Like Odysseus in Homer’s Odyssey, BNY Mellon had to choose between the lesser of two evils in National Bank of Kazakhstan v Bank Of New York Mellon. While Odysseus faced Charybdis, a dangerous whirlpool, on one side of the Straits of Messina, and on the other Scylla, a monster living in hazardous rocks, BNY Mellon has navigated foreign freezing orders and a global custody agreement.
BNY Mellon was served with freezing orders, issued by Dutch and Belgian courts, in respect of assets it held for the National Bank of Kazakhstan. In response, BNY Mellon froze almost USD 22bn. The National Bank of Kazakhstan brought proceedings against BNY Mellon in the English court, asking the court to declare that BNY Mellon was not entitled to freeze those assets and was in breach of a global custody agreement between the parties.
Under the global custody agreement, BNY Mellon was not liable for any failure to perform an obligation under it caused by “circumstances beyond its direct and reasonable control including … any order … imposed by any … judicial … authority”. The National Bank of Kazakhstan argued that this clause should be interpreted from a contextual starting point and ultimately should be construed narrowly so as not to extend to foreign court orders.
The Court of Appeal rejected this argument. The judge at first instance had correctly interpreted the provision, following recent Supreme Court authority. As a matter of language the Dutch and Belgian orders clearly fell within the terms of clause. As BNY Mellon said, “any” meant “any” and there was no textual reason for reading down the clear words used. The court rejected the claimed “uncommerical consequence” of this interpretation — that a customer who places assets with the London branch of an international bank by reference to English law and jurisdiction would not expect its assets to be at risk of foreign enforcement proceedings. The court pointed, in contrast, to the risk of criminal liability and/or civil liability to third parties (up to the full value of the assets that BNY Mellon held) merely by accepting deposits or custody of assets, as being a commercially insensible outcome.
Despite losing several sailors to Scylla, Odysseus navigated the Straits without his ship sinking in the whirlpool. The clear language in the global custody agreement allowed BNY Mellon to negotiate similarly tricky waters. However, the Supreme Court decisions on interpretation mean that despite clear language, a court is still likely to verify its textual interpretation against the commercial context.