England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building, 7 Rolls Buildings Fetter Lane, London EC4A 1NL
		17 August 2015

Mr. Justice Teare :

1. This is an application for summary judgment brought by the Claimant ("GMI"). In its action GMI has claimed 5 declarations which it invites the court to make on a summary basis, there being, it is said, no realistic defence.
2. GMI's action has been brought and pursued in the wake of the insolvency of the Defendant ("OW") and of certain proceedings which have been brought in Denmark by OW's trustee in bankruptcy. The application for summary judgment was directed by Flaux J. to be heard in August because certain steps have, or might have, to be taken by GMI in the Danish proceedings by 1 September. The hearing before this court took place on 13 August. I was not scheduled to be sitting between 14 August and 1 September. In the circumstances and in order to produce this judgment expeditiously I will set out my decision and reasons rather more succinctly than I might otherwise have done. I will set out the factual background very shortly. The parties are very familiar with it and simply require my decision and reasons.

The background

3. Between 26 February 2014 and 1 October 2014 the parties entered into 10 cash-settled derivatives transactions relating to energy commodities. The transactions are contracts for differences between a fixed price for a notional quantity of a specified commodity and a floating price referable to the market. The transactions were on the terms of a written agreement dated 6 June 2012 ("the General Terms"). They are governed by English law. The particulars of each transaction were set out in a document known as a confirmation.
4. The confirmation made provision for payments on a monthly basis. In addition provision was made in the General Terms for what is known or described as close-out netting in the event of early termination (as explained in clause 8 of the General Terms and entitled Settlement on Early Termination).
5. The parties also entered into a Credit Support Agreement dated 6 June 2012 ("the CSA"). The CSA provided that if the exposure of one party to another exceeded US$800,000 the latter could demand transfer of the amount by which the exposure exceeded US$800,000.
6. I have set out in an annex to this judgment the most material terms of the General Terms, CSA and of one of the 10 confirmations (which, so far as material, are in the same terms).
7. On 7 November 2014 OW filed for bankruptcy in Denmark. There is no dispute that that amounted to an event of default under the General Terms. On 3 February 2015 the Chancery Division of the High Court recognised the Danish bankruptcy proceedings pursuant to the Cross Border Insolvency Regulations 2006.
8. On 9 March 2015 OW's trustee in bankruptcy commenced proceedings in Denmark against GMI seeking a ruling that

"1. [GMI] be ordered to accept that under section 58h(2), second sentence, of the Danish Securities Trading etc Act [OW] in bankruptcy can demand to be put in a position as if close-out netting in compliance with clause 8 of the [General Terms] had taken place as at 7 November 2014 ………..

2. [GMI] be ordered to accept that because of [OW]'s bankruptcy [GMI] cannot rely on clause 3.3 of the [General Terms] in respect of [OW]."

9. OW has indicated that if close-out netting is treated as having taken place on 7 November 2014 a substantial sum, said to be in the region of US$1.6m., would be due from GMI to OW.
10. On 30 March 2015 the Chancery Division granted GMI permission to commence and continue with proceedings which had been issued in this court on 12 February 2015.
11. GMI maintains that, pursuant to the General Terms, the bankruptcy of OW is an event of default and so no payments can be sought by OW from GMI. GMI also maintains that any claim for sums due under the transactions must be brought in this court. The declarations which it seeks from this court are designed to reflect that position. It is submitted on behalf of GMI that OW has no realistic defence to the declarations being granted.
12. Standing back from the detail the overall picture appears to be as follows. GMI considers that under the terms of its contracts with OW no sums are payable by GMI to OW so long as OW remains in default. However, OW's trustee in bankruptcy, who obviously has a duty to gather in such assets as it can for the benefit of OW's creditors, wishes to rely upon a provision of Danish insolvency law which, it says, enables OW to demand that close-out netting under the contracts with GMI be carried out as at the date when OW learnt that OW was in default. If OW's trustee can make and enforce that demand GMI fears that the trustee will seek some US$1.6m. from it. GMI therefore wishes to establish that under the terms of its contracts with OW (a) no sum is presently payable (declarations 1-3), (b) the provision of Danish insolvency law on which the trustee relies cannot affect the contractual position between GMI and OW (declaration 4) and (c) any claim for US$1.6m. alleged to be due pursuant to the process of close-out netting must be brought in England.
13. The conflict between, on the one hand, the terms of the English law contracts and, on the other hand, the provisions of Danish insolvency law is an example of the type of conflict which can arise when a company which conducts business internationally pursuant to the law of one country is subject to insolvency proceedings pursuant to the law of another country.
14. Five declarations are sought. It is convenient to deal, first, with declarations 1-3, secondly, with declaration 4, and thirdly with declaration 5.

