Microsoft Mobile OY (Ltd) v Sony Europe Ltd & Ors

Contents

INTRODUCTION

The Claimant

The Claimant, Microsoft Mobile Oy (Ltd) (the “Claimant” or “Microsoft Mobile”), (Footnote: ¹) is a company established with limited liability under the laws of Finland. It is a wholly owned subsidiary of the Microsoft Corporation. It was, and is, a manufacturer and distributor of mobile telephone handsets, which contain lithium ion batteries (“Li-ion Batteries”). These Microsoft Mobile purchased from third parties.

Li-ion Batteries contain one or more lithium ion battery cells (“Li-ion Cells”).

By a Stock and Asset Purchase Agreement dated 2 September 2013 (the “SAPA”), the Microsoft group of companies acquired the mobile devices business of Nokia Corporation and its relevant subsidiaries (“Nokia” (Footnote: ²)). Nokia Corporation was a multinational communications and information technology company, established under the laws of Finland. Microsoft Mobile alleges that prior to the SAPA, when these activities transferred to the Microsoft group of companies, its activities included the manufacture, distribution and sale of mobile telephone handsets, which contained Li-ion Batteries purchased from third parties.

Microsoft Mobile alleges that both it and Nokia also sold replacement Li-ion Batteries in an after-market. Again, these were purchased from third parties.

The Cartel

Microsoft Mobile brings these proceedings in its own right and as assignee of the rights of Nokia and its relevant subsidiaries. Microsoft claims damages for losses caused by allegedly anti-competitive conduct in relation to the sale to Nokia and/or to Microsoft Mobile of Li-ion Batteries (the “Cartel”).

More specifically, Microsoft Mobile contends that:

The Defendants

There were, originally, six defendants to these proceedings. Proceedings against the Third Defendant, Panasonic Corporation, and the Fifth Defendant, Sanyo Electric Co Limited, were withdrawn by Microsoft Mobile. Save incidentally, these defendants do not feature in this Judgment: they did not appear before me.

As pleaded in the Amended Particulars of Claim, the remaining defendants are:

Collectively, D1/Sony Europe, D2/Sony Corporation, D4/LG Chem and D6/Samsung are referred to herein as the “Defendants”.

The factual case pleaded by Microsoft Mobile against the Defendants

It is unnecessary, for the purposes of this Judgment, to set out in detail the facts and matters pleaded by Microsoft Mobile in support of its claims. Paragraph 37 of the Amended Particulars of Claim provides a summary of the operation of the Cartel, as follows:

“Unknown to the Claimant and/or Nokia at the material times, the Defendants and/or the undertakings of which they were a part, together with other undertakings (collectively ‘the Cartelists’) in the period from at least August 1999 to May 2011 entered into agreements and/or arrangements and/or concerted practices by which they or two or more of them:

37.1

exchanged commercially sensitive information; and/or

37.2

agreed to fix prices; and/or

37.3

agreed to restrict their output; and/or

37.4

agreed to limit their technological development; and/or

37.5

agreed to share or allocate markets and/or customers; and/or

37.6

engaged in bid-rigging.”

It is specifically averred – in paragraph 38 – that “[s]uch conduct took place in secret in the course of the conclusion, implementation and/or operation of the Cartel and the Defendants deliberately took steps to avoid detection”.

It is also averred – in paragraph 40 – that “the Cartel was a single and continuous infringement of the prohibition contained in Article 101 TFEU (formerly Article 81(1)EC) and/or Article 53 of the EAA Agreement”.

As a result of the Cartel, it is said that Microsoft Mobile and Nokia suffered loss and damage. This loss and damage manifested itself in:

It was not Microsoft Mobile’s primary case that the overcharge incurred by it was passed on by Microsoft Mobile and/or Nokia to its customers: see paragraph 195 of the Amended Particulars of Claim. However, in the alternative, if such costs were passed on, then it is contended (in paragraph 196) that “the necessary price increases would have reduced demand for Nokia’s and/or the Claimant’s products accordingly”.

