Since the collapse of several large financial institutions
from 2008 onward, derivative counterparties have attempted to
challenge a derivative contract and avoid losses by arguing the
contract is ultra vires because the counterparty did
not have legal capacity to enter the contract in the first
By raising this argument, foreign counterparties to an
English law-governed derivative contract have also sought to
invoke an EU regulation challenging the jurisdiction clause and
seeking to have the proceedings heard in its home jurisdiction
potentially on more favourable terms.
Article 22(2) of the Council Regulation (EC) No 44/2001
provides that in proceedings which have as their object the
validity of the decisions of the organs of a company or legal
person, the courts of the member state where the company or
legal person has its seat have exclusive jurisdiction.
The European Court of Justice (ECJ) has recently considered
this issue in an...