Neutral Citation Number: [2014] EWHC 34 (Ch)
Case No. HC13B03839, 18389 of 2009
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, EC4A 1NL

Date: 16/01/2014
Before :

MR JUSTICE DAVID RICHARDS
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Between :

	FONDAZIONE ENASARCO 	Claimant	
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	(1) LEHMAN BROTHERS FINANCE S.A. 
(2) ANTHRACITE RATED INVESTMENTS (CAYMAN) LIMITED	Defendants	
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MR MARK HAPGOOD QC and MR JASBIR DHILLON QC (instructed by Sidley Austin LLP) for the Claimant
MR JONATHAN NASH QC and MR THEODOR VAN SANTE (instructed by Field Fisher Waterhouse LLP) for the First Defendant
MR JEREMY GOLDRING QC (instructed by Clifford Chance LLP) for the Second Defendant

Hearing dates: 16 and 17 December 2013
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Judgment
Mr Justice David Richards : 

Introduction
1.	Two applications are made in these proceedings. First, the first defendant, Lehman Brothers Finance S.A. (LBF), applies for an order that the court either stays the proceedings as required by article 27 of the Lugano Convention, or exercises its discretion to stay the proceedings pursuant to either article 28 of the Lugano Convention or, on case management grounds, section 49(3) of the Senior Courts Act 1981. Secondly, the second defendant, Anthracite Rated Investments (Cayman) Limited (ARIC), applies for permission to commence a Part 20 claim against LBF or, if the present proceedings are stayed, a Part 7 claim seeking relief in identical form against LBF. This application is made under article 20 of Schedule 1 to the Cross-Border Insolvency Regulations 2006 (CBIR).
Facts
2.	The background facts are largely common ground and may be summarised as follows. The claim in these proceedings arises from the investment of €780,470,000 by the claimant, Fondazione Enasarco (Enasarco), in notes as part of a transaction structured and marketed by the Lehman group of companies. The notes were issued on 14 December 2007 by ARIC as part of a $10 billion secured euro medium-term note programme. ARIC was a special purpose vehicle incorporated in the Cayman Islands for the purposes of this programme.
3.	The principal amount of the notes was protected, or intended to be protected, by a Derivative Agreement, also made on 14 December 2007, between LBF and ARIC. Its bespoke terms appear in a confirmation of that date which incorporated by reference a standard form ISDA 1992 Master Agreement and a schedule to it which had been made between the same parties in 2005 and amended in 2006. The Derivative Agreement provided for the grant by LBF to ARIC of a put option over shares subscribed by ARIC in another vehicle using the proceeds of the issue of the notes, at a strike price of €780,470,000, expiring shortly before the maturity date of the notes in 2023. 
4.	By the express terms of section 13 of the ISDA Master Agreement, the Derivative Agreement is governed by English law and any disputes relating to the agreement are subject to the jurisdiction of the English courts. Section 13(b), dealing with jurisdiction, provides:
“With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.”
The effect of this provision is to give exclusive jurisdiction to the English courts, as between the courts of States bound by the Lugano Convention, but proceedings may be brought in the courts of other countries. 
5.	On 15 September 2008, Lehman Brothers Holding Inc. (LBHI), the ultimate holding company of LBF, filed for protection under chapter 11 of the US Bankruptcy Code. This constituted an event of default under the Derivative Agreement and caused an automatic early termination on 15 September 2008, with LBF as the defaulting party. As the non-defaulting party, ARIC was entitled and required by the Derivative Agreement to ascertain the close-out payment, if any, payable in respect of the early termination by one party to the other, on the bases set out in the agreement. The agreement contained provisions for the payment of interest on the amount found to be payable and for the defaulting party to indemnify the other party against all expenses incurred as a result of the default.
6.	On 29 October 2008, LBF was ordered by the Swiss Banking Commission to be placed into liquidation. On 22 December 2008, LBF entered bankruptcy proceedings in Switzerland.
7.	On 16 September 2009, ARIC provided LBF with its calculation of the termination payment due under the Derivative Agreement, amounting to approximately $61.5 million plus interest. On the same day, ARIC filed a claim in the Swiss bankruptcy of LBF for a sum in Swiss francs equivalent to this claim. 
8.	On 18 September 2009, ARIC’s claim under the Derivative Agreement was assigned to Enasarco and notice of the assignment was given to LBF.
9.	On 12 November 2009, by an order of this Court made on the application of the liquidators of LBF, the Swiss bankruptcy proceedings relating to LBF were recognised as foreign main proceedings under the CBIR.
10.	By a letter dated 21 December 2010, LBF rejected ARIC’s calculation of loss and asserted that ARIC owed LBF approximately €43 million under the Derivative Agreement. It contended that the loss should be calculated by reference to the “Early Termination Cash Settlement Amount” (ETCSA).
