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Jurisdiction Wars - The Battle of the Clauses

Jurisdiction clauses in contractual disputes are of seminal importance and dictate the location and often the mechanism by which litigation between parties is to be decided. However, in complex contractual relationships between parties spanning varying commercial interests, conflicting jurisdiction clauses are frequently encountered and can cause uncertainty when disputes arise.

In UBS v HSB Nordbank Lord Collins stated as follows:

"Sensible business people are unlikely to intend that disputes between them should fall within the scope of two inconsistent jurisdiction clauses”

This statement was cited with approval in the recent Court of Appeal decision of BNP Paribas SA v Trattamento Rifiuti Metropolitani SpA, where it unanimously dismissed the defendant’s appeal against an Order refusing its application to dismiss the claim against it for want of jurisdiction.

In 2008, the defendant, an Italian public-private partnership, entered into a loan agreement with a syndicate of banks, led by the claimant, to fund the building of an energy plant near Turin. The loan agreement contained an exclusive jurisdiction clause in favour of the Court of Turn. In 2010, the defendant subsequently entered into an interest-rate swap with the claimant pursuant to an ISDA Master Agreement in Multi-Currency Cross Border form. The Master Agreement contained an exclusive jurisdiction clause in favour of the English courts.

In 2016, a dispute arose over the swap, and the bank issued a claim in the Commercial Court seeking declarations of non-liability based on the express terms of the Master Agreement. The defendant subsequently brought proceedings in Italy and challenged jurisdiction in England on the ground that the dispute was not concerned with the swap per se, but in fact with alleged breaches of the loan agreement and other obligations subject to the jurisdiction of the Court of Turin.

The Court of Appeal upheld the Judge’s reasoning and conclusions to find that the bank had much the better of the argument on jurisdiction. The Court emphasised the importance of commercial certainty and predictability in the construction of the ISDA jurisdiction clause and rejected the argument that the subsequent Italian proceedings should form part of its analysis of whether the declarations sought fell within that clause.

The decision underscores the commercial imperative that jurisdiction clauses provide certainty and that the parties know where their disputes will be resolved, both from the outset and when a claim arises.

Jurisdiction Wars - The Battle of the Clauses

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