Declarations 1-3

15. The declarations sought are:

1. A declaration that an Event of Default within clause 6.1.4 of the General Terms has occurred in respect of the Defendant and is continuing.

2. A declaration that, pursuant to clause 1.3 of the General Terms, and for so long as an Event of Default in respect of the Defendant is continuing, the Claimant is not obliged to make any payment to the defendant in respect of any Transaction governed by the General Terms. For the avoidance of doubt, an obligation to transfer Eligible Credit Support pursuant to the provisions of the Credit Support Agreement dated 6 June 2012 is a "payment" within the meaning of clause 3.3.

3. A declaration that no Early Termination date has been designated or occurred.

16. There is no dispute that declarations 1 and 3 are true and accurate. For that reason counsel for OW's trustee has submitted that there is no purpose in granting them. However, declaration 2 is in dispute. If it is granted declarations 1 and 3 set out the factual context in which it is granted. It is therefore sensible to consider them together. It is accepted that if the three declarations are granted they can only reflect the position as at the date of judgment. Counsel suggested that that also suggested that there was no purpose in granting the declarations because they would be out of date as soon as they were made. However, they will only be out of date if conditions materially change and if that happens it will be easily established. There does not appear to be any likelihood that conditions will materially change.
17. The issue between the parties is whether an obligation to transfer Eligible Credit Support is a "payment" within the meaning of clause 3.3 of the General Terms but it is not accepted that the court should grant a declaration resolving that issue. Counsel for OW's trustee submitted that in circumstances where there had been no threat by OW or its trustee to demand a transfer of Eligible Credit Support the declaration should be refused because the question is hypothetical. However, by an email dated 3 February 2015 OW said that at current market values there was an exposure of US$1.6m in favour of OW. Further, in OW's amended defence dated 6 August 2015 (the "Amended Defence") it is pleaded that "any obligation to transfer Eligible Credit Support pursuant to the provisions of the Credit Support Agreement dated 6 June 2012 is not a "payment" within the meaning of Clause 3.3" (see paragraph 6.2.4 of the Amended Defence). Although Miss Roepstorff, the Danish lawyer acting on behalf of OW's trustee, has said that the trustee has no current intention of bringing proceedings in England it is unclear whether that extends to claims for the transfer of Eligible Credit Support and in any event it has not been said that proceedings for sums due under the transactions will not be brought elsewhere. I consider, given the contention raised in the Amended Defence and the assertion that the exposure under the transactions is US$1.6m in favour of OW, GMI is justifiably concerned that OW's trustee may make a demand for Eligible Credit Support. I therefore consider that there is "a real and present dispute" (see Rolls-Royce v Unite the Union [2010] 1 WLR 318 at paragraph 120 per Aikens LJ) between the parties concerning the true construction of clause 3.3 of the General Terms. I further consider that in circumstances where the contention has been specifically raised in the Amended Defence there is "a useful purpose" in resolving it (see Financial Services Authority v Rourke [2002] CP Rep 14 per Neuberger J. as quoted in Knighthead Master Fund and others v Bank of New York Mellon and others [2014] EWHC 3662 (Ch) at paragraph 23 per Newey J.), namely, that the parties will thereby know the extent of their rights and obligations and will be saved the legal and other costs of resolving any future demand for transfer of Eligible Credit Support.
18. As to the substance of the issue counsel for GMI submitted that since the obligation to provide Eligible Credit Support is an obligation to transfer US dollars (see clause 2.2 of the CSA) that is an obligation to make a payment. He further submitted that the commercial purpose of clause 3.3 of the General Terms is to mitigate counterparty credit risk (a phrase taken from Lomas and others v Firth Rixon and others [2012] EWCA Civ 419 at paragraph 75). That commercial purpose makes equal sense both in the context of the monthly payments required under the transactions and in the context of transfers of Eligible Credit Support. The transfer of Eligible Credit Support was said to be a payment on account because, pursuant to clause 5.2 of the CSA the transfer was outright in the sense that the transferee was entitled to use and dispose of it. He submitted that it would make no sense for the parties to agree that the monthly payments need not be made so long as an event of default continued but that payments on account of future liabilities to pay future monthly payments must still be made.
19. Counsel for OW's trustee submitted that had it been intended that clause 3.3 of the General Terms would embrace transfers of Eligible Credit Support the parties would have said so in terms. Further, it was mere happenstance that the parties had agreed that transfers of Eligible Credit Support were to be made in US dollars. Other provisions of the CSA, in particular clauses 2.2, 5.2 and 6.1, contemplated that Eligible Credit Support could consist of things other than cash such as bonds, shares or even physical commodities. Clause 3 (in particular clause 3.1) of the General Terms expressly contemplated that "payments" were to be in the "contractual currency specified in the relevant Confirmation". Thus "payments" cannot have been intended to include transfers of Eligible Credit Support. Finally, counsel submitted that since the obligation to make monthly payments was only suspended (during the continuance of an event of default) leaving the underlying debt obligation undisturbed it made sense to require what in effect were transfers of security for future payments (which would have to be made if the suspension of the payment obligation came to an end).
20. Transfers of Eligible Credit Support are "out and out" transfers in the sense that, pursuant to clause 5.2 of the CSA, the recipient shall be free to use and dispose of them. However, it is to be noted that clause 3.1 of the CSA provides that in the circumstances there set out a "return amount" will have to be transferred back. Nevertheless, in circumstances where the amounts transferred can be used and disposed the transfers look like payments. Counsel for OW's trustee described them as transfers of "security". I am not sure that is entirely apt. Security cannot usually be used and disposed of.
21. I accept that clause 3.1 refers to payments "in the contractual currency specified in the relevant Confirmation" and that "payments" in clause 3.3 must have the same meaning. However, all of the Confirmations refer to the US dollar currency and the CSA also provides in terms that Eligible Credit Support means "cash in USD". Thus a transfer of Eligible Credit Support with reference to the 10 transactions entered into by GMI and OW will always be a transfer of US dollars and accordingly "in the contractual currency specified in the relevant Confirmation."
22. The strongest point in favour of the case of OW's trustee on this issue is, as it appears to me, that transfers of Eligible Credit Support are described in that way and not simply as payments. Instead of clause 3.1 of the CSA saying that in the events there specified "the Transferee shall be entitled to demand by written notice ….that the other party ("the Transferor") transfers to it Eligible Credit Support with a value equal to the Excess Amount" it could have said "the Transferee shall be entitled to demand by written notice ….that the other party ("the Transferor") pay to it a sum equal to the Excess Amount."
23. However, two matters persuade me that the meaning which clause 3.3 of the General Terms would be reasonably expected to bear in its context is that "payment" includes transfers of Eligible Credit Support. The first is that the commercial purpose of clause 3.3 must be, as submitted, to mitigate counterparty risk. The second is that that commercial purpose makes sense not only for payments on a monthly basis but also for transfers of Eligible Credit Support in the form of cash which can be freely used and disposed of just as the monthly payments can.
24. Counsel for OW's trustee had one further point, namely, that the declaration ignores OW's right to designate an early termination date if an event of default occurs in relation to GMI. It is true that it does. But no such default has occurred. If it does occur then it will be a change of circumstances from those which prevailed at the date of making declaration no.2 and its effect, if any, on the liability of GMI to make payments to OW will have to be debated if it cannot be agreed. I do not accept that the mere possibility that GMI might commit an event of default in the future is a reason for not making declaration no.2.
25. For these reasons the court will grant declarations 1-3.

