The State of the Netherlands v Deutsche Bank AG [2019] EWCA Civ 771 (02 May 2019)

The State of the Netherlands v Deutsche Bank AG [2019] EWCA Civ 771 (02 May 2019)

The CSA, properly construed, does not provide for the payment or accounting of negative interest on cash collateral. The contractual language, structure, and contemporaneous ISDA materials do not support the State's interpretation. The absence of an express provision for negative interest in paragraph 5(c)(ii), the drafting asymmetries, and the commercial context all indicate that negative interest was not intended or contemplated by the parties.

Citation
[2019] EWCA Civ 771
Parties
Claimant / Appellant: The State of the Netherlands; Defendant / Respondent: Deutsche Bank AG
Jurisdiction
England and Wales
Judgment Date
02 May 2019
Procedural Posture
Civil Appeal / Appeal From High Court (commercial Court Qbd) to Court of Appeal
Outcome
Appeal dismissed
Legal Topics
Interpretation of ISDA Master Agreement and Credit Support Annex, Negative Interest on Cash Collateral, Collateral Management in Derivatives, Contractual Construction
Contract Law Banking and Finance Interpretation of ISDA Master Agreement and Credit Support Annex Negative Interest on Cash Collateral Collateral Management in Derivatives Contractual Construction

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Parties

The State of the Netherlands

Claimant / Appellant

Deutsche Bank AG

Defendant / Respondent

Procedural Posture

Civil Appeal / Appeal From High Court (commercial Court Qbd) to Court of Appeal

Legal Issues

  1. 1 Whether the CSA provides for negative interest to accrue on cash collateral posted under the Credit Support Annex
  2. 2 Whether negative interest is to be accounted for in the Credit Support Balance under the CSA
  3. 3 Proper construction of the ISDA CSA in the context of negative interest rates

Ratio Decidendi

The CSA, properly construed, does not provide for the payment or accounting of negative interest on cash collateral. The contractual language, structure, and contemporaneous ISDA materials do not support the State's interpretation. The absence of an express provision for negative interest in paragraph 5(c)(ii), the drafting asymmetries, and the commercial context all indicate that negative interest was not intended or contemplated by the parties.

Court Disposition

Appeal dismissed

Orders

  • The appeal by the State of the Netherlands is dismissed.