High Court Refuses Administrators' Application To Close Out FX Contracts Before Maturity

The High Court has refused an application by the joint administrators of a specialist foreign exchange (FX) and payment services firm to close out customer contracts before their maturity as a consequence of the firm's own insolvency: Conway & Ors v Plass & Ors (Re Argentex LLP) [2025] EWHC 3125 (Ch).

At the time of the administrators' appointment, the firm's trading book of forward contracts and options were unhedged and unprotected. The administrators wished to immediately close out the entire trading book because it was net positive (ie the firm would be owed more than it owes) and the administrators could realise a profit for the benefit of the creditors as a whole. However, the administrators' application was resisted by those customers who would be out of the money if close out and termination occurred now.

The administrators relied on a broadly drafted clause enabling the firm to terminate the customers' FX agreements where it "reasonably considers it necessary for its own protection". In accordance with the well-established principles of contractual construction, the court read this general protection clause in light of the contract as a whole, which contained extensive provisions entitling the firm to terminate as a result of the customer's financial position. Further, the absence of any express contractual provision allowing the firm to terminate based on its own insolvency (or likely insolvency) was critical. In the court's view, to allow the firm to terminate before maturity based on its own economic interest would have been inconsistent with the commercial purpose of the FX contracts which were intended to provide customers with commercial certainty as to the future price of the relevant currency at the maturity date.

In the court's view, the clause in question provided protection from the risk of harm to the firm's own rights and interests arising by reason of the conduct of its contractual counterparty. It did not provide protection from the risk of harm to the firm's own rights and interests which arose from how that firm conducted its own business.

From an insolvency law perspective, the decision highlights that placing a company into special administration is not itself conclusive proof that a company can no longer carry out its contractual obligations under the terms of contracts to which it is a party. Rather, whether or not a company can carry out its contractual obligations is a question to be determined on the evidence.

We consider the decision in further detail below.

Background

Argentex LLP (Argentex), a specialist FX and payment services firm, entered into administration in July 2025 following severe liquidity issues. Argentex's trading model relied on hedging its customers' FX contracts (including options and forwards) with corresponding positions from its banking partners, enabling Argentex to seek to hedge its risk on its customer contracts with counterparty banks.

In April 2025, volatility in the US dollar caused by new US tariff policies triggered substantial margin calls under Argentex's hedging contracts with its banking partners. Argentex was unable to make equivalent margin calls on a number of customer contracts that were entered into on a zero margin basis. Argentex's inability to cover the margin payments to banks, coupled with its breach of regulatory liquidity thresholds and failure to obtain further funding, led to the suspension of its trading operations and placement into administration. Shortly before the administrators' appointment, Argentex's banking partners terminated its hedging contracts, leaving Argentex's trading book fully exposed and unhedged.

Once appointed, the administrators sought directions from the court under the Insolvency Act 1986 and Payment and Electronic Money Institution Insolvency Regulations 2021 regarding their powers to: (i) close out the customers' foreign exchange contracts before maturity; (ii) terminate customer service agreements; and (iii) enforce any debts arising as a result. In doing so, they relied principally on contractual provisions between Argentex and its customers, and/or the terms pursuant to the Markets in Financial Instruments Directive II as implemented under UK law, permitting early termination where Argentex:

At the time of the application, Argentex was owed more money by its customers than it owed to them. The administrators wanted to close out the trading book immediately to secure this profit (for the benefit of the creditors as a whole), rather than risk losing it if the contracts continued to their original maturity dates. Those customers who were "out of the money" (ie, who would owe Argentex under an immediate close out) objected.

Decision

The court rejected the administrators' application and refused to grant directions to close out the trading book.

Applying the well-established principles of contractual interpretation, the court considered the context of the contracts as a whole and the factual matrix (as per Rainy Sky SA v Kookmin Bank [2011] UKSC 50, Arnold v Britton [2015] UKSC 36, and Wood v Capita Insurance Services Ltd [2017] UKSC 24).

The court started with the express terms of the contracts, highlighting that the contracts provided "extensive protections" enabling Argentex to terminate prior to the maturity date. In particular, Argentex had a right to terminate:

• As a result of its customers' financial position which allowed Argentex to effectively monitor the ability of customers to perform contracts at the maturity date.
• Following a request by a regulatory body.
• In the event of customer insolvency.

In contrast, there was no express entitlement for Argentex to terminate in the event that it was insolvent itself. In the court's view, this was significant in seeking to construe the relevant clauses.

Considering the factual and commercial context, the court noted that the commercial purpose of the forward contracts, from the perspective of the customers (particularly the "zero margin" agreements) was to provide customers with certainty to purchase currency at a fixed rate in the future. In the courts' view, customers would have expected Argentex to have adequately hedged its risk and to have priced market volatility into the contracts. Allowing Argentex to terminate early for its own economic interest would undermine this commercial purpose and amount to shifting the risk of a bad bargain from Argentex to its customers.

In the court's view, a reasonable person with all the background knowledge (reasonably available to the parties when they entered into the contract) would not have understood that the language of the relevant clauses would effectively entitle Argentex to terminate the contract for its own economic interest rather than being bound by the terms of the contracts to perform its obligations at the date of maturity. The proposed construction was inconsistent with the structure of the contracts and flouted business common sense. It would allow Argentex to seek to close out and terminate because of what it perceived was a bad deal or in circumstances where it wanted to realise a profit rather than awaiting the maturity date.

Accordingly, the court refused the directions sought by the administrators.

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