Barclays Bank Plc v Ente Nazionale Di Previdenza Ed Assistenza Dei Medici E Degli Odontoiatri
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blair |
| Judgment Date | 09 October 2015 |
| Neutral Citation | [2015] EWHC 2857 (Comm) |
| Docket Number | Case No: CL-2014-000352, (formerly 2014 FOLIO 1108) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 09 October 2015 |
[2015] EWHC 2857 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Blair
Case No: CL-2014-000352, (formerly 2014 FOLIO 1108)
Sonia Tolaney Q.C. (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant
Alain Choo-Choy Q.C. (instructed by Joseph Hage Aaronson LLP) for the Defendant
Hearing dates: 14–15 September 2015
The claimant, Barclays Bank PLC, is an English bank. The defendant, Ente Nazionale di Previdenza ed Assistenza dei Medici e Degli Odontoiatri ("ENPAM") is an Italian pension fund. A dispute has arisen between them as to a transaction entered into by way of a Conditional Asset Exchange Letter from ENPAM to Barclays dated 21 September 2007 by which ENPAM exchanged fund assets for securities which were in the form of credit-linked notes called the "Ferras CDO securities". ENPAM's claim is that it incurred a major loss in the transaction, and that it is entitled in law to look to Barclays to make that loss good.
ENPAM began proceedings against Barclays and others in the Civil Court of Milan on 23 June 2014 (the Milan proceedings). Barclays says that this was in breach of provisions in the contractual documentation giving exclusive jurisdiction to the English courts. It issued these proceedings seeking a declaration to that effect and other relief on 15 September 2014. I am told that the proceedings were not served for some time. On 20 April 2015, ENPAM applied pursuant to Article 27 or Article 28 of Council Regulation (EC) No. 44/2001 (the "Judgments Regulation") for an order that the English court should not exercise its jurisdiction in these proceedings on the basis that Milan court was first seised.
On 18 May 2015, Barclays issued a summary judgment application in these proceedings on the basis that there is no defence to its claim that the Milan proceedings fall within contractual provisions giving exclusive jurisdiction to the English courts.
Following an exchange of correspondence between the parties, on 31 July 2015 Mr Justice Flaux, the judge in charge of the Commercial Court, acceded to Barclays' application that the summary judgment application be heard at the same hearing as ENPAM's jurisdiction application, subject always to the directions of the judge hearing the applications.
Seven witness statements were placed before the court explaining the factual background. The hearing took place on 14 and 15 September 2015.
There are three matters for decision:
(1) ENPAM's jurisdiction application;
(2) Whether it is appropriate to hear Barclays' summary judgment application at the same hearing; and
(3) If so, and if ENPAM's jurisdiction application is not successful, whether Barclays is entitled to summary judgment.
(i) JURISDICTION
The Milan proceedings
Without accepting any contentious assertions contained in it, and for the purposes of this hearing only, Barclays has agreed the following summary of the Milan proceedings in ENPAM's skeleton argument.
By a Writ of Summons and Statement of Claim dated 12 June 2014 (the Italian Statement of Claim), ENPAM commenced the Milan proceedings against Barclays and five other defendants alleging as follows.
ENPAM is an Italian non-profit foundation with legal personality governed by private law. It manages a fund for the benefit and welfare of its members, namely, surgeons and orthodontists. Pursuant to Italian statutory provisions by which ENPAM became a private law foundation, ENPAM's investments were required to carry low risk, guarantee full repayment of capital, and allow immediate recoupment of the investment at any time.
Prior to 2007, ENPAM held various assets as part of an investment portfolio. During 2007, after detailed discussions with Barclays, including visits by two of Barclays' employees (Giorgio Carone and Guido Contesso, both of Italian nationality but based at Barclays' offices in London) to ENPAM's offices in Italy, ENPAM alleges that it was persuaded to enter into an asset exchange transaction with Barclays whereby it exchanged certain securities and cash for €140 million (in notional value) of the Ferras CDO securities, with the transaction being effected pursuant to the terms of a Conditional Asset Exchange Letter dated 21 September 2007 as amended by a Supplement and Second Supplement to the Conditional Asset Exchange Letter dated 1 October 2007 and 11 October 2007 respectively.
