Credit Suisse International v Stichting Vestia Groep [2014] EWHC 3103 (Comm)


The High Court has held that a Dutch social housing association was liable under an ISDA Master Agreement because, although it had lacked capacity to enter into a number of swap transactions, it had made representations that it had capacity which gave rise to a contractual estoppel preventing it from escaping liability.

The facts

Credit Suisse International (“CSI”) claimed €83 million after Stichting Vestia Groep (“Vestia”) had defaulted on a number of swap transactions with CSI which were governed by an ISDA Master Agreement.

Vestia claimed that it lacked capacity under Dutch law and therefore the swap transactions were ultra vires.

The Court accepted that Vestia, as a not-for-profit social housing association, only had the power under Dutch law to enter into contracts which had the effect of hedging its borrowing liabilities. The Court further agreed that some of the complex derivative transactions with CSI were speculative rather than hedging in nature.

The consequences of such a lack of capacity fell to be decided, not under Dutch law, but under English law which governed the ISDA Master Agreement (the “ISDA”). Under English law, the ultra vires contracts were invalid at common law. Sections 39 and 40 of the Companies Act 2006 provided exceptions to that rule (so that a lack of capacity would not invalidate a contract as against a third party dealing in good faith), but those statutory rules did not apply to the Dutch company. The transactions were therefore void.

However, CSI claimed that Vestia was still liable under representations it made under the ISDA. Vestia had made a number of representations in section 3 of the ISDA and “Additional Representations” in the Schedule to the ISDA that Vestia had capacity and had complied with its Articles, financial rules and any other applicable laws or regulations. The Court held that the representations in section 3 of the ISDA were mere representations and not warranties and were only concerned with Vestia’s capacity to enter into the ISDA and not the individual future transactions made under the ISDA. By contrast, the Additional Representations were contractual warranties that Vestia did have capacity to enter into the transactions.

CSI also claimed that the Additional Representations provided by Vestia contractually estopped it from disputing the validity of the transactions. Vestia argued that contractual estoppel could not make valid contracts which were outside the scope of its authority; the Court accepted that point, but said that CSI was entitled to enforce the ISDA as if the ultra vires contracts were valid. Vestia was therefore prevented by estoppel from disputing its liability to CSI.


Although this case involves the added complication of a Dutch counterparty, it still highlights issues concerning capacity and authority which can be raised in disputes involving complex derivatives and the importance of the precise meaning of representations to be negotiated under ISDA Master Agreements.