This document is a dissertation submitted by Damilola Yewande Durowaiye towards a Master's degree in international commercial law. It analyzes sub-participation agreements, which have become an increasingly relevant method for loan transfer but have received little academic discussion. The dissertation will explore the legal nature and risks of sub-participations, comparing English and US approaches, and how regulation and contractual provisions can help mitigate risks for sub-participants.
The Hannemann campaign email blast provided a campaign update for the period ending September 30, 2011. It stated that the campaign has traveled across Hawaii bringing its message of leadership, ideas, and bipartisan problem solving. It highlighted some positive press coverage received. It encouraged supporters to visit the campaign's website to see polling results showing Hannemann with a lead in the congressional race, as well as updates, news, and fundraising information. The campaign looks forward to an exciting race in 2012.
University of Bristol Law Society's Dicta Magzine - 2016 EditionGeorge Edward Aubrey
This document is the introduction to the 2016 edition of the Dicta magazine. It discusses the theme of "Controversy in Law" and aims to encourage thoughtful discussion and questioning of legal norms. The introduction emphasizes challenging preconceptions without contempt, and hopes the magazine will plant "seeds of intellectual curiosity" in readers. It thanks the writers and editors involved for their contributions in making the 2016 edition possible.
The document defines several words related to deceit, trickery, and dishonest behavior. It provides definitions for terms like "deceit", "cant", "cheat", and discusses related concepts like cunning, artifice, guile, and deception. It also defines words like "game", "pride", and the adjective "conceited". The document appears to be extracting definitions and related terms from a dictionary or other reference work.
SIM, TIARA AYUNINGSIH, HAPZI ALI, SISTEM INFORMASI MANAJEMEN UNTUK KEUNGGULAN...Tiara Ayuningsih
This document provides characteristics of information management systems and their components. It discusses that an information system has elements, boundaries, external environment, interfaces, and inputs. The elements are smallest parts of a system that cannot be broken down further. Boundaries define the system separately from other systems or environments. The external environment influences and is influenced by system operations. Interfaces are the connections between subsystems, with outputs from one subsystem becoming inputs to another. Inputs provide energy for system maintenance and operation.
The document describes Nobody's Place/Nowhere's Map, a collaborative art project exploring sites of crisis, resistance, and change through creating a politically fictional map of Athens. Creators choose a word from the introductory text and a corresponding location in Athens to develop connections and resonances between sites, with embodied encounters informing the map's collective construction. The summary highlights the project's aims of fostering new imaginings through dialogue across dispersed communities and geographies.
A rebranding proposal recommends updating Will Electronics' image to emphasize its work in security solutions rather than electronics. The proposal suggests a name change could modernize the company and attract new clients by showing its commitment to adapting with technological advances in
This document is a CV for Francis Bell, an architectural assistant seeking further experience. It outlines his personal details, education history including a Postgraduate Diploma in Architecture from Portsmouth University, skills in architectural design programs and modeling/rendering. It also provides employment history showing over a year of experience as an architectural assistant at a Bristol firm and previous experience at a Taunton firm during his studies.
The Hannemann campaign email blast provided a campaign update for the period ending September 30, 2011. It stated that the campaign has traveled across Hawaii bringing its message of leadership, ideas, and bipartisan problem solving. It highlighted some positive press coverage received. It encouraged supporters to visit the campaign's website to see polling results showing Hannemann with a lead in the congressional race, as well as updates, news, and fundraising information. The campaign looks forward to an exciting race in 2012.
University of Bristol Law Society's Dicta Magzine - 2016 EditionGeorge Edward Aubrey
This document is the introduction to the 2016 edition of the Dicta magazine. It discusses the theme of "Controversy in Law" and aims to encourage thoughtful discussion and questioning of legal norms. The introduction emphasizes challenging preconceptions without contempt, and hopes the magazine will plant "seeds of intellectual curiosity" in readers. It thanks the writers and editors involved for their contributions in making the 2016 edition possible.
The document defines several words related to deceit, trickery, and dishonest behavior. It provides definitions for terms like "deceit", "cant", "cheat", and discusses related concepts like cunning, artifice, guile, and deception. It also defines words like "game", "pride", and the adjective "conceited". The document appears to be extracting definitions and related terms from a dictionary or other reference work.
SIM, TIARA AYUNINGSIH, HAPZI ALI, SISTEM INFORMASI MANAJEMEN UNTUK KEUNGGULAN...Tiara Ayuningsih
This document provides characteristics of information management systems and their components. It discusses that an information system has elements, boundaries, external environment, interfaces, and inputs. The elements are smallest parts of a system that cannot be broken down further. Boundaries define the system separately from other systems or environments. The external environment influences and is influenced by system operations. Interfaces are the connections between subsystems, with outputs from one subsystem becoming inputs to another. Inputs provide energy for system maintenance and operation.
The document describes Nobody's Place/Nowhere's Map, a collaborative art project exploring sites of crisis, resistance, and change through creating a politically fictional map of Athens. Creators choose a word from the introductory text and a corresponding location in Athens to develop connections and resonances between sites, with embodied encounters informing the map's collective construction. The summary highlights the project's aims of fostering new imaginings through dialogue across dispersed communities and geographies.
A rebranding proposal recommends updating Will Electronics' image to emphasize its work in security solutions rather than electronics. The proposal suggests a name change could modernize the company and attract new clients by showing its commitment to adapting with technological advances in
This document is a CV for Francis Bell, an architectural assistant seeking further experience. It outlines his personal details, education history including a Postgraduate Diploma in Architecture from Portsmouth University, skills in architectural design programs and modeling/rendering. It also provides employment history showing over a year of experience as an architectural assistant at a Bristol firm and previous experience at a Taunton firm during his studies.
Training & workshop feb 18th 2014 berouaghia teaching writingMr Bounab Samir
The document outlines an agenda for a teacher training workshop on February 18th, 2014 in Berrouaghia, Algeria. The workshop will cover teaching writing and the writing process. The agenda includes an opening session, presentations on challenges in teaching writing and the writing process, feedback sessions, and a workshop for teachers to plan writing lessons for different middle school levels. The writing process portion describes the five stages of process writing: brainstorming, planning, drafting, editing, and publishing. It provides details on strategies and tasks for each stage.
The document discusses the key stages in the marketing process. It begins with identifying opportunities in the market through research and analysis of customer needs. The next stage involves segmenting the market and selecting target customer groups. A market analysis is then conducted to understand customers and competitors within the target market. Based on this, marketing strategies are formulated. Action plans are then developed to implement the strategies, followed by executing the plans. Finally, performance is monitored and strategies are evaluated and adjusted based on results. The goal of the marketing process is to meet customer needs effectively while maintaining competitiveness.
This document appears to be an architectural portfolio from 2013-2015 produced by Kirstie Mini Fie. It includes summaries and diagrams of several projects, including renovations to a sailing club damaged by floods, an auditory exhibition investigating sound properties in architecture, a fashion studio customized for a designer client, lighting design bringing personality to a home, and a social hub incorporating different levels to influence the senses within an existing landscape. Diagrams and reflections on each project are provided, showcasing the portfolio maker's growing skills in combining landscape and building design.
Affiliated Engineer
If you are looking for an internship in Engineering, at AIE Ireland we offer you the opportunity to apply in 6 countries in Europe and 2 in the United Kingdom for more information Contact us: e-mail: irelandtrainee@gmail.com / aieacademic.iep@gmail.com
https://www.aieireland.com/
Presented by Bruce Harwood: July 2016
Have you heard about traditional media but aren't quite sure what it is?
This session on how to plan and buy traditional media will give you some context on why advertisers use it and how you should think about it.
As each medium is different in its own way and we will explore the nuances of each and how they are adapting in today's digital landscape.
This document is the CV of Stephen Kelleher, which outlines his education and qualifications, achievements, skills, and work experience. He has a Masters in Planning and Sustainable Development from University College Cork and a Bachelor of Architecture from University of Limerick. His experience includes working as an architectural assistant on commercial, education, and planning projects. He has received several awards and has experience in urban design, master planning, and presenting work.
TMK.edu Traditional Media Buying Presentation: August 2015The Media Kitchen
This document provides an overview of traditional media buying, including television, radio, print, outdoor, and network upfronts. It shows the average time spent with different media, with digital surpassing TV in 2013. Television advertising strengths include immediate impact and building awareness, while limitations are competitive clutter and time-shifted viewing. For radio, strengths are local presence and low cost, while limitations are lack of visuals and limited reach. Print advertising includes magazines, with strengths being targeted demographics and quality reproduction, while limitations are longer lead times and costs.
This document discusses common stereotypes and representations of different social classes, disabilities, ages, and regional identities in television drama. For social class, it describes stereotypes associated with the upper class, upper-middle class, middle class, lower-middle class, and lower class. For disability, it outlines six common stereotypes applied to people with disabilities. For age, it lists stereotypes associated with children, teenagers, people in their 20s-30s, middle aged people, and the elderly. Finally, it provides regional stereotypes for the Scottish, Welsh, Irish, English, and Londoners.
This document provides an overview and analysis of the Sport b. brand. It discusses the brand's history as a line of Agnes b. launched in 1999. Sport b. offers youthful, stylish clothing and accessories at affordable price points. While it focuses on the Asian market, opening numerous stores in countries like Hong Kong and Taiwan, it has limited online presence. The brand utilizes ambient marketing strategies like music festivals and sporting events for promotion. An evaluation notes Asia as the key target market given Sport b.'s strong physical presence and early launches there.
This document summarizes several horror film posters. For Friday the 13th, the lighting creates tension and fear, the title is in red suggesting danger, and the villain wears a mask and holds a machete. For Scream, the black and white color scheme makes it seem dark and scary, and the close-up of a terrified girl's eyes uses light and color contrast. Insidious advertises its producers of popular horror films and features a drained image of a boy in pajamas with "insidious" in his eye. Paranormal Activity emphasizes its basis on a true story by showing footage from a home camera. The Woman in Black only mentions actor Daniel Radcliffe to attract fans and uses a dark
The document discusses various root cause analysis tools including 5-Why analysis, thought mapping, process mapping, cause-and-effect matrices, FMEA, process behavior charts, and data mining. 5-Why analysis involves repeatedly asking "why" to identify the root causes, while thought mapping explores multiple influences without assuming a single cause. Process mapping catalogs variables and process behavior charts detect shifts or outliers in process data. Combined, these tools provide thorough root cause identification and analysis.
This document discusses common stereotypes portrayed in television dramas regarding class, disability, age, and regional identity. For class, it outlines stereotypes associated with the upper, upper-middle, middle, lower-middle, and lower classes. For disability, it lists 6 common stereotypes people with disabilities face in media. For age, it provides stereotypes for children, teenagers, those in their 20s-30s, middle aged people, and the elderly. Finally, it lists regional stereotypes often shown for people from Scotland, Wales, Ireland, England, and London.
This document discusses pain (dolor) from physiological and psychological perspectives. Physiologically, pain is classified based on its origin (somatic, visceral, neuropathic), characteristics (acute, chronic, superficial, deep), and transmission pathways. Psychologically, pain can have subjective and psychosomatic components. Medicaments and complementary therapies are proposed for treating different types of pain.
The document describes HELPHUMAN EMERGENCY LIFE POINT, an outdoor digital signage terminal that provides life-saving defibrillation functionality along with advertising display. The terminal uses cutting-edge LCD and Apple computer technology to provide bright, high-definition video displays between 55-84 inches in size. It is designed for tough, all-weather outdoor use and remote monitoring and control. In addition to advertising, the terminal integrates with emergency response networks and provides public security features like surveillance cameras.
The document describes a proposed Telephone Billing System project that aims to automate the telephone billing process. The key objectives of the new system are to reduce manual work, make maintenance and information retrieval easier, and provide greater security, flexibility and user-friendliness compared to the existing manual process. The new system will use Java for the front-end and SQL for the back-end database. It will feature modules for updating customer information, performing calculations and deductions, and generating bills. While the new system provides benefits over the existing manual process, there is still room for further improvements such as adding an online component and better security features.
Active22 was founded to inspire young women through fashion, fitness, and content. It curates activewear brands and fitness classes, and provides lifestyle advice. Its target audience is college-aged women. It plans to sell fitness classes and memberships on its site, partnering with large fitness franchises. The activewear market is growing faster than overall apparel, and Active22 aims to engage its members through commerce, content and conditioning for healthy lifestyles.
1Terrorism is highly d e p e n d e n t o n c a s h f.docxeugeniadean34240
The document discusses how terrorist organizations have increasingly used digital currencies like Bitcoin to finance their activities. It describes some limitations of traditional financing methods like hawala networks and international banking. Digital currencies provide a more anonymous and decentralized way to transfer funds compared to conventional banking. However, their adoption by terrorist groups has been slow and law enforcement faces challenges tracking transactions on these technologies.
The production method is an exhausting journey, specifically all of the paintings main as much as it, however, there are four varieties of automatic machine manufacturers in India which we need to spotlight to help your knowledge of the general production method.
Training & workshop feb 18th 2014 berouaghia teaching writingMr Bounab Samir
The document outlines an agenda for a teacher training workshop on February 18th, 2014 in Berrouaghia, Algeria. The workshop will cover teaching writing and the writing process. The agenda includes an opening session, presentations on challenges in teaching writing and the writing process, feedback sessions, and a workshop for teachers to plan writing lessons for different middle school levels. The writing process portion describes the five stages of process writing: brainstorming, planning, drafting, editing, and publishing. It provides details on strategies and tasks for each stage.
The document discusses the key stages in the marketing process. It begins with identifying opportunities in the market through research and analysis of customer needs. The next stage involves segmenting the market and selecting target customer groups. A market analysis is then conducted to understand customers and competitors within the target market. Based on this, marketing strategies are formulated. Action plans are then developed to implement the strategies, followed by executing the plans. Finally, performance is monitored and strategies are evaluated and adjusted based on results. The goal of the marketing process is to meet customer needs effectively while maintaining competitiveness.
This document appears to be an architectural portfolio from 2013-2015 produced by Kirstie Mini Fie. It includes summaries and diagrams of several projects, including renovations to a sailing club damaged by floods, an auditory exhibition investigating sound properties in architecture, a fashion studio customized for a designer client, lighting design bringing personality to a home, and a social hub incorporating different levels to influence the senses within an existing landscape. Diagrams and reflections on each project are provided, showcasing the portfolio maker's growing skills in combining landscape and building design.
Affiliated Engineer
If you are looking for an internship in Engineering, at AIE Ireland we offer you the opportunity to apply in 6 countries in Europe and 2 in the United Kingdom for more information Contact us: e-mail: irelandtrainee@gmail.com / aieacademic.iep@gmail.com
https://www.aieireland.com/
Presented by Bruce Harwood: July 2016
Have you heard about traditional media but aren't quite sure what it is?
This session on how to plan and buy traditional media will give you some context on why advertisers use it and how you should think about it.
As each medium is different in its own way and we will explore the nuances of each and how they are adapting in today's digital landscape.
This document is the CV of Stephen Kelleher, which outlines his education and qualifications, achievements, skills, and work experience. He has a Masters in Planning and Sustainable Development from University College Cork and a Bachelor of Architecture from University of Limerick. His experience includes working as an architectural assistant on commercial, education, and planning projects. He has received several awards and has experience in urban design, master planning, and presenting work.
TMK.edu Traditional Media Buying Presentation: August 2015The Media Kitchen
This document provides an overview of traditional media buying, including television, radio, print, outdoor, and network upfronts. It shows the average time spent with different media, with digital surpassing TV in 2013. Television advertising strengths include immediate impact and building awareness, while limitations are competitive clutter and time-shifted viewing. For radio, strengths are local presence and low cost, while limitations are lack of visuals and limited reach. Print advertising includes magazines, with strengths being targeted demographics and quality reproduction, while limitations are longer lead times and costs.
This document discusses common stereotypes and representations of different social classes, disabilities, ages, and regional identities in television drama. For social class, it describes stereotypes associated with the upper class, upper-middle class, middle class, lower-middle class, and lower class. For disability, it outlines six common stereotypes applied to people with disabilities. For age, it lists stereotypes associated with children, teenagers, people in their 20s-30s, middle aged people, and the elderly. Finally, it provides regional stereotypes for the Scottish, Welsh, Irish, English, and Londoners.
This document provides an overview and analysis of the Sport b. brand. It discusses the brand's history as a line of Agnes b. launched in 1999. Sport b. offers youthful, stylish clothing and accessories at affordable price points. While it focuses on the Asian market, opening numerous stores in countries like Hong Kong and Taiwan, it has limited online presence. The brand utilizes ambient marketing strategies like music festivals and sporting events for promotion. An evaluation notes Asia as the key target market given Sport b.'s strong physical presence and early launches there.
This document summarizes several horror film posters. For Friday the 13th, the lighting creates tension and fear, the title is in red suggesting danger, and the villain wears a mask and holds a machete. For Scream, the black and white color scheme makes it seem dark and scary, and the close-up of a terrified girl's eyes uses light and color contrast. Insidious advertises its producers of popular horror films and features a drained image of a boy in pajamas with "insidious" in his eye. Paranormal Activity emphasizes its basis on a true story by showing footage from a home camera. The Woman in Black only mentions actor Daniel Radcliffe to attract fans and uses a dark
The document discusses various root cause analysis tools including 5-Why analysis, thought mapping, process mapping, cause-and-effect matrices, FMEA, process behavior charts, and data mining. 5-Why analysis involves repeatedly asking "why" to identify the root causes, while thought mapping explores multiple influences without assuming a single cause. Process mapping catalogs variables and process behavior charts detect shifts or outliers in process data. Combined, these tools provide thorough root cause identification and analysis.
