In light of the recent decision of Mr Justice Marcus Smith in Microsoft Mobile OY (Ltd) v Sony Europe Limited and others, the “one stop shop” approach to arbitration clauses may now be relied on in relation to claims pleaded only in tort if a related contractual claim would have been pleadable. If that is correct, what should the applicant for a stay be demonstrating?
In Microsoft, the judge had to consider applications for the stay of proceedings pursuant to section 9 of the Arbitration Act 1996 (AA 1996). The noteworthy aspect of what are normally straightforward applications was that the claims brought by Microsoft, as assignees of Nokia, against Sony and others, were tortious claims related to alleged anti-competitive conduct in the sale of lithium-ion batteries to Nokia and Microsoft Mobile. No claim for breach of contract was pleaded.
The product purchase agreement for the batteries contained a fairly standard arbitration clause. It provided for:
“Any disputes related to this Agreement or its enforcement shall be resolved and settled by arbitration… in United Kingdom, in accordance with the Arbitration Rules of the International Chamber of Commerce…”
Importantly for the purposes of the decision, the agreement also provided for any change in price under the long term contract to be negotiated in good faith.
The judge considered the proper approach to the construction of arbitration clauses. He referred to the familiar decisions in Investors Compensation Scheme v West Bromwich Building Society, Rainy Sky SA v Kookmin Bank and Arnold v Britton concerning the construction of commercial agreements generally, and also the Fiona Trust decision in relation to arbitration clauses. The judge cited at length from Fiona Trust, including the following from the speech of Lord Hoffmann:
“In approaching the question of construction, it is therefore necessary to inquire into the purpose of the arbitration clause. As to this, I think there can be no doubt. The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes. They want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction…
In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to have entered to be decided by the same tribunal.”
The problem has been: what would a rational businessperson have intended in relation to the resolution of a competition claim, rather than a claim for breach of the agreement itself?
The judge drew a distinction between a tortious claim which arises out of a contractual relationship, where the only related contractual claim would be unarguable, and a claim where there would be an arguable contractual claim, even if the same had not been pleaded. The mere fact that no claim had been pleaded in contract was irrelevant, although the extent to which a contractual claim was pleadable was relevant. If, in order to be caught by the arbitration clause, a contractual claim had to be actually pleaded, the arbitration clause could be circumvented by pleading a parallel claim in tort. If any contractual claim would be “strained, recondite, convoluted or plain outlandish”, then any “related” tortious claim may not be subject to an arbitration clause. In light of the express good faith provision, the overlap between a pleadable contractual claim and the cartel claim was considerable.
So we will now be involved in a “find the contractual claim” when seeking the stay of a competition claim or any other tortious claim. However, the party that will set about seeking to show that there is a pleadable and arguable contractual claim will be the defendant to any such contractual claim. Presumably, having succeeded in having the competition claim referred to arbitration, the other side will then seek to add the contractual claim that has been set out by the defendant as part of its application to have the proceedings stayed!
Finding a contractual claim will depend on the express and implied terms of the contract. There may be an express or implied term to comply with EU competition law or all relevant statutory provisions or rules. If there is, obtaining a stay should be straightforward. In the Microsoft case itself, a claim could have been pleaded pursuant to the good faith provision in relation to the negotiating of the price.
The decision is a sensible one. If the parties have chosen to arbitrate disputes related to the contract then that should be given a generous construction. A competition claim is still related to the agreement.
The effect of this decision is to make competition claims between contracting parties more likely to be covered by the arbitration clause. However, many competition claims will involve other members of the cartel who have no direct contractual relationship with the party making the claim. There will be no contractual arbitration clause in relation to such parties and the question of a stay will simply not arise.