Deutsche Bank AG v Comune Di Savona (Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Waksman |
| Judgment Date | 05 May 2017 |
| Neutral Citation | [2017] EWHC 1013 (Comm) |
| Docket Number | Claim No: CL-2016-000349 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 May 2017 |
[2017] EWHC 1013 (Comm)
His Honour Judge Waksman QC
(sitting as a Judge of the High Court)
Claim No: CL-2016-000349
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Jonathan Davies-Jones QC and Christopher Burdin (instructed by Seddons, Solicitors) for the Defendant/Applicant
Sonia Tolaney QC, Rupert Allen and Andrew Lodder (instructed by Allen & Overy LLP, Solicitors) for the Claimant/Respondent
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Hearing dates: 22 and 23 March 2017
INTRODUCTION
This application is a yet further instance of the litigation between Italian local authorities and banks or other financial institutions with whom they have entered into substantial swap or derivative transactions. In this case, the Applicant and Defendant to the proceedings here, Comune di Savona ("Savona") seeks to strike out part of the claim made against it by Deutsche Bank AG London ("DB") for a series of negative declarations and to stay the balance of the proceedings pending the decision of the Court of Appeal in the case of Dexia Crediop v Comune di Prato [2015] EWHC 1746, which was heard at first instance by Walker J (" Prato").
In this case, Savona entered into two interest rate swaps with DB ("the Swaps") pursuant to an ISDA Master Agreement dated 6 June 2007 ("the Master Agreement") and confirmations dated 14 June 2007. The claim brought by DB here was issued on 3 June 2016 with Particulars of Claim dated 30 September 2016. It was made as a result of it becoming aware of a review of the Swaps made by the Court of Auditors for the Liguria Region on 18 April 2016 which was critical of them and the basis on which DB had recommended them. It appeared to presage the possibility of proceedings being brought against DB in Italy. Those proceedings have, eventually, emerged in the form of a Writ issued by Savona against DB on 9 February 2017 which was served on 8 March 2017 i.e. shortly before this application (made on 12 December 2016) was to be heard ("the Italian Claim"). Accordingly, at the time when DB's claim was issued here, the precise form and shape of any Italian proceedings was unknown.
The Italian Claim, however, having now been made, provides the appropriate context in which to consider the nature of the dispute in respect of which the negative declarations are sought.
Prior to the making of the Master Agreement DB and Savona had entered into a written agreement dated 22 March 2007 known as the "Convention" by which DB agreed to provide, for no consideration, certain advice and assistance in respect of Savona's existing derivative commitments and in relation to the restructuring of its present debts.
The Convention is governed by Italian law and contained an exclusive jurisdiction clause in favour of the Italian Court ("the Italian Clause"). The Master Agreement also contained an exclusive jurisdiction clause in favour of the English Court in the familiar ISDA standard form ("the English Clause"). Savona's application therefore raises the stark question as to whether the dispute between the parties to which the challenged negative declarations are to be seen to relate falls within the English or the Italian Clauses and the answer to that question will dictate whether the English Court has jurisdiction for the purpose of Article 25 of the Recast Brussels Regulation.
THE ITALIAN CLAUSE
It is common ground that prior to the making of the Convention, DB was already reviewing Savona's derivative investments and commitments. I refer to the relevant parts of the Convention below, save for the jurisdiction clause which states as follows:
"GOVERNING LAW AND JURISDICTION
This Agreement shall be regulated and interpreted in conformity with Italian Law and disputes relating to it must be referred to the exclusive jurisdiction of the Court of Milan."
There is a debate before me as to the extent to which the Convention imposed advisory obligations upon DB in respect of the Swaps later entered into. To the extent necessary, I shall deal with that dispute below.
THE ENGLISH CLAUSE
Clause 13 of the Master Agreement provides as follows:
"GOVERNING LAW AND JURISDICTION
(a) Governing Law This Agreement will be governed by and construed in accordance with [English Law]
(b) Jurisdiction With respect to any suit, action or proceedings relating to this Agreement ("proceedings") each party irrevocably:
(i) submits to the jurisdiction of the English Courts…"
There are also a number of other relevant terms in the Master Agreement which form the basis for the declarations sought by DB and so are referred to below.
