Deutsche Bank Ag v Sebastian Holdings Inc.
| Jurisdiction | England & Wales |
| Judgment Date | 01 December 2009 |
| Neutral Citation | [2009] EWHC 2132 (Comm),[2009] EWHC 3069 (Comm) |
| Docket Number | Case No: 2009 Folio 83 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 01 December 2009 |
[2009] EWHC 2132 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before : Mr Justice Walker
Case No: 2009 Folio 83
Mr David Foxton QC (instructed by Freshfields Bruckhaus Deringer) for the claimant
Mr Tim Lord QC and Mr Jasbir Dhillon (instructed by Travers Smith LLP) for the defendant
Hearing dates: 15, 16 June 2009
Mr Justice Walker :
Introduction
A claim (“the London claim”) has been brought in this court by Deutsche Bank AG (“DB”). DB is a global investment bank which is incorporated under the laws of Germany. It has its headquarters in Frankfurt and has substantial offices throughout the world including New York, London and Geneva.
The defendant in the London claim is Sebastian Holdings Inc (“SHI”). SHI is a company incorporated under the laws of the Turks and Caicos Islands. It was formed for the purpose of holding and dealing in investments including securities and foreign currencies. The sole shareholder and director of SHI is Mr. Alexander Vik.
For some years SHI was a customer of DB. Disputes arose between them. On 24 November 2008 SHI began proceedings (“the New York claim”) in the Supreme Court of the State of New York, County of New York City (“the New York court”) against SHI. In pursuit of the New York claim SHI on 20 January 2009 served its complaint (“the New York complaint”) on DB.
On 21 January 2009 DB issued its claim form in the London claim. The claim form and particulars of claim (“the London particulars”) were served on Clifford Chance in London on behalf of SHI. SHI filed an acknowledgement of service which indicated an intention to contest the jurisdiction of the court.
On 23 February 2009 SHI filed a motion (“the Motion to Restrain”) in the New York court seeking an order restraining DB from taking further steps in the English proceedings pending the determination of the New York claim, and also sought a temporary restraining order until the Motion to Restrain could be decided. The New York court did not grant SHI a temporary restraining order. On 24 February 2009 DB filed a motion (“the Motion to Dismiss”) with the New York court seeking: (1) the dismissal of the New York complaint or a stay of the New York claim on the grounds of forum non conveniens, the existence of the English proceedings between the parties, and the existence of English jurisdiction clauses; or (2) dismissal of the New York complaint on the ground that SHI was not authorised to do business in New York; or (3) the dismissal of SHI's tort and restitution claims on the grounds that those claims failed to state a cause of action. The New York court has heard argument on the parties' respective motions and its decision is awaited.
SHI has in the meantime applied in the London claim for an order that this court has no jurisdiction to try the claim which DB seeks to make in these proceedings. The parties are agreed that this court should determine the procedural questions which arise in the English claim without awaiting the decision of the New York court on the Motion to Restrain and the Motion to Dismiss. For that reason I have heard argument and proceed to give judgment now, without intending any discourtesy to the New York court.
SHI has an alternative application. If this court has jurisdiction, SHI asks the court to decline to exercise jurisdiction on the grounds that the courts of New York are the natural and proper forum for the resolution of the dispute. As a matter of case management I ruled that argument on this alternative application should not proceed until I had given my decision on the question whether this court did indeed have jurisdiction.
Overview of dealings between the parties
Between May 2006 and January 2008 inclusive DB and SHI entered into a number of agreements (“the equities agreements”) concerning equities trading carried out by SHI. DB held and operated an account on behalf of SHI in London to facilitate this trading (“the equities trading) and to provide prime brokerage services to SHI.
During the same period DB and SHI also entered into a number of agreements (“the FX agreements”) concerning foreign exchange, precious metals and options trading by SHI. SHI, through its agent who was based in Connecticut, entered into trades in DB's name with third parties. Each such trade was the subject of an offsetting contract between SHI and DB. The trades were processed by DB's FX Prime Brokerage operations group in New Jersey. The associated SHI account into which debit or credit entries were made was located in London.
In October 2008 DB became concerned about losses on SHI's FX Trading. It made margin calls in mid-October. These were followed by various transfers and liquidations, leading (among other things) to demands by DB under the Equities Agreements and the FX Agreements. The demands were not met. Legal proceedings ensued as described above.
History of events
In May 2006 DB and SHI entered into the first of the equities agreements. It was dated “as of May 8, 2006” and was based on a 1992 form prepared by the International Swap Dealers Association (“ISDA”) for a Master Agreement and Schedule, including Credit Support Annex. I shall refer to it as “the Equities ISDA Master Agreement”, or “EIMA” for short. It provided a contractual framework within which DB and SHI could enter into over the counter (“OTC”) derivativestransactions with one another. OTC derivatives transactions are derivative contracts that are traded and privately negotiated between counterparties, rather than trading over an exchange or intermediary. As to service of process, section 13(c) stated that each party irrevocably appointed the process agent (if any) specified opposite its name in the Schedule to receive service of “Proceedings”—defined as “any suit, action or proceedings relating to this Agreement”. Part 4(b) of the Schedule dealt with process agents. For SHI it stated, “To be notified in writing by [SHI]”. As to governing law, Section 13 (a) of EIMA and Part 4 (h) of the Schedule to EIMA stated that EIMA was to be governed by English law. As to jurisdiction, Section 13 (b) stated:
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 …; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.
Nothing in this agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.
The next agreements to be made were FX agreements. On 28 November 2006 SHI signed two documents which were also signed by DB. One was dated on its signature page “as of” the date on its first page, namely 3 November 2006. The other was dated “as of 22 November 2006.”
The document dated as of 3 November 2006 was a prime brokerage agreement. I shall refer to it as “the FX prime brokerage agreement”, or “FXPBA” for short. In it DB authorised SHI to act as its agent in executing certain foreign exchange transactions, precious metal transactions and currency options (“counterparty transactions”) with listed counterparties on the terms set out in Annex B. By clause 1 SHI's authority was limited for each counterparty by a settlement limit and a maximum counterparty net open position. By clause 2 SHI agreed to monitor the net daily settlement amount and counterparty net open position for each counterparty, and it was stated that DB would not be responsible for counterparty transactions unless certain requirements were met. Also by clause 2 DB agreed to provide SHI with a summary of outstanding trades and net exposure with respect to each counterparty at specified intervals. Clause 4 provided that each counterparty transaction would give rise to an offsetting transaction in one or other of two alternative ways. In fact only one of the alternatives was used: an offsetting agreement between DB and SHI which was described as an “agent transaction.” Each agent transaction was subject to and governed by what was described as the “Agent Master Agreement”, namely “the applicable ISDA master agreement between [DB] and [SHI], including the credit support annex.” SHI was required to post collateral with respect to its obligations under the Agent Master Agreement in accordance with the terms and provisions of the credit support annex. Clause 13 provided that FXPBA was to be governed by the law of the state of New York and subject to the non-exclusive jurisdiction of the courts of the state of New York and the United States District Court located in Manhattan, New York.
The document dated as of 22 November 2006 was the “Agent Master Agreement.” I shall refer to it as “AMA” for short. Like EIMA it was based on the ISDA 1992 form. It provided a contractual framework for the agent transactions. As to service of process, governing law and jurisdiction, Sections 13 (a) to (c) of AMA and Part 4 (h) of the Schedule to AMA were in identical terms to those of EIMA (see above). Part 4(c) of the Schedule stated that SHI appointed as its process agent Clifford Chance in London.
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