JEFFERIES INTERNATIONAL LTD V LANDSBANKI ISLANDS HF

[2009] EWHC 894 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Cooke, 28 April 2009

Stay – Banking – Cross border insolvency proceedings – Bank in administration in Iceland – Claim for repayment under securities agreement – Whether court should exercise its discretion to grant a temporary stay

The claimant company and the defendant Icelandic bank had concluded a Global Master Securities Agreement in June 2007 whereby Landsbanki lent securities to the claimant against the transfer of collateral. The Agreement provided that under certain circumstances where the collateral Landsbanki had provided became insufficient, payment of equivalent collateral to cover the excess would be made. A failure to do so would amount to an event of default which on notice would give rise to a termination of the agreement and mutual accounting. It was the claimant’s case that such circumstances had arisen, a demand had been made and the required notices had been served so that it was entitled to repayment. Landsbanki denied that the right to terminate had arisen and that in any event its obligations under the agreement had been discharged by supervening illegality. In the meantime, the bank was taken over by the Icelandic supervisory authority and in the UK, a freezing order was issued against it. The claimant commenced proceedings under the Agreement and Landsbanki requested a stay, initially a permanent one but subsequently a temporary one against an undertaking to submit to the Administrative Claims Process in Iceland, on the basis of the discretion of the court. Cooke J declined to grant the stay, holding that none of the factors put forward by Landsbanki could justify a stay: While it was true that one of the objectives must be to prevent the company’s assets being squandered on pointless litigation, there was no evidence that continued pursuit of the present litigation was pointless. The Icelandic insolvency regime gave a creditor in the claimant’s position the choice of whether to continue with litigation or to submit its claim to the Administrative Claims Process. The claimant should not therefore be deprived of the same opportunity.