BNP Paribas v Wockhardt EU Operations (Swiss) AG

BNP Paribas v Wockhardt EU Operations (Swiss) AG

The Early Termination Amount and Close-out Amount provisions in the ISDA Master Agreement are not penal in character. The agreement provides for a commercially reasonable method of calculating loss upon default, and the obligation to pay within one Local Business Day after notice is a condition. There is no realistic prospect of the defendant establishing that the provisions are penalties. The calculation method is not unconscionable or extravagant, and the clause does not result in a windfall but crystallizes the parties' positions at termination.

Parties
Claimant: BNP Paribas; Defendant: Wockhardt EU Operations (Swiss) AG
Jurisdiction
England and Wales
Judgment Date
03 December 2009
Procedural Posture
Commercial/contract / Summary Judgment Application and Application to Strike Out Defence
Outcome
Defence (penalty argument) struck out in part; summary judgment and interim payment deferred pending amendment application outcome
Legal Topics
ISDA Master Agreement, Derivatives, Liquidated Damages, Penalty Clauses, Summary Judgment
Contract Law Banking and Finance Law ISDA Master Agreement Derivatives Liquidated Damages Penalty Clauses Summary Judgment

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 4 Authorities cited 24 Party arguments 2 Amounts and remedies 9
Sign in to unlock

Parties

BNP Paribas

Claimant

Wockhardt EU Operations (Swiss) AG

Defendant

Procedural Posture

Commercial/contract / Summary Judgment Application and Application to Strike Out Defence

Legal Issues

  1. 1 Whether the Early Termination Amount under the ISDA Master Agreement is a penalty and thus unenforceable
  2. 2 Whether the calculation of the Close-out Amount was commercially reasonable
  3. 3 Whether summary judgment should be granted for the claimant

Ratio Decidendi

The Early Termination Amount and Close-out Amount provisions in the ISDA Master Agreement are not penal in character. The agreement provides for a commercially reasonable method of calculating loss upon default, and the obligation to pay within one Local Business Day after notice is a condition. There is no realistic prospect of the defendant establishing that the provisions are penalties. The calculation method is not unconscionable or extravagant, and the clause does not result in a windfall but crystallizes the parties' positions at termination.

Court Disposition

Defence (penalty argument) struck out in part; summary judgment and interim payment deferred pending amendment application outcome

Orders

  • Paragraphs 19 and 20 of the defence (penalty argument) struck out
  • No summary judgment or interim payment order until determination of application to amend defence