposes (Oceanwood) have indicated that they wish to give a direction to Citibank, and/or Citibank have indicated that they wish to get a direction from that class of creditors. An uncertainty is said to have arisen as to whether Oceanwood is to be treated as a member of the class for those purposes. That is plainly a question arising “out of or in connection with” the ICA. Nothing could be plainer on the normal use of those words.[36]It therefore becomes necessary to consider the impact on that construction of the fact that the dispute as to whether Oceanwood can “vote” arises out of a provision in the Indenture which is said to deprive it of its voting qualification (section 2.09). I do not consider that that factor affects the first conclusion to which I have come on the construction of clause 29.1 of the ICA (the jurisdiction provision). The dispute in a real sense is still “arising out of or in connection with” the ICA. I consider that both limbs of that (“arising” and “in connection with”) are still fulfilled. Those factors are not negated by the fact that one has to look to another agreement to identify the underlying dispute; the voting question, and the ability of Citibank to seek or accept the direction of the Instructing Group with or without Oceanwood, is still a dispute falling within clause 29.1.[37]To the extent that Foxhill seeks to argue otherwise by reference to the three formulated questions, I consider that that argument fails. It is true that questions 2 and 3 are important questions, but question 1 is still a question arising out of or in connection with the ICA. There is not, and cannot in the circumstances be, any real question of question 1 somehow being an artificial contrivance to establish a jurisdiction which would otherwise not exist. If it were a contrivance, or artificial, the position might be different, but it is a real question, and it apparently falls within clause 29.1.[38]If the argument stops there then the argument of Oceanwood and Citibank, to the effect that Article 25 of the Recast Brussels Regulation concludes the matter, succeeds. That Article provides: “1. If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise."[39]The words "regardless of their domicile" were added with effect from 10 January 2015, so this provision in its amended form applies to the ICA. The effect of that provision is that if one applies without more the construction of the agreement to which I have just referred then the clause, reinforced by Article 25, gives the courts of England and Wales jurisdiction. Those courts have no discretion to grant a stay in favour of other jurisdictions on a forum non conveniens basis. Mr Margolin did not dispute that proposition.[40]Mr Margolin’s shortly expressed answer to this point was that this dispute did not come within the ICA at all. It came within the Indenture dispute resolution provisions. He did not really pursue that beyond relying on a proposition (with which the other parties agreed) that it was unlikely that sensible businessmen would have agreed to two conflicting jurisdiction provisions. He did not explain how the apparently clear wording of the ICA provisions, which of themselves plainly would cover the present dispute, come not to do so once one turns to the Indenture provisions. He was presumably saying that what he said was the mandatory or exclusive nature of the Indenture provisions meant that, as a matter of construction, the dispute could no longer fall within the apparently plain terms of clause 29 of the ICA. I shall return to that point when I have considered his case on the exclusive (or otherwise) nature of section 14.05.

