Privy Council sets terms for relief in Turkcell shareholder dispute
Following its decision in Cukurova’s favour in January 2013, allowing Cukurova’s appeal and granting relief against the appropriation of its shares, the Privy Council has now given judgment on the terms on which relief is available to Cukurova [2013] UK PC 20. This is the fourth and latest Privy Council decision in a six-year multi-billion dollar battle for control of Turkcell, the largest mobile phone company in Turkey, being fought between the Alfa Group of Russia and the Cukurova Group of Turkey (the earlier decisions of the Board are reported at [2009] UKPC 19, [2012] UKPC 20 and [2013] UKPC 2).
The case concerns Alfa’s attempts to rely on the novel remedy of appropriation, introduced into English law by Directive 2002/47/EC on financial collateral arrangements and the Financial Collateral Arrangements (No2) Regulations 2003, to seize a controlling interest in Turkcell following a default by Cukurova under a US$ 1.35 billion loan agreement in 2007.
In its important and ground-breaking decision in January 2013, the Board held that the Court had jurisdiction to grant a borrower relief against forfeiture where the lender had appropriated financial collateral which the borrower had provided as security for a loan pursuant to the Regulations. The Privy Council’s latest decision is the most in-depth consideration of the equitable jurisdiction to relieve against forfeiture by an appellate court since at least the leading House of Lords decision of Shiloh Spinners v Harding in 1973.
In its judgment the Board considered in detail the juridical nature of the remedy and whether its effect was to resurrect and restore the parties’ pre-existing contractual rights. The Board held, as Cukurova had submitted, that when setting the conditions for relief, the court was not constrained to require Cukurova to pay default interest at the rate specified in the loan agreement. The Board also considered in detail the principles concerning the effect of a tender of payment by a debtor on the entitlement of its creditor to interest, examining case law which stretches back to the Seventeenth Century, much of which has not been considered at this appellate level for many years, if at all. The decision is of considerable importance, both in the particular context of secured lending and security enforcement and as a guide to the nature of relief from forfeiture generally.
The effect of Board’s decision on these issues is that the sum to be paid by Cukurova to regain its interest in Turkcell is over US$1 billion lower than that contended for by Alfa before the Board.
Kenneth MacLean Q.C. and James Nadin have acted for Cukurova throughout the litigation. They were assisted by David Caplan who appeared in both recent Privy Council hearings. All three were instructed by White & Case LLP.
Full text of the Judgment available here.