Royal Bank of Canada v Cooperative Centrale Raiffeisen-Boorenleenbank Binding Authority

JurisdictionEngland & Wales
JudgeMr Justice Andrew Smith
Judgment Date02 December 2003
Neutral Citation[2003] EWHC 2913 (Comm)
Docket NumberCase No:2002/608
CourtQueen's Bench Division (Commercial Court)
Date02 December 2003
Between:
Royal Bank of Canada
Claimant
and
Cooperative Centrale Raiffeisen-boorenleenbank Binding Authority
Defendant

[2003] EWHC 2913 (Comm)

Before:

The Honourable Mr Justice Andrew Smith

Case No:2002/608

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Guy Philipps Q.C. and Richard Handyside

(instructed by White & Case, Sols.) for the Claimant

David Quest (instructed by Herbert Smith, Sols.) for the Defendant

Hearing dates: 20, 21 November 2003

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.

The Hon. Mr Justice Andrew Smith

Mr Justice Andrew Smith

Mr Justice Andrew Smith

1

This is an application by the claimant, the Royal Bank of Canada ("RBC"), for an injunction that the defendant, Cooperatieve Centrale Raiffeisen-Boerenleenbank BA ("Rabobank"), be restrained from taking any step to obtain a determination of any issue raised in proceedings instituted by Rabobank against RBC in the Commercial Division of Supreme Court of the State of New York ("the New York proceedings") save for the purpose of completing party and third party factual discovery. The grounds of the application are that England is the natural forum for the determination of the dispute between the parties and it is vexatious and oppressive for Rabobank to prosecute the New York proceedings save for the purpose of factual discovery.

2

The trial in this action is listed to begin on 8 March 2004. The New York proceedings raise the same issues between the same parties as these proceedings. As matters stand, there is the prospect that the trial of the New York proceedings will begin on or about 12 January 2004, and that an application by Rabobank for the summary determination of one of its claims will be heard before then. RBC complains that it would be vexatious and oppressive for it to be required "to prepare for and conduct a trial in New York at the same time as it is preparing and conducting a trial on the same issues in England"; and that the circumstances are such that this Court should protect it by making the order that it seeks.

3

It is not necessary to explain the background to the parties' litigation in great detail. RBC is a Canadian bank, its principal place of business being in Toronto. Rabobank is a co-operative institution organised under the laws of the Netherlands, its principal place of business being in Utrecht. They both do business in London and New York. RBC's claim is based upon a swap agreement with Rabobank recorded in a Total Return Swap Confirmation (the "Total Return Swap") dated 31 January 2001. Under it Rabobank was liable to pay RBC US$517 million, plus US$6 million interest, on 28 June 2002. The Total Return Swap formed part of a structured finance transaction involving a block of shares in a publicly traded company called EOG Resources Inc, the shares being owned by the Enron Corporation. The transaction involved two closings. At the first closing on 29 November 2000 RBC advanced part of the sum equivalent to the purchase price of the EOG shares to an entity called Heracles Trust. By the second closing, which was on 31 January 2001, RBC had effectively advanced the full sum of US$517 million. Rabobank's involvement in the transaction was at the stage of the second closing when it entered into the Total Return Swap with RBC and an equity swap with Enron North America, which was guaranteed by Enron Corporation. As part of the arrangement of the second closing, Rabobank assumed some Enron credit risk.

4

The Total Return Swap formed part of, and was subject to, an International Swap Dealers Association Master Agreement (the "Master Agreement") dated 9 January 1995. The Master Agreement, which was expressly governed by and to be construed in accordance with English law, included the following provision:

"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 if this Agreement is expressed to be governed by English law…; 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 a party.

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction… nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction."

5

On Friday 21 June 2002 Rabobank brought the New York proceedings against RBC. On 24 June 2002, the next working day, RBC brought these proceedings.

