Black Diamond Offshore Ltd & Ors v Fomento De Construcciones y Contratas SA

By this application under CPR 11(1) the Applicant/Defendant, Fomento de Construcciones y Contratas S.A. ("FCC") seeks a declaration that the court has no jurisdiction in this matter or alternatively, if it does, that that jurisdiction should not be exercised unless and until a further is made on an application issued by the Claimant/Respondent, after the determination of Homologation Proceedings in Spain.

FCC is a leading publicly quoted Spanish company. It specialises in the provision of, amongst other things, construction and city sanitation services, such as rubbish removal and waste water treatment. FCC has two main types of borrowing. The first is under a €450m at 6.5 per cent unsecured convertible note issued by an Offering Circular dated 27 October 2009 (the "Notes"). But for one immaterial exception, these are subject to English Law and the exclusive jurisdiction of the English courts. The second type of borrowing is under a syndicated finance agreement dated 24 March 2014 (the "Syndicated Finance Agreement”) in an amount of €4.5bn. The Syndicated Finance Agreement is subject to Spanish law and the jurisdiction of the courts of Madrid. The Syndicated Finance loan is divided into two tranches. Tranche B being the relevant tranche for present purposes, is convertible into shares in the initial amount of €1.35bn.

The Claimants/Respondents, Black Diamond Offshore Limited, Double Black Diamond Offshore Limited and North Light European Fundamental Credit Fund (to which I shall refer together as the "Creditors”) are the holders of Notes. They are also senior Creditors of FCC under the Syndicated Financing Agreement, being the holders of Tranche B debt.

FCC is seeking to restructure the terms of the Tranche B Debt in Spanish restructuring proceedings, which are known as homologation proceedings, which are underway in Barcelona, Spain (the "Homologation Proceedings").

In summary, the restructuring of this debt involves (amongst other things) (a) the prepayment of €900m of the debt for €765m i.e. a reduction of 15 per cent; (b) the extension of the term of the remaining debt by three years; and (c) a reduction in the rate at which the payment in kind (PIK) interest accrues.

The Creditors believe that the Homologation Proceedings have triggered an Event of Default under the Notes which entitles them to accelerate their Notes. In their capacity as holders of Tranche B Debt they disagree with the proposed restructuring. They consider that it imposes disproportionate sacrifice on the holders of the Tranche B Debt and that, correspondingly, a disproportionate benefit will accrue to FCC’s junior debt holders, shareholders and other interested parties. They also consider that those creditors who have voted in favour of the restructuring have done so on the basis of a conflict of interest and cross-interests, rather than on the basis of their interest as holders of the relevant debt.

On 16 January 2015 the Creditors and another seven Claimants, who were Tranche B Debt holders, but not Noteholders, issued the proceedings in which this application is made. It is a Part 8 Claim against FCC in which declarations are sought as to whether as a result of the Homologation Proceedings and the facts upon which they are based an Event of Default has occurred under the Notes. At the same time, they also applied for an expedited hearing, because they wished to have the matter heard before the Homologation Proceedings. The application for expedition was heard on 29 January 2015 and Nugee J declined to exercise his discretion to grant an order for expedition.

On 3 February 2015 the seven Claimants who were Tranche B Debt holders but were not Noteholders, filed notices of discontinuance and on the same day FCC filed its Acknowledgement of Service in which it indicated that it intended to dispute the jurisdiction of the English Court. On behalf of the Creditors it was suggested that it had been understood that such a challenge would not be made if the seven non-Noteholders discontinued their claims. Mr Gillis QC on behalf of FCC says that itself is a misunderstanding of the correspondence. In any event, on 6 February 2015 the Creditors issued a summary judgment application and on 17 February 2015 FCC issued its application for a declaration pursuant to CPR 11(1) that the Court has no jurisdiction or alternatively, that the jurisdiction should not be exercised.

As a result of the directions made by Nugee J on 23 February 2015 the jurisdictional challenge was heard on 4 March 2015 and if I dismiss the application the summary judgment application will be heard in a window between 31 March and 1 April 2015. As a result of the short timetable and the need for FCC to know whether to prepare for the summary judgment application I agreed to give judgment by 9 March 2015 and do so today.

