Amir Soleymani v Nifty Gateway LLC

The Court of Appeal considered whether an English court has jurisdiction to decide a freestanding claim that an arbitration clause in online platform terms is unfair under the Consumer Rights Act 2015 (the CRA), where the terms nominate New York law and arbitration administered by JAMS. The court held that a claim whose essential subject matter or principal focus is the validity of an arbitration agreement falls within the arbitration exception in Article 1(2)(d) of the Recast Regulation and, as restated in the Civil Jurisdiction and Judgments Act 1982 (sections 15A–15E), is therefore not covered by the jurisdictional gateways in Chapter 2 (including the consumer gateways). Accordingly the High Court was correct to find it had no jurisdiction to determine the appellant's freestanding Arbitration Claim.

However, in relation to the appellant’s separate claims (governing law and illegality under the Gambling Act 2005), which plainly fell within the consumer jurisdictional gateway, the Court of Appeal allowed the appeal in part. It directed that the question under section 9 of the Arbitration Act 1996 whether the arbitration agreement is "null and void, inoperative or incapable of being performed" (so as to displace a stay) be tried in the Commercial Court. The court reasoned that, where the objection to arbitration is expressly based on the vindication of arguable domestic consumer rights with a close connection to the United Kingdom, the English court is often the proper forum to determine enforceability of the arbitration agreement despite overlap with the arbitrator’s Kompetenz-Kompetenz.

Background and parties: The appellant purchased a non-fungible token on Nifty’s platform and made a successful bid of US$650,000. Nifty’s on-line terms of use nominated New York law and provided for arbitration in New York administered by JAMS. Nifty commenced arbitration in New York claiming the bid amount. The appellant commenced proceedings in England seeking three declarations: (1) that the arbitration clause was unfair and not binding; (2) that the governing law clause was unfair and not binding; and (3) that the contract was illegal under the Gambling Act 2005. The Competition and Markets Authority intervened as to consumer law aspects.

Procedural history: The High Court (Deputy Judge Ambrose) granted a declaration in respect of the Arbitration Claim that the English court had no jurisdiction, and stayed the Governing Law Claim and Gambling Act Claim under section 9 of the Arbitration Act 1996. The appellant appealed.

Issues framed: (i) whether the English court had jurisdiction under section 15B CJJA to decide the Arbitration Claim or whether the arbitration exception applied; (ii) whether section 15D(1) undermined the arbitration clause; and (iii) whether the Judge erred in granting a stay under section 9 AA without directing a trial of the fairness issue.

Court’s reasoning on jurisdiction (Grounds 1–2): The court analysed the statutory framework (CRA Part 2; AA ss. 89–91; CJJA ss. 15A–15E) and the EU jurisprudence on the arbitration exception to the Brussels/Recast regime. It concluded that the arbitration exception in Article 1(2)(d) (as explained in authorities such as Marc Rich, Ivan Zagubanski, Through Transport and The Prestige Nos 3 & 4) applies where the principal focus or essential subject matter of the proceedings is arbitration. A freestanding claim to declare an arbitration agreement invalid is such a claim and therefore falls outside the Recast Regulation and the consumer jurisdiction gateways recreated in the CJJA. The CJJA provisions were enacted to restate the Recast protections, not to extend them, and do not alter the hierarchy that treats arbitration matters as excluded.

Court’s reasoning on stay (Ground 3): The court accepted that, for the Governing Law and Gambling Act claims, the High Court had jurisdiction under section 15B(2) because Nifty arguably directed activities to the UK and the appellant arguably was a consumer. On the section 9 AA stay application, the judge had granted a stay because factual issues as to unfairness overlapped with merits and because the New York arbitration and courts were an adequate forum. The Court of Appeal allowed the appeal on Ground 3 and ordered a trial of the s.9(4) issue. It held that where the challenge to the arbitration agreement is the vindication of arguable domestic consumer rights closely connected to the UK, the English court is often the proper forum to decide whether the arbitration agreement is null and void, inoperative or incapable of being performed. The public importance of consumer law being decided in open court and the particular suitability of an English court to assess domestic consumer-protection concepts weighed in favour of trial rather than leaving the issues to the arbitrator.

Remedy: appeal dismissed on Grounds 1 and 2; appeal allowed on Ground 3 and a trial of the s.9(4) issue ordered in the Commercial Court.

Appeal allowed in part. The Court of Appeal held that a freestanding claim whose essential subject matter is the validity of an arbitration agreement falls within the arbitration exception (Article 1(2)(d) of the Recast Regulation) and the CJJA (ss. 15A–15E) therefore did not give the English court jurisdiction to determine the Arbitration Claim. However, because the Governing Law and Gambling Act claims fell within the consumer jurisdictional gateway and the challenge to arbitration was grounded in the vindication of arguable domestic consumer rights closely connected to the United Kingdom, the court allowed the appeal on the stay issue and ordered a trial of the s.9(4) Arbitration Act question whether the arbitration agreement is null and void, inoperative or incapable of being performed.

Appeal from: High Court of Justice, Business and Property Courts in London, Circuit Commercial Court, Deputy High Court Judge Clare Ambrose — [2022] EWHC 773 (Comm). This appeal determined by the Court of Appeal, Civil Division — [2022] EWCA Civ 1297.