Exclusive jurisdiction clause won't necessarily prevent grant of stay where there are related proceedings, but makes it very unlikely

The Commercial Court has held that the existence of an exclusive jurisdiction clause in favour of the English court does not, when there are proceedings already underway in another EU member state, mean the two sets of proceedings cannot be 'related' for the purposes of Article 28(3) of the Brussels Regulation. The English court therefore still has the discretion to stay its proceedings in favour of the court first seised. The jurisdiction clause will however be a very significant factor against the grant of the stay: Nomura International Plc v Banca Monte dei Paschi di Siena Spa [2013] EWHC 3187 (Comm).

Where proceedings before two member states' courts are the same, the court second seised must stay its proceedings until the jurisdiction of the first court is established and then decline jurisdiction (under Article 27). Where the proceedings are related, there is a discretion whether to stay under Article 28. This case shows that such a discretion exists even where there is an exclusive jurisdiction clause in favour of the second court. It is however very unlikely to be exercised.  

Background

Proceedings were commenced by the defendant Italian bank in Italy against members of its former senior management and against Nomura relating to a restructuring of the defendant's holding in some structured credit notes (the Alexandria Notes) which collapsed in value in 2008. It was alleged that this restructuring was given the appearance of an asset swap involving the underlying assets of the Alexandria Notes, when it was in fact an elaborate series of simultaneous transactions designed to prevent the losses on the Alexandria Notes having to be recorded in the bank's accounts. The claims against Nomura were made in tort on the basis of its alleged collusion with the defendant's former senior managers. Later the same day the claimant, Nomura, commenced proceedings against the defendant in the English court seeking declaratory relief that the agreements entered into were valid and binding.

It was common ground that the Italian court was the court first seised. The issue before the Commercial Court was whether it should stay its proceedings under Article 28(1) of the Brussels Regulation (Council Regulation (EC) 44/2001).

Certain of the agreements and transactions in issue (a 1992 ISDA Master Agreement and the confirmations thereunder (the Asset Swap Transactions)) contained or were subject to exclusive jurisdiction clauses in favour of the English courts. The other agreements (including a Global Master Repurchase Agreement) provided for non-exclusive English jurisdiction.

Article 28 of the Brussels Regulation provides as follows:

1. Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings.
2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
3. For the purposes of the Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgements resulting from separate proceedings.

The existence of an exclusive jurisdiction agreement in favour of the court second seised will, under the express terms of Article 28(2), prevent that court declining jurisdiction, as the court first seised will not have jurisdiction over both actions. The question was whether this also applied where the court second seised was merely being asked to stay its proceedings.

'Related' actions

The claimant sought to argue, based on earlier cases and textbook commentary, that the existence of the exclusive jurisdiction clause in the ISDA Master Agreement meant the actions were not related for the purposes of Article 28(3). The judge, Mr Justice Eder, rejected this argument, having taken into account the 'somewhat chequered and uncertain background' and the absence of clear authority. In his view, looking at the wording of Article 28(3), the focus was on what was desirable and not what was capable or possible.

Risk of irreconcilable judgments

The next question for the judge was whether the actions were so closely connected that there was a sufficient risk of irreconcilable judgments. Adopting, as the case law required, a broad common sense approach and considering the claims made and the likely defences (no formal defence having yet been served) he decided that the underlying factual issues gave rise to a very substantial degree of connection such that it would be very expedient to hear the two actions together to avoid the risk of inconsistent judgments.

Stay

The burden of proof was on the defendant to satisfy the court that a stay should be ordered. The judge considered three factors:

• The extent to which the proceedings were related and the risk of mutually irreconcilable decisions. Whilst the judge recognised the strong undesirability of two overlapping sets of proceedings being pursued in two different jurisdictions, he took into account the possibility of issue estoppels which might be relied upon in the second jurisdiction to reach judgment.
• The stage reached in each set of proceedings. There was little difference at present. He accepted that the Italian proceedings were likely to take longer overall and that given the exclusive jurisdiction clause in the ISDA Master Agreement some issues would remain for consideration in the English proceedings, at least given the way the Italian proceedings were currently put.
• Proximity/convenience. The arguments here were finely balanced in that the witnesses were in Italy, most of the documents would be in Italian and there were some issues of Italian law, but the governing law of the agreements was English law.

In the judge's view, these discretionary factors alone pointed against the grant of a stay. He considered that the case was also 'strongly fortified' by the existence of the exclusive jurisdiction clause in the ISDA Master Agreement which was a 'very significant factor' against the grant of a stay: The claimant was contractually entitled to bring proceedings in England and the court should so far as possible give effect to the parties' bargain and be very slow indeed to exercise a discretion in a manner that would destroy such bargain.

A further significant factor was the fact that the jurisdiction clause in the ISDA Master Agreement provided that the defendant waived any objections to the bringing of proceedings in England.

As regards the agreements which did not give the English courts exclusive jurisdiction, the fact that the English proceedings would continue in respect of the ISDA Master Agreement and Asset Swap Transactions was a significant factor against a stay of the proceedings in relation to the other agreements, given the same underlying issues were likely to arise.