Jurisdiction clauses: High Court finds English courts have exclusive jurisdiction under bespoke ISDA clause

A recent High Court decision shows that the English courts will not readily refuse jurisdiction or stay proceedings where parties have agreed an English jurisdiction clause, whether the choice of jurisdiction is exclusive or non-exclusive: Dexia Crédit Local SA v Patrimonio del Trentino SpA [2024] EWHC 2717 (KB).

It further suggests that the English courts are likely to accept jurisdiction over a claim in respect of a swap transaction where the relevant ISDA Master Agreement contains an English jurisdiction clause, even if it is alleged that the transaction itself was void for lack of capacity. A clause in the Master Agreement to the effect that it and all confirmations entered into under it formed a "single agreement" did not mean that the Master Agreement and the individual swap transactions would necessarily stand or fall together.

The decision also acts as a reminder that a claim can be served out of the jurisdiction without the need for the court's permission whenever there is an applicable English jurisdiction clause, whether that is exclusive, non-exclusive or asymmetric, and that in general a jurisdiction clause will be interpreted broadly.

Finally, the decision highlights the need to consider carefully whether foreign law evidence is needed on an application to challenge jurisdiction. The court's permission should be sought in good time where foreign law evidence is required and the parties should list a hearing with a realistic time limit if the application to adduce expert evidence is contested. In the present case, the court expressed some displeasure at the parties having adduced detailed expert evidence without permission where that evidence was not necessary or proportionate.

Background

In 2010, the claimant (Dexia) and defendant (Trentino) signed an ISDA Master Agreement governed by English law. The Master Agreement contained a bespoke clause (the Jurisdiction Clause) which provided that the parties:

• submitted to the exclusive jurisdiction of the English courts;
• waived any claim that any proceedings brought in England had been brought in an inconvenient forum (ie a "forum non conveniens waiver"); and
• agreed that bringing proceedings before the English courts would not preclude the bringing of proceedings before the Italian courts.

By way of confirmation statement (the Confirmation) agreed five months later, the parties entered into an interest rate swap to hedge a variable interest rate risk to which Trentino was exposed. Due to interest rates staying low, Trentino would have been better off had it not entered into the swap.

In 2023, Trentino commenced Italian proceedings claiming that the swap transaction was void under Italian law. Dexia challenged the Italian court's jurisdiction and commenced English proceedings. Dexia served the English proceedings on Trentino out of jurisdiction, relying on the jurisdictional gateway under CPR Rule 6.33(2B). CPR Rule 6.33(2B)(b) permits a party to serve proceedings outside of the UK without the court's permission where there is a contractual term that the English courts have jurisdiction.

Trentino applied to challenge jurisdiction, seeking two orders:

1. That the Jurisdiction Clause was not valid, such that Dexia had not been entitled to serve Trentino under CPR Rule 6.33(2B).
2. That the English proceedings be stayed on the basis that Italy was the appropriate forum.

Neither party had permission to serve evidence as to Italian law, but Trentino served such evidence together with an application for permission to rely on it. Dexia's position was that Italian law was irrelevant, but it served responsive Italian law evidence with an application for permission if Trentino were given permission. The court agreed to hear the evidence and rule on its admissibility as part of its judgment on the jurisdiction challenge.

Decision

The High Court (Bryan J) dismissed the jurisdiction challenge.

Service under Rule CPR 6.33(2B)

To rely on CPR Rule 6.33(2B)(b), a claimant must show a good arguable case that the claim falls within a jurisdiction clause conferring jurisdiction on the English courts. This provision applies to non-exclusive as well as exclusive jurisdiction clauses.

Trentino argued that the Jurisdiction Clause was void because it did not have capacity to enter into speculative derivatives. However, Bryan J held that this argument was irrelevant to the Master Agreement, which was the contract containing the Jurisdiction Clause. The derivative was entered into under the Confirmation, not the Master Agreement. The argument that it was speculative could not affect Trentino's capacity to enter into the Master Agreement five months earlier. The clause in the Master Agreement to the effect that it and all Confirmations form a single agreement did not mean the Master Agreement and individual swap transactions would stand or fall together: even if some derivative transactions under an ISDA Master Agreement are invalid for lack of capacity, a Master Agreement can remain valid.

Trentino also argued that to rely on CPR Rule 6.33(2B)(b), Dexia needed to show a good arguable case that the swap transaction entered into via the Confirmation was itself valid, rather than just the Master Agreement. Bryan J dismissed this argument on the basis that CPR Rule 6.33(2B)(b) required Dexia to show a good arguable case that a contract existed which gave the English courts jurisdiction. The contract relied upon by Dexia for this purpose was the Master Agreement, and the Jurisdiction Clause in that contract was wide enough to cover the claim brought.

Bryan J therefore found that Dexia had at least a good arguable case (and indeed very much more than a good arguable case) that CPR 6.33(2B)(b) applied.

