Palladian Partners LP & Ors v The Republic of Argentina & Anor

A contractual binding-effect provision embedded in provisions defining the Payment Amount and Excess GDP did not, on its proper construction, extend to the separate question whether the contractual conditions for payment had been satisfied. Summary judgment was therefore inappropriate where the interaction between rebasing GDP statistics, an adjustment provision and the payment conditions remained arguable. Allegations of manifest error, bad faith and wilful misconduct may proceed where the pleaded facts, taken together, could justify the relevant inference at trial. A claimant need not identify the responsible official or plead facts incapable of any innocent explanation where the relevant information lies principally with the defendant.

The claim concerned GDP-linked securities issued by Argentina in 2005 and 2010. The claimants alleged that Argentina’s rebasing of GDP statistics from 1993 to 2004 prices caused it wrongly to conclude that the contractual performance condition for 2013 was unmet and that no payment was due.

Argentina applied for summary judgment, relying on contractual provisions making Ministry of Economy calculations binding absent bad faith, wilful misconduct or manifest error. It also applied to strike out the pleaded allegations supporting those exceptions. The central issues were the scope of the binding-effect provisions and whether the claimants’ alternative allegations were sufficiently arguable and particularised.

1. Applications dismissed. The application for summary judgment failed. The contingent strike-out application, which depended on the binding-effect provisions applying, also failed.
2. The binding-effect provisions were not free-standing provisions of general effect. They appeared as the concluding words of the definitions of Payment Amount and Excess GDP. Read in context, they concerned the calculations expressly described in those provisions, rather than the distinct and prior question whether the GDP Level, Performance and Aggregate Payments Conditions were satisfied.
3. The contractual scheme distinguished entitlement to payment from calculation of the amount payable once the conditions had been fulfilled. The performance condition was framed in terms of conditionality and entitlement, not merely calculation. The word “hereunder” did not justify extending the provision to every process relevant to payment.
4. The relationship between the binding-effect provisions, the Adjustment Provision, the rebasing of GDP statistics and any implied obligation to continue publishing 1993-price data was materially interconnected. Even if Argentina’s construction had been stronger, the commercial-purpose arguments and factual context made the issue unsuitable for summary determination.
5. “Manifest error” was sufficiently arguable. The claimants’ case raised issues of contractual construction and mathematical approach which could, depending on the outcome of the implied-term and adjustment arguments, amount to an obvious error.
6. At the pleading stage, fraud or dishonesty need not be supported by facts inconsistent with every innocent explanation. It is sufficient that the pleaded facts, taken together and allowing for an evidential imbalance where appropriate, could tilt the balance towards dishonesty. The allegations of bad faith and wilful misconduct were therefore not defective. Identification of the responsible official was not essential before disclosure of the relevant decision-making material.
7. The court declined to determine finally whether “bad faith” required actual dishonesty or could include an improper purpose falling short of dishonesty. Wilful misconduct required conscious wrongdoing, but the claimants’ inferential case was sufficiently arguable to proceed to trial.

Not an appeal. No earlier decision material to the applications is stated in the judgment.