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Practical points on forum non conveniens in Deutsche Bank AG v CIMB Bank Berhad

The judgment in Deutsche Bank AG v CIMB Bank Berhad is admirably short. In my view, it is worth reading for the three main practical points it conveys in relation to forum non conveniens:

  • The test laid down in The Spiliada is still the starting point for considering a stay on the grounds of forum non conveniens.
  • The timing of any application for a stay is important. The court will consider who has issued proceedings in another jurisdiction, when they were issued, what their scope is and what stage they have reached.
  • The risk of duplication with proceedings in other jurisdictions and potentially inconsistent decisions arising may not be, on their own, enough to lead to a stay. It is therefore important to include all relevant factors when making an application.

Background

In brief, the claimant, Deutsche Bank, brought proceedings in London against the Defendant, CIMB, a Malaysian bank with a branch in London. The dispute centred upon fraud and the validity of letters of credit, which had originally been issued by CIMB in favour of Global Tradinglinks Limited (Global). This was in order to finance the purchase of cotton by Cashcot Industries Pte Limited (Cashcot) from Global.

Deutsche Bank, with the authority of CIMB, had confirmed the letters of credit. The involvement of two banks, an “issuing bank” (CIMB in this case) and a “confirming bank” (Deutsche Bank), is a common arrangement in international trade when the buyer and seller are based in different jurisdictions.

Deutsche Bank had previously advanced loans to Global. The obligation to repay those loans was discharged when Global presented the necessary documents under the letters of credit. Following this, Deutsche Bank sought reimbursement from CIMB pursuant to the letters of credit.

CIMB refused to pay on the grounds that the letters of credit were non-compliant, and CIMB was not required to pay because of an alleged fraud on the part of Cashcot and others. Significantly, no allegation of fraud was made against Deutsche Bank.

CIMB made an application to stay the proceedings in London on the basis of forum non conveniens and argued that Singapore was the appropriate forum for the dispute. They had two main arguments: first, continuation of proceedings would be duplicative of proceedings already ongoing in Singapore, thus increasing costs and the risk of inconsistent decisions; second, there were allegations of fraud where the supporting documents and witnesses were in Asia.

In my view, the three important practical points arising from the case are:

Practical point 1: Spiliada is still the starting point

In his judgment, Teare J repeated that the test for whether a case should be stayed on forum non conveniens grounds is the two-stage test set out in The Spiliada.

First, the burden is on the defendant to show that there is another forum that is clearly or distinctly more appropriate than England. A number of factors will be taken into account, including:

  • The law governing the transaction.
  • Expense and convenience, including the availability of witnesses.
  • The places where the parties reside or carry on business.

The relevant factors will vary from case to case, as will the weight that should be attached to each of the factors.

Second, even when the defendant proves that there is a more appropriate forum, the court will not order a stay where justice requires that a stay should not be granted. For instance, where a party will not obtain justice in a foreign jurisdiction.

Practical point 2: timing is (all?) important

In my opinion, Teare J’s reasoning was (rightly) heavily influenced by the timeline of events in two key respects.

First, at the time the London proceedings were issued, CIMB had already brought two sets of proceedings in Singapore: one against Cashcot; and one against Bhadresh Trading Corporation Limited, who had acted as Cashcot’s guarantor. However, CIMB had not yet brought proceedings against Deutsche Bank. In fact, CIMB only did this over two weeks after they made their application to stay the English proceedings. The “spectre of duplicative proceedings” as between Deutsche Bank and CIMB came about because CIMB chose to bring proceedings against Deutsche Bank in Singapore, not because Deutsche Bank brought proceedings in London. CIMB had brought on the risk of duplicative proceedings itself.

Second, one of the arguments made by CIMB was that proceedings were significantly more advanced in Singapore. Teare J’s reasoning implicitly accepted that this was a relevant factor, but rejected the argument on the facts as in both jurisdictions the proceedings were in their early stages.

Practical point 3: the risk of duplication and inconsistent decisions may not be enough to secure a stay

At several points in his judgment, Teare J stated that the risk of duplication and inconsistent decisions was not a reason, in isolation, to order a stay. It was a by-product of litigating a dispute in two different courts, rather than proving that Singapore was clearly the more appropriate forum.

Although I agree with Teare J, the key to this conclusion was being able to carve out a narrow dispute from litigation that was ongoing elsewhere. On the particular facts of Deutsche Bank, of central importance to his conclusion was the specific contractual relationship between Deutsche Bank and CIMB. As confirming bank and issuing bank, they had a contractual relationship which was entirely distinct from CIMB’s relationship with its customer. The issues between Deutsche Bank and CIMB were therefore:

  • Much narrower than the issues between CIMB, Cashcot and others as being litigated in Singapore, which would minimise any duplication.
  • Capable of being decided in either England or Singapore, as they rested on documents or evidence available in either jurisdiction, as opposed to the broader issues being litigated in Singapore, which would require further witness evidence.
  • There was only a risk of duplication, rather than a guarantee of it. The Singapore court may not ultimately consider the issue of whether the letters of credit were compliant if this is decided between Deutsche Bank and CIMB in the English courts.

If the issues were not as narrow or distinct, I think that the risk of duplication and inconsistent decisions between the jurisdictions may have carried more weight with Teare J.

Conclusion

From a practical perspective, two points arise from Teare J’s conclusion:

  • When making or resisting an application for a stay, it is important to consider whether it can be argued that the issues in one jurisdiction are much narrower (whether in fact, law or evidence) than those proceeding elsewhere or whether they are entirely distinct. If so, this is a point worth making.
  • In any application, rely on as broad a range of supporting factors as possible, as risk of duplication or inconsistent decisions may not be enough to ensure a successful outcome.
39 Essex Chambers Melissa Shipley

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