Neutral Citation Number[2007] EWHC 893 (Comm)

Case No:  2006 Folio 873
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date:  20th April 2007 

Before :

MRS JUSTICE GLOSTER, DBE
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Between :

	Merrill Lynch International Bank Ltd
(formerly Merrill Lynch Capital Markets Bank Ltd)	Claimant	
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	Winterthur Swiss Insurance Company	Defendant	

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Timothy Howe Esq
(instructed by Allen & Overy) for the Claimant
Andrew Neish Esq and Angus Rodger Esq
(instructed by Steptoe & Johnson) for the Defendant

Hearing date:  20th December 2006
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 Judgment

Mrs Justice Gloster, DBE:  
Introduction
1.	This is an application by the claimant, Merrill Lynch International Bank Limited (“the Bank”), for summary judgment under CPR Part 24 against the Defendant, Winterthur Swiss Insurance Company (“the Insurer”) in respect of the Bank’s claims for indemnity, payment and related declaratory and other relief against the Insurer pursuant to a Credit Indemnity Insurance Policy dated 27 December 2000 (“the Policy”).  The Insurer resists liability on various grounds and also takes certain points in relation to quantum (as described in more detail below).
2.	Under the Policy, the Insurer agreed to insure the Bank with respect to financial loss in respect of the Bank’s credit exposure under an ISDA Master Agreement dated as of 3 August 2000 and certain interest rate collar transactions (“the Hedge Transactions”) forming part of it (together “the ISDA Master Agreement”), into which the Bank had entered with Eurotunnel Finance Limited (“EFL”), a member of the Eurotunnel group of companies.  (I shall refer to the group as “Eurotunnel” and group companies as “Eurotunnel companies”.) EFL’s obligations under the ISDA Master Agreement were guaranteed by three other Eurotunnel companies, Eurotunnel S.A., Eurotunnel Plc and France Manche S.A.  These entities, together with EFL, are defined in the Policy, and referred to collectively in the judgment, as the “Eurotunnel Entities”.
3.	The Bank claims an indemnity from the Insurer alleged to have become due following the institution on 11 July 2006 by various Eurotunnel companies (including the Eurotunnel Entities) of French proceedings, which sought the opening of a judicial proceeding known as Procédure de Sauvegarde, or, translated, “safeguard proceedings”.  The Bank claims under clause 1(i)(c) of the Policy, alternatively under clauses 1(i)(b) and/or 1(i)(d) of the Policy.  The Bank maintains that, either on its primary or its alternative bases of claim, the Insurer is liable to indemnify the Bank under the Policy in respect of (and to pay the US Dollar equivalent of) the principal amount of €29,895,940, together with statutory interest at the appropriate commercial rate for the relevant period.  
4.	Both the Bank’s primary and alternative claims are the subject of summary judgment applications before the Court.  The Bank pursues its application for summary judgment in relation to its alternative claims in the event that the Court were not minded to grant summary judgment in respect of its primary claim.  The claims are for the same principal amount (subject to currency exchange rate differences).
Factual and procedural background
5.	Eurotunnel owns and operates the Channel Tunnel.  The history of Eurotunnel’s financial difficulties and commercial setbacks over the period since the early 1990s which led to its enforced financial restructuring on one previous occasion (between 1995 and 1998) are well known.  
6.	The Bank has at all material times had a substantial credit risk exposure to Eurotunnel and, in particular, to EFL in respect of the ISDA Master Agreement.  Under the ISDA Master Agreement, the Bank was exposed to distinct and independent credit risks  in respect of (i) EFL’s failure to pay any amounts falling due on periodic (6-monthly) payment dates, and (ii) the occurrence of a “Bankruptcy” Event of Default (as widely defined in section 5(a)(vii) of the ISDA Master Agreement) in respect of any of the Eurotunnel Entities, that is to say, EFL or any of its guarantors, Eurotunnel S.A., Eurotunnel Plc and France Manche S.A., defined in the ISDA Agreement as “the  Credit Support Providers”.
7.	Against this background, in December 2000 the Bank purchased what has been characterised by the Insurer as “back to back” credit indemnity insurance in the form of the Policy for a premium of US$2.805 million, from the Insurer’s predecessor, Winterthur International Insurance Company Limited (“WIICL”) in order to protect against these risks, subject to a limit on its maximum aggregate liability under the Policy of US$40,000,000.  The definition of “Counterparty Bankruptcy” in the Policy is in materially identical terms to the definition of “Bankruptcy” Event of Default in the ISDA Master Agreement.  Subsequently, on 31 March 2004, the Policy was novated to the Insurer, which assumed liability for WIICL’s obligations thereunder.
8.	On 11 July 2006 Eurotunnel S.A.  (together with the other Eurotunnel Entities) instituted proceedings in France before the Tribunal de Commerce de Paris (“the Tribunal de Commerce”) demanding the opening of a procédure de sauvegarde, or judicial proceeding, pursuant to Livre VI, Titre II, Articles L.620-1 et seq of the French Commercial Code (provisions of la Loi No 2005-845 of 26 July 2005, and Decree No 2005-1677 of 28 December 2005).  The Eurotunnel Entities initiated these proceedings by filing a petition or declaration dated 11 July 2006 and sought an expedited hearing of their demand for the opening of the procédure de sauvegarde.  
9.	The relief sought included the appointment of one or more officials known as “Administrateur Judiciaire”, Mandataire Judiciaire” and/or “Commissaire-Priseur Judiciaire”.  The evidence showed that these officials have the following roles within the procédure de sauvegarde:
i)	Once appointed, the Administrateur Judiciare has to oversee the management of the debtor’s affairs or to assist the management of the debtor’s affairs (Article L.622-1 II of the French Commercial Code).  In doing so, the Administrateur Judiciaire is required to observe all legal and contractual obligations incumbent upon the debtor’s Chief Executive (Article L.622-1 III of the French Commercial Code).  Further, it is the Administrateur Judiciaire who makes the decision whether to continue or terminate the debtor’s contracts (Article L.622-13 of the French Commercial Code).
ii)	Likewise, once appointed, the Mandataire Judiciaire has the sole authority to act on behalf of and for the interests of the creditors.  He can, in particular, initiate judicial proceedings for their benefit (Article L.622-20 of the French Commercial Code).  He is also in charge of compiling a list of declared creditors and making recommendations on the admissibility of their claims (L.624.1 of the French Commercial Code).
iii)	Likewise, once appointed, the Commissaire-Priseur Judiciaire has to draw up an inventory of the assets and liabilities of the company that will later be presented to the Administrateur Judiciaire and the Mandataire Judiciaire (Articles L621-4 and L.622-6 of the French Commercial Code).
10.	The evidence demonstrates that the procédure de sauvegarde is a new statutory procedure under French bankruptcy or insolvency law intended to offer interim protection to allow for reorganisation of the companies experiencing insurmountable financial difficulties of such a nature as to lead to any inability on the part of the company to meet its debts as they fall due.  The procédure de sauvegarde is, at the request of the French authorities, listed in Annex A of the EC Regulation on Insolvency Proceedings (No 1346/2000 of 29 May 2000) (“the Regulation”) with the effect that it is to be treated as a “Main Insolvency Proceeding” for the purpose of Article 3 of the Regulation.  Its legal consequence, once a procedure has been opened, by a judgment of the Court, include the following, with respect to each legal entity in the procedure:
i)	the opening of an observation procedure of six months during which the relevant entities are prohibited from paying any debt which arose prior to the date of the judgment opening of the procédure de sauvegarde (Articles L.621-3 and L.622-7 of the French Commercial Code);
ii)	all contractual and legal interest on the debts of all the relevant entities ceases to accrue (save insofar as they relate to loans for a term equal to or exceeding one year) (Article L.622.28 of the French Commercial Code);
iii)	all outstanding proceedings against the relevant entities seeking judgment for the payment of their debts or the termination of contracts on the basis of defaults are stayed, and the initiation of new proceedings is prohibited (Article L622.21 I of the French Commercial Code);
iv)	all enforcement measures by their existing creditors against the relevant entities or their assets are stayed and the initiation of any such new enforcement measures in prohibited (Article L.622-21 II);   and
v)	further miscellaneous limitations and other provisions affecting creditors’ rights apply such as:  (a) requiring creditors to make their claims within two months of publication of the decision of the court to open a procédure de sauvegarde in the Bulletin officiel des annonces civiles et commerciales (i.e.  the official journal for civil and commercial announcements) or lose their rights against the debtor (Articles L.622-24 to L.622-27 of the French Commercial Code);   and (b) null and void “acceleration clauses” and applying limits on the taking of further security (Articles L.622-29 to L.622-30 of the French Commercial Code).
11.	On 13 July 2006, an initial hearing took place before the Chambre de Conseil of the Tribunal de Commerce, attended by representatives of Eurotunnel S.A.  (and the other Eurotunnel Entities).  No order was made on that date.
12.	Following the institution of the French Proceedings, on 14 July 2006 the Bank, by notice to EFL, purported to declare a “Bankruptcy” Event of Default under section 5(a)(vii) of the ISDA Master Agreement and to designate 17 July 2006 as the Early Termination Date in respect of all Transactions.  The Bank contends that, on that date, the ISDA Master Agreement duly terminated.  Relying upon that termination, the Bank proceeded to determine and calculate the amount it claimed was payable to it by EFL on early termination and, on 20 July 2006, notified EFL of this amount - €29,895,940 exclusive of interest - by a Notice of Statement of Calculation.  
13.	On the same date, 20 July 2006, the Bank sent the Insurer by fax what it contends was a Notification of Loss pursuant to, and compliant with, clause 1(i)(c) of the Policy.  That notice was also delivered to the Insurer by courier on 21 July 2006.
14.	EFL immediately disputed that there had been any “Bankruptcy” or that the Bank was entitled to terminate the ISDA Agreement and Transactions or demand the sum of €29,895,940.  EFL, therefore, refused to pay that sum.  Instead, on 25 July 2006, EFL made the next semi-annual payment, about €8.9m, which would have been due under the Transactions, had there been no Early Termination Date.  The Bank applied this payment in partial discharge of the €29.9m it claimed EFL owed it.  The Bank’s entitlement to take this approach was disputed by EFL.  The dispute between EFL and the Bank  as to the validity of the early termination of the Transactions and the Bank’s entitlement to demand the €29m has never been resolved (having been overtaken by events in the procédure de sauvegarde).  