This document discusses common stereotypes portrayed in television dramas regarding class, disability, age, and regional identity. For class, it outlines stereotypes associated with the upper, upper-middle, middle, lower-middle, and lower classes. For disability, it lists 6 common stereotypes people with disabilities face in media. For age, it provides stereotypes for children, teenagers, those in their 20s-30s, middle aged people, and the elderly. Finally, it lists regional stereotypes often shown for people from Scotland, Wales, Ireland, England, and London.
This document discusses pain (dolor) from physiological and psychological perspectives. Physiologically, pain is classified based on its origin (somatic, visceral, neuropathic), characteristics (acute, chronic, superficial, deep), and transmission pathways. Psychologically, pain can have subjective and psychosomatic components. Medicaments and complementary therapies are proposed for treating different types of pain.
The document describes HELPHUMAN EMERGENCY LIFE POINT, an outdoor digital signage terminal that provides life-saving defibrillation functionality along with advertising display. The terminal uses cutting-edge LCD and Apple computer technology to provide bright, high-definition video displays between 55-84 inches in size. It is designed for tough, all-weather outdoor use and remote monitoring and control. In addition to advertising, the terminal integrates with emergency response networks and provides public security features like surveillance cameras.
The document describes a proposed Telephone Billing System project that aims to automate the telephone billing process. The key objectives of the new system are to reduce manual work, make maintenance and information retrieval easier, and provide greater security, flexibility and user-friendliness compared to the existing manual process. The new system will use Java for the front-end and SQL for the back-end database. It will feature modules for updating customer information, performing calculations and deductions, and generating bills. While the new system provides benefits over the existing manual process, there is still room for further improvements such as adding an online component and better security features.
Active22 was founded to inspire young women through fashion, fitness, and content. It curates activewear brands and fitness classes, and provides lifestyle advice. Its target audience is college-aged women. It plans to sell fitness classes and memberships on its site, partnering with large fitness franchises. The activewear market is growing faster than overall apparel, and Active22 aims to engage its members through commerce, content and conditioning for healthy lifestyles.
1Terrorism is highly d e p e n d e n t o n c a s h f.docxeugeniadean34240
The document discusses how terrorist organizations have increasingly used digital currencies like Bitcoin to finance their activities. It describes some limitations of traditional financing methods like hawala networks and international banking. Digital currencies provide a more anonymous and decentralized way to transfer funds compared to conventional banking. However, their adoption by terrorist groups has been slow and law enforcement faces challenges tracking transactions on these technologies.
The production method is an exhausting journey, specifically all of the paintings main as much as it, however, there are four varieties of automatic machine manufacturers in India which we need to spotlight to help your knowledge of the general production method.
The document proposes 5 adjustments to the Hobart Rivulet Park master plan to better highlight the natural and cultural heritage of the area. It suggests:
1. Showing the trail along the old rivulet course where it meets Macquarie Street.
2. Changing the preferred pedestrian route from Elizabeth Street grid to along the rivulet course for better access.
3. Allowing a concept plan for a "Buried Brook Promenade" trail along the rivulet from the docks to the CBD.
4. Noting the convicts who camped by the rivulet at the mall as an important heritage value.
5. Using "urban plastic surgery" to connect the
InstructionsDo the following and submit the completed assignment.docxdirkrplav
Instructions
Do the following and submit the completed assignment to the dropbox.
1. Print out the "The Narcissist in All of Us".
2. Number the paragraphs in the article from 1 to 29. (“1” in front of the paragraph beginning “You think you know…”, “2” in front of the paragraph beginning “But narcissists…” etc.)
3. This article does not have section headings. Decide how this article could be divided into five to eight sections.
4. For each section, give a phrase or short sentence that could be used as an informative section heading—a heading that indicates the main point of each of these sections.
5. After each section heading, give the number of paragraphs that go with each section heading.
6. Beneath each section heading, outline the main points of that section.
The following indicates how the first two sections might be done.
1. Narcissism can be tribal as well as individual (Paragraphs 1-3)
a. “We are all narcissists” (80)
b. Can result in harmless activity (e.g. cheering for a team) or destructive activity (e.g. US invasion of Iraq)
2. Group narcissism is natural & can be easy to manipulate (4-5)
a. Humans are social creatures, which “[implies] favoring your group above all others” (81”
b. “These feelings…are dangerously easy to manipulate”
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UK PR Experts is a PR firm that helps businesses and brands succeed through their expertise in areas like media relations, crisis management, and social media marketing. They take a customized approach to developing PR strategies tailored to each client's specific needs and goals. The document provides an overview of UK PR Experts' services, team, success stories, and clients to demonstrate how they can help guide brands on their PR journey.
The document discusses several environmental concerns and provides an activity for students. It outlines issues like genetic modification of crops, waste production, water and air pollution, and deforestation. These problems are negatively impacting forests, oceans, and the planet's temperature. The activity asks students to choose a spot in their home, draw what it currently looks like and their vision to transform it into a garden using reusable materials. The goal is for students to contribute positively to the environment.
Financial Statement Class 12th Accountancy topic explained in detailpriyaan122002
The financial statement is a fundamental concept in Class 12 Accountancy, serving as a critical tool for businesses to communicate their financial performance and position to stakeholders. This topic encompasses the preparation, analysis, and interpretation of financial statements, providing students with essential skills for understanding and managing business finances. Financial statements are formal records of the financial activities and position of a business, person, or entity. These statements are crucial for stakeholders, including investors, creditors, and management, to make informed decisions. The primary financial statements include the Balance Sheet, Income Statement (Profit and Loss Account), and Cash Flow Statement.
We are engaged in an exponentially growing cyber war that we are visibly losing. Within the next 3 years it has been estimated that the global cost will equal, or overtake, the UK GDP, and it is clear that our defences are inadequate and often ineffective. Malware and ransomer-ware continue to extort more money, and cause damage and inconvenience to individuals, organisations and society, whilst hacker groups, criminals and rogue states continue to innovate and maintain their advantage. At the same time, our defences are subverted and rendered ineffective as we operate in a reactive and prescriptive, after the fact, mode with no foresight or anticipation.
In any war it is essential to know and understand as much about the enemy as possible, it is also necessary to establish the truth and validity of any situation or development. Doing this in the cyber domain is orders of magnitude more difficult than the real world, but some of the relevant tools are now available or at an advanced stage of development. For example; fully automated fact checkers and truth engines have been demonstrated, whilst situational awareness technologies are commercially available. However, what is missing is some level of context assessment on a continual basis. Without this we will continue to be ‘blind-sided’ by the actions and developments of the attackers as they maintain their element of surprise along every line of innovation.
What do we need? In short ; a Context Engine that continually monitors networks, servers, routers, machines, devices and people for anomalous behaviours that flag pending attacks as behavioural deviations that are generally easy to detect. In the case of attacker groups we have observed precursor events and trends in network activity days ahead of some big offensive. However, this requires a shift in the defenders thinking and operations away for the reactive and short term, to the long term continual monitoring, data collection and analysis in order to establish threat assessments on a real time.
The behavioural analysis of people, networks and ITC, is at the core of our ‘Context Engine’ solution which completes the triangle of: Truth; Situation; Context Awareness to provide defenders with a fuller and transformative picture. Most of the known precursor elements of this undertaken have been studied in some depth, with some behavioural elements identified on real networks and some physical situations. The unknown can only add more accuracy!
Cryptocurrency is a digital form of money designed to remain anonymous through cryptography. It has pros like protecting users from fraud and identity theft, and providing widespread accessibility to those with internet access. However, it also has cons like being less familiar and requiring education for users and businesses. It also has limitations like being susceptible to human error and technical issues, and having limits on transaction sizes and speeds.
This document provides guidance on classroom structuring and management. It discusses the standard facilities and equipment required for a regular classroom, including furniture, blackboards, bulletin boards, and other items. It describes how to ideally structure a classroom in terms of signage, displays, and placement of furniture and resources. The document also addresses considerations for classroom acoustics and the importance and guidelines for use of color in educational facilities. The overall purpose is to outline how to design classrooms to support effective teaching and learning.
Cisa domain 2 part 3 governance and management of itShivamSharma909
The process of identifying vulnerabilities and threats to the information resources used by an organization in achieving business objectives and what countermeasures to take in reducing risk to an acceptable level.
Training & workshop feb 18th 2014 berouaghia teaching writingMr Bounab Samir
The document outlines an agenda for a teacher training workshop on February 18th, 2014 in Berrouaghia, Algeria. The workshop will cover teaching writing and the writing process. The agenda includes an opening session, presentations on challenges in teaching writing and the writing process, feedback sessions, and a workshop for teachers to plan writing lessons for different middle school levels. The writing process portion describes the five stages of process writing: brainstorming, planning, drafting, editing, and publishing. It provides details on strategies and tasks for each stage.
Forming part of the Yoma Central project, the Peninsula Residences Yangon is a collection of luxury private homes for sale that blends heritage and modern design with the Peninsula brand’s refined elegance. The Peninsula Residences Yangon which comprises 112 units offers the choice of two-bedroom, three-bedroom, four-bedroom, and penthouse serviced residences across its 26 floors together with a unique menu of dedicated facilities and amenities.
EMPLOYEE BRAND AMBASSADORS ARE THE LOYAL LABRADORS FOR SUCCESSFUL COMPANIES—G...BOMBDIGGITY, LLC
Five years ago a brand ambassador was just a well-known expert or celebrity that a company paid to represent their brand. But my friends, times they are a-changing. Most consumers could care less if Kim Kardashian tells them to wear a particular shoe brand or if LeBron James tells you not to drink Sprite. Consumers are looking for honesty and authenticity. Now, let's talk about the best ambassadors that are LITERALLY right in front of you!
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g a b r o c h u r e f r o m B o r a - B o r a .
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ANALYSIS OF SUB-PARTICIPATION AGREEMENTS DAMILOLA BEN-OMOTEHINSE
1. 1
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
ANALYSIS OF SUB-PARTICIPATION AGREEMENTS
Contents
I n t r o d u c t i o n ................................................................................................................2
O v e r v i e w ...................................................................................................................2
T e r m i n o l o g y ............................................................................................................3
L o a n T r a n s f e r M e c h a n i c s : S t r e n g t h s a n d F a i l i n g s ............................4
A s s i g n m e n t ...............................................................................................................7
N o v a t i o n ....................................................................................................................9
S u b - p a r t i c i p a t i o n : N a t u r e a n d T y p e s .......................................................11
F u n d e d s u b - P a r t i c i p a t i o n ............................................................................17
R i s k p a r t i c i p a t i o n .............................................................................................19
T h e U n i t e d S t a t e s C o n c e p t i o n o f S u b - P a r t i c i p a t i o n .................20
S u b - P a r t i c i p a t i o n D r i v e r s & R e g u l a t o r y B a c k d r o p ........................21
R e g u l a t i o n : C a p i t a l A d e q u a c y ..................................................................21
A c c o u n t i n g C o n s i d e r a t i o n s : .......................................................................26
C o n t r a c t u a l R e s p o n s e s t o t h e U n d e r l y i n g C l i m a t e .....................28
S p e c i f i c R i s k A r e a s a n d M i t i g a t i o n M e c h a n i s m s ............................30
A d m i n i s t r a t i o n / M a n a g e m e n t I s s u e s .......................................................31
P r i m a r y C r e d i t R i s k : N o n - P a y m e n t b y B o r r o w e r .........................37
D o u b l e C r e d i t R i s k : L e n d e r C o l l a p s e a n d o t h e r i s s u e s ..........38
R e s c h e d u l i n g R i s k : F i n a n c i a l R e s t r u c t u r i n g C o n c e r n s ...........41
I n s o l v e n c y S p e c i f i c R i s k s ............................................................................43
C o n c l u s i o n s ...................................................................................................................47
2. 2
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
Introduction
O v e r v i e w
T h o u g h i t h a s b e c o m e i n c r e a s i n g l y r e l e v a n t a n d h a s e v e n
b e e n d e s c r i b e d a s a ― … t r a d i t i o n a l m e t h o d o f l o a n
t r a n s f e r ‖ , 1
t h e s u b - p a r t i c i p a t i o n h a s b e e n d e s c r i b e d a s
h a v i n g ― n o t e c h n i c a l l e g a l m e a n i n g u n d e r E n g l i s h l a w ‖ 2
.
T h e v i e w h a s a l s o b e e n e x p r e s s e d t h a t ― F r e q u e n t l y , t h e
s e v e r a l p a r t s o f a p a r t i c i p a t i o n a r r a n g e m e n t l e n d
t h e m s e l v e s t o d i f f e r e n t c h a r a c t e r i z a t i o n s a n d t h e
a g r e e m e n t i s r e a l l y a c o m p o s i t e o f d i f f e r e n t l e g a l
e l e m e n t s … ‖ . 3
T h e a p p e a l o f t h e s u b - p a r t i c i p a t i o n i n
w h a t e v e r f o r m u l a t i o n i s i t s a d a p t a b i l i t y a n d s u i t a b i l i t y i n
s i t u a t i o n s w h e r e t h e o t h e r m e t h o d s o f t r a n s f e r m a y b e
u n s u i t a b l e o r u n d e s i r a b l e . T h a t n o t w i t h s t a n d i n g , t h e
p r e v a l e n t v i e w i s t h a t , ― s u b - p a r t i c i p a t i o n s h a v e m a j o r
d i s a d v a n t a g e s , m a i n l y f o r t h e s u b - p a r t i c i p a n t ‖ 4
.
T h i s e s s a y w i l l a n a l ys e t h e l e g a l n a t u r e o f t h e s u b -
p a r t i c i p a t i o n v i s - à - v i s t h e r i g h t s a n d b e n e f i t s i t c o n f e r s
o n t h e s u b - p a r t i c i p a n t . T h i s i s r e l e v a n t i n v i e w o f t h e
p r e v a l e n t u s e o f t h e s u b - p a r t i c i p a n t a s a d u a l m e c h a n i s m
1
E Yamahara, ‗A guide to the legal issues arising from the use of the "Rose" technique in Japan‘,
J.I.B.L. 1997, 13(1), 4-10, 4
2
J Barrat, ‗Distressed debt-the sale of loan assets‘, JIBL 1998 13(2), 50, 53
3
J Ziegel, ‗Characterization of Loan Participation Agreements‘ 14 Can. Bus. L.J. 336
4
P Wood, ‗Law and Practice of International Finance‘ International Loans and Bonds (Sweet
&Maxwell London, 2008), 152
3. 3
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
o f c a p i t a l a l l e v i a t i o n a n d a s s e t d i v e r s i f i c a t i o n , t h o u g h i t
h a s n o t r e c e i v e d s u f f i c i e n t a c a d e m i c d i s c u s s i o n .
I n a n a l ys i n g t h e s u b - p a r t i c i p a t i o n t h i s e s s a y w i l l d r a w
f r o m t h e r e s p e c t i v e c o n c e p t u a l i s a t i o n i n t h e E n g l i s h a n d
U n i t e d S t a t e s j u r i s p r u d e n c e , a s w e l l a s t h e c o m m e r c i a l
a n d r e g u l a t o r y b a c k d r o p u n d e r p i n n i n g t h e n e e d t o t r a n s f e r
l o a n s a n d a t t h a t , b y s u b - p a r t i c i p a t i o n . T h i s e s s a y w i l l
f u r t h e r a n a l ys e s p e c i f i c p o t e n t i a l l e g a l a n d c o m m e r c i a l
r i s k s w h i c h a t t e n d t h e s u b - p a r t i c i p a n t a n d t h e p o s s i b l e
m e c h a n i s m s w h i c h c a n b e a d o p t e d t o m i t i g a t e s a m e a n d
w i l l a l s o g o o n t o a n a l ys e p r a c t i c a l l i m i t a t i o n s o n s o m e o f
t h e r i g h t s t h e s u b - p a r t i c i p a n t m a y o t h e r w i s e w i s h t o
r e s e r v e u n d e r t h e t e r m s o f t h e s u b - p a r t i c i p a t i o n . T h e
i m p a c t o n r e g u l a t i o n o n t h i s f i n a n c i n g t o o l w i l l a l s o b e
e x p o s e d . T h e e s s a y w i l l c o n c l u d e b y d r a w i n g o n t h e
s t r e n g t h s o f t h e s u b - p a r t i c i p a t i o n n o t w i t h s t a n d i n g i t s
p o t e n t i a l a n d i n h e r e n t f l a w s , t o r e f l e c t t h a t t h e s u b -
p a r t i c i p a t i o n r e m a i n s a n e x t r e m e l y u s e f u l a n d v e r s a t i l e
f i n a n c i n g t o o l .
