Ultra vires: jurisdiction


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In UBS v The Kommunale Wasserwerke Leipzig [2010] EWHC 2566 (Comm), the bank sued in England for sums due from the defendant under swap agreements. They were governed by ISDA master agreements and contained English law and jurisdiction clauses.

The defendant raised various defences, including the potentially decisive issue of ultra vires or incapacity under German law, which governed its constitutions. The vendor therefore sought to rely on article 22(2) of the Brussels Regulation, which would have given the German court exclusive jurisdiction on the basis that the proceedings had as their object the validity of the decisions of the organs of the defendant.

The English court held that the likelihood was that the defendant was going to challenge the enforceability of the swaps on numerous legal and factual grounds apart from ultra vires and incapacity, which were not going to be the principal focus of the English proceedings as a whole. The sound administration of justice did not require the proceedings to be tried in Germany, therefore the proceedings should continue in England.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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