An English court ruled 4 April that Cuba’s former central bank, Banco Nacional de Cuba (BNC), is liable for a EUR 70m sovereign debt claim dating back almost four decades. The court, however, found that the liability does not extend to the Cuban state.
Mrs Justice Cockerill’s approved judgment follows a trial held over eight days between 23 January and 2 February before the High Court of Justice of England and Wales. The judge ruled that the court has jurisdiction to hear the case, and that the debt in question was validly assigned to CRF I Limited, a Cayman Islands-based entity created to invest in defaulted Cuban debt. The claims had previously been held by Chinese bank ICBC.
Prior to the creation of the Central Bank of Cuba in 1997, BNC fulfilled certain central banking functions of the country.
The Cuban parties who appeared as defendants in the action argued that CRF was not “a responsible creditor” of a sovereign state, but was instead a "vulture fund" intent on enforcing the debts of an impoverished country.
CRF had sued both BNC and the Republic of Cuba, arguing that it took valid assignment of the debt from the original lenders. The Cuban parties disputed the court’s jurisdiction, putting forward, among other things, that the debt was not validly assigned because while BNC did consent to the reassignment of the debt, it did not have the right to make that decision for Cuba.
The debt dates to 1984 and was initially provided by French bank Credit Lyonnais. It had since changed hands several times, always with the required consent of the borrower, until CRF’s acquisitions, which took place between 2009 and 2019.
Cockerill J determined that BNC did have the right to make the assignment and that the court could exercise its jurisdiction over the matter.
In her conclusions, the judge ruled that BNC consented on its own behalf to the assignment by ICBC to CRF of its rights and obligations under the loan agreements, but “lacked capacity” to consent on behalf of Cuba to the assignment by ICBC to CRF of its rights under a deed of guarantee.
“Accordingly, the rights and obligations of ICBC under the Agreements were validly assigned to CRF, with the result that CRF is entitled to rely on the contractual provisions contained therein as to the jurisdiction of the English court, waiver of immunity and service of process,” Cockerill J wrote.
She then went on to declare, among other things, that the debts “have been validly assigned” by ICBC to CRF, and that the court has jurisdiction to try the claims, adding that BNC was “not immune from the jurisdiction of the Court.”
Today’s judgment paves the way for CRF to litigate against BNC in English courts if a compromise solution over the fate of the disputed debts cannot be reached.
The so-called “London Club Committee” of holders of Cuban debt have reached out to the country to negotiate a restructuring “that would eliminate the costs, negative publicity and stigma for Cuba,” proposing that Cuba exchange the debt of that group, of which CRF was a member, for a single, zero interest instrument to be paid beginning in 2026. Cuba has not accepted that proposal, according to court documents.
A further matter that was dealt with in Cockerill J’s judgment was that of alleged bribery. Cuba accused and convicted former bank manager Raúl Lozano and former secretary María Teresa Compte of accepting bribes in exchange for accepting the debt reassignment. It did make the bribe allegations at trial, but Cockerill J noted in the judgment that the country did not ask the court to make a finding on whether a bribe was paid. CRF asked the court for a finding that Lozano was not bribed, but the judge said it would “not be appropriate” for her to make such a finding” as the point “was not in issue and full evidence of the point was not before [her].”
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