T e r m i n o l o g y
F o r t h e p u r p o s e o f t h i s e s s a y, t h e f o l l o w i n g w o r d s w i l l
h a v e t h e s e m e a n i n g s :
B o r r o w e r : t h e u n d e r l yi n g o b l i g o r t o w h o m t h e Le n d e r h a s
g r a n t e d a f a c i l i t y a n d w i t h w h o m t h e Le n d e r m a i n t a i n s a
r e l a t i o n s h i p ;
4. 4
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
F S A : F i n a n c i a l S e r v i c e s A u t h o r i t y;
I n v e s t o r : t h e In v e s t o r i s t h e p a r t y w h o t o w h o m t h e
L e n d e r t r a n s f e r s t h e c r e d i t r i s k i n a l o a n o r p o r t f o l i o i n
r e t u r n f o r t h e r i gh t t o r e c e i v e p a ym e n t s d e r i v a t i v e f r o m
t h e l o a n o r p o r t f o l i o ;
L e n d e r : i s t h e l e n d e r o f r e c o r d w h o h a d g r a n t e d l o a n s t o
t h e B o r r o w e r w h i c h l o a n s i t i n t e n d s t o t r a n s f e r ;
LM A : Lo a n M a r k e t A s s o c i a t i o n ;
LS T A : Lo a n S yn d i c a t i o n a n d T r a d i n g A s s o c i a t i o n ;
P a r t i c i p a t i o n : m e a n s a Le n d e r ‟ s p o r t i o n o f i n t e r e s t i n a
l o a n s yn d i c a t i o n , o r i n t h e c a s e o f a b i l a t e r a l f a c i l i t y, a
L e n d e r ‟ s e n t i r e i n t e r e s t i n a l o a n ;
P R A : P r u d e n t i a l R e g u l a t i o n A u t h o r i t y; a n d
S u b - p a r t i c i p a t i o n : i t i s a c k n o w l e d ge d t h a t t h e t e r m „ s u b -
p a r t i c i p a t i o n ‟ h a s n o „ a g r e e d ‟ l e g a l m e a n i n g a n d t h e
p r e c i s e n a t u r e o f e a c h s u b - p a r t i c i p a t i o n w i l l t u r n o n i t s
t e r m s . H o w e v e r , i n t h i s e s s a y t h e t e r m i s u s e d t o r e f e r t o
a n o n - r e c o u r s e f u n d i n g a r r a n g e m e n t b e t w e e n a Le n d e r a n d
a n In v e s t o r b y w h i c h t h e In v e s t o r m a k e s a n o n - r e f u n d a b l e
p a ym e n t t o t h e L e n d e r i n r e t u r n f o r a r i g h t t o r e c e i v e
i n c o m e s s t r e a m s r e f e r a b l e t o r e c e i p t s f r o m t h e
B o r r o w e r ( s ) ;
L o a n T r a n s f e r M e c h a n i c s : S t r e n g t h s a n d F a i l i n g s
B a n k s h a v e a l w a ys b e e n i n t h e b u s i n e s s o f o r i g i n a t i n g
l o a n a s s e t s a s p a r t o f t h e i r c o r e b u s i n e s s a n d t h e t r a n s f e r
5. 5
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
o f l o a n a s s e t s h a s b y p r a c t i c e b e c o m e a n e c e s s a r y i n c i d e n t
t o c o r e b a n k i n g b u s i n e s s f o r v a r i o u s r e a s o n s , n o t a b l e
a m o n g s t w h i c h a r e t h e n e e d t o r a i s e f i n a n c e 5
a n d t o
e n g a g e i n f r e s h l e n d i n g i n c o n s e q u e n c e o f r e gu l a t o r y
r e s t r a i n t s . 6
It h a s b e e n o b s e r v e d t h a t t h e d i s p o s a l o f l o a n
a s s e t s i s a s a n c i e n t a s t h e a d v a n c e m e n t o f c r e d i t b y
l e n d e r s 7
a n d t h e o b j e c t i v e r e m a i n s t o m o v e t h e a s s e t a n d
t h e r i s k r e l a t e d t o i t t o a t h i r d p a r t y w i l l i n g t o t a k e s a m e
o n , o n a g r e e d t e r m s . Lo a n s a l e s h a v e c o n t i n u e d t o b e
i n c r e a s i n g l y r e l e v a n t a s a n a c t i v e t o o l i n t h e f i n a n c i a l
m a r k e t s , i m p a c t e d i n n o s m a l l m e a s u r e b y t h e e f f e c t o n
f i n a n c i a l i n s t i t u t i o n s o f r e g u l a t i o n 8
w h i c h l i m i t s t h e i r
a b i l i t y t o g e n e r a t e a s s e t s . 9
A n o t h e r p e r t i n e n t i m p e t u s
t r i g g e r i n g s e c o n d a r y d e b t t r a d i n g i s t h e d e s i r e o f t h i r d
p a r t i e s t o g a i n a c c e s s t o e r s t w h i l e i n a c c e s s i b l e c r e d i t s .
A s H e n r y D u n n i n g M a c l e o d o b s e r v e d , ― [ t] h e m a n w h o
f i r s t d i s c o v e r e d t h a t a D e b t i s a S a l e a b l e C o m m o d i t y
m a d e t h e d i s c o v e r y w h i c h h a s m o s t d e e p l y a f f e c t e d t h e
f o r t u n e s o f t h e h u m a n r a c e ” . 10
In t h i s l i g h t , A n d r e w
M c K n i g h t h a s o b s e r v e d t h a t “ D e b t s a r e o f t e n u s e d a s
a s s e t s t o f o r m t h e b a s i s f o r r a i s i n g f i n a n c e . ” 11
T h u s ,
5
See A McKnight, ‗Contractual restrictions on a creditor's right to alienate debts: Part I‘ J.I.B.L.
2003, 18(1), 1
6
See below.
7
M Allen, ‗Asset Sales- an Analysis of Risk for Buyers and Sellers‘, J.I.B.L. 1987, 2(1), 13-21
8
Barrat (fn 2) has observed that ―Prior to 1989 there was little regulatory control. Since that
date…various regulations have been published which banks … need to take into account‖
9
See below
10
Macleod, Principles of Economical Philosophy (2nd edn 1872, 481) quoted in R Buckley ‗The
Law of Emerging Markets Loan Sales: Part 1‘ J.I.B.L. 1999, 14(4), 110-114 at 110
11
Fn 5, 1
6. 6
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
― D e b t s a r e o f t e n u s e d a s a s s e t s t o f o r m t h e b a s i s f o r
r a i s i n g f i n a n c e . A c r e d i t o r t o w h o m d e b t s a r e o w e d m a y
w i s h t o r a i s e s u c h f i n a n c e b y s e l l i n g t h e d e b t s f o r a
p u r c h a s e c o n s i d e r a t i o n t o a f i n a n c i e r o r b y b o r r o w i n g
f r o m t h e f i n a n c i e r a n d g i v i n g s e c u r i t y o v e r t h e d e b t s t o
s u p p o r t t h e b o r r o w i n g . I n d o i n g s o , t h e c r e d i t o r w i l l
r e c e i v e c a s h i m m e d i a t e l y f r o m t h e f i n a n c e i t h a s r a i s e d ,
r a t h e r t h a n w a i t i n g f o r c a s h t o c o m e f r o m i t s e v e n t u a l
c o l l e c t i o n o f t h e d e b t s u p o n p a y m e n t . ‖ 12
W h i l s t m o b i l i t y o f l o a n a s s e t s i s t r i t e , a n d t h e c o m m e r c i a l
d r i v e r s a r e v a r i e d i n e v e r y c a s e , t h e r a i s i n g o f f i n a n c e
r e m a i n s c e n t r a l t o t h e t r a n s f e r o f l o a n a s s e t s . T h e
d e v e l o p m e n t s o f m e t h o d s o f t r a n s f e r t o m e e t t h e
r e q u i r e m e n t s o f i n v e s t o r s h a s s e e n t h e u t i l i s a t i o n o f t h e
a s s i g n m e n t 13
; n o v a t i o n ; a n d t h e t r u s t d e v i c e 14
. T h e s u b -
p a r t i c i p a t i o n i s t h u s , b u t o n e i n a l i n e o f t o o l s w h i c h h a v e
b e e n a d o p t e d t o a c h i e v e s i m i l a r e n d s , i t s d e v e l o p m e n t c a n
b e l i n k e d i n d i r e c t l y t o t h e w e a k n e s s e s o f t h e e r t s w h i l e
m a r k e t m e t h o d s o f t r a n s f e r r i n g i n t e r e s t s i n l o a n s . 15
12
See fn 5, 1
13
Under Section 136 of the Law of Property Act 1925
14
P Wood, International Loans, Bonds and Securities Regulation‘ (Sweet & Maxwell, London
1995), 104
15
In addition, a declaration of trust may also be utilised as recognised in Milroy v Lord (1862) 4
De G.F. & J. 264 at 274-275.
7. 7
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
A s s i g n m e n t
A n a s s i g n m e n t 16
i s l a u d e d a s t h e „ c o n v e n t i o n a l m e t h o d ‟17
o f t r a n s f e r r i n g i n t e r e s t i n l o a n s , t h o u g h t h i s a s s e r t i o n i s
n o t i t s e l f w i t h o u t c o n t r o v e r s y . 18
A s a s s i g n m e n t o f a
P a r t i c i p a t i o n i n v o l v e s t h e t r a n s f e r o f t h e b e n e f i t 19
o f a
l o a n f r o m t h e l e n d e r t o t h e i n v e s t o r a n d t r a n s f e r s w i t h t h e
l o a n , a l l t h e r i g h t s o f t h e e r s t w h i l e l e n d e r i n r e l a t i o n t o
t h e t r a n s f e r r e d l o a n . T h i s t r a n s f e r m e c h a n i s m h a s t o
o v e r c o m e t h e „ h u r d l e s ‟ s e t b y t h e La w o f P r o p e r t y A c t
a n d c a n b e a n a b s o l u t e 20
a s s i g n m e n t o f t h e w h o l e a n d n o t
m e r e l y p a r t o f t h e d e b t , m a d e i n w r i t i n g a n d o f w h i c h
w r i t t e n n o t i c e i s g i v e n t o t h e o b l i g o r . W h i l s t t h e s t a m p
d u t i e s d i s i n c e n t i v e c a n b e a v o i d e d e i t h e r b y e n s u r i n g t h e
d o c u m e n t i s e x e c u t e d a b r o a d a n d n o t b r o u g h t i n t o t h e
U n i t e d K i n g d o m o r d e l a yi n g s t a m p i n g t o s u c h t i m e a s
l e g a l a c t i o n i s t o b e t a k e n , t h e p r a c t i c a l l i m i t a t i o n o f
g i v i n g n o t i c e t o t h e o b l i g o r - e i t h e r d u e t o t h e e x i s t e n c e
o f n u m e r o u s o b l i g o r s o r d u e t o t h e c o m m e r c i a l i n t e n t i o n
t o k e e p t h e f a c t o f t h e a s s i g n m e n t a w a y f r o m t h e o b l i g o r
a s w e l l a s t h e p r a c t i c a l u t i l i t y o f t r a n s f e r r i n g d e b t i n
t r a n c h e s a n d n o t a s a w h o l e h a s m e a n t t h a t t h e S e c t i o n
1 3 6 c o n d i t i o n s c a n n o t b e m e t o r a r e n o t i n t e n d e d i n
16
under Section 136 of the Law of Property Act 1925
17
fn 2, 52
18
See fn 1
19
See Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd. [1902] 2 KB 660
20
As opposed to security
8. 8
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
p r a c t i c e t o b e m e t b y c o m m e r c i a l p a r t i e s . 21
A n a s s i g n m e n t
w h i c h l a c k s a n y o f t h e S e c t i o n 1 3 6 c o n d i t i o n s i s a n
e q u i t a b l e 22
a s s i g n m e n t 23
t h o u g h , t h e r e i s n o d o u b t , t h a t t h e
b e n e f i t c o n f e r r e d o n a S e c t i o n 1 3 6 a s s i g n e e ‟ s a b i l i t y t o
s u e o n t h e d e b t d i r e c t l y i s o v e r c o m e b y t h e e q u i t a b l e
a s s i g n e e j o i n i n g t h e a s s i g n o r i n a n a c t i o n o n t h e d e b t .
T h e s i t u a t i o n i s p e c u l i a r l y d i f f e r e n t i n t h e c a s e o f a n
e q u i t a b l e a s s i g n m e n t o f w h i c h n o n o t i c e i s g i v e n t o t h e
o b l i g o r , a s t h e r e c e i p t o f n o t i c e o f t h e a s s i g n m e n t
p r e c l u d e s t h e o b l i g o r f r o m d i s c h a r g i n g t h e d e b t s b y
m a k i n g p a ym e n t s t o t h e a s s i g n o r – i n t h e a b s e n c e o f s u c h
n o t i c e , t h e o b l i go r i s a t l i b e r t y t o m a k e p a ym e n t s a s
h i t h e r t o t h e c a s e a n d t h e a s s i g n e e i s l e f t t o p r o c e e d
a g a i n s t t h e a s s i g n o r f o r s u m s r e c e i v e d . O f g r e a t e r
s i g n i f i c a n c e , a n a s s i g n e e , b e n e f i c i a r y o f a n o n - n o t i f i e d
a s s i g n m e n t r u n s t h e r i s k t h a t s u b s e q u e n t t o t h e t r a n s f e r
b u t p r i o r t o t h e g i v i n g o f n o t i c e , n e w e q u i t i e s w i l l a r i s e
i n r e l a t i o n t o t h e a s s i g n e d a s s e t w h i c h w i l l b e b i n d i n g o n
h i m a n d a f f e c t t h e q u a l i t y o f t h e a s s e t p u r c h a s e d o r t h e
e f f e c t i v e n e s s o f t h e r e m e d i e s h e h a s . 24
F u r t h e r , b a s e d o n
t h e r u l e i n D e a r l e v . H a l l , 25
t h e p r i o r i t y o f d o u b l e
a s s i g n m e n t s o f t h e s a m e d e b t i s d e t e r m i n e d b y t h e t i m e a t
w h i c h n o t i c e o f a s s i g n m e n t i s g i v e n t o t h e B o r r o w e r .
21
The giving of notice to the Borrower may also not be practical because this may result in a
mistaken assumption by the Borrower that the Lender is in financial difficulty. See R Goode,
Commercial Law, 3rd edn (London: Penguin Books, 2004), p.149.
22
See William Brandt's Sons & Co. v Dunlop Rubber Co. Ltd [1905] A.C. 454 at 462
23
Chitty on Contracts, (26th edn Sweet &Maxwell, London, 1989), p.864
24
See C Bamford, Principles of International Financial Law, (Oxford University Press, Oxford
2011) at 5.68
25
(1828) 3 Russ 1.
9. 9
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
C o n s e q u e n t l y, t h e p r i o r a s s i g n e e m a y l o s e t h e b e n e f i t o f
t h e a s s i g n m e n t w h e r e t h e a s s i g n o r s u b s e q u e n t l y t r a n s f e r s
t h e s a m e i n t e r e s t t o a t h i r d p a r t y w h o g i v e s n o t i c e t o t h e
o b l i g o r a h e a d o f t h e a s s i g n e e . T h e i n a b i l i t y t o u s e a n
a s s i g n m e n t a s a t o o l f o r t h e t r a n s f e r o f o b l i g a t i o n s 26
i s
a n o t h e r l i m i t a t i o n o n t h e u s e o f a s s i g n m e n t s o f a n y
c h a r a c t e r a n d i t i s i n t h i s w i s e t h a t t h e n o v a t i o n - t h o u g h
n o t s t r i c t l y a m e a n s o f t r a n s f e r - i s u t i l i s e d .
N o v a t i o n
A n o v a t i o n i n v o l v e s t h e a g r e e m e n t o f a l l p a r t i e s t o t h e
e x i s t i n g c o n t r a c t u a l r e l a t i o n s h i p t o t h e c a n c e l l a t i o n o f t h e
e x i s t i n g c o n t r a c t a n d t h e s u b s t i t u t i o n o f t h e e x i s t i n g
c o n t r a c t u a l r e l a t i o n s h i p b e t w e e n t h e e x i s t i n g l e n d e r a n d
t h e o b l i g o r ( w i t h i t s a t t e n d a n t r i g h t s a n d o b l i g a t i o n s ) f o r
n e w c o n t r a c t u a l r e l a t i o n s b e t w e e n t h e o b l i g o r a n d t h e
b u ye r o f t h e l o a n a s s e t 27
a n d i t g o e s b e yo n d a S e c t i o n 1 3 6
n o t i c e t o r e q u i r e t h e a c t i v e c o n s e n t o f t h e o b l i g o r 28
t o t h e
a r r a n g e m e n t . F u r t h e r , w h e r e a s a n a s s i g n m e n t i n v o l v e s a
t r a n s f e r o f t h e b e n e f i t o f t h e Le n d e r ‟ s p a r t i c i p a t i o n , a
n o v a t i o n r e q u i r e s t h e d i s c h a r g e o f t h a t p a r t i c i p a t i o n a n d
t h e c r e a t i o n o f n e w r i g h t s a n d o b l i g a t i o n s i n i t s s t e a d ,
w i t h t h e c o n c u r r e n c e o f a l l t h e p a r t i e s t o t h e o r i g i n a l
t r a n s a c t i o n a n d t h e In v e s t o r . T h e c o n c u r r e n c e o f a l l
p a r t i e s a l l o w e d t h e t r a n s f e r o f b o t h r i g h t s a n d o b l i g a t i o n s
a n d i t t h u s p r o v i d e s a n e f f i c i e n t m e t h o d o f d i v e s t i n g a n
26
See fn 10 and Argo Fund Ltd v Essar Steel Ltd. [2005] 2 C.L.C. 209 at para 61.
