Microsoft Mobile initially issued proceedings against various addressees of the Lithium-ion Batteries cartel in 2015, both in its own right and in its capacity as assignee of the rights of Nokia (which Microsoft purchased in 2013).
R-14 Global Competition Litigation Review
MICROSOFT MOBILE OY (LTD) V SONY EUROPE LTD  EWHC 374 (CH)
Microsoft Mobile initially issued proceedings against various addressees of the Lithium-ion Batteries cartel in 2015, both in its own right and in its capacity as assignee of the rights of Nokia (which Microsoft purchased in 2013). Microsoft claimed damages for losses allegedly suffered relating to purchases of Lithium-ion Batteries between 1999 and 2011, relying on the decision of the European Commission dated 12 December 2016, Case COMP/39904. Microsoft Mobile, which is domiciled in Finland, relied on art.4 of the Brussels Recast Regulation to sue the first defendant, Sony Europe, in the jurisdiction of its domicile (England).
The other defendants were all companies domiciled in Japan or South Korea. Since none of these defendants were domiciled in the EU or EEA, the case against them was outside the scope of the Brussels Recast Regulation. Microsoft Mobile therefore needed permission to serve the claim on them, out of the jurisdiction, pursuant to Pt 6.36 CPR. An application to that effect was made by Microsoft Mobile in December 2015 and granted by the High Court in January 2016.
Sony Europe and the second defendant, Sony Corp, each subsequently sought a stay of the proceedings against them pursuant to s.9 of the Arbitration Act 1996, on the grounds that the dispute between Microsoft and the Sony entities was subject to a valid arbitration clause, contained in a product purchase agreement with Nokia dating back to 2001.
Meanwhile, the other defendants filed applications requesting that the Order authorising service on them outside the jurisdiction be set aside. They first argued that there was no good arguable case that the claims against them fell within any of the grounds or “gateways” required for such service to be granted under para.3.1 of Practice Direction 6B and that England and Wales was, in their view, not clearly and distinctly the proper forum for the trial of the claims.
In his judgment dated 28 February 2017, following a five-day hearing, Mr Justice Marcus Smith concluded that the claims by Microsoft against the Sony entities in respect of their participation in the cartel should be stayed pursuant to the arbitration clauses contained in supply contracts between them. Second, and most significantly (for Microsoft and the remaining defendants), he concluded that the High Court could assert no jurisdiction as against the foreign-domiciled defendants.
In relation to the application to stay proceedings against the Sony entities, the judge took the view that the arbitration clauses were sufficiently broad to encompass Microsoft’s claims having regard to the terms of the supply contracts, which included express good faith pricing obligations. Mr Justice Marcus Smith held that, parallel claims in contract could be brought encompassing Microsoft’s claims against the Sony entities, if the arbitration clauses were engaged. It was irrelevant in this regard that Microsoft had not explicitly pleaded its claim in contract—it was sufficient that such claims were pleadable. The potential contractual claims were sufficiently closely related to the tortious claims actually advanced by the claimant so as to render rational businessmen likely to have intended such a dispute to be decided by arbitration pursuant to the contract. The EU law principle of effectiveness was also considered not to be an obstacle to granting a stay given that the approach recommended by the Advocate General Jääskinen in CDC Hydrogen Peroxide* (which Microsoft had relied on) was not binding and was in any case rejected by the Court of Justice in its judgment.
As for the decision to set aside the Order for service out of the jurisdiction, Mr Justice Marcus Smith found that there were no sufficient connective CPR “gateways” to draw the dispute away from its apparent centre of gravity in East Asia, in favour of England and Wales. The only potentially relevant factor identified by the claimants in this regard had been that Nokia had purchased 12 million battery units from the UK defendant Sony Europe. The judge noted however that these 12 million units represent just a tiny fraction of the more than 3 billion units purchased by Nokia/Microsoft over the entire cartel period. The judge also found that the claimant had failed to prove that a single entity within Nokia/Microsoft had sustained losses as a result of these UK sales.
On the second question of whether England and Wales was clearly and distinctly the proper forum for the trial of the claims, Microsoft Mobile could say relatively little, as the clear centre of gravity of the cartel was outside England and Wales. It could merely point to certain isolated events allegedly occurring in Finland and to some extent in Surrey, England, meaning any connection between the cartel and England was “nebulous” at best*. The judge was not convinced by Microsoft Mobile’s most persuasive argument, namely that this was a multi-jurisdictional cartel operating globally, with “no unique natural home for any particular litigation”* Mr Justice Marcus Smith recognised in his judgment that there was some force in this submission but even so, the Court ruled that the jurisdictions centrally engaged were not England and Wales—the English jurisdiction was only peripherally involved.
This judgment is the first occasion in which an English court has had the opportunity to consider the proper interpretation of arbitration clauses in the context of a cartel damages claim. The ramifications of the judgment are wide reaching as many supply agreements contain such clauses. A detailed review of such contracts before proceedings are issued will now be even more important, even where cartel damages claims are founded solely in tort rather than in breach of contract. Claimants may however be able to mitigate or even completely avoid such issues by choosing to sue cartelist entities that they did not directly contract with on the basis of joint and several liability. It is also possible that arbitration clauses that are drafted less broadly may not “bite” in the same way as those in the Microsoft case: this will be a matter for consideration on a case by case basis.