6

In the English proceedings RBC claims damages from Rabobank on the basis that Rabobank gave notice dated 21 June 2002 that it did not intend to pay RBC the sum due under the Total Return Swap on 28 June 2002 and thereby committed an anticipatory repudiatory breach of it, which RBC accepted so as to terminate the agreement. Rabobank served a defence and counterclaim on 4 October 2002 in which it refutes RBC's claim and itself claims a declaration that the Total Return Swap has been rescinded and also damages, which it deploys by way of a set-off against RBC's claim. Its principal allegation, in summary, is that Rabobank's participation in the transaction was procured by the fraud of three former senior employees of RBC's global structured finance group. It is said that these employees had previously engaged in a conspiracy with senior officers of Enron to defraud their respective employers, and therefore were aware of serious management dishonesty at a high level in Enron; and that representations made by the employees on behalf of RBC about the published credit rating of Enron were fraudulent. Alternatively, Rabobank contends that the employees owed a duty to disclose their knowledge to Rabobank when negotiating the Total Return Swap on behalf of RBC. It is also said (i) that RBC aided and abetted fraud on the part of Enron; (ii) that Enron committed fraud in the course of a joint venture with RBC; and (iii) that a condition precedent to payment by Rabobank stipulated in the Master Agreement was not satisfied, and therefore Rabobank has no liability to RBC.

7

The claims made by Rabobank in the New York proceedings closely mirror its defence and counterclaim in these proceedings. RBC responded to the claims with an answer and counterclaim dated 25 February 2003 in which RBC claims damages on the same basis as in these proceedings. Rabobank contends both in this action and in the New York proceedings that (in so far as English law differs from New York law) its claims and the issues between the parties are governed by the law of New York. RBC contends that they are governed by English law.

8

On 31 July 2002, RBC applied in the New York proceedings for orders that the complaint be dismissed or stayed on the grounds of forum non conveniens, and also that it be dismissed for failure to state a cause of action, because Rabobank's pleading does not, as a matter of law, disclose a claim. Judgment was given on 31 January 2003. As for forum non conveniens, Judge Ramos cited the rule that where, " the Court finds that in the interest of substantial justice the action should be heard in another forum, the Court, on the motion of any party, may stay or dismiss the action in whole or in part on any conditions that may be just", and said that the plaintiff's choice of law would not be disturbed unless the defendant demonstrated that private and public interest militate against the continuation of the suit in New York. Denying the motion, he observed:

"Considering the role of New York as a financial capital and the need to provide access to a forum to redress grievances in cases where parties utilise New York's financial resources to further their acts, such as the use of New York banks to facilitate the transfer of money according to the agreements, dismissal of the action is not readily warranted".

9

Justice Ramos also dismissed the application asserting that Rabobank's pleading failed to disclose a cause of action.

10

In the meantime on 27 September 2002 Rabobank had applied in these proceedings for a stay of them on the ground that "these proceedings entail a substantial overlap of issues with the New York Proceedings and it would not be desirable for the same issues to be litigated concurrently in both the New York and English Courts, with a view to costs, effective case management and the risk of irreconcilable judgments". The application came before Moore-Bick J on 23 January 2003. He dismissed the application. In the course of presenting it, Rabobank's counsel, Mr. Ali Malek Q.C., said that a lot of the evidence about the issues in the proceedings was "going to be US based" and that it was best gathered in New York: specifically that the most effective way of gathering the requisite evidence was for there to be proceedings in New York, where appropriate orders could be made for depositions and the production of documents by way of third party discovery. He pointed to no other consideration that made New York more appropriate than London as a forum to determine the dispute.

11

In his judgment Moore-Bick J, having set out the jurisdiction clause, observed that it followed from it that the parties agreed to submit to the jurisdiction of the English courts, but, he said, "not in such a way as to preclude the bringing of proceedings in any other jurisdiction, or indeed in more than one jurisdiction concurrently". Having referred to the case of National...

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