27
See R Buckley ‗The Law of Emerging Market Loan Sales: Part 1‘ (1999) JIBL 14(4), 110, 1
28
As well as the agent and syndicated banks in the case of syndicated facilities
10. 10
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
e x i s t i n g l e n d e r o f t h e i n t e r e s t a n d r i s k i n t h e l o a n a n d
t r a n s f e r r i n g s a m e t o a n i n v e s t o r l e n d e r . H o w e v e r , t h e
n o v a t i o n i s n o t a l w a ys a v i a b l e o p t i o n a t t h e p a r t i e s ‟
d i s p o s a l . 29
In a d d i t i o n a n d q u i t e u n l i k e a n a s s i g n m e n t , a
n o v a t i o n b e i n g a c o n t r a c t o f c a n c e l l a t i o n a n d s u b s t i t u t i o n ,
i n t h e c a s e o f a s e c u r e d l o a n n e c e s s a r i l y i n v o l v e s t h e
d i s c h a r g e o f t h e s e c u r e d o b l i g a t i o n a n d t h e c r e a t i o n o f a
f r e s h o b l i g a t i o n a n d t h e c o n s e q u e n t l o s s o f t h e p r i o r i t y
h i t h e r t o e n j o ye d b y t h e l e n d e r . 30
29
Such as where it is impossible or undesirable to involve the obligor and where Transferable
Loan Certificates or Transferable Loan Instruments have not been incorporated into the original
agreement. However, the latter device is commonly incorporated into syndicated loan facilities at
the outset in the underlying loan documentation based on the freestanding offer principle in Carlill
v Carbolic Smoke Ball Co. [1893] 1 Q.B. 256, and approved in Habibsons Bank Ltd. v Standard
Chartered Bank (Hong Kong) Limited [2010] EWCA Civ 1335. This has been utilised by the
incorporation of Transferable loan certificates or Transferring loan instruments. See New Zealand
Shipping Co Ltd v AM Satterthwaite& Co Ltd (The Eurymedon) [1975] AC 154)
30
The utility of the security trust is thus useful in loan agreements as it ensures that the security
continues to enure for the benefit of the investor- as it creates a collateral obligation by which the
obligor is required to pay the security trustee the same amounts due to the lenders. See British
Energy Power & Trading Ltd &Ors v Credit Suisse &Ors [2008] EWCA Civ 53. There are other
methods of transfer such as broking, trust assignment, proceeds assignment.
11. 11
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
Sub-participation: Nature and Types
T h e s u b - p a r t i c i p a t i o n h a s b e e n d e s c r i b e d a s a n
― i n c r e a s i n g l y s i g n i f i c a n t m e t h o d o f e f f e c t i v e l y
t r a n s f e r r i n g l o a n s ‖ 31
; t h o u g h a l e g a l a n a l ys i s r e v e a l s t h a t
t h e d e v i c e d o e s n o t i n v o l v e a t r a n s f e r o f a l o a n a t a l l i n
t h e s e n s e o f t h e t r a d i t i o n a l l y a d o p t e d m e a n s o f t r a n s f e r 32
.
A s u b - p a r t i c i p a t i o n i s a n a r r a n g e m e n t o n t h e t e r m s o f
w h i c h a Le n d e r w h o h a s a d v a n c e d l o a n s t o a b o r r o w e r o r
b o r r o w e r s w h i c h l o a n s h o l d s o n i t s b o o k s , e n t e r s a b a c k
t o b a c k a r r a n g e m e n t w i t h a t h i r d p a r t y , t yp i c a l l y a n o t h e r
b a n k o r s i m i l a r i n s t i t u t i o n , o n t e r m s o f w h i c h t h e l e n d e r
m a i n t a i n s t h e l o a n s o n i t s b o o k s a n d c o n t i n u e s t o m a n a g e
s a m e , 33
b u t i s u n d e r a n o b l i g a t i o n t o m a k e p a ym e n t s t o t h e
t h i r d p a r t y w h i c h a r e d i r e c t l y r e l a t e d t o r e c e i p t s f r o m t h e
B o r r o w e r . T h e In v e s t o r i s t h u s , n o t g r a n t e d a r i g h t i n t h e
u n d e r l yi n g l o a n , n o r i s t h e l o a n a s s i g n e d , r a t h e r t h e
I n v e s t o r , i n c o n s i d e r a t i o n f o r p a ym e n t t o t h e Le n d e r o f a
s u m e q u i v a l e n t t o t h e a m o u n t o u t s t a n d i n g o n t h e f a c i l i t y ,
i s c o n t r a c t u a l l y e n t i t l e d t o r e c e i v e f r o m t h e L e n d e r ,
p a ym e n t s e q u i v a l e n t t o t h e p a ym e n t s o f p r i n c i p a l a n d
i n t e r e s t f r o m t h e B o r r o w e r . 34
31
Linklaters Banking Update, December 2007 at page 10assessed at <
www.linklaters.com/pdfs/publications/bankingupdate/Dec2007.pdf> assessed on 25 June 2013
32
Such as assignment and novation
33
Either in its own right or as mandated by the third party investor
34
See A McKnight, Law of International Finance (Oxford University Press, Oxford 2008)
12. 12
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
T h e t r a n s a c t i o n i s d i s t i n c t f r o m t h e Le n d e r ‟ s r e l a t i o n s h i p
w i t h t h e B o r r o w e r a n d i s n o t d i s c l o s e d t o t h e B o r r o w e r . A
B a n k o f E n g l a n d N o t i c e 35
n o t e s t h a t a s u b - p a r t i c i p a t i o n
― … d o e s n o t t r a n s f e r a n y r i g h t s , r e m e d i e s o r o b l i g a t i o n s
f r o m s e l l e r t o b u y e r , b u t i s a n e n t i r e l y s e p a r a t e n o n -
r e c o u r s e f u n d i n g a r r a n g e m e n t , u n d e r w h i c h t h e b u y e r
p l a c e s f u n d s w i t h t h e s e l l e r i n e x c h a n g e f o r a c q u i r i n g a
b e n e f i c i a l i n t e r e s t i n t h e u n d e r l y i n g l o a n , b u t t h e l o a n
i t s e l f i s n o t t r a n s f e r r e d ‖ . 36
A s t h e a b o v e b e a r s o u t , i n a s u b - p a r t i c i p a t i o n , n o p a r t o f
t h e l o a n o r i n t e r e s t t h e r e i n i s a c t u a l l y t r a n s f e r r e d i n a
l e g a l s e n s e f r o m t h e Le n d e r t o t h e In v e s t o r – t h e l a t t e r
m e r e l y a c q u i r e s n e w r i g h t s w h i c h a r e t r a c e a b l e t o ,
m e a s u r e d b y a n d d e r i v a t i v e o f , t h e i n t e r e s t h e l d b y t h e
L e n d e r i n t h e l o a n . Im p o r t a n t l y h o w e v e r , a n e l e m e n t o f
„ t r a n s f e r ‟ i n a m a n n e r o f s p e a k i n g o c c u r s i n t h e s e n s e t h a t
t h e r i s k o f t h e B o r r o w e r ‟ s d e f a u l t i s , b y t h e t e r m s o f t h e
s u b - p a r t i c i p a t i o n , s h i f t e d t o t h e I n v e s t o r , w h o b e a r s t h e
f u l l r i s k o f d e f a u l t o f t h e B o r r o w e r a s w e l l a s t h e r e w a r d s
o f t h e B o r r o w e r ‟ s f u t u r e p e r f o r m a n c e 37
. T h e t r a n s f e r i s
t h u s , n o t a t r a n s f e r o f t h e l o a n a s s e t , b u t o f t h e r i s k
a t t a c h e d t o t h e a s s e t . T h i s t h u s b e a r s o u t t h a t a s u b -
p a r t i c i p a t i o n d o e s n o t i n v o l v e a t r a n s f e r o f a l o a n i n t h e
t r u e s e n s e .
35
Prior to the transfer of supervisory power over banks and financial institutions to the FSA
36
Appendix (W) BSD/1989/1, Loan Transfers and Securitisation.
37
A McKnight ‗A Review of Developments in English Law During 2002: Part 1‘ J.I.B.L.R. 2003,
18(3), 110, 118
13. 13
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
T h i s p o s i t i o n i s r e f l e c t e d i n t h e r e a s o n i n g i n L l o y d s
t h o u g h t h e C o u r t e m p h a s i s e d t h e i m p o r t a n c e o f j u d i c i a l
c o n s t r u c t i o n i n d e t e r m i n i n g t h e l e g a l r i g h t s a n d d u t i e s
c r e a t e d b y t h e c o n t r a c t . 38
T h e c o u r t h e l d t h a t t h e
a g r e e m e n t i n q u e s t i o n d i d n o t g r a n t t o t h e s u b -
p a r t i c i p a t i n g b a n k a n y p r o p r i e t a r y i n t e r e s t i n t h e
u n d e r l yi n g b o n d s o r t h e i r p r o c e e d s . 39
F u r t h e r , t h e t e r m s o f
t h e a g r e e m e n t b o r e o u t t h a t i t w a s t h e i n t e n t i o n o f t h e
p a r t i e s t h a t r e c e i p t s o f p a ym e n t s f r o m t h e B o r r o w e r b e
p a s s e d o n t o t h e s u b - p a r t i c i p a n t 40
. R a t h e r , a s t h e t o t a l i t y
o f t h e t e r m s o f t h e a g r e e m e n t b o r e o u t , t h e In v e s t o r w a s
e n t i t l e d t o s u m s e q u a l t o r e c e i p t s f r o m t h e B o r r o w e r .
T h e c a s e t h u s r e f l e c t s t h e i m p o r t a n c e a t t a c h e d t o t h e
c o n t r a c t u a l d e v i c e s b y w h i c h p a r t i e s c a n s e e k t o c r e a t e a
r e l a t i o n s h i p w h i c h r e f l e c t s t h e i r f u l l c o m m e r c i a l
i n t e n t i o n , w h i l e o b v i a t i n g a r e a s o f p o t e n t i a l r i s k .
T h e l i m i t a t i o n s n o t e d e a r l i e r i n r e l a t i o n t o o t h e r
m e c h a n i s m s o f a c q u i r i n g i n t e r e s t s i n e x i s t i n g l o a n s l e d t o
t h e d e v e l o p m e n t o f t h e s u b - p a r t i c i p a t i o n i n t h e s t r i c t
s e n s e . In e n t e r i n g a s u b - p a r t i c i p a t i o n , t h e i n v e s t o r i s n o t
38
Lloyds, 18
39
See also R Goode, ‗Assignment Clauses in International Contracts‘ I.B.L.J. 2002, 3/4, 389, 393
40
In the words of Lord Hoffman, the relevant question was ―Does the sub-participation
agreement show an intention that the money received from Bombril should be the source of the
payments to Chase or only the measure of those payments?‖,. See Lloyds, at 21
14. 14
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
l i m i t e d b y t h e r e q u i r e m e n t s o f S e c t i o n 1 3 6 L a w o f
P r o p e r t y A c t a n d i t s a t t e n d a n t l i m i t a t i o n s 41
n o r i s h e
c o n c e r n e d w i t h t h e n e e d t o o b t a i n t h e c o n c u r r e n c e o f t h e
o b l i g o r a s i n t h e n o v a t i o n . T h u s , t h e a t t r a c t i o n s o f t h e
s u b - p a r t i c i p a t i o n c a n b e s a i d t o b e b o r n e o u t o f t h e
c o r o l l a r y l i m i t a t i o n s i n t h e o t h e r m e t h o d s o f t r a n s f e r –
t h e f l e x i b i l i t y o f t h e s u b - p a r t i c i p a t i o n c r e a t i v e l y e n a b l e s
t h e p a r t i e s t o e f f e c t i v e l y c r a f t c o n t e m p o r a n e o u s b u t
d i s t i n c t r i g h t s a n d o b l i g a t i o n s w h i c h a v o i d t h e t yp i c a l
l i m i t a t i o n s i n h e r e n t i n o t h e r m e a n s o f a s s i g n m e n t b u t
w h i c h a r e n o n e t h e l e s s , b y n o m e a n s p e r f e c t . A s u b -
p a r t i c i p a t i o n h a s b e e n d e s c r i b e d a s a n o n - r e c o u r s e
f u n d i n g a r r a n g e m e n t 42
a n d e l s e w h e r e i t h a s b e e n d e s c r i b e d
a s e n c o m p a s s i n g a l l o f t h e t e c h n i q u e s b y w h i c h a b a n k
t r a n s f e r s i t s e c o n o m i c i n t e r e s t i n a d e b t . 43
T h e n o n -
r e c o u r s e n a t u r e o f t h e s u b - p a r t i c i p a t i o n i s b o r n e o u t o f
t h e f a c t t h a t u p o n i n v e s t m e n t i n a p a r t i c u l a r l o a n o r g r o u p
o f l o a n s t h e i n v e s t o r h a s n o r i g h t o f r e c o u r s e t o t h e s e l l e r
i n r e l a t i o n t o t h e p u r c h a s e p r i c e f o r t h e l o a n s b u t i s
r a t h e r , l i m i t e d t o r e c e i v i n g p a ym e n t s f r o m t h e s e l l e r o n l y
w h e n c o n t e m p o r a n e o u s p a ym e n t s a r e m a d e b y t h e o b l i g o r
u n d e r t h e u n d e r l yi n g l o a n c o n t r a c t s . 44
T h e n o n - r e c o u r s e
n a t u r e o f t h e a r r a n g e m e n t i s a l s o e m p h a s i s e d b y t h e f a c t
t h a t t h e s u b - p a r t i c i p a t i o n a g r e e m e n t c r e a t e s a d i c h o t o m y
b e t w e e n t h e u n d e r l yi n g l o a n a n d t h e s e l l e r ‟ s i n t e r e s t i n
s a m e a n d t h e i n v e s t o r ‟ s i n t e r e s t o b t a i n e d o n t h e t e r m s o f
41
Discussed above
42
See fn 7
43
See fn 27, 2.72
44
See Lloyds
15. 15
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
t h e a g r e e m e n t . T h u s , t h e In v e s t o r d o e s n o t o b t a i n a n y
d i r e c t p r o p r i e t a r y i n t e r e s t i n t h e l o a n a s s e t n o r i s h e
e n t i t l e d t o r e c e i v e t h e a c t u a l p a ym e n t s m a d e b y t h e
B o r r o w e r - t h o s e p a ym e n t s a r e m e r e l y t h e m e a s u r e o f t h e
c o n t i n g e n t p a ym e n t s c o n t r a c t u a l l y d u e f r o m t h e Le n d e r t o
t h e i n v e s t o r . 45
T h i s i s r e f l e c t i v e o f t h e Lo a n M a r k e t A s s o c i a t i o n ‟ s
s t a n d a r d f u n d e d s u b - p a r t i c i p a t i o n a g r e e m e n t w h i c h
e m b o d i e s a b a c k - t o - b a c k a r r a n g e m e n t b e t w e e n t h e L e n d e r
a n d t h e I n v e s t o r s e p a r a t e f r o m t h e e x i s t i n g l o a n c o n t r a c t ,
w h i c h c r e a t e s r i g h t s a n d o b l i g a t i o n s a s b e t w e e n t h e
L e n d e r a n d t h e I n v e s t o r , a n d o n t e r m s o f w h i c h t h e
L e n d e r r e t a i n s i t s e x i s t i n g r e l a t i o n s h i p w i t h t h e o b l i g o r
a n d n o r e l a t i o n s h i p i s c r e a t e d b e t w e e n t h e I n v e s t o r a n d
t h e B o r r o w e r . D u e t o t h e f a c t t h a t t h e s u b - p a r t i c i p a t i o n i s
a d e r i v a t i v e c o n t r a c t t h u s , t h e i n v e s t o r ‟ s r i g h t s a n d
o b l i g a t i o n s a r e a g a i n s t a n d t o t h e Le n d e r a n d d o e s n o t
o b t a i n a n y r i g h t s v i s - à - v i s t h e B o r r o w e r . 46
A s t h e s u b - p a r t i c i p a t i o n d o e s n o t r e q u i r e n o t i c e o r
c o n s e n t f r o m t h e o b l i g o r , a s u b - p a r t i c i p a t i o n i s e x t r e m e l y
u s e f u l w h e r e t h e s e l l e r s o b j e c t i v e i s t o m a i n t a i n a
r e l a t i o n s h i p w i t h t h e o b l i g o r o r w h e r e a s a r e s u l t o f
p r a c t i c a l u t i l i t y i t i s p r u d e n t f o r t h e s e l l e r t o r e t a i n
a d m i n i s t r a t i v e m a n a g e m e n t o f t h e l o a n . T h i s i s d r i v e n b y
t h e f a c t t h a t t h e s u b - p a r t i c i p a t i o n c r e a t e s a r e l a t i o n s h i p
45
See Adolfo Altman v Australia and New Zealand Banking Group Ltd [2002] EWHC 2488
(Comm)
46
See Lloyds; British Energy Power & Trading Ltd &Ors v Credit Suisse &Ors (Supra).
16. 16
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
d i s t i n c t f r o m t h e u n d e r l yi n g l o a n o b l i g a t i o n a n d d o e s n o t
h a v e a l e g a l e f f e c t o n t h e e x i s t i n g r e l a t i o n s h i p b e t w e e n
t h e s e l l e r a n d t h e o b l i g o r . T h e e x i s t e n c e o f c o - r e l a t i o n a l
b u t d i s t i n c t l e g a l r e l a t i o n s h i p s a l s o r e s u l t s i n t h e s u b -
p a r t i c i p a t i o n b e i n g u n l i k e l y t o c o n t r a v e n e e x i s t i n g
r e s t r i c t i o n s o n a s s i g n m e n t s , 47
s a v e i n t h e u n l i k e l y
c i r c u m s t a n c e t h a t t h e r e s t r i c t i o n l a n g u a g e i n t h e l o a n
a g r e e m e n t h a s b e e n d r a f t e d t o c o v e r a r e s t r i c t i o n a g a i n s t
s u b - p a r t i c i p a t i o n s p e c i f i c a l l y. I n a d d i t i o n , a s u b -
p a r t i c i p a t i o n a l l o w s t h e s e l l e r c o n v e n i e n t l y d i v i d e a l o a n
i n t o d i f f e r e n t t r a n c h e s i n w h i c h d i f f e r e n t i n v e s t o r s i n v e s t
o r a c q u i r e a n i n t e r e s t . T h i s e n a b l e s a s e l l e r d i v i d e l o a n s
i n t o t r a n c h e s w h i c h m a y b e m o r e a t t r a c t i v e t o c e r t a i n
i n v e s t o r s , w h i l s t m a i n t a i n i n g h i s d i r e c t r e l a t i o n s h i p w i t h
t h e o b l i g o r . In a d d i t i o n , u n l i k e w i t h a s s i g n m e n t s , t h e
p r o v i s i o n s o f t h e S t a m p A c t d o n o t a p p l y t o s u b -
p a r t i c i p a t i o n s a n d a s s u c h s t a m p d u t i e s a r e n o t p a ya b l e o n
s u b - p a r t i c i p a t i o n a g r e e m e n t s w h i c h n o d o u b t r e d u c e s
t r a n s a c t i o n c o s t s s i g n i f i c a n t l y.
