The recent English High Court decision in Torre Asset
Funding v The Royal Bank of Scotland plc puts into the
spotlight the role and duties of a facility agent in a syndicated
The case concerned a loan agreement based on the LMA standard
form. Since many shipping loans today incorporate LMA standard
terms, this decision will be of particular interest to shipping
banks. The LMA form sets out the duties of the facility agent and
clearly states that they are "solely mechanical and
administrative in nature".
The court in Torre was asked to impose additional
common law obligations on the facility agent – specifically,
an obligation to pass on information concerning the borrower. The
court declined to do this. It effectively said that that it was not
appropriate to impose additional duties on the facility agent where
the loan agreement itself already clearly defined the facility
agent's role. At the same time, the court upheld the standard
LMA exclusion of liability clause, saying that it extends to
omissions and, therefore, would have been effective to protect the
facility agent in this case.
Although the court refused to impose an obligation to pass on
information, the judge (of his own volition) did question whether
an obligation might arise (i) from the facility agent's express
power to pass on information concerning the borrower, and (ii) on
the basis that the facility agent had a duty to exercise that power
in the best interests of the lenders. The end result was that the
court found that there was no obligation, but there was a warning,
that a facility agent cannot just assume that its role is purely
administrative and that it does not need to apply any qualitative
analysis to information it receives.
Agent banks under LMA style documents will welcome this
decision. They can continue to regard their role as
"mechanical and administrative" and limited by the
particular wording of the loan agreement. However, this case may
encourage lenders to negotiate harder on agency provisions, so as
to impose greater express obligations on the facility agent to pass
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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