Key Points

  • Court considers the impact of the Spanish Insolvency Act on guarantees governed by English law
  • Court holds that the liability under the guarantee was not extinguished

The Facts

Ramblas Investments B.V. (“R”), a company incorporated in the Netherlands with its COMI in Spain, entered into a €200m loan agreement with RBS. The defendant (“D”) provided RBS with a limited guarantee in respect of R’s liability. The guarantee was governed by English law. D also entered into a personal loan with RBS. The claimants (“C”) took an assignment of RBS’s rights against R and D. R failed to pay sums due under the loan agreement and subsequently R was placed into a Spanish insolvency process and demand was made on D.

D argued that Article 97.2 of the Spanish Insolvency Act meant that any guarantees given to a creditor “specially related to the debtor” were extinguished on insolvency. C argued that the provision did not affect guarantees provided by third parties, as was the case here.

The Decision

The Judge was presented with extensive expert evidence on the scope and impact of Article 97.2 and, taking into account an objective consideration of the wording within the framework of the legislation, held that Article 97.2 did not operate to extinguish guarantees provided by third parties. No credible reason for extending the Article to third party guarantees (the cancellation of which would only benefit the guarantor) had been put forward.


This decision is helpful for creditors of Spanish companies (or those with their COMI in Spain) holding third party guarantees which may otherwise have found themselves without the benefit of recourse against guarantors.

Edgeworth Capital Luxembourg & ors v Maud