It is not in dispute that by virtue of clause 19(a) for the purposes relevant to this dispute, the Notes are subject to English Law and that the exclusive jurisdiction clause in favour of the English courts, contained in clause 19(b) of the Notes applies. Clause 19(b) is in the following form:

By contrast clauses 28.1 and 28.2 of the Syndicated Financing Agreement, which govern the Tranche B Debt provide that that agreement is governed by Spanish civil law and that the parties "with an express waiver of the right to their own forum, expressly and irrevocably submit to the Courts and Tribunals of the city of Madrid for the resolution of any issues that might arise from the interpretation, validity or performance of [the] agreement." It is also relevant that clause 18 of the Syndicated Financing Agreement provides for the acceleration of the Tranche B Debt in certain circumstances which is said may include the acceleration of the Notes.

As I have already mentioned, under the Part 8 proceedings the Creditors seek a declaration that there has been an Event of Default under the Notes as a result of the Homologation application or in the alternative that such an event will occur upon the formal implementation of the restructuring proposal before the Spanish court if or when it upholds the Homologation Order. They contend that such an event has occurred because the judicial homologation constitutes "an arrangement … with or for the benefit of the relevant Creditors in respect of any of [FCC’s] debts", or the proposal of such an arrangement, within the meaning of Condition 10(f) of the Notes and/or, if it is upheld, that the Homologation Order is an "arrangement". However, FCC has refused to accept that there has been an Event of Default and has asserted that Condition 10(f) is only triggered by an arrangement in respect of "all" of FCC’s debts.

It is not in dispute that the Homologation Proceedings were commenced before the Part 8 Claim was issued and that the only ground upon which a Homologation Order could be challenged is that of "disproportionate sacrifice". However, the parties’ Spanish law experts disagree about whether an Event of Default under the Notes, if such an event has occurred or will occur on the making of a Homologation Order, is relevant to such a challenge. FCC’s expert contends that it is of no relevance and accordingly will not be taken into account or considered by the Spanish court whilst the Creditor’s expert says that it is relevant and therefore, will be considered.

Despite the opinion of FCC’s expert as to the relevance of an Event of Default under the Notes to the making of any Homologation Order, Mr Gillis QC on behalf of FCC contends that the English Court has no jurisdiction in relation to the Part 8 Claim or in the alternative that the jurisdiction should not be exercised, but that a case management stay should be granted over and until the Homologation Proceedings have been determined.

Before turning to the main heads of his arguments, Mr Gillis made clear that it is accepted and agreed that the Homologation Proceedings are of a different nature from the Part 8 Claim, there is no Defendant in such proceedings, the Creditors are not parties to the Homologation Proceedings, qua Noteholders and that accordingly, there will be no determination of civil rights between the Noteholders and the Defendant as a result of any Homologation Order.

Mr Gillis also made clear that as a result of the distinctive nature of the Homologation Proceedings there was no need to decide and that he was not pursuing any argument as to whether those proceedings fall within EC Insolvency Regulation 1346/2000 or the EC Brussels 1 Regulation 1215/2012. In fact, he stated that he was not arguing that the Homologation Proceedings fall within the Brussels 1 Regulation or that they are "related proceedings" for the purposes of Article 30. In this regard he made clear that he was not suggesting that the Part 8 Claim be stayed so that another tribunal could decide the issue between the Noteholders and FCC. On the contrary, after the Homologation Proceedings are determined, he says that the Creditors could always seek to lift the stay and litigate the issue in the English courts.

Mr Gillis’s real complaint is that he says that the Creditors have no real interest in pursuing the Part 8 Claim. He says that they seek to do so in order to confer a collateral benefit upon the Tranche B Debt holders and as a result, he says they seek to subvert the contractual agreement under which the Tranche B Debt and questions arising in relation to it are subject to Spanish law and jurisdiction. Mr Gillis says that this is relevant both to the issue of the construction of the exclusive jurisdiction clause in the Notes and the question of whether a stay should be granted.

