Andrew de Mestre KC

Hybrid debt agreements and cross-border enforcement risk

Hybrid governing law structures are now commonplace in cross-border finance, commonly allocating covenants and events of default to New York law while assigning security and intercreditor mechanics to English law. This produces contractual fragmentation in which economically integrated rights are governed by and applied through different legal systems. This Spotlight article examines resulting interpretive challenges, focusing on differences between New York and English law approaches to contractual construction, implied obligations and discretionary powers, including the implied covenant of good faith and fair dealing and the Braganza duty. Using the Selecta uptiering litigation as a case study, it analyses implications for interpretation, evidence and forum strategy in liability management transactions.