High Court reaffirms primacy of ISDA Master Agreement jurisdiction clause post-Brexit

The High Court's judgment in Dexia Crediop SpA v Provincia di Brescia [2023] EWHC 959 (Comm) confirms that an English jurisdiction clause within standard form ISDA documentation will not readily be displaced.

The High Court gave effect to an English jurisdiction clause in an ISDA Master Agreement, finding that the claims related to the validity and enforceability of either the ISDA Master Agreement or the underlying swaps. The court rejected the suggestion that the relevant claims for declaratory relief arose out of a connected settlement agreement between the parties (which did not contain a jurisdiction clause and was governed by Italian law).

This decision is consistent with the trend of the English courts to give effect to ISDA standard form jurisdiction clauses, as set out in the previous decisions of BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2019] EWCA Civ 1740 (read our blog post) and Deutsche Bank AG v Comune di Savona [2018] EWCA Civ 1740 (read our blog post). These judgments were made pursuant to Article 25 of the Recast Brussels Regulation, which governs the question of jurisdiction where there has been an agreement between the parties under EU law. The present case (together with the recent decision in Deutsche Bank v Brescia [2022] EWHC 2859 (Comm)) is one of the first to look at the question of competing jurisdiction clauses in an ISDA context since the UK left the EU, deciding the issue under the UK's domestic rules on jurisdiction agreements.

Helpfully for financial institutions, the English courts are continuing to demonstrate under the post-Brexit regime that they will give effect to the broad and market standard jurisdiction clauses contained in standard form ISDA documentation. This provides some degree of certainty to parties incorporating such clauses into their transactional documentation, should they need to rely on them at a later stage.

Background

The court considered the standard form ISDA Master Agreement jurisdiction clauses relating to two swap transactions entered into by Dexia and Brescia in 2006 (the Swaps).

The parties were previously involved in litigation in England and Italy concerning the Swaps, which was brought to an end by a settlement agreement. One of the provisions of the settlement agreement purported to confirm the validity of the Swaps. The settlement agreement did not contain a jurisdiction clause, but was governed by Italian law and expressly referred to the fact that the Swaps and the related ISDA Master Agreement were subject to English law and the jurisdiction of the English courts.

Subsequently, the Provincia di Brescia (Brescia) sought to challenge the validity and enforceability of the Swaps and the settlement agreement in a new claim in Italy. In turn, Dexia Crediop SpA (Dexia) brought proceedings in the English court seeking various declarations to the effect that the Swaps were valid and enforceable.

Brescia accepted that the English court had jurisdiction to hear and determine some of the declarations, but applied for an order that it had no jurisdiction in respect of declarations referring to the settlement agreement. Brescia contended that these declarations fell outside the ISDA Master Agreement jurisdiction clause and should be litigated in Italy. Dexia argued that the declarations to which Brescia objected, all related to the Swaps and to the ISDA Master Agreement, and therefore fell within the scope of the jurisdiction clause in the ISDA Master Agreement.

Brescia was not represented at the hearing although the court went on to consider the application anyway, as it had not been withdrawn.

Decision

The court confirmed that no permission to serve out of the jurisdiction was required since the contract contained an English jurisdiction clause (as provided for by CPR 6.33(2B)(b)).

The key question for the court was whether the declarations sought by Dexia related to: (i) the ISDA Master Agreement/Swaps; or (ii) the settlement agreement.

In coming to its decision, the court relied heavily on another recent decision (Deutsche Bank v Brescia [2022] EWHC 2859 (Comm)), where proceedings were brought by Deutsche Bank in relation to two swap transactions entered into by Brescia at the same time as the Swaps. Deutsche Bank sought many of the same declarations as Dexia in the present case, and Brescia took the same position in relation to the ISDA Master Agreement (and related settlement agreement), which were on substantially the same terms. In the Deutsche Bank v Bresica case, the court had held that the ISDA Master Agreement jurisdiction clause:

• was drawn in "very wide terms" and applied to future disputes; and
• took precedence over the settlement agreement which expressly preserved the rights of the parties under the ISDA Master jurisdiction clause.

In the present case, the court considered the terms of the relevant declarations sought by Dexia, finding that they each related to the validity and enforceability of either the ISDA Master Agreement or the Swaps.

The court also rejected Brescia's alternative arguments that: (1) England was not the proper forum, given the irrevocable waiver of any objection on the ground of forum non conveniens set out in the ISDA Master Agreement jurisdiction clause; and (2) service of the claim form had not been properly effected, on the basis that service had been effected in accordance with the notice provisions in the ISDA Master Agreement (which was in accordance with CPR rule 6.11, which requires service to be effected by an agreed contractual method where the claim relates to the contract in question).

As a result, the court dismissed Brescia's application.