Declaration 4

26. GMI seeks a declaration that

"no rule of Danish insolvency law will have any effect as a matter of English law to alter or disapply any of the provisions of the General Terms."

27. As expressed this declaration is very wide. It applies to any rule of Danish insolvency law. I have been referred to only one such rule, namely, section 58h(2) of the Danish Securities Trading etc Act which provides as follows:

"in situations where the party in breach is made subject to insolvency proceedings, said party may, however, demand that the close-out netting be carried out in such a manner that the conditions applicable to the parties are the same as they would have been if close-out netting had been effected without undue delay after the time when the party not in breach knew, or should have known, that the party in breach was made subject to insolvency proceedings."

28. It seems to me, as counsel for GMI appeared to accept during his submissions, that declaration 4 can only be made, if at all, with reference to section 58h(2) of the relevant Danish Act.
29. Counsel for GMI was at pains to stress in his oral submissions that he was not seeking a declaration in relation to any judgment or order which might be made by the Danish court in the proceedings which have been brought by OW's trustee but only in relation to the effect of Danish law on the contract. This appeared to contradict the evidence of Mr. Perrott (see paragraph 22(6) and (7) of his second witness statement). However, the oral submission was consistent with the language of the declaration and I consider that I should deal with it.
30. Counsel for GMI accepted that if the Danish court gave judgment in favour of OW's trustee and sought to enforce that judgment in this jurisdiction then questions of recognition and enforceability would arise. Counsel accepted that he was not seeking a declaration which would determine those questions.
31. It thus appears that declaration no.4 is intended to do no more than state that as a matter of English law section 58h(2) of the relevant Danish Act does not alter or disapply the provisions of the General Terms. I very much doubt that this is in dispute.
32. It is common ground that Danish law does not require termination to take place automatically upon the occurrence of an event of default in order for a close-out netting agreement to be effective: see paragraph 26 of the Particulars of Claim and paragraph 5.7 of the Amended Defence. Rather, it seems that there has to be an order of the Danish Court declaring that OW's trustee can demand to be put in a position as if close-out netting in compliance with clause 8 of the General Terms had taken place as at 7 November 2014. Were such an order made the question would arise whether it should be recognised and enforced with the result that the General Terms would, in effect, be altered. That question would in turn give rise to the question whether the decision in Anthony Gibbs & Sons v La Societe Industrielle et Commerciale des Metaux (1890) 25 QBD 399 remains good law (as to which see Global Distressed Alpha Fund 1 Ltd. Partnership v PT Bakrie Investindo [2011] EWHC 256 (Comm)) and if so whether its principle or ratio decidendi applies not only to the question whether a foreign insolvency proceeding can discharge a debt governed by English law but also to the question whether a foreign insolvency proceeding can create a debt which would not be created by the English law contract between the parties.
33. The evidence before me suggests that these issues will have to be resolved if and when OW's trustee obtains an order or judgment from the Danish Court. The evidence before me does not suggest that OW's trustee contends that Danish law itself, absent a judgment of the Danish court, alters the terms of an English law contract.
34. I am therefore not persuaded that there is a "real and present dispute" between the parties as to the effect of section 58h(2) of the relevant Danish Act on the English law contract between the parties or that the making of declaration 4 (in its modified form) would serve any useful purpose.
35. For these reasons I decline to grant declaration no.4

Declaration no.5

36. The final declaration sought (in the revised form put forward at the hearing) is that:

"[GMI] having commenced these proceedings against [OW] in England relating to the General Terms, clause 13.2 of the General Terms prohibits [OW] from commencing any proceedings relating to the General Terms against [GMI] in any other jurisdiction."

37. This declaration requires the court to construe clause 13.2 of the General Terms which, for convenience, I set out:

"With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts."

