Duty Of Care Owed By Arranger In Relation To The Execution Of Sukuk Documents

Golden Belt Sukuk Company B.S.C. v. BNP Paribas and FCOF II UB Securities LLC and others v. BNP Paribas [2017] EWHC 3182 (Comm)

This case concerned the inability of the claimants to recover sums pursuant to a promissory note (the Promissory Note) which formed part of the transaction documents for a sukuk financing transaction (the Sukuk) for the Saudi Arabian Saad group, referred to by the judge in the case as "equivalent in economic effect to a Eurobond issue". The claimants were the issuer and trustee of the rights of holders of certain certificates issued as part of the Sukuk (Golden Belt) and funds which had invested in the secondary market, and were specialist investors in distressed debt (the Funds).

BNP Paribas (BNPP) was described as the Arranger and as one of the Lead Managers for the Sukuk. There was some discussion in the judgment as to what this role entailed, but the judge found as a matter of fact that it included the preparation and execution of the transaction documents. The judge declined, however, to find that disclaimers contained in the transaction document relating to BNPP's role as Lead Manager did not apply also to its role as Arranger, in view of the fluidity of use of these descriptions.

The claimants alleged (and the judge agreed) that it was a requirement under Saudi Arabian law (which governed the Promissory Note) that the Promissory Note be signed with a "wet ink" signature. In fact, microscopic investigation showed that the relevant signature had been added by a laser printer. The judge held that, had the Promissory Note been signed with a "wet ink" signature, Golden Belt would have obtained judgment on it in Saudi Arabia, although he also held that such judgment would not have been paid.

Golden Belt alleged that BNPP owed it (and certificate holders) a duty of care to exercise reasonable care and skill to ensure that the Promissory Note was properly executed - BNPP denied this. The judge considered some of the authorities dealing with the existence of a duty of care in this context. He drew from them the following two points: (1) that BNPP's client was Saad, and that the existence of contractual duties to one party generally meant that a bank would not undertake a duty of care to other parties in relation to the transaction; and (2) that the existence of carefully structured contractual relationships meant that the court should be slow to superimpose a tortious duty on those relationships. Nonetheless, the...