This was the important question at issue in the recent case of British Energy Trading Ltd & Others v Credit Suisse & Others [2008] EWCA Civ 53.

Current Practice

In a syndicated loan, one of the banks is appointed as agent on behalf of the lending banks to manage the day-to-day relationship between the lender and the borrower. If the agent bank signs a document as agent on behalf of the banks, the banks are bound by the terms of that document.

A security trustee holds the suite of security documents for the benefit of the banks in the syndicate in order to avoid having to grant separate security in favour of each individual bank which would be costly and time consuming.

Facts of the case

The borrower's group of companies restructured its debt with a syndicate of banks. As part of the deal option agreements were entered into giving the banks the right to buy shares in the borrower. The security trustee (acting on the instructions of the majority lenders) would exercise the options.

The credit agreement was signed by the borrower, the banks and A as arranger, agent and security trustee. A was party to the option agreements as agent and security trustee.

The option agreements included a clause that imposed a restriction on assignment or transfer of the options.

C acquired almost 90% of the debt constituted by the credit agreement and wanted to transfer the options to a special purpose vehicle.

C argued that the option agreements which included the restriction on assignment had been entered into by A as security trustee and not agent and therefore C was not bound by the assignment clause.

The borrower argued that C was bound by the restriction in the assignment clause as the option agreement had been entered into by A as agent of each of the banks including C.

HELD (by the Court of Appeal):

It was clear from the terms of the option agreements that A had entered into them as both security trustee and as agent for the banks. Therefore, each clause should be examined in its own right to decide which had been entered into by A as security trustee, which as agent for the banks, and which in both capacities.

The court found that the commercial purpose of the assignment clause was to limit the rights of the banks to transfer the options. A had therefore entered into the clause as agent for the banks.


When drafting a suite of documents in a syndicated deal it should not only be made clear in what capacity the lead bank signs a document but also the capacity in which it enters into each clause of that document.