Merrill Lynch International v Città Metropolitano Di Milano
| Jurisdiction | England & Wales |
| Judge | Mr Stephen Houseman,Stephen Houseman |
| Judgment Date | 02 May 2023 |
| Neutral Citation | [2023] EWHC 1015 (Comm) |
| Docket Number | Case No: CL-2016-000041 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 1015 (Comm)
Mr Stephen Houseman KC
Sitting as a Deputy Judge of the High Court
Case No: CL-2016-000041
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Matthew Hoyle (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant
Craig Ulyatt (instructed by Osborne Clarke LLP) for the Defendant
Hearing date: 28 April 2023
Approved Judgment
I direct that 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 Stephen Houseman KC
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Tuesday 2 May 2023 at 11.30am.
Stephen Houseman KC:
Introduction
This is my judgment upon an application heard last Friday afternoon. I indicated my decision on both grounds at the end of the hearing, made directions as required and promised fuller reasons to follow after the bank holiday weekend.
By its application notice dated 17 March 2023, the Defendant (“ Milano”) seeks production of a specific document in the control of the Claimant (“ MLI”) in the context of a pending jurisdiction challenge listed to be heard on 16 and 17 May 2023 (“ May Hearing”). I refer to this application as the “ Disclosure Application”.
The document in question is an unexecuted but avowedly final version of a joint venture or temporary consortium agreement — known to Italian lawyers as an Associazione Temporanea d'Impresa or ‘ATI’ for short — entered into between MLI and an Italian bank (“ Dexia”) on 15 May 2001. This unexecuted version of the ATI (“ Unexecuted ATI”) was attached to an email sent from Dexia to MLI on 14 May 2001. Neither document was shown to the Court.
There is a dispute between the parties, not for resolution here or necessarily so at the May Hearing, as to whether the ATI as executed was in precisely the same terms as the Unexecuted ATI. I distinguish the two versions by referring to the former as the “ Executed ATI”. The Disclosure Application concerns the Unexecuted ATI. No version of the Executed ATI has yet been located — a position unlikely to change before the May Hearing.
These proceedings were commenced by MLI in January 2016 seeking negative declaratory relief in the context of apprehended or threatened proceedings by Milano in its home court. The proceedings were automatically stayed under CPR 15.11 between 16 October 2016 and 4 June 2022. The Order of Mr Justice Foxton which lifted the stay last summer also granted Milano an extension of time to acknowledge service and make an application under CPR Part 11, together with permission to the parties to adduce expert evidence as to issues of Italian law. Milano issued its jurisdiction challenge on 4 November 2022 (“ Part 11 Application”). Detailed factual and expert evidence has been served by both sides.
The Disclosure Application arises out of a reference made in MLI's factual witness evidence, namely the Fourth Witness Statement of Thomas Clark dated 27 January 2023 (“ Clark-4”), to the fact that no version of the Executed ATI had been located. The existence of the Unexecuted ATI was revealed by MLI's solicitors in correspondence. In support of the Disclosure Application, Milano sought and I granted permission to adduce a further short expert report from Professor Antonella Sciarrone Alibrandi (“ Alibrandi-3”) dealing with the approach of Italian law to so-called ‘connected contracts’.
Relevant Background
This action concerns events that occurred over 20 years ago. The dispute, now also the subject of proceedings commenced by Milano before the Civil Court of Milan in April 2021, relates to alleged mis-selling of two interest rate swaps in November 2002 (“ 2002 Swaps”).
Both swaps were concluded on ISDA terms, including English law and exclusive jurisdiction. MLI was not a party to either transaction. It was, however, involved in their design and the process by which each was concluded with Milano. By this action, MLI seeks wide declarations of non-liability under any applicable system of law relating to the circumstances in which Milano entered into both swap transactions.
Some 17 months or so prior to the 2002 Swaps, Milano had entered into a written mandate agreement, entitled “ Contratto di Mandatto” and dated 15 May 2001, with both MLI and Dexia — themselves acting by or through or as an ATI as a matter of Italian law for such purposes — pursuant to which MLI and Dexia agreed to provide credit rating advice to Milano (“ 2001 Mandate”). MLI and Dexia subsequently acted as arrangers, joint book runners and joint lead managers for Milano's note programme. The 2001 Mandate is three pages long and provides (article 13) for Italian governing law and Milan court jurisdiction. Its meaning and effect is the focus of Italian law evidence. The relationship, if any, between the 2001 Mandate and the 2002 Swaps will be addressed at the May Hearing.
