European Union: English Law Routes Exhausted For Banco Espirito Santo Creditors: English Law Challenges To EU Bank Restructurings Firmly Closed Off By U.K. Supreme Court

Last Updated: 26 July 2018
Article by Sonya Van De Graaff and Edward Downer

Summary – Decision of U.K. Supreme Court

The U.K. Supreme Court has closed off a challenge to the restructuring of Banco Espirito Santo (BES) under English law. Through an emergency liquidity facility creditors had previously found success in the High Court (read our summary here). Now the U.K. Supreme Court1 have confirmed the automatic pan-European effect, under the EBRRD, of actions effective under the domestic laws of Portugal that were taken by the Portuguese authorities following their initial 'Reorganisation Measure'.  Aggrieved creditors will need to challenge European bank restructurings under the administrative law of the bank's resolution authority or before the European Court in Luxembourg rather than the jurisdiction pertaining to the governing law of the loan or other debt instrument.

Takeaways for EU bank creditors

Going forward, creditors of EU banks should be mindful that:

  • All measures taken under the law of the home state that affect a reorganisation measure previously made will themselves be given automatic effect under the EBRRD; it is irrelevant whether those subsequent measures themselves are 'reorganisation measures' provided they have effect under the domestic law of the home state. 
  • Challenges to resolution authority measures are to be pursued under the administrative law of the bank's resolution authority.
  • Challenges against the Single Resolution Board may be brought before European courts.
  • Act promptly if you are aggrieved by reorganisation measures taken under the EBRRD. There are extremely tight limitation periods within which to bring administrative law challenges in most jurisdictions (e.g. within two months for challenges to decisions of EU bodies).

Recap of facts

As it applied to the emergency liquidity loan ("Oak Loan"), the BES restructuring involved decisions taken by the resolution authority for BES, Banco de Portugal, in August 2014 ("August Decision") and December 2014 ("December Decision"). The August Decision involved Banco de Portugal exercising the bridge institution tool under the European Bank Resolution and Recovery Directive ("EBRRD"), thereby transferring assets and liabilities of BES to Novo Banco. The December Decision (couched as clarificatory) provided that the Oak Loan was never transferred to Novo Banco in August. As a matter of domestic Portuguese law, the December Decision was effective.

The Oak Loan lenders' primary case was that, while the August Decision was a reorganisation measure made under the EBRRD and afforded automatic pan-European recognition, the December Decision was not a reorganisation measure and therefore could not be afforded automatic pan-European recognition. It would follow that the retransfer of the Oak Loan from Novo Banco back to BES did not have effect under English law, and so Novo Banco would be liable for repaying the Oak Loan.

The U.K. Supreme Court's approach affirmed the Court of Appeal's approach

The U.K. Supreme Court acknowledged that Banco de Portugal's December Decision had immediate effect as a matter of Portuguese administrative law and therefore held that this was determinative of the issue. There was no need to consider whether the December Decision itself was a 'reorganisation measure', since it was beyond doubt that the August Decision was such a measure. The Supreme Court referred to the two fundamental principles of the EBRRD:

24.     The first is that its purpose, as recital (119) of the EBRRD records, is to ensure that 'all assets and liabilities of the institution... are dealt with in a single process in the home member state and that creditors in the host member states are treated in the same way as creditors in the home member state. This can be achieved only by taking the process as a whole and applying the legal effects attaching to it under the law of the home state in every other member state.

27.     Secondly, an administrative act such as the August decision does not occur in a legal vacuum. It occurs in the context of a broader framework of public law. Article 3 does not only give effect to 'reorganisation measures' throughout the Union. It requires them to be 'applied in accordance with the laws, regulations and procedures applicable in the home member state, unless otherwise provided in this Directive', and to be 'fully effective in accordance with the legislation of that member state'. In this legal scheme it cannot make sense for the courts of another member state to give effect to a 'reorganisation measure' but not to other provisions of the law of the home state affecting the operation of a 'reorganisation measure'. This is so, whether or not that other provision is itself a 'reorganisation measure'.2

The Supreme Court therefore held that it did not matter what the correct analysis of the December Decision was, as long as it is accepted that, as a matter of Portuguese law, it concludes the question as to whether the Oak Loan was or was not transferred [para 28]. The Supreme Court went on to observe that it was therefore unnecessary to consider whether the December Decision was itself a 'reorganisation measure'. Having determined that the issues in dispute were a matter of Portuguese domestic law (in respect of which there was agreement), the Supreme Court determined that that was an end to the matter.

The decisions are therefore afforded pan-European recognition unless later annulled as a matter of Portuguese administrative law. As a result, English law recognises that the Oak Loan sits with BES and the lenders cannot look to Novo Banco for a recovery.

The Oak Loan lenders are continuing their challenge of the December Decision before the Portuguese courts. If they are successful, perhaps the saga of the Oak Loan will return to the English courts again under the English law Oak Loan.


1 Goldman Sachs International v Novo Banco SA [2018] UKSC 34.

2 Emphasis added.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions