QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
| NOMURA INTERNATIONAL PLC
|- and -
BANCA MONTE DEI PASCHI DI SIENA SpA
Mr Jonathan Nash QC and Mr Douglas Paine (instructed by DAC Beachcroft LLP) for the Defendant/Applicant
Hearing dates: 23 & 24 September 2013
Crown Copyright ©
Mr Justice Eder:
"1. Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.
2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."
i) Each of the Agreements is a valid and binding contract between Nomura and BMPS.
ii) All of BMPS's obligations under each of the Agreements remain in full force and effect.
iii) Each of the jurisdiction agreements in the Agreements is valid and binding on BMPS.
iv) The commencement of proceedings in Italy of (a) any proceedings arising out of or in connection with the Agreements or (b) any proceedings against Nomura arising out of the Restructuring, will constitute a continuing breach by BMPS of its contractual obligations, in particular under the jurisdiction agreements, for which BMPS will be liable (inter alia) to pay damages to Nomura.
v) Nomura is not liable, whether on the basis of unjust enrichment or otherwise, to repay in whole or in part any amount received from or otherwise on account of BMPS under or in connection with any of the Agreements (or any of them) or the Restructuring.
vi) Nomura is not liable to BMPS (in damages or otherwise and whether in contract, tort or otherwise) (a) for breach of any contractual or non-contractual obligation arising out of or in connection with the Agreements (or any of them) or the Restructuring or (b) in respect of any act or omission in connection with the Agreements (or any of them) or the Restructuring.
On 20 June 2013, Nomura served formal notice discontinuing that part of the claim referred to in paragraph (vi) above seeking a declaration for Nomura's non-liability in tort or otherwise and/or for breach of any non-contractual obligation arising out of or in connection with the Agreements. (I should mention that Mr Nash submitted that there remained an ambiguity or lack of clarity with regard to the scope of the relief now sought as referred to in sub-paragraph (vi). In the event, Mr Handyside clarified Nomura's position in his oral submissions and agreed to produce a redraft of paragraph (vi) to make it clear that the declaration sought is limited to non-liability in contract.) Further, in his skeleton argument served shortly before the hearing, Mr Handyside indicated the intention of Nomura to discontinue its claim for declaratory relief as set out in paragraph (iv) above although expressly reserving Nomura's right to challenge the jurisdiction of the Italian court in the Italian proceedings referred to below. Since the hearing, I have been informed that formal notice of such discontinuance has been served.
The Mandate Agreement
"BMPS understands that the Term Repurchase Transaction, the Repurchase Facility and each Asset Swap Transaction and/or each Substituted Asset Swap Transaction (as applicable) are together entered in consideration for the Proposed Restructuring and that Nomura would not be able to enter into the Proposed Restructuring without entering into the Term Repurchase Transaction, the Repurchase Facility, each Asset Swap Transaction and/or each Substituted Asset Swap Transaction (as applicable) together."
In passing, it should be noted that Mr Handyside submitted that this representation clearly confirms that the Agreements formed part of a single overall transaction; that it was never the parties' intention that one of them would be entered into without the other; and that this has important implications for BMPS's attempts to play down the importance of the exclusive jurisdiction clause in the ISDA Master Agreement (see below), and for BMPS's application generally.
(a) The English courts have non-exclusive jurisdiction to settle any dispute including a dispute relating to any non-contractual obligation arising out of or in connection with this Agreement.
(b) The English courts are the most appropriate and convenient courts to settle any such dispute in connection with this Agreement. Each Party agrees not to argue to the contrary and waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with this Agreement."
The Asset Swap Transactions
"(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the law of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction."
The Long Term Repo
"This Agreement shall be governed by and construed in accordance with the laws of England. Buyer and Seller irrevocably submit for all purposes of or in connection with this Agreement and each Transaction to the jurisdiction of the Courts of England [ ]
Nothing in this paragraph shall limit the right of any party to take proceedings in the courts of any other country of competent jurisdiction."
"This Deed (and any dispute, controversy, proceedings or claim of whatever nature arising out of or in any way relating to this Deed or its formation) shall be governed by and construed in accordance with English law. The parties hereto irrevocably submit to the non-exclusive jurisdiction of the courts of England."
The Repurchase Facility
The Italian Proceedings
A) Breach of directors' and general managers' duties (Articles 2392, 2396 and 2391 of the Italian Civil Code ("ICC")). In summary, it is alleged that Messrs Mussari and Vigni failed to act diligently, to protect the corporate interests of BMPS, by entering into transactions (i) in conflict of interest and causing damage to BMPS; and (ii) without prior authorisation from the board of directors. It is common ground that the liability is of a contractual nature.
