High Court finds English court has exclusive jurisdiction in ISDA swaps case

In a recent decision, the High Court has granted summary judgment in favour of a French bank seeking declarations that: (i) the English courts had exclusive jurisdiction under the jurisdiction clause contained in the 1992 ISDA Master Agreement (which applied to the transactions in dispute); and (ii) proceedings commenced in Italy by an Italian municipal authority were therefore commenced in breach of that clause: Dexia S.A. v Comune di Torino [2025] EWHC 1903 (Comm).

This decision, one of a number of judgments in recent years relating to swaps entered into by Italian public authorities, will be of particular interest to financial institutions trading in derivatives based on standard form ISDA documentation. The English court has once again taken a robust approach to interpreting a jurisdiction clause, confirming its appreciation of the importance of market certainty and predictability in the interpretation of standard form ISDA documentation.

We consider the decision in more detail below.

Background

Between 2001 and 2006, the Italian municipal authority of Torino (Torino) entered into 11 interest rate swap transactions with a French bank (Dexia). The transactions, which were subject to 1992 ISDA Master Agreements, bespoke schedules and individual trade confirmations, aimed to hedge Torino's interest rate exposure and reduce its indebtedness under 20-year variable rate bonds.

The transaction documents were governed by English law. The jurisdiction provision at clause 13(b) of the ISDA Master Agreements provided as follows:

"… 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…

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."

In 2024, Torino issued proceedings against Dexia in the Court of Turin seeking to unwind or set aside the transactions (the Italian proceedings). Torino claimed damages for breach of an alleged advisory agreement between Dexia and Torino, damages for alleged pre-contractual and tortious liability for Dexia having structured and offered the transactions to Torino negligently, a declaration that the transactions were void under Italian law, damages for breach of the transactions and termination of the same.

In response, Dexia issued a claim in the English court (the English proceedings) seeking declarations that the transactions were valid, lawful and binding as well as declarations as to the jurisdiction of the English court.

Dexia brought a number of preliminary matters and applications before the court, including an application for summary judgment seeking declarations that: (1) by reason of clause 13(b) of the ISDA Master Agreement, the English court had exclusive jurisdiction over the validity of the transactions and any liability arising out of them; and (2) Torino's claims in the Italian proceedings were commenced in breach of clause 13(b).

Torino took no part in the English proceedings other than obtaining an extension of time to serve its Acknowledgement of Service (which was not then served). In its absence, Dexia identified three points which Torino raised in the Italian proceedings and might therefore have brought in the summary judgment application:

1. Clause 13(b) should be construed narrowly in line with the general approach to construing choice of court clauses in Italian law;
2. Clause 13(b) was not an exclusive jurisdiction provision; and
3. The rights in question were "non-disposable" rights under Italian law, and so Italian jurisdiction could not be waived in favour of a foreign court.

Decision

The High Court (Butcher J) found in favour of Dexia in respect of all of its applications including in relation to its claims for declaratory relief. The areas of interest to financial institutions are considered further below.

Preliminary applications

As preliminary points, the court found that it was appropriate to proceed in Torino's absence, (exercising its discretion under CPR 39.3); and it granted permission for Dexia to apply for summary judgment in circumstances where Torino had not served an Acknowledgement of Service or a Defence (applying the principles identified in EU v Syrian Arab Republic [2018] EWHC 1712 (Comm)).

Summary judgment application

The court noted that where an application is made for summary judgment in relation to declaratory relief, the correct approach is to determine whether the claimant has shown that the defendant has no real prospect of mounting a successful defence in relation to the underlying facts and matters to which the declaration relates. If so, then the court should exercise its discretion as to whether or not to make the declaration in the usual way.

The court considered the three points Torino might have been expected to make, had it taken part in the proceedings:

1. Clause 13(b) should be construed narrowly

The effect of a narrow interpretation of the clause 13(b) jurisdiction clause (per the approach under Italian law), would be that certain claims brought in the Italian proceedings would fall outside its scope.

