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High Court refuses to grant anti-suit injunction restraining insolvency proceedings in Denmark

03 July 2015. Published by Alexis Armitage, Senior Associate

In SwissMarine Corporation Ltd v OW Supply & Trading[1], the High Court refused to grant an anti-suit injunction restraining Danish insolvency proceedings.

This case provides a useful discussion of the circumstances in which the court are likely to grant an anti-suit injunction, and in particular where there are jurisdiction issues involving elements of both civil and insolvency proceedings. The judge's comment that a choice by the parties to use standard contract wording usually displays an intention by the parties that the wording is to be given its usual meaning, regardless of the parties' circumstances at the time, is particularly helpful. 

Background

Where a defendant is domiciled in the European (EU) and proceedings were commenced on or after 10 January 2015, Article 25 of the Recast Brussels Regulation[2] provides that, where the parties have agreed that a particular EU member state court shall have jurisdiction to settle any disputes in relation to a particular legal arrangement, that court shall have jurisdiction. Unless otherwise agreed, the EU member state shall have exclusive jurisdiction. However, Article 1(2)(b) provides that the Recast Brussels Regulation shall not apply to bankruptcy proceedings in relation to the winding-up of insolvent companies.

The court may grant an anti-suit injunction restraining a party from pursuing foreign proceedings if those proceedings have been brought in breach of a legal right, for example an exclusive English jurisdiction clause, or where the foreign proceedings would be vexatious, oppressive or interfere with the due process of the English court and consequently are likely to be deemed "unconscionable". If it is clear that foreign proceedings are in breach of an exclusive jurisdiction agreement between the parties, there is "no good reason for diffidence" in granting an injunction to enforce the promise[3]. However, for this principle to apply, the applicant needs to demonstrate a high degree of probability that there is a valid and binding exclusive forum clause[4]. The court cannot grant an anti-suit injunction to restrain foreign proceedings if the foreign court has jurisdiction under the 2001 or Recast Brussels Regulations[5].

Facts

The dispute arises under an ISDA Agreement between SwissMarine Corporation Limited (SwissMarine) and O. W. Supply & Trading A/S (OW Supply) dated 22 May 2014 (Agreement). The Agreement covered derivatives contracts for differences between OW Supply and SwissMarine (together the "Parties"); SwissMarine being the fixed price payer and OW Supply being the floating price payer. The Agreement between the Parties was in the ISDA 2002 Master Agreement form, included a schedule and documented that the Parties anticipated entering into one or more transactions. In September 2014, the Parties entered into a transaction referred to as the "Confirmation – Swap" (the "September Swap"). The September Swap document expressly stated that it supplemented, formed part of and was subject to the terms of the Agreement. The Agreement provided that "Each obligation of each party [to make specified payments] is subject to (1) the condition precedent that no Event of Default or Potential Event of Default has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant transaction has occurred or been effectively designated …". The Agreement specified various "Events of Default" including when a party "becomes insolvent or unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due".

In November 2014, OW Supply filed for bankruptcy in Denmark and trustees in bankruptcy were subsequently appointed. It was not contested that this was an act which amounted to an "Event of Default" by OW Supply under the Agreement.

In February 2015, SwissMarine issued proceedings in the UK against OW Supply seeking:

  1. entitlement to rescind the Agreement due to alleged misrepresentations made by OW Supply at the time the relevant transactions were entered into under the Agreement (on 22 May 2014 and 22 September 2014 respectively) in relation to OW Supply's solvency and ability to pay its debts;
  2. a declaration that an Event of Default under section 5A of the Agreement had occurred in respect of OW Supply filing for bankruptcy and was continuing;
  3. a declaration that, pursuant to section 2(a)(iii) of the Agreement, and for so long as an Event of Default in respect of OW Supply continued, SwissMarine was not obliged to make any payment to OW Supply in respect of any transaction governed by the Agreement[6];
  4. a declaration that no Early Termination Date had been designated or occurred;
  5. a declaration that no rule of Danish insolvency law would have any effect as a matter of English law to alter or disapply any of the provisions of the Agreement; and
  6. a declaration that SwissMarine, having commenced proceedings against OW Supply in England, pursuant to section 14 of the Agreement conferred exclusive jurisdiction on the English court and prohibited OW Supply from commencing any proceedings against SwissMarine in any other jurisdiction in respect of the Agreement or transactions under it.

