LONDON – Italy's Monte dei Paschi di Siena asked a London court on Monday to stay or dismiss legal action by Japan's Nomura <8604.T> over risky derivatives trades that got the Tuscan bank into deep trouble.
The complex deals agreed in 2009 between the two banks are already the subject of criminal investigations in Italy, and Monte dei Paschi is seeking damages from Nomura in a Florence court.
Monte dei Paschi alleges that its former chairman Giuseppe Mussari and former general manager Antonio Vigni colluded with Nomura to set up opaque structured finance transactions aimed at concealing losses of about 220 million euros which had accrued under an earlier investment known as Alexandria.
Nomura has denied any wrongdoing. Monte dei Paschi is seeking 700 million euros ($944.48 million) in damages from Nomura, Mussari and Vigni.
The Japanese bank launched legal action in the High Court in London in March, seeking a series of court declarations including that the contracts between the banks are valid and that Monte dei Paschi's obligations remain in full force.
Monte dei Paschi responded by challenging the jurisdiction of the English court over the matter.
A hearing that began on Monday in the High Court was the first time the dispute between Nomura and Monte dei Paschi was aired in open court in London.
The hearing, which was scheduled to last a day and a half, was not to resolve any of the substantive factual disputes but rather for both parties to present their arguments on the jurisdiction issue.
The hearing focused on questions such as whether the Italian and English proceedings were related in a legal sense, whether there was a risk of irreconcilable judgments from courts in the two countries, and other legal issues.
Monte dei Paschi argued that the court should either stay the proceedings initiated by Nomura or decline jurisdiction.
Monte dei Paschi's lead counsel Jonathan Nash told the court that an asset swap transaction, a long-term repo and a repurchase facility agreed with Nomura were linked by a so-called "mandate agreement".
This agreement, he said, contained a clause providing for the "non-exclusive jurisdiction of the English courts".
"It is the mandate agreement which links all the other contracts into a single transaction, and the core allegation in this complaint is that this structure had only one purpose which was to conceal the loss which had been accrued in the Alexandria notes," said Nash.
He argued that for the purposes of determining jurisdiction, the mandate agreement should thus take precedence over the asset swap transaction, which contained an exclusive jurisdiction clause in favour of the English courts.
Nomura's lead counsel Richard Handyside is expected to respond to Nash's submissions on Tuesday.
In a written skeleton argument submitted to the court ahead of Monday's hearing, Nomura argued that all the relevant contracts were governed by English law.
"None of the Nomura agreements contains jurisdiction clauses in favour of the Italian courts," the Nomura document says.
The Japanese bank's lawyers also dispute that the mandate agreement is the key document connecting all the transactions.
According to Monte dei Paschi, the mandate agreement only came to light in 2012 when it was found by the bank's new management in a safe previously used by Vigni. The agreement had been concealed from the board of directors and from regulators when it was first drawn up, according to Monte dei Paschi.
Nomura disputes this, asserting that the mandate agreement had been registered internally in Monte dei Paschi's Management Office. ($1 = 0.7412 euros)
(Editing by David Cowell)