15.	On 25 July 2006 a further hearing (also attended by representatives of Eurotunnel S.A.  and the other Eurotunnel Entities) took place before the Chambre de Conseil of the Tribunal de Commerce de Paris.  No order was made on that date.  On 2 August 2006, the Tribunal de Commerce de Paris delivered a judgment opening a procédure de sauvegarde in respect of Eurotunnel S.A.  and each of the other Eurotunnel Entities and ordering (inter alia) the appointment of two Administrateurs Judiciaires, two Mandataires Judiciaires and two Commissaires-Priseurs Judiciaires for each of them.  In its judgment the court recorded that, in making the application for the procédure de sauvegarde, lawyers for Eurotunnel S.A. had explained that the appointment of an ad hoc administrator to oversee Eurotunnel S.A. had come to an end less than 18 months ago.  Further the court recorded that all the companies comprising the Eurotunnel group were facing the same financial difficulties, with debts in excess of their liability to repay them.  These financial difficulties were noted by the court to be insurmountable.  
16.	As a result of the judgment opening a procédure de sauvegarde, the six month observation period referred to above came into effect on 2 August 2006.  During this period various prohibitions, stays and restrictions applied to the rights of creditors of the Eurotunnel Entities (inter alia) to obtain payment of their debts, prosecute outstanding, or bring new, proceedings against the companies which would oblige them to pay a sum of money or terminate a contract for default of payment of a sum of money, and take enforcement measures against them or their assets.
17.	In summary, it is the Bank’s case that, in the above circumstances, the Insurer’s obligation to indemnify the former under the Policy in respect of its resulting financial loss under the ISDA Master Agreement has been triggered by reason of these events in France.  The Bank’s primary case is that, by reason of the occurrence of a “Bankruptcy”/“Counterparty Bankruptcy” event in respect of Eurotunnel S.A.  by 13 July 2006, the Insurer became liable by 11 August 2006 to indemnify the Bank and to pay it the US Dollar-denominated equivalent of €29,895,940 pursuant to clause 1(i)(c) of the Policy.  The Bank claims payment of US$38,129,282 (excluding interest) under this head, as to the arithmetical calculation of which sum there is no dispute.
18.	However, the Insurer refused to respond to the Bank’s primary claim under clause 1(i)(c) of the Policy.  In correspondence between the parties’ solicitors prior to the issue of proceedings, and in circumstances where EFL was denying the occurrence of any “Bankruptcy” the Insurer  sought (subject to reservation of its rights) to obtain clarification of whether there was a valid claim under the Policy and of the Bank’s and EFL’s respective positions.  Accordingly, on 4 September 2006, the Bank issued and served the Claim Form against the Insurer in respect of what the Bank contended was the Insurer’s liability to indemnify the Bank under clause 1(i)(c) of the Policy.  On 4 October 2006, the Bank served Particulars of Claim on the Insurer.
19.	The Insurer was pressed in correspondence by the Bank and its solicitors, Allen & Overy (“A&O”), to explain its reasons for non-payment under the Policy.  The Insurer’s solicitors, Steptoe & Johnson (“S&J”), in a letter dated 29 September 2006, raised the question whether (in the light of the Policy definition of “Bankruptcy Trigger Event”, which S&J contended required there to have been a “Counterparty Failure To Pay” prior to any termination of the Transactions), a claim arose under clause 1(i)(c) of the Policy and suggested that any claim would, in fact, arise under clause 1(i)(b).  S&J also suggested that, since EFL disputed the Bank’s termination but had not articulated the basis for its stance, it ought to be joined to the proceedings.  
20.	Accordingly, on 11 October 2006, the Bank (expressly without prejudice to its primary case and the validity of its Notification of Loss under clause 1(i)(c) of the Policy) served the Insurer with a Notification of Loss pursuant to clause 1(i)(b), together with a Contingent Liability Event Notice pursuant to clause 1(i)(d), in support of the Bank’s alternative claim under those provisions for indemnification and payment of an equivalent sum.  The Insurer has not indemnified the Bank or paid this (or any other) sum on the basis of this alternative claim.  The Bank’s alternative claim under clause 1(i)(d) is additional to, and cumulative with, its claim under clause 1(i)(b):  the latter is for US$20 million being the “Initial Policy Limit” under the Policy;  the former is for the balance of the amount due to the Bank under the ISDA Master Agreement in excess of US$20million.  The Bank claims a total principal amount of US$38,165,157 on this alternative basis with effect from 1 November 2006.  
21.	On 26 October 2006 the Bank issued its application for summary judgment in respect of its primary claim under clause 1(i)(c) of the Policy.  It also sought permission to amend its Claim Form and Particulars of Claim to bring its alternative claim under clauses 1(i)(b) and 1(i)(d) of the Policy in the present proceedings.  The Insurer initially opposed the Bank’s application to amend, but permission was granted by Cresswell J at a hearing on 17 November 2006.  The Bank then issued an application for summary judgment on its alternative claim under the Policy, returnable at the same time as its application for summary judgment in respect of its primary claim, pursuant to the Order of Cresswell J.
22.	On 30 November 2006, the Insurer sought to join EFL as a party to the action, but this application was dismissed by Toulson J on 30 November 2006.  
The Bank’s primary Claim under clause 1(i)(c) of the Policy
23.	The Bank’s claim under clause 1(i)(c) is based upon the alleged occurrence of a “Bankruptcy Trigger Event”, namely a “Counterparty Bankruptcy” (as both those terms are defined in clause 14 of the Policy) in respect of Eurotunnel S.A..  It is said that the Counterparty Bankruptcy occurred  by not later than 13 July 2006, entitling the Bank to serve Notice of Event of Default under the ISDA Master Agreement on 14 July 2006, designating 17 July 2006 as the Early Termination Date.  
24.	Clause 1 of the Policy provides as follows:
“1.	INSURANCE
(i)		In consideration of the payment of the Policy Premium by the Insured and subject to the terms and conditions of this Policy, the Insurance Company agrees to insure the Insured as follows:
(a)	Upon the occurrence of a Pre-Close Out Failure to Pay Event, the Insured will, upon become aware of the Pre-Close Out Failure to Pay Event, promptly provide to the Insurance Company a Pre-Close Out Failure to Pay Event Notice.  In the event that an amount is due and payable by the Eurotunnel Entities to the Insured under the terms of the Hedge Transactions following the Pre-Close Out Failure to Pay Event (the ‘Defaulted Payment Amount’), the Insured may in its sole and absolute discretion terminate the ISDA Master Agreement in accordance with the terms of Section 6 thereof upon the earlier to occur of:
(1)	the expiry of not less then 90 days following the occurrence of a Counterparty Failure to Pay;  and
(2)	receipt by the Insured of a Termination Notice.
If the Insured does not terminate the ISDA Master Agreement following the Pre-Close Out Failure to Pay Event, then the Insurance Company shall not, under any circumstances and notwithstanding any other provision hereunder, be under the obligation to indemnify the Insured for the Defaulted Payment Amount.
(b)	Upon the occurrence of a Post Close-Out Failure to Pay, the Insured will, upon becoming aware of the Post Close-Out Failure to Pay, provide to the Insurance Company a Notification of Loss.  The Insurance Company shall, upon receipt of a duly completed Notification of Loss, indemnify the Insured for the Loss Amount, provided that the Loss Amount is equal to or less than the Initial Policy Limit.  If the Loss Amount is in excess of the Initial Policy Limit, the Insurance Company will be obligated to pay to the Insured and amount equal to the Initial Policy Amount upon the occurrence of a Contingent Liability Event in accordance with Clause 1(i)(d) of this Policy.
(c)	Upon the occurrence of a Bankruptcy Trigger Event, the Insurance shall promptly, upon becoming aware of the Bankruptcy Trigger Event, terminate the ISDA Master Agreement in accordance with the terms of Section 6 therefore.  On or as soon as reasonably practicable following the occurrence of an Early Termination Date designated in accordance with Section 6(a) of the ISDA Master Agreement, the Insured shall provide to the Insurance Company a Notification of Loss.
In the event that a Loss Amount is payable following such Bankruptcy Trigger Event, the Insurance Company shall, upon receipt of a duly completed Notification of Loss, indemnify the Insured for such Loss Amount, provided that the Loss Amount is equal to or less than the Aggregate Policy Limit.  If the Loss Amount is in excess of the Aggregate Policy Limit, the Insurance Company shall only be obligated to pay to the Insured an amount equal to the Aggregate Policy Limit.
(d)	Upon the occurrence of a Contingent Liability Event, the Insured shall, upon becoming aware of the Contingent Liability Event, promptly provide to the Insurance Company a Contingent Liability Event Notice.
The Insurance Company shall, upon receipt of a duly completed Contingent Liability Event Notice, indemnify the Insured for the Excess Termination Amount payable by the Counterparty to the Insured, which for the avoidance of doubt shall be an amount in addition to the amount equal to the Initial Policy Limited payable under Clause 1(i)(a) or (b) above and which shall be reduced by any Reduction Amount in accordance with Clause 5.”
25.	A Pre-Close Out Failure to Pay under clause 1(i)(a) is excluded from the definition of “Trigger Event” under the Policy and, unlike clauses 1(i)(b)-(d), does not give rise to an immediate right to indemnification.  Rather, it is concerned with giving the Insurer some control over the circumstances in which the ISDA Master Agreement can be terminated.  Under clause 1(i)(a), in the event of a Pre-Close Out Failure to Pay, the Bank must wait at least 90 days before terminating the ISDA Master Agreement, though it may terminate it at an earlier date if the Insurer serves a “Termination Notice”, requiring the Bank to terminate the ISDA Agreement.  While the final decision as to whether to terminate the ISDA Master Agreement is within the “sole and absolute discretion” of the Bank, if the Bank does not terminate it following a Pre-Close Out Failure to Pay (when it is entitled to do so), the Insurer ceases to be under any obligation to indemnify the Bank in respect of the amount which EFL failed to pay.
26.	A “Bankruptcy Trigger Event” is defined in clause 14 of the Policy as follows:
“‘Bankruptcy Trigger Event’ means the occurrence of a Counterparty Bankruptcy which occurs prior to the termination of the ISDA Master Agreement following the occurrence of a Counterparty Failure to Pay.”
A Counterparty Bankruptcy is also defined in clause 14 as follows:
“‘Counterparty Bankruptcy’ means any of the Eurotunnel Entities (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger);   (2) become insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;   (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors;   (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;   (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);   seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets;   (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;   (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive);   or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts”.
A Counterparty Failure to Pay is also defined in clause 14 as follows:
“‘Counterparty Failure to Pay’ means, after the expiration of any applicable (or deemed) grace period, a failure by any of the Eurotunnel Entities to make, when and where due, any payments to [the Bank] in accordance with the terms of the ISDA Master Agreement.”
27.	The Policy deliberately tracked the definitions in the ISDA Master Agreement.  For present purposes clause 5 of the ISDA Agreement defines “Events of Default” as follows:
“(a)	Events of Default.  The occurrence at any time with respect to a party, or, if inapplicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an ‘Event of Default’) with respect to such party.
