UBS Ag & Anor v HSH Nordbank Ag

Contractual jurisdiction clauses must be construed against the background of all agreements forming part of the parties’ relationship. Where different contracts contain conflicting jurisdiction provisions, each clause should ordinarily be confined to disputes directly relating to the contract in which it appears. An exclusive jurisdiction clause cannot be construed so broadly that it overlaps with a non-exclusive clause conferring jurisdiction elsewhere. The relevant focus is the cause of action, rather than the remedy sought or its collateral effects on another contract. A claim for rescission or damages arising from an impugned transaction does not necessarily become a dispute concerning a related financing instrument.

UBS sought negative declaratory relief in England concerning a structured credit transaction entered into with Landesbank Schleswig-Holstein, whose rights and obligations had later passed to HSH Nordbank AG. HSH had commenced proceedings in New York alleging misrepresentation, fraud, breach of contract, fiduciary breach, breach of an implied covenant, unjust enrichment, conversion and related matters concerning the Class A to D NS4 Notes and the Reference Pool.

HSH applied for an order that the English court lacked jurisdiction, or alternatively should decline jurisdiction in favour of New York. The issue was whether the New York dispute fell within exclusive English jurisdiction clauses contained in the Kiel Notes documentation.

1. HSH succeeded in its jurisdiction application. The court held that the English jurisdiction clauses did not cover the dispute pleaded in New York. The question whether proceedings should be stayed in favour of New York therefore did not arise.

2. Under article 23 of Council Regulation (EC) 44/2001, jurisdiction depended on whether the dispute fell within the contractual scope of a relevant jurisdiction clause. UBS had to show a good arguable case, meaning that its argument was materially stronger on the available interlocutory material and sufficiently established the basis for English jurisdiction.

3. The jurisdiction clauses had to be construed in the context of the complete contractual structure. The parties had used different agreements for different aspects of the transaction and had selected different governing laws and jurisdiction provisions. Although the agreements were interwoven, the clauses should be given distinct and meaningful fields of operation.

4. The court accepted that the words “arising out of or relating to” in the RPSA had the same reach as “in connection with” in the English clauses. Applying the approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R. 896, a reasonable person with knowledge of the transaction would recognise the potential conflict between the clauses. The exclusive English clauses therefore focused on matters directly relating to the Kiel Notes and the Kiel Notes IPA. They could not extend to matters also falling within the non-exclusive New York clause.

5. The court followed the allocation approach discussed in Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd’s Rep. 767. The cause of action, rather than the remedy, was decisive. Claims for rescission or damages based on the alleged misconduct concerning the Class A to D NS4 Notes were not transformed into disputes concerning the Kiel Notes merely because the remedy might affect those notes. The alleged conversion likewise related directly to the sale and management of the NS4 Notes, not to the Kiel Notes or the Kiel Notes IPA.

6. The court distinguished the usual presumption of a single forum described in Fiona Trust v Privalov [2007] UKHL 40, because the parties had deliberately adopted different jurisdiction arrangements for different contractual aspects of the transaction.