ICBC Standard Bank becomes creditor to Banco Nacional de Cuba for EUR 200 million in sovereign debt via debt acquisition

Project narrative

On May 28, 2021, ICBC Standard Bank Plc filed a lawsuit against Banco Nacional de Cuba and the Government of the Republic of Cuba to recover unpaid (principal) debts worth approximately EUR 200 million. The lawsuit (CL2021-000343) was filed in England’s High Court of Justice. A separate, but related, lawsuit (CL-2020-000092) was filed by CRF I Limited in 2020 against Banco Nacional de Cuba and the Government of the Republic of Cuba. The dispute involves a sovereign debt claim by the claimant (CRF I Limited) against the principal obligor of those debts, Banco Nacional de Cuba (BNC), and the guarantor of one of those debts, the Republic of Cuba. The debts arose out of loan agreements dating to the mid-1980s. CRF was not the original lender. CRF I Limited is a company (legally incorporated in the Cayman Islands) that was established in 2009 to invest in defaulted Cuban debt. It has taken what it claims to be valid assignments of the debts from the lenders and their successors, and sued the defendants (BNC and the Republic of Cuba) for those debts. On September 24, 2009, Standard Bank Plc entered into a custody agreement with CRF I Limited, as well as a Master Participation Agreement and a Debt Acquisition Agreement. At the same time, CRF I Limited began to build its interest in Cuban debts. On September 29, 2009, Exotix offered CRF I Limited a Cuban sovereign debt (with face value JPY 321,550,000) for sale. CRF I Limited executed the relevant confirmation document on September 30, 2009. Then, on October 7, 2009, CRF I Limited instructed Standard Bank Plc to accept the sale pursuant to the terms of the Debt Acquisition Agreement. By a Joint Seller Notice of Assignment and Buyer Agreement to be Bound dated on its face October 12, 2009, this debt was assigned by Exotix to Standard Bank Plc. There was no indication that Standard Bank Plc was acting on behalf of CRF I Limited (or indeed in any capacity other than as principal). This Notice, and the cover letter purportedly providing BNC’s consent, were signed by two BNC employees: Mr. Raúl Eugenio Olivera Lozano, who was at the time the Director of Operations at BNC (“Mr. Lozano”), as a “Manager”, and Ms. Lidia Gomez Beltran of BNC as a “Director”. The cover letter was on BNC’s official “blue security paper”. The Notice contained a stamp confirming that the two BNC signatories were authorized. The relevant “Sale Letter Agreement” between Exotix, Standard Bank Plc, and CRF I Limited is dated on its face October 26, 2009, but executed at a later date. On November 1, 2012, an advisory agreement was entered into between CRF Management Limited, CRF I Limited, and Mr Jeetkumar Gordhandas, a consultant acting on behalf of CRF I Limited (“Mr Gordhandas”). Mr Gordhandas’ role was to provide investment research and recommendations, accounting and administration services. Then, on March 26, 2013, Mr Gordhandas informed Standard Bank Plc that CRF I Limited had purchased various Cuban sovereign debt positions from Westlake. Two days later, on March 28, 2013, CRF I Limited purchased a number of DEM-denominated debts from the liquidator of Socimer. The executed Letter Agreement was dated April 22, 2013, between Socimer as “Assignor” and CRF I Limited as “Assignee”. BNC gave agreement “in principle” to the assignment of various debts from Socimer to Standard Bank Plc on July 9, 2013, with this document being signed by two BNC employees: Ms Martí as “Assignment of Debt” and Mr Lozano as a “Manager”. By various Joint Seller Notices of Assignment and Buyer Agreements to be Bound dated on their face November 8, 2013, certain debts were assigned by Socimer to Standard Bank Plc, with no indication that Standard Bank Plc was acting on behalf of CRF I Limited (or indeed in any capacity other than as principal). These Notices, and the cover letters providing BNC’s consent, were each signed by two BNC employees: Mr Lozano as a “Manager” and Ms Magali Mon Hernandez as a “Director”. The cover letters were each on BNC’s official “blue security paper”. The Notices each contained a stamp confirming that the two BNC signatories were authorized. On November 19, 2013, Socimer’s