11.	Enasarco indicated in early 2011 that it intended to seek the resolution of issues relating to the correct method for calculating loss under the Derivative Agreement in proceedings before the English High Court, in accordance with section 13(b) of the ISDA Master Agreement. The effect of the recognition of the Swiss bankruptcy proceedings as foreign main proceedings was the imposition of an automatic stay of all proceedings in England against LBF, under article 20 of Schedule 1 to the CBIR. Enasarco applied for and on 4 March 2011, with the consent of LBF, was granted by Peter Smith J an order lifting the stay to permit, first, proceedings under Part 8 to resolve the issues of interpretation of the Derivative Agreement that had been raised by LBF and, secondly, any proceedings under Part 7 that might be required to determine any issues in connection with the Part 8 claim that were not resolved.
12.	On 15 March 2011, Enasarco commenced a Part 8 claim against LBF. On LBF’s application, ARIC was joined as a defendant to LBF’s counterclaim that ARIC was liable to pay a sum to LBF. Following a trial of the Part 8 claim, Briggs J held in a judgment handed down on 15 July 2011 ([2011] EWHC 1822 (Ch), [2011] 2 Lloyd’s Rep. 538) that ARIC was entitled to determine its loss under the agreement by reference to the cost of a replacement transaction and rejected LBF’s argument that ARIC was required to include the value of any ETCSA in the determination of loss. LBF did not appeal this decision.
13.	While the judgment did not determine, and the court was not invited to determine, the amount of any liability under the agreement, the liquidators of LBF gave no indication that the claim made by ARIC, and assigned to Enasarco, would not be accepted by them and included in the formal schedule of claims against the bankruptcy estate of LBF. 
14.	On 3 April 2013, the liquidators of LBF published the formal schedule of accepted claims of creditors. ARIC’s claim was rejected in whole and in a letter dated 9 April 2013 to ARIC, the liquidators asserted that, on the grounds set out in the letter, ARIC owed approximately $30.8 million to LBF.
15.	I will refer in more detail to the relevant provisions of Swiss bankruptcy law, but the purpose of the formal schedule of creditors’ claims is, subject to challenge, to determine the claims entitled to payment out of the bankruptcy estate and to determine their ranking under Swiss law. Under the relevant provisions of Swiss law, Enasarco was required to file any challenge to the liquidators’ rejection of its claim within 20 days after publication of the schedule. If it did not do so, it would lose its right to seek to prove in the Swiss bankruptcy of LBF.
16.	On 22 April 2013, Enasarco filed a claim with the Swiss bankruptcy court challenging the liquidators’ rejection of its claim and seeking an order for inclusion of the claim in the schedule. As required by the relevant rules, the documents filed by Enasarco set out the basis of its claim. They also stated that Enasarco intended to ask for a stay of the Swiss proceedings pending proceedings in England, which it intended to commence pursuant to section 13(b) of the ISDA Master Agreement.
17.	On 29 August 2013, Enasarco issued the Part 7 claim form in the present proceedings, claiming, amongst other relief, the sum of $61.5 million plus interest from LBF under the Derivative Agreement and a declaration that no sums are payable by ARIC or Enasarco to LBF under the Agreement. 
18.	It is accepted by LBF that the order made by Peter Smith J on 4 March 2011 permitted the issue of these proceedings, notwithstanding the stay under article 20 of Schedule 1 to the CBIR. 
19.	On 26 September 2013, LBF issued its application for a stay of the proceedings. 
20.	On 15 November 2013, ARIC issued its application for permission to make a Part 20 or Part 7 claim for a declaration of non-liability to LBF.
The issues
21.	LBF submits that the Lugano Convention applies to the present proceedings and also to the proceedings in Switzerland whereby Enasarco challenges the rejection of its claim and, accordingly, that article 27 requires this court to stay the English proceedings in favour of the Swiss proceedings. It is common ground that, if article 27 applies, the Swiss court was the court first seised. Alternatively, LBF submits that the court should exercise its discretion under article 28 to stay the English proceedings. In the further alternative, it submits that this court should grant a stay, on case management grounds, of the English claim pursuant to section 49(3) of the Senior Courts Act 1981 (SCA 1981). 
22.	Enasarco, supported by ARIC, submits that the Lugano Convention does not apply to the Swiss proceedings, on the basis that they fall within the exemption for insolvency proceedings contained in article 1(2)(b). Therefore, they submit, neither article 27 nor article 28 has any application. They further submit that the court should not exercise any discretion to stay the English proceedings. As well as joining issue with each of these positions, LBF in response submits that even if the Swiss proceedings are within the exclusion in article 1(2)(b), so that article 27 has no application, this court nonetheless has a discretion under article 28 to stay the English proceedings. 
23.	The issues which therefore arise on LBF’s application may be summarised as follows:
i)	Whether the Swiss proceedings fall within the exclusion of insolvency proceedings under article 1(2)(b).
ii)	If the Swiss proceedings do not fall within the exclusion of insolvency proceedings, whether this court is required to order a stay of the English proceedings under article 27.
iii)	If the Swiss proceedings do fall within the exclusion of insolvency proceedings, is article 28 nonetheless applicable, so that this court has the discretion to stay the English proceedings.
iv)	If article 28 is applicable, whether this court should exercise its discretion to stay the English proceedings.
v)	Whether this court should stay the English proceedings pursuant to section 49(3) SCA 1981.
