Deutsche Bank AG v Sebastian Holdings Inc. [QBD (Comm)]

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeWalker J.
Judgment Date14 August 2009
Date14 August 2009

[2009] EWHC 2132 (Comm)

Queen's Bench Division (Commercial Court)

Walker J.

Deutsche Bank AG
and
Sebastian Holdings Inc.

David Foxton QC (instructed by Freshfields Bruckhaus Deringer) for the claimant.

Tim Lord QC and Jasbir Dhillon (instructed by Travers Smith LLP) for the defendant.

The following cases were referred to in the judgment:

Attorney General of Belize v Belize Telecom LtdUNK [2009] UKPC 10.

Canada Trust Co v Stolzenberg (No. 2) [1998] CLC 23; [1998] 1 WLR 547.

Chartbrook Ltd v Persimmon Homes LtdUNK [2009] UKHL 38; [2009] 1 AC 1101.

Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] CLC 579.

Fiona Trust & Holding Corp v PrivalovUNK [2007] UKHL 40; [2007] 2 CLC 553.

Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc (The Reborn)UNK [2009] EWCA Civ 531; [2009] 1 CLC 909.

Royal Bank of Canada v Co-operatieve Centrale Raiffeisen-Boerenleenbank BAUNK [2004] EWCA Civ 7; [2004] 1 CLC 170.

Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami IranELR [1994] 1 AC 438

UBS AG v HSH Nordbank AGUNK [2008] EWHC 1529 (Comm); [2009] EWCA Civ 585; [2009] 1 CLC 934.

Conflict of laws — Jurisdiction clauses — ISDA master agreement — Agreements between investment bank and investment company concerning equities trading — Parties also entered into agreements concerning foreign exchange trading through US agent — Investment bank demanded sums said to be due under agreements — Proceedings in New York and London — Equities agreements containing exclusive and non-exclusive English jurisdiction clauses — FX agreement containing nonexclusive New York jurisdiction clause — No contractual bar to bank's London claim — Defendant's challenge to English jurisdiction failed — Council Regulation 44/2001, art. 23.

This was an application by the defendant (SHI) challenging the jurisdiction of the English court.

The claimant was a German investment bank (DB) with an office in London. SHI was an investment company incorporated under the laws of the Turks and Caicos Islands.

Between May 2006 and January 2008 DB and SHI entered into a number of equities trading agreements. DB held and operated an equities account on behalf of SHI in London to facilitate SHI's equities trading and to provide prime brokerage services to SHI.

During the same period DB and SHI also entered into a number of FX agreements concerning foreign exchange, precious metals and options trading by SHI. SHI, through its agent 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 account into which debit or credit entries were made was held and operated by DB on behalf of SHI in London.

The first agreement in time was an equities ISDA master agreement (EIMA) which provided a contractual framework within which DB and SHI could enter into over-the-counter derivatives transactions with one another. The EIMA was governed by English law and contained a non-exclusive submission to English jurisdiction. The next agreements were an FX prime brokerage agreement (FXPBA), governed by the law of New York and subject to the non-exclusive jurisdiction of the New York courts, and an Agent Master Agreement (AMA), based on the ISDA 1992 form. It provided a contractual framework for the agent transactions. Its provisions as to service of process, governing law and jurisdiction, were the same as those of the EIMA.

A pledge agreement, entered into between SHI as pledgor, DB as pledgee and Deutsche Bank (Suisse) SA as pledgeholder, was governed by Swiss law.

In January 2008 four new equities agreements were made. They were associated with a broadening of the type of transaction covered by the EIMA so as to go beyond OTC transactions and to include trading over an exchange orthrough an intermediary. Two of the agreements, an equities prime brokerage agreement (EPBA) and a master netting agreement (MNA), were governed by English law and contained an exclusive English jurisdiction clause.

In October 2008 DB became concerned about losses on SHI's FX trading. It made margin calls in mid-October. Those 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.

SHI began proceedings against DB in New York breach of duty and misrepresentation and seeking declarations of non-liability DB issued proceedings in London for sums said to be due under the agreements. SHI contended that the English court lacked jurisdiction.