In May 2015, OW Supply served Danish proceedings (the "Lyngby action") on SwissMarine for alleged outstanding monies owed by SwissMarine under the Agreement in the sum of USD 2,552,083.33, plus statutory interest. OW Supply further pleaded that, by reason of Danish insolvency law and securities legislation, section 2(a)(iii) of the Agreement must be deemed not to apply to a Danish estate in bankruptcy. If correct, this would mean that SwissMarine would have an obligation to continue to make payments to OW Supply in relation to any transactions under the Agreement, irrespective of the existing bankruptcy proceedings against OW Supply.

Shortly after this, SwissMarine applied to the court for an anti-suit injunction against OW Supply seeking an order restraining OW Supply (i) from proceeding with the Lyngby action; and (ii) from commencing any other or further proceedings in Denmark or elsewhere against SwissMarine directed to obtaining a "disputed" sum claimed under the Agreement or any transaction pursuant to the Agreement. SwissMarine sought the injunction on the basis that the Lyngby action was i) in breach of an English jurisdiction clause in the Agreement and/or was ii) vexatious or oppressive. On the contrary, OW Supply contended that i) the jurisdiction clause did not apply at all to the Lyngby action; and ii) in any event, there was no agreement between the Parties that the English courts should have any relevant exclusive jurisdiction. These were the key issues which the judge considered in his judgment.

Decision

Jurisdiction clause

(i) Was the Lyngby action in breach of an English jurisdiction clause in the Agreement?

This was the main issue to be determined by the judge. OW Supply argued that the Lygnby action was not covered at all by the jurisdiction agreement because it was not a suit, action or proceedings relating to a dispute arising out of or in connection with the Agreement or any non-contractual obligations arising out of or in relation to the Agreement. OW Supply did not wish to have determined any dispute under the Agreement nor was it about the Parties' rights and obligations under the Agreement, and there was no dispute about their contractual rights and obligations. OW Supply stated that the question for the Lyngby court was instead how the Danish insolvency regime would apply to OW Supply. OW Supply submitted that the facts of this case were similar to those in the Court of Appeal case of AWB (Geneva) SA v North America SS Ltd[7]. In this case,  the test used by Lord Justice Thomas to determine whether the foreign proceedings fell within the scope of the jurisdiction agreement was whether the foreign proceedings "related to a dispute under the contract" and/or whether they related to "contractual obligations under the agreement".

In order to establish whether the Lyngby action was in breach of an English jurisdiction clause in the Agreement, the judge therefore considered whether there were any material differences between the facts of the present case and that of AWB (Geneva) SA v North America SS Ltd case. Although the judge acknowledged that the agreements were not identical, he commented that there appeared to be no relevant distinction between the two jurisdiction agreements. The judge commented that the differences in wording between the jurisdiction agreements do not "…bear on the question whether OW Supply can invoke the protection of Danish insolvency rules, or whether the jurisdiction agreement was intended to prevent this. I cannot accept that the parties evinced an intention in the schedule that OW Supply (or SwissMarine) should abandon the protection of its national insolvency regime. Clearer wording would be required to evince this intention[8]".

The judge therefore concluded that SwissMarine had not demonstrated a sufficient case in order to apply the jurisdiction agreement to the Lyngby action and to justify SwissMarine's submission that it should be granted an anti-suit injunction on the grounds that in bringing and pursuing the action, OW Supply had acted in breach of the jurisdiction agreement. Interestingly, the judge further commented that "To my mind, when parties choose to use for a contract a standard wording such as the ISDA Master Agreement form, generally their own circumstances at the time of the contract will not affect the interpretation of the wording. By choosing standard wording, parties usually evince an intention that the wording as incorporated into their contract should be given its usual meaning[9]".

(ii) Was the jurisdiction agreement exclusive?

In addition to arguing that the jurisdiction clause did not apply at all to the Lyngby action, OW Supply argued that even if it did apply (which as discussed above, the judge decided it did not), the jurisdiction clause was not exclusive in favour of the English courts in any event.

On the contrary, SwissMarine argued that under the jurisdiction agreement the English courts had an exclusive jurisdiction such that OW Supply agreed not to bring or pursue the Lyngby action and in particular, submitted that i) by SwissMarine having brought proceedings in England, the effect of section 13(b)(i)(1)(B) of the Agreement was that the English courts had exclusive jurisdiction over all disputes arising out of the Agreement and/or over the dispute that was the subject matter of the proceedings; and that in the event that this was not the case, (ii) because OW Supply nevertheless agreed to submit to the jurisdiction of the English courts, it was a breach of the Agreement to bring proceedings elsewhere.