24.	I will consider later the issues arising on ARIC’s application, insofar as they differ from those arising on LBF’s application.
The application of the Lugano Convention to the Swiss proceedings
25.	The Lugano Convention of 21 December 2007 (OJ 2007 L 339/3) (the Lugano Convention) is the successor of the Lugano Convention of 16 September 1988. The latter extended the application of the rules of the Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (the Brussels Convention) to certain states which were members of the European Free Trade Association, including Switzerland. The Brussels Convention was replaced by Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Judgments Regulation). The purpose of the Lugano Convention of 21 December 2007 is to extend the principles laid down in the Judgments Regulation to the parties to the Convention. So far as relevant to the issues on these applications, the terms of these Conventions and the Judgments Regulation are identical. It is accepted that judgments of the Court of Justice (CJEU) on the Brussels Convention and the Judgments Regulation provide authoritative guidance on the interpretation of the Lugano Convention. 
26.	Article 1(1) of the Lugano Convention provides:
“This Convention shall apply in civil and commercial matters whatever the nature of the court or tribunal. It shall not extend, in particular, to revenue, customs or administrative matters.”
Article 1(2)(b) provides:
“The Convention shall not apply to:
(b) bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings.”
27.	In Gourdain v Nadler (C-133/78) [1979] 3 CMLR 180, a decision on the Brussels Convention, the CJEU explained that insolvency proceedings were excluded “because of the special nature of certain matters and of the profound differences between the laws of the Contracting States”. As the submissions made on behalf of the Commission and the German government in that case make clear, an important factor was also that work was proceeding on a draft of a convention on bankruptcy and similar proceedings, which would provide for the allocation of jurisdiction in such proceedings among member states. 
28.	Although the Bankruptcy Convention never came into effect, the distribution of jurisdiction in insolvency matters was achieved by Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (the Insolvency Regulation). In paragraph 53 of his report on the accession of the UK, Denmark and Ireland to the Brussels Convention, Professor Peter Schlosser stated that the Brussels Convention and the intended Bankruptcy Convention were “intended to dovetail almost completely with each other”. Although the planned Bankruptcy Convention was replaced by the Insolvency Regulation, I agree with the observation of Briggs J in Re Rodenstock GmbH [2011] EWHC 1104 (Ch), [2011] Bus LR 1245, that:
“nothing which thereafter occurred appears to me to have been intended to detract from the plan that the bankruptcy exclusion should exclude from the Judgments Regulation nothing more, and nothing less, than what was included within the scope of the Insolvency Regulation.”
As regards the exclusion of insolvency proceedings, the Judgments Regulation and the Insolvency Regulation must be read in the light of the other, and the same in my judgment is true of the Lugano Convention.
29.	The nature and extent of the exclusion of insolvency proceedings has been considered by the CJEU. In Gourdain v Nadler, the Court said:
“…it is necessary, if decisions relating to bankruptcy and winding-up are to be excluded from the scope of the Convention, that they must derive directly from the bankruptcy or winding-up and be closely connected with the proceedings for the “liquidation des biens” or the “règlement judiciaire”.”
30.	In that case, the “syndic”, equivalent to a liquidator, of a French company which was placed in insolvency proceedings by the judgment of a French court, applied for and obtained a judgment against the manager of the company for payment of the company’s debts up to a specified limit, pursuant to the relevant French law on insolvency proceedings. The syndic sought to enforce the judgment under the Brussels Convention, but the CJEU held that it fell within the exclusion of insolvency proceedings. The Court said that, in order to determine this issue:
“…it is therefore necessary to ascertain whether the legal foundation of an application such as that provided for in Article 99 of the French Law is based on the law relating to bankruptcy and winding-up as interpreted for the purposes of the Convention.

The application under Article 99, called an application to make good a deficiency in the assets, for which special provision is made in a law on bankruptcy and winding-up is made only to the court which made the order for the “règlement judiciaire” or the “liquidation des biens”.

It is only the “syndic” – apart from the court which can make the order of its own motion – who can make this application on behalf of and in the interest of the general body of creditors with a view to the partial reimbursement of the creditors by respecting the principle that they rank equally and by taking account of any preferential rights lawfully acquired.”
After referring to the period of limitation of three years running from the date when the final list of claims is drawn up and the fact that a successful claim results in a benefit to the general body of creditors, the Court continued:
“It is quite apparent from all these findings that the legal foundation of Article 99, the object of which, in the event of the winding-up of a commercial company, is to go beyond the legal person and proceed against its managers and their property, is based solely on the provisions of the law of bankruptcy and winding-up as interpreted for the purpose of the Convention.”
The judgment was accordingly excluded from the Brussels Convention.