The exclusive jurisdiction provisions

[41]At the heart of Mr Margolin's whole case, to which an enormous amount of effort was devoted, was the proposition that section 14.05 of the Indenture afforded to the New York courts exclusive jurisdiction over the disputes within its remit, and that those disputes included the present dispute. As I have indicated, experts were instructed. Each expert gave evidence as to the extent to which the word "may" (which appears in section 14.05) was or was not capable of giving rise to exclusive (or mandatory) jurisdiction despite its apparently permissive nature. Prof Adler's thesis is that the word "may", or other permissive wording, is not necessarily conclusive and that the situation can be coloured by other wording so as to produce a more exclusive (or mandatory) effect. Mr Smith does not seem to dispute that the addition of language indicating exclusivity is capable of turning a "may" into a "must" (my summary, not his) but would (or might) disagree with Prof Adler as to the sort of language necessary to achieve that effect. He did not accept that a further provision (added to permissive language) to the effect that the parties submitted to a given state jurisdiction, was necessarily capable of removing the clause from permissive to exclusive.[42]Each side sought to treat me to a menu of a large number of instances where New York (and other US) courts have considered the effect of clauses said to be similar to the provisions of clause 14.05. I say "similar to", because they were said to contain equivalent elements to three elements of the Indenture provision - a provision that proceedings "may" be instituted in a given court, a waiver of any objection to jurisdiction and some form of submission to jurisdiction. Mr Margolin relied on those cases (some of which were referred to in his expert evidence, some of which were not) and Mr Moss sought to counter them with other cases.[43]Those cases had the merit of moving the debate from the slightly abstract level of Prof Adler and Mr Smith to the more concrete level of how New York courts approach similar types of jurisdiction clause. Some of them would certainly tend to support the proposition that a clause of the nature of section 14.05 (with the three elements that I have just identified) has an at least mandatory if not exclusive effect. By "mandatory" I mean a clause with the effect described by Mr Trower, namely that it provides for jurisdiction, and (at least once one party has commenced proceedings in that jurisdiction) stops any objection being taken on forum non conveniens grounds, while not perhaps contractually preventing proceedings being commenced elsewhere.[44]However, it seems to me that this detailed debate, which would have taken some considerable time to resolve bearing in mind the large number of authorities involved, fails to address the real point which arises in this case. Neither the experts nor those cases addressed in terms the addition of the all-important additional factor which exists in the present case, which is the existence of clause 29.1 of the ICA. That seems to me inevitably to be part of the background which must inform a debate about the true effect of section 14.05. Neither expert in terms addressed the permissibility or otherwise of considering related documentation, as a matter of New York law.[45]Mr Smith expressed the view that a New York court, presented with the dispute between the parties as to whether section 14.05 permitted the bringing of the present dispute in this jurisdiction, would say that the outcome turned on whether the court considered section 14.05 to be “a mandatory or permissive forum selection clause”. That suggests that he would not take the existence of the ICA into account at all, and would narrowly consider the labelling exercise that he proposed, though I find it hard to believe that he would in fact ignore the terms of another agreement which is expressly referred to in the Indenture.[46]However, I do not propose so to confine my deliberations. As part of the directions leading up to this hearing, Snowden J ordered that the parties exchange propositions of US law on which they relied, and on which they challenged the other parties. Those documents are extensive documents, and I do not propose to cite from them extensively (or indeed at all) and it is sufficient to say that their thrust is to accept that jurisdiction clauses are contractual clauses without suggesting that they fall to be interpreted by reference to a set of considerations which are different from other clauses. Foxhill’s statement of principles at paragraph 4 acknowledges that the interpretation of contracts may depend on facts and circumstances extrinsic to the contract, and that part of the proposition was not apparently disputed by Oceanwood or Citibank (Oceanwood disputed the admission of evidence of subjective intention and post-contract matters, but those are different points). Prof Adler adopted the terms of paragraph 4. It therefore seems to me to be permissible to take into account the existence and terms of the ICA when considering the real point that arises on this part of the present dispute. A debate about labels (”permissive”, “mandatory”, “exclusive”) without that context seems to me to be arid.[47]I also consider the approach of Mr Margolin to this matter, as set out in paragraphs 36 and following of his skeleton argument, to be helpful. He invited me to take into account some English case law in determining what reasonable businessmen are likely to be taken to have intended or not intended, a test which I consider to be an appropriate one. He submitted that even if section 14.05 contemplated proceedings in another forum, it cannot have been intended that there should be parallel proceedings involving duplication of effort, time and costs. He invited me to take into account the views of Males J expressed in English authorities: “It would make no sense, in my judgment, to construe the clause as permitting Anchorage, so long as it submits to the jurisdiction of the English court, also to bring a claim of its own in New York in respect of essentially the same matters as arise here. It cannot sensibly be supposed that the parties would have regarded such a prospect as acceptable. On the contrary they would rightly have regarded it as a procedural nightmare." (BNP Paribas SA v Anchorage Capital Europe LLP [2013] EWHC 3073 (Comm) at para 91) Prior to which Males J had said (at para 88): “… the terms "exclusive" and "non exclusive" themselves are merely convenient labels. In agreement with Dicey at para 12-105 ("the true question is whether on its proper construction the clause obliges the parties to resort to the relevant jurisdiction, irrespective of whether the word "exclusive" is used"), I prefer to ask the question whether the commencement and pursuit of the foreign proceedings in question are things which a party has promised not to do."