The judge made the following comments on the construction of the jurisdiction agreement;

(i) it did not include a promise to bring the claims to which section 13(b) of the Agreement refers in the English court;

(ii) nor did it include an express promise not to bring proceedings elsewhere; and

(iii) section 13(b)(iii) of the Agreement anticipated that, at least in some circumstances, that there might be proceedings in different jurisdictions.

although, the judge acknowledged that section 13(b)(i) of the Agreement provided that in some circumstances (where the proceedings involve "a Convention Court" i.e. a court that is bound to apply either article 17 of the Brussels Convention or article 17 of the Lugano Convention), the Parties submit to the exclusive jurisdiction of the English courts, the judge concluded that the proceedings did not involve a "Covention Court" as defined in the Agreement. The judge further concluded that the reference in the Agreement to the Brussels Convention could not be interpreted as including a reference to the 2001 Brussels Regulation or the Recast Brussels Regulation.

SwissMarine sought to further argue that OW Supply's agreement to submit to the jurisdiction of the English Courts was breached if it brought proceedings elsewhere, relying on BNP Paribas SA v Anchorage Capital Europe LLP[10]. However, the judge distinguished BNP Paribas SA v Anchorage Capital Europe LLP from this caseon various grounds, in particular because in the present case there was an express agreement for non-exclusive jurisdiction, meaning that the Parties had a right to bring proceedings elsewhere, and in particular section 13(b)(iii) of the Agreement meant that the right was not lost to one party if the other brought proceedings in the chosen non-exclusive jurisdiction. The judge therefore concluded that even if the he had determined that the jurisdiction agreement applied to the Lyngby action (which as discussed at i) above, he did not), in any event, the jurisdiction agreement was not exclusive to the English courts.

Lyngby Action was vexatious or oppressive

(iv) Was the Lyngby action vexatious or oppressive?

SwissMarine further argued that OW Supply should be prohibited from bringing the Lyngby action on the basis that it was vexatious or oppressive because OW Supply:

(i) were asking the Danish court to apply Danish law to the Parties' rights and obligations, and to ovveride English law, in particular English law about the validity and effect of section 2(a)(iii) of the Agreement;

(ii) were seeking an unfair advantage by obtaining an order from the Danish court, which would be unenforceable under English law but which it would seek to enforce elsewhere, notwithstanding the Parties' choice of English law to govern the contract, and thereby it is in breach of Agreement as to the governing law;

(iii) were tring to thwart and undermine the English proceedings, which were commenced first. SwissMarine also expressed a fear that OW Supply hoped to obtain a Danish order and to enforce it before it could obtain a declaration in these proceedings;

(iv) ignored in the Lyngby action the contention in these proceedings that the Agreement and the September Swap were voidable for misrepresentation. SwissMarine submitted that it would be unfair and unjust to allow OW Supply to obtain an order from the Danish court and enforce it before the rescission allegation had been decided by this court.

The judge was not persuaded by any of the above arguments put forward by SwissMarine, commenting in particular that the Danish court was not being asked to decide any question about the meaning or effect of the contract. Rather, the Danish trustees wanted the Danish Court to decide how the Danish insolvency regime would affect OW Supply's claim against SwissMarine. The judge commented that the Danish court was the natural and appropriate court to decide upon this issue. The judge further commented that the English proceedings would continue alongside the Danish action and so would determine the allegations of misrepresentation made by SwissMarine against OW Supply. As result the judge concluded that the Lyngby action brought by OW Supply was neither vexatious nor oppressive and for all of the above reasons refused to grant an anti-suit injunction restraining the Danish insolvency proceedings.

[1] SwissMarine Corporation Ltd v OW Supply & Trading A/S (in bankruptcy) [2015] EWHC 1571 (Comm)

[2] Regulation (EU) 1215/2012 of the European Parliament and of the Council on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)

[3] Aggeliki Charis Compania Maritima SA v Pagnan Spa (The "Angelic Grace") [1991] 1 Lloyd's Rep 87

[4] Thomas Raphael,The Anti-Suit Injunction (Oxford Private International Law)(Oxford University Press, 2008).

[5] Turner v Grovit (Case C-159/02).

[6] By advancing this argument SwissMarine relied on the Court of Appeal judgment in Lomas v JRF Firth Rixon Inc [2012] EWCA Civ 419

[7] AWB (Geneva) SA v North America SS Ltd [2007] EWCA 739. See paragraph 21 of SwissMarine Corporation Ltd v OW Supply & Trading for a summary of the facts of this case.

[8] Paragraph 26 of the Judgment in SwissMarine Corporation Ltd v OW Supply & Trading

[9] Paragraph 27 of the Judgment in SwissMarine Corporation Ltd v OW Supply & Trading

[10] BNP Paribas SA v Anchorage Capital Europe LLP [2013] EWHC 3073 (Comm)