In Dexia v Trentino¹, the High Court unequivocally upheld a bespoke exclusive jurisdiction clause in favour of the English court in an ISDA Master Agreement. The decision reflects the English court’s commercially pragmatic and generous approach towards jurisdiction clauses. The barrier for seeking to override a contractual choice of English jurisdiction remains very high.  

Background

The underlying dispute involved Trentino, an Italian private company with the sole business of managing the assets of the Autonomous Province of Trento, and Dexia, an Italian bank. In late 2008, the Province of Trento decided to purchase land for the construction of a new science museum. The purchase was funded by (a) grants provided by the Province and (b) the issuance of bonds. 

The Swap 

To hedge its interest rate exposure, Trentino entered into a swap transaction with Dexia. Trentino and Dexia entered into a 2002 ISDA Master Agreement on 7 October 2010. In the associated Schedule, the standard form governing law and jurisdiction clause at clause 13 of the ISDA Master Agreement was replaced with the following bespoke wording:

“(b)  Jurisdiction. With respect to any suit, action or proceedings relating to any dispute, whether contractual or non-contractual, arising out of or in connection with this Agreement (Proceedings), each party irrevocably:

1. submits to the exclusive jurisdiction of the English courts; 
2. waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court […] [this was referred to by the Judge as the “Waiver Clause”]; and
3. agrees, notwithstanding the above and to the extent permitted by applicable law, that the bringing of Proceedings before the English courts will not preclude the bringing of Proceedings before the Italian courts.” 

On 18 February 2011, the parties entered into the Swap, as documented in a trade confirmation dated 7 March 2011 (the Confirmation). The Confirmation expressly stated that it “supplements, forms part of, and is subject to the [Master] Agreement. All provisions contained in the [Master] Agreement govern the Confirmation”.

The dispute

The parties performed their obligations for a decade until Trentino, seeking to rescind the Swap, commenced proceedings in Italy on 27 September 2023. Trentino asserts that the Swap is void, was not appropriate, and that it has made losses of over EUR 10m in net payments to Dexia that it should be allowed to recover. Dexia challenged the jurisdiction of the Italian courts to hear that claim, with the hearing to decide jurisdiction scheduled for January 2025. 

On 27 November 2023, relying on the Jurisdiction Clause, Dexia commenced English proceedings seeking declaratory relief that the Swap was valid. Trentino challenged jurisdiction.

The judgment

The judge’s starting point was that it was common ground between the parties that they had entered into the Master Agreement and its associated Schedule. The judge said that the jurisdiction clause “could not be wider” and thus Dexia had “very much more than” a good arguable case that the jurisdictional gateway in CPR 6.33(2B)(b), which provides that a claimant may serve out of the jurisdiction without permission if a contract contains an English jurisdiction clause, applied. Further, as the Confirmation expressly supplemented, formed part of and was subject to the Master Agreement, and stated that all provisions in the Master Agreement govern it, there was also very much more than a good arguable case that the jurisdiction clause was binding on Trentino in relation to the Swap.

Trentino argued that the jurisdiction clause was void on the basis that it did not have capacity to enter into speculative derivatives and therefore the Master Agreement itself was invalid. This challenge was dismissed, with the judge ruling that the jurisdiction clause contained within the Master Agreement was binding on both parties. 

Under English law, the capacity of a foreign company to enter into agreements is governed by the law of its country of incorporation. However, in this case it was not necessary to consider Italian law questions of Trentino’s capacity, nor of whether the Transaction was speculative, as Trentino’s argument failed in a more fundamental way. The Master Agreement was entered into before any particular derivative transaction was contemplated. The judge applied prior case law confirming that whether or not there was a lack of capacity to enter into a particular derivative transaction cannot and does not mean there is a lack of capacity to enter into an ISDA Master Agreement.

Accordingly, the jurisdictional challenge failed: there was “very much more than a good arguable case” that Dexia was able to rely on the jurisdiction clause.

The judge did, however, make some observations on the question of capacity, given he had heard argument on this topic. First, in a dispute with the Italian Revenue Service over Trentino’s tax assessment, Trentino had successfully argued that the Transaction was not speculative. It was thus “deeply unattractive (and hardly credible)” for Trentino to argue the precise opposite in this case. And second, while Trentino inevitably sought to rely on the well-known Cattolica decision of the Italian Supreme Court (as to which, read our article on Dexia’s successful case in the Court of Appeal against the Comune di Venezia), the Cattolica decision would not apply to Trentino in any event because it was a joint stock company, not a public authority.

An exclusive or non-exclusive jurisdiction clause? 

Having found that Dexia was entitled to serve its claim on Trentino out of the jurisdiction without permission, the judge noted that Trentino was still able to pursue its application for a stay of the English proceedings on the basis that Italy is the appropriate forum and/or the Italian proceedings constituted a lis alibi pendens. However, for this to succeed, Trentino would need to show that the jurisdiction clause was not an exclusive jurisdiction clause. It was unable to do so.

This question was fundamentally one of contractual construction. As previously noted, the general approach to interpreting jurisdiction clauses is to take a broad, purposive and commercially minded approach and to construe them generously. 

Here, the judge agreed with Dexia that:

• the jurisdiction clause conferred exclusive jurisdiction upon English courts. While the use of the word “exclusive” would not automatically mean the clause would be interpreted as such, it will only be on rare occasions that the express use of “exclusive” would be deemed to have been an error;
• the parties had waived any claim that England is an inconvenient forum as well as the right to object to the English courts exercising jurisdiction over them (by way of the Waiver Clause); and 
• sub-paragraph (3) of the jurisdiction clause permitted parallel proceedings to be brought in Italy in relation to provisional and protective measures if English proceedings had already been commenced.

Sub-paragraph (3) had to be approached against the express language of the rest of the clause. It was possible to construe this wording consistently with the express choice of exclusive English jurisdiction in sub-paragraph (1). The judge found that sub-paragraph (3) did not mean that parallel substantive proceedings could be brought in Italy, but rather envisaged that ancillary, protective proceedings (such as to obtain security) could be initiated once English proceedings had already commenced. This was logical because both parties were Italian companies, and therefore their assets would most likely be in Italy (rather than England and Wales). 

The Brussels I Regulation was also relevant to the factual matrix. The jurisdiction clause had needed to be exclusive because, otherwise, the effect of the Brussels I Regulation would be that the English court would have to decline jurisdiction if the Italian court was first seized, notwithstanding the selection of England. That England was to be the neutral forum was supported by the wording of the Waiver Clause, which showed the parties’ objective common intention in that regard. 

The court would need “very strong or exceptional grounds” to stay proceedings in England in circumstances where there was an English jurisdiction clause paired with a waiver of rights in relation to objecting that jurisdiction (i.e. a waiver of any forum non conveniens argument). This meant that Trentino’s application for a stay would have failed even if the Jurisdiction Clause had not been exclusive. The reasons argued for by Trentino in support of a stay were foreseeable at the time the contract was entered into (e.g. that the parties were based in Italy and Italian speakers), and therefore did not overcome this high hurdle. 

¹Dexia Crédit Local S.A. v Patrimonio del Trentino S.p.A. [2024] EWHC 2717 (KB)