Amir Soleymani v Nifty Gateway LLC

A claim whose principal focus or essential subject matter is the validity of an arbitration agreement falls within the arbitration exception. It therefore falls outside the consumer-jurisdiction rules derived from the Recast Regulation.

Where proceedings otherwise fall within the English court’s jurisdiction, the court may determine under section 9(4) of the Arbitration Act 1996 whether an arbitration agreement is invalid. If an arguable consumer relies on domestic consumer law, vindication of those rights in a public domestic court is a powerful factor favouring trial rather than referral to a foreign arbitrator. The domestic court is better placed to apply the statutory fairness assessment, even where factual issues overlap with the arbitration.

The appellant participated in an online auction operated from New York and successfully bid US$650,000 for a non-fungible token. The platform’s terms selected New York law and required JAMS arbitration in New York. After the respondent commenced arbitration, the appellant brought English proceedings seeking declarations that the arbitration and governing-law clauses were unfair and that any auction contract was illegal under gambling legislation.

The High Court, in [2022] EWHC 773 (Comm), held that it lacked jurisdiction over the freestanding challenge to the arbitration clause. It stayed the remaining claims under section 9 of the Arbitration Act 1996.

The appeal concerned whether the consumer-jurisdiction provisions conferred jurisdiction over the arbitration claim and whether the English court should itself try the statutory objection to the arbitration agreement.

1. The appeal was dismissed on Grounds 1 and 2 but allowed on Ground 3. The freestanding claim for a declaration that the arbitration agreement was unfair concerned arbitration as its essential subject matter and principal focus. The relief was integral to the arbitration process. Article 1(2)(d) of the Recast Regulation therefore excluded the claim, and sections 15A and 15B of the Civil Jurisdiction and Judgments Act 1982 did not confer jurisdiction: per Popplewell LJ, with whom Birss and Snowden LJJ agreed.

2. The domestic provisions retained rather than expanded the consumer protection formerly provided by the Recast Regulation. The arbitration exclusion takes priority over the Regulation’s jurisdictional allocations, including its consumer provisions. Sections 15B(6) and 15D(1) concern agreements conferring jurisdiction on courts; they do not invalidate arbitration agreements. Consumer-protection grounds relied upon to challenge an arbitration agreement do not change the essential character of a claim directed solely to that agreement’s validity.

3. The position differs where the English court is properly seised of substantive claims and considers a stay under section 9 of the Arbitration Act 1996. Section 9(4) independently authorises the court to decide whether the arbitration agreement is null and void, inoperative or incapable of performance. If the question cannot be resolved summarily, the court may order a trial after considering all the circumstances.

4. Per Birss LJ, an arguable consumer’s reliance on domestic statutory rights is a powerful factor favouring determination by the domestic court. The fairness provisions of the Consumer Rights Act 2015 may apply despite a foreign-law clause where the consumer contract has a close connection with the United Kingdom. A domestic court is better placed to apply those provisions, and public adjudication benefits consumers generally. These considerations outweighed overlap with the foreign arbitration, the arbitrator’s competence to determine jurisdiction and the possibility that enforcement would occur abroad.

5. The stay of the governing-law and gambling claims was accordingly displaced. A trial was directed in the Commercial Court to determine whether the arbitration agreement was null and void, inoperative or incapable of performance in relation to those claims. A subsequent undertaking that the arbitrator would determine the domestic consumer-law questions did not justify reconsideration.

1. Court of Appeal (Civil Division): In [2022] EWCA Civ 1297, dismissed the jurisdictional grounds but allowed the appeal against the stay. It directed a Commercial Court trial of the section 9(4) issue.

2. High Court, Commercial Court: In [2022] EWHC 773 (Comm), declared that the court lacked jurisdiction over the freestanding arbitration claim and stayed the governing-law and gambling claims under section 9 of the Arbitration Act 1996.