BNP Paribas v Wockhardt EU Operations (Swiss) AG [2009] EWHC 3116 (Comm) (03 December 2009)

BNP Paribas v Wockhardt EU Operations (Swiss) AG [2009] EWHC 3116 (Comm) (03 December 2009)

The Early Termination Amount provisions in the ISDA Master Agreement are not penal in character. The obligation to pay within one Local Business Day of a failure notice is a condition of the agreement, and the method for calculating the Early Termination Amount is commercially reasonable and represents a genuine pre-estimate of loss. There is no realistic prospect of Wockhardt establishing that the provisions are unenforceable as penalties.

Citation
[2009] EWHC 3116 (Comm)
Parties
Claimant: BNP Paribas; Defendant: Wockhardt EU Operations (Swiss) AG
Jurisdiction
England and Wales
Judgment Date
03 December 2009
Procedural Posture
Commercial Court Claim (summary Judgment/strike Out Application) / Interlocutory (application for Summary Judgment and Strike Out of Defence)
Outcome
Application to strike out defence paragraphs relating to penalties granted; summary judgment on commercial reasonableness of Close-out Amount indicated but final order deferred pending amendment application.
Legal Topics
ISDA Master Agreement, Derivatives, Penalty Clauses, Summary Judgment, Liquidated Damages, Close Out Netting
Contract Law Banking and Finance Law ISDA Master Agreement Derivatives Penalty Clauses Summary Judgment Liquidated Damages Close Out Netting

Case Brief

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Parties

BNP Paribas

Claimant

Wockhardt EU Operations (Swiss) AG

Defendant

Procedural Posture

Commercial Court Claim (summary Judgment/strike Out Application) / Interlocutory (application for Summary Judgment and Strike Out of Defence)

Legal Issues

  1. 1 Whether the Early Termination Amount provisions in the ISDA Master Agreement are unenforceable as a penalty
  2. 2 Whether the Close-out Amount was calculated using commercially reasonable procedures as required by the Agreement

Ratio Decidendi

The Early Termination Amount provisions in the ISDA Master Agreement are not penal in character. The obligation to pay within one Local Business Day of a failure notice is a condition of the agreement, and the method for calculating the Early Termination Amount is commercially reasonable and represents a genuine pre-estimate of loss. There is no realistic prospect of Wockhardt establishing that the provisions are unenforceable as penalties.

Court Disposition

Application to strike out defence paragraphs relating to penalties granted; summary judgment on commercial reasonableness of Close-out Amount indicated but final order deferred pending amendment application.

Orders

  • Paragraphs 19 and 20 of the defence (relating to penalties) struck out.
  • No summary judgment or interim payment order until application to amend defence is resolved.