31.	In German Graphics Graphischer Maschinen GmbH v van der Schee (C-292/08) [2009] ECR I-8421, the CJEU held that a claim in Germany to assert a reservation of title clause over goods supplied to a Dutch company which had gone into liquidation in the Netherlands was not a claim excluded by article 1(2)(b) of the Judgments Regulation. In its judgment, the Court drew attention to the intention demonstrated by the recitals to the Judgments Regulation to provide for a broad definition of the concept of civil and commercial matters and, consequently, to provide that article 1(1) should be broad in its scope. This interpretation was also supported by recital (6) to the Insolvency Regulation which states that:
“In accordance with the principle of proportionality this Regulation should be confined to provisions governing jurisdiction for opening insolvency proceedings and judgments which are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings.”
Recital (6) reflects the approach in Gourdain v Nadler. The Court continued “Consequently, the scope of application of [the Insolvency Regulation] should not be broadly interpreted”, while nonetheless noting that by reason of the Gourdain test “an action is related to bankruptcy if it derives directly from the bankruptcy and is closely linked to proceedings for realising the assets or judicial supervision”.
32.	The court continued at [29] – [33]:
“29 In the light of the above it is therefore the closeness of the link, in the sense of the case-law resulting from Gourdain, between a court action such as the one at issue in the main proceedings and the insolvency proceedings that is decisive for the purposes of deciding whether the exclusion in Article 1(2)(b) of Regulation No 44/2001 is applicable.
30 It should be noted that, in a case such as the one at issue in the main proceedings, that link is neither sufficiently direct nor sufficiently close to exclude the application of Regulation No 44/2001.
31 It appears from the order for reference that German Graphics, the applicant in the proceedings before the Landgericht Braunschweig, has requested the recovery of assets owned by it and that the only question before the court relates to the ownership of certain machines situated on the premises of Holland Binding in the Netherlands. The answer to that question of law is independent of the opening of insolvency proceedings. The action brought by German Graphics sought only to ensure the application of the reservation of title clause in its own favour. 
32 In other words, the action concerning that reservation of title clause constitutes an independent claim, as it is not based on the law of the insolvency proceedings and requires neither the opening of such proceedings nor the involvement of a liquidator. 
33 In those circumstances, the mere fact that the liquidator is a party to the proceedings is not sufficient to classify the proceedings brought before the Landgericht Braunschweig as proceedings deriving directly from the insolvency and being closely linked to proceedings for realising assets. ”
33.	I was referred to a number of English authorities where the issue has arisen whether particular proceedings fell within the exclusion of insolvency proceedings in article 1(2)(b) of the Judgments Regulation. Each has been resolved by an application of the approach set out above. In Re Hayward [1997] Ch 45, proceedings by a trustee in bankruptcy to recover the debtor’s share in a villa in Spain was held not to be within the exclusion. It was a claim which existed independently of the bankruptcy and the only connection with the bankruptcy was that the right to bring the claim had vested in the trustee. As Rattee J observed at page 54E the relief sought by the trustee, unlike the situation in Gourdain v Nadler, could not be said to be relief available to the trustee only in the bankruptcy jurisdiction and in accordance with bankruptcy law. On the contrary, it was very like a claim made by a liquidator of a company to recover the company’s debts: page 54D. Re Hayward was approved and applied by the Court of Appeal in Ashurst v Pollard [2001] Ch 595, which concerned a claim by a trustee in bankruptcy to realise the debtor’s interest in a villa in Portugal. Likewise, in Byers v Yacht Bull Corp [2010] EWHC 133 (Ch), [2010] 2 BCLC 169, it was held that a claim by the liquidator of a company to assert the beneficial ownership of a yacht purchased with funds derived from the company was not within the exclusion. The claim existed independently of the liquidation of the company and could have been brought by the company prior to its liquidation. Actions brought to determine rights and obligations arising under pre-liquidation contracts are not within the exclusion: UBS AG v Omni Holding AG [2000] 1 WLR 916. No one suggests that the claim brought in the English proceedings by Enasarco against LBF falls within the exclusion. 
34.	It is necessary therefore to examine the nature of the Swiss proceedings, to determine whether they derive directly from the liquidation of LBF and are closely connected with its liquidation proceedings. For this purpose, both LBF and Enasarco have filed witness statements by their respective solicitors, exhibiting letters of advice from the Swiss lawyers acting respectively for them. Both parties put these letters of advice before the court as evidence of the relevant Swiss law. Although I have formed the clear view that I have sufficient information about the relevant Swiss law to determine the issues arising on this application, I do not regard this way of putting expert “evidence” before the court as satisfactory. Expert evidence of foreign law should be put before the court in accordance with the provisions of the Civil Procedure Rules. The attention of the experts should be drawn to their duties under Part 35 and its Practice Direction and their reports should comply with the requirements of the Practice Direction, including containing the statement required by para 3.2(9). The court would, as always, be assisted by the preparation of a joint report, identifying the areas where they agree and where they disagree, in the latter case indicating the grounds for their disagreement. It is also helpful to have experts who are independent of the parties, a point illustrated by the somewhat argumentative character of the letters of advice exhibited in this case. Nonetheless, as I have said, I have concluded that I have sufficient information to enable me to proceed to decide this application without requiring expert evidence properly so called. 
