AWB (Geneva) SA & Anor v North America Steamships Ltd & Anor

An exclusive English jurisdiction clause covering proceedings relating to a contract is wide, but it does not encompass proceedings brought under a foreign insolvency statute to obtain statutory relief within that insolvency regime, even where the relief may affect contractual rights.

Construction of the jurisdiction clause is distinct from recognition or enforcement of any foreign insolvency order. Those questions may arise later under the proper law of the contract.

Where the English-law meaning and effectiveness of widely used ISDA terms are disputed, prompt determination may be appropriate despite related foreign insolvency proceedings.

International traders entered into forward freight swaps governed by the ISDA Master Agreement, English law and an exclusive English jurisdiction clause. After the first defendant became insolvent in Canada, its trustee sought relief under the Canadian Companies’ Creditors Arrangement Act preventing counterparties from relying on insolvency-related defaults and requiring continued performance.

The claimants sought an anti-suit injunction and declarations concerning the meaning and effectiveness of the ISDA terms. The Commercial Court, before Mr Justice Field, refused the injunction and stayed the declaratory proceedings: [2007]EWCA 1167 (Comm).

The central issues were whether the Canadian insolvency proceedings fell within the jurisdiction clause and whether the English declaration proceedings should await the Canadian process.

Lord Justice Thomas gave the detailed reasons, with Lord Justices Latham and Chadwick agreeing.

1. Anti-suit injunction. Permission to appeal against refusal of the injunction was refused. A wide exclusive jurisdiction clause would cover proceedings seeking a judicial determination of contractual rights or obligations. The Canadian proceedings, however, were part of insolvency proceedings governed by Canadian law. The relief sought was statutory insolvency relief within those proceedings, rather than a determination of contractual rights under the swaps. The claimants were within the potential jurisdiction of the Canadian insolvency proceedings as an actual and contingent creditor. The proceedings therefore fell outside the clause.
2. Separate recognition question. The construction of the jurisdiction clause had to be distinguished from the later question whether a Canadian order would affect the swaps or be recognised and enforced in England. That question would arise only if the Canadian court made an order and enforcement or assistance was later sought. The court noted the submissions concerning the proper law of the contract, Gibbs v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399, and assistance under section 426 of the Insolvency Act 1986, but expressly declined to decide them.
3. Declaratory proceedings. The stay was set aside and the appeal was allowed on this issue. The challenge to the effectiveness of the ISDA provisions had potentially significant implications because the Master Agreement was widely used in international derivative transactions. Prompt determination by the Commercial Court would also assist the Canadian court in assessing the proposed insolvency plan, including the effect of the English-law contractual analysis.
4. Cross-appeal. Permission to cross-appeal concerning the necessity of the declarations and the Trustee’s status as a necessary and proper party was refused. The declaration claim should proceed in the Commercial Court.

• Court of Appeal (Civil Division) — Refused permission to appeal against refusal of the anti-suit injunction; allowed the appeal against the stay; and refused permission to cross-appeal.
• Commercial Court — Mr Justice Field refused the anti-suit injunction, stayed the declaratory proceedings and refused permission to appeal: [2007]EWCA 1167 (Comm).