In summary, in relation to the no real interest point he says: the Homologation Proceedings do not affect the rights of the Noteholders; in fact, the proposed restructuring, which is the subject of those proceedings, improves the position of the Noteholders; the Noteholders have not in fact sought to accelerate their debt and he says that that is because given the 6.5 per cent interest rate upon the Notes, there is no financial reason to do so; there is a ready market for the Notes and where they sold only a 0.4 per cent reduction in receipt would be suffered; it is clear, both from the expedition application and the content of the evidence served in support that the only interest that the Creditors have is to seek to confer a benefit which can be utilised in the Homologation Proceedings; and lastly, the furthest which the Creditors are willing to go is to say that they will give "serious consideration" to whether to accelerate the Notes, which Mr Gillis describes as equivocal in the extreme. Mr Gillis adds that, even if he is wrong about a real interest, the evidence is that the Homologation Proceedings will be concluded by the end of April and therefore, a case management stay would only prevent the Creditors from proceeding for a period of seven weeks and can be of no prejudice to them.

There is no dispute that the relevant principles which apply to the construction of jurisdiction provisions can be derived from Donohue v. Armco Inc [2001] UKHL 64 and [2002] Ll Rep 45; Fiona Trust and Holding Corporation v. Privalov [2007] EWCA Civ 20, [2007] 2 Ll Rep 267 and Satyam Computer Services Limited v. Upaid Systems Limited [2008] EWCA Civ 487 and [2008] 2 AE (Comm) 465. It is accepted therefore, that jurisdiction clauses must be construed "widely and generously" with a presumption in favour of "one-stop shopping" for dispute resolution.

However, as I have already mentioned, Mr Gillis submits that the real dispute here arises between FCC and the Creditors, not in their capacity as Noteholders at all, because in that capacity they have no real interest in the outcome of the Part 8 Claim, but in their role as Tranche B Debt holders. He goes on to say that as a matter of construction the parties must be taken to have intended that the dispute in this case which he says can fall within either the agreement relating to the Notes or the Syndicated Financing Agreement should be governed by the jurisdiction clause in the contract with which it has a closer connection, namely, the Syndicated Financing Agreement and that accordingly, it is the Spanish courts which have jurisdiction in this matter.

In this regard Mr Gillis referred to UBS AG and UBS Securities LLC v. HSH Nordbank AG [2009] EWCA Civ 585 in which the Court of Appeal dealt with the question of how the court should approach the construction of jurisdiction provisions where the dispute in question could be said to "arise out of or in connection with" either of two different contracts which contain different jurisdiction provisions.

Lord Collins of Mapesbury, who gave the judgment of the court with which Ward and Toulson LJJ agreed, described the case as one in which a negative declaration had been used as a means of seeking to have a dispute litigated in what was perceived to be a favourable forum. At paragraph [1] of his judgment he stated that the issue was whether the English jurisdiction clause in one of the documents recording the complex transaction between the parties, which in total amounted to 500 pages of documentation constituting the overall deal, applied to the claims in the action in England for the negative declarations. The deal itself related to derivatives in relation to the property market or collateralised debt obligations. The action for negative declarations by UBS against HSH was commenced on the same day, but shortly before an action by HSH against UBS in the New York state court. HSH alleged mis-selling and mismanagement of the securities, which were the subject of the complex arrangements between the parties. Fraud and negligent misrepresentation were alleged amongst other things. HSH applied in the English proceedings for an order that the English court had no jurisdiction to try UBS’s claim. In the alternative, it asked the court to decline to exercise jurisdiction on forum non conveniens grounds. Walker J decided that the English court did not have jurisdiction.

