Further scheme of arrangement approved

The court had to consider what it described as a somewhat unusual choice of law clause when deciding whether to sanction a Part 26 scheme of arrangement. The choice of law clause originally provided for New York law as the governing law for the loan notes and trust deed that were the subject of the scheme but this was amended to make English law the governing law.

This amendment was however subject to a proviso to the effect that if English law would interpret certain provisions (the specific provisions) of the trust deed and loan notes in a manner that was less favourable to holders than under New York law, then the parties intended that the New York interpretation should apply but that nothing in the clause precluded any amendment or variation which was permitted in accordance with English law.

The judge stated that he was initially concerned that the uncertainty might create a “floating” choice of law. That was important not only because the choice of English law was relied on as establishing a sufficient connection with the English jurisdiction but also because a critical part of the analysis was the effectiveness of the scheme abroad.

The judge however held that no present problem arose for at least two reasons:

  • The effect of the clause was to operate as a present choice of English law, subject to the possibility that the governing law may change. If that was correct, then no issue arose, because English law choice of law rules have no difficulty with the idea that parties may elect to change the governing law of their contract.
  • In any event, even if that was wrong and there was no effective express choice of English law, that would only be so in relation to the specific provisions. There would still be a valid express choice of English law in relation to all the other provisions and therefore there would almost certainly be an implied choice of the same law in relation to the specific provisions, by virtue of their being part of a wider set of arrangements which were expressly governed by English law.

The judge therefore sanctioned the scheme.

In re Safari Holding Verwaltungs GmbH, convening hearing, 4 April 2022; sanction hearing, 5 May 2022

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