VR Global Partners LP v Exotix Partners LLP

Where a contractual option to unwind a transaction becomes exercisable because a specified regulatory condition has not been satisfied by a long-stop date, the option may be exercised for its commercial reasons even if the resulting market movement benefits the option-holder. A contractual reference to reviewing the position does not, without more, impose an obligation to agree an extension. A good-faith obligation concerning unwinding ordinarily governs the unwinding process rather than the exercise of the option itself. The parties’ conduct must be assessed in its commercial and factual context when deciding whether reasonable assistance, cooperation or further action was required.

VR Global Partners purchased a portion of a Ukrainian loan from Exotix Partners, which had purchased it from CVI EMCVF Lux Securities Trading Sàrl. The trade confirmations made the transactions subject to NBU Registration by 30 November 2014. If registration evidence was not received by that date, VR could elect to unwind, with the parties entering into a multilateral netting agreement and acting in good faith during the unwinding process.

Registration was not obtained and VR exercised the option after the market had moved against the traded portion. CVI disputed VR’s entitlement and the consequences of unwinding. The issues included construction of the extension provision, good-faith and assistance obligations, alleged implied cooperation and agency obligations, further-document obligations, and allocation of the market risk on unwinding.

1. Construction of the long-stop provision. The word “may” in clause 14(6), read in context, meant that no party was obliged to agree a further review period. The reference to reviewing the situation was not redundant: it identified an activity which might result in an agreed extension. No term requiring VR to take reasonable steps to agree an extension was necessary or obvious.
2. Good faith and assistance. The good-faith obligation in clause 14(7) concerned the process of unwinding, not the exercise of the option. VR’s exercise was not bad faith merely because non-registration had removed regulatory protection and the exercise was economically advantageous. Under clause 14(8), VR had to take all reasonable actions open to it to assist in obtaining NBU Registration. That obligation was context-sensitive. On the facts, VR had taken the steps reasonably expected of it, and no further clarification, chasing or activity was required.
3. Cooperation and further action. The court did not need to decide whether the alleged cooperation and non-hindrance term was implied into the CVI/Exotix confirmation. On the facts, Exotix and VR had cooperated and had not prevented or hindered registration. The relevant clause 28 obligation to take further action and execute documents arose only where a reasonable request was made, and there had been no failure to comply.
4. Agency. Exotix acted as principal in each trade and had not become CVI’s agent for passing information concerning registration or an extension. Clause 14(10) also expressly provided that neither party was obliged to share information with the other.
5. Consequences of unwinding. The parties’ pre-trade positions were that CVI owned the asset while Exotix and VR held the purchase monies. The option effectively cancelled the sales where the ultimate seller did not deliver registration in time. The words “to the extent possible” did not require VR to bear the intervening market loss. VR succeeded on its claim, and Exotix succeeded against CVI. The parties were invited to agree the practical form of order.