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

In construing a bespoke financial instrument, the court must give effect to the language read as a whole, in its documentary, factual and commercial context. A market-disruption provision referring to an index being prevented, restricted or limited concerned the index’s availability for contractual use, not whether the published index represented a genuine or honest measure of inflation. The court will not rewrite the bargain to introduce concepts such as genuine inflation or good faith where the contract does not support them. Practical workability, the role of the calculation agent, the contract’s scheme and commercial purpose may confirm the construction.

The appellant subscribed for structured notes issued under a medium-term note programme. The redemption amount was linked to the Argentine CER inflation index. The appellant alleged that governmental manipulation of the underlying CPI meant that a CER Event had occurred, triggering a substitute calculation by the respondent as calculation agent.

The Commercial Court, before Mr Justice Burton, accepted the respondent’s construction that the contractual provision addressed the availability of the CER index and dismissed the claim. The appellant appealed, contending that the published figure was fabricated and therefore did not constitute CER within the contractual meaning. The central issue was the proper construction of clause 22.

1. The appeal was dismissed. The Commercial Court’s construction of the Notes was upheld.

2. Hamblen LJ held that the expression CER was not contractually limited to a genuine or bona fide measurement of inflation. That proposed meaning was unsupported by the wording and would involve rewriting the Terms. The changing formulations of the appellant’s case, from reliability to genuineness and good faith, reinforced that conclusion.

3. Clause 22, read as a whole, addressed the availability of the CER index for use on the ARS Valuation Date. Subclauses 22(a) to 22(c), and part of 22(d), dealt with non-announcement, replacement, non-publication or prevention of calculation. The reference to action restricting or limiting calculation did not convert the clause into a general inquiry into the honesty or methodology of the underlying CPI. Apparent overlap or duplication in complex financial drafting did not itself justify rejecting the construction.

4. The contractual scheme supported that construction. The calculation agent had to determine a substitute figure within 48 hours, using specified market information, including a successor index or CER-linked securities. That role was essentially mechanical and required a CER Event to be objectively identifiable. The appellant’s construction would create a wide, uncertain and evidence-heavy discretion, with difficult and potentially unquantifiable consequences for pricing and hedging.

5. The use of manipulated figures did not mean that no calculation had occurred. The CER continued to be calculated in accordance with Resolution 47/2002, and the CPI continued to be calculated and published. Changes to input data or methodology did not, on the contractual wording, amount to restriction or limitation of the calculation itself.

6. Lewison LJ regarded the case as involving dishonesty rather than mere unreliability, but agreed that the respondent’s interpretation produced the more coherent and workable scheme. Black LJ agreed with Hamblen LJ’s reasons.

• Court of Appeal (Civil Division) — Appeal from the Commercial Court dismissed; the construction adopted below was upheld.
• Queen’s Bench Division, Commercial Court — Mr Justice Burton dismissed the claim, holding that the respondent’s construction of clause 22 was correct.