38. Counsel for GMI submits that this clause creates an exclusive jurisdiction clause, that is, it prohibits either party from commencing proceedings relating to the General Terms in any country other than England. Alternatively, in circumstances where one party has commenced proceedings relating to the General Terms in England, the other party is prohibited from commencing proceedings relating to the General Terms in any country other than England. He accepts that the proceedings already commenced in Denmark by OW's trustee are not in breach of the clause.
39. Counsel for OW's trustee submits that the clause does not create an exclusive jurisdiction clause but accepts that the sense of the clause is that neither party will object to English jurisdiction if the other invokes it. She explained this concession by saying that she accepted that there could be no parallel proceedings relating to the General Terms so long as there were such proceedings underway in England.
40. Counsel for OW submitted that the claim for a declaration was premature, futile and inappropriate in circumstances where no proceedings arguably within the clause have been commenced or even threatened.
41. Typically questions as to the meaning and scope of a jurisdiction clause will arise in the context of an application for an anti-suit injunction where the court is able to consider whether proceedings which have been commenced or threatened breach the clause. The present application for a declaration is unusual in that no specific proceedings alleged to be in breach of the clause have been commenced or expressly threatened. It is therefore necessary to examine carefully the submission of counsel for OW's trustee that the question sought to be answered is hypothetical and for that reason the application for a declaration should be dismissed.
42. GMI fears that if OW's trustee obtains from the Danish court the order it is seeking it may then commence proceedings in Denmark or in some other country for payment of a monetary sum by GMI pursuant to the close-out netting provisions of the General Terms. GMI "wishes to make clear" that any such claim, if it is ever brought, must be brought in England. That is the "utility" of declaration no.5 (see paragraph 22(13) of Mr. Perrott's second witness statement).
43. It seems to me that GMI has a justifiable fear that in the event that OW's Danish proceedings are successful the trustee may well commence proceedings for the sum said to be due to it pursuant to the close-out netting provisions of the General Terms. That fear derives from the fact that the Danish proceedings have been commenced. They were commenced "as part of an overall strategy for the effective administration of the estate...........the contingent entitlement .....comprises an asset of [OW's] estate and one which the Trustees are obliged to protect and secure...." (see paragraphs 14 and 15 of Miss Roepstorff's witness statement). It is obvious that the intention of OW's trustee is to gather in the sum due pursuant to the close-out netting provisions for the benefit of the creditors of OW. That will require proceedings. There is therefore a real fear of such proceedings and GMI has a real interest in seeking a declaration that any such proceedings be brought in England.
44. However, were such proceedings to be brought in a country other than England there would remain to be debated and decided the question whether the proceedings "related to the General Terms". GMI says they would but it may well be arguable that they would relate to the insolvency of OW albeit that the sum claimed was calculated in accordance with clause 8 of the General Terms. Thus the declaration which has been sought would not completely resolve the question whether such proceedings were in breach of the jurisdiction clause in the General Terms.
45. Nevertheless in my judgment there is "a real and present dispute" between the parties as to the effect of the jurisdiction clause and a useful purpose in resolving that dispute, namely, that if and when OW's trustee commences proceedings in a country other than England the dispute between the parties will have been narrowed to the question whether the proceedings "relate to the General Terms".
46. I shall therefore proceed to decide the question which has been raised as to the meaning and effect of the jurisdiction clause in the General Terms.
47. The question is whether the commencement by OW of proceedings in relation to the General Terms in a country other than England would be a breach of clause 13.2 of the General Terms. I respectfully adopt the approach of Males J. in BNP Paribas v Anchorage Capital and others [2013] EWHC 3073 (Comm) at paragraph 88.
