Deutsche Bank AG v Comune Di Savona

Where related agreements contain exclusive jurisdiction clauses, the clauses should generally be construed as mutually exclusive, although this may produce some fragmentation. The court must consider each clause in its contractual and factual context, including any earlier agreement and jurisdiction clause.

A dispute concerning advice given under an earlier advisory agreement may fall within that agreement’s jurisdiction clause even where the claimant seeks declarations based on terms of a later ISDA agreement. The court must identify the substance of the underlying dispute, rather than the form of the relief sought.

Deutsche Bank sought negative declarations concerning two interest rate swaps entered into with Comune di Savona under an ISDA Master Agreement. Savona had also entered into an earlier Convention under which Deutsche Bank provided debt-management and financial advice. The Convention contained an Italian jurisdiction clause, while the Master Agreement contained an English jurisdiction clause.

After Savona commenced related proceedings in Italy alleging advisory, statutory and contractual breaches, it challenged the English court’s jurisdiction over declarations concerning advice, reliance and pre-swap obligations. It also sought a stay of the remaining proceedings pending an appeal in Dexia Crediop v Comune di Prato. The central issues were which jurisdiction clause governed the underlying dispute and whether the remaining English proceedings should be stayed.

1. Advisory obligations. The Convention plainly imposed advisory obligations on Deutsche Bank concerning the appropriate financial instruments, including derivatives, for managing Savona’s debt. The provisions requiring Savona to approve proposed transactions and disclaiming reliance did not eliminate that advisory role. Their legal effect was a matter for the court determining the Italian claim.
2. Characterisation of the Italian claim. On a fair reading, the Italian proceedings principally concerned advice given under or arising from the Convention, together with alleged breaches of Italian financial-services and administrative provisions. They were not merely claims about the validity, performance or contractual operation of the swaps.
3. Competing jurisdiction clauses. The clauses had to be construed according to their own governing laws and in their contractual context. The court should strive to avoid overlap, but there was no rule that the later ISDA clause necessarily cut down the earlier Italian clause, or that fragmentation had to be avoided at all costs. The reasoning in Dexia v Brescia was distinguishable and any wider proposition that declarations based on contractual representations must invariably fall within the ISDA clause was obiter.
4. Article 25. Deutsche Bank had to show a good arguable case, meaning the better argument, that the English jurisdiction clause applied. It failed to do so in relation to declarations (7)–(10) and (12). Those declarations concerned contractual estoppels and pre-swap advisory obligations whose substance was the Italian claim. Savona’s challenge to jurisdiction therefore succeeded. No separate issue arose under Article 31.
5. Stay. The remaining declarations concerned validity and enforceability issues which were not shown to depend on the pending appeal in Dexia Crediop v Comune di Prato. The application for a stay was refused, and the balance of the proceedings was to continue.