“Mr Justice Field:
INTRODUCTION
The contract and the jurisdiction clause in issue
This is an application by the defendant (“PZL”) for a declaration that the
Court has no jurisdiction to try the claim brought against it by Calyon in
Claim No. 2008 Folio 1250.
Calyon is a bank incorporated in France. It was formerly known
as Credit Agricole. PZL is a company incorporated in Poland which
manufactures aircraft equipment. In the course of 2008 PZL entered
into a number of foreign exchange derivative transactions with Calyon
in order to hedge against adverse movements in the US Dollar/Polish
Zloty exchange rate. One such contract was entered into over the
telephone on 13 August 2008, with Mr Dariusz Frejowski acting for PZL
and Mr Grzegorz Klimczyk acting for Calyon. The transaction involved
was called a Strip of Ratio Forwards (“SRF”. Also known as a “geared
forward” or a “geared rate forward”). A confirmation of the transaction
setting out its terms was sent by Calyon's London Branch to PZL on
20th August 2008. Those terms provided, inter alia, that: (i) there were
to be bi-weekly “fixings” in the period September 2008 to May 2009;
(ii) the governing law of the SRF was English law; and (iii) the transaction
was subject to the provisions of 1992 Master Agreement (Multicurrency-
Cross Border) as published by the International Swaps and Derivatives
Association (“the ISDA Master Agreement”).
Clause 13(b) of the ISDA Master Agreement provides that if the
agreement is governed by English law, each party irrevocably submits
to the jurisdiction of the English courts in relation to any suit, action or
proceedings relating to the agreement.
PZL did not sign the Confirmation. After permitting a number of payments
out of its bank account in discharge of sums Calyon said were due under
the SRF, PZL refused to make further payments alleging that it had
not agreed to the terms set out in the Confirmation. In particular, PZL
said that it had not agreed to bi-weekly fixings for October 2008 to
May 2009. Some four months after receipt of the Confirmation, PZL first
explicitly stated that the transaction was not governed by the terms of the
ISDA Master Agreement.
On 1 December 2008, Calyon issued proceedings in this Court (Claim
No 2008 Folio 1250) seeking: (i) a declaration that the agreement of
13 August 2008 was made on the terms contained in the Confirmation;
and (ii) specific performance of those terms. On 4 December 2008,
Calyon applied for permission to serve the claim out of the jurisdiction
under CPR 6.33(2)(b)(iii) on the basis that PZL was a party to an
agreement conferring jurisdiction on this Court within Article 23 of
the Brussels I Regulation. The permission sought was granted by
Master Whitaker on 11 December 2008.
On 22 December 2008, PZL started proceedings in the Commercial
Division of the Regional Court in Warsaw (“the Polish proceedings”) for
the recovery of the payments made to Calyon under the SRF. This claim is
made on the basis that PZL never agreed to there being bi-weekly fixings.
PZL also alleges that: (i) Mr Frejowski had no authority to make an
agreement with Calyon that was subject to the terms of the ISDA Master;
and (ii) Calyon was in breach of the standard of diligence applicable to it
as a bank in not presenting by telephone the terms of the transaction in a
detailed and clear manner and not obtaining PZL's express agreement to
each of the fixing dates.
Article 23(1) of the Brussels I Regulation and the applicable standard of
proof
Article 23(1) provides:
If the parties, one or more of whom is domiciled in a Member State,
have agreed that a court or the courts of a Member State are to have
jurisdiction to settle any disputes which have arisen or which may arise in
connection with a particular legal relationship, that court or those courts
shall have jurisdiction. Such jurisdiction shall be exclusive unless the
parties have agreed otherwise. Such an agreement conferring jurisdiction
shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have
established between themselves; or
(c) in international trade or commerce, in a form which accords with a
usage of which the parties are or ought to have been aware and which
in such trade or commerce is widely known to, and regularly observed
by, parties to contracts of the type involved in the particular trade or
commerce concerned.
Theoretically, Article 23(1) contains two requirements: (i) an agreement
(“consensus”) between the parties that disputes between them are to be
settled in the courts of a Member State of the EU; and (ii) the satisfaction
of the formalities specified in (a), (b) or (c).
In Estasis Salotti di Colzani Aimo e Gianmario Colzani v. RÜWA
Polstereimaschinen GmbH [1976] ECR 1831 the question was whether
the parties to a contract had agreed for the purposes of Article 17 of
the 1968 Convention on Jurisdiction and Enforcement of Judgments
that the Cologne courts should have jurisdiction over disputes arising
out of the contract. Printed on the back of the signed contract were the
seller's general terms and conditions which included a clause stipulating
that disputes should be decided in the courts of Cologne. There was no
express reference to the general conditions on the face of the contract but
there was a reference to previous offer letters which had referred to the
seller's general conditions.
In paragraphs 6 and 7 of the judgement, the ECJ said:
6. The first paragraph of Article 17 of the Convention provides: “If the
parties, one or more of whom is domiciled in a Contracting State, have,
by agreement in writing or by an oral agreement confirmed in writing,
agreed that a court or the courts of a contracting state are to have
jurisdiction to settle any disputes which have arisen or which may arise in
connexion with a particular legal relationship, that court or those courts
shall have exclusive jurisdiction”.
7. The way in which that provision is to be applied must be interpreted in
the light of the effect of the conferment of jurisdiction by consent, which
is to exclude both the jurisdiction determined by the general principle laid
down in article 2 and the special jurisdictions provided for in Articles 5
and 6 of the Convention.
In view of the consequences that such an option may have on the
position of the parties to the action, the requirements set out in Article 17
governing the validity of clauses conferring jurisdiction must be strictly
construed.
By making such validity subject to the existence of an “agreement”
between the parties, Article 17 imposes on the court before which
the matter is brought the duty of examining, first, whether the clause
conferring jurisdiction upon it was in fact the subject of a consensus
between the parties, which must be clearly and precisely demonstrated.
The purpose of the formal requirements imposed by Article 17 is to
ensure that the consensus between the parties is in fact established.
The ECJ went on to hold that the requirement of writing under the first
paragraph of Article 17 of the Convention is fulfilled: (i) where a clause
conferring jurisdiction is included among the general conditions of one
of the parties printed on the back of a contract, only if the contract
signed by both parties contains an express reference to those general
conditions; or (ii) where the contract refers to a prior written offer which
refers to general conditions including a jurisdiction clause, only if the
express reference can be checked by a party exercising reasonable care
and the general conditions (including the jurisdiction clause) had been
communicated to the other party with the prior offer.