Having agreed that jurisdiction clauses should be construed widely and generously, Lord Collins went on at paragraph [83] of his judgment to point out that it was necessary to construe the jurisdiction agreement in the light of the transaction as a whole and went on to state that "whether a dispute falls within one or more related agreements depends on the intention of the parties as revealed by the agreements." Mr Gillis then drew my attention in particular to paragraphs [94] and [95] of the judgment, at which Lord Collins analysed the reasoning of Rix J in Credit Suisse First Boston (Europe) Limited v. MLC (Bermuda) Limited [1999] Ll Rep 767, which he had set out at paragraph [92] of his judgment and then went on to consider the facts of the UBS case itself. The paragraphs are as follows:

In this case, Mr Gillis submits that I cannot say that either the Syndicated Financing Agreement governing the Tranche B Debt or the Notes are at the centre of the transaction and that in such circumstances one is thrown back upon the way in which Rix J dealt with the matter in the Credit Suisse First Boston (Europe) Limited case, which Lord Collins analysed at paragraph [94] of his judgment and did not disapprove. Mr Gillis says therefore, that the dispute in this case falls within both agreements and should be governed by the one with which it has the closer connection, being the Tranche B Debt transaction governed by the Syndicated Financing Agreement. He says that that is the substance and the real nature of the dispute. As a matter of construction, therefore, he says that the parties must be taken to have intended that the dispute would be governed by the Spanish jurisdiction clause in this Syndicated Financing Agreement, which he says is closer to the claim and that as a result, the English court has no jurisdiction in relation to the Part 8 Claim.

In the alternative, Mr Gillis says that it is appropriate that there be a temporary case management stay in this case to enable the Homologation Proceedings to be determined first. He accepts that the Homologation Proceedings are not determinative of the Noteholders' rights and as a result, he says that there is no question here of the effect of the stay being to switch the effective jurisdiction for the determination of the issue from that of the English court pursuant to the exclusive jurisdiction clause to that of the Spanish court. There is therefore no question, he says, of seeking to circumvent the contractual jurisdiction clause contained in the Notes. On the contrary, he says the Creditors can come back and have the issue determined later if they think fit.

Accordingly, Mr Gillis says that the principles which were summarised by Gloster J, as she then was, in Antec International Limited v. Biosafety USA Inc [2006] EWHC 47 (Comm) are not engaged. In the context of a non-exclusive jurisdiction clause, which had been exercised by one of the parties, Gloster J set out the relevant legal principles at paragraph [7] of her judgment. Amongst other things she held that the fact that “the parties have freely negotiated a contract providing for a non-exclusive jurisdiction of the English courts and English law, creates a strong prima facie case that the English jurisdiction is the correct one” and that “the general rule is that the parties will be held to their contractual choice of English jurisdiction unless there are overwhelming, or at least very strong reasons for departing from this rule." She went on to hold that "such overwhelming or very strong reasons do not include factors of convenience that were foreseeable at the time that the contract was entered into (save in exceptional circumstances involving the interests of justice)".

Equally, Mr Gillis says that the passage in Bank of New York Mellon v GV Films [2009] EWHC 2338 (Comm), in which Field J addressed the effect of an exclusive jurisdiction clause coupled with an express provision waiving forum non conveniens is also not engaged. Field J had concluded that in such circumstances "especially strong reasons will be required before the exclusive jurisdiction clause can be departed from on grounds founded upon convenience".

Lastly, in this regard and, as I have already mentioned, Mr Gillis submitted that it is unnecessary to decide whether the Homologation Proceedings fall within Brussels 1 Regulation or to consider Owusu v. Jackson [2005] 2 WLR 936, because the stay which is sought is only temporary and Homologation Proceedings are not a trial of the issues raised in the Part 8 Claim. The Noteholders are not parties to the Homologation Proceedings, at least in that capacity. Any decision in those proceedings would not be determinative of the dispute between FCC and the Creditors as Noteholders and there is no "lis" and no Defendant is sued in the Homologation Proceedings. He says therefore, that this is not a case in which the doctrine of forum non conveniens is being relied upon to determine whether a foreign court would be "a more appropriate forum for the trial of an action...".

Mr Gillis submits therefore, that the Court has inherent jurisdiction to stay its own proceedings and, that a party does not have an inherent right to determine the order in which parallel proceedings are heard and he referred me to Reichhold Norway ASA and Another v Goldman Sachs International [1999] 2 Ll Rep 567. He also submits that as the stay which is sought is not permanent and it is not suggested that the issues raised in the Part 8 Claim are to be determined in Spain, there is no question of a conflict with the Brussels 1 Regulation or of the Defendant seeking to "under the guise of case management, achieve by the back door a result against which the ECJ has locked the front door", per Lewison J as he then was, at paragraph 120 in Skype Technologies SA v. Joltid [2009] EWHC 2783 (Ch).