The Part 11 Application falls to be determined in accordance with Parliament and Council Regulation (EU) No.1215/2022 (“ Regulation”). There are two main issues:
(i) The first main issue concerns Articles 25 and 31(2) of the Regulation, i.e. the alleged applicability of the Milanese jurisdiction clause (‘MJC’ for short) in the 2001 Mandate to each distinct basis of MLI's contested liability. The parties differ as to whether MLI provided any services in relation to the 2002 Swaps pursuant to or in connection with such mandate. A separate issue arises as to the proper scope and effect of the MJC. I refer to this set of jurisdictional disputes as the “ Article 25 Issue”.
(ii) The second main issue concerns Article 7(2) of the Regulation. MLI no longer seeks negative declaratory relief on a contractual basis; the focus is on its non-contractual position. This issue therefore concerns the place where any “ harmful event occurred” within the meaning of Article 7(2). The factual witness evidence is largely directed at a geographical inquiry as to the location(s) of the event(s) giving rise to relevant harm, i.e. alleged harm to Milano. In an exercise familiar to practitioners in common law jurisdictions, the rival witness evidence is populated with references to events or conversations in London or Milan, as the case may be. I refer to this evaluative nexus inquiry as the “ Article 7(2) Issue”.
It is common ground as a matter of Italian law analysis that MLI and Dexia both entered into the 2001 Mandate with Milano pursuant to or through or as a joint venture/consortium governed by the Executed ATI. (I refer to this situation or status simply as ‘the ATI’.) Although no copy of the Executed ATI has yet been located by MLI or its solicitors, it is presupposed by the terms of and specifically identified in the recitals to the 2001 Mandate as having been signed on the same day, i.e. 15 May 2001.
Broadly speaking, the ATI constituted the relationship between MLI and Dexia for the purposes of their participation in and performance of the 2001 Mandate. There is a dispute between the parties as to the legal relevance of Dexia and its role; such dispute straddles both limbs of the Part 11 Application outlined above. The Executed ATI is the foundational or constitutional instrument governing the relationship between MLI and Dexia for the purposes of providing services to and establishing privity with Milano in May 2001. It is not yet explained whether or to what extent such instrument might have identified who is to do what and where in performance of the 2001 Mandate.
Clark-4 was served on behalf of MLI in opposition to the Part 11 Application. It responds with commendable discipline to Milano's supporting evidence (“ Frapwell-2”). Clark-4 comprises 55 paragraphs arranged in three sections. The first section (paragraphs 7 to 42) deals with factual background. Under three sub-headings this covers circumstances said to be relevant to the Article 7(2) Issue with emphasis on the location(s) of the event(s) giving rise to harm allegedly suffered by Milano. Amongst other things, Mr Clark explains (paragraph 16) that none of the individuals involved in relevant events in 2001–2002 are employed by MLI any longer. He also explains (paragraphs 34 and 35) that MLI has been unable to locate documents which identify the author(s) of key contemporary documentation, i.e. two technical reports alleged to relate to (what became) the 2002 Swaps.
In a sub-section entitled “ Milano's factual chronology” which starts at paragraph 24, Mr Clark deals with a series of matters covered in the factual background section (paragraphs 10 to 50) of Frapwell-2. Paragraph 27 of Clark-4 responds to paragraphs 13 to 16 of Frapwell-2 concerning events in March-April 2001. This paragraph is important. It reads in material part as follows:
“ Similarly (subject to the points in paragraphs 27.a. 27.c. below) MLI does not dispute Milano's summary of the invitation process and the Joint Offer at Frapwell-2/13–16, although it notes that it has no knowledge of whether invitations were sent to other banks and, if so, in what form. Nor has it presently located an executed copy of the ATI.
[…]
b. Second, I am instructed that, contrary to Frapwell/15, MLI did not enter into an ATI with Dexia until 15 May 2001…”
(emphasis added)
Paragraph 27.b. corrects what Mr Frapwell said in his first witness statement, relating to the lifting of the automatic stay, which suggested (paragraph 15) that MLI and Dexia had entered into their ATI by early April 2001. Mr Clark confirmed on behalf of MLI that the ATI was...
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