It is clear from Salotti that the purpose of establishing paragraphs (a),
(b) and (c) of Article 23 is to ensure that the consensus between
the parties is in fact established. Further, the establishment of (b)
and/or (c) gives rise to a presumption of actual consensus, see
Mainschiffahrts-Genossenschaft eG (MSG) v. Les Gravières Rhénanes Sarl
(Case C-106/95); [1997] QB 731 (ECJ), at p. 755 at paragraph 19; The
“Kribi” [2001] 1 Lloyd's Law Reports 76, at paragraph 64.
It is common ground that (i) the approach of the ECJ in Estasis Salotti
applies to Article 23(1) of the Brussels I Regulation; (ii) it is for Calyon
to demonstrate clearly and precisely to the applicable standard of proof
that the jurisdiction clause contained in Clause 13(b) of the ISDA Master
was in fact the subject of a consensus between the parties; and (iii)
“consensus” for the purposes of Article 23 has an autonomous meaning.
The applicable standard of proof is a “good arguable case”, which means
that Calyon must show that it has a much better argument than PZL
that, on the material available, the requirements of Article 23(1) are met
and it can be established clearly and precisely that Clause 13(b) was
the subject of consensus between the parties: see Bols Distilleries BV
(trading as Bols Royal Distilleries) and another v. Superior Yacht
Services Ltd [2007] 1 WLR 12 where at paragraph 28 the Privy Council
endorsed Waller LJ's approach in Canada Trust Co v. Stolzenberg (No 2)
[1998] 1 WLR 547 at 555.
Mr Gaisman QC for Calyon submitted that where there was a conflict on
the evidence putting the reliability and/or veracity of the witnesses in
question, and the jurisdiction issue could only be decided by the court
preferring the evidence of one or more witnesses over the evidence of
other witnesses, the court should not apply the “much better argument”
test but should ask itself simply whether the applicant has established
a good arguable case. In support of this submission he referred to
the judgement of Toulson LJ in WPP Holdings Italy Srl v. Benatti
[2007] 1 WLR 2316 at 2330 D – E. For reasons that appear later in this
judgement, it is unnecessary for me to pronounce on the correctness of
this submission.
THE COURSE OF DEALINGS BETWEEN THE PARTIES
In addition to submitting that consensus is established through the
incorporation by reference of Clause 13(b) of the ISDA Master Agreement
into the SRF contract, Calyon contends, inter alia, that consensus is
established by the course of dealing between the parties in the period
February to 16th August 2008. It is accordingly necessary to record the
parties' dealings with each other over that period.
The Early Discussions
Following his attendance at a trade finance seminar in early
February 2008 organised by Calyon, Mr Frejowski received a telephone
call from Mr Klimczyk on 19 February 2008 in which Mr Klimczyk
suggested that he could send details of “slightly more structured
products” which might satisfy PZL's needs to secure exchange rate risk.
The following day Mr Klimczyk sent Mr Frejowski by email proposals for
“geared forwards”, “par forwards” and “knockout geared forwards”.
19. During telephone conversations with Mr Frejowski in April 2008,
Mr Klimczyk returned to the subject of forward foreign exchange
transactions including Target Redemption Forward Transactions (“TRFs”),
Participating Forward Transactions and Risk Reversals.
The structure of a TRF
Under a TRF the parties nominate a notional sum in a particular
currency eg US$ 1 million (the Base Currency Principal Amount), agree
a benchmark exchange rate (the Forward Rate) between that currency
and another currency (here the new Polish zloty, PLN, and undertake that
on pre-determined dates (“fixing” or “expiration” dates) they will make
payments to one another via put and call options, the payments being
calculated by applying the market exchange rate on that date (the Fixing
Rate) to the Base Currency Principal Amount. In practice the parties net
the two sums off against each other and only the positive difference is
paid by the party who is “out of the money” i.e. on the wrong side of
the exchange rate. In addition, there is an element of gearing in that
the customer agrees that if Calyon are “in the money”, he will pay a sum
based on a multiple of the Currency Principal Amount.
TRFs also contain a “knockout” provision whereby the transaction
terminates if a certain trigger point is reached, even if the transaction
would otherwise run on. A trigger point may be when a certain number of
fixing dates have resulted in a payment to the customer or when a certain
level of profit has been earned.
A TRF is structured as a series of options. It is an example of what Calyon
calls a “structured” transaction.
The first transaction – a TRF
During 17th April 2008 Mr Klimczyk and Mr Frejowski had a number
of telephone conversations that led to a concluded deal for a TRF and
Mr Klimczyk sent Mr Frejowski details of geared forwards and TRFs
contained in attachments to an email in English sent to Mr Klimczyk
by Ms Aviva Biglaizer which Mr Klimczyk forwarded to Mr Frejowski.
Ms Biglaizer worked in Calyon's London office.
The Polish Master Agreement
Following the conclusion of the first TRF, Mr Klimczyk sent Mr Frejowski an
email on 17th April 2008 thanking him for the transaction and stating:
At the same time, I would like to ask you to send me corporate financial
documents and sign the Master Agreement regulating our FX and
derivative dealings.
The Master Agreement referred to (“the Polish Master Agreement”) was
a contract in Polish which had been sent to PZL some time previously.
It was signed on behalf of PZL that very day – 17 April 2008. It was
entitled “MASTER AGREEMENT FOR ENTERING INTO TRANSACTIONS
WITH DEALING ROOM FOR CUSTOMERS MAINTAINING ACCOUNT WITH
CALYON S.A. BRANCH IN POLAND”. The parties were expressed to be
PZL, represented by Ryszard Cukierman, Member of Management Board,
Commercial Director and Dariusz Frejowski, Member of Management
Board, Financial Director, (referred to as the “Client”) and Calyon S.A.
Oddzial w Polsce, a Polish branch operating as a joint-stock company, with
its seat in Warsaw, represented by Piotr Kwiatkowski, Managing Director,
Calyon SA Branch in Poland and Maciej Obroniecki, Deputy Managing
Director, Calyon SA Branch in Poland, (referred to as “the Bank”).
The agreement contained 10 Sections entitled “1 Subject-Matter of
Agreement”, “2 Form of Transactions”, “3 Authorised Representatives”,
“4 Negotiations and Entering into Transaction”, “5 Confirmation of
Transaction”, “6 Execution of Transaction Entered into”, “7 Delay in
Effecting Payment”, “8 Damages”, “9 Procedure in Event of Bankruptcy of
a Party to Agreement” and “10 Final Provisions”.
