page_title: BNY Corporate Trustees Services Ltd v Eurosail-UK 2007-3BL plc
hierarchical_section_title: BNY Corporate Trustees Services Ltd v Eurosail-UK 2007-3BL plc
caption_attribution_description: English: Lehman Brothers Rockefeller centre. The Manhattan headquarters of Lehman Brothers before their bankruptcy in 2008
context_page_description: BNY Corporate Trustees Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28 was a decision of the Supreme Court of the United Kingdom in relation to the proper interpretation of section 123 of the Insolvency Act 1986 as it had been applied in commercial bond documentation. The analysis and reasoning in the case are now commonly referred to as the Eurosail test.
  The ruling related to the insolvency of a special purpose company which had issued asset-backed securities as part of a securitisation. However, the collapse of Lehman Brothers meant that certain tranches of the securities were exposed because Lehman Brothers would not be able to meet its obligations under derivative contracts which had been entered into. Although strictly speaking the Court was expressing an opinion on the proper interpretation of an event of default in the bond documentation, the ruling is treated as an authoritative interpretation on section 123.
  The Supreme Court also rejected the "point of no return" test suggested by the Court of Appeal, and also ruled on the limited efficacy of the post-enforcement call option.
context_section_description: BNY Corporate Trustees Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28 (often referred to as simply the Eurosail case) was a decision of the Supreme Court of the United Kingdom in relation to the proper interpretation of section 123(2) of the Insolvency Act 1986 (the so-called "balance-sheet test") as it had been applied in commercial bond documentation.  The analysis and reasoning in the case are now commonly referred to as the Eurosail test.
  The ruling related to the insolvency of a special purpose company which had issued asset-backed securities as part of a securitisation.  However, the collapse of Lehman Brothers meant that certain tranches of the securities were exposed because Lehman Brothers would not be able to meet its obligations under derivative contracts which had been entered into.  Although strictly speaking the Court was expressing an opinion on the proper interpretation of an event of default in the bond documentation, the ruling is treated as an authoritative interpretation on section 123(2).
  The Supreme Court also rejected the "point of no return" test suggested by the Court of Appeal, and also ruled on the limited efficacy of the post-enforcement call option ("PECO").
caption: Lehman Brothers former Time Square headquarters
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