PCB Byrne secures €400 million victory for Spain’s Banco Sabadell against asset management giant Cerberus

The Commercial Court has given judgment in favour of Banco Sabadell – one of Spain’s largest banks – in its dispute with US asset management giant Cerberus. Sabadell was awarded damages and interest of over €400 million, plus costs.

The genesis of the case was the 2008 Global Financial Crisis which triggered a real estate crisis in Spain and left many Spanish banks with significant real asset exposure. Pressures from the European Central Bank and the European Commission led to institutional sales of real estate portfolios to private equity funds. This case concerned one of the largest of those deals in Spain – valued at over €4 billion.

The dispute centered on sums due from guarantors in respect of deferred consideration payable for three Spanish real estate portfolios, which Cerberus acquired from the bank in 2019. The parties differed as to the circumstances in which the deferred portion of the consideration would be triggered, with reference to the registration of properties in the portfolios.

Mr Justice Andrew Baker found resoundingly in Banco Sabadell’s favour, concluding that Cerberus’s case was based on “a narrative constructed for the litigation”. He found that Cerberus’s only witness of fact (one of its senior managers) had given dishonest evidence, as part of an ex post facto “effort to argue that there was a sensible commercial rationale for the bargain Cerberus now claim was struck”.

The judgment is of huge commercial significance to Banco Sabadell and represents a vindication of the position it has maintained from the outset: namely that it was always the common intention of the parties that the deferred consideration would be payable in respect of all registered properties, and that Cerberus’s attempt to re-construe the deal was commercially absurd.

The team at PCB Byrne was led by partner Ben Davies, with assistance from Catherine Eason (partner), Marie Smale (senior associate), Yana Ahlden (associate) and Zo? Vanhegan (paralegal).

Counsel for Banco Sabadell were James Collins KC, Matthieu Gregoire and Akash Sonecha of Essex Court Chambers. PCB Byrne instructed Francisco Malaga of White & Case as a Spanish law expert witness. Assistance was provided throughout the proceedings by a team at Uría Menéndez, led by partner Julio Iglesias.

The Cerberus entities were represented by Kirkland & Ellis (for the guarantors) and Latham & Watkins (for the purchaser).

The full judgment can be found here:

https://caselaw.nationalarchives.gov.uk/ewhc/comm/2024/3022

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