(vii)	Bankruptcy.  The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:
(1)	is dissolved (other than pursuant to a consolidation, amalgamation or merger);   (2) become insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;   (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors;   (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof;   (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);   seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets;   (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;   (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive);   or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts;  …”
28.	The relevant provisions of the ISDA Agreement permitting early termination following an Event of Default are set out in Section 6.  They are in the following terms:
“6.	Early Termination
(a)	Right to Terminate Following Event of Default.  If at any time an Event of Default with respect to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions.
…
(c)	Effect of Designation
(i)	If notice terminating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination is then continuing.
(ii)	Upon the occurrence or effective designation of any Early Termination Date, no further payments or deliveries under Section 2(a)(i) or “(e) in respect of the Terminated Transaction will be required to be made, but without prejudice to the other provisions of this Agreement.  The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(3).
(d)	Calculations
(i)	Statement.  On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid.  In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.
(ii)	Payment Date.  An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of any Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of a Termination Event).  Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate.  Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed.
(e)	Payments on Early Termination.  If an Early Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either ‘Market Quotation’ or ‘Loss’, and a payment method, either the ‘First Method’ or the ‘Second Method’.  If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that ‘Market Quotation’ or the ‘Second Method’, as the case may be, shall apply.  The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off….”
Section 6(e) then goes on to set out the relevant provisions relating to the method in which the calculation of the payment is to be made.
29.	The Insurer contends that it has defences which provide it with a “real prospect of successfully defending” all or some of the Bank’s claims, for the purposes of CPR Part 24.  In particular, its position in relation to the Bank’s clause 1(i)(c) claim is that:
i)	it does not admit that a “Counterparty Bankruptcy” occurred in respect of Eurotunnel S.A.  or any of the other Eurotunnel Entities as a result of the institution of the proceedings on 11 July 2006 claiming the remedy of procédure de sauvegarde;  the Insurer does not advance any positive case that there was not a Counterparty Bankruptcy as defined under the Policy, but puts the Bank to proof on this central issue;
ii)	further, the Insurer does not admit that the Bank was entitled to, and did, validly terminate the ISDA Master Agreement with effect on 17 July 2006 on the grounds of a Bankruptcy Event of Default;  
iii)	it contends that, as a matter of construction of the term “Bankruptcy Trigger Event”, no claim arose under clause 1(i)(c), since no “Bankruptcy Trigger Event” occurred on any view, even if a “Counterparty Bankruptcy” occurred in respect of Eurotunnel S.A.  or any of the other Eurotunnel Entities as a result of the events in France in July 2006;  this is because it is contended that, for the purposes of the definition of the term “Bankruptcy Trigger Event”, the relevant “Counterparty Bankruptcy” has to be one which occurs prior to an actual termination of the ISDA Master Agreement which termination has occurred following, and therefore by reason of,  the occurrence of a Counterparty Failure to Pay;
iv)	in any event, in breach of condition precedent, the Bank failed to provide the Insurer with “a duly completed Notification of Loss” as required under clause 1(i)(c).
30.	Thus the issues which arise are under this head can be articulated as follows:  
i)	Was there a Counterparty Bankruptcy?
ii)	Was the Bank entitled to, and did it, validly terminate the ISDA Master Agreement with effect on 17 July 2006 on the grounds of a Bankruptcy Event of Default?
iii)	As a matter of construction of the term “Bankruptcy Trigger Event”, does the relevant “Counterparty Bankruptcy” have to be one which occurs prior to an actual termination of the ISDA Master Agreement which termination has occurred following, and therefore by reason of,  the occurrence of a Counterparty Failure to Pay? Alternatively, does the relevant “Counterparty Bankruptcy” merely have to be one which occurs prior to there having been any termination of the ISDA Master Agreement following, and therefore by reason of,  the occurrence of a Counterparty Failure to Pay without the need for there to have been any actual termination on this ground?
iv)	Did a Bankruptcy Trigger Event accordingly occur?
v)	Did the Bank provide the Insurer with “a duly completed Notification of Loss” as required under clause 1(i)(c) of the Policy?
Was there a Counterparty Bankruptcy?
31.	I have no hesitation in concluding, on the evidence before me, that a Counterparty Bankruptcy occurred.  The Bank relies on sub-clauses (4), (6), (8) and (9) of the definition of “Counterparty Bankruptcy” under the Policy.  As these sub-clauses are disjunctive, the Bank only needs to establish that one of them is satisfied to succeed on this issue.  
32.	Mr. Andrew Neish, counsel appearing on behalf of the Insurer, submitted that the Bank cannot rely upon sub-clause (4) because neither of the conditions in sub-clauses (4A) or (4B) had been satisfied as at 13 July 2006;  i.e.  “such proceeding or petition “had not, by that date, either “(A) result[ed] in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B)” had not been “dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof”.
33.	In my judgment, for the reasons submitted by Mr. Timothy Howe, counsel appearing on behalf of the Bank, this is not correct.  It is clear, as a matter of language of the clause, that the requirement, or condition subsequent, contained in sub-clauses (4A) and (4B) that the proceedings or petition should have resulted in a judgment or order etc., or not have been dismissed or discharged etc., within the 30 day period, is only engaged “in the case of any such proceeding or petition instituted against” any of the Eurotunnel Entities (emphasis added).  However, in the present case, the procédure de sauvegarde was a proceeding instituted by Eurotunnel S.A.  (together with France Manche S.A., EFL and Eurotunnel plc) themselves, by filing the déclaration of 11 July 2006 before the Tribunal de Commerce.  This fact is clear from the text of the Court’s judgment dated 2 August 2006, and has been confirmed in terms by Professor Laurent Aynès, the Bank’s expert on French law, and indeed is now admitted by the Insurer.  It is also clear from the wording of Article L.620-1 of the French Commercial Code which states (in translation) that “this article institutes a safeguard procedure to be commenced on the petition of the debtor …” (emphasis added).  There is a real distinction between the situation where a debtor presents its own petition for insolvency protection, and the hostile situation where a creditor applies for an insolvency procedure such as winding up, or administration, to be opened in relation to the debtor.  In the latter case, there may in the event be no justification for the making of an order, and the creditor may be bringing the proceedings in an attempt to recover a disputed debt.  There is thus a real practical justification for the attachment of conditions such as those in sub-clauses (4A) or (4B) in the latter case, but not in the former.
34.	Likewise, in my judgment, there can be no doubt that, in the circumstances, the proceedings instituted by Eurotunnel S.A. and the other Eurotunnel Entities, by petition or declaration on  satisfied the description in sub-clause (4) of “a proceeding seeking … any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights”.  This requirement is clearly fulfilled by the institution of proceedings claiming the remedy of the opening of a procédure de sauvegarde.  Such proceedings are analogous to an application to the Court for the making of an administration order under section 8 and schedule B1 of the Insolvency Act 2006 (as amended by the Enterprise Act 2002).  As Professor Aynès set out in his evidence, and as is obvious from the wording of Livre VI, Titre II, Articles L.620-1 et seq of the French Commercial Code and the fact that it was inserted into Annex A of the Regulation in relation to France, it constitutes French insolvency law.  It is also clear from the evidence that, if an order is made by the Court, opening a procédure de sauvegarde, then creditors’ rights are clearly affected.  There can therefore be no doubt in my judgment that the institution of the proceedings on 11 July 2006 by the Eurotunnel Entities, claiming the protection of the procédure de sauvegarde, was indeed “a proceeding seeking … any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights”, albeit that the order itself formally opening the judicial procedure was not made until 2 August 2006.
35.	For similar reasons, in my judgment sub-clause (6) was also engaged.  The Eurotunnel Entities clearly sought the appointment of the Administrateurs Judiciaires by instituting the proceedings seeking the opening of a procédure de sauvegarde.  It was an inevitable consequence of the relief sought by Eurotunnel S.A.  that, if granted, such officials would be appointed.  Moreover, the functions and powers of Administrateurs Judiciaires (as described by Professor Aynès) clearly bring them within the category of “an administrator … or other similar official for it or for all or substantially all its assets”.  Given my view that sub-clauses (4) and (6) were indeed engaged, there is no room for the application of sub-clause (8), which only becomes relevant in the event that the Eurotunnel Entities cause an event to occur which “has an analogous effect”.  For what it is worth, in my view sub-clause (9) was also engaged, when, on 13 July 2006, an initial hearing took place before the Tribunal de Commerce, attended by representatives of Eurotunnel S.A.  (and the other Eurotunnel Entities).  No doubt the attendance could be characterised as “action in furtherance of, or indicating its consent to, or approval of, or acquiescence in” the institution of the procédure de sauvegarde and/or the seeking of the appointment of one or more Administrateurs Judiciaires, within the meaning of sub-clause (9).
36.	Accordingly, in my judgment, in so far as any positive case was put forward by the Insurer under this head, Mr. Neish’s arguments do not provide any realistic basis for a defence.
Was the Bank entitled to, and did it, validly terminate the ISDA Master Agreement with effect on 17 July 2006 on the grounds of a Bankruptcy Event of Default?
37.	In its defence the Insurer merely makes non-admissions as to whether the Bank was entitled to, and did validly, designate an “Early Termination Date” and terminate the ISDA Master Agreement, and as to whether the Loss Amount claimed by the Bank was accurately calculated in accordance with the terms of the ISDA Master Agreement and payable by EFL;  see Amended Defence, paragraph 16(1)-(2);  and paragraph 16(3)-(4).  However, no real positive case was advanced by Mr. Neish at the hearing under this head.  In my judgment the evidence served by the Bank in support of its application for summary judgment, together with its Amended Particulars of Claim, discharges the necessary burden of proof in relation to these matters and there is no realistic prospect of a defence succeeding on these grounds.