B) Liability in tort (under the general rule on torts in Article 2043 of the ICC).
C) Liability to pay damages ("Restitution and compensation") to the victim of a criminal offence (under Articles 185(2) and 187 of the Criminal Code). This will only be relevant in the event that ongoing criminal investigations (described below) reveal that the conduct of the former senior management amounted to a criminal offence.
The Italian Criminal Proceedings
The Threshold Point
i) Actions can only be "related actions" within the meaning of Article 28 if the two actions are capable of being heard and determined together: JP Morgan Europe Ltd v Primacom AG  2 Lloyd's Rep 665 at 674, col 2 per Cooke J; Television Autonomic Valenciana v Imagina Contenidos Audiovisuales  EWHC 160 (Ch) at  per Arnold J.
ii) The only Court with jurisdiction to rule upon the validity and enforceability of all the Agreements is the English Court.
iii) Accordingly, there is no possibility of Nomura's claims in the present action being heard and determined together with BMPS's claim in the Italian proceedings. The reason for this is that the ISDA Master Agreement that governs the Asset Swap Transactions contains an exclusive English jurisdiction clause. Accordingly, any claim by BMPS that that contract is invalid must be brought in England (unless of course Nomura was prepared to waive the clause, which it is not). Although the jurisdiction clauses in the GMRA and the Mandate Agreement are non-exclusive, they do not confer jurisdiction on the courts of any other country: only the English Court is identified in them.
i) Dicey para 12-073 where it is stated:
" the court seised second may dismiss the proceedings before it to allow them to be consolidated provided that the other court will have jurisdiction over both claims and its law permits the consolidation of claim ."
ii) Cheshire p314 where it is stated:
" It seems to be implicit from the part of the definition of related actions that refers to it being expedient to hear the two actions together that the court first seised is able to try both actions together, not just in relation to Article 28(2), which makes this an express requirement, but also in relation to Article 28(1); where this is not the case the actions cannot come within Article 28 [footnote 940] "
Footnote 940 reads: "Haji-Ioannou v Frangos  2 Lloyd's Rep 337 at 352 CA; L A Gear Inc v Gerald Whelan & Sons Ltd  FSR 670; De Pina v MS Birka ICG  IL Pr 694; But cf Centro Internationale Handelsbank AG v Morgan Grenfell Trade Finance Ltd  CLC 870."
iii) Layton & Mercer p798 para 22.029 where it is stated:
" Art. 28 applies only as between Brussels-Lugano states and may be subject to there not being a valid jurisdiction agreement [footnote 56] "
Footnote 56 refers back to a previous paragraph 22.022 and the cases there cited where it is stated in the main body of the text: "Subject to a possible exception where the court second seised has exclusive jurisdiction under Art 20, the court second seised may not conduct a review of the jurisdiction of the court first seised".
"It is true that the two sets of proceedings are related in the broad sense that they are between the same parties and concern the activities of the defendant in two different countries in dealing in footwear which it is alleged wrongly bears the plaintiff's mark without the plaintiff's consent. However, in my view, it would not be possible, let alone expedient, for the two sets of proceedings to be heard and determined together in one country. If I stayed the English proceedings in whole under Article 22 the plaintiff would be prevented from pursuing in the English courts its action for infringement of the United Kingdom trade mark which, for the reasons I have mentioned above, can only properly be pursued in the English courts. Mr McClure argued that I could simply stay the passing off proceedings in England. But, in my judgment, the passing off claim is so closely related to the trade mark claim indeed, as I have mentioned, the same acts of infringement are relied on that there would be little advantage to the defendant in staying the passing off proceedings in England. I cannot see that there would be any substantial saving of costs and time so far as the defendant is concerned."
"The crucial issue in the present applications is, however, one of mixed fact and law and it is how one identifies the criteria for determining whether a number of separate contracts are part of a single overall transaction for the purposes of the rule against rescission of part of a transaction. On this point there is little or no help in the authorities, but application of general principles strongly suggests the necessary criteria. If a representee is induced to enter into separate contracts A&B by the same misrepresentation, it may be that performance of contract B depends on the prior performance of contract A. In that case one cannot rescind contract A without also rescinding contract B. To permit the survival of contract B would be inconsistent with the principles of restitutio in integrum. But there may be cases where, although both contracts were induced by the same misrepresentation either can be performed without performance of the other. In that case the representee may rescind unless the contract not sought to be rescinded would never have been entered into by the parties without also entering into the other. Thus, for example, in a case where the transaction is divided into different contracts simultaneously negotiated, it may be that the consideration for the whole bargain is written into one contract, leaving only nominal consideration in the other contract. In that event it would not be open to the representee to leave open the contract that gave him the main consideration while rescinding the other contract under which his primary performance obligation lay. Again, to do otherwise would not effect restitutio in integrum. Or there may be cases where it is clear from the terms of the contracts and the matrix evidence that the subject matter of the contracts is so interrelated that, although it would be theoretically possible to perform each separately, one would never have been entered into without that contract sought to be rescinded. However, in the absence of structural interdependence between separate contracts, the most usual determinant of inseparability is likely to be the distribution of consideration for the whole bargain between the separate contracts."
