Secure Capital SA v Credit Suisse AG

Whether an investor may sue an issuer under a bearer note is a contractual issue where the claim seeks enforcement of rights under the note. The issue cannot be transformed into a proprietary or sui generis issue by describing it as entitlement to be treated as a bearer. The law governing the note governs the issuer’s obligations and the investor’s entitlement to enforce them. A foreign law governing an intermediary’s account or the circulation of securities cannot create new contractual obligations under an English-law contract. Where the contractual claim is governed by English law, only the contractual counterparty may sue unless the contract or applicable English law provides otherwise.

Secure Capital sought damages from Credit Suisse for an alleged breach of a misleading-statements term in eight longevity contingent notes issued in bearer form. The notes were governed by English law and held through a Luxembourg clearing system. The physical global notes remained with the common depository, which was the bearer and contractual counterparty. Secure Capital held an indirect interest through a Luxembourg account holder.

Credit Suisse applied for summary judgment or strike-out. Secure Capital relied on Article 8 of the Luxembourg law dated August 2001 on the circulation of securities, contending that it created an independent right for an investor to exercise rights linked to possession of the notes, including a claim for breach of contract. The central issue was the applicable law and whether Luxembourg law could confer that right.

1. Application granted. Secure Capital’s claim had no real prospect of succeeding. The court would hear the parties on the precise form of the order.
2. The true issue was whether Secure Capital could claim damages against Credit Suisse for breach of the misleading-statements term. That term was contractual. The asserted entitlement to sue therefore involved contractual rights and a contractual duty owed by the issuer. The issue was accordingly contractual, not proprietary or sui generis: [2015] EWHC 388 (Comm) [33]–[35], [48]–[52].
3. The conflict-of-laws analysis required the court to identify the true issue, select the relevant connecting rule and identify the applicable legal system, while maintaining an overall focus on the most appropriate law. The parties had chosen English law for the notes. Whether under the Rome Convention or common-law principles, the contractual issues were therefore governed by English law: [2015] EWHC 388 (Comm) [32], [52]–[55].
4. Under English law the issuer’s obligations were owed only to the bearer, here the common depository. Article 8 of the Luxembourg law could not create new contractual obligations in an English-law contract. The fact that Luxembourg law might purport to grant an investor a right to sue was therefore irrelevant: [2015] EWHC 388 (Comm) [55]–[57].
5. The court also considered the structure and practical operation of intermediated securities. The separation between issuer, common depository, clearing system, intermediaries and ultimate investors supported the conclusion that direct contractual claims belonged to the bearer, subject to any express contractual mechanism. Extending liability to successive underlying investors would create uncertainty about the number and timing of potential claims: [2015] EWHC 388 (Comm) [58]–[62].

First-instance decision. No earlier decision or appeal is stated in the judgment.