Astrazeneca UK Ltd v International Business Machines Corporation

In construing a complex services agreement, the court must read individual provisions in the context of the agreement’s overall scheme and relevant background. Commercial consequences may assist, but arguments based on contractual redundancy carry limited weight in a lengthy and complex document.

Termination provisions were construed to permit continued shared services after the extended termination date where shared infrastructure, associated systems or third-party contracts could not reasonably be transferred. The customer could request all or only separable elements of those services. Termination assistance generally ended with the exit period. An IT transfer plan was required where termination assistance was needed, but the supplier’s information and assistance obligations were not conditional upon its prior production. A fixed fee could be adjusted to reflect the transfer plan and actual exit period.

The claimant and defendant entered into a Master Services Agreement for the provision of information technology services. The claimant gave notice terminating the agreement and sought declarations concerning the parties’ post-termination rights and obligations.

The principal issues concerned the meaning and operation of the termination assistance provisions in Schedule 22 and Schedule 22A. They included the scope of shared infrastructure, the systems and third-party contracts subject to transferability, the scope and duration of shared services and termination assistance, the requirement for an IT transfer plan, and the operation of the fixed fee.

1. Construction. The MSA was to be construed by ascertaining the meaning conveyed to a reasonable person with the relevant background knowledge. The provisions had to be read in the context of the agreement’s overall scheme, including the purpose of the termination schedules and the contractual background recorded in Schedule 29 ([2011] EWHC 306 (TCC), paras 29–33, 77–94).
2. Shared infrastructure and transferability. “Shared infrastructure” in paragraph 12.1 of Schedule 22 included equipment, systems and facilities at IBM’s shared data centres used to provide Data Centre Facilities Services. “Associated Systems and Third Party contracts” referred to those associated with the shared infrastructure, rather than only those associated with the relevant terminating services. The physical environment of the data centres could therefore fall within the provision, including power, HVAC, fire protection, cabling, security and floor space (paras 87–111).
3. Scope of a request. AstraZeneca was not required to request all shared services. It could request all shared services or particular separable Individual Services, Services, Service Components or Operating System instances. The request had to be made in sufficient time for IBM to provide its offer at least 30 days before the extended termination date (paras 122–129).
4. Duration of assistance. Subject to the special provision for shared services, IBM’s contractual obligation to provide services and termination assistance ended with the exit period and extended termination date. The reference to the “Actual Exit Period” did not extend those obligations until every responsibility had in fact been transferred (paras 143–149).
5. IT transfer plan. Where AstraZeneca required terminating services or termination assistance, it was obliged to provide an IT transfer plan. The word “may” in paragraph 7.1 of Schedule 22 concerned the preparation of one or more plans, not a discretion to provide none. IBM’s obligations to provide information and termination assistance were not conditional on AstraZeneca first producing the plan (paras 175–193).
6. Fixed fee. IBM was required to provide a fixed fee for termination assistance. The fee was not conditional on an IT transfer plan or the final duration of the exit period, but it could require adjustment if either affected the substance or extent of IBM’s obligations (paras 194–201).
7. The court proposed declarations reflecting those conclusions. No declaration was made on the agreed Clause 75 issue because it would not determine the real dispute between the parties (paras 150–156).