Clause 1.1 provides:
This Agreement lays down the procedure for entering into transactions
referred to in the Description of Categories of Foreign Currency
Transactions, FRA and IRS attached hereto as Schedule 1 and, as
regards options, in the Foreign Currency Call and Put Options Regulations
attached hereto as Schedule 2 (“Transactions”).
In Section 2 it is stated that the Transaction[s] are entered into orally
by authorised representatives of the parties (who are identified in
Schedule 3, including Mr Frejowski).
Clause 4.4 provides:
The Agreement, terms agreed between the Parties with respect to each
Transaction, each Confirmation and all changes to any of the above items
constitute a mutual agreement, and the only agreement, between the
Parties. The Parties confirm that all the Transactions are entered into
under the terms of the Agreement.
In Section 5 it is provided that the Bank will deliver to the Client
on the following Business Day after a Transaction is entered into a
written Confirmation of the Transaction substantially in the form set
out Schedule 5. Any discrepancy between the terms set out in the
Confirmation and the agreed terms must be notified to the Bank no later
than the following Business Day and whether any changes to the terms of
the Confirmation are to be made depends on the recording made of the
oral agreement.
Clause 10.2 provides that any amendments to the Agreement must
be made in writing and by Clause 10.7 any disputes that may arise in
connection with the performance of the Agreement are to be settled
by the Court of Arbitration at the Association of Polish Banks under the
applicable regulations.
Contained in Schedule 1 are descriptions of Spot Forward and Currency
Swaps and various interest rate transactions, whilst Schedule 2 contains
Regulations for Call and Put Foreign Currency Options. These Regulations
include pro-forma confirmations for the regulated transactions. At the
foot of the pro-forma confirmation of Buy/Sell Foreign Currency Options
appear the words: “The buy/sell transaction has been concluded in
compliance with the Regulations of Calyon S.A. in Poland Call and Put
Foreign Currency Options”.
Paragraph 1 of Chapter 1 of Schedule 2 states that Call Foreign Currency
Options and Put Foreign Currency Options transactions are offered by
“Calyon S.A. Branch in Poland”.
The four pre-13 August 2008 TRF transactions
34. On 23rd April 2008, the London Branch of Calyon sent PZL a
Confirmation of the TRF agreed on 17th April. Its opening words were:
“The purpose of this letter agreement (this “Confirmation”) is to
confirm the terms and conditions of a transaction entered into between
us, Calyon, acting through our London Office, (“Party X”), and you,
Wytwornia Sprzetu Komunikacyjengo PZL Swidnik SA (“Party Y”), on the
Trade Date specified below (the “Transaction”).
35. At the foot of each page was a London address for Calyon and,
alongside reference to the French financial regulators, mention of the
fact that Calyon was authorised and regulated by the Financial Services
Authority for the conduct of UK business. On the last page, above the
place for authorised signatories for Calyon, appeared the words “Calyon
London”. There was no mention of Warsaw or Poland or Polish financial
regulators anywhere in the document.
36. The TRF Confirmation also stated:
The definitions and provisions contained in the 1998 FX and Currency
Option Definitions as amended by the 2005 Barrier Option Supplement,
as published by the International Swaps and Derivatives Associations,
Inc. and The Foreign Exchange Committee (the “Definitions”) are
incorporated into this Confirmation….This Confirmation evidences a
complete and binding agreement between you and us as to the terms
of the Transaction. In addition, you and we agree to use all reasonable
efforts promptly to negotiate, execute, and deliver an agreement in
the form of the 1992 Master Agreement (Multicurrency-Cross Border)
as published by ISDA (the “Master Form”), with such modifications as
you and we will in good faith agree. Upon the execution by you and
us of such an agreement, this Confirmation will supplement, form part
of, and be subject to that agreement. All provisions contained in or
incorporated by reference in that agreement upon its execution will
govern this Confirmation except as expressly modified below. Until we
execute and deliver that agreement, this Confirmation, together with all
other documents referring to the Master Form confirming transactions
entered into between us, shall supplement, form part of, and be subject
to an agreement in the form of the Master Form as if we had executed
an agreement in such form (but without any Schedule except for the
election of English law as the governing law and United States Dollars as
the Termination Currency) on the Trade Date of the first such transaction
between us…
There then were set out the terms of the transaction – the Forward Rate,
the Base Principal Amount, the Fixing Dates etc – in which Calyon was
referred to Party X and PZL as Party Y. At the end of the terms under the
heading “Offices” it was stated that London was the office through which
Party X acts and Poland was the office through which Party Y acts.
Above the space for the signatures of the representatives of the parties
appeared the words:
Please confirm that the foregoing correctly sets forth the terms of our
agreement by signing this Confirmation and returning a copy of it to us
by electronic mail or fax or by sending to us a letter substantially similar
to this Confirmation, setting forth the material terms of the Transaction
and indicating your agreement to those terms. If we do not receive
acknowledgement or correction of this Confirmation within two Business
Days or receipt by you, we shall consider the above details to be correct
(absent manifest error).
PZL never obtained a copy of the ISDA Master Agreement. Had they
wanted to, a copy could easily have been downloaded using the internet.
The opening words of the ISDA Master record that the parties:
have entered and/or anticipate entering into one or more transactions
(each a “Transaction”) that are or will be governed by this Master
Agreement, which includes the schedule (the “Schedule”), and the
documents and other confirming evidence (each a “Confirmation”)
exchanged between the parties confirming those Transactions.
Clause 1(c) provides:
(c) Single Agreement. All Transactions are entered into in reliance
on the fact that this Master Agreement and all Confirmations form a
single agreement between the parties (collectively referred to as this
“Agreement”), and the parties would not otherwise enter into any
Transactions.
Clauses 13(a) and (b) provide:
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. 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 laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings, that
such court does not have any jurisdiction over such party.
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 s.  1(3) of the Civil Jurisdiction and Judgments Act 1982 or
any modification extension of re-enactment thereof for the time being in
force) nor will the bringing of Proceedings in any one or more jurisdictions
preclude the bringing Proceedings in any other jurisdiction.
On 24th April, 4th June and 5th June 2008 respectively, three further
TRF transactions were entered into between Calyon and PZL following
telephone conversations between Mr Klimczyk and Mr Frejowski. The
Confirmations in respect of these transactions were in a form (save
as to the specific terms) identical to the form of the 23rd April TRF
Confirmation. They were received by PZL on 25th April, 6th June and
9th June 2008 respectively.
