UBS AG, London Branch & Anor v Kommunale Wasserwerke Leipzig GmbH

For the purposes of Article 22.2 of Council Regulation (EC) 44/2001, the court must make an overall classification of the proceedings. An action is not principally concerned with the validity of a company organ’s decision merely because that issue is raised, or might be decisive. The court must assess the proceedings as a whole, including the claims and likely defences, and displace a contractual jurisdiction clause only where the dispute is so closely connected with local company law and internal decision-making that it should be tried only in the company’s state of seat.

Under Article 30, a court is seised when proceedings are instituted, provided the claimant has taken the steps required by the applicable procedural rules for service. Deliberate delay within the permitted service period does not of itself deprive the issuing court of priority.

UBS AG and UBS Global Asset Management (UK) Limited brought English proceedings concerning the enforceability of credit default swap and portfolio management arrangements with Kommunale Wasserwerke Leipzig GmbH. The agreements were governed by English law and contained English jurisdiction clauses.

KWL applied for the proceedings to be dismissed or stayed. It argued that the German courts had exclusive jurisdiction under Article 22.2 of Council Regulation (EC) 44/2001 because the dispute concerned the validity of decisions of KWL’s organs. Alternatively, it relied on Articles 27, 28 and 30, arguing that the German proceedings were first seised or related proceedings. The central questions were whether the English proceedings were principally concerned with an Article 22.2 issue and which court was first seised.

1. Article 22.2. Applying the approach in Berliner Verkehrsbetriebe (BVG) Anstalt Des Offentlichen Rechts v JP Morgan Chase Bank N.A. and JP Morgan Securities Ltd [2010] EWCA Civ 390, the court had to make an overall classification of the English proceedings. The words proceedings having the relevant matter as their object mean proceedings principally concerned with that matter. The court had to consider both the claims and likely defences.
2. The English proceedings were principally concerned with the enforceability of the Balaba CDO, UBS AG’s entitlement to payment and UBS AM’s conduct as portfolio manager. KWL’s ultra vires and capacity arguments were important and potentially decisive, but they were only part of a much wider dispute involving contractual construction, alleged duties of care and fiduciary duties, misrepresentation, reliance, portfolio management and loss. The proceedings were therefore not principally concerned with the validity of decisions of KWL’s organs.
3. The sound administration of justice did not require exclusive German jurisdiction. The transactions were commercial contracts governed by English law and containing English jurisdiction clauses. The principal factual dispute concerning German company law was likely to overlap with questions concerning UBS’s knowledge, alleged mis-selling and advice. The other issues fell outside Article 22.2, and UBS AM was not a party to the German proceedings. Accordingly, the application to dismiss or stay on Article 22.2 grounds failed.
4. Articles 27, 28 and 30. Assuming, without deciding, that the parties’ claims involved the same cause of action and that UBS AM’s claim was related, the English court was first seised when the claim form was issued on 18 January 2010. Under CPR 7.5, service within the jurisdiction was permitted within four months. There was no additional requirement to serve forthwith or as soon as practicable. The period during which without-prejudice negotiations took place did not constitute a failure to take the steps required for service.
5. The English court was first seised in relation to both UBS claims. Article 28 could not justify a stay of UBS AM’s claim because only the court second seised may stay related proceedings. There was no sufficient uncertainty requiring a reference to the Court of Justice.
6. KWL’s application to dismiss or stay the English proceedings was dismissed.