35.	LBF was subject to regulation by the Swiss Financial Market Supervisory Authority (FINMA) and to the special provisions regarding bank insolvency contained in the Swiss Federal Banking Act. Exercising its powers under article 33 of the Federal Banking Act, FINMA ordered the liquidation of LBF and appointed its liquidators. The principal Swiss statute dealing with insolvency law and procedure is the Debt Enforcement and Bankruptcy Law Act (DEBLA). By article 34 of the Federal Banking Act, a liquidation order under article 33 has the effect of opening bankruptcy proceedings in accordance with articles 197-220 of DEBLA and the liquidation is to be conducted in accordance with articles 221-270. The provisions of the Banking Insolvency Ordinance of FINMA (BIO-FINMA) also apply to the liquidation of LBF. 
36.	Both DEBLA and BIO-FINMA provide for a public announcement inviting claimants to submit their claims, together with evidence. It is the duty of the liquidator to examine the claims and to decide whether and to what extent claims are to be recognised and the ranking that they are to be given in accordance with Swiss liquidation law. The liquidator draws up a schedule of claims, showing the claims which have been admitted, their amounts and their ranking and, if claims are rejected or reduced, the claimants are informed by the liquidator of his decision and the grounds for it. Claimants may challenge the decision of the liquidator under article 250.4.1 of DEBLA which provides: 
“Any creditor wishing to contest the schedule of claims because its claim has been entirely or partially rejected or not allocated the class requested must bring an action against the bankrupt estate before the court of the place of the bankruptcy proceedings within 20 days of the schedule of claims being made available for public inspection.”
Article 250.4.2 entitles any creditor to contest the admission of another creditor to the schedule of claims or the allocated class. The assets of the company in liquidation are distributed to and among the claimants as admitted in the schedule of claims, amended as necessary as the result of any court challenges. 
37.	The grounds on which claims may be rejected or reduced include grounds arising exclusively under Swiss insolvency law. 
38.	This procedure is in substance indistinguishable from the procedure for the proof of debts under English insolvency law.
39.	According to the letter of advice provided by LBF’s Swiss lawyers the following issues must be dealt with in the challenge proceedings: the existence and the amount of the claim, the existence of collateral, the ranking of the claim, avoidance provisions under DEBLA which the liquidator may invoke as a reason for rejecting a claim, and other provisions of Swiss bankruptcy law on which the liquidators may rely for their decision.
40.	The Swiss Federal Supreme Court has held that the purpose of proceedings to challenge the schedule of creditors is limited to determining which claims are to be listed in the schedule of claims and their amounts and ranking. Their object is limited to determining the claims which will be recognised for participation in the distribution of the assets available in the liquidation. A judgment in such proceedings has no effect beyond those proceedings and does not amount to res judicata between the parties as to the merits of the underlying claim. If a claim is governed by foreign law, the Swiss bankruptcy court will receive evidence of the foreign law, but will not be bound by a decision of a foreign court, even one with exclusive jurisdiction, on the merits of the claim. 
41.	Mr Nash QC on behalf of LBF submitted that the real substance of the Swiss proceedings was the same as the English action, namely the existence and extent of any liability of LBF to Enasarco as assignee of ARIC’s rights under the Derivative Agreement. Unless Enasarco can establish such contractual rights, it will have no basis for its claim against the estate of LBF in the Swiss liquidation, any more than it will be entitled to a judgment in the English action. The issue will be decided as a matter of English law both in the English action and in the Swiss proceedings and there will therefore be a risk of irreconcilable decisions, the avoidance of which is one of the primary purposes of the Judgments Regulation. Against this background, the fact that the Swiss proceedings arise as a matter of procedure under Swiss insolvency law and are directed to determining whether Enasarco’s claim should be included in the schedule of claims is not sufficient to bring the Swiss proceedings within the exclusion contained in article 1(2)(b) of the Lugano Convention. 
42.	Notwithstanding the important common features on which Mr Nash relies, the Swiss proceedings are in my judgment clearly insolvency proceedings falling within the exclusion contained within article 1(2)(b). There are a number of reasons for this conclusion. First, they are proceedings which arise, and can only arise, under Swiss insolvency law. Secondly, they form an integral part of the liquidation proceedings, designed to achieve the primary purpose of such proceedings, which is the distribution of the assets available to the liquidators among those creditors whose claims are admitted. The proceedings must take place in the court dealing with the liquidation. Thirdly, the purpose of the proceedings is not simply to establish whether the claimant has a good contractual or other claim, but to determine the amount and the ranking of the claim for the purposes of the liquidation. The ranking of claims is a matter arising exclusively under the relevant insolvency law. The determination of the relevant amount depends on more than just the contractual or similar rights of the claimant and the company in liquidation. A good contractual claim can be reduced or even extinguished for insolvency purposes by cross-claims or other matters arising exclusively under Swiss insolvency law. Indeed, in this case, the liquidators rely on a provision in DEBLA to reject Enasarco’s claim, even if it is well-founded as a matter of contract under the Derivatives Agreement. Fourthly, the self-contained and special character of the Swiss proceedings is well illustrated by the fact that it does not give rise to res judicata as between the parties in relation to the underlying contractual dispute. 
