A British court has backed attempts by a Danish pension fund to reclaim losses from a loan extended to Banco Espirito Santo (BES), the failed Portuguese bank.

Novo Banco (NB), the successor to BES, is being sued by a group of investors including TDC Pension, the Danish telecommunications pension scheme, and the New Zealand Superannuation Fund (NZSF), for the recovery of a $785m (€701m) loan made to BES before it went under last August.

The money was lent by Oak Finance Luxembourg, a vehicle set up by Goldman Sachs (GS), which raised funds from investors, issuing them with fixed rate notes.

The loan was arranged under a facility agreement between BES and Oak Finance. This agreement contained an express choice of English law and English jurisdiction.

After its collapse, the bank was bailed out by the Banco de Portugal (BDP), the country’s central bank.

Assets and senior debt were transferred to NB – the so-called ‘good bank’ – leaving other items in BES, now the ‘bad bank’, to be liquidated.

However, on 22 December 2014, the BDP announced it was reversing the transfer of the loan since it regarded the original deal as a related party transaction, because of GS’s small shareholding in BES.

In its application to the Commercial Court, NB had contended that an English court could not hear the case, because – among other reasons – this “trespasses on the administrative acts of a foreign executive body”, in reference to the BDP.

However, in a written judgment, Mr Justice Hamblen said he was satisfied the lawsuit was within the scope of the EU Judgments Regulation, and therefore the English court had jurisdiction to hear the case.

He added: “I conclude that the claimants have the better of the argument that NB became a party to the facility agreement as a result of the August decision [to transfer assets and debt to NB] and that this is sufficient to found jurisdiction under Article 25 of the Judgments Regulation.”

The claimants launched their suit earlier this year.

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