[48]I respectfully agree with that as an approach, and it is particularly useful in the present case. I do not consider that any of the US law and expert material in this case prevents me from adopting it, and in the circumstances Foxhill can hardly object to my doing so. It requires a proper consideration of clause 29 of the ICA as part of the context of the debate as to what section 14.05 does and does not permit.[49]I have already referred to the fact that not only was the ICA entered into on the same day and as part of the same package as the Indenture, it is expressly cross-referred to in the Indenture. The Indenture even gives it a degree of express priority – see the passage cited above. The parties obviously intended the ICA to have full effect according to its terms in relation to the very important areas governed by it.[50]One of those important terms is the jurisdiction provision in clause 29. The parties plainly acknowledged that there might be disputes arising under "and in connection with" that agreement and the appropriateness of the courts of England as a venue for dealing with them (see paragraph (b)). The persons interested in that clause would not necessarily comprise just those who are parties for the time being to the Indenture. Another limited class of non-secured creditors were also subject to that Agreement, as would be further creditors who might accede to it. That latter event has actually happened in relation to a subsequent liquidity financing agreement. Those additional parties would not necessarily accede to the provisions of the Indenture. They would or might therefore have a particular separate interest in relation to the separate jurisdiction provision of clause 29.[51]All those factors point towards an intention that clause 29 should have its own vigorous life. Foxhill would not dispute that so far as it did not touch on any aspects of the Indenture, but it must always have been anticipated that a dispute under the ICA might, at least to a degree, turn on certain considerations arising out of the Indenture. Where that happens there are three alternative courses of action. Either the whole dispute would have to be tried in New York (because of the engagement of the Indenture); or the "Indenture parts" would have to be tried in New York with the rest (disputes arising out of or in connection with the ICA) being tried in this jurisdiction; or the whole dispute has to be tried in this jurisdiction. If one considers for the moment the position of those who are, or have become, parties to the ICA only, it is hard to see why they should be expected to have to submit any part of the dispute to the New York courts when they have not been party to any agreement to do so. So far as those who are also parties to the Indenture are concerned, it does not seem to me that a reasonable businessman would expect to have to remove the whole dispute to New York when it is nonetheless a genuine dispute under the terms of the ICA, and even less likely that such a businessman would be likely to expect the fragmented approach foreshadowed in the second of my three possibilities. I consider that the answer to the question of whether the parties in that situation (and therefore in the present situation) have agreed to submit the dispute to the courts of New York under section 14.05 is that they have not.[52]I am aware that in approaching the matter in that way, and in reaching that conclusion, I have not come to a conclusion as to the full extent to which section 14.05 is permissive, mandatory or exclusive. That is because I do not think that an attempt to apply that sort of label to the clause is necessarily helpful in answering the real question that arises in this case. What my conclusion means, if it matters, is that certain aspects of the dispute between the parties, which might, in other circumstances not involving a dispute under the ICA, have been driven to New York by that section, get themselves tried elsewhere. That is because the context of the other jurisdiction (England and Wales) and the litigation in it is a context which is provided for by a separate agreement to which full and proper effect must be given. I do not think that full and proper effect would be given to clause 29 if the presence of disputes potentially arising under the Indenture, as part of the clause 29 dispute, required the removal of the dispute, much less part of it, to New York.[53]All this presupposes, of course, that the dispute is genuinely one which arises under the ICA and is not one in respect of which the ICA dispute is some sort of contrived wrapper. I have already held that there is no such contrivance in this case.[54]I have not overlooked the dicta of Lawrence Collins LJ in USB AG v HSH Nordbank AG [2009] ICLC 934, which warn against the likelihood of inconsistent jurisdiction clauses and which was relied on by all parties in argument before me. “84. …But in my judgment sensible business people would not have intended that a dispute of this kind would have been within the scope of two inconsistent jurisdiction agreements. The agreements were all connected and part of one package, and it seems to me plain that the result for which UBS contends would be a wholly uncommercial result and one that sensible business people cannot have intended … … 95 … Whether a jurisdiction clause applies to a dispute is a question of construction. Where there are numerous jurisdiction agreements which may overlap, the parties must be presumed to be acting commercially, and not to intend that similar claims should be the subject of inconsistent jurisdiction clauses. …”[55]I do not consider that the conclusion which I have reached offends that principle, assuming, as I do, that it is as likely to refer to New York jurisdiction clauses as English jurisdiction clauses. I consider that either the clauses can be reconciled by carving out of section 14.05 (so far as necessary) disputes that fall within clause 29, or that the two courts between them can control cases as a matter of case management. But whatever the technique, I consider that clause 29 has the life that my construction of the two clauses gives to it.

