The English High Court recently dismissed a legal challenge to the ability of the National Asset Management Agency, the Irish Government body established to cleanse Irish banks of (largely distressed) land and development loans (NAMA), to exercise its powers in the UK.

The companies that took the action were civil engineering and construction companies and customers of AIB UK, a wholly owned subsidiary of Allied Irish Banks plc (AIB). They sought an injunction to prevent NAMA from acquiring almost €50m in loans from AIB UK.

The grounds for seeking the injunction were that the acquisition of the loans would breach the loan agreement with AIB UK and that NAMA lacked jurisdiction in the UK to acquire the loans.

On the first ground, the judge ruled that as a party is entitled to assign, transfer, share or otherwise confer the economic benefit of a contract as it pleases, unless restrained by the contract itself or by statute. As the loan agreement did not preclude such an assignment or transfer, the acquisition of the loans by NAMA did not breach the loan agreement.

On the second ground, the court held that a person resident or carrying on business in England is at liberty to comply voluntarily with a request or demand of a foreign government agency, based upon foreign public law, without fear of restraint by the English courts provided only that he thereby commits no wrong actionable under English law.  As AIB UK is a participating credit institution for the purposes of NAMA and it had voluntarily transferred the loans to NAMA, the court refused to interfere with the transfer.

The case could have implications for other borrowers in Britain and Northern Ireland who are seeking to prevent the transfer of loans from participating credit institutions in those jurisdictions to NAMA.

Contributed by Shane Kelleher.

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