UK: Derivatives Update: The 2002 ISDA Master Agreement's Jurisdiction Clause

Last Updated: 30 July 2015
Article by Andrew Lafferty, Guy Usher, Edward Miller and Duncan Black

The recent case of SwissMarine Corporation Ltd v OW Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm) reached some interesting conclusions as to how the jurisdiction clause in the 2002 ISDA Master Agreement operates when the English Court's jurisdiction is chosen.


SwissMarine and OW Supply entered into a 2002 ISDA Master Agreement. An event of default under the 2002 ISDA occurred when OW Supply filed for bankruptcy in Denmark on 7 November 2014. 

SwissMarine chose not to designate an early termination of the 2002 ISDA on the basis of OW Supply's insolvency. Instead it brought proceedings in London for a declaration that, under Section 2(a)(iii) of the 2002 ISDA, it was not obliged to make any payment to OW Supply as long as this event of default was continuing.  Click here for our most recent alerter on Section 2(a)(iii) of the ISDA Master Agreements.

OW Supply then began an action in Lyngby, Denmark seeking payment of sums allegedly due from SwissMarine. OW Supply argued that, under the Danish insolvency law and securities legislation Section 2(a)(iii) of the 2002 ISDA could be deemed not to apply to a Danish company in bankruptcy.

SwissMarine applied for an anti-suit injunction in London restraining OW Supply from continuing with the Danish proceedings, on the basis that the Danish proceedings were a breach of the 2002 ISDA's exclusive jurisdiction and English governing law provisions.  The English Court refused the anti-suit injunction, finding that the Danish proceedings did not concern the parties' rights and obligations under the 2002 ISDA,  but instead dealt with how the Danish insolvency regime applies to those rights and obligations. The Danish Court was not being asked to decide the construction of the contract or the parties' rights and obligations under it.

Section 13(b)(i)(1) of the 2002 ISDA provides for the English court's jurisdiction over the 2002 ISDA Agreement and any non-contractual obligations, where English law is selected as the governing law. Such jurisdiction is stated to be non-exclusive, unless proceedings involve a "Convention Court", in which case it is to be exclusive. A Convention Court means a court which is bound to apply the jurisdiction provisions of the 1968 Brussels Convention or the 1988 Lugano Convention.

The English court held that the Danish proceedings did not involve a Convention Court, as defined in the 2002 ISDA wording.  Neither the High Court in London nor the Danish Court could be considered a Convention Court, because the reference to the 1968 Brussels Convention in the 2002 ISDA could not be interpreted as including a reference to the 2001 Brussels Regulation or the 2012 Brussels Regulation.  At the time the 2002 ISDA standard form was drafted, the Danish Court would have fallen within the definition but it did not when this 2002 ISDA was entered into between these particular parties in 2014. Today, the 1968 Brussels Convention only applies to limited dependent territories of EU Member States and the 1988 Lugano Convention only applies to judgements that pre-date the entry into force of the 2007 Lugano Convention.


Perhaps unsurprisingly, SwissMarine's submission that Article 68.2 of the Brussels Regulation providing that "any reference to the [1968] Convention shall be understood as a reference to this [Brussels] Regulation, was not accepted by the Court (in part because this referred to other legislation, not private contracts). Instead it found that Danish Courts were not a "Convention Court" for the purpose of the jurisdiction clause.  It did, however, beg the question as to what exactly the parties might be taken to have had in mind by agreeing to exclusive English jurisdiction in such limited circumstances, which the English Court described as "not immediately obvious".  Limited assistance was gained from The User's Guide to the ISDA 2002 Master Agreement (2003) which recorded the then-prevailing position that non-exclusive jurisdiction agreements were valid under the Brussels Regulation, but not the Brussels Convention or Lugano Convention.  That position has changed subsequently so that non-exclusive submissions to jurisdiction where the Lugano Convention applies have been recognised.

The judgment does reinforce the position that when a standard form contract is used, limited recourse can be had to the surrounding factual matrix and individual positions of the parties.  The judge stated "to my mind, when parties choose to use for a contract a standard wording such as the ISDA Master Agreement form, generally their own circumstances at the time of the contract will not affect the interpretation of the wording.  By choosing standard wording, parties usually evince an intention that the wording as incorporated into their contract should be given its usual meaning".

Finally, parties should note that the non-exclusive jurisdiction clause in the 2002 ISDA is to be construed liberally, such that a party has a right to bring proceedings in another jurisdiction, even where the other party has commenced proceedings in the chosen non-exclusive jurisdiction (in this case England).

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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