Derivatives Update: The 2002 ISDA Master Agreement's Jurisdiction Clause

The recent case of SwissMarine Corporation Ltd v OW Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm) reached some interesting conclusions as to how the jurisdiction clause in the 2002 ISDA Master Agreement operates when the English Court's jurisdiction is chosen.

Background

SwissMarine and OW Supply entered into a 2002 ISDA Master Agreement. An event of default under the 2002 ISDA occurred when OW Supply filed for bankruptcy in Denmark on 7 November 2014.

SwissMarine chose not to designate an early termination of the 2002 ISDA on the basis of OW Supply's insolvency. Instead it brought proceedings in London for a declaration that, under Section 2(a)(iii) of the 2002 ISDA, it was not obliged to make any payment to OW Supply as long as this event of default was continuing. Click here for our most recent alerter on Section 2(a)(iii) of the ISDA Master Agreements.

OW Supply then began an action in Lyngby, Denmark seeking payment of sums allegedly due from SwissMarine. OW Supply argued that, under the Danish insolvency law and securities legislation Section 2(a)(iii) of the 2002 ISDA could be deemed not to apply to a Danish company in bankruptcy.

SwissMarine applied for an anti-suit injunction in London restraining OW Supply from continuing with the Danish proceedings, on the basis that the Danish proceedings were a breach of the 2002 ISDA's exclusive jurisdiction and English governing law provisions. The English Court refused the anti-suit injunction, finding that the Danish proceedings did not concern the parties' rights and obligations under the 2002 ISDA, but instead dealt with how the Danish insolvency regime applies to those rights and obligations. The Danish Court was not being asked to decide the construction of the contract or the parties' rights and obligations under it.

Section 13(b)(i)(1) of the 2002 ISDA provides for the English court's jurisdiction over the 2002 ISDA Agreement and any non-contractual obligations, where English law is selected as the governing law. Such jurisdiction is stated to be non-exclusive, unless proceedings involve a "Convention Court", in which case it is to be exclusive. A Convention Court means a court which is bound to apply the jurisdiction provisions of the 1968 Brussels Convention or the 1988 Lugano Convention.

The English court held that the Danish proceedings did not involve a Convention Court, as defined in the 2002 ISDA wording. Neither the High Court in London nor the Danish Court...