BNP Paribas SA v Yukos Oil Co

Facts

A syndicate of banks sought summary judgment on an English-law loan to Yukos. After set-off the claim was about 472.8 million dollars. The judgment records that the chief executive was arrested in October 2003, that a tax liability of 3.3 billion dollars for one year was fixed in December 2003, and that Yukos's assets were frozen in April 2004. The facility agent demanded about 525.8 million dollars, later reduced by the set-off.

Issue

Had a material adverse change occurred, so that the banks were entitled to judgment on the accelerated debt?

Held

Evans-Lombe J gave summary judgment for the banks. Yukos had no real prospect of showing that the banks' determination of a material adverse effect was unreasonable.

Principle

A MAC clause is applied to the contract's own words and to the borrower's ability to perform. An asset freeze, a very large tax claim and the threat of further claims can be enough. The chief executive's arrest was part of the history. It was not, by itself, the reason the clause was satisfied.

Why it matters

Use it for extreme facts. Blair J later cited it in that limited way in Grupo Hotelero Urvasco SA v Carey Value Added SL. Do not treat every downturn as a MAC, and do not memorise a round figure of 500 million dollars in place of the sums in the judgment.

For study only. By lanbuk.com. Always check current sources and consult a qualified professional.