Real Estate Lawyer William
Blanchard publishes first article in a series, on real-estate related
jurisdiction clauses
Attorney William B.
Blanchard reviews the case of UBS AG v. HSH Nordbank AG, involving jurisdiction
clauses in complex contract litigation
In the first article of
his instructional series of articles, Real Estate Lawyer William B. Blanchard
reviews the case of UBS AG v. HSH Nordbank AG, E.W.C.A. Civ. 585; WL 1657158:
"Interpreting jurisdiction clauses in complex contract litigation over
collateralized debt, where one party has sued in New York courts and opposing
party has invoked jurisdiction of English courts, Court of Appeal upholds lower
court’s ruling that rejected resort to English courts."
Mr. Blanchard first
provides an overview of the case. This appeal turns on the construction of
jurisdiction clauses. The principal issue is whether the English jurisdiction
clause in one of the documents recording the complex transaction between the
parties applies to the claims in the action in England for the negative
declaration. The English court of first instance concluded that it did not.
This dispute concerns derivatives in relation to the property market, or
Collateralized Debt Obligations (CDOs). The contractual documentation in this
matter consists of more than 500 pages; its size and complexity, which is no
doubt duplicated in many other transactions, make it easier to understand, if
not to excuse, why many senior banking figures throughout the world had little
understanding of this market and of the very high risks their institutions were
undertaking.
HSH Nordbank AG (HSH) is a
commercial bank incorporated in Germany with dual headquarters in Hamburg and
Kiel. The first claimant, UBS AG, is incorporated in Switzerland, where it has
its head office, and has substantial offices worldwide, including in New York
and London.
The second claimant, UBS
Securities LLC (UBS LLC), is an affiliate of UBS. It is incorporated in the
United States and has its principal place of business here. The appellate court
generally refers to either or both of them as “UBS.”
The relevant transactions
took place in 2002/2003 between UBS and LB Kiel. HSH has assumed all material
assets, rights and obligations of LB Kiel, and it is in that capacity that HSH
has sued UBS in New York state court and is being sued by UBS in England. HSH
is domiciled in Germany for the purposes of Council Regulation 44/2001 on
jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters (the Brussels I Regulation).
UBS filed its English
action for negative declaratory relief against HSH on February 25, 2008, in
anticipation of proceedings which HSH was going to lodge against UBS in New
York later the same day. In its complaint, HSH alleged mis selling and
mismanagement of the securities which were the subject of the complex
arrangements between the parties. The original complaint relied on the
following causes of action: breach of contract; fraud; negligent
misrepresentation; breach of fiduciary duty; breach of an implied covenant of
good faith and fair dealing; unjust enrichment; and constructive trust.
“Plainly the parties did
not actually contemplate at the time of the conclusion of the contracts that
there would be litigation in two countries involving allegations of misrepresentation
in the inception and performance of the agreements. But, in my judgment,
sensible business people would not have intended that a dispute of this kind
would have been within the scope of two inconsistent jurisdiction agreements.
The agreements were all connected and part of one package, and it seems to me
plain that the result for which UBS contends would be a wholly uncommercial
result and one that sensible business people cannot have intended.”
“The New York complaint
alleges, inter alia, that (a) UBS induced HSH to purchase the NS4 Notes by
misrepresentations concerning the credit quality of the Reference Pool to which
payments under the NS4 Notes were linked; (b) UBS failed to operate a
Commitments Committee, as required by the RPSA, so as to select Reference Pool
assets with stable or improving credit profiles, carefully monitor the credit
status and quality of each asset, and avoid downgrades. As Justice Lowe stated
in his decision of October 21, 2008: ‘HSH’s overarching claim is that UBS
failed to maintain the promised high quality of the notes in the Reference
Pool, by failing to ensure that the Commitments Committee keep an eye on the
condition of the investments.’” [¶ 89].
“Whether a jurisdiction
clause applies to a dispute is a question of construction. Where there are
numerous jurisdiction agreements which may overlap, the parties must be
presumed to be acting commercially, and not to intend that similar claims
should be the subject of inconsistent jurisdiction clauses. The jurisdiction
clause in the Dealer’s Confirmation is a ‘boilerplate’ bond issue jurisdiction
clause, and is primarily intended to deal with technical banking disputes.
Where the parties have entered into a complex transaction, it is the
jurisdiction clauses in the agreements which are at the commercial centre of
the transaction which the parties must have intended to apply to such claims as
are made in the New York complaint and reflected in the draft particulars of
claim in England.” [¶ 95].
“The action in England is
intended to mirror the New York proceedings. I have already emphasised that the
essence of the claims for misrepresentation in New York is that HSH was induced
to purchase the NS4 Notes in reliance on the fraudulent and negligent
misrepresentations, and would not have purchased them in the absence of those
representations. No sensible commercial interpretation of the jurisdiction
clause in the Dealer’s Confirmation could have the result that identical
misrepresentation claims would fall both within that clause and within the non
exclusive New York jurisdiction clauses, simply because the consideration for
the transaction was the issue of the Kiel MTN Notes.
The Court concludes that
the standard form bond issue jurisdiction clause in the Dealer’s Confirmation
does not apply to claims that the transaction as a whole, and in particular the
purchase of the NS4 Notes, was induced by misrepresentation.
The case citation is UBS
AG v. HSH Nordbank AG, E.W.C.A. Civ. 585; WL 1657158. The complete commentary
will be published on the Blog of Mr. Blanchard at Blog:
https://williamblanchardblog.blogspot.com/
About William B. Blanchard
Mr. William Blanchard
(“Bill Blanchard”) is a solo practice attorney with offices in St. Charles and
Oakbrook Terrace, Illinois. Bill
specializes in representing real estate clients for purchases and sales as well
as home owner real estate tax assessment appeals.
Mr. Blanchard is General
Counsel for Gaia Title, Inc. a title insurance agency and settlement services
provider. The Company is owned by real
estate attorneys who demand exemplary title insurance services and accurate and
efficient settlement services. As
General Counsel he is responsible for title examination, commitment and policy
review, escrow settlement supervision and regulatory review.
Mr. Blanchard gained
distinction as a real estate assessment attorney by representing 23 Will County
senior citizen home owners before the Illinois Property Tax Appeal Board and
winning every case; this in addition to several successful appeals before
various County Boards of Appeal.
Bill is often interviewed
for comments on significant legal and real estate news and is developing a blog
for discussion of relevant judicial decisions affecting the title insurance
industry.
William B. Blanchard,
Attorney at Law
1700 Lincoln Hwy. Ste. K
St. Charles, IL 60174
Phone: (630) 549-7909
Fax: (331) 901-5941
https://www.facebook.com/blanchardlawgroup/
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**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7