The TRF Confirmations were sent to PZL by Calyon's London Branch
because it was that Branch of Calyon which priced, assessed and entered
into structured transactions such as TRFs and SRFs. Simpler transactions,
such as ungeared options with one exercise date or conventional FX spot,
forward or swaps trades and deposits were entered into by the Branch
local to the customer and kept on that Branch's books, subject to a back-
to-back trade with the London Branch.
Following an approval procedure begun in 2007, Calyon London granted
PZL a “Radical number”, equivalent to a client or customer number, in
April 2008.
The 20th June 2008 telephone conversation between Mr Klimczyk and
Ms Iwona Ignaciuk
On 20th June 2008 Ms Iwona Ignaciuk (In his second witness
statement, Mr Frejowski says of Ms Ignaciuk that she joined PZL’s
Finance Department at the beginning of 2008 and “was relatively
inexperienced”), a colleague of Mr Frejowski in PZL's Finance Department,
telephoned Mr Klimczyk [GK] in response to a request that the four TRF
Confirmations be signed and sent to Calyon London.
At the start of this conversation, Ms Ignaciuk explained that PZL had not
sent back the Confirmations because of the wording that provided that if
the confirmations were not returned it is presumed that their contents are
agreed. The transcript of the conversation continues:
[II: ] “One more question now. Because we also concluded with you,
except that it's now with Warsaw, two transactions. Should we also send
those confirmations or not?”
[GK: ] “The ones with Warsaw, which in reality means under the
framework agreement you have, you do not need to.”
[II: ] “Exactly”.
[GK: ] “If you did not raise objections within the deadline specified
there, we deem the transaction concluded and you hereby confirm … the
transaction terms. Hence you do not need to. But those for London, yes.”
[II: ] “Uh-huh. Exactly, because I was reading that framework agreement
and there was nothing about that confirmation … so we did. OK”.
[GK: ] “It all depends on where the transaction is recorded. Here,
in Poland, you can absolutely use your right under the framework
agreement. Because the framework agreement, in reality, er … concerns
transactions recorded here. As for the transactions recorded in London,
on the other hand, and those are precisely all the structured transactions,
then, well, we should sign with time the document called ISDA which
would constitute the framework of our cooperation. And also … and also it
is necessary to sign those. those confirmations. Probably, with the ISDA
signed, one does not have to sign it then, but then we don't have it, so we
will appreciate if you sign it though.”
…
[II: ] “OK. So, then, we will be sending over all those confirmations
signed.”
The Settlement Instructions dated 23rd June 2008
On or around 23rd June 2008, Mr Frejowski and Mr Zbigniew Juszczynski,
PZL's Chief Accountant, signed a document expressed to be in respect of
“FX Spot, FX Forward, FX Swap, FX Options, and Deposits transactions
(in PLN and in other currencies), as well as other transactions consisting
in combination of various financial products referred to as structured
transactions, between [PZL] and Calyon London,” authorising “Calyon S.A.
Oddzial w Polsce” to settle such transactions by debiting or crediting three
accounts at Calyon S.A. Oddzial w Polsce and transferring amounts to
three accounts of Calyon London.
The Return of the Four TRF Confirmations to Calyon London
On 27 June 2008, all four TRF Confirmations were faxed to the London
Branch of Calyon duly signed by Mr Frejowski and another authorised
signatory on behalf of PZL.
The pre-13th August 2008 Simple FX Options
Meanwhile, on 23 May 2008, PZL, acting by Mr Frejowski, and Calyon,
acting by Mr Klimczyk, entered into two “simple” foreign exchange
options, one with a value of US$ 5,000.000, whose exercise date and
rate were 26 September 2008 and PLN 2.2400 respectively, and the other
with a value of US$ 7,500.000 with an exercise date of 27 March 2009
and an exercise rate PLN 2.4500. These contracts were made orally
over the telephone and were confirmed by confirmations in Polish dated
23 May 2008. The confirmations were in the form of the pro-forma
confirmations set out in Schedule 2 to the Polish Master Agreement.
Thus, at the head and foot of the documents Calyon was identified as
“Calyon S.A. Branch in Poland”, the documents were signed on behalf of
“Calyon S.A. Branch in Poland” and above the signatures appeared the
words: “The sell transaction has been concluded in compliance with the
Regulations of Calyon S.A. Branch in Poland Call and Put Foreign Currency
Options.”
The 13th August 2008 SRF
On 8th August 2008, Mr Klimczyk started discussing the possibility of
PZL entering into some new foreign exchange transactions including a
TRF, a SRF or a Risk Reversal. Mr Frejowski wanted a hedge running
to early 2009, and possibly after that and for that reason wanted a
transaction that had no knock-out provision. There followed a series
of telephone calls between Mr Klimczyk and Mr Frejowski on 11th,
12th and 13th August 2008 leading up to a conversation shortly after
1.16 pm that day when the SRF transaction was finally done. During
this conversation, Mr Frejowski would have heard Mr Klimczyk speaking
in French to Aviva Biglaizer to get a pricing up-date. Aviva Biglaizer
was speaking from Calyon's London Branch. At Mr Klimczyk's request,
Mr Frejowski agreed to wait while Mr Klimczyk obtained an updated price.
When Mr Frejowski asked in one of the earlier calls for the transaction to
be re-priced he was told that London would be asked to re-price the trade
straight away.
Over the period 8th – 13th August 2008, Mr Klimczyk had sent
Mr Frejowski a number of emails in Polish but with attachments in
English specifying outline proposals and prices. Immediately following
the conversation on 13th August 2008 when the SRF deal was done,
Mr Klimczyk sent Mr Frejowski an email in Polish confirming the
transaction with an email in English from Ms Biglaizer to Mr Klimczyk
attached, setting out the pricing for the various delivery dates. At no time
in this period did Mr Klimczyk mention ISDA terms. This was because, to
his mind, Calyon always did these types of transactions on ISDA terms;
he had made it clear in late May or early June 2008 that Calyon had to
trade on ISDA terms and this did not need repeating.
As recorded in paragraph 2 above, an ISDA long form Confirmation of the
SRF transaction was sent by Calyon London to PZL on 20th August 2008.
This was in the same standard terms as the TRF Confirmations that
had been signed by Mr Frejowski and sent to Calyon London on
27th June 2008.