48. The manner in which the courts resolve disputes of this nature is revealed by cases such as Austrian Lloyd Steamship Company v Gresham Life Assurance Society Limited [1903] 1 KB 249, Sohio Supply Co. V Gatoil (USA) Inc. [1989] 1 Lloyd's Reports 588, Pathe Screen Entertainment Limited v Handmade Films 11 July 1998 per Hobhouse J. (unreported), BAE v Dee Howard [1993] 1 Lloyd's Reports 368, A/S D/S Svendborg v Wansa [1997] 2 Lloyd's Reports 183, Sinochem v Mobil Sales [2000] 1 Lloyd's Reports 670, Sabah Shipyard v Islamic Republic of Pakistan [2003] 2 Lloyd's Reports 571 and BNP Paribas v Anchorage Capital and others [2013] EWHC 3073 (Comm). Some of the approaches adopted by the courts in construing jurisdiction clauses have been criticised by the textbook writers; see Civil Jurisdiction and Judgments by Briggs 6^th edition at paragraphs 4.13-4.17 and Dicey, Morris and Collins on the Conflict of Laws 15^th edition paragraphs 12-105 – 12-108.
49. As with all questions of construction the court's task is to identify the meaning which the jurisdiction clause would reasonably be understood to bear in its context. Since the court has tackled questions of this nature before the court must have regard to the manner in which the court has approached this question in previous cases but those cases, which involve clauses worded differently from clause 13.2 of the General Terms, cannot determine the construction of clause 13.2. Again, I respectfully adopt the approach of Males J. in BNP Paribas v Anchorage Capital and others [2013] EWHC 3073 (Comm) at paragraph 88. The factors identified in previous cases are only "signposts which may sometimes assist in determining the intention of the parties".
50. I infer from the terms of clause 13.2 that the parties intended it to apply to all proceedings relating to the General Terms. In this regard I have in mind that it refers to "any suit, action or proceedings relating to" the General Terms and that it applies mutually, as in "each party irrevocably submits". I further infer from the fact that the jurisdiction clause follows the parties' agreement that the General Terms will be governed by English law that the parties saw that there was good sense in linking the proper law of the transactions with the law of the country whose courts were referred to in the jurisdiction clause. In that context the obligation assumed by the parties to "submit to the jurisdiction of the English courts" would reasonably be understood as an obligation to submit all claims relating to the General Terms to the jurisdiction of the English courts.
51. I accept that the language of the clause is not what has been described in previous cases as transitive, as in "each party agrees to submit all claims" to the jurisdiction of the English courts. But the notion that each party is free to submit a claim to the jurisdiction of a court other than the English court in circumstances where each party has "irrevocably" submitted to the jurisdiction of the English court is difficult.
52. I also accept that my construction of clause 13.2 does not sit happily with the approach of Hobhouse J. in Pathe Screen Entertainment Limited v Handmade Films 11 July 1998 per Hobhouse J. (unreported). However, the approach of the Court of Appeal in Austrian Lloyd Steamship Company v Gresham Life Assurance Society Limited [1903] 1 KB 249 shows that language such as an agreement by parties "to submit to the jurisdiction of the Courts of Budapest" can, depending upon the context, be construed as a mutual agreement that disputes between the parties shall be determined by the Courts of Budapest. In that case the clause began with the words "for all disputes which may arise out of the contract of insurance" whereas in the present case the clause begins with the words "with respect to any suit, action or proceedings relating to" the General Terms. But I do not consider that the reasonable commercial man who had agreed to clause 13.1 (choice of English law) and clause 13.2 (the jurisdiction clause) would regard clause 13.2 as permitting him to commence a suit, action or proceeding in the courts of countries other than that of England. In my judgment the meaning which clause 13.2 would reasonably be understood to bear is that claims relating to the General Terms were to be determined by the English court.
53. However, the factual context in which the claim for declaration no.5 must be determined is that GMI has already commenced proceedings relating to the General Terms in England and therefore, even if clause 13.2 is not an exclusive jurisdiction clause, OW is, as accepted by counsel for OW's trustee, obliged to submit to the jurisdiction of the English court and cannot commence parallel proceedings elsewhere. This is consistent with the approach of Males J. in BNP Paribas v Anchorage Capital and others [2013] EWHC 3073 (Comm) at paragraph 91. To paraphrase what Males J. said in that case and apply it to the present case,