43.	Further, article 4(2) of the Insolvency Regulation provides that the law of the state in which insolvency proceedings are opened shall determine “the conditions for the opening of those proceedings, their conduct and their closure”, in particular “the claims which are to be lodged against the debtor’s estate” (paragraph g) and “the rules governing the lodging, verification and admission of claims” (paragraph h). Paragraph 196 of the Virgos-Schmit Report on the Convention on Insolvency Proceedings states that the Convention was to apply to “actions which are based on (and not only affected by) insolvency law and are only possible during the insolvency proceedings or in direct relation with them”, including “actions relating to the admission or the ranking of a claim”. The Virgos-Schmit Report is regarded as an authoritative commentary both on the Convention and on the Insolvency Regulation: see Re Stanford International Bank Ltd [2010] EWCA Civ 137, [2011] Ch 33 at [36] per Sir Andrew Morritt C.
44.	For all these reasons, the Swiss proceedings meet the criteria laid down in Gourdain v Nadler of deriving directly from the liquidation and being closely connected with the liquidation proceedings. The Swiss proceedings could not exist, nor have any relevance, outside the Swiss liquidation.
45.	Mr Nash accepted that issues could arise in such proceedings which depended exclusively on questions of insolvency law. He accepted that, to that extent, the proceedings had the character of insolvency proceedings to which article 1(2)(b) would apply. In determining whether in any particular case article 1(2)(b) did apply to such proceedings, he submitted that the court would have to engage in a balancing exercise, analysing whether insolvency issues arose and the weight which they would have in those proceedings. The proceedings would constitute insolvency proceedings if it could be seen that, on balance, the insolvency issues were preponderant. Equally, if they were less significant to the outcome than the issues of general law, they would not fall within article 1(2)(b). In my view, article 1(2)(b) cannot have been intended to introduce such uncertainty into the application of a provision which is intended to create a clear demarcation between insolvency and other proceedings. The need to make this submission in order to have any chance of making his principal submission workable shows, in my view, that Mr Nash’s principal submission is not sound. 
46.	In coming to a conclusion on the application of article 1(2)(b) to the Swiss proceedings, I have taken account of decisions of the Swiss courts to which the parties’ Swiss lawyers refer in their letters of advice. In State of Belgium v SAirLINES (in liquidation) (Case No. FB060044, 29.09.06), the Zurich District Court held that a challenge brought by the claimant to the schedule of claims prepared by the liquidator were not proceedings falling within the liquidation exclusion in article 1(2)(b) and should therefore be stayed in favour of proceedings already commenced in Belgium before the commencement of the liquidation. The stay was ordered not under article 27 (of the earlier Lugano Convention), because a challenge to the schedule of claims is not limited to dealing with the substance of the underlying contractual or other claim, but on the basis that they were related actions falling within what is now article 28. 
47.	On appeal, the Superior Court of the Canton of Zurich reversed this decision and held that the Swiss proceedings fell within the exclusion of insolvency proceedings in article 1(2)(b). It did so on the grounds that if the Lugano Convention were to apply, it could apply only to the proceedings so far as they were concerned with the substantive law aspects of the claim. The Swiss proceedings were inextricably linked with the company’s insolvency, and dealt with insolvency law issues as well as substantive law issues. The Swiss proceedings were a single claim and there was no basis in the Lugano Convention for dividing a single claim. The court concluded that “the claim cannot be defined according to the issue in dispute in each individual case, rather what is critical is the purpose of the claim, taken as an instrument of insolvency law.” The court emphasised too that any decision in the challenge proceedings as to the substance of the claim had no effect beyond the liquidation proceedings.
48.	The case went on appeal to the Swiss Federal Supreme Court, which gave its decision on 23 April 2007. However, there was no appeal against the Superior Court’s decision on this particular point. Nonetheless, the Court noted that the view of the overwhelming majority of legal scholars was that challenge proceedings under article 250 of DEBLA fell within the exclusion for insolvency proceedings. The court stated at [4.3.3]:
“It is the purpose of scheduling proceedings in the context of bankruptcy (Art 244 to 251 DEBA) to determine the encumbered estate, i.e. the scope of all claims which can satisfy themselves from the bankruptcy proceedings, according to their existence, amount, rank and any preferential rights that exist against the debtor’s assets. Scheduling proceedings served the sole purpose of clarifying the schedule of claims and have as little impact beyond the scope of the bankruptcy proceedings in terms of any res judicata effects as the schedule. The debt obligation as such – between debtor and creditor – is not resolved with binding legal effect as a result thereof. In scheduling proceedings, the existence of a claim can certainly be the object of judicial review, but cannot form the object of a decision that obtains res judicata. Rather the object of a scheduling decision is merely a determination as to the extent to which the contested claims of the creditor are to be taken into account when liquidating the bankrupt’s estate.”
