BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA

A negative declaration is a discretionary remedy whose touchstone is utility. The court must scrutinise whether it will resolve a real and present dispute effectively and do justice to both parties. Questions divorced from concrete facts, or declarations framed too broadly, should ordinarily be refused.

An ISDA Master Agreement containing an entire agreement clause remains a distinct, self-contained contract notwithstanding its connection with a financing agreement. A conflicts clause giving the financing agreement priority operates only where substantive provisions actually conflict. Contractual non-reliance representations may also establish a contractual estoppel where, objectively construed, the parties intended to contract on the stated basis.

BNP Paribas SA sought declarations concerning an English-law interest rate hedging transaction entered into with Trattamento Rifiuti Metropolitani SPA under a 1992 ISDA Master Agreement. The transaction was connected with a separate financing agreement governed by Italian law. TRM had commenced Italian proceedings alleging contractual, tortious and regulatory wrongdoing concerning the transaction.

The court determined whether the ISDA documents were the parties’ entire agreement concerning the transaction; how provisions giving priority to the financing agreement in the event of conflict operated; whether there was a sufficiently real dispute; and which positive and negative declarations should be granted. It also considered contractual estoppel, limitation and BNP Paribas’s refusal to waive an early-termination right.

1. The claim succeeded in part. The earlier jurisdiction decisions created no issue estoppel on the substantive merits. A jurisdiction challenge ordinarily decides a preliminary question using an interlocutory standard. Nevertheless, their contractual analysis remained persuasive and properly informed the trial court’s consideration.

2. The court’s power to grant declarations under section 19 of the Senior Courts Act 1981 and CPR 40.20 is discretionary. For negative declarations, the touchstone is utility. The court must scrutinise whether the declaration serves a useful purpose, resolves a real and present dispute effectively, and does justice to both parties. The possibility of foreign proceedings does not itself require exceptional reluctance, particularly where the declaration concerns an English-law contract containing an exclusive English jurisdiction clause.

3. The ISDA Master Agreement, Schedule and Confirmation constituted the entire agreement concerning the transaction. Their connection with the financing agreement did not combine the instruments into one contract. The financing agreement and the transaction documents governed distinct legal relationships. Certainty, predictability and clarity were especially important when construing the standard ISDA form.

4. The Schedule gave the financing agreement or intercreditor agreement priority only where an applicable substantive provision actually conflicted with a provision of the transaction documents. It did not prevent reliance on the transaction documents merely because that reliance might inhibit a claim under another agreement.

5. There was a real and present dispute. The Italian claim concerned alleged mis-selling of the transaction, and BNP Paribas relied on the ISDA terms as part of its defence. Declarations concerning the English-law meaning of those terms could assist the Italian court. The court therefore granted declarations concerning validity, the entire agreement clause, the contractual representations, contractual estoppel, and the absence of an advisory or fiduciary role.

6. The contractual representations were capable of creating a contractual estoppel. Binding authority established that commercial parties may agree to contract on an assumed state of affairs. TRM had not properly raised any case under section 3 of the Misrepresentation Act 1967 or sections 3 and 11 of the Unfair Contract Terms Act 1977. In any event, the transaction was negotiated between sophisticated commercial parties using market-standard and bespoke ISDA terms.

7. The court refused the sweeping declaration excluding liability for any claim under any system of law, the associated indemnity declaration, and the proposed limitation declaration. Their breadth, uncertain connection with concrete claims and hypothetical operation undermined their utility and risked confusing or interfering with foreign proceedings.

8. BNP Paribas owed no obligation under the transaction documents to grant the requested waiver of its early-termination right. The corresponding declaration was granted.

• Supreme Court: Permission to appeal the jurisdiction decision was refused on 9 January 2020.
• Court of Appeal: TRM’s jurisdiction appeal was dismissed in [2019] EWCA Civ 768.
• High Court (Commercial Court): TRM’s application to set aside the claim form for want of jurisdiction was dismissed in [2018] EWHC 1670 (Comm).