Exceptional circumstances

[56]That conclusion means that I do not have to consider whether or not there are exceptional circumstances which mean that this court should entertain these proceedings notwithstanding a form of New York jurisdiction clause which assigns such disputes to the courts of New York. The “exceptional circumstances” principle is accepted by Foxhill, though it makes submissions as to just how exceptional they have to be (which is “very”). Despite the fact that the point does not arise I shall express very brief views on the topic.[57]Citibank and Oceanwood rely on various matters as pointing to the exceptional appropriateness of English proceedings. They were: the availability of an expedited process which will render a decision significantly in advance of any decision on the “control” point which might be rendered by the New York courts, and, importantly, in time to permit Citibank to have its directions for the purposes of the necessary next phase of the sales process; the fact that the sales process is being driven from London; Citibank is acting through its registered London branch; it has instructed PriceWaterhouseCoopers to provide a necessary fairness opinion in connection with a proposed sale; and Oceanwood’s investment advisory service is based in London.[58]The only one of those factors which carries any potential weight is the first. I do not consider that any of the other factors carry any weight at all. They are commercial matters adopted for the convenience of the parties and which have no bearing on where litigation about the Indenture ought to be conducted. The first of them gives rather more pause for thought.[59]It involves considering the speed of the New York process. As I have indicated Foxhill started its New York proceedings raising the “control” point the day after these proceedings were started. It sought preliminary disclosure but was refused. It has also put in train procedures seeking an interim injunction, but that has not yet been heard. The New York court is, in essence, waiting for a decision from this court on the jurisdiction issue, as I understand it. Crucially, no steps have been taken in New York to get an urgent trial. Foxhill has recently suggested that it would or might be possible to have a bench trial (a trial without a jury) by about the end of March. It is not yet wholly clear whether that will in fact be possible, but insofar as it is, that is the earliest that a final decision could be litigated in New York.[60]I accept on the evidence that the sales process requires an answer to the question of “control” by the beginning of March; I accept that on the evidence if it is not possible for Citibank to get its directions or consent by then there will be a real and serious risk to the continuation of the business of the Norske Skog group, with the result that there will be nothing, or materially less to sell; I accept that an answer from a New York bench trial at the end of March (or thereabouts) may well be too late for these purposes; and I accept that a prompter decision in New York is not realistically possible. All those difficulties do not exist if the English proceedings are pursued. An answer ought to be forthcoming by the date said to be required by Citibank, with the very enhanced prospect of the survival of the business of the group as a going concern if the sales process is approved (I do not assume it will be - that may depend on the outcome of the next stage of these proceedings). The only misgiving I have is that it is not apparent that a New York bench trial would not have been available had Citibank started where (on the present hypothesis) it ought to have started. It is certainly a good point that a party ought not to be able to generate exceptional circumstances based on delay in getting a result where delay in achieving that in the prima facie correct venue has resulted from that party starting in the wrong place. However, in this case the decision to start here was, I assume, taken bona fide, and not in order to steal a march, and Foxhill have not, at least until recently, taken or proposed steps which would generate a speedy trial in New York (assuming for these purposes that its proposal for a bench trial in March is indeed achievable despite the question mark over that). I do not hold this point against Citibank in the circumstances.[61]Bearing in mind that a trial in this jurisdiction is probably the only way of getting an answer in time to have a relevant bearing on the sale process, in the circumstances I would, if necessary, and (subject to the next point) just have decided that the circumstances were such as to justify a trial here notwithstanding a New York clause which, on its terms, did not allow it.