Case law Developments in PIL

The Place of Financial Loss – The Court of Appeal for England and Wales in Kwok Ho Wan v UBS

Determining financial loss has become the neuralgic point of Art 7(2) Brussels Ibis and Art 4(1) Rome II Regulation. By leaving the EU, the UK has not been able to leave the issue behind. It has retained the Rome II Regulation as domestic law. Additionally, it is obliged to keep the place of damage as a criterion for determining jurisdiction under the Brussels Ibis and the Lugano Convention at least for those proceedings that started before 31 December 2020, the end of the implementation period. This means that English courts will need to continue determining the place of financial loss for a while.


A recent case, Kwok Ho Wan and Others v. UBS AG (London branch), involved a suit against a Swiss bank brought in London by an individual based in Hong Kong and two companies, one from Hong Kong and the other from the British Virgin Islands.

The subject matter was a botched investment made by the first claimant – a prominent exiled billionaire from China – into shares of a Hong Kong company via a third company, also based in Hong Kong. When entering into the investment agreement, Kwok Ho Wan allegedly relied on misstatements by UBS’ London branch – misstatements which were made in Hong Kong. The London branch of the bank had also partly financed a loan to the acquiring company via a financing and security agreements, which were subject to English law and jurisdiction.

When the investment turned south, the London branch exercised its right under the security agreement and sold the shares, resulting in a heavy loss for the claimants. Unhappy about this, they sued the Swiss bank in London.

Legal Issue and Holding

To decide whether it had jurisdiction, the Court of Appeal had to determine where the damage had occurred in accordance with Art 5(3) Lugano Convention 2007 (“Lugano II”). It held that this was in England.


The Court of Appeal discusses the case law of the CJEU, in particular the decisions Kronhofer, Kolassa, Universal Music, Löber and VEB. After a thorough analysis, Sir Geoffrey Vos, the Master of the Rolls, writes that

I am not certain that there is any rule that is universally applicable to financial loss cases, as UBS London seeks to establish. The answer will depend on the facts of those cases as the contrast between the outcomes in Kronhofer and VEB on the one hand and Kolassa and Löber on the other hand, demonstrates. It is, in my judgment, dangerous to seek to define the test for where damage occurs in a wide range of financial loss cases, because they are likely to be so fact dependent” [at 45 and 46].

Few observers on the continent will disagree with this sober assessment.

The Swiss bank submitted that the claimants had suffered loss in Hong Kong when they had entered into the investment agreement there. Sir Geoffrey finds this approach “over technical and not appropriate in this case” [at 51]. In his view, it “puts form above substance, and places too much reliance on the shape of the pleadings” [ibid.]. Instead, an autonomous approach to Art 5(3) Lugano Convention would require an answer to “pragmatic questions”, namely where the damage manifested itself and whether there were sufficient connections to London to displace the rule that defendants have to be sued at their domicile.

He finds such connections in the present case because (1) the loss had manifested itself when the shares were sold in London (2) the loan and the security agreements “were founded” there (3) any real loss to the shares “was always likely to be suffered in London”, and (4) the Swiss domicile of the bank had no connection to the transaction “whatsoever”. As a result, the damage would have occurred in London, not in Hong Kong, and the English courts would have jurisdiction.


It is hard to follow the arguments of the Court of Appeal. Under Kolassa, Löber and VEB, the place where the shares are listed or offered is decisive, which would be in Hong Kong. One can of course disregard this line of decisions in the present case on the grounds it does not involve issuer liability. Then, one would end up with Universal Music, which refers to the place where the disadvantageous transaction was entered into. But again, this was in Hong Kong! One way or the other, all roads therefore lead to Hong Kong and away from London.

The counterarguments of the Court are hardly convincing: (1) The sale of the shares certainly generated a loss, but this loss already existed before the sale. It would not have impacted jurisdiction if the Swiss bank had sold the shares from the botched investment e.g. in Zurich. (2) The loss resulted from the investment agreement, not from the financing and the security agreement. The fact that the latter are subject to English law and jurisdiction does not change the place of the loss resulting from the investment itself. (3) Where loss was expected to be suffered cannot impact where it was actually suffered. It was not unforeseeable either that the loss already occurred when the investment agreement was signed in Hong Kong. (4) The rule that the defendant has to be sued at the place of his or her domicile (Article 2 Lugano II) is the general rule of the Convention. It applies irrespective of whether the case has any connection to this place.

The interpretation of the Lugano Convention by the Court of Appeal is thus misconceived. While it is understandable that the English judges prefer not let a profitable case go and assume jurisdiction, one can only hope that this case was an outlier and will not be the harbinger of a larger trend of estrangement from the CJEU’s case law.

2 comments on “The Place of Financial Loss – The Court of Appeal for England and Wales in Kwok Ho Wan v UBS

  1. Adrian Briggs

    I agree that the judgment is hard to applaud. The first impression it gives is of a certain judicial impatience with the law (or with those who have tried to make an accurate map of the law) which is to be derived from these decisions of the CJEU. These decisions have wandered to and fro, and in some cases, at least, have the acrid smell of expediency (or of diesel emissions) about them; the most one can say for them is that they tend to ask when occurred the event that made loss legally inescapable, which is, intuitively, a good indication of when, but a poorer indication of where, damage occurred.
    My sense is that the court, whether it realises it or not, is harking back to a ‘where in substance…’ test, of the kind we use(d) from time to time in dealing with non-Convention jurisdictional rules. And there are strands in CJEU jurisprudence – particularly in Loeber – which seem to ask whether there is enough of a connection to justify finding the ‘damage occurred’ rule pointing to the claimant’s home. In the fullness of time, an analysis of ‘where?’ which is not held captive by the ‘ what was the event in the chain when…?’ approach may come to be seen as rational, and as the more likely to point to a court (or a law, in the Rome II context) to a connection sufficient to satisfy the rule, and the policy underpinning the rule, in question. But I agree that it is not what the Court of Appeal should have done, or veered towards, in this case.
    I would take issue with the suggestion, if it is really intended, that the court reasoned as it did because it saw the case as profitable. I cannot begin to see how this is based in reality. English practitioners do sometimes joke about what sometimes seems to be the English court’s universal jurisdiction over fraudsters, but the idea is an amusing fantasy. The suggestion that the court’s decision was motivated by its sense that the case was a ‘profitable’ one is not.

  2. I would draw attention to the facts as carefully articuled by Cockerill J at first instance ([2022] EWHC 245 (Comm)). The Investment Agreement was not signed in Hong Kong. It happened to be signed in Shenzhen, China (at [55]) which had no other connection to the dispute.

    Moreover, Cockerill J, asking ‘when and where’ the loss actually manifested (appling Lober and VEB), found that there was no ‘actually manifested’ loss when the agreement was signed, but only when the market moved so as to allow UBS London to exercise its rights (at [112]-[115]). Until that time there was no meaningful loss. This was contrasted with cases where money is expended and immediately lost (e.g. where it is paid to fraudsters, or where the transaction is inherantly loss making because it is for defective goods).

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