In summary therefore, Mr Gillis says that a case management stay is appropriate because: the Claimants have no real interest in the declaratory relief sought (or at least none that would be materially effected by the temporary stay sought); the Claimants' real aim in pursuing the proceedings is to seek to confer a collateral benefit on the Tranche B Debt holders, who have agreed that their rights and interests are subject to Spanish jurisdiction and law; it is unlikely that the current action will ever be resumed if the stay is granted; the stay removes the risk of inconsistent decisions; and there is no reason to believe that the Spanish court needs the English Court’s assistance in determining the Event of Default question.

Further, in relation to the risk of inconsistent decisions, Mr Gillis points out that the expert evidence on Spanish law on behalf of FCC is to the effect that any decision of the English court on the Event of Default issue would only be binding in Spain as between the parties to that action and not upon the other Tranche B Debt holders. He also says that in any event the Spanish court would consider the matter afresh. Lastly, he says that the fact that the Part 8 Claim and the Homologation Proceedings are between different parties does not mean that there is no risk of inconsistent decisions. He relied by analogy in this regard upon Ferrexpo AG v. Gilson Investments Limited and Ors [2012] EWHC 71 (Comm) in which Andrew Smith J found at paragraph [167] that the "related actions" provision of the Brussels 1 Regulation (which permits stays so as to avoid the risk of inconsistent decisions) can apply where the parties to the two proceedings are different.

As to the lack of need of assistance in determining the Event of Default question, Mr Gillis submitted that the question is only of conditional relevance in any event. It only arises if, in fact, it is held to be relevant to the issue of "disproportionate sacrifice" as a means of challenge to a Homologation Order and even then its only relevance is if, in fact, it has significant financial consequences. Mr Gillis says there is no such evidence. As a result he says that a short case management stay should be granted.

Ms Toube QC on behalf of the Creditors takes issue with the suggestion that Noteholders have no real interest in the issues comprised in the Part 8 Claim. She says that the question of whether there is an Event of Default arises squarely out of the construction of the Notes themselves and not the Tranche B Debt documentation. She also submits quite candidly that the fact that the Creditors also wish to make use of any decision of the English court in the Homologation Proceedings does not preclude them from having a real interest in the Part 8 Claim itself. She says that the evidence shows that a declaration would have important consequences for and real value to the Creditors. She says it would be provide them with certainty, enable them to know whether they are entitled to accelerate without risk of a damages claim for having done so wrongfully, would amount to a put option, which would be particularly valuable if the financial position of FCC were to deteriorate and enable them to decide whether they would prefer immediate repayment. She says that the reference in Ms Harrison’s witness statement to giving "serious consideration" to whether to accelerate is no more than a reference to the commercial decision to be made and is not equivocal. She also submits that it is not necessary to have decided to accelerate in order to have a real interest in the Part 8 Claim. It is sufficient that the Creditors genuinely want to know if they can and the evidence reveals that they do.

Ms Toube goes on to submit that FCC’s lack of jurisdiction based on the construction argument is hopeless. She says that the exclusive jurisdiction clause contained in the Notes is clear and that unlike the Credit Suisse case and in UBS, this is not a situation in which there are two competing jurisdiction clauses at all. Here the question of the Event of Default arises under the Notes in relation to which there is a clear jurisdiction provision. She says that an analysis based upon the commercial centre of the transaction brings one back to the Notes and accordingly, to the jurisdiction of the English court, the issues arising in relation to the Tranche B Debt being entirely separate. The issue of whether there is a default under the Notes is a prior question to that which may arise Homologation Proceedings. She says that only the English court can decide that issue in relation to the Notes. Ms Toube went on to submit that FCC contends that there is one dispute and two competing jurisdiction clauses whereas in reality she says that there are two disputes and two clauses. Furthermore, she says that the second dispute does not fall within the clauses at all. In this regard she points out that the Homologation Proceedings do not fall within clause 28.1 and 28.2 of the Syndicated Financing Agreement, which applies to the Tranche B Debt. It is free-standing and in fact the Homologation Proceedings are taking place in Barcelona and not in Madrid.