The SRF is very similar to the TRF. The structure of both types of
transaction is commercially identical, but the SRF has no “knock-out”
condition. In addition, the SRF has an express provision for the netting
of the sums due to and from each party following each fixing date, rather
than leaving this to the practice of the parties. Thus in the SRF, the
“Settlement Amount” on each fixing date is expressed to be the difference
between the Forward Rate (2.2800) and the then applicable exchange
rate, multiplied by the Base Currency Principal Amount for that fixing
date.
The central conflict on the evidence of Mr Klimczyk and Mr Frejowski
The evidence of Mr Klimczyk
Mr Klimczyk says that when he was talking to Mr Frejowski in April 2008,
he explained to him that: (i) if he wanted to do complex and structured
trades he would need to go through Calyon London compliance and obtain
a “Radical number”; and (ii) such transactions would generally be dealt
with Calyon London which would price and book the transactions. Simple
options, FX Spots or FX Forwards, however, could be dealt with by Calyon
Warsaw.
In late May 2008 Calyon began chasing PZL for the return of the four
TRF Confirmations, duly signed. At about this time Mr Frejowski asked
Mr Klimczyk over the phone why the confirmations were in English and
why they had to be sent to Calyon London. Mr Klimczyk explained again
that this was because the TRF transactions were traded with Calyon
London. Mr Frejowski said he preferred to trade on a local agreement
locally signed under Polish law. Mr Klimczyk told Mr Frejowski that in that
case it would only be possible for him to do simple options and FX trades
with Calyon Warsaw under the Polish Master Agreement. It would not
be possible for him to trade more complex FX structured products.
These had to be booked with London and London traded on ISDA terms.
Mr Frejowski replied that simple FX spots and simple options were not
much use to him and he wanted to do structured derivative products.
Mr Klimczyk told him that that meant dealing on ISDA terms with London.
Following this conversation, Mr Klimczyk spoke about it to Ms Agata
Jakobczyk, the Calyon relationship manager for PZL.
When he spoke to Mr Frejowski on the phone in the lead up to the
four TRFs agreed before 13th August 2008, Mr Frejowski knew that
Mr Klimczyk was dealing on behalf of Calyon London. Mr Frejowski also
knew that prices for TRFs came from Calyon London.
The evidence of Mr Frejowski
Mr Frejowski states that as far as he was concerned, he always dealt with
Calyon's Warsaw Branch. At no point did Mr Klimczyk discuss with him the
difference between “Calyon London” and “Calyon Warsaw”. Nor, so far as
Mr Frejowski knew, did anyone else at Calyon discuss with anyone else
at PZL this difference. Mr Klimczyk never said that certain transactions
would be concluded with the Warsaw branch of Calyon, while others
would be concluded by the London Branch. As far as he and the other
two persons authorised under the Polish Master Agreement, Ms Dudek
and Ms Grudzien, understood it, PZL's arrangements were solely with the
Warsaw branch of Calyon and were governed by the terms of the Polish
Master Agreement.
In paragraph 31 of his witness statement, Mr Frejowski insists that
neither he, nor Ms Dudek nor Ms Grudzien, was told that the counterparty
for the SRF was the London Branch of Calyon.
Mr Frejowski did not query whether the SRF concluded on 13 August 2008
was governed by rules other than those contained in the Polish
Master Agreement, such as the ISDA rules. He did not do so because
the Polish Master Agreement deals with put and call options and the SRF
was a series of such options, one for each of the fixing dates. Moreover,
Mr Klimczyk never said that any of the arranged transactions was not
covered by the Polish Master Agreement. Nor did Mr Klimczyk or anyone
else at Calyon make any distinction between what Mr Klimczyk refers to
as “simple” and “complex” options. As far as Mr Frejowski understood it,
the Polish Master Agreement was the only agreement defining the terms
of the foreign exchange and derivative transactions between PZL and
Calyon.
Mr Frejowski remembered a conversation when Mr Klimczyk rang about
sending back the four TRF Confirmations, but his recollection was that
this was in mid-June and not May 2008 and there was no discussion
about using Calyon's London Branch or using the Warsaw Branch for
“very simple trades”. Mr Frejowski recalled asking why he needed to sign
anything for a transaction that was already concluded and was told that
the Confirmations were information about the technical aspect of the
transaction which had been sent for his information. Mr Frejowski asked
Mr Klimczyk for a written confirmation from him that he should sign the
Confirmations, since he had had nothing to do with the Calyon branch in
London and that branch was not his negotiating party.
When Mr Frejowski signed the four TRF Confirmations, he relied on
Mr Klimczyk's assertion that these were merely confirmatory documents
dealing with the technical aspects of the transaction. He did not think
anything more about it; he did not know anything about Calyon's internal
workings; if their HQ in London needed the confirmations then that
was fine with him. He did not think that there was any importance to
the English law section. These transactions did not include any English
jurisdiction clause. He simply acted on Mr Klimczyk's request to sign the
documents and send them to Calyon London. He was entering into the
transactions under the terms of the Polish Master Agreement which makes
it quite clear that later confirmations cannot be deemed to change the
terms of individual transactions. It had already been agreed the Polish
Master Agreement would apply to all such transactions.
The evidence of Mr Jeffries
Mr Jeffries is a partner in Calyon's London solicitors with responsibility
for these proceedings. In paragraph 37 of his first witness statement
dated 9 April 2009, Mr Jeffries says that he is informed by Ms Jakobczyk
that following her conversation with Mr Klimczyk referred to above,
she herself spoke to Mr Frejowski to discuss PZL entering into an ISDA
Master Agreement and Mr Frejowski told her that he would send a draft of
the ISDA Master Agreement to his legal department for them to review.
Mr Frejowski's failure to contradict paragraph 37 of Mr Jeffries' witness
statement
Mr Frejowski's first witness statement was in response to the first
witness statements of Mr Klimczyk and Mr Jeffries. However, neither
in this statement, nor in his second statement, does Mr Frejowski
dispute that Ms Jakobczyk rang to discuss PZL entering into an ISDA
Master Agreement and that he told her that he would send a draft to his
legal department.
The telephone transcripts
Transcripts of numerous telephone conversations translated into English
between Mr Klimczyk and Mr Frejowski and of the conversation between
Mr Klimczyk and Ms Ignaciuk on 20th June 2008 were put before the
court. There was, however, no transcript of the conversation Mr Klimczyk
says he had with Mr Frejowski in late May or early June 2008.
