Competing Jurisdiction Clauses In Interest Rate Swap Cases

Two recent decisions, with similar facts, have provided clarity on the approach the Courts should take when faced with competing jurisdiction clauses. In Deutsche Bank AG v Comune di Savona [2018] EWCA Civ 1740 (27 July 2018) the Court of Appeal overruled an earlier decision of the lower court, drawing on the recent Commercial Court decision of Mr Justice Knowles in BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2018] EWHC 1670 (Comm), and finding that the English Court had jurisdiction to hear claims for declarations regarding the terms and effect of an ISDA Master Agreement.

The issue of competing jurisdiction clauses is a common problem in cases relating to interest rate swaps (or other hedging/derivative transactions), primarily arising when the contractual arrangements that govern the underlying relationship between the parties have jurisdiction clauses that differ from the jurisdiction clause of an ISDA Master Agreement that the parties later enter into in respect of interest rate and other swaps. There has been a divergence in a number of first instance decisions in such cases, on which the Court of Appeal's decision in Deutsche v Savona provides some clarity.

In Savona, the parties had entered into an underlying advisory agreement (the "Convention") that gave exclusive jurisdiction to the Courts of Milan, and then subsequently entered into a multicurrency ISDA Master Agreement in respect of two interest rate swap transactions, which gave non-exclusive jurisdiction to the English Courts. A number of years later, Savona and the bank were publicly criticised by the Italian Court of Auditors for entering into these transactions, which led to Deutsche commencing proceedings in the Commercial Court in London, seeking declarations relating to the validity of the swaps. Savona challenged the jurisdiction of the English Court on the basis that the Convention was the agreement that governed the legal relationship in question and therefore it was the Milan Court that had jurisdiction. Savona then issued proceedings in Italy.

Savona's jurisdiction challenge was heard in the Commercial Court by HHJ Waksman QC, who found in favour of Savona on the basis that while, if read in a vacuum, the English law jurisdiction clause would bring the declarations sought within the jurisdiction of the English Court, this would not take account of the contractual context of the agreement, or the desirability of avoiding any overlap between two...