38.	It is clear, in the light of my conclusions above in relation to Counterparty Bankruptcy, that, likewise, a “Bankruptcy” occurred under the ISDA Master Agreement.  It necessarily follows that the Bank was entitled on this basis to notify an Event of Default under section 5(vii) and to designate 17 July 2006 as the Early Termination Date under section 6(a), as it in fact did.  By reason of section 6(c)(i), the effect of so designating an Early Termination Date was that the ISDA Master Agreement terminated on that date.  Thereupon the amount due by EFL to the Bank in respect of the Early Termination Date was determined by the Bank in accordance with sections 6(c)(ii) and 6(e) and on the basis of Second Method and Market Quotation (as provided for in Part 1 of the Schedule to the ISDA Master Agreement).  The evidence showed that the Bank provided EFL with a Notice of Statement of Calculation in accordance with sections 6(d)(i) and 6(e) on 20 July 2006  and under section 6(d)(ii) the amount so calculated as being due was then payable to the Bank.  The Insurer stated in its evidence that it has been able to verify that the Bank’s calculation was mathematically correct in relation to all but 2 of the ISDA collars.  However the Bank’s evidence adequately demonstrated that its calculation of the Loss Amount due to it upon the Early Termination Date was correct and that the Insurer’s query stemmed from a small typographical error on the dealer poll spreadsheet which did not, however, affect the accuracy of the calculation which the Bank actually carried out.  Otherwise, as Mr. Howe submitted, the Insurer’s unsubstantiated speculation as to the Reference Market-makers’ quotations obtained by the Bank does not afford the Insurer any ground to resist the Bank’s Part 24 applications;  see e.g.  Barros Mattos Junior v MacDaniels Ltd [2004] EWHC 1188 (Ch), [2005] 1 WLR 247, 256, at paragraph [37] per Laddie J.  Accordingly, this non-admission provides no basis for a defence to the claim.
The construction of the term “Bankruptcy Trigger Event”;  does the relevant “Counterparty Bankruptcy” have to be one which occurs prior to an actual termination of the ISDA Master Agreement which termination has occurred following, and therefore by reason of, the occurrence of a Counterparty Failure to Pay?
39.	It is the Bank’s case that, on the true construction of the Policy as a whole and of the term, a “Bankruptcy Trigger Event” requires only the occurrence of a Counterparty Bankruptcy in circumstances where the ISDA Master Agreement has not already been subject to termination for a Counterparty Failure to Pay.  Mr. Howe therefore contends that the Counterparty Bankruptcy of Eurotunnel S.A. and the other Eurotunnel Entities satisfies this test and thus constitutes a “Bankruptcy Trigger Event” for the purpose of clause 1(i)(c).  
40.	The Insurer disputes this construction of “Bankruptcy Trigger Event”.  Mr. Neish argued:
i)	that (as was common ground as a matter of fact for the purposes of the application), because there was no failure to pay before the alleged termination of the ISDA Master Agreement, there could be no Bankruptcy Trigger Event as defined;  
ii)	that “a ‘Bankruptcy Trigger Event’ occurs only where a ‘Counterparty Bankruptcy’ occurs prior to the termination of the ISDA Agreement and Transactions but following the occurrence of a ‘Counterparty Failure to Pay’”;  see the Amended Defence, paragraph 7(2);  
iii)	that, in accordance with its plain words, clause 1(i)(c) is to be construed as requiring the occurrence of a “Counterparty Failure To Pay” prior to termination of the ISDA Master Agreement on grounds of  “Counterparty Bankruptcy”.
41.	The modern approach of the Court to contractual construction is well known and frequently rehearsed.  It can perhaps be characterised as “neither uncompromisingly literal nor unswervingly purposive”;  Arbuthnott v Fagan [1995] CLC 1396, 1340, per Lord Bingham MR.  As the House of Lords recently stated in Sirius International Insurance Co v FAI General Insurance Ltd & Ors [2004]  1 WLR 3251, at 3257, paragraph 18, per Lord Steyn, commercial contractual documents should be interpreted in a way which is commercially realistic rather than literalistic:  
“The aim of the inquiry is not to probe the real intentions of the parties but to ascertain the contextual meaning of the relevant contractual language.  The inquiry is objective:  the question is what a reasonable person, circumstanced as the actual parties were, would have understood the parties to have meant by the use of specific language.  The answer to that question is to be gathered from the text under consideration and its relevant contextual scene.”
42.	I refer also to the well  known passages in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771A-B per Lord Steyn;  775E-G per Lord Hoffmann;  and in  ICS v the West Bromwich Building Society [1998] 1 WLR 896, 912 per Lord Hoffmann.  In the latter case, Lord Hoffmann said that, in construing the terms of a commercial contract such as the Policy, the object is to ascertain objectively therefrom the intention of the parties at the time and to identify 
“the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.
43.	I start, therefore, by simply looking at the words of the definition of “Bankruptcy Trigger Event” in clause 14.  An obvious and plain reading of those words suggests that what is being described is a Counterparty Bankruptcy which occurs before something else happens;  that something else is the “termination of the ISDA Master Agreement following the occurrence of a Counterparty Failure to Pay.”  The natural reading of the words does not suggest that the phrase “following the occurrence of a Counterparty Failure to Pay” applies to the occurrence of the Counterparty Bankruptcy itself;  that is to say, a natural reading does not suggest that the phrase defines in temporal terms when a Counterparty Bankruptcy occurs.  On the contrary, on a natural reading, the phrase clearly appears to describe, or qualify, a termination of the ISDA Master Agreement;  i.e.  it has to be a termination which satisfies the description of being one which follows a Counterparty Failure to Pay.  Nor does the definition in any way suggest that the event before which a Counterparty Bankruptcy has to occur is an event which actually has to happen before a Bankruptcy Trigger Event can occur.
44.	I then turn to consider the term “Bankruptcy Trigger Event” in the wider context of the Policy, as construed against the factual matrix of the objective commercial purpose of the transaction, which was clearly to protect the Bank against credit exposure risks under the ISDA Master Agreement resulting in financial loss to it.  It was common ground (as was obvious) that the Policy was indeed “a back to back credit indemnity” with the ISDA Master Agreement, and the inter-relationship is borne out by the fact that many of the definitions are in materially identical terms.  I do so in order to consider whether there is any reason for rejecting or modifying the natural and plain meaning of the words, as I read them, or any support for Mr. Neish’s construction that a Counterparty Bankruptcy must be preceded by a Counterparty Failure to Pay, if it is to trigger clause 1(i)(c).  
45.	Despite Mr. Neish’s extensive and elaborate submissions in support of this argument, and those of Mr. Howe in response, the answer did not appear to me to be a difficult one.  In my judgment, one finds no support whatsoever for Mr. Neish’s construction, when one construes the term Bankruptcy Trigger Event in this wider context.  Put simply, as Mr. Howe submitted, under the ISDA Master Agreement, the Bank was exposed to two separate and distinct risks of credit exposure, which constitute separate and distinct Events of Default, against each of which it is reasonable to suppose that the Policy was intended separately to protect the Bank, namely:  
i)	the risk of a payment default by EFL on the date when a periodic payment obligation fell due under the ISDA Master Agreement:  this was a risk that could only materialise at 6-monthly intervals;  and
ii)	the risk of a “Bankruptcy” as defined in respect of EFL or any of the other Eurotunnel Entities:  this risk could materialise at any time.
46.	Indeed, so much was admitted by the Insurer.  Thus in paragraph 6(1) of its  Amended Defence, it asserts that the Policy provisions “protect [the Bank] against the distinct risks of (a) EFL’s failure to make payments due under the Transactions and/or ISDA Agreement and (b) EFL becoming bankrupt” (emphasis added).  In my judgment, from a commercial point of view, it is natural that the Bank should have been concerned to protect itself against the occurrence of the latter risk, independently of the former because:
i)	“Bankruptcy” can be a more serious credit risk event than Counterparty Failure to Pay since the latter might occur for reasons which do not materially increase the Bank’s credit exposure risk under the ISDA Master Agreement;  and 
ii)	further, the scope of the risk of Bankruptcy as defined was greater:  it embraced not only EFL but also “any Credit Support Provider” such as Eurotunnel S.A. in the present case, and its occurrence was also not confined to the occasion of twice-yearly payment dates.
47.	I agree with Mr. Howe, that in these circumstances it would be surprising, as well as anomalous from a commercial standpoint, if the credit indemnity insurance protection put in place in respect of the ISDA Master Agreement were not effective to protect the Bank separately against each of these credit risks.  On the Bank’s case as to construction, the Policy mirrors and responds to each of the separate credit risks under the ISDA Master Agreement referred to above.  The Policy provides indemnity to the Bank against such risks in four defined situations.  Clauses 1(i)(a) and (c) are concerned with pre-termination events, while clauses 1(i)(b) and (d) are concerned with post-termination events.  Clauses 1(i)(a) and 1(i)(b) deal with the risks of a Counterparty Failure to Pay, whereas clauses 1(i)(c) and 1(i)(d) are concerned with the risks of Bankruptcy.	
48.	Bankruptcy after termination is only of significance to the Bank’s risk of credit exposure if there has already been a Post Close-Out Failure to Pay, i.e.  a failure by EFL to pay the Bank the amount due upon termination.  Otherwise, ex hypothesi, EFL’s obligations under the ISDA Master Agreement will have been discharged on termination and the Bank will not have had any need to call on the Policy.  However, as Mr. Howe submitted, before termination, Bankruptcy does have an independent significance and in a certain sense is a more significant credit risk event than a Counterparty Failure to Pay;  the occurrence of a Bankruptcy event during the currency of the ISDA Master Agreement materially increases the risk of a future default by EFL at a periodic payment date, so that it is in the interests of the Bank – as well as of the Insurer - that the ISDA Master Agreement should be brought to an end immediately following the occurrence of a pre-termination Bankruptcy Event:  termination brings forward EFL’s obligations under the ISDA Master Agreement and avoids the risk of those obligations becoming more substantial – and also more unlikely to be enforceable - by the time of the next scheduled payment date (which could be 6 months away) as a result of unanticipated changes in interest rates.
49.	It was common ground that the alternative claims under clause 1(i)(c) and 1(i)(b) and (d) cannot be evaluated without first having considered the overall structure of clause 1(i) of the Policy and how that structure relates to the relevant terms of the ISDA Agreement.  Mr. Neish submitted that the structure proceeds on a linear, temporal basis, which deals first with ordinary payment default before addressing, in stages, its effect depending on whether and (if so) when payment default leads to “Bankruptcy.
50.	However, according to Mr. Neish’s construction, the Policy would offer no cover under clause 1(i)(c) for the Bank’s credit exposure where a pre-termination Bankruptcy Event occurred without a prior Counterparty Failure to Pay.  In my judgment there is no good reason why a distinction should be drawn for the purposes of clause 1(i)(c) between such a Bankruptcy Event which occurs immediately prior to the date on which a payment is due under the ISDA Master Agreement (and thus without any prior Counterparty Failure to Pay) and a Bankruptcy Event which occurs a day later, after a Counterparty Failure to Pay.  The temporal sequence of a Counterparty Failure to Pay and a Bankruptcy Event is entirely fortuitous, especially since the dates on which payments fall due under the ISDA are widely spaced at 6 month intervals.  The order of these events does not have any significance so far as the commercial object of the Policy is concerned.  
