Consistent with recent authority, the Court of Appeal has given primacy to an English jurisdiction clause in an ISDA Master Agreement (overturning the first instance decision that had declined to do so), in circumstances where there was a “theoretically competing” jurisdiction clause in a separate agreement governing the wider relationship: Deutsche Bank AG v Comune di Savona [2018] EWCA Civ 1740.

The appellate decision contributes to market certainty in respect of contracting parties’ choice of jurisdiction and therefore represents good news for derivative market participants. The Court of Appeal commented that it would have been “startling” if the bank’s claims for declaratory relief falling squarely under the relevant swap contracts could not be brought in the forum selected by the parties in the ISDA Master Agreement.

The approach taken by the Court of Appeal focused on determining the “particular legal relationship” to which the dispute related for the purpose of Article 25 of the Recast Brussels Regulation, which deals with jurisdiction agreements. In circumstances where there were two contracts (with theoretically competing jurisdiction clauses), it held that there was a distinction to be drawn between a generic wider relationship on the one hand, and a specific interest rate swap relationship governed by the ISDA Master Agreement on the other. It concluded in general terms that disputes relating to the swap transactions were therefore governed by the jurisdiction clause in the ISDA Master Agreement.

While it may be expected that disputes relating to a specific transaction should be governed by the contract for that transaction, the position had been undermined by the High Court decision in the instant case (which considered a number of points of Italian law and the effect of the declarations sought by the bank on any potential claims in Italy). The Court of Appeal noted that while each case should be considered on its own terms, it agreed in principle with the approach in the recent case of BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2018] EWHC 1670 (Comm) which focused on the question of whether the English court had jurisdiction under the relevant agreements, rather than to trying to predict whether the declarations sought, if made, would act as defences in another jurisdiction (read our e-bulletin on that decision). Given that there had been conflicting first instance decisions on this issue, it is helpful to have this clarification from the Court of Appeal.

For more information, see our Banking litigation e-bulletin.

Disagreeing with the High Court, the Court of Appeal has ruled that a claim by a creditor under section 423 of the Insolvency Act 1986 falls within the jurisdictional gateway permitting service out of the jurisdiction at common law for claims “under an enactment which allows proceedings to be brought”: Orexim Trading Limited v Mahavir Port and Terminal Private Limited [2018] EWCA Civ 1660.

In doing so, the Court of Appeal resolved the conflict of authority at first instance in relation to the court’s approach to the “enactment” gateway (paragraph 3.1(20) of CPR PD 6B), holding that it was unnecessary for the enactment in question specifically to contemplate proceedings against foreign defendants. It was sufficient that section 423 was not on its face limited to claims against defendants in England and Wales.

This decision removes the difficulty that creditors may have experienced in making section 423 claims against defendants domiciled outside the EU following the first instance decision. It is no longer necessary to identify an alternative gateway in order to obtain permission to serve out; the “enactment” gateway can be relied upon provided that the creditor can show that its claim has a reasonable prospect of success and that England and Wales is the proper place to bring the claim. This is a useful option where claimants are seeking to recover assets that defendants have tried to put out of the reach of creditors.

Outside the insolvency sphere, the Court of Appeal’s approach will likely permit statutory claims to be brought against foreign defendants even where the statute does not expressly contemplate extra-territoriality, provided that the proper construction of the statutory provision permits extra-territoriality (and subject to establishing the other required elements for service out). This is a further example of the court giving a wide interpretation to a common law gateway (see also our post on Eurasia Sports Ltd v Mahchi Aguad [2018] EWCA Civ 1742 here).

The decision in Orexim is unlikely to affect claims against defendants within the EU, where the recast Brussels Regulations applies in place of the jurisdictional gateways, though the status of the Brussels Regulation remains uncertain given the ongoing negotiations between the UK and EU regarding Brexit.

Andrew Cooke, a senior associate in our contentious restructuring, turnaround and insolvency team, considers the decision further below. Continue reading →

In a recent decision, the High Court found that the jurisdiction clause in a 1992 ISDA Master Agreement was effective over a ‘competing’ jurisdiction clause in a separate but related agreement between the same parties. This was despite a provision in the Schedule to the Master Agreement that, in the event of conflict, the related agreement would prevail: BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2018] EWHC 1670 (Comm).

This decision is in line with recent judgments in relation to jurisdiction clauses in associated agreements and reinforces the view that non-identical clauses can co-exist in related agreements. It also confirms that an express agreement to the jurisdiction of the English court within standard form ISDA documentation will not easily be displaced or restricted, and is another example of judicial recognition of the need for certainty and consistency associated with the use and interpretation of the ISDA standard documentation.

The decision is likely to be of interest to financial institutions trading in derivatives based on ISDA documentation, and of particular interest to those involved in cross-border funding transactions which require the implementation of associated hedging through separate but related agreements. For more information see our Banking litigation e-bulletin on the decision.