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PrimaCom gives lenders certainty on jurisdiction

A recent German ruling gives international lenders certainty that German courts will uphold English law jurisdiction clauses. By Sven Schulte-Hillen and Markus J Friedl

This article appears courtesy of International Financial Law Review

On September 13 2005, the District Court of Mainz, Germany, dismissed a lawsuit brought by telecoms company PrimaCom against its lenders under its second secured loan facility. The court upheld the jurisdiction clause giving the courts of England exclusive jurisdiction over all disputes relating to the loan agreement and rejected PrimaCom's claims based on the lack of international jurisdiction. PrimaCom had claimed that the loan agreement was null and void because it violates German public policy. Consequently, PrimaCom argued that the District Court should disregard the exclusive jurisdiction clause in favour of English courts contained in the loan facility agreement.

The District Court, however, held that the agreement on exclusive jurisdiction was valid and that, therefore, it would not hear any arguments with respect to the validity of the loan agreement. Pursuant to European law, the validity of an agreement on exclusive jurisdiction is not dependent on the validity of the underlying agreement.

Three months after PrimaCom started its proceedings in Germany, JPMorgan, the agent under the second secured loan facility, filed a claim against PrimaCom before the High Court in London, seeking declaratory judgement that the provisions regarding the calculation of interest contained in the facility agreement were valid and enforceable.