In relation to the alternative claim for a case management stay over until the Homologation Proceedings are complete, Ms Toube agrees with Mr Gillis that the Court has a residual discretion to grant such a stay. However, she says Mr Gillis accepts that the Homologation Proceedings will not determine the issues in the Part 8 Claim and accordingly, what FCC is seeking to do is to delay the English proceedings in order that a Spanish court can have the opportunity, which it may not take, to consider something which is subject to an English exclusive jurisdiction clause and which is subject to English law, which if it does so, will not bind the parties. She says that the only reason that FCC puts forward in favour of the stay is that the Creditors have no real interest in the Part 8 Claim and that that is not correct and it is not good enough in any event where the Homologation Proceedings will not determine the issue in a manner which is binding in any event.

She says that there is no question here of seeking to subvert the contractual agreement in the Syndicated Financing Agreement to submit to the jurisdiction of the Madrid court, because that agreement and clause 28 in particular does not govern the Homologation Proceedings which is vividly illustrated by the fact that they are proceedings in Barcelona and not in Madrid at all. She also points out that if FCC is right, the issue will not arise in the Homologation Proceedings at all and if the Creditors are right and it is relevant, the Spanish court will be assisted by a decision of the English court in relation to a matter which is subject to English Law. She also submits that despite the fact that the evidence suggests that if it considered the matter to be relevant, the Spanish court would decide the issue itself in the context of the disproportionate sacrifice challenge, the risk of inconsistent decisions is fanciful. In fact, she says that the chances of inconstant decisions is greater if the stay is granted.

Ms Toube also says that the authorities bear out a need for a strong reason for a stay where there is an exclusive jurisdiction clause, even where that stay is temporary and arises from case management issues. In any event, she says that the exclusive jurisdiction clause should be given weight here, because, in fact, FCC is seeking to abandon its bargain as to jurisdiction in respect of the Notes, because the proposed stay deprives the Creditors of the use of the outcome in Spain.

Ms Toube took me to the headnote in Equitas Limited v All State Insurance Company [2009] Ll Rep 227 a decision of Beatson J, as he then was. It is a case which concerned an application for a stay on case management grounds where proceedings were brought pursuant to an English exclusive jurisdiction clause. The headnote makes clear that at common law an English court would enforce such a clause unless there is a strong or compelling reason not to do so and that a case management stay required rare and compelling circumstances. She also drew my attention to the holding that there was an advantage in the construction of a contract governed by English law coming before the English Court especially where the parties have agreed that that court should have an exclusive jurisdiction. Lastly, she referred me to paragraph [74] of the judgment at which Beatson J also took note when deciding not to grant the stay that allowing the English proceedings to continue would result in a final binding determination of the issue between the parties to the agreement. She also referred me to Jefferies International Limited v. Landsbanki Islands HF [2009] EWHC 894 (Comm), a case on which EC Regulations and the Lugano Convention applied and in which Cooke J refused a case management stay where there was an exclusive jurisdiction clause. He held at paragraph [26] that the grounds needed to overcome such a clause would have to be "exceptionally strong". She also referred me back to paragraph [100] of the UBS case, which was not a case in which a case management stay was sought. However, Lord Collins noted that "it is most unusual for an English court to stay proceedings brought in England pursuant to an English jurisdiction agreement".

I should say that in response Mr Gillis referred me to Blue Tropic Limited and Anr v. Chkhartishvili [2014] EWHC 2243 (Ch) in which Newey J recognised that a case management stay could be granted, but did not do so and to Plaza BV v The Lord Debenture Trust Organisation plc [2015] EWHC 43 (Ch) in which Proudman J granted a temporary case management stay.

