National Bank of Kazakhstan & Anor v The Bank of New York Mellon Sa/nv, London Branch

A broadly worded contractual exemption covering delay or failure caused by any order of any judicial authority may extend to foreign orders which English law would neither recognise nor enforce. Its scope depends on the objective meaning of the language, read in contractual and commercial context.

Where the clause supplies its own broad causation requirement, that requirement may provide the necessary limit. The inquiry concerns the order’s factual, practical and coercive consequences for performance, rather than its status under English private international law. Clear language in a professionally drafted agreement between sophisticated parties should not be read down merely because each proposed construction carries adverse commercial consequences.

The National Bank of Kazakhstan held assets of the National Fund of Kazakhstan under an English-law global custody agreement with the respondent Belgian bank. After arbitral creditors of the Republic of Kazakhstan obtained attachment orders in the Netherlands and Belgium, the bank froze assets held under the agreement.

Popplewell J dismissed the appellants’ claim for declarations requiring continued performance: [2018] EWHC 300 (Comm). The judge held that clause 16(i), which protected the bank from liability or default where circumstances beyond its direct and reasonable control caused delayed or failed performance, covered the foreign orders.

The central issue on appeal was whether clause 16(i) applied only to judicial orders recognisable or enforceable under English law.

1. Appeal dismissed. Hamblen LJ, with whom Flaux and Patten LJJ agreed, held that clause 16(i) applied, subject to proof of causation, to the Dutch and Belgian orders. The appellants’ proposed declaration was therefore properly refused.
2. The agreement was a formal and carefully drafted contract concluded between sophisticated parties with legal assistance. Applying Wood v Capita Insurance Services [2017] UKSC 24 and Arnold v Britton [2015] UKSC 36, textual and contextual considerations formed a unitary interpretative exercise. The clear contractual language carried particular weight in this setting: paras [37]–[40].
3. Clause 16(i) referred without qualification to any order imposed by any judicial authority. The Dutch and Belgian orders fell naturally within those words and were circumstances beyond the bank’s direct and reasonable control. The clause did not restrict its operation to domestic orders or foreign orders recognisable under English law: paras [41]–[44].
4. The contractual causation requirement supplied the necessary limit. The court had to examine the order’s factual, practical and coercive effect upon performance, rather than its legal status under English private international law. An order unconnected with the agreement or the parties would be unlikely to satisfy that requirement. Whether the actual orders were sufficiently connected to the failure to perform potentially raised factual questions unsuitable for determination in the Part 8 proceedings: paras [42], [45]–[48].
5. Even an unrecognisable foreign order could expose a bank within the foreign court’s personal jurisdiction to criminal or civil liability. Deutsche Schachtbau-und Tiefbohr-Gesellschaft MBH v Shell International Petroleum Co Ltd [1990] 1 AC 295 demonstrated that the reality of such a risk could matter despite the foreign court’s exorbitant jurisdiction. The separate entity doctrine did not remove that potential liability: paras [61]–[65].
6. Assuming that clause 16(i) was a force majeure clause, rules concerning strict construction and the burden of showing that such a clause applied did not resolve the rival interpretations. The clause was unambiguous, and its broad causation language required neither physical nor legal impossibility: para [50].
7. The agreement was global rather than London-centric. Its commercial context did not justify an implied limitation based on English recognition rules. Both interpretations carried adverse commercial consequences, but the appellants’ construction necessarily exposed the bank to a risk of double liability arising from third-party disputes: paras [53]–[72].

1. Court of Appeal (Civil Division): The court unanimously dismissed the appeal and upheld the refusal of declaratory relief: [2018] EWCA Civ 1390.
2. High Court, Commercial Court: Popplewell J dismissed the appellants’ claim for declarations concerning the effect of the Dutch and Belgian orders on the custody agreement. He also dismissed the respondent’s jurisdictional challenge, which was not appealed: [2018] EWHC 300 (Comm).