A recent decision of the English Court of Appeal should provide relief to counterparties who have nominated different courts as having jurisdiction in multiple related agreements.

Sebastian Holdings Inc v Deutsche Bank AG

In 2006 Sebastian Holdings Inc ("Sebastian") entered into a 1992 ISDA Master Agreement and schedule with Deutsche Bank AG (the "Bank") for the purposes of trading equities. Later that year, Sebastian entered into a series of foreign exchange ("FX") agreements with the Bank, including a Prime Brokerage Agreement and Agent Master Agreement. The Prime Brokerage Agreement enabled Sebastian to enter into FX and related transactions with specified counterparties as agent for the Bank. The Agent Master Agreement, which also used the 1992 ISDA Master Agreement, provided for off-setting transactions to be entered into between Sebastian and the Bank.

In early 2008 the parties entered into further agreements, including a Master Netting Agreement that provided for a net termination payment upon termination of the Prime Brokerage Agreement and the ISDA Master Agreement. The fora for disputes designated in the various agreements were as follows:

  • ISDA Master Agreement and Agent Master Agreement: non-exclusive jurisdiction of the English courts.
  • Master Netting Agreement: exclusive jurisdiction of the English courts.
  • Prime Brokerage Agreement: non-exclusive jurisdiction of New York courts.

During October 2008 the Bank made margin calls totalling approximately US$436m after Sebastian had suffered heavy FX trading losses. The Bank subsequently closed out its positions with Sebastian and demanded payment of more than $120m under the Agent Master Agreement (for FX losses) and $125m under the Master Netting Agreement (for equities losses).

In November 2008 Sebastian issued proceedings in New York claiming damages of at least $750m from the Bank. Sebastian alleged, among other things, that it had agreed with the Bank to limit its exposure on foreign exchange trading to $35m and claimed damages for breach of the Prime Brokerage Agreement. In response, the Bank issued a claim in the Commercial Court in England in respect of approximately $250m it was owed under the Agent Master Agreement and Master Netting Agreement. The Bank denied that it agreed to limit Sebastian's exposure. Sebastian subsequently sought a declaration from the Commercial Court that it did not have jurisdiction to hear the Bank's claim.

Sebastian's argument

Counsel for Sebastian argued that the court should presume that the parties intended any claim or dispute arising in respect of multiple agreements to be subject to a single jurisdiction. Counsel argued that this jurisdiction should be that specified in the contract at the "centre of gravity" of the dispute and the jurisdiction clauses in the contracts should be interpreted to give effect to this presumed intention. Counsel further argued that as all claims and disputes arose from FX trading, it must be inferred that the parties had intended that any claim be heard in the jurisdiction chosen in the Prime Brokerage Agreement, that is, New York.

English court's reluctance to re-write clearly drafted agreements

The Court of Appeal affirmed the decision of the Commercial Court and unanimously rejected Sebastian's claim even though such decision potentially resulted in a "degree of fragmentation in the resolution of disputes between parties to the series of agreements".

Lord Justice Thomas stated that the objective of the court was to focus on finding the commercially rational construction of a contract and to give effect to the parties' agreements. Here, the Bank's claims were being made under the Agent Master Agreement and the Master Netting Agreement. Both of these agreements contained an express right to bring proceedings in England and this was clearly the intention of the parties. The fact that Sebastian raised a defence based on the Prime Brokerage Agreement (in which New York was designated as the forum for disputes) was insufficient to override the intention of the parties that was obvious from the plain wording of the agreements.

The court held that rather than giving effect to the intention of the parties, Sebastian's suggested interpretation of the agreements would in fact frustrate it:

"... the wording of the clauses in the agreements shows that the parties plainly intended the Bank to be able to bring a claim under an agreement under which a debt was due in the jurisdiction provided for in that agreement. ...The language of the agreements plainly envisages [claims being brought under different agreements in different jurisdictions and] it is entirely rational for businessmen to agree to this."


This case is one of several recent English decisions that have given effect to the intention of the parties as evidenced by unambiguous

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