Lehman Brothers Finance AG v Klaus Tschira Stiftung GmbH & Anor

For the purposes of the Lugano Convention, mandatory conciliation forming an integral first stage of a civil claim may constitute proceedings before a court. The court must examine the function of the conciliation authority within the procedural system, rather than its formal classification under national law. A written request for conciliation may therefore be the document instituting proceedings under article 30. The broad interpretation required by article 27 supports treating such conciliation as pending proceedings where it may lead to a binding settlement or adjudicative judgment. The court should grant a stay where the requirements of article 27 are met, although no stay can operate while the foreign proceedings stand dismissed.

The claimant brought English proceedings concerning the calculation of Loss under an ISDA Master Agreement governed by English law and containing an exclusive English jurisdiction clause. Before the claim form was issued in England, the defendants filed requests for conciliation before a Zurich conciliation authority under article 197 of the Swiss Civil Procedure Code. The conciliation failed, after which the defendants commenced related proceedings in Zurich. Those proceedings were subsequently dismissed for want of jurisdiction, subject to a proposed appeal.

The defendants applied for a stay under article 27(1) of the Lugano Convention, arguing that the Swiss conciliation procedure constituted proceedings before a court and that Switzerland was first seised. The central issue was whether the conciliation procedure fell within articles 27 and 30.

1. Applicable principles. The terms “proceedings”, “document instituting proceedings” and “court” in the Lugano Convention have autonomous meanings. Articles 27–30 pursue the prevention of parallel proceedings and inconsistent judgments and must be interpreted broadly for that purpose, as explained in Gubisch Maschinenfabrik KG v Palumbo (Case C-144/86) [1987] ECR 4861 and Erich Gasser GmbH v MISAT srl (Case C-116/02) [2005] QB 1.
2. Conciliation procedure. The Swiss procedure was not an isolated or voluntary mediation process. It was a mandatory first step in the Swiss civil process, subject to specified exceptions. It could finally dispose of a dispute through settlement, acceptance or withdrawal having the effect of a binding decision, or could authorise the claimant to commence adjudicative proceedings. Its commencement also created lis pendens under Swiss domestic law and interrupted limitation.
3. Meaning of court. The Zurich conciliation authorities were state authorities forming part of the judicial system. Their formal separation from the courts under cantonal law did not prevent them falling within article 62. The relevant question was the function they performed within Swiss civil procedure. The absence of a general power to determine their own jurisdiction was not decisive, particularly because jurisdictional questions could be determined by a superior court.
4. Conclusion. Lodging the written request for conciliation was the first procedural step in a civil claim and fell within article 30. The conciliation authorities were courts for the purposes of the Convention. If the Swiss proceedings had remained extant, the English proceedings would have been stayed under article 27(1). Because the Swiss proceedings had been dismissed and that dismissal affirmed on appeal, the court deferred the terms of the appropriate order and invited evidence and submissions on the current Swiss position. A reference to the Court of Justice was refused.

First-instance decision. The judgment records that the Swiss proceedings had been dismissed by the Zurich District Court and that the dismissal was affirmed by the Supreme Court of Zurich on 4 July 2014. Those decisions were not decisions in the present English proceedings.