Even if (contrary to the court's findings) the validity of the swaps transaction itself was relevant, the court would still have held that the claim form was validly served. The court was satisfied that there was no merit in any of the Italian law arguments, and so Dexia had at least a good arguable case that the derivative was not speculative under Italian law and that Trentino had capacity to enter into speculative derivatives in any event, both because it was an Italian joint stock company and an Italian Region, which has a greater level of autonomy than Italian local authorities.

Exclusive jurisdiction

The court then went on to consider the stay sought by Trentino. It was common ground between the parties that, if the Jurisdiction Clause conferred exclusive jurisdiction on the English court, the stay application should be dismissed. This was fundamentally a question of construing the parties' bargain, with the starting point that English courts should interpret jurisdiction clauses generously.

In the present case, there could be no doubt that, on its face, the Jurisdiction Clause contained a submission to the exclusive jurisdiction of the English courts, as it used the word "exclusive". However, the clause had to be read as a whole, including the reference to proceedings before the Italian courts.

An important part of the factual matrix was that EC Regulation No 44/2001 (the Brussels I Regulation, and the Regulation) applied to the UK at the time of contracting. In brief, the Regulation mandated that a second seised convention court must stay its proceedings until the convention court first seised had determined its own jurisdiction. The Regulation therefore did not permit parallel proceedings in Member State courts.  

(The judge said this is why the standard ISDA 2002 Master Agreement provides for non-exclusive jurisdiction where the proceedings do not involve a Convention Court but exclusive jurisdiction where the proceedings involve a Convention Court – though this is not consistent with the explanation given in SwissMarine Corporation Limited v OW Supply & Trading A/S [2015] EWHC 1571 (Comm), by reference to the ISDA User's Guide, which relates to the uncertain status of non-exclusive jurisdiction clauses under the Brussels and Lugano Conventions at the time the 2002 Master Agreement was introduced, rather than anything to do with the Regulation. The judgment also appears to suggest that, under the Regulation, the second seised court would not have to stay its proceedings if there was an exclusive (rather than a non-exclusive) jurisdiction clause in its favour. However, the carve-out from the "first in time" rule for exclusive jurisdiction clauses was only introduced by the recast Brussels I Regulation (1215/2012), with effect from January 2015.)

In the present case, the judge said, the clause only made sense as an exclusive jurisdiction clause, as it was not permissible to have parallel proceedings in two EU countries. What was permissible was for one Member State to have exclusive jurisdiction, while making provision for provisional and protective measures (ie applications for interim relief) to be brought in another Member State.

Accordingly, the judge held that the Jurisdiction Clause was exclusive, but permitted provisional protective measures to be sought in the Italian courts once proceedings had been brought in England. Trentino's stay application was therefore dismissed.

Non-exclusive jurisdiction

For completeness, Bryan J considered what the position would have been in respect of the stay application if the Jurisdiction Clause had not been exclusive.

It is well-established that strong grounds are needed for the English courts to stay proceedings where there is a clause conferring (even non-exclusive) jurisdiction on the English courts. Where there is also a contractual waiver of any forum non conveniens arguments (as was the case here), very strong or exceptional grounds must be shown. In such circumstances, parties are unable to rely on forum non conveniens arguments, save to the extent that factors were unforeseeable at the time of contracting.

Tretino made various submissions around the case being heavily localised to Italy and requiring decisions on points of Italian law such as capacity. Bryan J did not regard any of these issues as unforeseeable at the time of contracting and therefore none justified a stay.

Trentino also submitted that there were two factors which were unforeseeable at the time of contracting (given changes due to Brexit): (i) the likelihood of parallel proceedings; and (ii) the risk that an English judgment would be unenforceable in Italy.

Bryan J held that the possibility of parallel proceedings could not constitute a very strong reason justifying a stay, as it did not bear on the question of which court was the more convenient forum. In any event, the risk of parallel proceedings was not unforeseeable.

Regarding whether an English judgment would be enforceable in Italy post-Brexit, Trentino's Italian law expert claimed that such a judgment would not be recognised in Italy where there was a pending lawsuit before the Italian courts for the same subject and between the same parties. However, Bryan J was not convinced that the subject of the Italian and English proceedings were the same, and therefore Trentino's argument did not succeed. Bryan J also considered, based on Dexia's expert's view, that there was a good arguable case that an English judgment would be enforceable in Italy under the 1964 Bilateral Convention between Italy and the UK which pre-dated the UK's entry into the EU and the various Brussels regulations.

Trentino's application was therefore dismissed on both grounds.

Expert evidence

As a matter of procedure, the judge described it as "deeply regrettable" that the parties did not fix a hearing to determine the applications to adduce Italian law expert evidence in good time before the jurisdiction challenge was heard, particularly given that Dexia denied its relevance. Nor was there any attempt to give the expert applications a realistic time estimate as part of the jurisdiction challenge itself. Bryan J reiterated the importance of realistic time estimates, and of notifying the court if there is a material risk that a hearing will overrun.

Ultimately, as noted above, Bryan J did not consider that the Italian law expert evidence was required. He noted that any evidence on Italian law could sensibly have been dealt with in the witness statements, if necessary with short supporting letters from the experts.