51.	Moreover, if Mr. Neish were correct, there would, or at least might, be a tension between the mandatory obligation of the Bank to terminate the ISDA under clause 1(i)(c)  of the Policy “promptly, upon becoming aware of the Bankruptcy Trigger Event”, and its need to do so under clause 1(i)(a), in the event of a Pre-Close Out Failure to Pay Event, in order to be entitled to recover from the Insurer the “Defaulted Payment Amount”;  in the latter case the Bank may only be able to do so in accordance with the terms of Section 6 of the ISDA Master Agreement upon the earlier to occur of the expiry of not less then 90 days following the occurrence of a Counterparty Failure to Pay;   and receipt by the Insured of a “Termination Notice” from the Insurer instructing the Bank to designate an Early Termination Date.  Moreover, as Mr. Howe submitted, if the prior occurrence of a Pre-Close Out Failure to Pay was a necessary element of clause 1(i)(c), then (at least) that part of clause 1(i)(c) which provides for mandatory termination of the ISDA Master Agreement would surely have been included in clause 1(i)(a) as, in effect, an “accelerated termination” provision.  This is a further indication that the scope of clause 1(i)(c) is not as narrow as the Insurer now suggests, but is an overarching provision  dealing with pre-termination Bankruptcy Events.  
52.	Mr. Neish’s arguments in response to these points were not compelling.  He first relied upon what he submitted was legitimate factual matrix evidence contained in a witness statement from a Mr. Wiegley which he said constituted admissible evidence about the commercial context of the Policy and about background commercial considerations.  In particular he sought to rely on the facts that, to the parties’ knowledge (as reflected in a “Deal Sheet” prepared by the Insurer prior to the signing of the Policy, but allegedly upon the basis of information supplied by the Bank):
i)	Eurotunnel had defaulted on interest payments due in respect of its borrowing in 1995 and had been forced to restructure its debt;  and
ii)	payments under interest rate swaps had, despite Eurotunnel’s payment  defaults and restructuring, been treated as operating expenses and had continued to be paid in 1995, and that this latter point was recorded by the Insurer as (and, in all probability presented by the Bank when seeking the Policy as) “…a significant risk mitigant for the transaction” in the “Deal Sheet”.  
53.	Even were this material admissible as legitimate factual matrix evidence on the issues of Policy construction, which is doubtful, I consider it of little or no assistance in deciding the point of construction.  Mr. Wiegley’s opinion evidence as to the possible treatment of payments under ISDA collars as operating expenses in an insolvency situation, and the “typical” conduct of a party to an ISDA transaction faced with a Bankruptcy event affecting its counterparty, is not only conjectural but far from the type of objective matrix evidence that can assist in resolving a nice, but relatively straightforward, point of construction.  Moreover, the “Deal Sheet” contemplates the existence of insurance cover in circumstances where there was a Bankruptcy (as defined) without a prior failure to pay by EFL:  it expressly refers to the grant of protection to the Bank “against the risk of a Eurotunnel failure to pay or bankruptcy” and “against failure to pay and/or bankruptcy” (emphasis added).  This hardly assists the Insurer’s case.
54.	Moreover, the very term “Bankruptcy Trigger Event” which is used in the Policy to define the circumstances in which clause 1(i)(c) is engaged suggests that it is Bankruptcy (rather than Counterparty Failure to Pay) which is the focus of this gateway to indemnification.  There is no good reason to distinguish between pre-termination Bankruptcy Events which (fortuitously) occur after a Counterparty Failure to Pay and Bankruptcy Events which do not.  Had it been agreed to limit the application of clause 1(i)(c) in the way contended for by Mr. Neish, I have no doubt but that it would have been clearly spelled out in the definition clause.
55.	Mr. Neish contended that objective considerations of commercial commonsense and the commercial rationale of the Policy supported his conclusions.  I disagree.  In my judgment it would be commercially unrealistic for what was agreed to be a “back to back” credit indemnity insurance to exclude pre-termination Bankruptcy, where there had been no prior Counterparty Failure To Pay, as an independent route to indemnification and thereby ignore the effect of a Bankruptcy Event on the credit risk faced by the Bank which the ISDA Master Agreement itself contemplates.  Mr. Neish attempts to explain the commercial rationale of the Policy by the assertion that:
“ The lower limit of indemnity [under clause 1(i)(b)] provides a disincentive to [the Bank] to terminate the ISDA Agreement and Transactions upon the occurrence of a “Counterparty Bankruptcy” where EFL is continuing to make payments under Transactions when due.”
see the Amended Defence, paragraph 6E(3)(d).  However, in my judgment, the different limits of cover under clauses 1(i)(c) and 1(i)(b) are far more convincingly explained by reference to the fact that the maximum exposure in a Bankruptcy Event situation (i.e.  100%) is likely to be higher than in the case of a mere Counterparty Failure to Pay.  This explanation is supported by the fact that clause 1(i)(d) will be triggered if a Contingent Liability Event (that is, a Counterparty Bankruptcy after a Post Close-Out Failure to Pay) occurs, resulting in a higher limit of indemnity.
56.	Mr. Neish sought to support this “disincentivisation” argument by the assertion that:
“the occurrence of a ‘Bankruptcy’ would not necessarily lead to any payment default on the part of EFL under the ISDA Agreement and Transactions.  EFL might continue to require interest-rate hedging even if a ‘Bankruptcy’ occurred and, accordingly, might treat payments due under Transactions as operating expenses and continue to pay them when due”;
see paragraph 6E(2) of the Insurer’s Amended Defence.
Mr. Wiegley similarly speculates that a party in EFL’s position “might well continue” to pay under ISDA collars and “it is far from inevitable” that its counterparty would choose to exercise its termination rights.  I did not find this argument in any way persuasive.  At the time of entry into the ISDA Master Agreement and the Policy, whether or not payments under ISDA collars would fall to be treated as “operating expenses” at all in a hypothetical future insolvency situation would be a matter of the local law governing the insolvency, as well as a question for the debtor company, and therefore unpredictable and at least a matter for some debate and uncertainty;  in any case, the chance of the counterparty making payments under the ISDA collars would vary widely depending on the gravity of the Counterparty Bankruptcy which had occurred, its precise financial position and the course of events both before and after the Bankruptcy event, which would be entirely unpredictable – all the more so in circumstances where, as here, the payment obligations were spaced 6-months apart.  
57.	As submitted by Mr. Howe, there are many other reasons why Mr. Neish’s arguments would produce a commercially unrealistic result.  The Insurer’s construction of clause 1(i)(c) would necessarily apply in all circumstances, including those where it is self-evident that EFL would not, or would be unlikely to, continue making payments under the ISDA Master Agreement.  It is unrealistic to suggest that in such circumstances the Bank would be prepared to leave matters in the hands of EFL where, ex hypothesi, a Counterparty Bankruptcy has already occurred, and it is unlikely that the Bank would have sufficient information to be able to determine for itself whether or not EFL might satisfy its periodic payment obligations.  The Insurer’s construction of clause 1(i)(c) leaves no room for a case where the Bank has real concerns about the likelihood of EFL satisfying its future payment obligations under the ISDA Master Agreement.  This in my judgment is a strong pointer to the fact that its interpretation cannot be correct.  Furthermore, as is explained by the ISDA User Guide, which is part of the commercial background to the Policy, the purposefully wide definition of “Bankruptcy” in the ISDA Master Agreement is intended to be triggered by events in advance of the onset of a formal insolvency process, precisely so as to allow the non-defaulting party to terminate and take advantage of the netting provisions in the ISDA Master Agreement, as well as to maximise its prospects of enforcing its right to any termination payment, which such a formal insolvency process might otherwise prevent.  There are strong commercial reasons why it might wish to do so.  In such circumstances it would be in the Bank’s interests to terminate the ISDA Master Agreement immediately on Bankruptcy.  An obligation to pay – and a likely Counterparty Failure to Pay - would arise on termination.  Any subsequent Bankruptcy Event would then open the clause 1(i)(d) gateway.  Although the limit of indemnity under the clause 1(i)(d) is (potentially) slightly lower - by 50% of any amount in excess of US$20 million recovered in respect of EFL’s liability under the ISDA Master Agreement - than that under clause 1(i)(c), the provisions are broadly analogous.  The risk of a slightly lesser recovery under clause 1(i)(d) than under clause 1(i)(c) would be unlikely to have encouraged the Bank to take the risk of being able to rely on neither provision.
58.	Mr. Neish also submitted that “it was not in [the Insurer’s] interests for the ISDA Agreement and Transactions to be terminated early (triggering a possible claim under clause 1(i)(b) [of] the Policy) in circumstances where there had been ‘Counterparty Bankruptcy’ but no payment default by EFL”;  see the Amended Defence, paragraph 6E(3)(c).  But this submission, in my judgment, provides no commercial support for the Insurer’s construction.  As Mr. Howe submitted, a mandatory termination under clause 1(i)(c) would operate in the Insurer’s interest in the event of Counterparty Bankruptcy whether or not there had been a prior Counterparty Failure to Pay.  Otherwise, it would be at the Bank’s discretion whether to terminate on the ground of Bankruptcy.  If the ISDA Master Agreement were not terminated upon the occurrence of a Bankruptcy Event, the Insurer would run the risk of increased losses for which – in the event of a future Counterparty Failure to Pay– the Insurer could be required to indemnify the Insurer under the Policy.  There is no reason to suppose that at the time of entering into the Policy this was a risk which the Insurer was prepared to undertake.  Furthermore early termination might well be in the interests of an insurer in the Insurer’s position insofar as it would mitigate the risk of the insurer not having the benefit of assigned rights until after a formal insolvency process had intervened, making enforcement more difficult.
59.	Accordingly, in my view, any arguments based upon the commercial rationale of the Policy, clearly support the Bank’s construction of the term Bankruptcy Trigger Event.  In my judgment, none of the detailed arguments of construction advanced by Mr. Neish under this head have any reasonable prospect of success at trial.  I therefore conclude that it is clear that a Bankruptcy Trigger Event, as defined in the Policy, did indeed occur, notwithstanding that there was no prior Counterparty Failure To Pay.
Did the Bank provide the Insurer with “a duly completed Notification of Loss” as required under clause 1(i)(c) of the Policy?
60.	The next issue in relation to the Bank’s primary claim under clause 1(i)(c) of the Policy is whether the Bank fulfilled its obligation to provide the Insurer with a “duly completed” Notification of Loss under clause 1(i)(c).  Two points were argued under this head:  
i)	the first is whether the Bank’s obligation to provide a “duly completed” Notification of Loss was a condition precedent to any liability on the part of the Bank  to indemnify the Bank in respect of its claim;  and
ii)	the second is whether, in the circumstances, such an obligation was in fact fulfilled by the Bank.