The court held that the construction of a jurisdiction clause was a matter of its proper law, which was English law in the present case, which requires a broad and purposive approach to construction. In this case, the wording of the jurisdiction clause was wide enough to cover collateral, tortious and pre-contractual claims such as Torino had sought to bring in the Italian proceedings, not least because the 1992 ISDA Master Agreement also included provisions expressly dealing with the (lack of an) advisory relationship and an entire agreement clause. The court relied in particular on a previous Italian swaps case, Deutsche Bank AG v Comune di Savona [2018] EWCA Civ 1740 (see our blog post), which held that a 1992 ISDA Master Agreement with a similarly drafted governing law and jurisdiction provision covered claims arising from pre-contractual negotiations and advice.

The court concluded that this argument had no prospect of success.

2. Clause 13(b) was not an exclusive jurisdiction provision

The effect of clause 13(b) of the 1992 ISDA Master Agreement was for the English courts to have non-exclusive jurisdiction, subject to the proviso in the second paragraph of the clause that the parties were not entitled to commence proceedings in any "Contracting State" as defined by section 1(3) of the Civil Jurisdiction and Judgments Act 1982 (the CJJA). As regards a "Contracting State", English jurisdiction was exclusive. The question was whether Italy was a "Contracting State" for the purpose of the clause.

The court held that this question should be assessed on the basis of the wording of section 1(3) of the CJJA at the time of the litigation rather than the time of entry into the contract in dispute. The definition in section 1(3) had changed over time, referring at one time to the Brussels and Lugano Conventions and now to the 2005 Hague Convention on Choice of Court Agreements.

As to whether Italy was a "Contracting State" for the purposes of clause 13(b), Torino argued (in the Italian proceedings) that the identified convention had to apply to the dispute itself (in this case the 2005 Hague Convention), in order for a state to fall within the definition of "Contracting State". Torino argued that Italy was not a Contracting State in the present case, because it said the 2005 Hague Convention did not apply to the dispute.

The court disagreed, finding that the purpose of the reference to section 1(3) of the CJJA was simply to identify specific states which were party to identified conventions to which the UK was also a party. Whether a state was a Contracting State for the purposes of clause 13(b) did not depend on whether the identified convention was applicable to the dispute, but only on whether the state was party to that convention. This position had long been assumed to be the case and was reflected in an established body of case law including BNP Paribas S.A. v Trattamento Rifiuti Metropolitani SpA [2019] EWCA Civ 768 (see our blog post).    

The court held that the correct construction of clause 13(b) was that "Contracting States" were states   bound by the 2005 Hague Convention, which included Italy. Accordingly, clause 13(b) conferred, vis-à-vis Italy, exclusive jurisdiction on the English courts. Although the definition in the CJJA had changed over time, Italy had remained within the class of Contracting States since before the transactions were entered into. Torino would therefore have understood from the outset of the transactions that the English court was, as regards the courts of Italy, to have exclusive jurisdiction over disputes relating to the transactions.

3. The rights in question were non-disposable rights under Italian law

This argument related to Article 4(2) of Italian Law No 218/1995, which allows Italian jurisdiction to be waived in favour of a foreign court only where such rights are considered "disposable". In the Italian proceedings, Torino argued that it could not have agreed to clause 13(b) because the rights at issue, which concerned public finances, were non-disposable.

The court held that this argument was clearly wrong. The material validity of the jurisdiction clause was a question for the law applicable to the contract, ie English law, not for Italian law, other than in cases of corporate capacity which were a matter for the law of incorporation. On the court's analysis, Article 4(2) was a provision of general application that did not go to capacity or apply specifically to corporations or public authorities. The expert evidence supported this conclusion.

In addition, Italian case law had consistently held that disputes involving private law rights and commercial contracts concerned disposable rather than non-disposable rights. Indeed, in another case involving similar swap contracts and a jurisdiction clause in the same terms, the Italian Supreme Court did not accept an argument that the swap contracts involved non-disposable rights. An argument based on Article 4(2) therefore had no realistic prospect of success.

Summary judgment was granted accordingly.