Springwell v JP Morgan [2010] EWCA Civ 1221

It’s acceptable for parties to agree that certain facts are true when they make a contract, even if those facts are not actually true.

On the ground of contractual estoppel, a party may not assert any actionable misrepresentations nor can he claim reliance on such misrepresentations.

The case revolves around events in 1996-1998 when the Russian Federation sought international funding by offering sovereign debt and financial products to investors. Many investors, including the appellant company Springwell, were attracted by the high yields in emerging markets like Russia. However, Russia faced severe economic problems, resulting in a significant state deficit.

In 1998, the IMF offered a rescue package to Russia, but despite this assistance, Russia declared a moratorium on foreign debt payments and suspended trading on Russian-issued bonds. These restrictions affected "GKOs," which were short-term, non-interest-bearing bonds.

Springwell, a treasury company for a group of shipping companies, had invested in Russian securities, including a derivative called "GKO Linked Notes" (GKO LNs). Springwell bought 42 GKO LNs, with the last purchase occurring after the IMF's announcement.

However, the Russian moratorium and actions by the Russian Central Bank caused the GKO LNs to default. Additionally, the Russian ruble's value fell sharply against the US dollar, leading to substantial financial losses.

Appeal dismissed.

This case illustrates the legal concepts of misrepresentation and contractual estoppel.

It emphasizes the importance of good faith in contractual relationships and serves as a reminder that parties are bound by the terms and representations within their contracts.

This case highlights how legal principles can influence the outcomes of contract disputes and guide the behavior of parties in contractual negotiations.