61.	“Notification of Loss” is defined in clause 14 of the Policy as:
“… a notice in substantially the same form as the notice attached in Annex F, from the Insured to the Insurance Company (1) confirming the occurrence of a Trigger Event, (2) specifying any amount payable under section 6(e) of the ISDA Master Agreement, (3) giving details of the relevant account to which any amount payable to it is to be paid, and (4) providing the Insurance Company with such other information about the Trigger Event that the Insurance Company may reasonably require, except that the Insured shall not be obligated to provide any information to the Insurance Company that it would not be obligated to deliver to the Counterparty in accordance with Section 6(d)(i) of the ISDA Master Agreement.”
62.	Clause 11(viii) of the Policy  provides:
“The due observance of the conditions, warranties and exclusions of this Policy by the Insured insofar as they relate to anything to be done or complied with by the Insured …shall be a condition precedent to any liability of the Insurance Company to make payment under this Policy”.
63.	Annex F is in the following form:
“…
Dear Sir/Madam
NOTIFICATION OF LOSS
We refer to the Single Policy Credit Indemnity Insurance Policy (Policy No:  GB0002899AR001) (the ‘Policy’ dated 27th December, 2000 and made between Winterthur International Insurance Company Limited (the ‘Insurance Company’) and Merrill Lynch Capital Markets Bank Limited (the ‘Insured’).
This notice constitutes a Notification of Loss under the Policy.
Capitalised terms not otherwise defined herein and relating to the Policy will bear the meanings as defined in the Policy.
1.	Notification of Loss
	In accordance with Clause [1(i)(b)/1(i)(c)] [*delete as appropriate] of the Policy, we hereby give you notice and confirm to you an occurrence of a [Post-Close Out Failure to Pay] [Bankruptcy Trigger Event] [*delete as appropriate] (the ‘Trigger Event’)
	[*Insert details as appropriate]
2.	Amount Payable
	Following such Trigger Event, we hereby give you, the Insurance Company, notice that in accordance with Clause [1(i)(b)/1(i)(c) of the Policy, an amount of US$.  [       ] is payable to the insured.
	We hereby certify that such amount was calculated in accordance with the applicable terms of the ISD Master Agreement (as defined in the Policy).
3.	Account Details
	Account Details of the Insured:
Bank Name:		Bank of America NT & SA, New York, USA
Account Number:	6553062860
Swift Code:	BOFAUS3N
Reference:	A/C Merrill Lynch Capital Markets Bank, Dublin
CHIPS ID:	045559
4.	Further information
	[*Insert details of any additional information] 
5.	Governing Law
	This Notification of Loss is governed by, and shall be construed in accordance with, English law.
Yours faithfully,

For and on behalf of [the Bank]”
64.	As I have already mentioned, on 20 and 21 July 2006 (by fax and courier respectively), the Bank provided the Insurer with what the former claims was a valid and compliant Notification of Loss pursuant to clause 1(i)(c) of the Policy, in the form set out in Annex F to the Policy.  The Bank also contends that it provided the information required by the definition.  The Notification was accompanied by a copy of the same Notice of Statement of Calculation which the Bank had provided to EFL in accordance with section 6(d)(i) of the ISDA Master Agreement.  The actual Notification of Loss, so far as relevant for present purposes, was in the following terms:
“1.	Notification of Loss
		In accordance with Clause 1(i)(c) of the Policy, we hereby give you notice and confirm to you the occurrence of a Bankruptcy Trigger Event (the ‘Trigger Event’).
		The Trigger Event has occurred through the Counterparty Bankruptcy of Eurotunnel SA.
2.		Amount Payable
		Following such Trigger Event, we hereby give you, the Insurance Company, notice that, in accordance with Clause 1(i)(c) of the Policy, an amount of €29,895,940 is payable to the Insured.
		We hereby certify that such amount was calculated in accordance with the applicable terms of the ISDA Master Agreement (as defined in the Policy).”
3.	Account Details
	Account Details of the Insured:
Bank Name:		Bank of America NT & SA, New York, USA
Account Number:	6553062860
Swift Code:	BOFAUS3N
Reference:	A/C Merrill Lynch Capital Markets Bank, Dublin
CHIPS ID:	045559
4.	Further information
	A statement of calculation, drawn up pursuant to the terms of the ISDA Master Agreement, is attached for your information.
	….”
That statement of calculation was a copy of the Notice of Statement of Calculation which had been sent to EFL by letter dated 20 July 2006 together with the accompanying schedules showing in detail how the calculations had been made by reference to market quotations from three Reference Market Makers.
Was the Bank’s obligation to provide a “duly completed” Notification of Loss a condition precedent to any liability on the part of the Insurer to indemnify the Bank?
65.	The Insurer relies upon 1(i)(c), 1(ii) and 11(viii) of the Policy to support the argument that the provision of a “duly completed” Notification of Loss was a condition precedent to any liability on the part of the Insurer to indemnify the Bank in respect of its claim.  
66.	In my view, despite the fact that extensive argument was presented by both sides in relation to the point, it is neither necessary nor appropriate for the purposes of this CPR Part 24 application for me to decide it.  The point, in the context of the Policy, and indeed generally, is an interesting and important one, in relation to which numerous authorities and text books can be (and indeed, in the course of the hearing, were) invoked.  I propose to assume, for the purposes of this application, and in the Insurer’s favour, but without deciding the point, or expressing any view on it, that due Notification was a condition precedent to the Insurer’s liability, rather than merely (as Mr. Howe submitted) its liability actually to pay.  On any basis it is an issue in relation to which the Insurer has a prospect of successfully defending.
Was the Bank’s obligation to provide a “duly completed” Notification of Loss fulfilled in relation to the claim under clause 1(i)(c)?
67.	The Bank submits that the Notification of Loss clearly satisfied the Policy definition set out above, and fulfilled the Bank’s contractual obligation to provide the Insurer with a “duly completed” Notification of Loss.  
68.	The Insurer, on the other hand, accepts that the Bank’s Notification of Loss under clause 1(i)(c) was provided to it in time (i.e.  as soon as reasonably practicable following the occurrence of an Early Termination Date).  However, it complains that the Bank did not provide the Insurer with “such other information about the Trigger Event that [the Insurer] may reasonably require”, and failed to specify which individual sub-clauses of the definition of “Counterparty Bankruptcy” the Bank was relying upon in relation to Eurotunnel S.A.  (and its detailed reason(s) why) - either in the Notification of Loss itself, or by means of the Bank’s further communications in response to the Insurer’s subsequent “reasonable requirement”;  see the Insurer’s Amended Defence paragraph 13(3)(a) and paragraph 15(3)(c)-(d).  In particular, the Insurer submits it was not enough for the form to be as per Appendix F unless  it also contained “details as appropriate”, i.e.  in addition to the formal information required and, adopting the language of the definition in clause 14 of the Policy,  “..such other information about the Trigger Event that the Insurance Company may reasonably require…”.
69.	Mr. Neish submitted that the clause 1(i)(c) “Notification of Loss” was, therefore, required to convey to the Insurer the information it required to understand how a “Bankruptcy Trigger Event” had occurred;  that meant it had to provide particulars of a “Counterparty Bankruptcy” (by reference to particular parts of the complex provision of that definition) which justified early termination of the ISDA Agreement.  In fact, complained Mr. Neish, the “Notification of Loss” said nothing more informative than that “The Trigger Event has occurred through the Counterparty Bankruptcy of Eurotunnel SA”;  it did not mention or explain the French Proceedings or how they meant that a “Counterparty Bankruptcy” had occurred within the various limbs of the definition.  Thus, submitted Mr. Neish, it was not possible for the Insurer  to form any sensible view as to Policy liability on the basis of the “Notification of Loss” provided.  Although he accepted that some additional information was provided by the Bank’s letter dated 9 August 2006 (which specifically stated that the invocation of the French procédure de sauvegarde by Eurotunnel S.A. pursuant to the relevant statutory provisions was a Bankruptcy Event of Default under section 5(a)(vii)(4), (6) and (9)), he complained that the Policy required a duly completed “Loss Notification” (as defined) and none was provided.  He relied upon the fact that, following receipt of the “Notification of Loss” on 20 July 2006 the Insurer, in its letter of 4 August 2006 stated that the “Notification of Loss” provided was “…not duly completed” and that the Insurer had also made clear that:  
“This letter is solely for the purposes of obtaining additional information from [the Bank] and [the Insurer] expressly reserves all of its legal rights in this matter”.  
70.	In my judgment these arguments have no real prospect of success at trial.  I do not consider that the Bank’s notification obligation was as extensive as Mr. Neish submitted.  Annex F required the Bank to identify, in paragraph 1 of the Notification, simply by appropriate deletion, whether the Trigger Event was a Post-Close Out Failure to Pay or a Bankruptcy Trigger Event.  It also required the Bank, in that paragraph, to “[*Insert details as appropriate]”, but there is no indication of what precise details, or level of detail, were or was regarded as appropriate.  What the Bank did was to state “The Trigger Event has occurred through the Counterparty Bankruptcy of Eurotunnel SA.”.  It would have been obvious from the use of the definition “Counterparty Bankruptcy” that this was a reference to one or more of the events set out in the definition, in relation to Eurotunnel S.A., which was defined in the Policy as one of the Eurotunnel Entities.  Whilst it might possibly have been helpful to the Insurer to know precisely which sub-paragraph of the definition of Counterparty Bankruptcy was being relied upon, I cannot see that either the format of paragraph 1 of Annex F (and its use of the words “[*Insert details as appropriate]”) or the definition of Notification of Loss in the Policy, which required the Bank merely to “confirm...” in paragraph (1) “the occurrence of a Trigger Event”, leads to the conclusion that a failure to identify the relevant sub-clause or to specify the facts that comprised the Bankruptcy made the Notification fatally non-compliant.  
71.	Moreover, although paragraph 4 of Annex F states “[*Insert details of any additional information]” and the definition of Notification of Loss in the Policy goes on to provide that the Notification must be one “(4) providing the Insurance Company with such other information about the Trigger Event that the Insurance Company may reasonably require,” that paragraph (4) requirement (at least) is subject to the proviso -
“except that the Insured shall not be obligated to provide any information to the Insurance Company that it would not be obligated to deliver to the Counterparty in accordance with Section 6(d)(i) of the ISDA Master Agreement.”
What the Bank is obliged to deliver to the Counterparty in accordance with Section 6(d)(i) of the ISDA Master Agreement is:
“(d)	Calculations
(i)	Statement.  On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid.  In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.”
This is precisely the information that the Bank supplied under paragraph 4 of its Notification and the accompanying documents.
