Lifestyle Equities CV v Hornby Street (MCR) Ltd

The proper law of an arbitration agreement governs its contractual scope and effect, including whether a successor in title is bound despite not being an original party. The law governing the underlying intellectual-property right or its assignment does not displace that choice for the arbitration issue. A coexistence agreement may impose a burden on a trade mark which passes to an assignee, including an arbitration obligation, where the applicable foreign law so provides. Lack of knowledge is not decisive. Equitable estoppel requires the claimant’s case to be dependent upon, or inextricably intertwined with, contractual obligations containing the arbitration clause. If the agreement is operative, the statutory stay must be granted.

The appellants owned UK and EU trade marks. The respondents used a similar logo and relied on a 1997 worldwide coexistence agreement between the original United States trade-mark owners. That agreement contained a Los Angeles arbitration clause and selected Californian law.

The appellants acquired the marks without knowledge of the agreement and brought claims for trade-mark infringement and passing off. HHJ Hacon stayed the claims under section 9 of the Arbitration Act 1996: he held that the appellants had become parties by their dealings with the other side, were bound under Californian law as assignees, or were estopped from denying the arbitration agreement. The central issue on appeal was whether non-signatory assignees were bound by the arbitration clause and which law governed that question.

Appeal dismissed by a majority. Lewison LJ and Macur LJ held that the stay was required. Snowden LJ would have allowed the appeal.

1. All three judges agreed that the appellants had not become parties to the arbitration agreement. Absent an express accession provision, a person can become party to an existing agreement only with the consent of all existing parties, by novation or a new agreement. The appellants’ dealings with the respondents did not establish that consent.
2. The majority held that section 9(1) of the Arbitration Act 1996 permitted the respondents to seek a stay against the appellants as parties to the proceedings. Section 9(4) required a stay unless the arbitration agreement was null and void, inoperative or incapable of being performed.
3. Lewison LJ, with Macur LJ agreeing, characterised the question whether the appellants were bound by the clause as contractual in nature. Under Rule 64 of Dicey, Morris & Collins, the proper law of the arbitration agreement governed its scope and effect, including who was bound by it. The majority applied Californian law, selected by clause 9. It distinguished the different conflict-of-laws analysis in Egiazaryan and rejected reliance on the law governing the underlying trade-mark rights.
4. On the expert evidence, Californian law treated burdens in coexistence agreements as passing with assigned trade marks. The majority held that the general rule extended to the arbitration obligation and applied irrespective of the assignee’s knowledge. The clause was therefore operative against the appellants and the stay followed.
5. The judges also agreed that the Judge had misapplied Californian equitable estoppel principles. The appellants’ claims were brought as registered proprietors and did not depend on the 1997 agreement. Their Mexican consent-letter dealings did not amount to exploitation of that agreement and were at least ambiguous.
6. Snowden LJ’s dissenting view was that the issue concerned the effect of assignment of the trade marks and was governed by UK law for the UK mark and EU law for the EU marks. On that approach, the appellants were not bound by the arbitration clause and the stay should have been discharged.

1. Court of Appeal (Civil Division): Appeal dismissed by a majority. The stay of the proceedings was maintained. [2022] EWCA Civ 51
2. High Court, Intellectual Property Enterprise Court: HHJ Hacon granted a stay under section 9 of the Arbitration Act 1996. [2020] EWHC 3320 (IPEC)