NOTE: Springwell appealed two aspects of the judgments. The appeals were dismissed. For more information, see Legal update, A&O case report: Court of Appeal dismisses Springwell appeal and upholds non-reliance wording.

On 25 July 2008, the High Court rejected claims made by Springwell Navigation Corporation (Springwell) against JP Morgan Chase Bank (Chase) in respect of certain structured instruments (Instruments) issued by Chase, which were referenced to underlying bonds denominated in roubles. The underlying bonds had defaulted in the 1998 Russian financial crisis. Springwell therefore received no income from the Instruments and was left with substantial liabilities in respect of borrowings from Chase.

PLC reported on an earlier judgment in this matter, see PLC Dispute Resolution and PLC Financial Services, Legal update, Springwell fails to pin advisory duties and liability for loss on bank.

The latest judgment deals with claims by Springwell against Chase in relation to events on, and subsequent to, the date of the default under the bonds. Springwell claimed Chase was under an obligation to pay principal and interest due on the face of the Instruments unless it could show that the default of the underlying bonds fell within a narrowly defined event under one section of the Instruments. In addition, they said, Chase had failed to comply with the technical requirements of the relevant section. Chase submitted that the Instruments were drafted so that Chase was only ever obliged to pass through to Springwell such proceeds of the underlying bonds as it received.

Chase's construction of the documents was upheld and Springwell's claims were dismissed. The judgment did not give rise to any new law. However, the case is of interest to finance lawyers as similar cases are expected to arise as a result of the current credit crisis.

Case: JP Morgan Chase Bank & Ors v Springwell Navigation Corporation & Ors [2008] EWHC 1793 (Comm) (25 July 2008).