Home Knowledge ISDA Master Agreements and Competing Jurisdiction Clauses – What Jurisdiction Wins?

ISDA Master Agreements and Competing Jurisdiction Clauses – What Jurisdiction Wins?



In 2008 Trattamento Rifiuti Metropolitani S.P.A. (TRM) entered a financing agreement (FA) with a number of lenders, led by BNP Paribas S.A.’s (BNP) Milan branch as mandated lead arranger, lending bank and agent bank. The FA contained an exclusive Italian jurisdiction clause. 

The FA required TRM and BNP to enter a hedging arrangement. TRM entered into a swap (Swap Arrangement) with BNP’s Paris branch as the hedging bank. This was done through the International Swaps and Derivatives Association’s master agreement (ISDA Master Agreement) and schedule (Schedule). 

The ISDA Master Agreement contained an English jurisdiction clause.  However, the Schedule provided that in the event of inconsistency with the ISDA Master Agreement, the Schedule would prevail.  The Schedule expressly noted that the Swap Arrangement was made in connection with the FA, and in the event of conflict between the ISDA Master Agreement and the FA, the provisions of the FA would prevail. 

A dispute arose between the parties when TRM asked BNP to waive its right to designate an early termination date of the Swap Arrangement. Proceedings were brought in both the English and Italian courts and so a key preliminary issue was to decide which court had jurisdiction.

The Ruling

The English Court took as a starting point that competing jurisdiction clauses should be interpreted on the basis that each deals exclusively with its own subject matter and they are not overlapping, provided the language and surrounding circumstances so allow. It held that “a broad, purposive and commercially-minded approach” should be taken, with the jurisdiction clauses viewed in light of the transaction as a whole and the understanding that it is unlikely the parties intended similar claims should be the subject of inconsistent jurisdiction clauses. 

However, it was also noted that in certain circumstances the result of the language used may be that either clause can apply rather than one clause only. In applying this approach, the court noted that the parties “clearly had two relationships, as illustrated by the choice of different governing laws and jurisdictions”.

The Italian jurisdiction clause related to the FA and overarching background claims, whereas the English jurisdiction clause covered disputes under the ISDA Master Agreement. There was no conflict between the jurisdiction clauses as they concerned related but separate commercial and legal relationships. Although the FA referred to the Swap Arrangement this did not lead to the ISDA Master Agreement, and the English jurisdiction clause, being subsumed by the FA. 

The Court concluded that as the dispute between the parties was in relation to the Swap Arrangement, this came under the scope of the ISDA Master Agreement and so the English jurisdiction clause applied.


Whilst this decision provides clarity as to the interpretation principles used by the courts in respect to competing jurisdiction clauses.  It is of attendant interest in Ireland as, as of July 2018, ISDA have added Irish and French to the existing suite of English, New York and Japanese law choices, providing for options to parties preferring to continue trading under a European Union (EU) member-state law with EU court jurisdiction clauses once the UK leaves the EU. 

It is therefore envisaged that issues relating to competing jurisdiction clauses as those raised in the case above may become of increasing importance.  

Contributed by: Simona Mulligan




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