Anti-suit injunctions and non-exclusive jurisdiction clauses in the Court of Appeal

The Court of Appeal has held that the English Courts will not intervene, by way of anti-suit injunction, to restrain the pursuit of foreign proceedings by a party to a non-exclusive English jurisdiction agreement, unless there are factors, over and above the choice of non-exclusive English jurisdiction, which drive the court to conclude that the pursuit of the foreign proceedings is vexatious or oppressive.

It has long been acknowledged that an exclusive jurisdiction clause, which gives a party a right not to be sued outside the chosen forum, may be enforced by an anti-suit injunction, at least in cases outside the ambit of the Brussels I Regulation. In Highland Crusader Offshore Partners LP and ors v Deutsche Bank AG and anor [2009] EWCA Civ 725 the trial judge, Mr Justice Burton, had relied on an emerging line of authority which extended that approach to cases where the jurisdiction agreement was non-exclusive. In a judgment handed down earlier this week, the Court of Appeal overturned the judge's decision.  It held that in the context of applications for anti-suit relief, there is no presumption that proceedings brought in a foreign jurisdiction by a party to a non-exclusive English jurisdiction agreement are vexatious or oppressive and no burden on the party prosecuting the foreign proceedings to justify them on strong grounds not foreseeable at the time when the contractual jurisdiction was agreed.

The jurisdiction clause under consideration was in a form common to many widely-used standard form contracts. As such, the decision has wide implications for the conduct of litigation in the English courts, particularly transatlantic litigation.

The transaction

In October 2007, Deutsche Bank and Deutsche Bank Securities Inc (together, "DB") agreed to sell to Highland, a major US hedge fund, a number of tranches of asset backed collateralised loan obligations ("CLOs") with a nominal value of US$600million. The CLOs were backed by US real estate. Highland's purchases were financed by a number of revolving repurchase transactions. Under those transactions, Highland would sell the CLOs to DB and enter into a simultaneous agreement to repurchase equivalent CLOs from DB one month later. The price of the sale to DB was lower than the price of the repurchase of the CLOs by Highland, allowing DB to both finance Highland's investment, profit from the differential in price, and obtain collateral in the event of Highland's default.

The repurchase agreements were carried out under a Global Master Repurchase Agreement ("GMRA").  Paragraph 17 of the GMRA provided:

"Governing law: This Agreement shall be governed by and construed in accordance with the laws of England. Buyer and Seller hereby irrevocably submit for all purposes of or in connection with this Agreement and each Transaction to the jurisdiction of the Courts of England. … Nothing in this paragraph shall limit the right of any party to take proceedings in the courts of any other country of competent jurisdiction"

As a result of market movements, during 2008, DB made a number of margin calls on Highland. On 30 September 2008, Highland failed to pay a margin call. A default notice was served under the GMRA, and on 8 October 2008, DB served default valuation notices on Highland claiming sums in excess of US$70million.

Parallel proceedings in Texas and England

On 16 October 2008, Highland commenced proceedings against DB in the District Court of Dallas County, Texas. It alleged that DB induced it to purchase the CLOs by fraudulent or negligent misrepresentations as to the risk of the transaction, and also that DB made a number of improper margin calls.

On 7 November 2008, DB issued proceedings against Highland in the Commercial Court, claiming the amounts stated in the default valuation notices, together with interest. On 17 November 2008, DB sought a stay of the Texas proceedings on the basis that Texas was not a convenient forum for the resolution of the dispute (forum non conveniens). That motion was ultimately dismissed on 4 February 2009. In the meantime, Highland had indicated in the English action that it intended to dispute jurisdiction. However, it failed to do so within the time required. An application for an extension of time to make such an application was refused by Tomlinson J on 29 January 2009.

Anti-suit injunction granted

On 27 February 2009, DB applied for an anti-suit injunction to restrain Highland from continuing the Texas proceedings. On 3 April 2009, Burton J granted the application. The judge approached the application on the basis that an anti-suit injunction can be granted if required by the "ends of justice", and that, generally speaking, an anti-suit injunction would only be granted where pursuit of proceedings in a foreign court would be vexatious or oppressive. In determining whether foreign proceedings were vexatious or oppressive, it was important to keep in mind that the policy adopted in English law is to favour the litigation of issues once only, and in the most appropriate forum.

Burton J held that where there is a contractual non-exclusive jurisdiction clause, a party will ordinarily act vexatiously and oppressively in pursuing proceedings in the non-contractual jurisdiction in parallel with proceedings in the contractual jurisdiction, unless there are exceptional reasons, not foreseeable at the time when the contractual jurisdiction was agreed. As there had been no unforeseeable change since the conclusion of the contract, Burton J considered that it was unnecessary to go on to consider the balance of convenience, or the availability of juridical advantages to Highland from suing in Texas.

The decision on appeal

The Court of Appeal rejected this approach. Lord Justice Toulson (with whom Lord Justice Carnwath and Lord Justice Goldring agreed) held that it was incorrect to start from the position that proceedings brought in the noncontractual forum were to be presumed to be vexatious or oppressive unless strong grounds, unforeseeable at the time the jurisdiction agreement was made, or otherwise exceptional, could be demonstrated. To do so would be to elevate a non-exclusive jurisdiction clause to something close to an exclusive jurisdiction clause. Lord Justice Toulson found some force in the argument that, by agreeing to a non-exclusive jurisdiction clause, the parties must have contemplated at least some possibility of parallel proceedings. While it may be appropriate in some cases to grant relief, the existence of a non-exclusive jurisdiction clause could not, of itself, justify an anti-suit injunction.

The Court of Appeal decided that it would set aside the injunction and re-exercise the trial judge's discretion. It held that there were no compelling factors which suggested that the Texan proceedings were in fact vexatious or oppressive. Lord Justice Toulson said:

"When all is said and done, this is a dispute between international financial institutions under a standard from contract governed by English law and with an English non-exclusive jurisdiction clause, but where there is relatively little else to connect the dispute with England. The English Commercial Court has an important role as a tribunal often chosen by foreign parties for the resolution of their disputes; but if such parties do not choose to make its jurisdiction exclusive, the court should not attempt to block any alternative jurisdiction which properly regards itself as an appropriate forum, save possibly in exceptional circumstances which do not presently exist"

Comment

In deciding the case as it did, the Court of Appeal firmly established that non-exclusive jurisdiction clauses do not confer the same rights on parties to injunctive relief as exclusive jurisdiction clauses. As non-exclusive jurisdiction clauses are commonplace in a wide range of standard form contracts, this will inevitably lead to a greater incidence of parallel proceedings. Parties may wish to consider whether the uncertainties, costs and risks associated with multiple sets of proceedings outweigh the benefits of flexibility in choosing jurisdiction when considering whether to use an exclusive or non-exclusive jurisdiction clause.