72.	Accordingly, in my judgment, the argument that the Bank failed to comply with the requirements of paragraph 4 of Annex 4, or its obligation “to provid[e] ... the Insurance Company with such other information about the Trigger Event that the Insurance Company may reasonably require” by not specifying which individual sub-clauses of the definition of “Counterparty Bankruptcy” were relied upon by the Bank in relation to Eurotunnel S.A.  (and why), and by not setting out a “detailed explanation of how it considered the procédure de sauvegarde to give rise to an insured loss”, has no real prospect of success.  I regard such an approach as unnecessarily technical for the commercial purpose that a Notification of Loss has to serve, namely to inform the Insurer that an insured loss has occurred and to trigger the Insurer’s obligation to provide an indemnity;  see clauses 1(i)(c) and 1(ii).  In the context of a contractual obligation to give notice of certain claims under a charterparty, the House of Lords in A/S Rendal v Arcos [1937] 58 Ll.L.Rep 287, 292, per Lord Wright, held that sufficient notice would be given if the party receiving the notice was thereby able to meet the claim by preparing and obtaining appropriate evidence.  A precisely formulated claim giving full details was not required.  Of course, what, in any particular situation is required by way of notice, will depend upon the particular contractual wording, the function of the notification and the commercial context.  But, in circumstances where, as here, neither the Policy, nor Annex F, spelled out to any great level of detail what precise information had to be given in the Notification of Loss, I see no reason why the Insurer should escape liability to indemnify, simply because details which it claims should have been originally provided to it were not.  
73.	Moreover, in my judgment, the wording of the Policy envisages that further information could be provided in response to subsequent reasonable requests for such information by the Insurer, and did not need to be contained in the original Notification of Loss itself.  In that event the Notification of Loss might comprise two documents, but I do not consider that that matters, providing that one is in the Annex F format, and both satisfy the requirement that they have been provided as soon as reasonably practicable following the occurrence of an Early Termination Date.  I reach this conclusion because the wording “such other information about the Trigger Event that [the Insurer] may reasonably require” in point (4) of the definition of “Notification of Loss” suggests that such a request may be made by the Insurer for further information, after receipt of the original Notification of  Loss.  Moreover, this view is supported by the fact that the Insurer’s obligation to pay, is only triggered after receipt of a “duly completed” Notification of Loss, whereas the Bank’s obligation is merely to provide a “Notification of Loss” in the defined format.  This likewise suggests that is open to the Insurer to require further information in order to obtain a “duly completed” Notification of Loss.
74.	Here what happened was that following receipt of the Notification of Loss, the Insurer requested further information about the Bank’s claim under clause 1(i)(c).  The Bank duly provided such information to the Insurer in early August 2006.  Thus in response to the Insurer’s request by letter 4 August 2006 for “further information regarding the nature of the alleged Bankruptcy Event” the Bank provided such further information to the Insurer by its letters dated 8 and 9 August 2006:  in those letters the Bank confirmed that the ISDA Event of Default and Early Termination and the Bank’s claim under clause 1(i)(c) were triggered by Eurotunnel S.A., one of the Credit Support Providers, invoking the French procédure de sauvegarde, provided additional explanation of these matters, and stated that the actions of Eurotunnel S.A.  were caught by (at least) sub-clauses (4),(6) and (9) of the Policy definition of “Counterparty Bankruptcy”.  
75.	The Insurer initially did not focus on the Bank’s letter of 9 August 2006, prompting the Bank to send the Insurer a further copy of it on 24 August 2006.  In reply, the Insurer acknowledged receipt of this further information and made no complaint about it:  the Insurer merely stated that it was “not currently clear to us that a relevant event has occurred” and that the Insurer was “considering this issue further and will revert to [the Bank] as soon as possible”.  Thus, in my judgment, even if I were wrong in my conclusion that the initial Notification of Loss was compliant with the definition requirements, and comprised a “duly completed” Notification of Loss, the further information promptly supplied by the Bank on request in its letters dated 8 and 9 August 2006 meant that by the latter date the Insurer had indeed received a “duly completed” Notification of Loss.
76.	Accordingly, in my judgment, Mr. Neish’s arguments about the lack of a “duly completed” Notification of Loss under clause 1(i)(c) have no real prospect of success, and provide no ground for the Insurer to resist the Bank’s application for summary judgment in respect of its primary claim.  It follows that the Bank is entitled to summary judgment under this head.
The Bank’s alternative claim under clause 1(i)(b) of the Policy
77.	The Bank’s alternative claim under clause 1(i)(b) is based upon (the admitted fact of) EFL’s non-payment of the principal amount (€29,895,940) claimed by the Bank upon its early termination of the ISDA Master Agreement on 17 July 2006.  This constituted a “Post Close-Out Failure to Pay” by EFL as defined in the Policy.  The Insurer admits that, if a “Counterparty Bankruptcy” occurred in respect of Eurotunnel S.A.  as a result of any of the events referred to above, entitling the Bank to terminate the ISDA Master Agreement and calculate the amount due to it as it did, then EFL’s subsequent failure to pay this amount to the Bank amounted to a “Post Close-Out Failure to Pay”.  The Insurer also accepts that the Notification of Loss under clause 1(i)(b) which the Bank provided to it on 11 October 2006 was “duly completed” as required under the Policy.  It was also common ground that, if the Bank’s claim under clause 1(i)(b) is well-founded, the principal amount due and payable by the Insurer to the Bank under this head with effect from 1 November 2006 is quantified at US$20 million.  This alternative claim only falls for consideration in the event that I am wrong in my conclusion in relation to the Bank’s primary claim under clause 1(i)(c).
78.	The Insurer denies liability in respect of the Bank’s alternative claim under clause 1(i)(b) of the Policy on the basis of the alleged lateness of the Bank’s notice dated 11 October 2006.  It contends that timely service was a condition precedent to any liability to the Bank under the Policy.  It accepts that the notification was duly completed, which, as Mr. Howe pointed out, could be said to weaken the Insurer’s submission that the Notification of Loss under clause 1(i)(c) and the Contingent Liability Event Notice under clause 1(i)(d) were not “duly completed”, since the Notification of Loss under clause 1(i)(b) provided a similar level of detail.  
79.	Again, I approach this matter, for the purposes of this application, on the assumption, but without deciding the point, or expressing any view on it, that timely Notification was a condition precedent to the Insurer’s liability.  
80.	Clause 1(i)(b) required the Bank “to provide” a “Notification of Loss” “…on becoming aware of the Post Close-Out Failure To Pay”.  It was common ground that, in the absence of any specified time limit, this was to be done within a reasonable time of the Bank becoming aware of this event.
81.	The Post Close-Out Failure To Pay occurred on 17 July 2006.  In fact, it is clear that the Insurer was aware of the Early Termination on 17 July 2006 of the ISDA Master Agreement by not later than 20 July 2006 (when the Insurer   received a copy of the Bank’s Notice of Statement of Calculations of that date to EFL accompanying the Bank’s Notification of Loss under clause 1(i)(c)).  Further the Insurer was aware by not later than 4 August 2006 (as evidenced by its letter to the Bank of that date and confirmed by the Bank on 8 August 2006) that EFL was refusing to pay the Loss Amount due to the Bank in respect of that early termination.  Indeed, it was the Insurer, which first suggested on 29 September 2006 (by S& J, more than 3 weeks after their instruction) that the Bank’s claim should technically be brought under clause 1(i)(b), prompting the latter to serve a “protective” notice in respect of this alternative basis of claim.  
82.	The fact is that, following the delivery to the Insurer of the Notification of Loss under clause 1(i)(c) on 20 July 2006, the Bank and the Insurer (and their respective solicitors) were engaged in protracted correspondence concerning whether Counterparty Bankruptcy had occurred.  This correspondence clearly proceeded on the assumption that there was no other basis on which the claim under clause 1(i)(c) was being contested.  The Insurer made no suggestion that the claim ought to be brought under clause 1(i)(b) (or any other basis) until S&J’s letter dated 29 September 2006.  In response to this letter, the Bank served a Notification of Loss under clause 1(i)(b) by fax on 11 October 2006.  In this context the Notification of Loss under clause 1(i)(b) was served on The Insurer within a reasonable time.  Thus, were it necessary for me to decide the point, I would conclude that the Insurer has no valid ground on which to resist the Bank’s application for summary judgment in respect of its alternative claim under clause 1(i)(b) of the Policy.
The Bank’s alternative claim under clause 1(i)(d) of the Policy
83.	The Bank’s alternative claim under clause 1(i)(d) is based upon the occurrence of a “Contingent Liability Event” (as defined), that is:  a further, distinct and subsequent Counterparty Bankruptcy in respect of each of the Eurotunnel Entities by reason of the judgment of the Tribunal de Commerce de Paris of 2 August 2006, which occurred subsequent to a Post Close-Out Failure to Pay (namely EFL’s non-payment of €29,895,940 upon early termination of the ISDA Master Agreement, as referred to above).  The Bank’s Contingent Liability Event Notice under clause 1(i)(d) was provided to the Insurer on the same date as the Notification of Loss under clause 1(i)(b), namely 11 October 2006.  It would only be necessary for me to decide this point, if I were wrong in my conclusion in relation to the Bank’s primary claim.
84.	The Insurer’s position in relation to this alternative claim is that:
i)	As a matter of construction, no claim arose under claim 1(i)(d) since no “Contingent Liability Event” occurred on any view.
ii)	In breach of condition precedent, the Bank failed to provide the Insurer  with “a duly completed Contingent Liability Event Notice” as required under clause 1(i)(d).
iii)	In breach of condition precedent, the Bank failed, upon becoming aware of a “Contingent Liability Event” (not later than 2 August 2006), promptly to provide the Insurer  with a “Contingent Liability Event Notice”.  No “Contingent Liability Event Notice” was provided until 11 October 2006.
85.	As to the first point, Mr. Neish submitted that, taking account of the structure of the Policy, what is envisaged is a sequence of events starting with a “Pre Close-Out Failure To Pay” and followed by a “Counterparty Bankruptcy” which occurs either before or after termination of the ISDA Agreement and Transactions;  each event is part of a possible sequence and the Policy is designed to respond differently depending upon where each event, in fact, comes in the sequence;  it is not designed to respond on the basis that the same event can appear and be used at different stages;  the Policy operates on a series of triggers set off by the occurrence of the events, so that once the event has been used for the trigger, that is the end of its significance.  He further submitted that the same “Counterparty Bankruptcy” cannot feature twice in the same sequence of events and that, having relied on its occurrence for the purposes of its clause 1(i)(b) claim, the Bank cannot rely on the same “Counterparty Bankruptcy” for the purposes of its clause 1(i)(d) claim.  He submitted that the judgment of the Tribunal de Commerce de Paris of 2 August 2006 (or any other event relating to the procédure de sauvegarde) cannot be relied upon as a further occurrence of a “Counterparty Bankruptcy” distinct from the events relied on for the purpose of ML’s primary claim under clause 1(i)(c).  He asserted that “any aspect of the French proceedings was part of the same, single ‘Counterparty Bankruptcy’ which occurred upon the institution of the French proceedings”, and therefore no Counterparty Bankruptcy occurred on or subsequent to the Post Close-Out Failure to Pay (i.e.  EFL’s failure to pay the amount due on early termination of the ISDA Master Agreement).