Later in the same paragraph the court continued:
“The Swiss scheduling law suit is thus no different from the Swiss actio pauliana, which, as a bankruptcy-related law suit with reflexive effect on substantive law, is also excluded from the scope of application of the Lugano Convention. The scheduling action is a legal remedy that is closely related to the structure of bankruptcy law and the particularities thereof…and as such forms an integrated component of bankruptcy liquidation.”
The court went on to note that it was not, however, required to reach a decision on this point.
49.	LBF submit, on the basis of the advice of their Swiss lawyers, that the decision of the Superior Court was wrong and that the views expressed by the Federal Supreme Court should not carry weight because the court reached no decision on the matter. This is a bold submission which, in my view, lacks any solid foundation. While it is for this court to reach a decision on the application of article 1(2)(b) of the Lugano Convention to the Swiss proceedings, this decision and these views of senior Swiss courts carry great weight and, for the reasons which I have earlier given, are in my judgment correct. 
50.	It follows, as LBF accepts it must, that article 27 of the Lugano Convention does not apply and there cannot be an automatic stay of the English proceedings. It is therefore unnecessary to consider the issue which would otherwise have arisen, whether the English proceedings and the Swiss proceedings involve “the same cause of action and [are] between the same parties”. Given the different purposes of the English proceedings and Swiss proceedings as explained above, they do not appear to me to have “le même objet et la même cause”. This was the view of the Zurich District Court in the case cited above. However, it is not necessary to analyse this issue in any detail or come to a concluded view. 
51.	In the alternative, LBF seeks a stay of the English proceedings in exercise of the court’s discretion either under article 28 of the Lugano Convention or under the court’s case management powers under section 49(3) SCA 1981. 
52.	As regards the application under article 28, issues arise as to whether that article applies only when both the English proceedings and the foreign proceedings are within the scope of the Convention and, if the Convention applies even when the foreign proceedings are outside its scope, whether the English proceedings and the Swiss proceedings are “related actions” for the purposes of article 28. In Rahman v GAMC Commercial Finance Ltd [2012] EWCA Civ 1467, the judge at first instance had held that article 28 applied only where both sets of proceedings were within the scope of the Convention, but the Court of Appeal left this issue open and upheld the judge’s decision as a matter of discretion to refuse a stay of the English proceedings. 
53.	In the present case, I too am satisfied that there is a very strong case for refusing a stay of the English proceedings, even if article 28 applies. It is therefore also unnecessary for me to decide the issues of principle in relation to the proper construction of article 28.
54.	In support of its application for a discretionary stay, LBF relied on a number of factors. First, it submitted that there is a real risk of irreconcilable judgments on the issue whether LBF is liable to Enasarco under the Derivative Agreement and on the closely related issue whether ARIC has any liability to LBF. Secondly, unless a stay is granted, the two sets of proceedings will continue in parallel, wasting costs and court resources in hearing the same dispute twice. The Swiss proceedings are further advanced than the English proceedings and there appears to be agreement between the Swiss lawyers that judgment could be achieved by early 2015 or, if (as would seem to me to be likely) the Swiss court requires expert assistance on the issues of English law, some time in mid-2015. The Swiss court is perfectly capable of assessing the position in English law by reference to legal materials and expert evidence. Thirdly, this is not a case where the party seeking a stay has commenced foreign proceedings in breach of an exclusive jurisdiction clause. In this case, it is Enasarco, not LBF, which has instituted the Swiss as well as the English proceedings. 
55.	I do not consider that these amount to good or substantial grounds in favour of a stay in this case and I consider that there are strong grounds against the stay of the English proceedings. 
56.	First, the Derivative Agreement contains an exclusive jurisdiction clause, as regards states which are parties to the Lugano Convention, in favour of the English courts. The governing law of the contract is English law. The exclusive jurisdiction clause is itself “a powerful factor in support of refusal of a stay” and the English court is “the natural court to consider the issues raised…because they raise contractual questions governed by English law”: see The Alexandros T [2013] UKSC 70 at [95]-[96]. There is the additional factor, noted by the Court of Appeal in AWB (Geneva) SA v North America Steamships Ltd [2007] EWCA Civ 739, [2007] 2 Lloyd’s LR 315, that the Derivative Agreement incorporates the standard terms of the ISDA Master Agreement which is widely used in all types of derivative transactions on the international markets and plays an important role in the efficient functioning of those markets. 
57.	Secondly, as noted by the Court of Appeal in the AWB (Geneva) case when refusing a stay of English proceedings in favour of insolvency proceedings in Canada, and also by Rimer J in UBS AG v Omni Holding AG when refusing a stay of English proceedings in favour of insolvency proceedings in Switzerland, it is likely that the Swiss court will be greatly assisted by having the judgment of the English court on the rights and liabilities of the parties under the Derivative Agreement, given that it is governed by English law. It is of course possible that the Swiss court would come to a different determination of these issues, presumably on the basis of expert English law evidence, but that evidence itself would have to take account of the decision of the English courts and the risk of irreconcilable decisions appears to me to be more theoretical than real. Even if the Swiss court came to a conclusion contrary to that reached by the English court, its decision would have effect only within the insolvency proceedings in Switzerland and would create no res judicata as to the substantive rights of the parties. A decision in the Swiss proceedings would determine whether Enasarco can make any recovery from the available assets of LBF, but it would have no effect on the claim made by the liquidators of LBF against ARIC. If it wished to pursue such claim, LBF would need to bring proceedings against ARIC. Although, as Mr Nash submitted, the jurisdiction clause would not preclude LBF from commencing proceedings against ARIC in the Cayman Islands where it is incorporated, it appears to me unlikely that in reality the issue would be determined by any court other than the English court. 
