Key takeaways
English Courts confirm jurisdiction over swaps
Contract terms upheld despite foreign legal challenges.
Broad clause covers pre-contractual claims
Advisory and tort claims fall within jurisdiction scope.
Jurisdiction clauses remain strong post-Brexit
The Hague Convention continues to support enforceability.
Dexia S.A. -v- Comune di Torino [2025] EWHC 1903 (KB)
This is another chapter in the Italian swaps claims, in which Italian local authorities obtained finance through entering into interest rate swaps governed by the ISDA Master Agreement and subsequently sought to have those transactions declared void and to unravel them because they proved to be unfavourable. The disputes have involved a number of instances in which the authorities commenced Italian court proceedings in breach of the English jurisdiction clause governing the transactions.
The background facts
The claimant, Dexia S.A. (Dexia) is a company incorporated in France. The defendant, Comune di Torino (Torino) is an Italian municipal authority.
Between 2001 and 2006, the parties entered into 11 interest rate swap transactions (Transactions). The Transactions were aimed at hedging Torino’s interest rate exposure and reducing its indebtedness under 20-year variable rates bonds in a total amount of about €400 million.
ISDA Master Agreement
The Transactions were entered into pursuant to a 1992 ISDA Master Agreement (Multicurrency Cross-Border), a bespoke schedule thereto and individual trade confirmations for each of the Transactions.
Clause 13 of the ISDA Master Agreement provided for the Transaction Documents to be governed by English law. Clause 13(b) was the jurisdiction clause and provided in relevant part 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.”
Clause 9(a) was an entire agreement clause.
Italian proceedings
In June 2024, Torino commenced proceedings in the Court of Turin (Italian proceedings) in relation to the Transactions.
Specifically, in those proceedings, Torino sought various types of relief, including
damages for alleged breaches of the Transactions;
damages for alleged breach of an advisory agreement prior to the Transactions;
damages for alleged pre-contractual and tortious liability for Dexia having structured and offered the Transactions to Torino negligently and without providing proper, diligent and transparent information;
a declaration that the Transactions were void under Italian law; and
termination of the extant Transactions and restitution of the amounts paid under them.
English proceedings
Dexia challenged the jurisdiction of the Court of Turin and denied all of Torino’s claims in those proceedings.
Dexia also commenced English Court proceedings seeking, among other things, declarations as to the validity and enforceability of the Transactions and as to the extent of the English Court’s jurisdiction. Dexia further sought summary judgment in respect of a declaration that the Transactions were subject to an exclusive English jurisdiction clause and that the Italian proceedings were brought in breach of the clause.
Torino chose not to participate in the English Court proceedings, even though it was aware of them and had been duly served with the proceedings. Its absence was deliberate and voluntary. Under CPR r. 39.3 the Court has discretion to proceed with a hearing or trial in the absence of a party. In this case, Torino had decided not to participate and had waived its right to legal representation and to participation in the hearing. This was a clear case where it was appropriate to proceed in Torino’s absence, and this was consistent with good case management and furtherance of the overriding objective.
The Commercial Court decision
In Torino’s absence, Dexia drew the Court’s attention to the arguments that it might advance in opposition to Dexia’s applications.
Narrow construction of jurisdiction clause?
Firstly, the argument that clause 13(b) should be given a narrow construction, such that the relief sought in the Italian proceedings with regard to damages for breach of the advisory agreement and for pre-contractual and/or tortious liability would fall outside the scope of the clause. It was submitted that, under Italian law, such a narrow construction would be applied.
The Court was not persuaded by this argument. Construction of the relevant clause was a matter of the proper law of the contract, i.e. English law. Under English law, a jurisdiction clause was to be construed in a broad and purposive way.
The wording of clause 13(b) was wide. Especially in circumstances where the ISDA Master Agreement which contained the jurisdiction clause also included (a) provisions expressly dealing with the (lack of an) advisory relationship and (b) an entire agreement clause, clause 13(b) was wide enough to cover collateral, tortious and pre-contractual claims relating to the relevant contracts between the parties such as Torino had sought to bring in the Italian proceedings.
Not an exclusive jurisdiction clause?
Secondly, the argument that clause 13(b) did not confer exclusive jurisdiction on the English courts in this case because since Brexit, the Conventions which were previously referred to by the Civil Jurisdiction and Judgments Act (CJJA) no longer applied as between Italy and the UK, so that Italy was not a ‘Contracting State’ for these purposes.
The Court disagreed. While references in s.1(3) of the CJJA to the Brussels and Lugano Conventions had been deleted since Brexit, reference to the 2005 Hague Convention on Choice of Court Agreements (2005 Hague Convention) remained. By virtue of its membership of the EU, Italy was a state bound by the 2005 Hague Convention. The fact that the Transactions were entered into after the 2005 Hague Convention entered into force was not relevant. The issue of whether a state was a Contracting State for the purposes of clause 13(b) did not depend on whether the 2005 Hague Convention was applicable to the dispute under the Transactions but only on whether that state was a party to or was bound by the Hague Convention. Vis a vis Contracting States, English jurisdiction was exclusive.
This conclusion was borne out by past authorities and was neither surprising nor prejudicial to Torino. Since before the making of the Transactions Italy had counted as a ‘Contracting State’ for the purposes of clause 13(b) of the ISDA Master Agreement. Torino would have understood, from the outset of the Transactions, that the English courts were, vis-à-vis the courts of Italy, to have exclusive jurisdiction over disputes relating to the Transactions.
Non-disposable rights
The Court also dismissed the argument that Torino could not have agreed to clause 13(b) under Italian law because the dispute related to public finances and it could not dispose of the rights in question, as these are not ‘disposable’ (or are diritti indisponibili).
The applicable law as to the material validity of the jurisdiction clause was English law. On the evidence of Italian law, the Court found this was an issue of material validity and not corporate capacity, which would be a matter for the law of incorporation.
The Court concluded that Torino had no defence which stood a realistic prospect of success in relation to the declarations and so granted Dexia the declarations sought.
Comment
It is not clear from the judgment whether the Court of Turin has yet dealt with Dexia’s jurisdictional challenge. There seems to be potential for parallel proceedings in this case.
