Upon receipt or recovery by SIBL of any amount (whether of principal, interest or otherwise) in respect of the Subject Notes which becomes due during the term of the Participation, SIBL shall remit to the Participant such amount such amount being equal to the amount so received or recovered by SIBL. The actual rights of the Participant were stated in subclause 2.2: The Participant shall have no rights of ownership in the Subject Notes nor does SIBL act as agent or trustee for the Participant in relation to the Subject Notes provided that SIBL shall not be entitled to sell or otherwise dispose of the Subject Notes, without the prior written consent of the Participant. The relationship between SIBL and the Participant thus arising shall be a debtor-creditor relationship. On and subject to the terms and conditions of this letter agreement, and in consideration of the transfer by the Participant to SIBL of US$20,500,000 face value bearer depositary receipts ( the Receipts ) issued pursuant to a deposit agreement dated as of the date hereof ( the Effective Date ), SIBL grants the Participant a participation in the Payment Rights in respect of the Subject Notes. Subclause 2.1 was largely concerned with stating what a sub-participation did not mean: hereby confirm the proposed 100 per cent participation by the Participant (the Participation ) in the principal and interest (the Payment Rights ) with respect to of the Notes (the Subject Notes ). It referred to Chase as the Participant and began with a preamble: The sub-participation agreement was expressed to be governed by English law. (In fact there were two pairs of agreements, each dealing with a separate tranche of bonds, but they were in the same terms and it is sufficient to refer to one.) The first was called a Short-Form Sub-Participation Agreement ( the sub-participation agreement ) and the second a Deposit Agreement. SIBL entered into a pair of interlocking agreements with Chase Manhattan Bank Luxembourg SA ( Chase ). Woodchuck transferred title to the bonds to Socimer International Bank Ltd ( SIBL ) in exchange for payment in cash. The derivatives (called depositary receipts ) were then marketed and sold. The scheme adopted was to transfer that part of the issue held by Woodchuck to a friendly bank and then create transferable derivatives which carried the right to capital and interest but not to votes or custody of the bonds. The reasons are obscure and do not matter the evidence hints at some apprehended proxy battle. In 1996 it appears that Woodchuck wished to dispose of the notes in such a way that the voting rights remained in friendly hands. $36.1m of these notes were acquired by a Panamanian company called Woodchuck Investments Inc ( Woodchuck ). The eurobond issue consisted of US$150m 5 year 8% loan notes issued on 26 August 1993 by a Brazilian company called Bombril SA. If not, it forms part of the insolvent estate and the sub-participant is an unsecured creditor. If the agreement amounted to an assignment of a proprietary interest in the proceeds, the money belongs to the sub-participant. The question has arisen because the bank which granted the sub-participation has gone insolvent. The question in this appeal is whether a sub-participation agreement, entered into between two banks in respect of part of a eurobond issue, conferred upon the sub-participating bank any proprietary interest in the underlying bonds or their proceeds. REASONS FOR REPORT OF THE LORDS OF THE JUDICIALġ3th May 2002, Delivered the 29th May 2002Īt the conclusion of the hearing on their Lordships agreed humbly to advise Her Majesty that the appeal ought to be dismissed and that they would give their reasons later. (1) Paul Frederick Clarke (Liquidator of Socimer Lloyds TSB Bank plc v Clarke & Anor (Bahamas) UKPC 27 ()
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