HFW wins precedent-setting derivatives case for Olam

Law firm HFW has successfully defended its client global agri-business Olam International Limited (Olam) in a precedent-setting derivatives case involving proceedings in Denmark and before the English High Court.

The firm represented Olam in a dispute relating to cash-settled derivatives contracts it had agreed with Danish bunker trading company OW Supply & Trading A/S (OW) in 2013.

OW filed for bankruptcy in 2014 and the bankrupt estate subsequently pursued claims against Olam and two shipping companies over outstanding sums owed under the derivatives contracts.

HFW successfully applied to the English High Court, which ordered that Olam was not obliged to make any payment to OW for the open positions, due to it being in bankruptcy.

OW's bankruptcy estate then brought proceedings in Denmark "to have an authoritative Danish decision as to whether the estate is right that mandatory Danish insolvency law takes precedence over contract terms contrary to Danish insolvency law, and the bankruptcy estate has a legal and creditable interest in having this issue settled in Denmark".

The Danish District Court and now the Danish Western High Court on appeal found that they did not have jurisdiction to hear this matter. The Court held that the claim was a bankruptcy claim and not a claim for fulfilment of a contract giving grounds for jurisdiction – and even if it had been, the claim still had a character of a ‘money claim’ and therefore fell outside of the Danish Administration of Justice Act, which OW's bankruptcy estate was relying on to bring proceedings in Denmark.

This decision contrasts with the outcome of a similar case against Danish dry bulk shipping company XO Shipping in 2017. In that case, the Danish Courts found they had jurisdiction and ordered XO to pay sums due under derivatives contracts to a bankrupt estate.

HFW partner Brian Perrott states: "This is a significant decision that sets an interesting precedent: if you are an international company and enter into derivatives contracts with a Danish company that subsequently goes bankrupt, you now can't face claims in Denmark."

HFW's team comprised partner Brian Perrott and associate Prashant Kukadia. Olam was represented in Danish proceedings by Johannes Grove Nielsen at Danish law firm Bech-Bruun. The bankrupt estate was represented by Peter Bang at Danish law firm Plesner.