Summary
There was a series of transactions between the parties. The claimants, a Swiss bank and its US subsidiary, on the one hand, and the defendant, a German Bank, on the other hand, entered into a transaction, which was to be completed through a number of agreements, involving a Cayman Islands company which issued notes denominated in US dollars. The notes were purchased by the Swiss bank with a view to selling them to the German bank as a part of the transaction. Also, the Swiss bank and the Cayman Island entered into a credit swap. Further, there were a number of agreements between the Swiss bank (and/or its subsidiary) and the German bank: 1) A Reference Pool Side Agreement – New York non-exclusive jurisdiction clause; 2) Issue of Kiel notes – English jurisdiction clause; 3) The sale by the Swiss bank to the German bank of Notes in the Cayman Islands company in exchange to the issue to the Swiss bank of the Kiel notes – no express terms of jurisdiction.
Since there have been some defaults on assets in the reference pool, the German bank became concerned as to what may happen in the future which gave rise to the dispute the parties. A claim was initiated in New York – the German bank claimed that the bonds were purchased by them after relying on fraudulent or negligent misrepresentation. The German bank relied on the New York non-exclusive jurisdiction clause.
The Swiss bank and its subsidiary initiated an action, seeking a non-liability declaration in England. The English High Court held that it had no jurisdiction. The English jurisdiction clause (contained in the agreement re Kiel notes) was not wide enough to cover the claims which mirrored those initiated in the New York Proceedings. Walker J held:
“94 […] The question in each case is to which contract the dispute in question is properly to be allocated; and the court then applies whatever jurisdiction provisions, if any, that contract may contain.
95 This conclusion necessarily entails that the English jurisdiction clauses are insufficiently wide to cover the dispute set out in the New York complaint—even if one entirely leaves out of account the proposed revisions to that complaint. All matters relating to the Class A to D NS4 Notes, including the Indenture, the Letter Agreement and the RPSA are subject to the laws of New York. All those agreements contained submissions to the jurisdiction of the courts of New York, save for the Letter Agreement which was silent as to jurisdiction and hence effectively agreed that action could be brought in any court of competent jurisdiction. The Letter Agreement certainly would not entitle UBS to sue HSH, a German domiciled company, in England. I agree with Mr Henshaw that the focus must be on the cause of action rather than the remedy flowing from that cause of action. Thus a claim to rescission, or for damages based upon the risk of exercise of the put option, is not in my view to be regarded as so directly linked to the Kiel Notes or the Kiel Notes IPA as to fall within the English jurisdiction clauses. I was initially troubled by the cause of action for conversion in this regard, but on close examination it seems to me that Mr Henshaw was right to say that the events constituting the conversion as set out in the New York complaint are events which directly relate to the sale of the Class A to D NS4 Notes and do not directly relate to the Kiel Notes or the Kiel Notes IPA.” [2008] EWHC 1529 (Comm) [94-95]
An appeal was made. On 18th June 2009, the appeal was dismissed by the English Court of Appeal.