"it would make no sense to construe clause 13.2 as permitting OW, so long as it submits to the jurisdiction of the English court, also to bring a claim of its own elsewhere in respect of essentially the same matters as arise here. It cannot sensibly be supposed that the parties would have regarded such a prospect as acceptable. On the contrary they would have rightly have regarded it as a procedural nightmare."

54. Counsel for OW's trustee submitted that once the English proceedings had been concluded OW's trustee would be free to commence proceedings elsewhere. I am unable to accept that submission. It would give rise to the prospect of inconsistent decisions by separate courts on the same matters which prospect also cannot be supposed to be one which the parties would have regarded as acceptable.
55. Thus, whether or not clause 13.2 is an exclusive jurisdiction clause, declaration no.5 should be granted.

Conclusion

56. The Court will grant declarations nos. 1-3 and 5 but will not grant declaration no.4.
Appendix

The General Terms:

1.1 O.W. and Counterparty have entered and/or anticipate entering into one or more cash-settled derivative transactions (each a "Transaction") relating to energy commodities that are or will be governed by these general terms and conditions, unless otherwise specified in a Confirmation (as defined below) with respect to a specific Transaction.

1.2 In connection with the entering into of a Transaction, O.W. and Counterparty will confirm the Transaction by exchanging certain documents (each a "Confirmation"). In the event of any inconsistency between a Confirmation and these general terms and conditions, the Confirmation shall prevail with respect to the Transaction governed by the Confirmation.

1.3 All Transactions are entered into in reliance on the fact that these general terms and conditions and all Confirmations between O.W. and Counterparty shall constitute a single agreement between the parties (collectively the "Agreement").

............

3. PAYMENT CONDITIONS

3.1 Payments under this Agreement shall be made on the due date for value on that date in freely transferable funds in the contractual currency specified in the relevant Confirmation.

3.2 If an amount is not paid when due, it shall bear interest daily from the relevant due date until such amount paid in full at an interest rate per annum of the one (1) month LIBOR on 11. a.m. GMT on the maturity date plus two (2) per cent per annum.

3.3 Payments under this Agreement will only be required to be made by a party subject to the condition precedent that no Event of Default with respect to the other party has occurred and is then continuing.

..............

6. EVENTS OF DEFAULT

6.1 The occurrence of any of the following events with respect to a party constitutes an event of default (an "Event of Default") with respect to such party:

6.1.1 the failure by the party to make, when due, any payment required under this Agreement if such failure is not remedied within one (1) business days after notice of such failure is given to the party;

6.1.3 the breach by the party of any other obligation, covenant or agreement set out in these general terms and conditions or in a Confirmation (other than one in respect of payment) and such breach is not cured within thirty (30) days after notice of such breach is given to the party;

6.1.4 the party (i) is dissolved, (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due, (iii) makes a general assignment, arrangement or composition with or for the benefit of its creditors, (iv) suspends making payments, (v) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other similar proceedings are instituted against it, (vi) a petition is presented or a resolution is passed for its winding up or liquidation, (vii) seeks or becomes subject to an administrator or other similar official for all or substantially all of its assets, or (viii) causes or is subject to any event which has an analogous effect to any of the events specified in this clause 6.1.4;

...............

7. REMEDIES

7.1 If an event of Default has occurred and is then continuing the non-defaulting party may not more than twenty (20) days notice to the defaulting party designate a date not earlier than the day such notice is effective as an early termination date (the "Early Termination Date") in respect of all outstanding Transactions. Where the Event of Default is an event specified in Clause 6.1.4 above and the defaulting party is governed by a system of law, which require that the termination shall take place automatically upon the occurrence of the relevant Event of Default in order for a close-out netting agreement to be effective, then an Early Termination date will automatically occur immediately upon the occurrence of an Event of Default as specified in Clause 6.1.4

8. SETTLEMENT ON EARLY TERMINATION

8.1 Following the occurrence of an Early Termination Date the non-defaulting party shall in good faith calculate the aggregate of its Unpaid Amounts, Net Loss or Net Gains on all terminated Transactions as at the Early Termination Date. Such amount shall be paid on demand.