ENPAM's case is that the Ferras CDO securities were a very risky and complex type of credit-linked note which subordinated the repayment of capital and interest to the occurrence of credit events (such as debt restructuring, failure to pay and bankruptcy of the issuing company) concerning a portfolio of underlying financial assets (i.e. the reference entities), and that the characteristics of the Ferras CDO securities were wholly inappropriate for ENPAM's investment objectives. ENPAM further alleges that following further discussion with Barclays, certain changes and restructurings to the Ferras CDO securities portfolio occurred during the period 2008 to 2010, involving a substantial additional payment by ENPAM to Xelo Plc as issuer of the Ferras CDO securities.
As a result of the interactions between Barclays and ENPAM – as well as between ENPAM and entities known as ECP International S.A. (a Luxembourg company) and E. Capital Partners S.p.A (an Italian company now called Mittel Advisory Debt and Grant S.p.A. which is or was at the time the parent of ECP International), the former having been appointed as "ethical advisor" and/or "ethical reviewer" in relation to the Ferras CDO securities – ENPAM alleges that Barclays and its employees, Messrs Carone and Contesso, as well as ECP International/Mittel, "supplied [ENPAM] with a number of investment and ancillary services", including the "supply of advice", and that Barclays was involved in the management of ENPAM's investment portfolio.
ENPAM contends that, in so acting without the prior execution of a written framework agreement which is preliminary to the actual provision of investment services (including the proposal of financial products by Barclays to ENPAM), Barclays (and the other defendants) acted contrary to Italian law (in particular, Articles 23 and 24 of the Consolidating Finance Act) and breached both the general principle of good faith in negotiations under Article 1337 of the Italian Civil Code (and provisions of the Consolidating Finance Act and Consob Regulation No. 11522 of 1998 particularising the principle of good faith in relation to the conduct of financial intermediaries) and engaged in unlawful conduct contrary to Article 2043 of the Italian Civil Code.
In addition, ENPAM claims that because the Conditional Asset Exchange Letter did not articulate ENPAM's right of withdrawal in the context of a transaction "proposed and negotiated door to door and remotely by [Barclays]", the transaction was contrary to Article 30 of the Consolidating Finance Act. Further, because Barclays engaged in "door-to-door selling without engaging financial promoters entered in the Register of Financial Promoters" (neither Giorgio Carone nor Guido Contesso being so registered) ENPAM contends that Barclays also acted in breach of Article 31 of the Consolidating Finance Act.
For these reasons, ENPAM claims against Barclays (and the other defendants), by way of "main claim", compensation by way of damages in respect of "pre-contractual liability pursuant to [A]rticle 1337 of the Italian Civil Code" and "extra-contractual liability pursuant to [A]rticle 2043 of the Italian Civil Code". With regard to the quantum of damages claimed, ENPAM alleges that if it had retained the exchanged assets in its portfolio and not invested in the Ferras CDO securities, it would have been approximately €96 million better off and it therefore claims that amount by way of damages.
As "secondary claims", still by reason of the aforesaid absence of the prior conclusion of a written framework agreement and/or the failure to reserve a right of withdrawal for ENPAM in the contractual documentation, and/or non-registration of Messrs Carone and Contesso as financial promoters, ENPAM claims nullity (alternatively cancellation or termination) of all of the agreements (i.e. the Conditional Asset Exchange Letter and all subsequent agreements between the parties) by which the entire asset exchange transaction was effected, together with consequential restitution from Barclays in the approximate sum of €165 million.
In support and as an integral part of the above claims, ENPAM also claims as follows:
(1) As regards the applicable law, ENPAM contends that, notwithstanding the existence of an English governing law clause in the Conditional Asset Exchange Letter, "actually no valid choice of … English law was made" because "the choice of … English law … should have been included in the agreements under [A]rticles 23 and 24 Consolidating Finance Act [i.e. the preliminary framework agreements regarding the provision of investment services and portfolio management services by Barclays prior to the asset exchange transaction]…, but it was not, since these agreements have never been signed". In addition ENPAM relies on mandatory rules of Italian law pursuant to Article 3(3) of the Rome Convention on the Law Applicable to Contractual Obligations (Convention 80/934/EEC), contending that "all the factual elements of [the] case referred to Italy".
(2) With respect to the jurisdiction of the Milan court, ENPAM advances a similar argument to the one relied upon in relation to applicable law. This is that, notwithstanding the English jurisdiction clause in...
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