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Citigroup Global Markets Ltd v Amatra & Ors judgment

28th May 2012

Simon Picken QC and Sushma Ananda acted for the Defendants in their successful challenge to the jurisdiction in the face of a claim by Citigroup Global Markets Ltd (“CGML”) for negative declaratory relief arising out of two options transactions, evidenced by confirmations incorporating the form of the 2002 ISDA Master Agreement. In particular, the Defendants argued that the Court had no jurisdiction to determine negative declaration claims brought by CGML in respect of its affiliates, including Citigroup Global Markets Inc (“CGMI”), against whom arbitration proceedings had been commenced by the Defendants in New York under the FINRA regulatory regime, a regulatory regime instituted in the US to regulate the securities industry.

Mr Justice Andrew Smith concluded that the claims brought by CGML in respect of its affiliates (including CGMI) did not give rise to any serious issue to be tried, and as a result permission to serve out should not have been granted in respect of those claims. He also went on to find that he would in any event have declined, as a matter of discretion, to exercise exorbitant jurisdiction in respect of such claims. The learned Judge reached those conclusions on the basis that the affiliate claims did not satisfy the test set out by Aikens LJ in Rolls-Royce plc v Unite the Union [2009] EWCA Civ 387 at [120] for when the court should exercise its jurisdiction to grant declaratory relief and the specific guidance set out in New Hampshire Insurance Company v Philips Electronic North America Corp [1998] CLC 1062 in respect of when it would be appropriate to grant negative declaratory relief.

Mr Justice Andrew Smith’s decision in this regard is of general interest in a number of respects. First, it makes clear that the question of whether the Court should exercise its discretion to grant negative declaratory relief in accordance with the principles set out in the Rolls-Royce and New Hampshirecases can be considered at the stage when the jurisdiction of the Court is challenged. Secondly and importantly, the decision also limits the ability of banks to enforce, by way of negative declaratory relief, provisions contained in standard form derivative agreements excluding the liability of the bank’s affiliates in certain respects, particularly where there are foreign proceedings pending between the affiliate and the bank’s customer.

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