58.	Thirdly, as to practical considerations relating to the two sets of proceedings, I am not impressed by the submission that the Swiss proceedings are sufficiently far advanced to make it a relevant factor in favour of granting a stay of the English proceedings. Any decision of the Swiss court is at least twelve months away and, more probably, at least eighteen months away. I doubt whether there will be a significant difference in the time by which the two courts are likely to reach their respective decisions. Given that the issues are issues of English law, I would have thought it not improbable that the Swiss court would delay its decision until the English court had given judgment. There are other practical considerations. The relevant contractual documents are complex and stand to be construed in English as a matter of English law. For the Swiss court to reach a decision, these documents would require to be translated and then construed in a language which is not that of the contract. There may well be further extensive documentation, all of it in English, which will require translation. 
59.	Fourthly, the merits of having issues arising under the Derivative Agreement determined by the English court have in fact been recognised by the liquidators of LBF in the past. They consented to the lifting of the automatic stay under article 20 of Schedule 1 to the CBIR and fully participated in the substantial hearing before Briggs J. Not only that but they also consented to the lifting of the stay for any further part 7 proceedings which might be required, and the liquidators of LBF accept that the present proceedings come within that order. Against that background, the sensible course would appear to me to resolve the further issues arising under the agreement through proceedings in England. I asked counsel for the liquidators of LBF to take instructions on the reasons for not taking that course but instead insisting that the issues were determined in the Swiss proceedings. I was told that the focus of the liquidators’ activities had been on all the claims submitted in the liquidation, rather than specifically on this claim. This does not appear to me to be a convincing or satisfactory explanation, particularly as the liquidators must have taken English advice to reach their conclusion in rejecting Enasarco’s claim. I am left with the feeling that they consider that there is a tactical advantage in seeking to have the matter resolved in Switzerland. 
60.	Fifthly, there is, I consider, nothing in the suggestion that the English proceedings should be stayed because Enasarco has chosen to commence proceedings in Switzerland. In reality, Enasarco had no choice at all in the matter. Because the liquidators chose to deal with Enasarco’s claims only in the Swiss insolvency proceedings and not through further proceedings in the English courts, Enasarco had no choice other than to issue its challenge to the schedule of claims within the prescribed period of 20 days if it wished to preserve its right (if established) to participate in the distribution of LBF’s assets. The true analysis is that it was the liquidators’ choice in this respect that forced Enasarco to issue the Swiss proceedings.
61.	For these reasons, I am satisfied that a stay of the English proceedings should be refused, whether under article 28 of the Lugano Convention or under the court’s case management powers. 
62.	This leaves the application by ARIC for permission to bring proceedings against LBF in the English court, notwithstanding the automatic stay under article 20 of Schedule 1 to the CBIR. In the light of the assertion by the liquidators of LBF that ARIC is indebted to LBF in a sum of some $30.78 million, payment of which was demanded in a letter from LBF’s English solicitors dated 9 April 2013, ARIC wishes to issue proceedings for a declaration that it is not indebted to LBF. 
63.	Although it is said on behalf of the liquidators of LBF that they have not decided whether they will pursue this claim, there clearly is a real issue between the parties. In view of the jurisdiction and governing law provisions of the Derivative Agreement, it is not suggested on behalf of the liquidators that the issue of any liability on the part of ARIC would not properly be decided in English proceedings. They accept also that the issue of any such liability cannot be determined in LBF’s insolvency proceedings.
64.	In opposing ARIC’s application, it was submitted for LBF that the application should stand or fall with the decision on LBF’s own application for a stay. On that basis, it follows from my refusal of LBF’s application that ARIC should be granted permission to bring its proceedings. However, in any event, I consider that this is the right course. It was suggested on behalf of LBF that there was no urgency in determining the liability, if any, of ARIC. It was suggested that it could await a decision on Enasarco’s claim, in the light of which the liquidators of LBF would consider whether to pursue any claim against ARIC. In my judgment, there is no reason why ARIC should be required to wait for the determination of this issue. A large claim has been made in correspondence against it and, as it seems to me, it is entitled to have that issue determined as soon as is reasonably practicable. The circumstances in favour of the grant of permission to ARIC appear to me to be overwhelming. This provides an additional reason why there should be no stay of the related issues arising in the proceedings commenced by Enasarco. It means that the rights and liabilities of all three parties can be determined in one set of proceedings.
65.	Accordingly, I shall refuse the application of LBF for a stay of the English proceedings and, on ARIC’s application, I shall grant permission for it to commence a Part 20 claim against LBF.