Global Maritime Investments Cyprus Ltd v O.W. Supply & Trading A/S (Under Konkurs)

A declaration may be granted where there is a real and present dispute and resolving it serves a useful purpose, even though the relevant future event has not yet occurred, provided the dispute is properly evidenced and not merely hypothetical.

On construction, an obligation to transfer cash collateral may constitute a contractual obligation to make a payment where the collateral is freely usable and the construction advances the agreement’s commercial purpose. A mutual submission to the English courts for proceedings relating to an agreement may require claims to be brought in England and prohibit parallel proceedings elsewhere.

The claimant and defendant entered into ten English-law energy-commodity derivatives transactions, supported by a credit support agreement. After the defendant entered Danish bankruptcy proceedings, its trustee commenced proceedings in Denmark concerning close-out netting under Danish insolvency legislation.

The claimant sought five declarations concerning continuing default, payment obligations, close-out netting, the effect of Danish law on the English-law contracts, and the contractual jurisdiction clause. The application concerned whether the declarations involved real and present disputes, and whether the contractual provisions had the meanings asserted by the claimant.

1. Declarations 1–3. The defendant’s Danish bankruptcy constituted an Event of Default under clause 6.1.4 of the General Terms. While that default continued, clause 3.3 suspended the claimant’s obligation to make payments. There was a real and present dispute about whether transferring Eligible Credit Support was a payment, and resolving it served a useful purpose.
2. On the proper construction of clause 3.3, payment included transfers of Eligible Credit Support in the circumstances of these transactions. The collateral was cash in US dollars, transferable in the contractual currency, and the recipient could freely use and dispose of it. The commercial purpose of clause 3.3 was to mitigate counterparty credit risk, and that purpose applied to both monthly payments and cash collateral transfers. The possibility of a future default by the claimant did not make the declaration impermissibly hypothetical.
3. Declaration 4. The proposed declaration concerning any rule of Danish insolvency law was too wide. It could only properly relate to section 58h(2) of the Danish Securities Trading etc Act. No real and present dispute had been shown concerning the effect of that provision on the English-law contract absent a Danish court order. Recognition and enforcement of any future Danish judgment raised separate issues, which were not determined.
4. Declaration 5. Clause 13.2 required claims relating to the General Terms to be determined by the English courts. Whether or not it was technically an exclusive jurisdiction clause, it prevented the defendant from commencing parallel proceedings elsewhere concerning essentially the same matters. The claimant had a real interest in obtaining the declaration because the Danish proceedings created a real fear of subsequent proceedings for payment.
5. The court therefore granted declarations 1–3 and 5, and refused declaration 4.

First-instance decision in the High Court (Commercial Court). The judgment refers to earlier directions and orders of the Chancery Division concerning recognition of the Danish bankruptcy proceedings and permission to continue the English proceedings, but no appellate decision is stated.