W h i l s t m o s t s u b - p a r t i c i p a t i o n s t a k e t h e f o r m o f n o n -
r e c o u r s e f u n d i n g , t h e v i e w h a s b e e n e x p r e s s e d t h a t t h o u g h
u n u s u a l , t h e s u b - p a r t i c i p a t i o n ― … m a y b e f a s h i o n e d … a s
a n a s s i g n m e n t o f t h e g r a n t o r ‘ s r i g h t s u n d e r t h e f a c i l i t y o r
m i g h t i n c l u d e a c h a r g e o v e r t h o s e r i g h t s … ‖ 48
. It w o u l d
a p p e a r h o w e v e r , t h a t t h o u g h i t h a s r e p e a t e d l y b e e n
47
See Lloyds, Royal Bank of Scotland plc v Highland Financial Partners LP [2010] EWHC 2010
(Comm).
48
Fn 34, 656.
17. 17
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
e m p h a s i s e d t h a t a s u b - p a r t i c i p a t i o n i s n o t a t e r m o f a r t
b u t a m a t t e r o f c o n t r a c t a n d m a r k e t u s a g e . 49
T h e n a t u r e o f
a n a s s i g n m e n t o f r i g h t s i s a t d i v e r g e n c e w i t h t h e n a t u r e o f
a s u b - p a r t i c i p a t i o n – w h i l s t t h e f o r m e r i n v o l v e s a n a c t u a l
t r a n s f e r o f t h e s e l l e r ‟ s r i g h t s a g a i n s t t h e o b l i g o r , 50
t h e
l a t t e r i n v o l v e s t h e c r e a t i o n o f i n d e p e n d e n t r i g h t s a g a i n s t
t h e s e l l e r o f t h e a s s e t i n d e p e n d e n t o f t h e c o n t i n u i n g
i n t e r e s t s t h e s e l l e r h o l d s i n t h e a s s e t s . It i s u n c l e a r w h a t
t h e u t i l i t y o f s u c h a s t r u c t u r e w o u l d b e a s r e s t r i c t i o n s o n
a s s i g n m e n t w o u l d t yp i c a l l y r e s t r i c t n o t m e r e a s s i g n m e n t s
o f t h e l o a n a s s e t , b u t o f r i g h t s a n d i n t e r e s t s t h e r e i n ,
w h i c h i t i s t h o u g h t , w o u l d e x t e n d t o t h e r i g h t s t h e s e l l e r
h a s v i s - à - v i s t h e o b l i g o r s o u g h t t o b e t r a n s f e r r e d v i d e a
r i g h t s a s s i g n m e n t . H o w e v e r , w h e r e s u c h a s t r u c t u r e
s u c c e e d s , i t w o u l d a p p e a r t o p u t t h e i n v e s t o r i n a n
e n h a n c e d p o s i t i o n i n c o m p a r i s o n t o a n y o t h e r s u b -
p a r t i c i p a n t i n t h e t yp i c a l f a s h i o n , e n a b l i n g t h e i n v e s t o r
p r o c e e d d i r e c t l y a g a i n s t t h e o b l i go r w i t h o u t r e c o u r s e t o
t h e s e l l e r . T h e m a j o r i t y o f s u b - p a r t i c i p a t i o n s a r e
h o w e v e r n o n - r e c o u r s e f i n a n c i n g s t r u c t u r e s b y w h i c h t h e
i n v e s t o r o b t a i n s a n i n t e r e s t r e f e r a b l e t o t h e a s s e t , e i t h e r
o n a f u n d e d o r a n i n d e m n i t y/ r i s k b a s i s .
F u n d e d s u b - P a r t i c i p a t i o n
T h e f u n d e d s u b - p a r t i c i p a t i o n , i n v o l v e s t h e i n v e s t o r
f i n a n c i n g a n a g r e e d p o r t i o n o f t h e l o a n b y p l a c i n g a
49
See Lloyds at Para 15
50
Such as the sellers rights to receive payment when due and his right to sue for the debt as well
as potentially, the benefit of any security for the debt.
18. 18
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
d e p o s i t w i t h t h e Le n d e r i n c o n s i d e r a t i o n f o r p a ym e n t s 51
f r o m t h e Le n d e r w h i c h p a ym e n t s a r e r e f e r a b l e t o a n d a
p r o r a t a s h a r e o f , f u t u r e p a ym e n t s o f p r i n c i p a l a n d
i n t e r e s t f r o m t h e o b l i g o r a n d c o n t i n g e n t u p o n t h e r e c e i p t
o f p a ym e n t s f r o m t h e o b l i g o r . 52
T h e y a r e t h u s , e f f e c t i v e l y
l i m i t e d r e c o u r s e d e p o s i t s 53
a n d t h e r e l a t i o n s h i p h a s b e e n
h e l d t o c r e a t e a d i s t i n c t l e g a l r e l a t i o n s h i p f r o m t h a t t h e
L e n d e r h a s w i t h t h e B o r r o w e r . A n a n a l ys i s i s t h a t t h e
r e l a t i o n s h i p i s p u r e l y o n e o f l e n d e r / c r e d i t o r – t h e
i n v e s t o r l e n d s t o t h e Le n d e r o n t h e b a s i s t h a t r e p a ym e n t
i s m a d e i f a n d w h e n p a ym e n t s a r e m a d e 54
u n d e r t h e
r e f e r e n c e d l o a n . I n t h i s w a y t h e u n d e r l yi n g a s s e t s s e r v e
a s a m e a s u r e o f t h e e x t e n t o f r e c o u r s e t h e I n v e s t o r h a s t o
t h e Le n d e r a n d n o m o r e – t h e Le n d e r i s n o t r e q u i r e d t o
m a k e r e p a ym e n t s t o t h e In v e s t o r o u t o f t h e p a ym e n t s
r e c e i v e d f r o m t h e B o r r o w e r b u t t o m a k e c o r r e s p o n d i n g
p a ym e n t s t o t h e I n v e s t o r i n l i n e w i t h t h e t e r m s o f t h e
i n v e s t m e n t a g r e e m e n t – t h e s u b - p a r t i c i p a t i o n a g r e e m e n t . 55
51
In a manner, interest on the deposit
52
See Lloyds, Altman v Australia and New Zealand Banking Group Ltd. [2002] EWHC 2488
(Comm)
53
See Barrat, fn 2 at 54
54
See Fn 14, 104
55
The LMA Standard Form Sub-Participation Agreement provides that ―the relationship between
the Grantor and the Participant is that of debtor and creditor with the right of the Participant to
receive monies from the Grantor restricted to the extent of an amount equal to the relevant portion
of any monies received and applied by the Grantor from any Obligor‖.
19. 19
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
R i s k p a r t i c i p a t i o n
I n c o n t r a d i s t i n c t i o n t o a f u n d e d s u b - p a r t i c i p a t i o n , a r i s k
s u b - p a r t i c i p a t i o n i s c h a r a c t e r i s t i c a l l y u n f u n d e d – t h e
i n v e s t o r u n d e r w r i t e s o r g u a r a n t e e s t h e o b l i g o r ‟ s p a ym e n t
o b l i g a t i o n i n r e t u r n f o r a f e e p a i d b y t h e Le n d e r . T h i s
i n v o l v e s t h e In v e s t o r a g r e e i n g t o m e e t t h e B o r r o w e r ‟ s
p a ym e n t o b l i g a t i o n s i f a n d w h e n t h e B o r r o w e r f a i l s t o
m e e t s a m e , i n r e t u r n f o r p o r t i o n s o f r e c e i p t s f r o m t h e
B o r r o w e r u n t i l d e f a u l t . 56
T h e i n i t i a l p a ym e n t i n t h i s s u b -
p a r t i c i p a t i o n i s e f f e c t i v e l y a p r e m i u m p a i d b y t h e L e n d e r
t o t h e i n v e s t o r t o c o v e r f o r t h e r i s k o f n o n - p e r f o r m a n c e
b y t h e o b l i g o r . I n t h e e v e n t o f t h a t c o n t i n g e n c y, t h e
i n v e s t o r i s o n t h e t e r m s o f t h e S u b - P a r t i c i p a t i o n r e q u i r e d
t o p a y t h e s e l l e r a l u m p s u m r e f e r a b l e t o t h e n o n -
p a ym e n t ( s ) b y t h e o b l i g o r . T h e s u b - p a r t i c i p a t i o n m a y a l s o
b e s t r u c t u r e d a s a n u n d e r t a k i n g b y t h e i n v e s t o r t o
i n d e m n i f y t h e s e l l e r f r o m l o s s e s a r i s i n g u n d e r t h e
a g r e e m e n t . H e r e t h e i n v e s t o r b u ys i n t o a c o n t i n g e n c y a n d
d o e s n o t f u n d t h e l o a n t o t h e o b l i g o r , b u t u n d e r t a k e s
r e s p o n s i b i l i t y t o m a k e ( r a t h e r t h a n r e c e i v e ) p a ym e n t s o f
s a m e . In e v e n t o f t h e c o n t i n g e n c y o c c u r r i n g , t h e In v e s t o r
i s c o n t r a c t u a l l y r e q u i r e d t o m a k e g o o d t h e p r o m i s e t o
f u n d t h e Le n d e r i n r e s p e c t o f t h e s u m s d u e f r o m t h e
B o r r o w e r .
It i s w o r t h y o f n o t i n g t h a t t h e l e g a l r i s k s a r i s i n g f r o m a
r i s k s u b - p a r t i c i p a t i o n a r e m a r k e d l y d i f f e r e n t f r o m t h o s e
a r i s i n g f r o m a f u n d e d p a r t i c i p a t i o n . In p a r t i c u l a r , s p e c i f i c
56
See Fn 37, 118
20. 20
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
L e n d e r r i s k s a r i s e i n a n i n d e m n i t y s u b - p a r t i c i p a t i o n
w h e r e c o - g u a r a n t o r s e x i s t o r t h e u n d e r l yi n g l o a n
d o c u m e n t a t i o n i s a l t e r e d o r a m e n d e d w i t h o u t t h e
c o n c u r r e n c e o f t h e In v e s t o r . 57
T h i s m a y l e a d t o a
d i s c h a r g e o f t h e In v e s t o r ‟ s o b l i g a t i o n t o t h e L e n d e r ,
d e f e a t i n g t h e Le n d e r ‟ s c o m m e r c i a l i n t e n t i o n a n d l e a v i n g
t h e Le n d e r ‟ s e x p o s u r e t o t h e B o r r o w e r u n c o v e r e d .
T h e c o m m e r c i a l i n t e n t i o n , a n d t h u s r e g u l a t o r y t r e a t m e n t
o f t h e u n f u n d e d p a r t i c i p a t i o n i s r e m a r k a b l y d i f f e r e n t f r o m
t h e f u n d e d s u b - p a r t i c i p a t i o n - t h e r i s k s u b - p a r t i c i p a t i o n i s
n o t i n t e n d e d t o r e d u c e t h e Le n d e r ‟ s f u n d i n g r e q u i r e m e n t s
f o r r e g u l a t o r y p u r p o s e s , b u t t o c o v e r t h e L e n d e r s
e x p o s u r e t o t h e B o r r o w e r . It i s i n t h i s l i g h t t h a t t h e
u n f u n d e d s u b - p a r t i c i p a t i o n c a n b e s e e n t o b e a d e v i c e
a k i n t o a n i n s u r a n c e c o v e r . W h e r e t h e Le n d e r ‟ s i n t e n t i o n
i s c a p i t a l a l l e v i a t i o n , t h e r i s k s u b - p a r t i c i p a t i o n m u s t b e
s t r u c t u r e d s o a s t o r e m o v e t h e r i s k o f B o r r o w e r d e f a u l t
f r o m t h e Le n d e r f o r r e g u l a t o r y p u r p o s e s . T h e d e s i r e d
r e g u l a t o r y t r e a t m e n t w i l l o n l y b e a c h i e v e d t o t h e e x t e n t
t o w h i c h t h e c r e d i t r i s k i s t r a n s f e r r e d t o t h e In v e s t o r .
T h e U n i t e d S t a t e s C o n c e p t i o n o f S u b - P a r t i c i p a t i o n
W h i l e t h e E n g l i s h l a w s u b - p a r t i c i p a t i o n a s b o r n e o u t
a b o v e i s t yp i c a l l y c o n s t r u e d a s a n o n - r e c o u r s e f u n d i n g
57
On discharge of guaranteed obligations see Commercial Bank of Tasmania v. Jones [1893] A.C.
313, PC (Aus); Triodos Bank NV v Dobbs [2005] EWCA Civ 630; Mahant Singh v. Ba Yi [1939]
AC 601 at 606
21. 21
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
a r r a n g e m e n t , o n t e r m s o f w h i c h t h e In v e s t o r f u n d s t h e
L e n d e r ‟ s l o a n t o t h e B o r r o w e r , t h e U n i t e d S t a t e s
j u r i s p r u d e n c e i n r e l a t i o n t o s u b - p a r t i c i p a t i o n s h a s b e e n
m a r k e d l y d i f f e r e n t . A d i s t i n c t i o n i s d r a w n i n t h e U n i t e d
S t a t e s , b e t w e e n a f i n a n c i n g a n d a t r u e p a r t i c i p a t i o n -
w h i l s t t h e f o r m e r h a s t h e s a m e c o n c e p t u a l i s a t i o n a s a
S u b - P a r t i c i p a t i o n , t h e l a t t e r i n v o l v e s a n a c q u i s i t i o n b y
t h e p a r t i c i p a n t o f a n i n t e r e s t i n a p o r t i o n o f t h e
u n d e r l yi n g l o a n a s s e t ( s ) . C o n s e q u e n t l y, t h e p a r t i c i p a n t i s
a U n i t e d S t a t e s t r u e p a r t i c i p a t i o n 58
a c q u i r e s b y w a y o f
l e g a l t r a n s f e r , p r o p r i e t a r y i n t e r e s t s i n t h e Le n d e r ‟ s l o a n
o r c o m m i t m e n t t o t h e B o r r o w e r a n d i s e n t i t l e d t o
p a ym e n t s r e c e i v e d f r o m t h e B o r r o w e r . T h u s , u n d e r t h e
a r r a n g e m e n t , t h e p a ym e n t s t o t h e L e n d e r a r e n o l o n ge r t h e
p r o p e r t y o f t h e L e n d e r b u t o f t h e p a r t i c i p a n t . D u e t o t h e
p r o p r i e t a r y n a t u r e o f t h e p a r t i c i p a n t ‟ s i n t e r e s t , h e i s
p r o t e c t e d f r o m t h e c r e d i t r i s k o f t h e Le n d e r a n d i s
e n t i t l e d t o p r o c e e d a g a i n s t t h e L e n d e r f o r r e p a ym e n t a s
t h e s e d o n o t f o r m p a r t o f t h e l a t t e r ‟ s b a n k r u p t c y e s t a t e .
Sub-Participation Drivers &Regulatory Backdrop
R e g u l a t i o n : C a p i t a l A d e q u a c y
F r o m t h e p e r s p e c t i v e o f t h e L e n d e r , t h e r e g u l a t o r y
b a c k d r o p a n d t h e c h a n g e s i n t h e c a p i t a l a d e q u a c y 59
r e q u i r e m e n t s f o r r e g u l a t e d i n s t i t u t i o n s h a s a l s o i n c r e a s e d
58
Under the LSTA standard form agreement which provides that ―…the relationship between the
Seller and the Participant shall be that of seller and buyer‖. See Re Canadian Commercial Bank,
Canadian Deposit Insurance Corp v Canadian Commercial Bank [No 2] [1986] 5 WWR
59
Under the Capital Adequacy Accord (Basel II). The PRA Handbook in this light also stipulates
levels and quality of capital for banks recommending a significant part of a firm‟s capital to be
ordinary shares and reserves- the highest-quality of capital able to absorb loss.
22. 22
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
t h e m o b i l i t y o f l o a n a s s e t s i n t h e s e c o n d a r y m a r k e t a n d
c o n s e q u e n t l y, a n i n c r e a s e i n s u b - p a r t i c i p a t i o n s o n t h e
m a r k e t . O n t h e w h o l e , ― … b a n k i n g r e g u l a t i o n i s p r e m i s e d
o n a c o n c e r n w i t h s y s t e m i c r i s k a n d l o s s e s t o t h e p u b l i c
s a f e t y n e t d e s i g n e d t o a v o i d s u c h r i s k s . T h e c e n t r a l
f e a t u r e o f t h i s r e g u l a t i o n i s c a p i t a l a d e q u a c y . ‖ 60
In v i e w
o f t h e i n c r e a s e d a n d i n c r e a s i n g i n t e r n a t i o n a l n a t u r e o f
b a n k i n g a n d f i n a n c i a l t r a n s a c t i o n s , t h e B a s e l C o m m i t t e e
o n B a n k i n g S u p e r v i s i o n w a s e s t a b l i s h e d , t o e s t a b l i s h
i n t e r n a t i o n a l s t a n d a r d s f o r c a p i t a l a d e q u a c y. T h e B a s e l
A c c o r d s a r e t h u s , d r i v e n b y t h e n e e d t o e n s u r e f i n a n c i a l
s t a b i l i t y a c r o s s t h e g l o b e a n d p r o t e c t d e p o s i t o r s a n d t h e
e n t i r e f i n a n c i a l s ys t e m a n d a r e t r a c e a b l e t o t h e i n c r e a s e
o f i n t e r n a t i o n a l a c t i v i t y a m o n g s t b a n k s i n t h e l a t e 1 9 8 0 s .
