CRF I Limited v Banco Nacional De Cuba & Anor.

The court determined that CRF I Limited obtained valid assignments of the debts under the two 1984 loan agreements (the CL and IBI Agreements) from ICBC because BNC gave prior consent. The central issue was whether the contractual anti-assignment clause requiring "prior consent" had been satisfied and, if so, whether that consent was within BNC's capacity or authority (including on behalf of Cuba) under Cuban law.

The judge found that: (i) a written communication of 13 June 2019 from BNC's Foreign Debt Department constituted prior consent subject to documentary conditions; (ii) the documentary conditions were satisfied by the notarisation and legalisation steps carried out in September–November 2019 and by BNC officials' subsequent communications; (iii) under Cuban law (notably Article 7(ll) of Decree-Law 181/1998 and the BNC Handbook), BNC had capacity and actual authority to consent to assignments of debts contracted before 1997, but did not have capacity to consent on behalf of the Republic in respect of the IBI Guarantee; and (iv) the 2019 documentation and later conduct by BNC (including the President's responses to pre-action letters) confirmed consent and, as applicable, ratified or adopted the material steps taken by BNC officials. The consequence was that CRF could rely on the English-law jurisdiction, waiver of immunity and service provisions in the assigned agreements.

Background and parties: CRF I Limited is a fund acquiring defaulted Cuban sovereign debt. It sued Banco Nacional de Cuba (BNC) as principal obligor and the Republic of Cuba as guarantor in respect of debts under two 1980s refinancing agreements (the Credit Lyonnais and IBI Agreements) and an IBI Guarantee. The Defendants challenged English court jurisdiction by a CPR Part 11 application, contending that the relevant agreements and guarantee had not been validly assigned to CRF and that sovereign immunity barred the claims.

Nature of the claim and relief sought: CRF sued for the debts (in excess of €70m). The Defendants sought dismissal of the proceedings for want of jurisdiction, relying on three grounds: (1) lack of valid assignment (so CRF had no benefit of contractual jurisdiction clauses); (2) State immunity under the State Immunity Act 1978 (so the waivers in the contracts do not benefit CRF); and (3) service out of the jurisdiction was improper without valid assignment.

Issues framed by the court: The court focused on whether the contractual requirement of "prior consent" to assignment had been satisfied; whether BNC had capacity (under Cuban law) to consent on its own behalf and on behalf of Cuba; whether BNC officials had authority to give consent; whether apparent authority or ratification (English law concepts) cured any defect; whether any withholding of consent was unreasonable (so that consent should be treated as given); and whether the State Immunity Act 1978 prevented the court from exercising jurisdiction.

Procedural posture: First instance Commercial Court hearing of the Part 11 jurisdiction challenge, contested over multiple hearing days with factual and expert evidence on Cuban law and extensive documentary material.

Court’s reasoning (concise): The court analysed the documentary chain. ICBC notified BNC of the proposed assignment and BNC's Foreign Debt Department replied on 13 June 2019 accepting the assignment "in principle" and setting documentary conditions (certificates, incumbency, notarisation/legalisation). Those conditions were met: the Notice of Assignment was signed by ICBC and CRF (31 July 2019), translated, notarised and legalised through Cuban processes and submitted in Havana in November 2019; BNC's internal registry recorded and numbered the assignments; and BNC officials (including the Director of Operations) sent communications on 22–25 November 2019 confirming CRF as registered holder. On construction the 13 June communication was "prior consent" (a consent subject to conditions) and became unconditional once the conditions were fulfilled. On Cuban law the court accepted that Article 7(ll) of Decree-Law 181/1998 and the BNC Handbook entrusted BNC with registration, control and handling of the Republic's and BNC's pre-1997 external debt and empowered it to process assignments of such debts; but the court held that BNC did not have capacity to consent to assignment of a State guarantee (the IBI Guarantee) on Cuba's behalf after the mid-1970s redistribution of State financial functions. The court rejected arguments that signature formalities in BNC internal rules (two "A" signatures) invalidated the 2019 consent for the purpose of English law jurisdiction: the signature-formality arguments reflected an internal materialization step and the prior conditional consent already had been given and performed. The court also addressed ratification and apparent authority in English law and concluded that BNC's subsequent presidential letters and the working-party review adopted and confirmed the assignments. As a result, CRF holds properly assigned debts under the Agreements, BNC is not immune from jurisdiction under the State Immunity Act in relation to those claims, and service out was effective.

First instance: The court declared that BNC, on its own behalf, validly consented to the assignment by ICBC to CRF of the debts under the CL and IBI Agreements, so those debts were validly assigned to CRF; BNC lacked capacity to consent on behalf of the Republic in relation to the IBI Guarantee. The court therefore found it has jurisdiction to try the debt claims referred to, BNC is not immune from suit in respect of those debt claims under the State Immunity Act 1978, and the conditions for service out of the jurisdiction were met. Rationale: prior conditional consent of 13 June 2019 became unconditional when documentary requirements were satisfied; Decree-Law 181/1998 and BNC practice conferred capacity/authority on BNC to deal with pre-1997 external debt, but not to bind the State for guarantees; internal signature formalities did not defeat the prior consent and BNC's subsequent conduct adopted the assignments.