In Nomura International Plc v Banca Monte Dei Paschi Di Siena SpA1 [2013] EWHC 3187 (Comm), the court's discretion to stay proceedings under Article 28(1) of Council Regulation (EC) 44/2001 (the Brussels Regulation) was triggered by the existence of prior proceedings in another EU member state, which the court concluded was a "related action" under Article 28(3). However, the court refused to exercise its discretion to stay the proceedings, holding that the existence of an exclusive jurisdiction clause in favour of the English court was a "very significant factor against the grant of a stay".  

Facts

On 1 March 2013, the applicant, Banca Monte Dei Paschi Di Siena SpA (BMPS), Italy and the world’s oldest bank, brought Italian proceedings against members of its former senior management for acting in conflict of interest and in breach of their duties. The proceedings related to a sophisticated restructuring scheme involving a number of related agreements (the Agreements), with the respondent bank, Nomura International Plc (Nomura), including an ISDA Master Agreement. BMPS claimed that the restructuring had been implemented in order to conceal losses arising from a transaction that took place in late 2005 which subjected BMPS to enormous costs and risks, whilst lacking any economic rationale. BMPS also advanced claims against Nomura in tort on the basis that Nomura played a key role in the restructuring and had contributed to the breach of duties.

Later the same day, Nomura issued proceedings against BMPS in England seeking, in particular, declaratory relief that the Agreements, each of which was governed by English law and contained either an exclusive or non-exclusive English jurisdiction clause, were valid and binding on BMPS.

BMPS’ application to stay the English proceedings

BMPS applied to stay the English proceedings pursuant to Article 28(1) of the Brussels Regulation on the basis that they were “related” to the Italian proceedings and that the Italian court was first seised.

Article 28 provides: “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.

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.”

Related actions

Nomura claimed that the Italian proceedings were not a “related action” under Article 28(3) relying on two main points:

  • The ‘threshold point’ – actions can only be ‘related actions’ if the two actions are capable of being heard and determined together. In the present case this would be impossible due to the jurisdiction clauses in the Agreements
  • The ‘so closely connected point’ – in any event, the two sets of proceedings were not “related actions” because they were not “so closely connected that it is expedient to hear and determine them together”. In particular, because the Italian proceedings against Nomura were founded in tort and would not be concerned with any contractual issue such as the validity of the Agreements

The court rejected the ‘threshold point’ holding that the wording of Article 28(3) focussed on the question of what in principle was ‘expedient’, which the court interpreted as meaning what was ‘genuinely desirable’, not what was ‘capable’ or ‘possible’ as contended by Nomura. The court concluded that an exclusive jurisdiction clause in favour of the court second seised did not, of itself, mean that the proceedings commenced in that court might not be ‘related’ to proceedings in another court for the purposes of Article 28(3).

The court also rejected the ‘so closely connected point’. In reaching this conclusion the court applied Sarrio SA v Kuwait Investment Authority 2 , which advocated a ‘broad common sense approach’. Adopting this approach, the court held that the underlying factual issues of the case would give rise to a very substantial degree of connection.

The court concluded that the Italian proceedings were a “related action” and that it would be expedient, within the meaning of Article 28(3), to hear the two actions together to avoid the risk of inconsistent judgments. Accordingly the court had discretion under Article 28(1) to determine whether the proceedings should be stayed.

Discretion to stay the proceedings

In deciding whether to exercise its discretion in favour of a stay, the court was mindful of the relevant factors which had been identified in Owens Bank Ltd v Bracco 3. These were:

  • the extent of the relatedness of the proceedings and the risk of mutually irreconcilable decisions;
  • the stage reached in each set of proceedings; and
  • the proximity of the courts to the subject matter of the case.

In respect of these factors the court held:

  • Whilst recognising the undesirability of two overlapping sets of proceedings being pursued in two different jurisdictions, the court considered that the risk of this might disappear if the court in either England or Italy was to reach a conclusion which gave rise to “issue estoppel”, which could then be relied upon in the other jurisdiction.
  • The court held that there was little, if any, difference between the stages reached in each set of proceedings. However, the court also accepted that the need for a swift determination was an additional relevant factor. It noted that proceedings in Italy were likely to take longer than in England. The court also considered it relevant that if the proceedings in England were stayed then the issue of the validity of the Agreements would in effect be left hanging until the conclusion of the Italian proceedings, leading to further delay
  • The court noted that it seemed likely that the main witnesses would be in Italy (possibly with Italian as their first language), and that most of the documents would also be in Italian. On the other hand it was relevant that the governing law of the Agreements was English law, although the issues raised by BMPS also involved matters of Italian law. Overall the court concluded that these considerations were finely balanced

The court considered that on balance the above factors weighed against the grant of a stay.

Noting that these factors were non-exhaustive, the court also considered the relevance of the exclusive jurisdiction clause in the ISDA Master Agreement to its exercise of discretion. This contractually entitled Nomura to bring proceedings in England. The court held that this was a very significant factor against the grant of a stay and that so far as possible it should give effect to the parties’ bargain. It therefore concluded that in respect of Nomura’s claims under the ISDA Master Agreement it would allow the proceedings to continue.

In respect of the other agreements, some of which contained non-exclusive jurisdiction clauses, the court held that the decision to allow the proceedings to continue in respect of the ISDA Master Agreement was a very significant factor against a stay of the proceedings in relation to those agreements. It therefore refused BMPS’ application and held that the English court should determine all issues concerning the validity of the Agreements, and that it would be inexpedient to adopt any other course.

Comment

This case illustrates that the existence of an exclusive jurisdiction clause can prove a decisive factor in persuading the court to allow proceedings to continue in the English courts, despite a pre-existing related action in another EU member state.

The court also made reference to the fact that there had been some debate as to what the position might be if this application were to be determined under the revised Brussels Regulation regime (Regulation (EU) No 1215/2012 of 12 December 2012) which will come into force on 10 January 2015. Given its limited assistance in determining the present case the judge did not express a view on what that position would have been. Litigators will want to monitor closely any changes in this area of law once the new Regulation comes into force.