EuroResource—Deals and Debt

EuroResource—Deals and Debt

For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current developments.

Recent Developments

The Netherlands—On 6 February 2015, the Dutch Supreme Court, in a marked departure from previous case law, held that the bankruptcy of a Dutch partnership does not automatically result in the bankruptcy of its partners. Even though a Dutch partnership does not have "legal personality" (i.e., legal rights and obligations, such as the right to enter into contracts, to sue and to be sued), it is still considered an independent and separate legal entity under Dutch law. In its ruling, the Supreme Court reasoned that, because the bankruptcy of a partnership does not inherently rule out the possibility that individual partners may satisfy the partnership's current obligations, individual partner bankruptcy automatically triggered by the bankruptcy of the partnership is incongruous with legal and economic reality. Instead, the Supreme Court explained, if a partnership is deemed bankrupt because it is insolvent (i.e., unable to pay its debts as such debts mature), insolvency proceedings with respect to individual partners should be commenced only if the individual partners are also insolvent. Explaining that Dutch insolvency legislation explicitly provides for a debt management proceeding (schuldsanering) for natural persons with commercial debts, the Supreme Court further concluded that automatic bankruptcy would unjustifiably deprive the partners of a bankrupt partnership of access to such proceedings. Finally, the Supreme Court ruled that pre-existing Dutch case law on this issue is no longer compatible with the European Insolvency Regulation (Regulation (EC) No 1346/2000 on insolvency proceedings) (31 May 2002), which provides that a European Union court can assert international jurisdiction over a foreign EU citizen only after individually assessing such citizen's standing.

Global—On 13 February 2015, the Chancery Division of the English High Court ruled, in a lawsuit brought by certain holders of euro-denominated exchange bonds issued by the Republic of Argentina during 2005 and 2010 debt restructurings seeking to gain access to €225 million (US$257 million) in interest payments set aside to make payments on the bonds, that such funds are governed by English law because the bonds and the governing trust indenture are governed by English law. However, although Mr Justice David Richards made a declaration to the effect that the earmarked funds are held by the Bank of New York Mellon ("BNY Mellon") on trusts governed by English law, the Judge declined to declare that BNY Mellon's obligations and liabilities are unaffected by the 2012 US court injunction. Judge Thomas Griesa of the US District Court for the Southern District of New York ruled on 23 February 2012 that Argentina was prohibited from making payments on exchange bonds without also making payments on bonds held by holdout bondholders. In his injunction, which was affirmed on appeal and declined review by the US Supreme Court, Judge Griesa also prohibited any entity from "aiding and abetting" any violation of his order. The English High Court's 13 February 2015 ruling effectively shuts Argentina out of the international debt markets.

Global—At a hearing held before US District Court Judge Thomas Griesa on 17 February 2015, Citibank NA ("Citibank") claimed that the February 2012 injunction blocking it from making payments on US$2.3 billion worth of dollar-denominated bonds governed by Argentine law would lead to "catastrophic" consequences—including criminal charges and potentially the loss of its banking license in the South America country. Both Argentina and the Clearing House Association LLC—an association of leading commercial banks dedicated to protecting the integrity of the banking system—supported Citibank's request for permission to service the debt, warning that continuation of the payment bar "would raise anew the question of whether bank customers can trust their own bank to comply with the most basic banking and custody obligation: paying customers their money". Holdout bondholders from Argentina's 2005 and 2010 debt restructurings countered that, far from being bonds solely governed by Argentine law, the bonds in question were marketed and sold around the world and therefore should remain subject to the payment injunction.


Jones Day successfully obtained the enforcement of an ICC award in Morocco for a leading French industrial group against two Moroccan companies following the termination of a contract for the delivery of a cement plant. The Arbitral Tribunal seated in Geneva found in an award issued in 2011 that it had jurisdiction over the mother company in Morocco, given its involvement in the negotiation, performance and termination of the contract signed by its subsidiary. The Tribunal also noted that the mother company had left its subsidiary without sufficient assets to face a finding of liability after the termination. The Arbitral Tribunal further found the Moroccan mother company and its subsidiary jointly liable for damages, and arbitration costs, in excess of €20 million (US$22.4 million) before interest. The ICC award dismissed all claims submitted against Jones Day's client. In December 2012, a first instance court in Casablanca accepted the recognition of the ICC award against the Moroccan subsidiary but refused the enforcement against the mother company, on the ground that it was not a signatory of the contract containing the arbitration clause. In a landmark decision issued in January 2015 under the Moroccan arbitration law of 2007, the Court of Appeal reversed the first instance court decision and fully granted the recognition of the ICC award against both Moroccan companies.

Jones Day advised Inflexion Private Equity in connection with the £105 million (US$162 million) sale of Aspen Pumps ("Aspen"), a global market leader in the design and manufacture of air conditioning pumps, to international investment manager 3i Group plc. Aspen designs, manufactures and distributes specialised mini pumps that remove condensate water from air conditioning and refrigeration systems. Based in Hailsham, Sussex, and established in 1992, Aspen has a strong international presence, with its products available in more than 100 countries.

Jones Day advised Volkswagen Financial Services ("VFS") and two joint lead managers (Citigroup Global Markets Limited and Lloyds Bank plc) in connection with VFS's 13th automobile asset backed securities transaction, "Driver 13," with a deal volume of €750 million (US$850 million). The transaction was launched on Volkswagen's well-established DRIVER platform. VFS, a business division of the Volkswagen AG group of companies with 10,945 employees worldwide, is one of the largest repeating issuers in the German, European and global securitisation markets.

Jones Day is advising NII Holdings in connection with the sale of its Mexican operations operated by its indirect subsidiary, Nextel de Mexico, S.A. de C.V., to AT&T for US$1.875 billion, less the outstanding net debt of the business at closing. The transaction is being conducted as a sale under section 363(b) of the US Bankruptcy Code.

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