Court Of Appeal Endorses 'Commercially Rational' Approach To Construing Jurisdiction Clauses

In Sebastian Holdings Inc v Deutsche Bank AG [2010] EWCA Civ 998, the Court of Appeal upheld the finding of Walker J that the English Court had jurisdiction to hear Deutsche Bank's claim against Sebastian Holdings Inc in circumstances where the latter commenced prior proceedings in New York under a competing jurisdiction clause.

The proceedings concerned a series of agreements relating to equities and foreign exchange trading between 2006 and 2008 entered into between Deutsche Bank and Sebastian Holdings Inc ("SHI"). Most of the equities and foreign exchange agreements contained English jurisdiction clauses (some exclusive, some nonexclusive). A foreign exchange prime brokerage agreement however contained a non-exclusive New York jurisdiction clause. SHI made losses on foreign exchange trading which lead to demands by Deutsche Bank. The demands were not met by SHI, which subsequently issued proceedings in New York seeking, inter alia, a declaration of non-liability and damages for breach of the foreign exchange prime brokerage agreement. Deutsche Bank then issued proceedings in the English Court claiming sums due under the agreements containing the English jurisdiction clauses (namely a master netting agreement and a foreign exchange master agreement). In response, SHI applied to the English Court for an order that it had no jurisdiction to hear the claim, essentially saying that Deutsche Bank's claims fell under the prime brokerage agreement, which was at the commercial centre of the transaction as a whole (relying on the Court of Appeal decision in UBS v HSH). Walker J held, at first instance, that the English Court did have jurisdiction to hear Deutsche Bank's claim. He found that competing jurisdiction clauses should be considered chronologically to determine whether an initially agreed position had changed over time. The Court found that it was impossible to read into the foreign exchange prime brokerage agreement a bar on proceedings elsewhere once a New York claim was under way.

SHI appealed against this decision, arguing that as the prime brokerage agreement provided for the jurisdiction of the New York Court, the claims and disputes under all the agreements should be resolved in that Court. It also contended that if the claims could be viewed as relating to the master netting agreement and the foreign exchange master agreement as well as the prime brokerage agreement, then in the case of a conflict between the standard forms...