Governing Law and Jurisdiction - ISDA Provision
2002 ISDA Master Agreement
Section 13 in a Nutshell™
Use at your own risk, campers!
Full text of Section 13
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Template:M comp disc 2002 ISDA 13
There are parts of the ISDA Master Agreement with which you will spend weeks, months, or even years of your life grappling, pushing and pulling the embedded and nested intellectual concepts around in your mind, scrabbling desperately for a handhold, trying with all your might to get some purchase on the forensic Play-Doh that these clauses represent. We are fairly confident, without even knowing you, that section 13(a) Will not be one of them.
If it is, it may be time to get your coat.
On the disapplication of 13(b)(iii)
Where you wish to elect the exclusive jurisdiction of (say) English courts in your Schedule, you may wish to explicitly disapply the proviso to 13(b) which provides that nothing in this clause precludes the bringing of Proceedings in another jurisdiction (in the flush language of the 1992 ISDA version; in 13(b)(iii) of the 2002 ISDA version).
Strictly speaking you shouldn't need to do this: Section 1(b) provides that the inconsistency created by the use of the expression “exclusive jurisdiction” in the Schedule will prevail over the text the Master Agreement. But that won’t stop officious attorneys the world over trying.
But, counselor, be warned: if you do try to explicitly override it — you know, for good measure and everything — and your counterparty pushes back, having deliberately taken the clarifying language out of a draft, you may be in a ;;worse position when interpreting the meaning of “exclusive jurisdiction", precisely because the counterparty refused to rule out the use of other jurisdictions. A cracking example of the anal paradox at work.
Don’t be too clever by half, in other words.
A process agent, for an agreement subject to the jurisdiction the courts of England and Wales, is an agent located in England or Wales (or, in theory, their adjacent territorial waters) who accepts service of legal proceedings filed in those courts for someone who is not in England or Wales — technically, who has no permanent place of business here.
The rules of English civil court procedure requires a claim (in the trade called “process”) brought before an English (or Welsh) court to be physically served on the defendant in England or Wales (or, at the limit, in their adjacent territorial waters). Service in Scotland — or its territorial waters — will not do. This means you can serve process on someone rowing a boat in the Bristol Channel, but not in Inverness, much less on someone escaping in rowing a boat to, for example, the Isle of Skye.
This means if you have a contract with a counterparty who has no place of business in England or Wales (or their territorial waters), it will need to appoint a process agent on whom you can serve court papers should, heaven forfend, you need to.
Jurisdiction, not governing law
Point for details freaks: it is the jurisdiction of the English courts and not English governing law law that matters. A contract governed by Swiss law but subject to the jurisdiction of the English courts would still need an English or Welsh process agent. In theory — and, yes, a ripe theory it would be — a contract governed by English law but subject to the exclusive jurisdiction of Italian courts would not.
This also means that an agreement subject to some ghastly foreign law and the non-exclusive jurisdiction of some ghastly foreign courts, and which therefore could, in theory, come before an English or Welsh court, would require a process agent in England, Wales, or their territorial waters for that to happen. This would look most odd in the negotiation process. The JC hereby offers a free bag of sweeties to the first person who can show they have successfully inserted the appointment of an English process agent into a foreign law agreement for this reason.
The agent doesn’t have to agree to it, or pass any papers on
Now here’s an interesting thing. Having contractually agreed your “method or place” for service, as long as the plaintiff can prove it complied with it, the court will not enquire whether the claim, duly served, ever found its way to the actual defendant. The view being the defendant assumed the risk of its process agent being competent enough to forward on the correspondence, in the same way a local defendant assumes the risk of its receptionist neglecting to pass the package to its legal eagles. So the painful strictures in process agent boilerplate dealing with replacement or succession of agents are not entirely necessary. If the contract provides it may be served “by delivering it to the first person you meet at Waterloo station at 9am” — even, I like to think, by “impaling it on Boadicea’s sword on the Victoria Embankment in the presence of one or more tourists”, then that is what you must do, and no more.
This is, by the way, no more than an articulation of the basic rules of agency: the agent represent the principal: what I give to an agent, I have given to the principal as far as I am concerned.
New York law
The last time we checked New York rules of civil procedure do not require service of process within the state of New York, nor even her territorial waters. Your process service guy can travel far and wide, serving the miscreant in whichever jurisdiction he may find an authorised representative to whom he can hand the papers. As long as he trots back and files an affidavit of service in the New York court, that will do. Therefore — however much money CT Corporation may reap persuading its offshore clients otherwise — foreigners conducting their affairs under the laws of the state of New York need not appoint a NY process agent.
Don’t confuse sovereign immunity with ultra vires — cue thunder crack at the mention of Orange County or Hammersmith and Fulham council and a dramatic look from our house gopher — for they are quite different things.
- Ultra vires: If a contract is beyond your powers or capacity to enter into a contract in the first place then it is void ab initio; any payments you have made under that contract are also void and you may reclaim them, and you can appeal to the court system to do that. That is to say, ultra vires is an “intra-legal” measure, recognised, defended and enforced by the courts.
- Sovereign immunity: Sovereign immunity is a different, “extra-legal” thing: it is to say “I am, quite literally, above the law: I am the law, and I do not have to subject myself to the judicial branch of my law — or anyone else’s law — unless I choose to.” This extends to being free from judicial intervention if I decide not to perform my contractual obligations, but it also means I cannot myself resort to the court process to make my counterparty perform its obligations. If I choose to go to court, then I subject myself fully to the courts as regards actions my counterparty wishes to bring against me.
- ↑ Rule 6.11 of Part 6, details freaks.
- ↑ In the Civil Procedure Rules the “jurisdiction” is defined as “unless the context requires otherwise, England and Wales and any part of the territorial waters of the United Kingdom adjoining England and Wales” so, therefore, those of the Her Majesty’s territorial waters which adjoin Scotland or Northern Ireland are out of bounds.
- ↑ This sounds ridiculous, I know, but it does happen. The JC has personal direct experience.
- ↑ This sounds ridiculous, I know, and is ridiculous. The JC has no personal direct experience of this (and does not want any, so you can save your postcards).
- ↑ Up to fifty new pence in value, postage and packing excepted. Judge’s decision final is arbitrary, crotchety, and no correspondence will be entered into unless he feels like it, which he probably will. Competition not open to friends, relations or acquaintances of the JC.
- ↑ It will do this by having its process server swear an affidavit of service.
- ↑ We don’t check all that often folks, so on your head be it.
- ↑ But — quid pro quo, Clarice — any profits you have made you must also disgorge.