In (1) UBS AG (2) UBS Securities LLC v HSH Nordbank AG [2009] EWCA Civ 585 the Court of Appeal, in agreeing with the decision of the High Court that the proper jurisdiction for proceedings to be brought was New York, found that it was necessary to construe a jurisdiction clause in the light of the transaction as a whole.
UBS appealed against a decision that the English Courts did not have jurisdiction to try proceedings UBS had brought against the respondent bank, HSH Nordbank AG ("HSH"). The dispute related to a complex transaction involving various contracts that contained different jurisdiction clauses pursuant to which the predecessor of HSH, Landesbank Schleswig-Holstein, purchased derivatives from UBS. Among the central contracts governing the transaction was an agreement between the parties about the management of assets forming a particular reference pool, which was subject to New York law and contained a nonexclusive New York jurisdiction clause.
HSH brought proceedings in New York alleging that UBS had made fraudulent and negligent misrepresentations in relation to the reference pool, which had induced HSH to enter into the transaction. However, in anticipation of the New York proceedings, earlier on the same day UBS had started proceedings against HSH in the High Court, seeking a declaration that it was not liable to HSH, on the basis of English jurisdiction clauses contained in various documents governing a credit swap entered into by the parties in relation to the purchase of assets in the reference pool. HSH applied for an order in the English proceedings that the English Courts did not have jurisdiction to try UBS' claim, or (in the alternative) asked the Court to decline to exercise jurisdiction on the grounds that the New York Courts were the natural and proper forum for the resolution of the dispute. In short, HSH argued that none of the contracts out of which the New York dispute arose conferred jurisdiction on the English Courts. UBS, on the other hand, argued that certain exclusive jurisdiction clauses, and in particular a jurisdiction clause in a dealer's confirmation, conferred jurisdiction on the English Courts.
The High Court had found for HSH, the Judge deciding that the English jurisdiction clauses contained in the relevant credit swap documentation were insufficiently wide to cover the dispute set out in the New York claim. The Court held that those matters which were the subject of the U.S. proceedings (i.e. matters relating to the management of the assets within the reference pool) were subject to the laws of New York and contained submissions to the jurisdiction of the courts in New York.
The Court of Appeal, in agreeing with the findings of the Judge at first instance, relied in part on the fact that HSH's claim form in the New York proceedings made no mention of the credit swap documentation. The Court of Appeal said that the essence of the misrepresentation claim in New York was that HSH had been induced to purchase the derivatives, and the misrepresentations alleged related to all aspects of the transaction. The essential task was therefore to construe the jurisdiction agreements relied on by the parties in the light of the transaction as a whole. Whether a dispute fell within one or more related agreements depended on the intention of the parties as revealed by those agreements.
The Court found that it was not in the contemplation of the parties, at the time of the conclusion of the contracts, that there would be litigation in two countries involving allegations of misrepresentation in relation to the performance of the agreements. Commercially minded people would not have intended that a dispute of the type which arose would have been within the scope of two inconsistent jurisdiction agreements. Rather, the agreements were all part of one package. The Court said that it was not realistic to suggest that the credit swap documentation was renegotiated to provide expressly for the exclusive jurisdiction of the English Courts to deal with a dispute of the type which had arisen, or that the parties ever envisaged the risk of a clash. The Court held that where there were numerous jurisdiction agreements that overlapped, it had to be presumed that the parties were acting commercially and that there was no intention that similar claims would be the subject of inconsistent jurisdiction clauses. The English jurisdiction clauses in the credit swap documentation were boiler plate jurisdiction clauses which were primarily intended to deal with technical disputes as opposed to disputes of the type which had arisen in this case.
Practical implications
The Court of Appeal's decision demonstrates that the Courts will presume that parties to a complex transaction will act commercially and that "sensible business people" intend jurisdiction clauses in the agreements at the commercial centre f a transaction to apply. This means that a jurisdiction clause in one transaction document might be not be wide enough to cover disputes arising in respect of a transaction as a whole, or even in respect of another agreement forming part of that transaction.
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