The Facts

The Claimant Credit Suisse International (“Credit Suisse”) entered into an International Swaps and Derivatives Association (ISDA) Agreement (“the Master Agreement”), including a Credit Support Annex (“CSA”) with the Defendant Stichting Vestia Groep (“Vestia”), a Dutch social housing association, in 2002. Between November 2010 and September 2011 Credit Suisse and Vestia entered into 11 derivative transactions. In June 2012 Vestia failed to provide security due under the CSA and Credit Suisse terminated the Master Agreement. Credit Suisse brought a claim for EUR 83,196,829 against Vestia for the early termination amount which fell due under the Master Agreement.

Vestia disputed the claim on a number of grounds:
1. Authority – Vestia contended that some of the derivative transactions (the disputed transactions) were entered into by Vestia’s former Treasury & Control Manager and countersigned by their then Chief Executive Officer and Managing Director neither of whom had authority to enter into the disputed transactions . Vestia argued that the transactions were therefore never binding on Vestia;
2. Notice – Vestia contents that the termination notice served by Credit Suisse was invalid as when it was sent, Vestia was not in default of their obligation to provide security and Credit Suisse therefore failed to duly terminate the Master Agreement; and
3. Capacity – the Disputed Transactions were never binding on Vestia as they were not within their objects and Vestia did not have capacity to make them.

The Decision

The court decided that even though three of the disputed transactions were outside of Vestia’s capacity and therefore invalid, Credit Suisse’s rights and Vestia’s obligations under the Master Agreement were not affected by this due to additional representations contained in a schedule to the Master Agreement which the court held to be warranties. Credit Suisse was therefore entitled to the early termination amount which fell due under the Master Agreement. Alternatively, the Court held that Credit Suisse was entitled to damages for breach of the warranties to the amount that they could have recovered under the Master Agreement if all the agreements were valid and binding on Vestia.

In reaching its decision the court had to decide upon the following issues:
1. Whether Vestia had capacity under Dutch law to enter into the disputed transactions. Vestia contended that they only had capacity to enter into transactions which genuinely constituted hedges against its borrowing liabilities; and
2. Whether Credit Suisse could rely on the additional representations contained in the schedule to the Master Agreement
The court found that Vestia has had capacity under Dutch law to enter into three of the disputed transactions but not in the other three and that these transactions were invalid. Nevertheless, the Court decided for Credit Suisse as it found that the additional representations contained in the schedule to the Master Agreement were intended by the parties to take effect as contractual undertakings as well as representations. The representations contained a compliance provision which had been breached by Vestia when its managers purported to enter into the contracts under the Master Agreement even though these were in breach of Vestia’s articles of association.


This case highlights the importance in ensuring that the relevant parties to potential transactions have the capacity to enter into the type of transaction involved. Additionally it shows the importance of carefully negotiated provisions like the additional representations in this case. It is unlikely that Credit Suisse would have been able to recover any losses had these additional representations not been in place.

For further information, please contact Georgina Squire or the Partner with whom you usually deal.