The New Zealand Superannuation Fund's manager said the UK Supreme Court has rejected its attempts to pursue a debt recovery claim, made with others, against Portugal's Novo Banco in the UK, in part because the liability claim is not recognised in Portugal.
The case relates to a $199 million loan New Zealand’s national pension fund made to Banco Espirito Santo of Portugal by buying bonds in a Goldman Sachs entity, called Oak Finance and written under UK law. Shortly after, BES collapsed amid fraud allegations.
Following a bailout by the Bank of Portugal, BES’s assets and loans were split into a good bank, Novo Banco, and a bad bank.
Separate proceedings have been filed in Portugal against the Bank of Portugal, challenging the validity of its decision not to transfer the Oak Finance loan from BES to Novo Banco.
"In the first place, it is not for an English court to decide what would amount to an appeal from an administrative act of the Portuguese Central Bank," the Supreme Court said in its ruling.
The Supreme Court added that the European Union Bank Recovery and Resolution Directive — BRRD, a legal framework for rescuing failing banks in some EU member states — "would be undermined if the acts of a designated national Resolution Authority were open to challenge in every other member state simply because they were open to challenge in the home state.”
NZ Super Fund’s manager, “along with the other investors, continues to have ongoing legal action against the Bank of Portugal through the Portuguese courts,” it said in the statement, adding that further comments on this matter will be limited because the process is ongoing.
The Supreme Court decision might set an important precedent.
"This is the first case where the English courts were asked to consider how decisions made by another member state's resolution authority under the BRRD should be interpreted," Stuart McNeill, a partner at Pinsent Masons representing Novo Banco in the case, said in a statement.
"The directive is intended to provide a pan-European approach to rescuing banks and other financial institutions in difficulty, requiring member states to respect the decisions of the resolution authorities, many of which are central banks," McNeill noted. "The Supreme Court’s judgment has ramifications for other cases across Europe, and highlights the obvious danger (indeed potential chaos) of different courts interpreting the same decision of a single resolution authority in different ways.”