Jurisdiction Clauses - Recent Decisions

In four recent decisions, the English Court has considered, and provided some clarification on, the appropriate approach in relation to jurisdiction clauses in complex banking transactions, and the granting of anti-suit injunctions. We summarise these cases below.

(1) In Highland Crusader Offshore Partners LP and Others v Deutsche Bank AG and Another [2009] EWCA Civ 725 the Court of Appeal considered whether or not it was appropriate to grant an anti-suit injunction to restrain foreign proceedings where the parties had entered into a contract containing an English non-exclusive jurisdiction clause.

In October 2007, Deutsche Bank AG and Deutsche Bank Securities Inc (together "DB") entered into agreements with the Highland companies (collectively "Highland") on materially identical terms pursuant to which Highland agreed to buy from DB tranches of asset backed collateralised loan obligations with a face value of US$600 million. The agreements took the form of Global Master Repurchase Agreements (the "GMRAs").

Clause 17 of the GMRAs provided that they would be governed by and construed in accordance with the laws of England and that the parties irrevocably submitted to the jurisdiction of the Courts of England. However, that clause went on to say that "nothing in this paragraph shall limit the right of any party to take proceedings in the Courts of any other country of competent jurisdiction".

On 30 September 2008 DB made margin calls on Highland which Highland did not pay. DB subsequently served default and valuation notices claiming sums amounting to over US$70 million.

On 16 October 2008 Highland filed proceedings against DB in the District Court of Dallas County, Texas, alleging amongst other things that DB had induced Highland to agree to buy securities by fraudulent or negligent misrepresentations. On 7 November 2008 DB issued proceedings against Highland in the Commercial Court in England for the amounts stated in the default valuation notices. On 27 February 2009 DB issued an application in the Commercial Court for an anti-suit injunction (i.e. an order restraining Highland from pursuing the proceedings in the US). On 3 April 2009 the Commercial Court granted DB such an order. Highland appealed.

The Court of Appeal helpfully set out the key principles in respect of anti-suit injunctions, including the following:

1 Under English law the Court may restrain a defendant over whom it has personal jurisdiction from instituting or continuing proceedings in a foreign court when it is necessary and in the interests of justice to do so.

2 The parties seeking an anti-suit injunction must generally show that proceeding before the foreign court is or would be vexatious or oppressive.

3 In order to establish that proceeding in a foreign court is or would be vexatious or oppressive on grounds of forum non conveniens, it is generally necessary to show that England is clearly the more appropriate forum and that justice requires that the claimant in the foreign court should be restrained.

4 An anti-suit injunction requires caution because it involves interference with the process of a foreign court. The stronger the connection of the foreign court with the parties and the subject matter of the dispute, the stronger the argument against intervention.

5 The prosecution of parallel proceedings in different jurisdictions is undesirable but not necessarily vexatious or oppressive.

6 An application to stay, on forum non conveniens grounds, an action brought in England pursuant to an English non exclusive jurisdiction clause will ordinarily fail, but it does not follow that an alternative forum is necessarily inappropriate or inferior.

The Court of Appeal then considered the cases where applications have been made to the English Court for an anti-suit injunction on the basis of a non-exclusive jurisdiction clause. It concluded that the starting point for considering the effect of a non-exclusive jurisdiction clause must be the wording of the clause itself. A party cannot be said to be in breach of a contract containing a non-exclusive jurisdiction clause merely by pursuing proceedings in an alternative jurisdiction. By contracting for non-exclusive jurisdiction, the parties have anticipated and accepted the possibility of parallel proceedings and so only foreign proceedings which are vexatious and oppressive for some reason independent of the non-exclusive jurisdiction clause will be restrained by injunction. It was not right to start with a general presumption that parallel proceedings in a non-selected forum were to be regarded as vexatious or oppressive. Duplication of litigation through parallel proceedings is undesirable, but it is an inherent risk where the parties use a non-exclusive jurisdiction clause.

Accordingly, the Commercial Court Judge had misdirected himself as to the correct principles and the Court of Appeal had to make its own decision whether an anti-suit injunction ought to be granted. The Court of Appeal concluded that it should not be. The last sentence of clause 17 of the GMRA could not be relied on of itself to suggest that the prosecution of parallel proceedings in another jurisdiction would be oppressive or vexatious. Little significance should be attached to the fact that the Texas action was started...