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. An appeal was made.
On 18th June 2009, the appeal was dismissed by the English Court of Appeal. Lord Collins held that:
“97 The action in England is intended to mirror the New York proceedings. I have already emphasised that the essence of the claims for misrepresentation in New York is that HSH was induced to purchase the NS4 Notes in reliance on the fraudulent and negligent misrepresentations, and would not have purchased them in the absence of those representations. No sensible commercial interpretation of the jurisdiction clause in the Dealer's Confirmation could have the result that identical misrepresentation claims would fall both within that clause and within the non-exclusive New York jurisdiction clauses, simply because the consideration for the transaction was the issue of the Kiel MTN Notes. In my judgment the standard form bond issue jurisdiction clause in the Dealer's Confirmation does not apply to claims that the transaction as a whole, and in particular the purchase of the NS4 Notes, was induced by misrepresentation. I am satisfied that the judge's decision was right.” [2009] EWCA Civ 585 [97]