liquidator provided BNC’s November 8, 2013, letter to CRF I Limited. In July 2013, CRF Management Limited gave an Investor Update, where it was stated that CRF I Limited completed loan purchases of EUR 60.8 million in the first half of 2013, in which the portfolio had a notional exposure of EUR 126 million in loans with the Republic of Cuba as the Guarantor and Banco Nacional de Cuba as the Obligor. On August 6, 2013, against a background of reports that the Paris Club restructuring negotiations were to resume, CRF Management Limited wrote to President Raul Castro as follows: “[CRF] holds approximately € 130mm (Face Value) of medium-term and short-term (MT/ST) restructured debt from the early 1980s which is guaranteed by the Republic of Cuba … Furthermore, CRF Management Limited (CRFM) is in direct contact with other professional creditors that own approximately another € 300mm of this debt. Together, we represent over 40% of the total outstanding MT/ST debt and strongly believe that, as a group, we can lead the process to restructure this benchmark debt. Such a process would set a precedent for all other creditors and could lead to the full restructuring process for Cuba, giving the country renewed access to the international capital markets. CRFM is willing to lead discussions for the formation of a “London Club” steering committee with the other identified professional creditors mentioned above. CRFM feels that a Cuba that has access to international capital markets would be able to efficiently execute its current economic strategy and grow more rapidly, reducing its dependence on trade finance and bilateral credits. CRFM seeks to be a long-term partner for the Cuban government and seeks a fair, rational restructuring that is equitable to all sides based upon established international norms.” However, the delivery of this letter is contentious. CRF claims that it was delivered by hand to the Cuban embassy in London. The defendants claims that (i) CRF has adduced no documentary evidence of sending the letter or of delivery; (ii) Mr Gordhandas’ evidence that he handed the evidence to someone at the Cuban Embassy in London is not sufficient; and (iii) in any event, hand delivery to the Cuban embassy does not amount to delivery of the letter to Cuba or to its identified addressee, the Cuban President. On December 2, 2013, CRFM wrote to the Secretary General of the Paris Club, in which it was outlined that there is a broad scope to cooperate with the Paris Club on the matter of restructuring Cuba’s sovereign debt. It was outlined that working together would provide a tailored, comprehensive debt treatment that reflects their current financial situation, as well as ensuring long-term debt sustainability. In December 2013, CRFM, CRF I Limited, and Mr. Gordhandas entered into a further Consultancy Agreement where Mr. Gordhandas agreed to provide information and factual analysis relating to securities, bonds, debt instruments, and derivative instruments, amongst other services, in relation to the valuations in respect of securities, bonds, debt instruments, and derivative instruments. Then, by a letter to Standard Bank Plc dated February 18, 2014, Mr. Lozano and Ms. Martí confirmed that the debts represented by the Agreements and the Guarantee were held by BNC in favor of Standard Bank Plc. In 2015, ICBC purchased a 60% controlling interest in Standard Bank Plc, forming ICBC Standard Bank Plc. Then, on November 25, 2019, an assignment of receivables was reportedly executed by ICBC Standard Bank Plc in favor of CRF I Limited. However, as of 2023, this was a matter being litigated in English courts. In an attempt to extricate themselves from the consequences of these assignments, the defendants accused ICBC Standard Bank Plc, the assignor, and CRF I Limited, the assignee, of bribing one of the senior officials at BNC as part of a corrupt scheme to procure (or at least expedite) BNC’s consent to the assignments. In particular, it was said that Mr. Raúl Eugenio Olivera Lozano, who was at the time the Director of Operations at BNC (“Mr Lozano”), acted in return for a financial inducement promised by Mr. Don Stevenson of Standard Bank Plc (“Mr. Stevenson”) and paid by Mr. Jeetkumar Gordhandas, a consultant acting on behalf of CRF (“Mr Gordhandas”).