It s t i p u l a t e s m i n i m u m l e v e l s o f c a p i t a l f o r b a n k s 61
b a s e d
o n t h e r i s k w e i g h t i n g o f t h e a s s e t s 62
t h e b a n k s h a s o n t h e i r
b o o k s a t e a c h r e l e v a n t t i m e . T h e i n c r e a s e i n r e g u l a t o r y
c a p i t a l a r b i t r a g e w i t h b a n k s o p h i s t i c a t i o n a n d t h e
i n a b i l i t y o f t h e f i r s t B a s e l A c c o r d t o c a p t u r e
s o p h i s t i c a t e d t e c h n i q u e s a d o p t e d b y b a n k s t o d e f l e c t f r o m
t h e r e a l r i s k a t t a c h e d t o a s s e t s o n t h e i r b o o k s 63
, l e d t o t h e
d e v e l o p m e n t a n d i m p l e m e n t a t i o n o f a m o r e c o m p l e x
B a s e l A c c o r d 64
t o m e e t t h e r e a l i t i e s o f l e n d i n g b u s i n e s s .
60
H Scott International Finance, Law and Regulation (2nd edn Sweet & Maxwell, London 2008),
281
61
in developed countries
62
Assets on a bank‟s balance sheet are weighted between 0% (for safer assets like government
issued securities) and 100% (for riskier exposures such as unsecured lending.
63
Known as capital arbitrage
64
Basel II which came into force in the European Union on 1 January 2007 under the Capital
Requirements Directive (CRD)and is currentlyin force (as at 2 September, 2013)
23. 23
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
U n d e r B a s e l I I t h e r i s k w e i g h t i n g o f d i f f e r e n t i a l a s s e t s
f o u n d e x p r e s s i o n w i t h a s s e t s a s s e s s e d t o b e i n v o l v e
g r e a t e r e x p o s u r e f o r t h e b a n k a n d t h u s , a d j u d g e d t o b e
r i s k i e r a r e g i v e n h i g h e r r i s k i n d e x t h a n m o r e s e c u r e
a s s e t s s u c h a s s e c u r e d f i n a n c i n g o r c o n t i n g e n t l i a b i l i t i e s .
T o t h e e x t e n t t h a t t h e c a p i t a l a d e q u a c y r e g i m e r e q u i r e s
b a n k s t o k e e p a r a t i o o f c a p i t a l t o i t s r i s k - w e i g h t e d
a s s e t s , i t l i m i t s t h e t o t a l n u m b e r o f a s s e t s a b a n k c a n
g e n e r a t e a n d m a i n t a i n o n i t s b o o k s w i t h o u t i n c r e a s i n g i t s
c a p i t a l b a s e . 65
S a v e w h e r e a b a n k i s a b l e t o g e n e r a t e
c a p i t a l b y a n a l t e r n a t i v e m e a n s , t h i s e f f e c t i v e l y p r e c l u d e s
l e n d i n g b u s i n e s s i n e x c e s s o f t h e r e g u l a t o r y l i m i t , a n d
s e r v e s a s a n i m p e t u s f o r t h e t r a n s f e r o f l o a n a s s e t s . T h u s ,
i n o r d e r t o g e n e r a t e f r e s h l o a n a s s e t s a n d p a r t i c u l a r l y i n
v i e w o f t h e c o s t s i n v o l v e d i n i n c r e a s i n g c a p i t a l b y t h e
i s s u a n c e o f s e c u r i t i e s , – i t i s c h e a p e r f o r b a n k s t o s e l l 66
t h e i r l o a n a s s e t s a s a m e c h a n i s m o f m e e t i n g r e g u l a t o r y
r e q u i r e m e n t s . 67
65
Capital is made up of Tier I and Tier II capital as provided in the Accord. In order to maintain
the required capital ratios, banks can reduce dividends to increase retained earnings; raise capital
by issuing new capital instruments; reduce their assets or shift assets to categories requiring less
capital. See Scott (Supra), 284.
66
In the sense of moving the risk from the selling bank to a third party
67
The European Union in June 2013 published legislation to implement within the EU “Basel III”,
the international regulatory framework for banks developed by the Basel Committee on Banking
Supervision from 1 January 2014.
24. 24
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
T h i s r e g u l a t o r y l a n d s c a p e h a s m e a n t t h a t b a n k s a r e u n d e r
i n c r e a s e d p r e s s u r e t o f r e e u p c a p i t a l a l l o c a t e d t o t h e i r
e x i s t i n g l o a n a s s e t s t o e n a b l e t h e n e n g a g e i n f r e s h
b a n k i n g b u s i n e s s i n a m a r k e t s t i l l s u f f e r i n g f r o m t h e
m a g n i t u d e o f t h e g l o b a l c r e d i t c r i s i s a n d i s h i n g e d o n a
n e e d t o e n s u r e t h a t f i n a n c i a l i n s t i t u t i o n s a r e r o b u s t
e n o u g h t o m e e t f i n a n c i a l s t r e s s a n d l o s s e s .
W h i l s t t h e r e g u l a t o r y b a c k d r o p i s a m a j o r d r i v e r f o r
L e n d e r s t o r e s t r u c t u r e t h e i r b a l a n c e s h e e t s v i a t h e
t r a n s f e r o f a s s e t s , 68
i t i s b y n o m e a n s t h e s o l e r e a s o n f o r
s a l e b y s u b - p a r t i c i p a t i o n . S e p a r a t e f r o m t h e r e g u l a t o r y
i n c e n t i v e , a Le n d e r m a y s i m p l y d e s i r e t o d i v e r s i f y i t s r i s k
p o r t f o l i o a n d t r a n s f e r t h e r i s k r e l a t e d t o a p a r t i c u l a r a s s e t
o r p o o l o f a s s e t s w h e t h e r o r i g i n a t e d f r o m a c l a s s o f
b o r r o w e r s o r f r o m a s p e c i f i c r e g i o n ; a n d g e n e r a t e n e w
a s s e t s f r o m a n e w c l a s s o f b o r r o w e r s o r r e g i o n . In v e s t o r s
o n t h e o t h e r h a n d a r e t yp i c a l l y d r i v e n b y t h e d e s i r e t o
a c c e s s h i g h e r r a t i n g c r e d i t s w h i c h t h e y m a y b e u n a b l e t o
a c c e s s d i r e c t l y, o r a d e s i r e t o m a i n t a i n a p o r t f o l i o d r a w n
f r o m a c l a s s o f b o r r o w e r ‟ s o r r e g i o n s . In a d d i t i o n , a s u b -
p a r t i c i p a t i o n i s n o t i n h i b i t e d f r o m t r a n s f e r r i n g
o b l i g a t i o n s , n o r s u b j e c t t o s t a m p d u t i e s o b l i g a t i o n s .
I n o r d e r t o a c h i e v e t h e c o m m e r c i a l i n t e n t i o n o f
t r a n s f e r r i n g t h e r i s k i n t h e l o a n a s s e t f r o m t h e Le n d e r t o
t h e In v e s t o r , i t i s i m p e r a t i v e f r o m a n a c c o u n t i n g a n d
68
And in particular the risk attached to said assets
25. 25
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
r e g u l a t o r y p e r s p e c t i v e , t h a t t h e a s s e t t r a n s f e r r e d b e
d i s r e g a r d e d o n t h e Le n d e r ‟ s b o o k s b o t h f r o m a r e g u l a t o r y
a n d f r o m a n a c c o u n t i n g p e r s p e c t i v e . T h u s , t h e n a t u r e o f
t h e t r a n s f e r e f f e c t e d o n t e r m s o f t h e s u b - p a r t i c i p a t i o n
a g r e e m e n t a n d t h e e x t e n t t o w h i c h c r e d i t r i s k i s r e t a i n e d
b y t h e Le n d e r o r t r a n s f e r r e d t o t h e In v e s t o r i s g e r m a n e .
Im p o r t a n t l y, f o r t h e p u r p o s e o f d e t e r m i n i n g w h e t h e r t h e
c o m m e r c i a l i n t e n t i o n o f t r a n s f e r r i n g c r e d i t r i s k i s
a c h i e v e d f o r r e g u l a t o r y p u r p o s e s , i t i s i m p o r t a n t t o
a c h i e v e a n e c o n o m i c s e p a r a t i o n o f t h e Le n d e r f r o m t h e
t r a n s f e r r e d a s s e t s . 69
N o t a b l y, f r o m J a n u a r y 2 0 1 4 , P r u d e n t i a l R e g u l a t i o n s C R D
I V , 70
c o m p r i s e d o f C a p i t a l R e q u i r e m e n t s R e g u l a t i o n ,
a p p l i c a b l e d i r e c t l y a c r o s s t h e E u r o p e a n U n i o n a n d t h e
C a p i t a l R e q u i r e m e n t s D i r e c t i v e , w h i c h i s t o d o m e s t i c a t e d
v i a n a t i o n a l l a w , i s i n t e n d e d t o i m p l e m e n t t h e B a s e l I I I
a g r e e m e n t i n t h e E U a n d i s a f a l l o u t o f t h e g l o b a l
f i n a n c i a l c r i s i s , w h i c h c r i s i s r e f l e c t e d f a i l i n g s i n t h e
r e g u l a t o r y f r a m e w o r k a s w e l l a s r i s k m a n a g e m e n t a n d
c a p i t a l a s s e s s m e n t m e c h a n i s m s t o d e a l w i t h f i n a n c i a l
s t r e s s . T h e C R D IV h a s t i g h t e n e d t h e c a p i t a l q u a l i t y
r e q u i r e m e n t s , i n c r e a s e d t h r e s h o l d s f o r h i g h e r q u a l i t y
c a p i t a l a n d r e p o r t i n g r e q u i r e m e n t s o f r e g u l a t e d
i n s t i t u t i o n s .
69
See S Curtis ‗A practical guide to the new FSA rules for securitisations and loan transfers,
J.I.B.L. 1999, 14(8), 260, 262.
70
In force from January 2014
26. 26
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
A c c o u n t i n g C o n s i d e r a t i o n s :
S p e c i f i c a l l y, u n d e r t h e In t e r n a t i o n a l A c c o u n t i n g
S t a n d a r d s 3 9 71
( IA S 3 9 ) w h i c h d e a l s w i t h t h e r e c o g n i t i o n
a n d m a n a g e m e n t o f f i n a n c i a l a s s e t s , r e c o g n i s e s a s u b -
p a r t i c i p a t i o n a s a c l e a n t r a n s f e r a n d f o r t h e p u r p o s e o f
t a k i n g t h e a s s e t o f f t h e Le n d e r ‟ s b a l a n c e s h e e t w h e r e
t h e r e i s a s u b s t a n t i a l t r a n s f e r o f a l l t h e r i s k s a n d r e w a r d s
o f o w n e r s h i p o f t h e a s s e t f o r t h e L e n d e r t o t h e In v e s t o r .
I n t h e c a s e o f a p a r t i a l t r a n s f e r o f r i s k s a n d o w n e r s h i p ,
t h e e x t e n t t o w h i c h t h e r e q u i r e d a c c o u n t i n g t r e a t m e n t i s
a c h i e v e d i s d e t e r m i n e d b y t h e e x t e n t t o w h i c h t h e L e n d e r
r e t a i n s c o n t r o l a n d i n v o l v e m e n t i n t h e m a n a g e m e n t o f t h e
t r a n s f e r r e d a s s e t . O n t h e t e r m s o f IA S 1 3 9 , t h e Le n d e r
w i l l b e d e e m e d t o h a v e r e t a i n e d t h e r i s k s a n d r e w a r d s
a s s o c i a t e d w i t h t h e „ t r a n s f e r r e d ‟ a s s e t s w h e r e i t s
e x p o s u r e v i s - à - v i s i n c o m e r e l a t e d t o t h e a s s e t d o e s n o t
c h a n g e s u b s e q u e n t t o t h e p u r p o r t e d t r a n s f e r . O n t h e o t h e r
h a n d , w h e r e t h e L e n d e r ‟ s e x p o s u r e d o e s n o t c h a n g e v i s - à -
v i s v a r i a t i o n s i n t h e t o t a l f u t u r e i n c o m e s t r e a m f r o m t h e
t r a n s f e r r e d a s s e t , i t i s s a i d t o h a v e t r a n s f e r r e d
s u b s t a n t i a l l y a l l t h e r i s k s a n d r e w a r d s a s s o c i a t e d w i t h t h e
a s s e t . W h i l s t t h e e x t e n t t o w h i c h t h i s i s a c h i e v e d w i l l
d e p e n d o n t h e c o n t r a c t u a l u n d e r p i n n i n g o f t h e t r a n s a c t i o n
a n d i n p a r t i c u l a r , b o t h t h e d o c u m e n t a t i o n a n d t h e c o n d u c t
71
IAS 39: Financial Instruments: Recognition and Measurement in force in the European Union
from 2004 assessed at
<http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&sqi=2&ved=0CDgQ
FjAA&url=http%3A%2F%2Fec.europa.eu%2Finternal_market%2Faccounting%2Fdocs%2Fcons
olidated%2Fias39_en.pdf&ei=vdsgUp2IF6_n7Aa7jIGwCw&usg=AFQjCNGYL99iLoiuxPFv2yI
wuTT2wvPVVQ&sig2=ehsmVRz3NUoKanzDRZagfw&bvm=bv.51495398,d.ZGU> on 3 July,
2013 at 20.31
27. 27
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
o f t h e p a r t i e s , 72
t h e IA S p r o v i d e s gu i d e l i n e s f o r t h e s u b -
p a r t i c i p a t i o n t o r e c e i v e t h e d e s i r e d t r e a t m e n t a s f o l l o w s :
I f t h e L e n d e r r e t a i n s t h e c o n t r a c t u a l r i g h t s t o
r e c e i v e t h e c a s h f l o w s f r o m t h e a s s e t s b u t i s u n d e r a
c o n t r a c t u a l o b l i g a t i o n t o m a k e p a ym e n t s t o t h e
I n v e s t o r i f a n d w h e n i t c o l l e c t s e q u i v a l e n t p a ym e n t s
f r o m t h e u n d e r l yi n g o b l i g o r i n r e l a t i o n t o t h e
r e f e r e n c e d a s s e t s ;
T h e Le n d e r i s p r o h i b i t e d o n t e r m s o f t h e a g r e e m e n t
f r o m s e l l i n g o r p l e d g i n g t h e o r i g i n a l a s s e t t o t h e
I n v e s t o r 73
o t h e r t h a n a s s e c u r i t y f o r t h e o b l i g a t i o n t o
t h e In v e s t o r ; a n d
T h e Le n d e r m u s t b e u n d e r a n o b l i g a t i o n t o r e m i t
r e c e i v a b l e s t o t h e In v e s t o r w i t h o u t m a t e r i a l d e l a y
a n d i s n o t e n t i t l e d t o r e - i n v e s t s a m e 74
a n d p a s s t h e
i n t e r e s t o n t h e In v e s t o r . 75
72
The view that on the basic of freedom of contract, the contractual documentation is the
conclusive determinant of the rights and obligations created between the parties (as in Re New
Bullas Trading Ltd. [1994] 1 BCLC 485 and Siebe Gorman & Co Ltd. V. Barclays Bank Ltd.
[1979] 2 Lloyd's Rep 142) may not always hold sway on the authority of such cases as;Re
Brumark [2001]UKPC 28 and Re Spectrum Plus [2005]UKHL 41. In addition, in Static Control
Components (Europe) Ltd v Egan[2004] 2 Lloyd's Rep. 429 at [27] it was held that a contract
should be construed in light of the factual background around it and in the context of which it was
concluded.
73
Other than as security
74
Except for investment in cash or cash equivalent for a short period
75
See <http://www.deloitteifrslearning.com/description.asp?id=ias32393_v11&mod=ias> assessed
at 3 July, 2013 at 22.31.
28. 28
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
I n v i e w o f t h e f o r e g o i n g , i t i s i m p e r a t i v e t h a t L e n d e r ‟ s
e n s u r e t h a t t h e s t r u c t u r e a n d d o c u m e n t a t i o n o f t h e s u b -
p a r t i c i p a t i o n i s s u c h t h a t e n a b l e s a n e f f i c i e n t t r a n s f e r o f
t h e e c o n o m i c r i s k s i n t h e l o a n t o t h e c o u n t e r - p a r t y
I n v e s t o r , t o e n s u r e t h a t t h e a s s e t c e a s e s t o b e c o u n t e d a s
a n a s s e t o f t h e Le n d e r f o r b a l a n c e s h e e t p u r p o s e s . 76
T h u s ,
t h e a n a l ys i s o f t h e c o n t r a c t u a l p r o v i s i o n s o f a s u b -
p a r t i c i p a t i o n a g r e e m e n t i s i m p e r a t i v e t o e n s u r e t h a t t h e
c o m m e r c i a l i n t e n t i o n o f r i s k t r a n s f e r 77
i s a c h i e v e d a ga i n s t
t h e b a c k d r o p o f t h e r e g u l a t o r y c l i m e . 78
C o n t r a c t u a l R e s p o n s e s t o t h e U n d e r l y i n g C l i m a t e
A g a i n s t t h i s b a c k d r o p o f t h e r e g u l a t o r y a n d c o m m e r c i a l
c l i m a t e t h e r e h a v e b e e n m o d i f i c a t i o n s i n t h e c o m m e r c i a l
d r i v e r s o f t h e s e l l i n g - b a n k s a n d t h e s u b - p a r t i c i p a n t s i n
t h e m a r k e t a n d c o n s e q u e n t t i g h t e n i n g o f t h e c o m m e r c i a l
t e r m s o f t h e u n d e r l yi n g d o c u m e n t a t i o n i n f a v o u r o f t h e
s u b - p a r t i c i p a n t s t o e n s u r e t h a t t h e i n v e s t m e n t a n d r i s k
b o r n e b y t h e s u b - p a r t i c i p a n t a t a l l t i m e s r e m a i n t h a t
l i m i t e d t o t h e l o a n a s s e t , i n r e f l e c t i o n o f t h e c o m m e r c i a l
i n t e n t i o n o f p a r t i e s a n d r e g u l a t o r y u n d e r p i n n i n g o f t h e
t r a n s a c t i o n .
