Metlife Seguros De Retiro S.A. v JPMorgan Chase Bank, National Association, Court of Appeal - Commercial Court, February 26, 2015, [2015] EWHC 463 (Comm)

Resolution Date:February 26, 2015
Issuing Organization:Commercial Court
Actores:Metlife Seguros De Retiro S.A. v JPMorgan Chase Bank, National Association

Case No: 2012 Folio 1281

Neutral Citation Number: [2015] EWHC 463 (Comm)




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 26/02/2015

Before :


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Between :

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John Taylor QC (instructed by Taylor Wessing LLP) for the Claimant

David Wolfson QC and Patricia Burns (instructed by Allen & Overy LLP ) for the Defendant

Hearing dates: 20, 21, 22, 26, 27 January and 2, 3 February 2015

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JudgmentMr Justice Burton :

  1. The claim by the Claimant (MetLife) is for sums alleged to be due to it by the Defendant (JPMorgan) pursuant to structured USD and CER-Linked Notes issued to MetLife, for which it subscribed on 6 February 2006, and whose maturity date was 6 February 2011. The Defendant has paid out at the maturity date all it admits to have been due under the Notes, and the Claimant alleges that further sums remain outstanding.

  2. The Claimant subscribed for 462,048,909 Argentine Pesos (``ARS'') on the terms (subject to English law) set out in the Defendant's Series Prospectus (supplemented where necessary by the JPMorgan Base Prospectus) and in the Final Terms, both dated 6 February 2006. The Final Redemption Amount (``FRA'') payable on the maturity date depended upon the increase in inflation between 23 January 2006 and 3 February 2011, measured by reference to the CER as at those dates. The CER is defined in the Final Terms as:

    ``in respect of any day, the Argentine Coeficiente de Estabilización de Referencia published in respect of such day by the Banco Central de la Republica Argentina (``the BCRA'') as reported [on its] website. The CER is calculated according to Resolution 47/2002 of the Argentine Ministry of Economy.''

    Resolution 47/2002 contained a formula for calculating the CER which involves using monthly figures from the ``Índice de Precios al Consumidor'', meaning Argentina's monthly Consumer Price Index (``CPI'') for Buenos Aires City and Greater Buenos Aires (``GBA''), calculated and published by the ``Instituto Nacional de Estadística y Censos'', the Argentine Institute of National Statistics, known as INDEC. INDEC announced the monthly CPI on its website by the seventh day of the following month. The BCRA used that figure to announce the CER on its website, which it did on a daily basis. At the time of the issue of the Notes the method of calculation pursuant to Resolution 47/2002 which was in place, and had been since October 2000, was INDEC's Methodology 13, but this is nowhere referred to in the Notes.

  3. The CER at the outset (23 January 2006), called CERINITIAL, was, and was recorded in the Notes as, 1.7317. At the Maturity Date the CER calculated and published by INDEC was 2.6539, and by reference to that figure as the CERFINAL the Defendant paid out as the FRA the sum of US$176,541,651.36, calculated by reference to it. As will be seen, the Claimant asserts that there had been a ``CER Event'' which had occurred and was continuing on the valuation date, such as to oblige the Calculation Agent under the Notes (which was in fact the Defendant, acting through its New York office), to re-determine the CERFINAL. Had the Defendant as Calculation Agent done so, the Claimant submits that the sum due is up to US$275,540,000, such that it claims the balance of some US$100 million as damages for breach of contract.

  4. The central provisions, the subject of the dispute before me, both appear in Clause 22 of the Final Terms, and they are as follows:

    (i) ``CER Event means the occurrence of one or more of the following:

    (a) the CER is not timely announced by the BCRA; or

    (b) the CER is replaced by a successor index; or

    (c) the CER is no longer published and has not been replaced by a successor index; or

    (d) The Republic of Argentina, or any of its agencies, instrumentalities or entities (including, without limitation, the BCRA) by means of any law, regulation, ruling, directive or interpretation whether or not having the force of law, takes any action which legally or de facto prevents or has the effect of restricting or limiting the calculation or announcement of the CER or any of the values used to determine the CER.''

    (``The CER Event Provision'').

    (ii) ``If a CER Event has occurred and is continuing on the ARS Valuation Date then CERFINAL shall be determined and CERINITIAL may be recalculated as for January 23, 2006 if determined to be necessary by the Calculation Agent, such determination and recalculation (if any) to be made by the Calculation Agent in good faith and in a commercially reasonable manner based on such available market information and other information as it deems necessary and relevant, including the new calculation method applicable to (i) the successor index or to (ii) the securities issued by the Republic of Argentina linked to CER or other obligations of the Central Bank linked to CER.

