5.5 Summary: Striking a Fair Balance
The above objections constitute reasonable counter-arguments against vesting the Nordic Trustee with a right to sue in its own name on behalf of the bondholders. Nevertheless, the Supreme Court’s reasoning is convincing, due to the lack of a viable alternative. As properly noted by the court: one cannot deny the Nordic Trustee a right of action due to lacking insight into all the possible consequences of doing so. The objections above, save for the difficulties of calculating a claim, are likely to only apply to a very limited number of cases; thus the weight of these counter-arguments is reduced.
One may however argue that we have simply adopted the Anglo-Saxon bond trusteeship without consideration of our peremptory civil procedure rules, whereby a representative does not have a right to sue or be sued in its own name. On the other hand, when introducing the bond market to Norway, especially the high yield market, we needed a mechanism and a contractual framework to cater for its complexity. What better way to do this, than to adopt the well-developed mechanisms of the Anglo-Saxon markets?
Despite not being at the centre of the Supreme Court’s reasoning in the Thule Drilling cases, the no‑action clause is designed to provide equal protection to both the issuer and the bondholders. The issuer has one entity, the Nordic Trustee, to relate to when it comes to reporting and discussing minor amendments to the bond terms,(1) Pursuant to cl. 17.1 (a) of the standard bond terms (n 6), the Nordic Trustee has authority to waive or agree to minor amendments to the finance documents. as well as a professional counterpart when considering restructuring of the bond issue(s). Only the Nordic Trustee is entitled to declare an event of default, although a certain percentage of bondholders may instruct the Nordic Trustee to do so.(2) Cl. 15 of the Nordic Trustee’s standard bond terms (n 6)
Enforcement proceedings by the Nordic Trustee secure the best outcome and limit the costs. A class action by the bondholders is not possible when seeking an interlocutory order, if the immediate need to secure assets arises. Nor is a class action easy to establish, due to the anonymous and shifting nature of the bondholders. As such, the no-action clause protects the issuer against frivolous or multiple lawsuits from individual bondholders, including bondholders with interests contrary to those of the class of bondholders. The no‑action clause does not expressly apply to claims in tort against third parties not privy to the bond terms. However, the no-action clause, read in light of the powers vested with the trustee to recover any amount outstanding, can certainly serve as a supporting argument when suing third parties in close proximity to the issuer.(3) See clause 14.2 (c) of the standard bond terms (n 6) and the Supreme Court’s reasoning in Rt. 2010 s. 402 [32], [41]-[43].
The Nordic Trustee is responsible for the active management and supervision of the bond terms. Without a right to sue or to secure and enforce security, much of the legal and economic basis for appointing a bond trustee would disappear. It is thus likely that the bond market, as it is today, would have collapsed awaiting an alternative regulation in order to cater for the functions currently held by the Nordic Trustee. The Nordic Trustee may therefore help to secure financial stability in a distressed bond market, as we have seen today. As a result, this article argues that the no-action clause does strike a fair and proper balance, and that the Supreme Court – despite the mentioned objections – was right in vesting the Nordic Trustee with title to sue in its own name.