Lastly, in this regard, Ms Toube took me to Nomura International plc v. Banca Monte Dei Paschi di Siena SpA [2013] EWHC 3187 (Comm) a decision of Eder J which was concerned with circumstances in which there were proceedings in both Italy and England and the relevant agreements contained English Law and jurisdiction clauses and in which Article 28(3) of Council Regulation (EC) No: 44/2001 applied. The application for a stay of the English proceedings was refused and Eder J stated at paragraph [80] of his judgment that the effect of the exclusive jurisdiction clause was that the Claimant was contractually entitled to bring the proceedings in England and that that was a very significant factor against the grant of a stay. He went on:

She also submitted that summary judgment application is due to be heard before the Homologation Proceedings are determined, but the decision of the English court will create an issue estoppel which can be relied upon in those proceedings whereas no issue estoppel will arise if the matter is considered first in the context of the Homologation Proceedings (and in any event, it is common ground that there would be no "determination" of the Event of Default issue in those proceedings), no reason has been given for why the Spanish court would come to a different conclusion on a question of foreign law than that already decided in England and that in any event, any English judgment would be recognised in Spain under the Brussels Convention. Lastly, she said that there is no evidence to suggest that FCC would suffer any prejudice were the stay refused. In summary, therefore, Ms Toube says that in the light of the exclusive jurisdiction clause FCC faces a very high hurdle when seeking to persuade the court to grant a case management stay and that it requires especially strong grounds, which are not present here.

Conclusions

Construction

First, I did not understand it to be in dispute, nor could it be, that the clause 19(b) of the Notes contains an exclusive jurisdiction clause in favour of the English court. Further, it seems to me that on the face of it the question of whether there is an Event of Default under the Notes is a question which arises primarily from the terms of the Notes themselves.

Secondly, as to whether there is one dispute but two different contracts with different jurisdiction provisions and therefore, whether the considerations in the UBS and Credit Suisse cases apply, I have to say, I agree with Ms Toube. In my judgment, this is not a situation in which the UBS or Credit Suisse approach applies at all. FCC appear to be seeking to argue that the issue of an Event of Default can be determined under either of the Notes or the Syndicated Financing Agreement in order to bring in the considerations in the UBS and Credit Suisse cases and to contend that the parties must have intended the Event of Default issue to be determined under the Syndicated Financing Agreement jurisdiction clause despite the fact that the jurisdiction clause in that agreement has not been invoked. The issue is not being considered under the Syndicated Financing Agreement at all and the jurisdiction in relation to the Homologation Proceedings, whilst being Spanish, is completely different from that under the Syndicated Financing Agreement and is not the subject of any agreement between the parties.

As I have already concluded, the question of the Event of Default arises naturally under the Notes. Although it is possible that the status of the Notes and whether there has been an Event of Default might be considered relevant, at least on the Creditors’ interpretation, to a challenge to a Homologation Order, because of clause 18 of the Syndicated Financing Agreement which covers the Tranche B Debt, there is no competing jurisdiction clause which applies to the Homologation Proceedings. The Homologation Proceedings are of an entirely different nature in which there is no Defendant and no lis. They are free- standing. They are being conducted in Barcelona and are not subject to the jurisdiction clause contained in the Syndicated Financing Agreement or that Agreement at all. If they were, the Homologation Proceedings would be conducted in the courts of Madrid.

Furthermore, it seems to me that the issues in the Homologation Proceedings in relation to the restructuring of the Tranche B Debt are separate from those which arise under the Notes. The facts of this case are therefore materially different from those considered in the UBS and Credit Suisse cases where one dispute which could have been dealt with under one of two competing contracts and in one of two competing sets of proceedings. In fact, it is not disputed that if the Event of Default were considered in the Homologation Proceedings, which is far from certain, any conclusion reached would not be binding between FCC and the Noteholders.

I come to the same conclusion even if despite the fact that there are no proceedings on foot or even proposed in relation to the Syndicated Financing Agreement, one focuses on the issue of the Event of Default through the lens of the Notes on the one hand and the Syndicated Financing Agreement which relates to the Tranche B Debt on the other.

