JP Morgan Chase Bank NA v Berliner Verkehrsbetriebe (BVG) Anstalt Des Öffenlichen Rechts [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Teare J. |
| Judgment Date | 09 July 2009 |
| Neutral Citation | [2009] EWHC 1627 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2008 Folio 1052 |
| Date | 09 July 2009 |
[2009] EWHC 1627 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr. Justice Teare
Case No: 2008 Folio 1052
Laurence Rabinowitz QC and Richard Handyside QC (instructed by Linklaters LLP) for the Claimants
Tim Lord QC, Simon Salzedo and Sarah Abram (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing dates: 29 and 30 June 2009
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.
MR.JUSTICE TEARE
Mr. Justice Teare:
This is an application by the Defendant for an order pursuant to Article 22(2) of the Council Regulation No.44/2001 on Jurisdiction that this court has no jurisdiction. The proceedings before this court are said to be “proceedings which have as their object ….. the validity of the decisions” of the organs of a legal person, the Defendant, whose seat is in Germany. If that is so, then the courts of the Member State in which the company, legal person or association has its seat have exclusive jurisdiction.
The parties
The First Claimant is JPMorgan Chase Bank NA (“JPM”), a global provider of banking and financial services. The Defendant is Berliner Verkehrsbetriebe (BVG) Anstalt Des Öffenlichen Rechts (“BVG”), a public law institution established under German law. It is responsible for the provision and operation of the Berlin public transport system.
The claim
JPM claims from BVG approximately US$112m. said to be due pursuant to the terms of an Independent Collateral Enhancement Transaction dated 19 July 2007 which was intended to provide protection to BVG against the risks inherent in cross-border leasing arrangements into which it had entered. Part of the transaction was the JPM Swap. Pursuant to the JPM Swap BVG sold to JPM, in return for a net premium of about US$6m., protection worth US$220m. against the credit risk of 150 companies. As a result of the turmoil in the financial markets in the second half of 2008 some of those credit risks (including Federal National Mortgage Association (“Freddie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Lehman Brothers Holdings Inc. and three Icelandic banks) materialised and gave rise to JPM's claim. Proceedings were commenced by JPM in this court on 10 October 2008 because the contractual arrangements between the parties contain a choice of English law and jurisdiction. Originally, the claim was for certain declarations, including a declaration that the JPM Swap is “valid, binding and enforceable in accordance with its terms”. On 21 January 2009 it was amended to include the monetary claim to which I have referred.
The German proceedings
On 9 March 2009 BVG filed a complaint against JPM in the Berlin Landgericht (or Regional Court). In those proceedings BVG claim that the JPM Swap is invalid because it is ultra vires BVG. BVG also claims to be released from liability under the JPM Swap (or damages equivalent to the sums claimed by JPM) by reason of “grossly incorrect advice” given by JPM concerning the nature and characteristics of the JPM Swap. Allegations of misrepresentation, non-disclosure and breach of a consultancy agreement are made.
The English Court was first seized and so the German Court, having concluded that the English and German proceedings involve the same cause of action within the meaning of Article 27, has stayed the proceedings before it pending the decision by this court as to whether it, the English court, has jurisdiction.
The rival submissions
Before summarising the rival submissions it is necessary to set out the most relevant provisions of the Judgments Regulation.
Article 22
The following courts shall have exclusive jurisdiction, regardless of domicile:
……….
2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its rules of private international law;
Article 23
1. If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.
…………
5. Agreements or provisions of a trust instrument conferring jurisdiction shall have no legal force if they are contrary to Article 13, 17 or 21, or if the courts whose jurisdiction they purport to exclude have exclusive jurisdiction by virtue of Article 22.
Article 25
Where a court of a Member State is seised of a claim which is principally concerned with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 22, it shall declare of its own motion that it has no jurisdiction.
It is common ground that in construing the Regulation the report of Mr. P. Jenard on the Judgments Convention (the predecessor of the Judgments Regulation) may be considered and given such weight as is considered appropriate. The numbering of the articles in the Convention and Regulation is not the same. In this judgment, wherever possible, I shall use the numbering of the Regulation in order to avoid confusion. The relevant parts of the Jenard Report are as follows:
Article [22]
Article [22] lists the circumstances in which the six States recognize that the courts of one of them have exclusive jurisdiction. The matters referred to in this Article will normally be the subject of exclusive jurisdiction only if they constitute the principal subject-matter of the proceedings of which the court is to be seised.
The provisions of Article [22] on jurisdiction may not be departed from either by an agreement purporting to confer jurisdiction on the courts of another Contracting State, or by an implied submission to the jurisdiction (Articles [23] and [24]). Any court of a State other than the State whose courts have exclusive jurisdiction must declare of its own motion that it has no jurisdiction (Article [25]). Failure to observe these rules constitutes a ground for refusal of recognition or enforcement (Articles [35] and [27]).
These rules, which take as their criterion the subject matter of the action, are applicable regardless of the domicile or nationality of the parties. ………….
Companies and associations of natural or legal persons
Article [22(2)] provides that the courts of the State in which a company or other legal person, or an association of natural or legal persons, has its seat, have exclusive jurisdiction in proceedings which are in substance concerned either with the validity of the constitution, the nullity or the dissolution of the company, legal person or association, or with the decisions of its organs.
It is important, in the interests of legal certainty, to avoid conflicting judgments being given as regards the existence of a company or association or as regards the validity of the decisions of its organs. For this reason, it is obviously preferable that all proceedings should take place in the courts of the State in which the company or association has its seat. It is in that State that information about the company or association will have been notified and made public. Moreover, the rule adopted will more often than not result in the application of the traditional maxim 'actor sequitur forum rei'. Such jurisdiction is recognized in particular in German law and, as regards non-profit making organisations, in Luxembourg law.
Article [23]
Jurisdiction deriving from agreements conferring jurisdiction is already a feature of all the Conventions concluded between Member States of the Community, whether the rules of jurisdiction are direct or indirect: ……………
It is unnecessary to stress the importance of this jurisdiction, particularly in commercial relations.
Article [25]
…………
The words 'principally concerned' have the effect that the court is not obliged to declare of its own motion that it has no jurisdiction if an issue which comes within the exclusive jurisdiction of another court is raised only as a preliminary or incidental matter.
Mr. Tim Lord QC on behalf of BVG submits that the English court has no jurisdiction in this matter. The reasons underlying that submission may be summarised as follows:
i) Were the claim to proceed in England BVG would defend the claim brought against them on the grounds that the JPM Swap was ultra vires BVG and therefore void. (It is, I think, accepted that there will or may be other grounds for resisting the claim, including the contention that BVG was induced to enter the JPM Swap because of incorrect advice given by JPM.)
ii) The meaning of the phrase, “proceedings which have as their object”, in Article 22(2) is “proceedings which have as their subject matter” or “proceedings which are principally concerned with”; see Group Torras v Al-Sabah [1996] 1 Lloyd's Rep.7 at p.15.
iii) The proceedings before the English court have as their subject matter, or are principally concerned with, the question whether the JPM Swap is ultra vires BVG, which is a question which concerns the validity of a decision or decisions made by organs of BVG. That is because the ultra vires issue is (potentially) dispositive of JPM's claim.
iv) The courts of Germany, being...
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