Metlife Seguros De Retiro S.A. v JPMorgan Chase Bank, National Association

Contractual market-disruption provisions are construed as a whole, in their commercial context and by reference to the purpose a reasonable informed person would attribute to the transaction. A provision triggered when an index is prevented, restricted or limited from being calculated or announced does not necessarily address an index that remains published but is alleged to be inaccurate or manipulated. Where the contractual mechanism directs a calculation agent to determine a substitute or replacement index, it should not be extended to require that agent to resolve complex disputes about the reliability or validity of the existing index, particularly where the contract supplies no methodology for doing so. The provision was therefore confined to cases where the CER was unavailable, and the claim based on alleged distortion of the published CER failed.

The claimant subscribed for structured notes linked to the Argentine CER inflation index. The notes provided for a CER Event where governmental action legally or de facto prevented, restricted or limited the calculation or announcement of the CER or values used to determine it. The claimant alleged that governmental intervention had distorted the Argentine CPI and therefore the published CER, and sought a substantially larger maturity payment. The defendant contended that the provision addressed only the unavailability of the CER and that the calculation mechanism required a substitute or replacement CER only in that situation. The principal issue was the proper construction of the CER Event Provision and CER Calculation Provision. The court also considered, conditionally, how any replacement CER would be calculated.

1. Claim dismissed. Judgment was entered for the defendant.
2. The relevant provisions had to be construed together, using the language of the Notes, their commercial purpose and the relevant factual matrix. The court applied a composite approach which was neither uncompromisingly literal nor unswervingly purposive, and preferred the commercially sensible construction.
3. Clause 22 was directed to the CER becoming unavailable. Sub-paragraph (d) covered governmental action preventing, restricting or limiting calculation or announcement, including action that meant the CER or its underlying CPI was not available when required. It did not provide for a judicial or calculation-agent inquiry into whether a continuing published CER had been fabricated, distorted or calculated contrary to international standards.
4. The CER Calculation Provision required the Calculation Agent to determine a substitute or replacement CER in good faith and in a commercially reasonable manner. The references to successor indices and CER-linked securities supported the derivative nature of the Notes. They did not establish a methodology for reconstructing inflation or resolve the alleged reliability dispute. Extending the provision as the claimant proposed would make the contractual scheme unworkable, particularly because the Notes contained no procedure for deciding that dispute.
5. The alleged primary and secondary interventions therefore did not constitute a CER Event within the proper construction of clause 22. The court nevertheless considered quantum conditionally. Had liability been established, it would have adopted a weighted average based on 14 Argentine Provinces, excluding Mendoza because its figures were unreliable and retaining Córdoba because manipulation had not been shown.