8.2 Unpaid Amounts means the aggregate of any amounts due and payable, which remain unpaid, in respect of the terminated Transactions on or before the Early Termination Date together with interest thereon, cf. Clause 3.2 above.

8.3 Net Loss or Net Gains means the arithmetic mean of quotations provided by at least three independent leading dealers in the derivatives market. The quotations shall be for the amount that would be paid to or by such party in consideration of an agreement between such party and the quoting leading dealer to enter into a transaction that would preserve the economic equivalent of any payment, that would, but for the occurrence of the Early Termination Date, have been required to be paid under the terminated Transactions after the Early Termination Date.

...............

13. LAW AND JURISDICTION

13.1 These general terms and conditions will be governed by and construed in accordance with English law.

13.2 With respect to any suit, action or proceedings relating to these general terms and conditions each party irrevocably submits to the jurisdiction of the English courts.

The CSA

1. BACKGROUND

1.1 OW and the Counterparty have entered and/or may enter into certain transactions regarding the sale and purchase of certain derivatives and futures transactions, which have been and/or will be evidenced by certain confirmations (all such confirmations which is subject to this Credit Support Annex ("the Annex") are jointly called the "Confirmations" and all transactions covered by such Confirmations are jointly referred to as "Transactions").

1.2 Furthermore OW and the Counterparty have entered and/or may enter into one or more fixed price agreements regarding the delivery of marine fuel at a fixed price which for the purpose of this Annex shall also be referred to as "Transactions".

1.3 This Annex supplements, forms part of, and is subject to the General Terms and Conditions for Derivatives Trading, as amended and supplemented from time to time, as accepted by you and us (the "GTC for Derivatives Trading"). For the purposes of these GTC for Derivatives Trading each of the credit support arrangements set out in Clause 3 and Clause 4, respectively, constitute a Transaction (for which this Annex constitutes the Confirmation).

2. THRESHOLD AND ELIGIBLE CREDIT SUPPORT

2.1 For the purposes of Clause 3 "Threshold" means:

- with respect to Counterparty: USD 800.000

- with respect to OW: USD 800.000

2.2 For purposes of Clause 3 and Clause 4

"Eligible Credit Support" means with respect to Counterparty and OW:

cash in USD

and "Equivalent Credit Support" means, in relation to any Eligible Credit Support, Eligible Credit Support of the same type, nominal value, description and amount as that Eligible Credit Support.

3. MARGIN CALLS – EXPOSURE

3.1 If at any time the Exposure (as defined below) of a party (the "Transferee") under the Transactions (less any value already held as Credit Support by the Transferee pursuant to this Clause 3) exceeds the Threshold for such Party (such excess amount referred to as the "Excess Amount"), the Transferee shall be entitled to demand by written notice (i.e. a margin call), that the other Party (the "Transferor"") transfers to it Eligible Credit Support with a value equal to the Excess Amount (the "Delivery Amount") as credit support (the "Credit Support"). If the value of the Credit Support held by the Transferee pursuant to this Clause 3 at any time exceeds the Excess Amount, the Transferor may demand by written notice to the Transferee that the Transferee transfers to it Equivalent Credit Support with a value equal to the excess Credit Support (the "Return Amount"). If at any time, the Exposure of the Transferee is reduced to less than the Threshold for such Party, the Transferor may demand by written notice that the Transferee transfers Equivalent Credit Support equal to the value held as Credit Support pursuant to this Clause 3 (in which case the provision below on minimum transfer amount shall not apply).

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3.4 "Exposure" means with respect to a Party on any given date, the amount that would have been payable to such Party by the other Party (expressed as a positive number) less the amount, which would have been payable by that Party to the other Party (expressed as a negative number) under the Transactions if all the Transactions were being terminated and cash settled on such date. Such Exposure will be calculated by OW in good faith and in a commercially reasonable manner based on mark to market values, and the Exposure may be calculated on a daily basis or as OW otherwise may deem fit in its sole discretion. All calculations and determinations shall be made in USD and are subject to review by Counterparty. Both Parties agree to use their best efforts to resolve expeditiously any disagreement concerning such calculations and determinations. If the Parties cannot agree on such calculation or determination they agree to appoint expeditiously and jointly an independent dealer in the instruments or obligations, to make such calculation or determination, with the calculation or determination made by such independent dealer to be binding and conclusive absent manifest error. Any disagreement with regards to the calculation of the Exposure cannot be invoked as a reason for withholding a demand for transfer of an amount. If it is subsequently determined by way of settlement or legal action that the calculation of the Exposure was erroneous the difference shall be transferred to the relevant Party in accordance with the terms applicable to an Excess Amount.