    Notwithstanding any provision in the Notes that the determinations of the Calculation Agent are binding absent wilful default, bad faith or manifest error, the Calculation Agent's determination of CERFINAL or CERINITIAL after the occurrence of a CER Event will only be binding if such determination is in good faith and in a commercially reasonable manner.''

    (``The CER Calculation Provision'').

  5. If there was a CER Event, there is a dispute about the effect of the CER Calculation Provision, and hence as to quantum. It is common ground, as above, that if there was no CER Event the sum was correctly calculated as US$176.54m. If there was a CER Event, there is a series of figures whose calculations are agreed between the experts, the choice from which depends upon a number of findings which are for me to make by reference to the quantum issues, discussed below, ranging between US$236.38m and US$275.54m.

  6. The CER Event, or Events, upon which the Claimant relies, and alleges to have occurred, arise by reference to the events of which I shall give a short summary below. Such events are mainly derived from the evidence of Ms Bevacqua, who was INDEC's Director of CPI from 2001, and had over 20 years' experience working in statistics and statistical analysis in Argentina and Latin America. Her evidence was unchallenged, in that it was, by agreement, read and she was not cross-examined. It is also derived from three Reports, by a Mr Manuel Garrido dated 15 May 2007 of the Office of the Argentine Attorney General, by a Dr Carlos Stornelli of the Argentine Federal Criminal and Correctional Prosecutor's Office also prepared in 2007 and by the Assessment and Follow-up Academic Committee (CAES) Report on the operation of the Argentine Statistics and Census Bureau dated September 2010, produced by experts from Argentina's leading universities (``the CAES Report''); and also by reference to, or inference from, a number of press articles and/or trade releases between 2007 and 2010, many of them produced by one of JPMorgan's own analysts Mr Werning (now Head of Latin America Research). Given that a report from a Dr Bianchi as to Argentine law and government structure was non contentious and also not adduced, the only live evidence I heard was from 2 experts on each side. For the Claimant I heard Mr Sébastien Goldenberg and Dr Pablo Guidotti, and for the Defendant Mr Veeswanaden Patten and Dr Guido Sandleris. Dr Guidotti's report included a lengthy summary of the history of events, to support the Claimant's case that a CER Event or CER Events occurred, and similarly to the lack of challenge by the Defendant to the factual evidence, as referred to above, so too there was no challenge to this aspect of Dr Guidotti's evidence.

  7. The evidence of Mr Goldenberg and Mr Patten related primarily to the role of a Calculation Agent. Mr Goldenberg is a very experienced trader, with more than 15 years' experience in the inflation-linked market. Mr Patten is also very experienced, with 25 years in relevant markets, including the property derivative market: he has also had recent and detailed experience of the role of a Calculation Agent. Neither of them had seen before a clause such as the CER Calculation Provision (or indeed the CER Event Provision) in this case, although both accept that it is common to have market disruption clauses.

  8. There was criticism by Mr Taylor QC for the Claimant of Mr Patten on 2 bases, neither of which I consider to be justified. First I am satisfied that he did not say or imply in his reports that this provision was a standard provision. Secondly his assertion that a Calculation Agent would adopt the published CER, if it were available, even in the circumstances that the events relied upon by the Claimant constituted a CER Event, was in my view entirely consistent with his strongly held view, as an independent expert, that he was unable to accept such a premise, and that what were referred to as the ``last five lines'' of the main paragraph of the CER Calculation Provision would drive a Calculation Agent to accept and adopt a continuing CER, if it was still widely adopted.

  9. Dr Guidotti was a very distinguished expert, with very relevant experience, including a period between 1996 and 1999 as Deputy Minister of Finance and Secretary of the Treasury of Argentina. He was the Claimant's quantum expert, giving evidence as to what sum should be calculated as the FRA in the event that the CER Event Provision and the CER Calculation Provision were triggered. Dr Sandleris is also very experienced and, like Dr Guidotti, has held senior academic positions, and is presently Dean of the Business School and Director of the Financial Research Centre at Universidad Torcuato Di Tella in Buenos Aires. He did not do himself full justice by failing to accept the force of the evidence of Ms Bevacqua and the other evidence e.g. from the three...

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