Lehman Brothers—when should a stay be granted?

Lehman Brothers—when should a stay be granted?
How should the courts determine whether proceedings have been commenced within the meaning of the Lugano Convention, art 27? Laura Newton, barrister at 11 Stone Buildings, examines the issue in relation to conciliation requests submitted in Switzerland and England.

Original news

Lehman Brothers Finance AG (in liquidation) v Klaus Tschira Stiftung GmbH and another company [2014] EWHC 2782 (Ch), [2014] All ER (D) 42 (Aug)

Following a dispute arising from the automatic termination of an International Swaps and Derivatives Association (ISDA) Master Agreement (after the insolvency of Lehman Brothers Inc) the defendants submitted requests for conciliation to the conciliation authority in Zurich and the claimant issued proceedings in England. The defendants sought a stay of the English proceedings. However, their Swiss proceedings were subsequently dismissed. The Chancery Division held the initiating of conciliation proceedings by the lodging of a written request for conciliation fell within the Lugano Convention, art 30. Were it not for the fact that the Swiss proceedings had been dismissed, a stay of the English proceedings would have been granted.

What was the case about?

This case concerned when foreign proceedings will fall within the Lugano Convention, art 27 so as to require a stay of subsequent English proceedings. The defendants applied for a stay of English proceedings under the Lugano Convention, art 27 on the basis that proceedings between the same parties involving the same cause of action had been commenced in the Swiss courts prior to issue of the English proceedings.

The issue was whether the procedure initiated in Switzerland—namely ‘an attempt at conciliation before a conciliation authority’—constituted proceedings before a court within the meaning of the Lugano Convention, art 27(1).

The dispute arose out of an ISDA Master Agreement between the defendants and Lehman Brothers Finance AG (LBF), a Swiss subsidiary of Lehman Brothers Holdings Inc (LBHI). The agreement was automatically terminated upon the insolvency of LBHI. Upon termination, the defendants were required to calculate loss (as defined) under the agreements. The dispu

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