"The relevant test is whether it was the mutual intention of the parties, expressed or to be imputed to them, that they would only enter into either of the other two earlier agreements if they also entered into the share distribution agreements". (at p289, col 2)
"Whether a jurisdiction clause applies to a dispute is a question of construction. Where there are numerous jurisdiction agreements which may overlap, the parties must be presumed to be acting commercially, and not to intend that similar claims should be the subject of inconsistent jurisdiction clauses. The jurisdiction clause in the Dealer's Confirmation is a 'boiler plate' bond issue jurisdiction clause, and is primarily intended to deal with technical banking disputes. Where the parties have entered into a complex transaction it is the jurisdiction clauses in the agreements which are at the commercial centre of the transaction which the parties must have intended to apply to such claims as are made in the New York complaint and reflected in the draft particulars of claim in England."
i) The Mandate Agreement is the "centre of gravity", because it is this agreement which connects the Asset Swap Transactions, Long Term Repo and Repo Facility in a single structure intended to fraudulently conceal the losses arising on the Alexandria Notes.
ii) Both the Mandate Agreement and the GMRA contain a non-exclusive jurisdiction agreement: if the parties had intended that disputes relevant to these agreements were to be subject to the exclusive agreement of the English Court they would have said so. By the same token, if the parties had intended that a dispute about the propriety of the Restructuring as a whole should be subject to the exclusive jurisdiction of the English Court, they would have stipulated for an exclusive jurisdiction clause in the Mandate Agreement.
iii) Whilst the ISDA Master Agreement contains an exclusive jurisdiction clause, it is a standard form which was agreed in 1994 and therefore pre-dates the other agreements by some fifteen years. It cannot realistically be expected to reflect the parties' jurisdictional intentions in respect of a transaction which had not even been contemplated. Rather, the clause in the ISDA Master Agreement is another 'boiler plate' provision of the kind identified in the UBS case, which was intended primarily to deal with technical banking disputes. The current actions do not involve technical disputes, or any specific breach of the ISDA Master Agreement, but a wide-ranging factual investigation into the circumstances of the Restructuring as a whole.
The "so closely connected" point
i) In order for actions to be deemed related, the Court must be satisfied not only that there is a risk of irreconcilable judgments, but that the risk is sufficiently great, and/or the connection between the two sets of proceedings is sufficiently close to make it expedient to hear and determine the actions together.
ii) According to The Tatry C-406/92  QB 515 (concerning the predecessor provision at Article 22 of the Brussels Convention), actions are related if they would involve the risk of conflicting decisions, without necessarily involving the risk of giving rise to mutually exclusive legal consequences.
iii) In Sarrio SA v Kuwait Investment Authority  1 AC 32 (again considering Article 22 of the Brussels Convention) the House of Lords advocated a broad common sense approach to the question of whether actions are considered to be "related". Lord Saville rejected an approach (adopted by Evans LJ below) which sought to differentiate between issues of fact and law which have to be decided in order that the court can reach its judgment, and other issues of fact which the court may or may not decide and which are not essential to its conclusion. He held (at 40C-D):
"... To my mind these wide words ['so closely connected that it is expedient to hear and determine together'] are designed to cover a range of circumstances, from cases where the matters before the courts are virtually identical (although not falling within the provisions of article 21) to cases where although this is not the position, the connection is close enough to make it expedient for them to be heard and determined together to avoid the risk in question."
Lord Saville continued (at 41F):
"For these reasons, I am of the view that there should be a broad common sense approach to the question whether the actions in question are related, bearing in mind the objective of this article, applying the simple wide test set out in article 22 and refraining from an over-sophisticated analysis of this matter."
iv) It is clear that the test is not to be applied mechanically but will require a careful assessment of the extent of connection of the two sets of proceedings. As the Court of Appeal held in Research in Motion UK Ltd v Visto Corporation  EWCA Civ 153 at  (cited in Lehman Brothers v CMA  EWHC 171 (Comm) at ):
"It requires an assessment of the degree of connection, and then a value judgment as to the expediency of hearing the two actions together (assuming they could be so heard) in order to avoid the risk of inconsistent judgments. It does not say that any possibility of inconsistent judgments means that they are inevitably related. It seems to us that the Article leaves it open to a court to acknowledge a connection, or risk of inconsistent judgments, but to say that the connection is not sufficiently close, or the risk is not sufficiently great, to make the actions related for the purposes of the Article. Mechanics do not, for once, provide a complete answer."
