Microsoft Mobile OY (Ltd) v Sony Europe Ltd & Ors

An arbitration clause covering disputes related to a long-term supply agreement may extend to parallel tort and competition claims where those claims are closely connected with plausible contractual claims. The court must assess the relationship contemplated by rational commercial parties, rather than the causes of action actually pleaded.

For service out of the jurisdiction, the claimant must establish a serious issue to be tried, a good arguable case within a gateway, and that England and Wales is clearly and distinctly the proper forum. Damage within the jurisdiction must be direct and substantial in the relevant claim. Assigned claims are assessed by reference to the original claimant. The duty of full and frank disclosure applies to material jurisdictional weaknesses on applications without notice.

Microsoft Mobile claimed damages from manufacturers and suppliers of lithium-ion batteries, alleging a prolonged cartel contrary to competition law and related economic torts. The claims were brought in Microsoft Mobile’s own right and as assignee of claims belonging to Nokia and its subsidiaries.

Sony Europe and Sony Corporation applied for stays under section 9 of the Arbitration Act 1996, relying on an arbitration clause in a product purchase agreement. Microsoft Mobile also sought to maintain service out of the jurisdiction against Sony Corporation, LG Chem and Samsung. Master Clark had permitted service out. The central issues were the scope and operation of the arbitration clause, and whether the claims satisfied the jurisdictional gateways under Practice Direction 6B.

1. Stays in favour of arbitration. The arbitration clause covered disputes related to the product purchase agreement or its enforcement. Applying the commercial approach in Fiona Trust and the one-stop-shop presumption, the clause extended to the pleaded tort and competition claims against Sony Europe, except any claims accruing before the agreement commenced. The claims were closely connected with plausible contractual claims based on the express obligation to negotiate prices in good faith. The absence of a pleaded contractual claim did not permit the claimant to avoid the clause. [42]-[73]
2. The court rejected the argument that EU law required the arbitration clause to be disregarded merely because arbitration might fragment the claims. The Court of Justice’s decision in Cartel Damage Claims (CDC) Hydrogen Peroxide did not mandate that result. [74]-[81]
3. The court was entitled to determine the scope of the arbitration agreement summarily. Relevant factors included efficiency, the detailed preparation for the hearing, and the importance of the issue to the service-out applications. [82]-[84]
4. Service out. The three requirements were a serious issue to be tried, a good arguable case that a gateway applied, and England and Wales being clearly and distinctly the proper forum. The arbitration stay meant that there was no real issue for this court to try against Sony Europe for Gateway (3). The claims also failed Gateway (9)(a): the evidence did not establish direct and substantial damage within England and Wales. Aggregated allegations concerning purchases by Nokia companies, without identifying the relevant purchaser, transaction chain or location of loss, were insufficient. [86]-[98], [105]-[125], [149]-[184]
5. For Gateway (3), a foreign defendant is a proper party if, assuming it were within the jurisdiction, it could properly have been joined under CPR Part 19. Claims involving one investigation, joint and several liability, and a risk of inconsistent judgments may satisfy that requirement. [126]-[139]
6. Had the arbitration stay not applied, England and Wales would have been the proper forum despite the foreign defendants’ stronger connections elsewhere, because Sony Europe was a substantial defendant and continuation of proceedings against it would create a significant risk of duplication and inconsistent findings. [186]-[200]
7. The evidence supporting service out materially understated the uncertainty surrounding the purchasers, location of damage, competing fora and effect of the arbitration clause. The order permitting service out would therefore also have been discharged for material non-disclosure. [201]-[210]
8. Disposition. Proceedings against Sony Europe and Sony Corporation were stayed under section 9 of the Arbitration Act 1996. The order permitting service out against the other foreign defendants, including Sony Corporation, and the service effected under it, were set aside. [211]