CALYON'S SUBMISSIONS ON THE APPLICATION OF ARTICLE 23(1) TO THE
SRF
Mr Gaisman QC first submitted that consensus as to Clause 13(b) of
the ISDA Master Agreement was established in respect of the four
pre-13 August TRFs and that by reason of the words:
this [TRF] Confirmation, together with all other documents referring to
the Master Form confirming transactions entered into between us, shall
supplement, form part of, and be subject to an agreement in the form
of the Master Form as if we had executed an agreement in such form
(but without any Schedule except for the election of English law as the
governing law …
consensus as to Clause 13(b) was also established in respect of the SRF.
In support of this submission, Mr Gaisman relied on the judgement of the
Court of Appeal in Credit Suisse Financial Products v. Société Generale
d'Entreprises [1997] CLC 168. There, the parties entered into an oral
bond put-option contract which was confirmed by a signed written ISDA
confirmation in the same general terms as the TRF Confirmations and
which contained many terms not agreed orally. Relying on Clause 13(b)
of the ISDA Master Agreement, the appellants contended that this court
had jurisdiction to determine a claim brought on the contract. The judge
at first instance held that consensus as to Clause 13(b) had not been
established because the respondent did not have a copy of the ISDA
Master Agreement in his possession and readily available to him. The
Court of Appeal disagreed. Delivering the lead judgement, Saville LJ noted
that the ECJ had said in Salotti that express reference in a contract to
general conditions fulfilled the requirements of writing under Article 17 of
the Brussels Convention only if the reference can be checked by a party
using reasonable care if the general conditions have been communicated
to the other contracting party with the offer to which reference is made.
In Saville LJ's view, however, those observations were dealing with a
reference in the contract to another document which in turn referred to
the general conditions, whereas in the instant case there was an express
reference in the written contract itself to the ISDA Master Agreement. In
his opinion the question was simply whether the express reference in the
written contract in the present case amounted to a “clear and precise”
demonstration that the clause conferring jurisdiction was the subject of a
consensus between the parties, and in his view it was because the terms
of the reference alone made it certain that the jurisdiction clause was
“part of the contract properly so-called”.
It followed, submitted Mr Gaisman, that: (1) by no later than
27 June 2008, the parties had agreed that (i) the ISDA Master Agreement
would be deemed to have been executed, and (ii) it would govern not
just the particular TRF Confirmation but “all other documents referring
to the Master Form confirming transactions between us”; (2) the SRF
Confirmation was a document referring to the ISDA Master Agreement
and hence, pursuant to the parties' previous agreement and without
having to analyse the SRF in any further detail, it was governed by the
ISDA Master Agreement, including Clause 13(b) thereof.
Mr Gaisman next submitted in the alternative that consensus was
established by the course of dealing between Calyon and PZL, the
negotiation of the SRF falling within the same course of dealing as that
concerned with the TRFs. He cited Partenreederei MS. Tilly Russ and
Another v. Haven & Vervoebedrijf Nova NV and Another [1985] 1 QB 931,
where the ECJ held that a jurisdiction clause included in the printed
conditions of a bill of lading was properly regarded as an agreement in
writing or an oral agreement evidenced in writing for the purposes of
Article 17 of the Brussels Convention if the bill was part of a continuing
business relationship between the parties which was itself governed by
general conditions including the jurisdiction clause. As the ECJ put it:
“In those circumstances, it would be contrary to good faith to deny the
existence of a jurisdiction agreement.”
Mr Gaisman also referred to I.P. Metal Ltd v. Ruote OZ SpA
[1993] 2 Lloyd's Rep 60, where Waller J held that consensus had been
established under Article 17 as to a jurisdiction clause in conditions that
in the course of dealing between the parties had been contained in a
confirmation sent immediately after an oral contract for the purchase of
metal.
The burden of Mr Gaisman's submission was that in the period
February 2008 to 13 August 2008 Calyon, through Mr Klimczyk, had made
it clear (whether or not the same was appreciated by Mr Frejowski as it
ought to have been) that: (i) foreign exchange transactions with several
fixing dates and with an element of gearing, such as the SRF, were
regarded by Calyon as “structured transactions”; (ii) such transactions,
including the TRFs and the SRF (which were very similar), were not
governed by the Polish Master Agreement, but were entered into by
Calyon acting through its London Branch on the basis that the ISDA
Master Agreement, including Clause 13(b), was incorporated. Accordingly,
it ought to have been obvious to PZL that the agreement for the SRF
transaction would be concluded on the same basis as the TRFs had been.
Mr Gaisman relied on the course of dealing related above and laid
particular emphasis on: (i) the similarity between the SRF and the TRFs;
and (ii) the following aspects of the evidence that showed that the SRF
was negotiated alongside potential further TRFs, with the two very similar
products often being discussed by Mr Klimczyk and Mr Frejowski in
tandem:
(1) On 20th February 2008, Mr Klimczyk emailed proposals for “geared
forwards” “par forwards” and “knockout geared forwards” to Mr Frejowski
having foreshadowed this during a conversation the previous day when he
said: “perhaps then I could send you some suggestions of slightly more
structured products, which could perhaps satisfy the needs, somehow.”
(2) On 17th April 2008 (the date of the first TRF) Mr Klimczyk sent
Mr Frejowski details of, among other things, “geared forwards” and TRFs.
(3) On the same day as PZL entered the second TRF (24th April 2008),
Mr Klimczyk sent Mr Frejowski details of a proposed SRF. Towards the top
of this document (which was in English) appeared the words: “The Target
Redemption Forward is a zero-rated structured product which allows the
client to hedge at a better rate than the forward until a target intrinsic
value level is reached.” (Emphasis supplied).
(4)During the first call on 8th August 2008 at 8:52, Mr Klimczyk referred
to “another TRF” while also describing what in essence is the SRF.
(5) In the first email to Mr Frejowski on 8th August 2008, Mr Klimczyk
enclosed a term sheet for a TRF as well as setting out details of an SRF
with bi-weekly expiration dates.
(6) In the second call on 8th August 2008 Mr Klimczyk again discussed
a TRF side-by-side with an SRF (or “geared forward”) with bi-weekly
expiration dates.
(7) In the second email to Mr Frejowski on 8th August 2008 Mr Klimczyk
stated “The spot rate has changed by 2 groshy and so have the TRF and
geared forward strike rates.”
