UK: Anti-Suit Injunctions, OW Bunker And ISDA Master Agreements

SwissMarine Corporation Limited v O.W. Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm)

The Commercial Court has recently refused to grant an anti-suit injunction to SwissMarine Corporation Limited (SwissMarine) to restrain proceedings brought by O.W. Supply & Trading A/S (OW) against SwissMarine in Denmark.

Background On 7 November 2014, OW – a global supplier and reseller of marine fuel – filed for bankruptcy in Denmark. On 3 February 2015, a Recognition Order was made in respect of the Danish insolvency proceedings by the English Court, under the Cross-Border Insolvency Regulations 2006. OW was in the money at the time of its bankruptcy and its trustees have sought to rely on Danish insolvency law, specifically section 58(h) of the Danish Securities Trading, etc Act which, it claimed, permits OW to close-out and value trades as at the date of OW's insolvency. OW has commenced numerous actions against OW's counterparties in Denmark for that purpose, including against SwissMarine (the Danish Proceedings).

SwissMarine had, by the time of the Danish Proceedings, already commenced proceedings in England for declaratory relief against OW, to the effect that it had no liability to OW under the 2002 ISDA Master Agreement, which governed the trades between OW and SwissMarine (the ISDA Agreement). The ISDA Agreement was governed by English law and, it was contended, contained an exclusive jurisdiction agreement conferring jurisdiction on the English courts.

The arguments in summary SwissMarine subsequently brought an application for an anti-suit injunction relating to the Danish Proceedings. For this purpose, it was accepted by the parties that the general rule for the grant of anti-suit relief is as follows:

"...subject to the provisions of the Brussels 1 Regulation and the Lugano Convention, an English court may restrain a party over whom it has personal jurisdiction from the institution or continuation of proceedings in a foreign court....where it is necessary in the interests of justice."1

SwissMarine argued that the anti-suit injunction was necessary in the interests of justice because:

  • The Danish Proceedings were in breach of the exclusive jurisdiction agreement under the ISDA Agreement
  • The Danish Proceedings were "vexatious or oppressive"

Were the Danish Proceedings brought in breach of the jurisdiction agreement? On the first question, the court agreed with OW's argument that the Danish Proceedings did not relate to contractual obligations under the ISDA Agreement, but rather concerned the application of the Danish insolvency regime. Accordingly, they were not subject to the jurisdiction clause contained in the ISDA Agreement.

In coming to this conclusion, the court referred to the Court of Appeal's judgment in AWB (Geneva) SA v North America SS Ltd2. In AWB (Geneva) SA, the question was formulated by reference to whether the foreign proceedings "related to a dispute under the contract" or related to the "contractual obligations under the contract", therefore falling within the exclusive jurisdiction agreement, as opposed to proceedings which related to the exercise of the foreign court's insolvency jurisdiction.

The judge was not persuaded by SwissMarine's attempt to distinguish between the ISDA wording in the AWB (Geneva) SA action and the modified ISDA Agreement between OW and SwissMarine, which was expressly stated also to cover "any non-contractual obligations to the extent permitted by applicable law arising out of, or in relation to, this Agreement". The judge held that this additional wording could not have been intended by either party to amount to an abandonment of the protection of their national insolvency regimes – much clearer wording would have been required to have that effect.

Further, the judge also concluded that on a proper construction of the jurisdiction clause at section 13(b)(i) of the ISDA Agreement, it did not confer exclusive jurisdiction on the English court in any event. As a result, OW was therefore entitled to bring proceedings in a non-exclusive jurisdiction.

Were the Danish Proceedings vexatious or oppressive? Having failed on the first argument put forward in support of the application, the court went on to consider whether the Danish Proceedings were vexatious or oppressive.

The reasons put forward by SwissMarine here included that OW was seeking to override the parties' rights and obligations under English law. In this regard, under the ISDA Agreement, SwissMarine's payment obligations were suspended under section 2(a)(iii) as a matter of English law3, whereas OW was seeking to argue that this provision must be dis-applied in the Danish Proceedings.

Of particular interest is the following comment made by the court in response to SwissMarine's unsuccessful attempts to persuade the court that the Danish Proceedings were vexatious or oppressive:

"While English law does not recognise the Danish insolvency regime, other jurisdictions where SwissMarine has assets might well do so, and I accept that the trustees...who are administering one of the largest bankruptcies in Denmark, have a proper interest in resolving the question and are entitled to have it resolved."

Were the Danish Proceedings covered by the Brussels Regulation? Given that the court had decided it was not necessary in the interests of justice to grant an anti-suit injunction because SwissMarine had failed on both of its arguments, the court did not need to go on to consider whether the Danish Proceedings fell within the recast Brussels Regulation4.

Nevertheless, the court stated that it was only because the court had already rejected SwissMarine's argument that the Danish Proceedings fell within the jurisdiction agreement, agreeing with OW as to their purpose and nature (i.e. the operation of Danish insolvency law), that the court was able to conclude that the Danish Proceedings fell outside of the Brussels Regulation. An anti-suit injunction was, as a result, not prohibited under the principle set out in Turner v. Grovitt.

Comment This decision highlights that in the event of insolvency of one of the parties, the insolvent estate may nevertheless seek to rely on its own national insolvency rules and bring proceedings before its own courts, regardless of the contractual position between the parties.

Protection under national insolvency law may be sought for the very purpose of overriding contractual rights and obligations. Whilst the English Courts may be prepared to grant declarations of non-liability in such circumstances and may refuse to recognise a foreign insolvency judgment, anti-suit injunctions are unlikely to be available to put an end to the proceedings brought for relief under a party's national insolvency rules.

Indeed, the English court stated in this case that, while a Danish insolvency judgment would not be recognised in England, it may be recognised elsewhere, and the judge appeared to accept that this was a legitimate purpose of OW's pursuit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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