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 drafted by Deutsche Bank, SHI should be entitled to exercise its rights to bring its claims in the New York Court.
Lord Justice Thomas, delivering the unanimous decision of the Court of Appeal, stated that the issue as to whether Deutsche Bank was entitled to bring its claim in the English Court was one of construction of the jurisdiction clauses in the agreements. He went on to examine the authorities relating to the construction of jurisdiction clauses, stating that a "broad and purposive construction must be followed". He concluded that the clear wording of the clauses in the agreements, looked at in a series, showed that the parties intended to have the ability to bring a claim under an agreement in the jurisdiction provided for in that specific agreement. He went on to state "although in one sense the clauses in the agreements might be said to conflict, as disputes which are related or overlap might arise under different agreements in the series of agreements, the clauses do not in fact conflict, as they envisage claims being brought under the different agreements for monies owed under each agreement, even if the defences may overlap". He concluded that the construction advanced by SHI faced the difficulty that it not only required the Court to rewrite the agreements, but on analysis it in fact sought to impose a regime that was not commercially rational.
Practical implications
This case highlights the Courts' willingness to interpret jurisdiction clauses literally, even where this results in parallel proceedings. In this instance, the Court of Appeal looked at the language contained in the jurisdiction clauses of the agreements pursuant to which the debt was being claimed by Deutsche Bank and had little difficulty in concluding that none of SHI's arguments provided any commercial rationality for construing those agreements differently from the clear language used. If a dispute falls within a particular agreement, the dispute will be covered by the jurisdiction clause in that agreement. It is only where a dispute relates to a transaction as a whole, and where jurisdiction clauses in different documents are inconsistent, that the jurisdiction clause in the agreement which is at the "commercial centre" of the transaction will apply.
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