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5. TRANSFERS

5.1 Transfers of cash as Eligible Credit Support or Equivalent Credit Support, respectively, shall be made, unless explicitly agreed otherwise, with value to the relevant bank account of the receiving Party (i) in case of Initial Margin or payment of option premium, within one (1) business day after entering into the relevant Transaction, and (ii) in other cases, within one (1) business day after receipt by Counterparty or OW, as applicable, of the demand from the other Party requesting such transfer. The relevant bank account shall be the USD bank account notified by a Party to the other Party from time to time.

5.2 The Parties agree that all transfers of Eligible Credit Support or Equivalent Credit Support shall be transfers of title to the relevant credit support and that the recipient shall be free to use and dispose of such credit support.

6. INTEREST AMOUNT

6.1 The Transferee will in respect of the preceding calendar month transfer to the Transferor an amount in USD equal to the interest for each day of such interest period on the principal amount of the cash portion of the Credit Support, cf. Clause 3 and Clause 4, as determined by OW by multiplying the amount of cash on that day by the interest rate, set out below in Clause 6.2, and dividing it by 360 (the "Interest Amount"), to the extent that OW determines that a Delivery Amount would not be created or increased by the transfer. Such transfer of accrued interest shall be made not later than on the fifth business day of each calendar month to a bank account specified by the Transferor.

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8. DEFAULT

8.1 Any breach by a Party of its obligations as set out in this Annex, if such breach is not cured within 1 business day after notice of such breach is given to the Party, shall constitute an Event of Default with respect to such Party for purposes of the GTC for Derivatives Trading and a material breach for the purposes of the GT for Fixed Price. Any Event of default or material breach shall entitle the other Party to exercise the remedies as such other Party may be entitled to under the GTC for Derivatives Trading, GT for Fixed Price, the Transactions or applicable law.

8.2 If an Early Termination Date (as defined in the GTC for Derivatives Trading) is designated or deemed to occur in respect of all Transactions subject to the GTC for Derivatives Trading an amount equal to the value of the credit support provided under Clause 3 and Clause 4, respectively, on such Early Termination Date (including any Interest Amount(s) accrued but not transferred as at that date) as calculated by OW to a net amount, will be deemed to be an Unpaid Amount due to the relevant Transferor for purposes of the settlement provisions of the GTC for Derivatives Trading. For purposes of this Clause the value of Credit Support will be calculated as follows: (i) with respect to cash, the face amount thereof.

9. LAW AND JURISDICTION

This Annex shall be governed by and construed in accordance with English law.

With respect to any suit, action or proceedings relating to this Annex each Party irrevocably submits to the jurisdiction of the English courts.

The Confirmation

The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between Counterparty and O.W. Supply & Trading A/S (OW) on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the general terms and conditions specified below.

The definitions and provisions contained in the 1993 ISDA Commodity Derivatives Definitions (as published by the International Swaps and Derivatives Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern.

This Confirmation supplements, forms part of, and is subject to the general terms and conditions for derivatives trading dated 6 June 2012, as amended and supplemented from time to time, (the "General Terms and Conditions") as accepted by you and us. All provisions contained in the General Terms and Conditions govern this Confirmation except as expressly modified below.

The terms of the particular Transaction to which this Confirmation relates are as follows:

Notional Quantity per Calculation Period: 500.00 Metric Tonnes

Total Notional Quantity: 12,000.00 Metric Tonnes

Commodity: As per Commodity Reference Price.

Trade Date: February 26, 2014

Pricing Start Date: May 1, 2014

Pricing End date: April 30, 2016

Calculation Periods: Each Calendar Month during the Term of the transaction.

Period End Dates: The last trading day of each Calculation Period.

Payment Dates: 14 (fourteen) Calendar days following each Period End Date, subject to adjustment in accordance with the 'Following Business day Convention'

Fixed Amount Details

Fixed Price Payer (Buyer): Global Maritime Investments Cypr

Fixed Price: USD 570.00 per Metric Tonne

Floating Amount Details

Floating Price Payer (Seller): O.W. Supply & Trading A/S

Commodity Reference Price: 3.5% Fuel FOB R'dam Barges

Reference Price Quotation: AVERAGE

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Credit Terms: This confirmation supplements, forms a part of, and is subject to, the Credit Support Document dated 6 June 2012 between you and us.