In my judgment, when seeking to determine the intention of the parties from the agreements, whether one adopts the "commercial centre of the transaction" test or the approach of "the contract which is closer to the claim" adopted by Rix J, the contract relating to the Notes is closer to the Event of Default issue and accordingly, one is brought back to the jurisdiction of the English court. The question arises directly out of the terms of the Notes, whereas in my judgment, any consideration of acceleration of the Notes for the purposes of clause 18 of the Syndicated Financing Agreement in relation to the Tranche B Debt would be peripheral. It seems to me to be clear from the agreements that the parties intended a question in the Event of Default to be determined under the Notes and subject to the jurisdiction clause contained in clause 19(b). In my judgment, therefore, on all of the bases set out above, Mr Gillis’s construction argument fails.

Before turning to the question of whether to grant a case management stay, I should add that, although this point was not argued, despite the fact that some of the Noteholders are also holders of Tranche B Debt under the Syndicated Financing Agreement agreed some years later, I am far from convinced that in fact in this case there is a single transaction in the light of which the jurisdiction provision in clause 19(b) should be construed. However, it was unnecessary also to take this matter into consideration in coming to my decision and I did not do so.

(ii) Case Management Stay

I agree with Ms Toube that there can be no question here of the Creditors seeking to subvert the contractual agreement in the Syndicated Financing Agreement to submit to the jurisdiction of the Madrid court. As I have already said, it seems to me that the issue raised arises naturally from the Notes and the fact that the Creditors will also seek to use any decision for a collateral purpose in the Homologation Proceedings does not detract from that. The Syndicated Financing Agreement and clause 28 in particular do not govern the Homologation Proceedings in any event.

In fact, it seems to me that FCC is seeking to circumvent their contractual bargain in relation to the Notes. In my judgment it is insufficient to say that he bargain is not affected, because the stay which is sought is only temporary whilst at the same time contending that if the stay were granted it would be very unlikely that the creditor would seek to have it lifted after the determination of the Homologation Proceedings.

Further, in my judgment, on the basis of the evidence before the Court it is not possible to say that the Creditors have no real interest in the Part 8 Claim or none which would be affected by the temporary stay which is sought. It will provide them certainty as to their rights to which they are entitled and may place them in a valuable commercial position and enable them to take a commercial decision as to whether, in fact, to accelerate the debt. In my judgment, it is not possible to conclude that in such circumstances a real interest does not exist, because there is a ready market in the Notes in which they could be sold at a slight discount or that the interest rate payable under the Notes exceeds that available in the market. Further, in my judgment, the fact that the Creditors also wish to make use of any decision of the English court in Homologation Proceedings does not preclude them from having a real interest in the Part 8 Claim itself. I also agree with Ms Toube that rather than give rise to the risk of inconsistent decisions, it is more likely that inconsistent decisions will be avoided if the Event of Default issue is decided in the Part 8 Claim. It is a question which the English Court is able to decide in accordance with English Law and although there is no question but that the court in Barcelona would be perfectly able to decide the point as a matter of foreign law, if it were to consider it relevant, it seems to me that it would be likely to be of assistance to it.

I also take into consideration when determining whether it would be appropriate to exercise the discretion to grant such a stay that, as in the Equitas case, allowing the Part 8 Claim to continue in accordance with the exclusive jurisdiction clause would result in a final binding determination of the issue between the parties to the agreement governing the Notes. I also take account of the fact that the Creditors are entitled to bring a Part 8 Claim in England.

Lastly, I take into consideration the fact that there is no evidence before the Court to suggest that there is any prejudice which would be suffered by FCC if the stay is not granted. In fact, as I have already mentioned, FCC’s expert evidence is to the effect that the Event of Default issue is entirely irrelevant to the Homologation Proceedings. By contrast, if the temporary stay is granted, the Creditors will be delayed in exercising their contractual right under the Notes to have the issues determined by the English Court and will be deprived of the opportunity which they say exists to raise that issue in the Homologation Proceedings, which are not governed by the jurisdiction clause in Syndicated Financing Agreement.

It follows from the matters which I have set out within my judgment, there is no very strong or compelling reason in this case why a case management stay should be granted or any good reason and in fact, that the balance is in favour of the Creditors. I refuse the alternative application.