76
See fn 7, 1 6
77
Linklaters: Banking Update, December 2007
<http://www.linklaters.com/pdfs/publications/bankingupdate/Dec2007.pdf > assessed on April 2,
2013 at 10.40
78
Notably, under the United States Generally accepted accounting principles, in order to achieve a
clean sale, the Investor must not be subject to the credit risk of the Lender.
29. 29
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
T h e S u b - P a r t i c i p a t i o n i s a f l e x i b l e m e t h o d o f l o a n
t r a n s f e r , i t s f l e x i b i l i t y i s b o r n e o u t o f t h e v e r y f a c t t h a t
i t d o e s n o t i n v o l v e i n r e a l i t y, a t r a n s f e r o f t h e l o a n a n d i s
t h u s , a c r e a t u r e o f a g r e e m e n t a n d h a s b e e n l a u d e d a s t h e
m o s t d u r a b l e a s s e t s a l e s t e c h n i q u e , 79
a r e f l e c t i o n o n t h e
i m p o r t a n c e p l a c e d b y p a r t i c i p a n t s i n t h e f i n a n c i a l m a r k e t
o n f l e x i b i l i t y i n t h e i r c o n t r a c t u a l a r r a n g e m e n t s , t h o u g h
t h e c o s t f o r t h i s f l e x i b i l i t y c a n b e s e e n i n t h e l i m i t e d
r i g h t s w h i c h t h e s u b - p a r t i c i p a n t b y d e f a u l t o b t a i n s o v e r
t h e s u b j e c t m a t t e r o f t h e „ t r a n s f e r ‟ .
T h e a b o v e l a n d s c a p e n o t w i t h s t a n d i n g s u b - p a r t i c i p a t i o n
r e t a i n s i t s m o s t n o t a b l e r o l e a s a f i n a n c i n g t o o l t o r a i s e
c a p i t a l a n d t r a n s f e r t h e o b l i g a t i o n o f f u n d i n g 80
a n d t h e
r i s k o f d e f a u l t f r o m t h e Le n d e r t o t h e In v e s t o r ) . T h e
m a j o r f l a w r e p e a t e d l y i d e n t i f i e d w i t h i t s u t i l i t y i s t h e
a b s e n c e o f a r i g h t i n t h e i n v e s t o r , t o p r o c e e d a g a i n s t t h e
d e b t o r f o r p a ym e n t o f t h e s u m s d u e t h e s e l l e r , b u t a s i n
a l l c o m m e r c i a l c o n t r a c t s , a r i s k a s s e s s m e n t i s i m p e r a t i v e
a n d i m p o r t a n t l y, s t e p s m u s t b e u t i l i s e d , i n l i n e w i t h t h e
r i s k s a s s u m e d t o c o n t r a c t u a l l y e n s u r e t h a t t h e r i s k s
a c t u a l l y a s s u m e d a r e l i m i t e d t o t h o s e c o n t e m p l a t e d
c o m m e r c i a l l y a n d t h a t t h e l i k e l i h o o d o f t h o s e r i s k s a r e
m i n i m i s e d .
79
See fn 7, 14
80
Vide a fresh undertaking to fund as opposed to a transfer in strict terms of an existing obligation
which requires a novation and a new contractual relationship as between the lender, the borrower
and the assignee of the relevant obligations. See Tolhurst v. Associated Portland Cement
Manufacturers (1900) Ltd [1902] 2 KB 660 at 668; Langston Group Corp v Cardiff City Football
Club Ltd. [2008] EWHC 535 (Ch)
30. 30
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
Specific Risk Areas and Mitigation Mechanisms
A N o t e o n C o n f i d e n t i a l i t y
A Le n d e r o w e s t h e B o r r o w e r a l e g a l d u t y o f
c o n f i d e n t i a l i t y i n r e s p e c t o f t h e l a t t e r ‟ s i n f o r m a t i o n a n d
m a y b e l i a b l e i n d a m a g e s i f h e d i s c l o s e s s u c h i n f o r m a t i o n
t o a t h i r d p a r t y a n d l o s s r e s u l t s . 81
U p o n a l o a n t r a n s f e r ,
t h e r e i s a c h a n c e t h a t s u c h i n f o r m a t i o n w i l l b e l e a k e d t o
t h i r d p a r t i e s a n d w h i l s t a L e n d e r m a y b e w a r y o f
i n c u r r i n g l i a b i l i t y t o h i s B o r r o w e r i n t h i s r e s p e c t , t h i s i s
u s u a l l y a d d r e s s e d b y w a y o f p r o v i s i o n s i n t h e l o a n
d o c u m e n t a t i o n p e r m i t t i n g d i s c l o s u r e t o p r o p o s e d
a c q u i r e r s o f i n t e r e s t i n t h e l o a n o r a p a r t i c i p a n t . 82
In
a d d i t i o n , t h e In v e s t o r i s t yp i c a l l y b o u n d o n t e r m s o f t h e
s u b - p a r t i c i p a t i o n a g r e e m e n t t o i n d e m n i f y t h e L e n d e r i n
r e s p e c t o f a n y l o s s i t m a y s u f f e r a s a r e s u l t o f a
d i s c l o s u r e b y t h e In v e s t o r o f i n f o r m a t i o n p r o p e r l y
d i s c l o s e d . H o w e v e r , m o s t l o a n c o n t r a c t s p e r m i t d i s c l o s u r e
81
See Tournier v National Provincial and Union Bank of England [1924] 1KB 461
82
Naturally the robustness of the clause would determine if it would cover a transfer by sub-
participation, but in view
31. 31
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
o f c o n f i d e n t i a l i n f o r m a t i o n t o p r o s p e c t i v e a s s i g n e e s o r
s u b - p a r t i c i p a n t 83
I n t h e F i n a n c i a l L a w P a n e l ‟ s D i s c u s s i o n P a p e r o f 1 9 9 7 84
,
t h e v i e w i s e x p r e s s e d t h a t t h e I n v e s t o r m a y o w e t h e
B o r r o w e r a d u t y o f c o n f i d e n t i a l i t y u n d e r g e n e r a l r u l e s o f
c o n f i d e n c e . T o t h e e x t e n t t h a t t h e r e i s n o p r i v i t y o f
c o n t r a c t b e t w e e n t h e In v e s t o r a n d t h e B o r r o w e r , t h e b a s i s
o f s u c h a c o n f i d e n t i a l i t y o b l i g a t i o n i s l e s s t h a n l i k e l y.
T h e m o r e p l a u s i b l e e x p l a n a t i o n i s t h a t t h e In v e s t o r i s
l i k e l y t o b e r e q u i r e d b y t h e Le n d e r t o e n t e r i n t o a
c o n f i d e n t i a l i t y u n d e r t a k i n g i n r e s p e c t o f i n f o r m a t i o n
d i v u l g e d t o t h e In v e s t o r a b o u t t h e B o r r o w e r . S u c h
c o n t r a c t u a l a n d n o t a n y g e n e r a l d u t y o f c o n f i d e n c e i s
m o r e l i k e l y t o b e t h e s o u r c e o f t h e i n v e s t o r ‟ s d u t y f
c o n f i d e n t i a l i t y.
A d m i n i s t r a t i o n / M a n a g e m e n t I s s u e s
A n a r e a o f p o t e n t i a l r i s k t o t h e In v e s t o r i s t h e
a d m i n i s t r a t i o n o r m a n a g e m e n t o f t h e l o a n . B y n a t u r e s u b -
p a r t i c i p a t i o n i s k e p t s i l e n t f r o m t h e B o r r o w e r , w h o
c o n t i n u e s t o c a r r y o n a r e l a t i o n s h i p w i t h t h e L e n d e r
o b l i v i o u s t o t h e n e w r e l a t i o n s h i p t h a t h a s b e e n c r e a t e d a s
a d e r i v a t i v e o f h i s r e l a t i o n s h i p w i t h t h e Le n d e r .
A r g u a b l y, w h i l s t a l l g o e s w e l l w i t h t h e B o r r o w e r ,
a d m i n i s t r a t i o n m a y n o t b e a c o n c e r n f o r t h e In v e s t o r n o r
83
Albeit subject to confidentiality undertakings
84
‗Legal Uncertainties in the Secondary Debt Market‟, (Financial Law Panel, 1997)
32. 32
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
w i l l t h e In v e s t o r b e c o n c e r n e d w i t h m i n o r a n d
i n c o n s e q u e n t i a l c h a n g e s o r d e c i s i o n s t o t h e f a c i l i t y b o r n e
o u t o f r o u t i n e a d m i n i s t r a t i o n . H o w e v e r , i n t h e e v e n t t h a t
t h e B o r r o w e r r u n s i n t o d i f f i c u l t i e s a n d r e q u i r e s s o m e
c h a n g e s t o b e m a d e t o h i s f a c i l i t y – p a r t i c u l a r l y t o t h e
m o n e y t e r m s o f t h e d e a l , a n In v e s t o r m a y b e c o m e u n e a s y
a n d r e q u i r e t o i n f l u e n c e d e c i s i o n s w h i c h w i l l a f f e c t t h e
r i s k p r o f i l e a s h e a n d n o t t h e Le n d e r b e a r s t h e r i s k o f
d e f a u l t . It w i l l t h u s b e e s s e n t i a l , f o r t h e s u b - p a r t i c i p a t i o n
a g r e e m e n t t o m a k e p r o v i s i o n s i n r e l a t i o n t o d e c i s i o n
m a k i n g a n d t h e e x e r c i s e o f t h e Le n d e r ‟ s r i g h t u n d e r t h e
f a c i l i t y a g r e e m e n t . 85
I n v i e w o f t h e p o t e n t i a l r i s k t h a t t h e Le n d e r t o b e l e n i e n t
t o w a r d s t h e B o r r o w e r , e i t h e r d u e t o p r e - e x i s t i n g
r e l a t i o n s h i p o r d u e t o t h e s h i f t o f t h e c r e d i t r i s k t o t h e
I n v e s t o r , d e v e l o p m e n t s i n t h e l o a n m a r k e t h a v e c h a n g e d
f r o m t h e e r s t w h i l e p o s i t i o n . W h i l e t h e f o r m s o f s u b -
p a r t i c i p a t i o n a g r e e m e n t s w i d e l y u s e d i n t h e m a r k e t d u r i n g
t h e 1 9 7 0 ' s a n d 1 9 8 0 ' s s a w t h e i n v e s t o r l e a v i n g t h e
m a j o r i t y o f d e c i s i o n s t o b e t a k e n b y t h e Le n d e r i n
r e l a t i o n t h e u n d e r l yi n g p o r t f o l i o , 86
i t i s i n c r e a s i n g l y
c o m m o n i n t o d a y‟ s m a r k e t t o s e e a t t e m p t s t o l i m i t t h e
L e n d e r ‟ s d i s c r e t i o n a n d r e q u i r e t h e c o n s u l t a t i o n w i t h , o r
i n e x t r e m e s c e n a r i o ‟ s t h e c o n s e n t o f t h e In v e s t o r b e f o r e
c e r t a i n a c t i o n s s u c h a s g r a n t i n g w a i v e r s o r a m e n d i n g o r
85
See A McKnight, Law of International Finance (2008 Oxford University Press, Oxford), 656
86
See Szathmary, „The Participation Agreement as a Fundraising Vehicle‘, 3(i) Int'l Bus. L. 75
(1975) at 46
33. 33
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
r e s c h e d u l i n g t h e B o r r o w e r ‟ s o b l i g a t i o n s , 87
a r e t a k e n i n
r e l a t i o n t o t h e p o r t f o l i o i n q u e s t i o n . D o u b t l e s s , i n t h e
c u r r e n t m a r k e t w h e r e z o m b i e c o m p a n i e s a r e r e p o r t e d t o
c o n s t i t u t e a m a j o r i t y o f t r a d i n g c o m p a n i e s a n d w i t h t h e
a f t e r m a t h o f t h e g l o b a l c r e d i t c r i s i s I n v e s t o r s a r e q u i c k t o
t a k e p r e c a u t i o n s t o e n s u r e t h a t a c t i o n s t a k e n i n r e l a t i o n
t o t h e l o a n p o r t f o l i o a r e n o t d e t r i m e n t a l t o h i s i n t e r e s t ,
m o r e s o w h e r e i t w o u l d a p p e a r t h a t t h e B o r r o w e r i s
n e a r i n g i n s o l v e n c y a n d i n t h e p r o c e s s o f r e s t r u c t u r i n g .
T h e r i s k t h a t t r a n s a c t i o n s i n v o l v i n g t h e r e f e r e n c e d l o a n
m a yb e u n w o u n d u n d e r r e l e v a n t i n s o l v e n c y p r o v i s i o n s 88
m a y b e a r u p o n t h e m i n d o f a n In v e s t o r i n e n t e r i n g i n t o a
s u b - p a r t i c i p a t i o n . T h u s , i t i s i n c r e a s i n g l y c o m m o n t o f i n d
r e s t r i c t i o n s o n t h e m a n a g e m e n t p o w e r s o f t h e l e n d e r i n
t h e s u b - p a r t i c i p a t i o n d o c u m e n t a t i o n .
I n t h e U S w h e r e t h e s e t r a n s a c t i o n s a r e v i e w e d d i f f e r e n t l y,
i t i s p e r c e i v e d t h a t t h e r e i s m o r e j u s t i f i c a t i o n f o r t h e
i n c l u s i o n o f s u c h p r o v i s i o n s a s t h e In v e s t o r i s i n r e a l i t y
t h e n e w l e n d e r a n d a b l e t o d i r e c t a l l a c t i o n s i n r e l a t i o n t o
t h e l o a n . T h e i n c l u s i o n o f s u c h p r o v i s i o n s i n t h e E n g l i s h
m a r k e t w h e r e t h e r e l a t i o n s h i p h a s b e e n d e s c r i b e d t o b e
o n e o f d e b t o r - c r e d i t o r m a y b e v i e w e d t o h a v e l e s s o f a
j u s t i f i c a t i o n b u t i t w o u l d a p p e a r t h a t t h e In v e s t o r w h o
n o w b e a r s t h e r i s k o f d e f a u l t s h o u l d b e a b l e t o d i r e c t
87
See Al-Bank Al Saudi Al-Alami Ltd v Arbuthnot Latham Bank Ltd (C.A., Official Transcripts
1990- 1997, 2 May 1991)
88
In view of provisions of the Insolvency Act 1986 or the Enterprise Act 2002
34. 34
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
d e c i s i o n s w h i c h i m p a c t o n t h a t In v e s t m e n t p a r t i c u l a r l y a s
h e b e a r s f u l l l i a b i l i t y i n e v e n t o f t h e B o r r o w e r ‟ s d e f a u l t .
I n v i e w o f t h e f a c t t h a t t h e c o u r t w i l l n o t u s u a l l y r e q u i r e
t h e Le n d e r t o a c t i n t h e i n t e r e s t o f t h e In v e s t o r 89
n o r t o
t a k e d e c i s i o n s i n a p a r t i c u l a r w a y a n d i n v i e w o f t h e
c o u r t ‟ s r e l u c t a n c e t o i m p l y d u t i e s w h e r e p a r t i e s a r e
d e e m e d s o p h i s t i c a t e d c o m m e r c i a l p a r t i e s , 90
o r t o r e q u i r e
L e n d e r s t o e x e r c i s e t h e i r d i s c r e t i o n i n a p a r t i c u l a r w a y. 91
A n In v e s t o r i s u n l i k e l y t o r e l y o n i m p l i e d t e r m s a n d w i l l
e x p r e s s l y p r o v i d e t h e w a y i n w h i c h t h e Le n d e r ‟ s
d i s c r e t i o n o n s u c h m a t t e r s i s t o b e e x e r c i s e d , i n o r d e r t o
s t r e n g t h e n t h e In v e s t o r ‟ s p o s i t i o n a n d p r o t e c t h i s i n t e r e s t .
It i s a l s o w o r t h y o f n o t e t h a t t h e r e m a y b e c e r t a i n
i n s t a n c e s s u c h a s t r i g g e r i n g a n e v e n t o f d e f a u l t u n d e r t h e
l o a n a g r e e m e n t w h e r e a r e q u i r e m e n t t o c o n s u l t o r o b t a i n
c o n s e n t m a y n o t b e i n t h e b e s t i n t e r e s t o f t h e In v e s t o r .