v) The fact that the court first seised may make findings or observations which could lead to irreconcilable judgments will not of itself be sufficient to establish that the actions are to be deemed related pursuant to Article 28(3). In Rahman v GMAC Commercial Finance Ltd  EWCA Civ 1467, the Court of Appeal upheld the judge's decision that German insolvency proceedings and proceedings in England for fraudulent misrepresentation and breach of a deed of warranty against the company director were not related within the meaning of Article 28(3) on the basis, inter alia, that the German court could arrive at a decision without deciding one of the issues which was before the English Court (at ).
vi) Similarly, in The Trademark Licensing Company Limited and Lonsdale Sports Limited v Leofelis SA  EWHC 3285 (Ch), Sir William Blackburne held that although there was a risk of irreconcilable judgments if English proceedings for breach of contract continued at the same time as IP proceedings in Milan for declaratory relief and damages, the risk was not sufficiently great to make the actions "related actions" for the purposes of Article 28 because:
" it is by no means evident that the issue of Leofelis's action in purporting to terminate the Licence Agreement for Lonsdale's breach the only area of potential overlaps presently affecting the proceedings will arise for decision in the Milan proceedings. (at )."
i) The Agreements are governed by English law. Any issue as to whether the Agreements are valid and enforceable would be governed by and determined according to English law.
ii) To the extent that allegations made by BMPS by way of defence to the English proceedings are the same or similar to allegations made by BMPS in the Italian proceedings, Nomura accepts that there will be some overlap.
iii) In so far as BMPS may seek to run other, as yet unidentified defences, it can reasonably be assumed that such defences will not be common to the Italian proceedings.
iv) Given the way in which BMPS advances its claim, not only is it unnecessary for the Italian Court to investigate the validity of the Agreements, but the Court is precluded from doing so. Accordingly, there is no prospect of any judgment in the Italian proceedings giving rise to any res judicata as to the invalidity of the Agreements, since that issue falls outside the scope of and is not in issue in the Italian proceedings. In this context, Mr Handyside relied on the evidence of his expert on Italian law, Professor Carbone.
v) It does not follow that because the Italian Court has been asked to determine whether Nomura is liable in tort that the Italian Court will address the illegality of the Agreements. Based upon the manner in which BMPS has presented its claims in the Summons & Complaint, Professor Carbone does not consider that determination of the claims will necessarily involve the determination of any matter that affects the validity of the Agreements. As he points out, it is BMPS's case that Nomura co-operated in the concealment of losses in BMPS's financial statements, through the execution of a set of transactions which, irrespective of their validity, caused damage to BMPS.
vi) Furthermore, and importantly, as noted above, BMPS's formulation of the claim in the Summons & Complaint is premised upon the basis that the payment obligations under the Agreements are valid and binding. Any judgment in BMPS's favour in the Italian proceedings would necessarily proceed upon the same basis.
vii) Thus, since no claim has been raised by BMPS in relation to the validity of the Agreements, if the Italian Court were to find that the allegations of misconduct made against the defendants were well founded, this would neither affect the enforceability nor imply the nullity of the Agreements. The Agreements would remain valid and binding between the parties while the decision of the Italian Court would simply result in a declaration that the defendants were liable for damages arising out of their illicit behaviour.
viii) In any event, the fact that the Italian Court may make findings as to the legality of the Agreements, is not sufficient to establish a risk of irreconcilable judgments.
Risk of irreconcilable judgments?
Stage of Proceedings
The English jurisdiction clauses
"Even if I had found that these two sets of proceedings and the German proceedings were related within the meaning of article 28, "the strong presumption" which "lies in favour of the applicant" on an application for a stay would be overridden here by virtue of the terms of the SSFA. Although the ECJ decision in Gasser means that a stay is mandatory where article 27 applies, there is no reason why weight should be given to that decision in the context of article 28, where a discretion is given to the court, the jurisdiction of which has been agreed by the parties as exclusive. It is nothing to the point that an English court could not have issued an anti-suit injunction to prevent the German proceedings (as per C-159/02 Turner v Grovit  2 Lloyd's Rep 169). The injustice of giving precedence to proceedings brought in breach of an exclusive jurisdiction clause where the parties have agreed that England is the appropriate forum is self-evident. To breach the clause and to gain priority for the German courts by such breach offends justice, where the court has a discretionary decision to make."