Court of Appeal finds ISDA jurisdiction clause trumps competing clause in related contract

A recent Court of Appeal judgment provides further assurance that jurisdiction clauses within standard form ISDA documentation will not readily be displaced by contrary jurisdiction clauses in related contracts: BNP Paribas SA v Trattamento Rifiuti Metropolitani SPA [2019] EWCA Civ 768. Upholding the first instance decision, the Court of Appeal gave effect to an English jurisdiction clause in an ISDA Master Agreement over an apparently competing Italian jurisdiction clause in a related financing agreement, despite a provision in the Schedule to the ISDA Master Agreement stating that, in the event of conflict, the financing agreement would prevail.

Key to the Court of Appeal's decision was its conclusion that there was no conflict between the jurisdiction clauses, which were found to govern different legal relationships and were therefore complementary, rather than conflicting. The Court emphasised that factual overlap, between potential claims under the ISDA Master Agreement and a related financing agreement, did not alter the legal reality that claims under the two agreements related to separate legal relationships.

The Court of Appeal's decision is not unexpected, as it is in line with the recent Court of Appeal decision in Deutsche Bank AG v Comune Di Savona [2018] EWCA Civ 1740, which expressly approved the first instance decision in the present case. However, it will be welcomed as further evidence of the English court's emphasis on construing commercial contracts, and in particular standard form ISDA documentation, in order to achieve market certainty and predictability.

Following the recent publication of French and Irish ISDA Master Agreements in light of Brexit, the court's emphasis on predictability may serve as a timely reminder of the advantages of selecting English jurisdiction for ISDA Master Agreements.

For more information see our Banking litigation e-bulletin on the decision.

Note: The Supreme Court refused permission to appeal against this decision on 9 January 2020.