(8) A further update on both prices for the TRF and SRF (“geared
forward”) was given to Mr Frejowski in Mr Klimczyk's first call on Monday
11th August 2008. It is during this call that Mr Frejowski first indicated
that he wanted to do an SRF, saying “For the time being I'd rather not do
the TRF,” to which Mr Klimczyk responded “OK, so for the time being only
the geared forward, right?”
(9) In the next call on 11th August 2008 at 10:30 Mr Klimczyk raised a
possible TRF again: “In this case, how about the TRF...”.
(10) In the second call on 13th August 2008, Mr Klimczyk again said: “I
am serious, I would add to that of a TRF…”.
(11) Immediately after the SRF was concluded on 13th August call,
Mr Klimczyk said: “I will call you regarding this TRF”.
In the further alternative, relying on Mainschiffahrts-Genossenschaft eG
(MSG) v. Les Gravieres Rhenanes Sarl (above), Mr Gaisman submitted
that Clause 13(b) of the ISDA Master Agreement was in a form which
accords with a usage in international trade or commerce of which the
parties were or ought to have been aware and which in such trade
or commerce is widely known to, or regularly observed by parties to
contracts of the type involved in the particular trade or commerce
concerned.
PZL'S SUBMISSIONS ON THE APPLICATION OF ARTICLE 23(1) TO THE
SRF
Mr Thomas for PZL submitted that Credit Suisse did not apply to the
instant case because here, unlike in Credit Suisse, the parties had
not signed that SRF Confirmation and had executed the Polish Master
Agreement well before the SRF transaction. It therefore could not
be clearly and precisely established that the parties had agreed that
Clause 13(b) of the ISDA Master Agreement was to be incorporated into
the transaction, rather than the Polish Master Agreement.
Mr Thomas went further and positively contended that the SRF was
covered by the Polish Master Agreement and was not subject to the ISDA
Master Agreement. In his submission, the SRF was simply a series of
straightforward options and as such was governed by the Regulations
contained in Schedule 2 to the Polish Master Agreement. There was no
difficulty, said Mr Thomas, in the pro-forma confirmations specified in
Schedule 2 being adapted to cater for the SRF.
Mr Thomas further submitted that even if there had been no Polish
Master Agreement, the long form ISDA confirmation would not in any
event apply to the SRF, or would not clearly and precisely apply, because:
(i) this form was expressed to apply to a transaction entered into between
“Calyon, acting through our London Office … and you …”, whereas the SRF
had been entered into by Calyon acting by its Polish Office, in the person
of Mr Klimczyk; and (ii) the words “transactions entered into between us”
either meant transactions entered into prior to the confirmation and not
all transactions whether prior or subsequent, or at the very least were
ambiguous.
76. On grounds that were similar to those adumbrated in paragraphs 73
to 75 above, Mr Thomas also argued that it was not clearly and precisely
established that the parties had agreed that Clause 13(b) applied to the
TRFs.
77. Responding to the Calyon's case based on prior dealing, Mr Thomas
submitted that there was no consistent and clear course of dealing from
which it could be clearly and precisely deduced that the SRF was to be
on ISDA terms rather than on the terms of the Polish Master Agreement.
He submitted that on the evidence available the court could not conclude
applying the requisite standard that Calyon had made it clear that there
was a difference between “simple” transactions that were governed by
the Polish Master Agreement and “structured” transactions that were
entered into by Calyon acting through its London Office and governed
by the ISDA Master Agreement. The internal workings of Calyon and the
alleged internal division of the booking of various transactions was largely
(if not entirely) unknown to PZL which had no interest in these matters
since it had not been given any indication that Calyon viewed the terms
applicable to the SRF transaction to be dependent upon any such factor.
Finally, Mr Thomas set considerable store by a letter of 10th October 2008
signed by Calyon's Deputy General Director in which assertions are
made that seem to be predicated on the applicability of the Polish
Master Agreement to the SRF.
DISCUSSION
In my judgement, by virtue of its case on course of dealing, Calyon has
a much better argument than PZL on the application of Article 23(1) to
the SRF. In reaching this conclusion I have kept in mind that the purpose
of the requirement that consensus be clearly and precisely established is
“to neutralise the effect of jurisdiction clauses that might pass unnoticed
in contracts.” In my view, what that means in a case where consensus
stands to be presumed is that the course of dealing must be such as
to have put the counterparty fairly and reasonably on notice that the
contract would contain the jurisdiction clause contended for.
I also leave out of account Mr Klimczyk's evidence that he specifically
explained to Mr Frejowski over the telephone that transactions such as
the TRF and the SRF were made with Calyon London and were subject to
ISDA terms. I do so because, this being an interlocutory hearing, neither
of these witnesses has been cross-examined and there has been no order
to give disclosure.
The reasons for my conclusion are as follows. Acting, inter alios, by
Mr Frejowski, PZL signed the four TRF Confirmations and sent them to
Calyon's London Office. It was clearly stated in those documents that:
(i) Calyon had entered into those transactions through its London Office;
(ii) the transaction was subject to the ISDA Master Agreement; and
(iii) those transaction were subject to English law. Further, before the
Confirmations were sent to Calyon's London Office: (1) Mr Klimczyk had
spoken to Ms Ignaciuk of PZL's Finance Department and explained to
her that in respect of structured transactions recorded in London, such
as the TRFs, the ISDA document should be signed and would represent
the framework of the parties' co-operation; transactions recorded in
Poland, on the other hand, such as the two transactions “with Warsaw”
were governed by the local framework agreement; and (2) PZL, acting,
inter alios, by Mr Frejowski, had signed the Settlement Instructions
which referred to “other transactions consisting in combination of various
financial products referred to as structured transactions, between [PZL]
and Calyon London,” [emphasis supplied]. In addition, shortly before or
shortly after the TRF Confirmations were sent to London, Ms Jakobczyk
of Calyon spoke to Mr Frejowski to discuss PZL entering into an ISDA
Master Agreement and was told by Mr Frejowski that he would send a
draft of the ISDA Master Agreement to his legal department for them
to review. It ought therefore to have been plain to PZL that the TRF
transactions were: (i) not governed by the Polish Master Agreement but
were entered into by Calyon's London Office and governed by the ISDA
Master Agreement; and (ii) Calyon regarded TRFs as being structured
transactions. Further, the ISDA Master Agreement was freely available
and its terms as to jurisdiction are clear and straightforward: if the
transaction is governed by English law, the Courts of England have
jurisdiction in respect of any suit, action or proceeding on the agreement.
