BANCO SANTANDER TOTTA SA V COMPANHIA CARRIS DE FERRO DE LISBOA SA AND OTHERS

[2016] EWCA Civ 1267, Court of Appeal, Civil Division, Sir Terence Etherton, MR, Lord Justice Longmore, Sir Martin Moore-Bick, 13 December 2016

Conflict of laws - Choice of law - Interest rate swaps - Application of mandatory provisions of country's legislation - Rome Convention, article 3(3) - Rome I Regulation, article 3(3)

A long-term interest rate swap transaction by which the appellant Portuguese public sector transport companies had financed their operations had become unsustainable due to the snowball effects of the movements of reference interest rates on the provisions of the swap, following the financial crisis. The transport companies had ceased payment in 2013, and the respondent bank sought payment under the swaps. At first instance, the transport companies advanced a number of grounds, all of which were rejected by the judge. Upon appeal, the issue was only whether under article 3(3) of the Rome Convention certain mandatory provisions of Portuguese law applied, even where English law was the governing law, rendering the contract void.