T h u s , a p p r o p r i a t e c a r v e - o u t l a n g u a g e w o u l d s e r v e t h e s u b -
p a r t i c i p a n t w e l l . F r o m t h e p e r s p e c t i v e o f t h e L e n d e r
h o w e v e r , p a r t i c u l a r l y w h e r e t h e t r a n s f e r t o t h e In v e s t o r
89
It may however, imply a term that any power given the Lender should not be exercised
improperly, capriciously or arbitrarily or in a way that no reasonable lender, acting reasonably,
would do. See Paragon Finance Plc v Nash & Staunton [2001] EWCA Civ 1466. In particular,
the creditor is entitled to exercise its discretion and commercial judgment tin determining if, when
and how it will enforce its security. See China & South Sea Bank Ltd v Tan[2002] EWCA Civ 21
90
See Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA 1221
91
See Sterling Credit Ltd v Rahman [2002] EWHC 3008 (17 December 2002 ); Law Debenture
Trust Corp Plc v Acciona SA [2004] EWHC 270 (Ch)
35. 35
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
i n v o l v e s a t r a n s f e r o f s o m e a n d n o t a l l o f , t h e l e n d e r s
e x p o s u r e t o t h e B o r r o w e r , t h e Le n d e r m a y b e u n w i l l i n g t o
a c c e p t t o f e t t e r h i s d i s c r e t i o n o r t o o b t a i n t h e c o n s e n t o f
t h e In v e s t o r . T h e e x t e n t t o w h i c h t h e I n v e s t o r w i l l b e a b l e
t o f e t t e r t h e Le n d e r ’ s d i s c r e t i o n i n s u c h c i r c u m s t a n c e s
w i l l n o d o u b t d e p e n d h e a v i l y o n t h e r e l a t i v e b a r g a i n i n g
p o w e r o f b o t h p a r t i e s a s w e l l a s t h e i r c o m m e r c i a l
o b j e c t i v e s . F u r t h e r , t h e Le n d e r m a y i n c l u d e c o m p r e h e n s i v e
e x c l u s i o n s o r l i m i t a t i o n s o f l i a b i l i t y w h i c h t h e c o u r t s a r e
l i k e l y t o u p h o l d o n t h e b a s i s o f f r e e d o m o f c o n t r a c t a n d
e q u a l i t y o f b a r g a i n i n g p o w e r a s b e t w e e n s o p h i s t i c a t e d
c o m m e r c i a l p a r t i e s . C o n v e r s e l y, w h e r e t h e Le n d e r i s a
p a r t i c i p a n t a m o n g s t o t h e r s i n t h e l o a n o r p o r t f o l i o , t h e
I n v e s t o r ‟ s a b i l i t y t o d i r e c t t h e Le n d e r ‟ s a c t i o n m a y b e
l i m i t e d f u r t h e r . A s i n a l l c o m m e r c i a l t r a n s a c t i o n s , t h e
r e l a t i v e p o w e r o f t h e c o n t r a c t i n g p a r t i e s m a y i m p a c t t h e i r
a b i l i t y t o r e s e r v e f o r t h e m s e l v e s p r o t e c t i o n s a n d p o w e r s
w h i c h o t h e r p a r t i e s m a y b e u n a b l e t o c o m m a n d .
T h e p o s s i b i l i t y t h e n a r i s e s , i n c i r c u m s t a n c e s w h e r e a l l t h e
c o n t r a c t i n g p a r t i e s h a v e e q u a l o r f a i r l y e q u a l b a r g a i n i n g
p o w e r t h a t t h e r e m a y b e a n e e d f o r d e m o c r a t i c d e c i s i o n
t a k i n g a k i n t o w h a t o b t a i n s u n d e r a s yn d i c a t e d f a c i l i t y,
a n d d e c i s i o n s b e t a k e n b a s e d o n t h e v o t e o f t h e m a j o r i t y,
a s a g r e e d . 92
T h i s m a y a t f i r s t b l u s h , a p p e a r t o l e a d t o
n e e d l e s s c o m p l e x i t y i n t h e a d m i n i s t r a t i o n o f t h e r e l e v a n t
p o r t f o l i o , b u t a p p e a r s t o r e p r e s e n t a t r u e r e f l e c t i o n o f t h e
92
See the approach taken in Redwood Master Fund Ltd v TD Bank Europe Ltd [2002] EWHC
2703 (Ch)
36. 36
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
r e a l i t y – t h e p a r t i e s w i t h m o s t a t s t a k e s h o u l d d e t e r m i n e
t h e d e c i s i o n s t a k e n – t h i s i s t h e c a s e w h e t h e r i n v e s t m e n t
i n t h e p o r t f o l i o i s b y a s i n g l e , o r b y m u l t i p l e p a r t i e s ,
d e c i s i o n s w h i c h w i l l i m p a c t d e f a u l t s h o u l d b e c o l l e c t i v e .
W h i l s t s u c h v o t i n g a r r a n g e m e n t s a r e ye t t o b e t e s t e d
j u d i c i a l l y, a n d s t i l l p r e s e n t s o m e u n c e r t a i n t y 93
h o w e v e r
s i m i l a r v o t i n g s t r u c t u r e s h a v e b e e n r o u t i n e l y u p h e l d i n
s yn d i c a t e d l e n d i n g a n d b o n d s . It d o e s n o t a p p e a r t h u s ,
t h a t t h e r e i s m u c h j u s t i f i c a t i o n f o r v o t i n g a r r a n g e m e n t s t o
b e s t r u c k d o w n i n s u b - p a r t i c i p a t i o n a r r a n g e m e n t s .
H o w e v e r , t h e d o w n s i d e f o r t h e In v e s t o r ( s ) m a y b e t h a t a n
a s t u t e Le n d e r m a y r e q u i r e t h e In v e s t o r t o b e a r t h e c o s t o f
m a n a g e m e n t a n d e n f o r c e m e n t w h e r e t h e In v e s t o r i s i n f a c t
t h e d i r e c t i n g m i n d o f a c t i o n s t a k e n i n r e l a t i o n t o t h e
p o r t f o l i o . 94
In a d d i t i o n , t h e r e m a y b e i n c r e a s e d s c o p e f o r
a B o r r o w e r w h o l e a n s o f t h e s u b - p a r t i c i p a t i o n i n b r e a c h
o f a n a p p r o p r i a t e l y c o u c h e d r e s t r i c t i o n ; t o o b t a i n d a m a g e s
f o r l o s s r e s u l t i n g f r o m m a n a g e m e n t a n d d e c i s i o n s a t
v a r i a n c e w i t h t h e p o s i t i o n h i t h e r t o t a k e n b y t h e Le n d e r .
A n a r e a o f l i m i t a t i o n w i l l h o w e v e r e x i s t i n r e l a t i o n t o
s u b - p a r t i c i p a t i o n i n s yn d i c a t e d f a c i l i t i e s w h e r e t h e
L e n d e r m a y b e c o n t r a c t u a l l y b o u n d b y o r c o n s u l t a t i o n
c l a u s e s w h i c h m a y c u r t a i l i t s a b i l i t y t o t a k e e n f o r c e m e n t
93
In a Bank of England Paper, the Bank noted that voting arrangements under sub-participation
agreements were an area of uncertainty. See M Smith, Bank of England, ‗The London Approach
and Trading in Distressed Debt”,
<http://www.bankofengland.co.uk/archive/Documents/historicpubs/qb/1996/qb960213.pdf>, 225
assessed on 6 June, 2013
94
See fn 34, 565
37. 37
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
a c t i o n , o r r e q u i r e d e m o c r a t i c d e c i s i o n m a k i n g b y t h e
s yn d i c a t e l e n d e r s b e f o r e a c c e l e r a t i o n .
P r i m a r y C r e d i t R i s k : N o n - P a y m e n t b y B o r r o w e r
F r o m a c o m m e r c i a l p e r s p e c t i v e , t h e c r e d i t r i s k o f d e f a u l t
a n d n o n - p a ym e n t b y t h e B o r r o w e r r e s i d e s i n t h e In v e s t o r ,
w h o i s o n l y e n t i t l e d t o p a ym e n t t o t h e e x t e n t t o w h i c h
s a m e i s r e c e i v e d b y t h e Le n d e r f r o m t h e B o r r o w e r . T h a t
b e i n g t h e c a s e , t h e In v e s t o r w i l l s e e k t o e n s u r e t h a t i t
o b t a i n s t h e b e n e f i t o f a n y s e c u r i t y p a c k a g e p r o v i d e d b y
t h e B o r r o w e r t o t h e Le n d e r i n r e s p e c t o f t h e Le n d e r ‟ s
e x p o s u r e . 95
It w o u l d b e e s s e n t i a l t o t h e In v e s t o r t h o u g h t o
e n g a g e d i l i g e n c e t o e n s u r e t h a t a n y s e c u r i t y p r o v i d e d i s
v a l i d a n d e n f o r c e a b l e a g a i n s t t h e B o r r o w e r a n d t h a t t h e
I n v e s t o r w i l l b e a b l e t o o b t a i n t h e b e n e f i t o f s a m e . 96
O b t a i n i n g p r o t e c t i o n i n t h i s a r e a i s i m p e r a t i v e f o r t h e
I n v e s t o r , w h o m u s t e n s u r e t h a t t h e b e n e f i t o f a n y r i s k
m i t i g a t i o n d e v i c e s h i t h e r t o a v a i l a b l e t o t h e L e n d e r
a c c r u e s t o i t . I n t h i s r e g a r d , t h e In v e s t o r ‟ s i n t e n t i o n
s h o u l d b e t o e n s u r e t h a t t h e Le n d e r i s u n d e r a n o b l i g a t i o n
t o p a s s o n t o t h e In v e s t o r p a ym e n t s r e f e r a b l e t o a n y
d i s t r i b u t i o n s i t r e c e i v e s i n r e s p e c t o f t h e s u b - p a r t i c i p a t e d
i n t e r e s t – i n c l u d i n g r e c e i p t s a n d d i s t r i b u t i o n s i n r e s p e c t
o f a n y e n f o r c e m e n t a c t i o n o r p r o c e e d i n g s .
95
See fn 5, 1
96
See fn 5, 2
38. 38
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
A n o t h e r a r e a o f n o t e i s i n r e s p e c t o f a n y s e c u r i t y
p r o v i d e d b y t h e B o r r o w e r o r t h i r d p a r t i e s i n t o s e c u r e t h e
B o r r o w e r ‟ s p a ym e n t o b l i g a t i o n s t o t h e L e n d e r - t o t h e
e x t e n t t h a t t h e B o r r o w e r h a s a s e p a r a t e l e g a l r e l a t i o n s h i p
f r o m t h e r e l a t i o n s h i p o f t h e In v e s t o r t o t h e h a s n o d i r e c t
b e n e f i t f r o m s u c h s e c u r i t y n o t c a u g h t b y s a m e . T h e s u b -
p a r t i c i p a t i o n a g r e e m e n t h a s t o b e d r a f t e d t o c a p t u r e
p r o c e e d s f r o m t h e e n f o r c e m e n t o f s e c u r i t y, s o t h a t t h i s
w i l l t r i g g e r t h e Le n d e r ‟ s p a ym e n t o b l i g a t i o n s t o t h e
I n v e s t o r .
D o u b l e C r e d i t R i s k : L e n d e r C o l l a p s e a n d o t h e r i s s u e s
A s a s u b - p a r t i c i p a t i o n i n v o l v e s t h e c r e a t i o n o f d e r i v a t i v e
r i g h t s a n d o b l i g a t i o n s a n d t h e In v e s t o r d o e s n o t a c q u i r e
r i g h t s i n t h e l o a n a s s e t b u t c o n t r a c t u a l r i g h t s a g a i n s t t h e
L e n d e r – i n t h e e v e n t t h a t s u b s e q u e n t t o r e c e i p t s f r o m t h e
B o r r o w e r 97
, t h e Le n d e r b e c o m e s i n s o l v e n t 98
, t h e In v e s t o r i s
f a c e d w i t h a d o u b l e c r e d i t r i s k . A s h a s b e e n a p t l y
o b s e r v e d , ― I f t h e l e a d b a n k b e c o m e s i n s o l v e n t , t h e
p a r t i c i p a n t i s a n u n s e c u r e d c r e d i t o r o f t h e l e a d b a n k …
T h e r e f o r e t h e p a r t i c i p a n t h a s a d o u b l e r i s k — t h e r i s k o f
t h e b o r r o w e r a n d t h e r i s k o f t h e l e a d b a n k ‖ 99
. In t h e e v e n t
o f t h e In v e s t o r b e i n g h e l d t o b e a n u n s e c u r e d c r e d i t o r t o
t h e Le n d e r h e w o u l d h a v e n o r e c o u r s e t o t h e i n c o m e
97
And even in respect of payments made by the Borrower subsequent to the Lender‟s insolvency.
See fn 37, 118
98
See R v Chester and North Wales Legal Aid Area Office (No. 12) Ex p Floods of Queensferry Ltd
[1998] 1 W.L.R. 1496
99
Wood, fn 11, 111
39. 39
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
s t r e a m f r o m t h e B o r r o w e r , p a r t i c u l a r w i t h r e s p e c t t o
r e p a ym e n t s r e c e i v e d s u b s e q u e n t t o t h e L e n d e r ‟ s
i n s o l v e n c y . A t t e m p t s b y t h e In v e s t o r t o r e l y o n t h e
e q u i t a b l e d o c t r i n e o f t r a c i n g 100
m a y b e f a r - f e t c h e d ,
p a r t i c u l a r l y a s t h e In v e s t o r d o e s n o t h a v e a n y r i g h t s i n
t h e p a ym e n t s f r o m t h e B o r r o w e r b u t i s e n t i t l e d t o
p r o c e e d s o f s a m e - e q u i v a l e n t p a ym e n t s . T h i s a p p e a r s t o
r u n c o n t r a r y t o t h e c o m m e r c i a l i n t e n t i o n t h a t t h e In v e s t o r
b e a r s t h e B o r r o w e r ‟ s c r e d i t r i s k s o l e l y a n d m e c h a n i s m s
h a v e b e e n d e v e l o p e d t o r e f l e c t t h i s i n t e n t i o n . T h e d e f a u l t
p o s i t i o n w a s c a p t u r e d a p t l y i n Ll o yd s , ― I f t h e a g r e e m e n t
a m o u n t e d t o a n a s s i g n m e n t o f a p r o p r i e t a r y i n t e r e s t i n
t h e p r o c e e d s , t h e m o n e y b e l o n g s t o t h e s u b - p a r t i c i p a n t . I f
n o t , i t f o r m s p a r t o f t h e i n s o l v e n t e s t a t e a n d t h e s u b -
p a r t i c i p a n t i s a n u n s e c u r e d c r e d i t o r . ‖ 101
I n o r d e r t o a d d r e s s t h i s p o t e n t i a l r i s k t h e In v e s t o r c a n
o b t a i n s e c u r i t y o v e r t h e Le n d e r ‟ s a s s e t s t o s e c u r e t h e
L e n d e r ‟ s o b l i g a t i o n t o p a y – s e c u r i t y m a y b e t a k e n e i t h e r
o v e r t h e Le n d e r ‟ s g e n e r a l a s s e t s 102
, o r o v e r t h e l o a n a s s e t s
i n w h i c h t h e In v e s t o r h a s o b t a i n e d a s u b - p a r t i c i p a t i o n .
W h e r e t h e In v e s t o r o b t a i n s a c h a r g e o v e r t h e a s s e t s t h e
e x t e n t o f c o n t r o l h e e x e r c i s e s i n r e l a t i o n t o t h e a s s e t w i l l
b e k e y i n d e t e r m i n i n g t h e c l a s s i f i c a t i o n o f t h e c h a r g e a s
100
By which a claimant can seek to establish title in property or proceeds of same. See Hudson,
Equity and Trusts (7th
edn Routlege: London, 2012)
101
Lloyds, 2
102
which will no doubt be commercially unsuitable
40. 40
Being a Dissertation Submitted by Damilola Yewande Durowaiye at the University College London
towards the award of a Master’s Degree in International Commercial Law
f i x e d a n d f l o a t i n g , 103
w h i c h w i l l i n t u r n d e t e r m i n e h i s
r e c o u r s e t o t h e a s s e t s o n t h e Le n d e r ‟ s i n s o l v e n c y. W h i l s t
t h i s i s d o u b t f u l , i t s t i l l r e m a i n s t o b e s e e n i f a n y
c o n t r a c t u a l f e t t e r s o n t h e Le n d e r ‟ s d i s c r e t i o n i n m a n a g i n g
t h e a s s e t s w o u l d s u f f i c e a s f i x e d c h a r g e „ c o n t r o l ‟ . 104
W h e r e t h e In v e s t o r d o e s t a k e a f i x e d c h a r g e t h e i n r o a d s
i n t o f l o a t i n g c h a r g e a s s e t s u n d e r t h e In s o l v e n c y A c t 1 9 8 6
a n d t h e E n t e r p r i s e A c t , 2 0 0 2 n o d o u b t p u t t h e In v e s t o r i n
a b e t t e r p o s i t i o n t h a n h e w o u l d b e a s a n u n s e c u r e d
w i t h o u t r e c o u r s e t o s e c u r e d a s s e t s . P h i l l i p W o o d h a s
h o w e v e r n o t e d t h a t c h a r g e s a r e g e n e r a l l y n o t a c c e p t a b l e
b y b a n k s m o r e s o i n v i e w o f t h e r o u t i n e i n c l u s i o n o f
n e g a t i v e p l e d g e s i n b a n k d o c u m e n t s . 105
T h e u t i l i t y o f a m o r t g a g e a s a f o r m o f s e c u r i t y f o r t h e
I n v e s t o r m a y b e l i m i t e d w h e r e t h e r a t i o n a l f o r S u b -
P a r t i c i p a t i o n a r e r e s t r i c t i o n s e x i s t i n g o n a s s i g n m e n t i n
t h e u n d e r l yi n g l o a n d o c u m e n t a t i o n , m a k i n g t h e c h a r g e a
m o r e l i k e l y s e c u r i t y d e v i c e . T h e l i m i t a t i o n s o f t h e u s e o f
f o r m a l s e c u r i t y d e v i c e s h o w e v e r r e l a t e t o
r e g i s t r a t i o n / d i s c l o s u r e r e q u i r e m e n t .
103
Section 251 Insolvency Act 1986 defines a floating charge as ―…a charge which, as created,
was a floating charge‖. See also Section 754 (1) Companies Act 2006
104
See Re Spectrum Plus [2005] UKHL 41 Re Brumark Investments Ltd [2001] UKPC 28
105
See fn 4, 152