DB asserted that the dispute which had arisen fell within the jurisdiction clauses in the equities agreements and the AMA so that the English court had jurisdiction under art. 23(1) of Regulation 44/2001.

Held, dismissing SHI's challenge to English jurisdiction:

1. The parties entered first into the EIMA on the terms of the ISDA master agreement. The AMA was on the same terms. The ISDA master agreement expressly accepted that, subject to an immaterial exception, nothing in the master agreement precluded either party from bringing proceedings in any other jurisdiction, and that the bringing of proceedings in any one or more jurisdictions would not preclude the bringing of proceedings in any other jurisdiction. Parties who entered into an agreement containing such other jurisdiction acceptances must have contemplated simultaneous trials taking place. It was impossible to imply a term that a particular court should take precedence. Should a claim be made under the EIMA or AMA or both, either party could make that claim in the English courts, but neither party could say that the jurisdiction clause precluded proceedings in New York if that court had jurisdiction under its own rules. (Royal Bank of Canada v Co-operatieve Centrale Raiffeisen-Boerenleenbank BAUNK[2004] EWCA Civ 7; [2004] 1 CLC 170considered.)

2. The FXPBA contained a non-exclusive jurisdiction clause which lacked the other jurisdiction acceptances. Under the FXPBA a claim could be brought in New York, but it was impossible to read into the FXPBA a ban on proceedings elsewhere once a New York claim was under way. It followed that the jurisdiction clause in the FXPBA was not inconsistent with those in the EIMA and AMA.

3. Under the Swiss pledge SHI was obliged to bring proceedings in the place where the respective DB office was located. Thus the Swiss pledge jurisdiction clause had the capacity to clash with the conferral of jurisdiction under the EIMA, AMA or FXPBA. However, the Swiss pledge jurisdiction clause was primarily intended to deal with technical questions as to the extent and nature of the pledge. It would have to give way to the jurisdiction clauses in the agreements at the commercial centre of the transaction. Those clauses, in the EIMA, AMA and FXPBA, remained clauses which did not clash, each of them contemplating proceedings in more than one jurisdiction. (UBS AG v HSH Nordbank AGUNK[2009] EWCA Civ 585; [2009] 1 CLC 934applied.)

4. The contractual position, that proceedings could be begun in England if relating to the AMA or EIMA, and it would not matter that the claim also fell within the FXPBA jurisdiction clause, changed when the parties agreed to exclusive jurisdiction clauses in the MNA and EPBA. The parties by agreeing on the jurisdiction clauses in the MNA and EPBA intended to vary the previous arrangements enabling concurrent proceedings in more than one jurisdiction. Those jurisdiction clauses were not primarily intended to deal with technical banking disputes. They were both at the heart of the new and extended arrangements for transactions involving equities. It was not possible to say that the parties intended that those jurisdiction clauses should defer to another central agreement. (UBS, Chartbrook Ltd v Persimmon Homes LtdUNK[2009] UKHL 38andMediterranean Salvage & Towage v Seamar Trading & Commerce Inc[2009] 1 CLC 909applied.)

5. DB accepted that the English exclusive jurisdiction clauses did not entitle it to bring a claim in England raising issues as to the rights or wrongs of what had occurred on the FX account. Those issues might arise by way of defence, and indeed the London particulars to an extent anticipate them. That did not mean however that there was a contractual entitlement to insist that those issues were resolved in London — whether they were so resolved would be a matter for case management by the English court in the light of relevant domestic and European legislative provisions. It followed that the parties' relationship was one where under the EIMA and later equities agreements, and the AMA, DB was entitled to bring its debt claim in England.

6. Any reasonable person having knowledge of the express arrangements made for jurisdiction would conclude that if the parties' express arrangements as to jurisdiction were not intended to confer jurisdiction in relation to a dispute, then the service of process provisions could not have been intended to bring about a different result. Conversely the service of process clauses did not of themselves confer jurisdiction. Service within England and Wales would only confer jurisdiction by virtue of the jurisdiction agreements made by the parties.

JUDGMENT

Walker J:

Introduction

1. 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.

2. 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...

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