THE ENGLISH CLAIM
This seeks the following 12 negative declarations. In respect of each of them, I have cited in bold square brackets the term of the Master Agreement which forms the basis for that declaration, save for declaration (12) which, it is accepted, is not to be found in any particular contractual provision.
"(1) The Defendant's obligations under the Transaction Documents constituted and constitute its legal, valid and binding obligations enforceable in accordance with their terms; [3 (a) (v)] and/or
(2) The Defendant has and at all material times had complied in all material respects with all applicable laws if failure so to comply would materially impair its ability to perform its obligations under the Transaction Documents; [4 (c)] and/or
(3) The Defendant has and at all material times had the power to execute and deliver the Transaction Documents and to perform its obligations under the Transaction Documents and it has and had at all material times taken all necessary action and made all necessary determinations and findings to authorise such execution, delivery and performance; [3 (a) (ii)] and/or
(4) The execution and delivery of and the performance of its obligations under the Transaction Documents by the Defendant does not and did not at any material time violate or conflict with any law applicable to the Defendant; [3 (a) (iii)] and/or
(5) The Transactions were entered into in conformity with Decree no 389 of 1 December 2003 issued by the Treasury Department of the Ministry of Economy and Finance and the Ministry of Interior and published in the Official Gazette no 28 of 4 February 2004; [3 (g) (6)] and/or
(6) The Transaction Documents constituted and constitute the entire agreement and understanding of the parties with respect to their subject matter and supersede all oral communication and prior writings with respect thereto; [9 (a)] and/or
(7) In entering into the Transactions, the Defendant was acting for its own account and had made its own independent decisions to enter into the Transactions and as to whether the Transactions were appropriate or proper for it based upon its own judgement and upon advice from such advisers as it had deemed necessary; [3 (h) (i)] and/or
(8) In entering into the Transactions, the Defendant did not rely on any communication (written or oral) of the Claimant as investment advice or as a recommendation to enter into the Transactions, it being understood that (i) information and explanations related to the terms and conditions of the Transactions would not be considered to be investment advice or a recommendation to enter into the Transactions, and (ii) no communication (written or oral) received from the Claimant would be deemed to be an assurance or guarantee as to the expected results of the Transactions; [3 (h) (i)] and/or
(9) Prior to and when entering into the Transactions, the Defendant was capable of assessing the merits of and understanding (on its own behalf or through independent professional advice) and understood and accepted, the terms, conditions and risks of the Transactions and the Defendant was capable of assuming and assumed the risks of the Transactions; [3 (h) (ii)] and/or
(10) The Claimant did not act as a fiduciary for or an advisor to the Defendant in respect of the Transactions; [3 (h) (iii)] and/or
(11) The Transactions were entered into by the Defendant for the purposes of managing its borrowings or investments and not for the purposes of speculation; [3 (g) (i)] and/or
(12) The Claimant has to date complied with and/or discharged each and all of its relevant obligations arising out of or in connection with the Transactions (including, for the avoidance of doubt, any obligations arising prior to the execution of any of the Transaction Documents as a result of pre-contractual negotiations between the Claimant and the Defendant or otherwise) and accordingly the Claimant has not caused and/or is not liable to the Defendant (whether in or pursuant to contract, tort, statute or otherwise) in respect of any loss or damage arising out of or in connection with the Transactions which may have been suffered or incurred by the Defendant."
The terms underlying declarations (3), (5) and (7) to (11) were all amendments to the standard form of Master Agreement.
Savona does not contest the English Court's jurisdiction in respect of declarations (1) to (5) and (11). The broad reason for this is that Savona accepts that questions as to the formal validity of the Swaps or as to whether it had the legal capacity to enter into them fall within the English Clause. It has contested jurisdiction in respect of the other declarations. However, in the case of declaration (6) this is, in my judgment, no more than the usual entire agreement clause designed to exclude collateral warranties and the like. It does not seek to exclude claims for misrepresentation or negligent advice and on that basis, as I understand it, Savona is content now not to maintain its jurisdictional...
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