Isis Investments Ltd v Oscatello Investments Ltd & Ors

The Court of Appeal held that the phrase "pending lawsuit" in Article 32 of Directive 2001/24/EC must be read as referring to the existing proceedings as a whole, not merely discrete claims within them. Accordingly, where an English action initiated before the winding up of a credit institution concerns an asset or right of which the institution has been divested, English law governs procedural questions about how that action is to continue, including whether additional Part 20 claims may be permitted.

The court concluded that Articles 99 and 116 of Icelandic law (implemented under the Directive and the UK Regulations) did not prevent the English court from permitting new Part 20 claims to be raised in Action 599. The judge properly treated the Part 20 application as a procedural matter governed by English law and, exercising her discretion under the Civil Procedure Rules, permissibly allowed the applicant to add the new claims.

Background and parties: Isis Investments Ltd commenced Action 599 in England on 27 February 2009 to determine entitlement to proceeds of sale of Somerfield shares and repayment of a loan of £67.15 million. Kaupthing Bank hf, an Icelandic bank, has been in winding up in Iceland since 22 November 2010. Mr Elfar Adalsteinsson represented sub-participants who claimed under sub-participation agreements with Isis. Some £129 million was paid into court to abide the outcome of Action 599.

Nature of the application/relief sought: The 3rd defendant, Mr Adalsteinsson, sought permission under CPR Part 20 to bring new claims within Action 599 against Kaupthing and others (the "new Part 20 claims"), including conspiracy, unlawful means, procurement of breaches of contract, an asserted trust for sub-participants and a claim to set aside clause 6 of a Framework Agreement under section 423 of the Insolvency Act 1986.

Procedural posture: Mrs Justice Asplin granted permission on 30 January 2013 to add the new Part 20 claims. Kaupthing appealed to the Court of Appeal, raising whether Article 32 of Directive 2001/24/EC (and corresponding Icelandic provisions) deprived the English court of jurisdiction to allow those claims.

Issues framed by the court:

• What is the proper meaning of "pending lawsuit" in Article 32?
• Whether the new Part 20 claims are part of a "pending lawsuit" within Article 32 and therefore outside the scope of Icelandic provisions (including Article 116) barring new claims after liquidation.
• Whether Article 99 (Icelandic implementing provision) meant English procedural law governs the question whether the new claims may be brought in the existing proceedings.
• Whether the judge mis-exercised her discretion in permitting the new Part 20 claims.

Court’s reasoning and decision: The court gave Article 32 an autonomous, strict construction as an exception to the Directive's universalist lex concursus principle and concluded the term "pending lawsuit" denotes the proceedings as a whole. Where the existing proceedings concern an asset or right of which the credit institution has been divested (common ground here), English law determines procedural questions about how those proceedings are to continue. Article 99 merely implements Article 32 in Icelandic law and thus reinforced the conclusion that English procedural law applies. The Court of Appeal found no error in the judge’s exercise of discretion under CPR Part 20: she permissibly considered the expert evidence on Icelandic law, the parties’ procedural position within Action 599, the interrelated nature of the claims and the commercial convenience of resolving connected disputes in a single forum. The appeal was dismissed.

Appeal dismissed. The Court of Appeal held that "pending lawsuit" in Article 32 of Directive 2001/24/EC refers to the existing proceedings as a whole so that English law governs procedural questions — including whether additional Part 20 claims may be permitted — where the proceedings concern an asset or right of which the credit institution has been divested. Articles 99 and 116 of Icelandic law did not deprive the English court of jurisdiction, and the judge did not mis-exercise her discretion in allowing the new Part 20 claims.

Appeal to the Court of Appeal (Civil Division) from Mrs Justice Asplin in the High Court, Chancery Division (Action HC09C00599). Permission to bring the new Part 20 claims was granted by Asplin J on 30 January 2013; that decision was appealed and the appeal was dismissed by the Court of Appeal on 27 November 2013 ([2013] EWCA Civ 1493).