Jefferies International Ltd v Landsbanki Islands HF

A case-management stay may assist a foreign insolvency, but the power is tightly constrained where the parties have chosen the English courts by an exclusive jurisdiction clause. A stay must not circumvent the Lugano Convention or deprive a claimant of its contractual right to have the dispute determined in England. Exceptional or rare and compelling circumstances are required. The court should not give the foreign insolvency regime a procedural advantage that it does not provide in its own jurisdiction.

Jefferies claimed approximately €4.3 million under a securities-lending agreement with Landsbanki. The agreement contained English law and an exclusive English jurisdiction clause. After Landsbanki entered an Icelandic moratorium and financial reorganisation, it applied for a stay of the English proceedings.

The alleged automatic stay under Icelandic law fell away after amending legislation repealed the relevant provision. Landsbanki pursued only a discretionary temporary stay linked to the Icelandic administrative claims process. The central issue was whether such a stay could be granted without undermining the agreed jurisdiction and the Lugano Convention.

1. Application dismissed. Landsbanki’s application for a temporary stay was refused. Jefferies was entitled to the costs of the application, subject to consequential submissions if required.
2. The court’s inherent jurisdiction, reinforced by section 49(3) of the Supreme Court Act 1981, and CPR 3.1(2)(f), was discretionary. It could not be exercised inconsistently with section 49 of the Civil Jurisdiction and Judgments Act 1982 or the Lugano Convention.
3. The reasoning in Mazur Media Limited v Mazur Media GmbH was directly applicable. A stay in favour of foreign insolvency proceedings required exceptionally strong grounds, particularly where the parties had conferred exclusive jurisdiction on the English court.
4. The decision in Equitas Limited v Allstate Insurance Company reinforced that a case-management stay could not be used where its practical effect was permanent or would conflict with the parties’ jurisdictional choice. Rare and compelling circumstances were required.
5. No such circumstances existed. The Icelandic regime allowed a creditor in Jefferies’ position to continue litigation or use the administrative claims process. A stay in England would therefore give Landsbanki a better position than it would have had in Iceland.
6. Arguments based on costs, proportionality, the overriding objective, the possible small dividend and alleged wastefulness of litigation did not justify a stay. There was no sufficient basis for concluding that the litigation was pointless.