[62]However, in this context I have considered Foxhill’s point on its undertakings. It says that the purpose of the undertakings was to make sure that any step that it took towards resolution of this dispute should not be taken against it on the question of jurisdiction. It has been forced, in practice, to prepare for a hearing which, on the hypothesis of the present debate, it need not have done. That has, in practice, enabled a speedy trial to take place here which would otherwise not have been able to take place. If it were now forced into that trial on the basis of exceptional circumstances, then its taking those steps would in effect be held against it - it would have been forced into the jurisdiction on the basis of steps which it was not otherwise obliged to take.[63]I confess that my first reaction to this point is that it was a bad one. It seemed to me that the undertakings were to prevent acts being relied on as a submission to the jurisdiction when otherwise they would have been. But further consideration of the second of the undertakings has led me to a different conclusion. The same order as that in which the undertakings were given (12th January 2018) contained a direction that the parties, including the Foxhill parties, should serve evidence and give disclosure in relation to the main “control” claim by dates which enabled the speedy trial which can now take place. The reason why Oceanwood and Citibank can now say that we can have a speedy trial here is because Foxhill was under those directions and has (I assume) complied with them and is ready for trial. That readiness for trial is the key reason for saying that exceptional circumstances justify a trial here, but it has only been achieved because of acts undertaken by Foxhill pursuant to the directions. In saying that we can now have a speedy trial, and should have one here under the “exceptional circumstances” head because this is the only jurisdiction in which such a trial can take place in time, Oceanwood and Citibank are adducing the facts of Foxhill’s readiness (which would otherwise not have been expected) against Foxhill in connection with the Jurisdiction Challenge.[64]That would seem to me to be contrary to the terms of the second undertaking. Oceanwood and Citibank should not be allowed to avail themselves of the fruits of that breach in order to allow be able to say that there can be a speedy trial here. They are, in effect, not to be allowed to rely on the readiness of Foxhill because they undertook not to do so.[65]I cannot pretend to reach this conclusion with enthusiasm in terms of practicality, but it seems to me to be right. To conclude otherwise would lead to Foxhill’s having trapped itself into being subject to litigation in this jurisdiction when the purposes of the undertakings was to avoid such a trap. A foreign litigant here should feel entitled not to be so trapped.[66]But of course none of this matters in the light of the conclusion that I have reached on the scope of section 14.05 of the Indenture.

Conclusion

[67]It follows from the foregoing that Foxhill’s challenge to the jurisdiction of the court in this matter fails. I shall deal with consequential matters, including directions for Foxhill to serve an unconditional acknowledgment of service, at a further hearing as soon as possible after the parties have had a chance to consider the terms of this judgment in draft - I anticipate within 24 hours.[68]I end by adding the following. I have not set out at any length a lot of the condensed oral submissions and detailed written submissions of the parties, referring to dozens of cases. Nor have I dealt with every point raised. That is not out of want of respect to the parties, their advisers and their experts, though I do think that there was a degree of over-enthusiasm in some of the citation of authority. All the parties knew that this matter was to be dealt with speedily, and the range of material submitted to me was not really consistent with that. The urgency with which this matter has had to have been dealt with means that I have had to produce this judgment over a weekend and that degree of urgency has not permitted me to set out a more detailed analysis of the large number of English and US cases cited and a more detailed exposition of the submissions. I have considered the material before me to the extent which is necessary for purposes of producing this judgment. The parties (or at least Citibank and Oceanwood) wish to know where they stand in relation to the sale process timetable and Foxhill wishes to have the opportunity of considering an appeal before the next phase of this court’s considerations. That required a very prompt, rather than a very full, judgment.

Cited in 1 later judgment