86.	I disagree.  The Order of the Tribunal de Commerce de Paris on 2 August 2006, opened the procédure de sauvegarde in respect of the Eurotunnel Entities, as a result of which each became subject to the appointment of (inter alia) two Administrateurs Judiciaires.  As was clear from the expert evidence of Professor Aynès, for each of these companies, this constituted becoming “subject to the appointment of an administrator … or other similar official for it or for all or substantially all its assets” within the meaning of sub-clause (6) of the “Counterparty Bankruptcy” definition and/or “subject to an event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to” the event specified in sub-clause (6), within the meaning of sub-clause (8).  Consequently a further Counterparty Bankruptcy occurred in relation to each of the Eurotunnel Entities on 2 August 2006, which was distinct from, and subsequent to, the prior Counterparty Bankruptcy in respect of Eurotunnel S.A.  upon which the termination of the ISDA Master Agreement had been based.  Mr. Neish’s suggested interpretation of the Policy fails to take account of the width of the extended definition of Counterparty Bankruptcy, which includes a wide range of events preparatory to, and subsequent to, the institution of the proceedings referred to in sub-clause (4).  It is possible for this definition to be satisfied in many different ways and at different times:  the various different limbs of the definition are not mutually exclusive.  For instance, it is clearly possible for a less serious event of Counterparty Bankruptcy to be followed at a later stage by a more serious event of Counterparty Bankruptcy.  I agree with Mr. Howe’s submission that Counterparty Bankruptcy cannot be regarded as a ‘once-and-for-all’ event.  Thus, while the institution of the procédure de sauvegarde on or before 13 July 2006 satisfied sub-clause (4) of the definition at that time, Eurotunnel S.A.  (and the other companies) did not become subject to the appointment of the Administrateurs Judiciaires until their appointment was ordered by the Tribunal de Commerce in its judgment of 2 August 2006.  The pronouncement of this judgment falls separately and independently within sub-clauses (6) and (8) of the definition of Counterparty Bankruptcy for the reasons referred to above.
87.	As to the second point, namely that the Bank failed, in breach of condition precedent, to provide the Insurer with “a duly completed Contingent Liability Event Notice” as required under clause 1(i)(d), for similar reasons to those which I have given in relation to the point in respect of the Bank’s Notification of Loss under clause 1(i)(c), in my judgment there is no reasonable prospect of a defence succeeding on this ground.  The definition of Contingent Liability Event Notice in clause 14 of the Policy differs from the definition of a Notification of Loss.  The former requires:
“… a notice, in substantially the same form as the notice attached in Annex B, from the Insured to the Insurance Company confirming the occurrence of a Contingent Liability Event.”
88.	In my judgment, the Bank’s Contingent Liability Event Notice was in the required form set out in Annex B to the Policy.  The informational requirements for this form of Notice were, if anything, less exacting than for the Notification of Loss under clauses 1(i)(b) and (c).  Unlike those Notifications, the Policy did not require the Contingent Liability Event Notice to contain a “Further Information” section.
89.	As to the third point, namely that the Bank failed upon becoming aware of a “Contingent Liability Event” promptly to provide the Insurer with a “Contingent Liability Event Notice”, for similar reason to those which I have given in relation to the Bank’s Notification of Loss under clause 1(i)(b), in my judgment there is no reasonable prospect of a defence succeeding on this ground.  The word “promptly” adds nothing to the argument in the circumstances.
90.	Accordingly, in my judgment, were it necessary to decide the point, I would hold that the Insurer has no real prospect of a defence upon any of these grounds to the Bank’s alternative clause 1(i)(d) claim.
Quantum
91.	By the time of the hearing, the only live quantum issue was whether, as the Insurer contends, the amount claimed by the Bank falls to be reduced by reference to the sum of €8.9m received by the Bank from EFL on about 26 July 2006.  The relevant facts are that, on 26 July 2006, EFL made a payment to the Bank of €8,887,953.73 on the basis that it did not accept that the ISDA Master Agreement had been terminated.  The Bank accepted that sum on the basis that it was a partial payment of the Loss Amount due to it from EFL on early termination.  In its letter to EFL dated 31 July 2006 it wrote:
“We note that on 26th July we received “Euro 8,887,954.00 from Eurotunnel Finance Limited.  Given the fact that we have designated an Early Termination Date under the Agreement, the Agreement has now been terminated.  The only amounts now payable under the Agreement are those due under section 6(e) of the Agreement (i.e.  the payment on early termination).  Accordingly, we have applied the Euro 8,887,954.00 in partial discharge of the debt of Euro 29,896,043 owed by Eurotunnel Finance Limited to MLCMB.  A balance of Euro 21.008.089.00 plus interest remains payable.  (See attached calculations”
After its application in this way, the Bank treated the Early Termination Payment “payable” as being €21,048,097.  
92.	Mr. Neish submitted that the Policy does not make express provision for receipt of payment in partial reduction of the Early Termination Amount prior to payment of any claim.  He referred to Clause 4 which addresses the situation where “Upon irrevocable payment in full by [the Insurer] to [EFL] of any amount under clause 1…”, there will be a transfer or assignment of the Bank’s rights against EFL in “…any Loss Amount”.  He also referred to Clause 6 which addresses “Set-Off” in circumstances where, having paid the claim, the Insurer seeks recovery of the “Loss Amount” from EFL under transferred or assigned rights and EFL asserts a pre-existing set-off against the Bank.  He contended that neither clause (upon which the Bank sought to rely) has any application on the present facts.  He submitted that the treatment of the €8.9m payment should be by reference to the Policy language and consistent with first principles of contracts of indemnity.  As to the former, he emphasized that the Policy requires payment of the “Loss Amount” (clauses 1(i)(b) and (c)) or “Excess Termination Amount” (clause 1(i)(d));  that both are defined by reference to the amount payable by EFL under Section 6(e) of the ISDA Agreement.  He pointed to the fact, that by the first date that any indemnity was due under the Policy, the amount so payable was, and was expressly acknowledged by the Bank to be (as per its letter to EFL dated 31 July 2006, quoted above), the balance due following application of the €8.9m in “partial discharge” of the sum demanded on Early Termination.  As to the latter point, he submitted that, to permit the Bank to recover an amount which takes no account of this partial discharge and that it received €8.9m prior to having any right to indemnity under the Policy, would be contrary to the basic principles of indemnity underlying an insurance contract of this sort.  
93.	Mr. Howe, on the other hand, relied upon clause 1(ii) of the Policy which provides that within the prescribed time the Insurer should settle all claims “by irrevocably paying in full all amounts which become payable under this Policy”.  Thus he contended that, under clause 1(i)(c), the Insurer is obliged to indemnify the Bank “for the Loss Amount”, which he emphasized was defined as “an amount (or any part thereof) payable by the Counterparty to the Insured on an Early Termination Date in accordance with Section 6(e) of the ISDA Master Agreement”.  He contended that it was only upon indemnification by the Insurer in full that the Bank was obliged under clause 4 of the Policy to assign all rights and interests that it might have against EFL.  He also relied upon clause 6 of the Policy.  He referred to the fact that there was a residual risk that EFL’s Administrateurs Judiciaires might seek the return of, or to claw back, the sum of €8,887,950, and that the Bank should be protected against this risk.  Consequently, he contended that there was no entitlement on the Insurer’s part to set off the sum of €8,887,950 against its liability to the Bank under the Policy.  Further, for the same reasons, he did not accept that the Bank was not entitled to interest on €8,887,950 of the full amount due.  He made it clear that the Bank was not seeking to recover more than its entitlement following default on the ISDA Master Agreement, but that, once the Insurer had indemnified the Bank in full, including against any residual risk with respect to the €8,887,950  payment, the Bank would account to the Insurer for that sum and the appropriate interest which has accrued on it.  
94.	In my judgment the submissions of Mr. Neish are to be preferred on this point.  This was not a case where the Bank had placed the sum of €8,887,950 on a suspense or contingency account.  On the contrary, the Bank had applied the sum in actual discharge of EFL’s debt.  There was no evidence, at the time of the hearing before me, or lodged subsequently thereto, to the effect that the Administrateurs Judiciaires were seeking to claw back the amount.  At the date when the Insurer was obliged to pay under the Policy, namely 11 August, the sum outstanding from EFL had been actually reduced by this sum.  The Policy provisions relating to transfer in clause 4 and to set off in clause 6 (although arguably not directly applicable) strongly support the argument that the Insurer was entitled to the benefit of the payment by EFL – certainly once the Insurer had paid.  In my judgment, in the absence of any express term in the Policy addressing the position, it would breach indemnity principles for there to be no notional set off or reduction in the Insurer’s favour as from 11 August of this amount, together with relative interest thereon.  Certainly the point is arguable by way of defence for CPR Part 24 purposes.  (I was not asked to decide the point in favour of the Insurer under CPR Part 24).  
95.	Accordingly, the amount in respect of which summary judgment will be given in favour of the Bank must be reduced by this sum.
Interest
96.	In the light of my conclusions in relation to the foregoing issues, the only live issue in relation to interest is whether the Bank should be awarded statutory interest under section 35A of the Supreme Court Act 1981 in respect of its claim under clause 1(i)(c) from 11 August to 5 September.  The Insurer contends that the Bank issued the proceedings “prematurely and peremptorily” and before the Insurer had had “any reasonable opportunity” to investigate the claim and/or “prior to the provision of information as to the precise basis of [its] claim”;  see the Amended Defence, paragraph 21(2).  Accordingly, it contends that, to the extent to which the Court awards the Bank damages in respect of its claim under clause 1(i)(c), interest should not be awarded on relevant sums for the period prior to 5 September 2006.  
97.	I reject this argument.  The Insurer was provided with a reasonably comprehensible claim in respect of which it could determine coverage at the latest by the letters of 8 and 9 August 2006 from the Bank to the Insurer.  Consequently, the Insurer had been fully informed of the basis of the Bank’s claim under clause 1(i)(c) of the Policy before the date when, at the latest, it should have settled that claim, namely 11 August.
Conclusion
98.	In the circumstances the Bank is entitled to summary judgment in respect of its primary clause 1(i)(c) claim, subject to the appropriate deduction in respect of the sum of €8,887,950.  I will hear argument from counsel as to the precise amount of both the principal and interest elements of the claim and as to any consequential orders.
99.	I am grateful to the legal teams on both sides for their helpful written and oral submissions.