Moving now to the discussions between Mr Frejowski and Mr Klimczyk
over the period 8th to 13th August 2008, it is clear that an SRF, which
is essentially the same as a TRF but without a knock-out condition,
was considered alongside a TRF. The evidence also strongly indicates
that, in contrast to the two simple option trades made under the Polish
Master Agreement, Mr Frejowski must have realised that Calyon's London
office was playing a significant role in the negotiations by providing the
pricing and other details of the transaction.
It follows, in my opinion, that it ought to have been clear to PZL that
the SRF was not the type of transaction that was governed by the Polish
Master Agreement but was of a type that would be treated by Calyon
in the same way as the TRFs had been. In short, PZL had fair and
reasonable notice that the SRF would be entered into on ISDA terms. In
this connection, I observe that although PZL challenged the values set out
in the SRF Confirmation on 20th August 2008, there was no challenge to
the applicability of the ISDA Master Agreement and English governing law
until 15 December 2008, and no mention of the Polish Master Agreement
until 14th October 2008.
I should add that I regard Mr Thomas's point based on the letter of
10th October 2008 as a weak one. The author of that letter had not been
involved in the negotiation of the SRF and since 21 October 2008, Calyon
has consistently asserted in correspondence that the SRF was governed
by the ISDA Master Agreement and not the Polish Master Agreement.
It is to be noted that paragraph (b) of Article 23(1) is an alternative
to paragraph (a). It is accordingly immaterial whether the jurisdiction
agreement was the subject of a prior oral agreement or was an
agreement in writing or is evidenced in writing.
My decision that Calyon has shown to the requisite standard that
Article 23(1)(b) applies to Clause 13(b) of the ISDA Master Agreement
renders it unnecessary to deal with Mr Gaisman's submissions as to
paragraphs (a) and (c) of Article 23(1) and I decline to do so. Suffice it
to say that I have doubts that: (i) that the signature by PZL of the four
TRF Confirmations and the wording of those documents alone would
be sufficient to establish the applicability of paragraph (a); and (ii) the
ISDA Master Agreement is sufficiently prevalent for paragraph (c) to be
established.
THE ARTICLE 22(2) POINT
Article 23(5) of the Brussels I Regulation provides:
Agreements ….shall have no legal force if … the courts whose jurisdiction
they purport to exclude have exclusive jurisdiction by virtue of Article 22.
Article 22(2) provides:
The following courts shall have exclusive jurisdiction, regardless of
domicile:
2. in proceedings which have as their object the validity of the
constitution, the nullity or the dissolution of companies or other legal
persons or associations of natural or legal persons, or of the validity of
the decisions of their organs, the courts of the Member State in which the
company, legal person or association has its seat. In order to determine
that seat, the court shall apply its rules of private international law.
Mr Thomas argued that since PZL was contending in the Polish
proceedings that under its Articles of Association Mr Frejowski had
no authority to agree to a transaction that was governed by the ISDA
Master Agreement, the courts of Poland had exclusive jurisdiction over the
dispute between the parties in respect of the SRF.
Mr Thomas cited the test formulated by Knox J in Newtherapeutics
Ltd v. Katz [1991] Ch 226 (at p. 245G):
The problem therefore is to identify from the material before the court
what it is that the proceedings are in substance or principally concerned
with. If the answer to that question is the validity of the decision of the
organ of the company, Article 16(2) [the pre-cursor to Article 22 (2)]
applies and this court has exclusive jurisdiction.
Mr Thomas also referred to: (1) the observation of the Court of
Appeal in Grupo Torras SA v. Sheikh Fahad Mohammed Al-Sabah
[1996] 1 Lloyd's Law Rep 7 at 15 that there is “much force” in the
contention that “allegations of want of authority” fall within Article 16(2)
[the pre-cursor to Article 22 (2)]; and (2) paragraph 2.52 of Briggs,
“Civil Jurisdiction and Judgments”, 4th Edition, 2005, “…a claim that an
act purportedly done by the directors was a nullity because it required
(and did not have) the prior sanction of a board meeting, would fall
within Article 22(2), because it does plainly raise a matter of corporate
constitutional law.”
After the hearing, counsel for Calyon (with notice to Mr Thomas) drew my
attention to the decision of Teare J in JP Morgan Chase Bank NA v. BVG
[2009] 1627 (Comm). I respectfully agree with Teare J's reasoning in
that case but I do not depend on it for my decision since on the principal
issue Teare J was giving effect to previous authority and because I have
received no submissions on Teare J's judgement.
It is clear that Article 22(2) should be read narrowly and by reference
to its central objective which is one of centralising jurisdiction in
order to avoid conflicting judgements being given as regards the
existence of a company or as regards the validity of the decisions of its
organs; see Hassett v. South Eastern Health Board (Case C-372/07)
(ECJ First Chamber), paragraph 20. This is important for otherwise the
right to agree jurisdiction conferred by Article 23 would be illegitimately
circumscribed.
Adopting the approach of Knox J in Newtherapeutics Ltd v. Katz, the
question is whether the proceedings brought in this court by Calyon are
in substance or principally concerned with whether Mr Frejowski lacked
actual authority under PZL's Articles of Association to enter into an SRF
that was governed by the ISDA Master Agreement. In my opinion, the
subject matter as a whole of the proceedings is the enforcement of the
oral SRF contract made on 13th August 2008 which will depend on the
determination of four main issues: (i) whether there was consensus as
to the commercial terms recorded in the SRF Confirmation; (ii) whether
PZL has a defence based on lack of diligence; (iii) whether Mr Frejowski
had actual authority to enter into the transaction under PZL's Articles
of Association; and (iv) whatever the position under (iii), whether
Mr Frejowski had apparent authority to enter into the transaction on
behalf of PZL.
Issue (iv) stands separately from issue (iii) not only because it raises
distinct conceptual issues but also because questions of apparent
authority under the conflict of laws are governed by English common law
conflict rules, pursuant to which the governing law is that chosen by the
parties to govern the contract sued upon; see Dicey, Morris and Collins on
The Conflict of Laws, 14th ed paras 33R-428 – 33-433.
Issue (iii) is therefore but one of four main issues and is not in my opinion
the substance of the proceedings nor a matter with which the proceedings
are principally concerned.
PZL's submissions based on Article 22(2) are accordingly rejected.
CONCLUSION
For the reasons given above, PZL's application fails. This court has
jurisdiction to determine the claim brought by Calyon in Claim No 2008
Folio 1250.