J.P. Morgan International Finance Limited v Werealize.com Limited

A contractual call option was exercised when the option-holder sent the prescribed irrevocable notice. Exercise did not depend on acceptance or the creation of a binding sale contract.

An open-market valuation ordinarily applies the reality principle. The asset is valued as it actually exists on the valuation date, subject only to counterfactual assumptions required by the contractual hypothesis. Existing regulatory constraints must therefore be considered, while valuers may assess the effect of future possibilities through their independent professional judgment.

A contractual mechanism permitting either party to request an independent appointment following failure to agree creates no enforceable obligation to reach agreement. A court may determine foreign law and grant a useful declaration binding the parties, while leaving the foreign regulator’s application of that law unaffected.

J.P. Morgan International Finance Ltd and Werealize.com Ltd were shareholders in Viva Wallet Holdings Software Development SA. Their shareholders’ agreement granted each shareholder call options and prescribed an expert process for valuing the shares. Disagreement arose over whether J.P. Morgan could exercise its option in successive option periods, whether the valuation should disregard restrictions arising from US Regulation K, and the appointment of a third valuation expert.

After an expedited trial, the Commercial Court held that J.P. Morgan’s option remained exercisable in later periods unless an exercise notice produced a binding sale contract. It also required the valuers to disregard Regulation K and made a declaration that Viva was J.P. Morgan’s subsidiary for Regulation K purposes: [2024] EWHC 1437 (Comm), [2024] BCC 1250.

Both shareholders appealed. The principal questions concerned contractual interpretation, the reality principle in open-market valuation, conditions governing appointment of a third expert, and the propriety of the foreign-law declaration.

1. The cross-appeals were allowed in part. Werealize.com Ltd succeeded on the “One-Shot” issue. The shareholders’ agreement repeatedly stated that the call option was exercised by sending the prescribed irrevocable notice. Acceptance and completion were separate steps. Consistent language concerning both shareholders’ options and the different option periods required “exercised” to bear that meaning throughout. The first-instance Multi-Shot construction was therefore wrong: paras [36]–[61].

2. J.P. Morgan succeeded on the Regulation K valuation issue. An open-market valuation identifies the measure of value, not a different asset. Under the reality principle, the Group had to be valued as it actually existed on the valuation date, subject only to departures required by the contractual hypothesis. Regulation K existed in the real world and could affect the asset’s price. It did not prevent the assumed sale and therefore could not simply be disregarded. The valuers could nevertheless use their independent professional judgment to assess future possibilities, including the prospect that a hypothetical buyer might free the Group from the restrictions: paras [62]–[94].

3. The parties’ valuations had to be more than 15% apart before a third valuation expert was appointed. The reference to the “Effective Date” in paragraph 3.10 was a drafting slip. The conditional “if … then” structure and the contractual timetable made the divergence between the two valuations a condition precedent: paras [95]–[105].

4. Absence of manifest error in the parties’ valuations was not an additional condition precedent to appointment. Paragraph 3.10 specified only the 15% divergence. A later finding of manifest error could not retrospectively invalidate an appointment, while an error established beforehand could be corrected: paras [106]–[110].

5. There was no enforceable obligation to agree upon a third expert. The agreement expressly contemplated failure to agree and then allowed either shareholder to request an ICC appointment. Consequently, Werealize.com Ltd was not in breach and no implied extension of an option period arose: paras [111]–[115].

6. The foreign-law declaration was properly retained. It served a potentially useful purpose in the valuation dispute and bound only the litigating shareholders. It did not bind Viva or the Federal Reserve. Determining the meaning of the US statutory definition was justiciable, although applying Regulation K in practice remained for the regulator: paras [116]–[128].

1. Court of Appeal (Civil Division): In [2025] EWCA Civ 57, allowed Werealize.com Ltd’s appeal on the One-Shot issue and dismissed its challenge to the declaration. Allowed J.P. Morgan’s appeal concerning Regulation K and the manifest-error condition, but dismissed its other grounds.
2. Commercial Court: In [2024] EWHC 1437 (Comm), reported at [2024] BCC 1250, decided preliminary issues concerning exercise of the call option, valuation under Regulation K, appointment of a third expert and declaratory relief.