Berliner Verkehrsbetriebe (BVG) Anstalt Des Offentlichen Rechts v JP Morgan Chase Bank N.A. & Anor (Rev 2)

In multi-issue proceedings, the exclusive jurisdiction conferred by Article 22.2 of Council Regulation (EC) No 44/2001 applies only where the proceedings, viewed overall, are principally concerned with the validity of a legal person’s constitution or decisions of its organs. A potentially dispositive validity issue does not automatically satisfy that test.

The court must classify the substance of the proceedings and consider whether they are so closely connected with local company law and internal corporate decision-making that sound administration of justice requires trial only in the courts of the legal person’s seat. An agreed jurisdiction clause remains effective where that threshold is not met.

A Berlin public transport institution entered into a credit default swap with members of the JP Morgan group. The documentation contained English law and jurisdiction clauses. JP Morgan subsequently commenced Commercial Court proceedings seeking declarations that the swap was valid and enforceable and payment of US$112 million.

The institution challenged English jurisdiction. It contended that its management and supervisory boards had acted ultra vires under German law, so that Article 22.2 of Council Regulation (EC) No 44/2001 gave the German courts exclusive jurisdiction. Teare J rejected the challenge in [2009] EWHC 1627 (Comm), also reported at [2010] 2 WLR 690.

The principal questions on appeal were how Article 22.2 applied to proceedings involving several issues, whether the potentially dispositive ultra vires issue made those proceedings principally concerned with organ validity, and whether the appeal should be stayed or questions referred to the European Court of Justice.

1. Appeal dismissed unanimously. Aikens LJ, with whom Etherton and Pill LJJ agreed, held that Article 22.2 of Council Regulation (EC) No 44/2001 did not confer exclusive jurisdiction on the German courts. The stay application was refused and the court declined to refer questions to the European Court of Justice.

2. The expression “proceedings which have as their object” in Article 22.2 means proceedings which are “principally concerned with” the specified matters. In a multi-issue case, the court must make an overall classification of the substance of the proceedings. It must assess whether the dispute is so closely connected with local company law and internal corporate decision-making that it should be tried only in the courts of the legal person’s seat.

3. Article 22 is exceptional and must receive no broader interpretation than its objectives require. Its objectives include centralising disputes genuinely concerning corporate existence or organ validity, avoiding conflicting judgments and promoting the sound administration of justice. Those objectives must be considered alongside the Regulation’s general jurisdictional structure and respect for agreed jurisdiction.

4. The existence of an issue falling within Article 22.2 is insufficient by itself. Nor does the fact that such an issue may dispose of the entire claim necessarily make it the principal concern of the proceedings. Although a merely preliminary or incidental issue cannot trigger exclusive jurisdiction, the converse does not follow: an issue may be important without defining the proceedings overall.

5. The English proceedings were principally concerned with the validity and enforceability of the swap. They would require examination of its complex terms, the parties’ negotiations, alleged misrepresentation, non-disclosure and breach of consultancy obligations, as well as the German-law ultra vires defence. The ultra vires issue was important and potentially decisive, but it was one defence within the wider dispute and was not its overall focus. The policies underlying Article 22.2 did not require trial in Germany. Article 23 therefore gave effect to the agreed English jurisdiction.

6. The first-instance judge had applied a legal standard to a combination of features of differing weight. An appellate court could interfere with that overall classification only for an error of principle or where the decision fell outside the bounds of reasonable disagreement. Neither condition was satisfied.

7. No stay or reference was justified. The questions referred by the German court did not determine the multi-issue questions before the English court. As the court first seised, the English court was entitled to decide its own jurisdiction, and doing so did not breach the obligation of sincere co-operation.

1. Court of Appeal (Civil Division): By [2010] EWCA Civ 390 , unanimously dismissed the appeal from Teare J, refused a stay and declined to refer questions to the European Court of Justice.
2. High Court, Queen’s Bench Division, Commercial Court: Teare J held in [2009] EWHC 1627 (Comm) , reported at [2010] 2 WLR 690 , that the English court had jurisdiction because the proceedings were not principally concerned with the Article 22.2 ultra vires issue and the agreed English jurisdiction should be respected under Article 23.