Microsoft Mobile contends that the Defendants or any of them are jointly and severally liable for the loss and damage claimed including (to quote from paragraph 197 of the Amended Particulars of Claim): (Footnote: ⁴)

“…the loss and damage caused by purchases at an overcharge during the Cartel Period and in the Run-Off Period from:

197.1

The other Defendants;

197.2

Other participants in the infringement; and

197.3

The other undertakings engaged in the manufacture and/or supply of Li-ion Batteries, who did not participate in the infringement or who did not participate throughout the entirety of the Cartel Period, but where prices were nonetheless inflated as a result of the effect of the infringement.”

Applicable law

The precise nature of the liability of the Defendants depends not only on the facts alleged by Microsoft Mobile (and its ability to make good those facts) but also on the applicable law. This Judgment does no more than describe the contentions advanced by Microsoft Mobile in the Amended Particulars of Claim, without expressing any view as to those contentions. Essentially, the position is as follows:

Aggregation of claims and Microsoft Mobile’s pleaded case

As described in paragraph 5 above, Microsoft Mobile brings these proceedings in its own right and as assignee of the rights of Nokia. As described in paragraph 3 above, Nokia is not a single legal person, but comprises “Nokia Corporation and its relevant subsidiaries” (to quote from paragraph 1 of the Amended Particulars of Claim). Appendix 1 to the Amended Particulars of Claim lists the relevant Nokia subsidiaries “which purchased Li-ion Batteries from the Defendants in the Cartel Period and/or Run-Off Period” (see paragraph 10 of the Amended Particulars of Claim).

Appendix 1 lists some 16 Nokia subsidiaries which purchased Li-ion Batteries. They are set out below, together with the place in which they are pleaded as being established:

The averments in the Amended Particulars of Claim aggregate the claims made by Nokia and/or Microsoft Mobile (as claimants) against the Defendants without differentiating between them. Thus, by way of example:

Precisely what Microsoft Mobile could, and could not, establish in terms of the purchases of Li-ion Batteries between Nokia and Microsoft Mobile and the Defendants was explored with Mr. Beal, Q.C., leading counsel for Microsoft Mobile, during the course of submissions. Essentially, the position was as follows:

It is necessary to set out exactly what Microsoft Mobile was alleging in the Amended Particulars of Claim for the purposes of dealing with Microsoft Mobile’s contentions on jurisdiction.

Service of the proceedings on the Defendants and the present applications

D1/Sony Europe is sued in the jurisdiction of its domicile – England and Wales – and Microsoft Mobile contends that this court has jurisdiction by virtue of Article 4 of Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition of judgments in civil and commercial matters (recast) (“the Brussels I Regulation (Recast)”).

By an application dated 3 June 2016, D1/Sony Europe seeks a stay of the proceedings against it pursuant to section 9 of the Arbitration Act 1996 and/or under the inherent jurisdiction of the court, on the grounds that the dispute between Microsoft and D1/Sony Europe is subject to a valid arbitration clause.

The other Defendants are all companies domiciled in Japan and the Republic of Korea. Since none of these Defendants is domiciled in the EU or the EEA, this was not a case falling within the Brussels I Regulation (Recast), and Microsoft Mobile needed permission to serve the claim out of the jurisdiction pursuant to Part 6.36 of the Civil Procedure Rules. An application was made on 23 December 2015, supported by a witness statement of Mr. Robert Murray (“Murray 1”).

As is considered in greater detail below, three requirements must be shown before the court will permit service of a claim or claims out of the jurisdiction:

The application was heard by Master Clark, who made an order for service out of the jurisdiction on 19 January 2016. (Footnote: ⁹)

D2/Sony Corporation, D4/LG Chem and D6/Samsung all object to this court assuming jurisdiction:

I shall refer to these applications of the Defendants as the “Applications”. (Footnote: ¹⁰) D2/Sony Corporation – as a fall-back to its stay application – also challenges the court’s jurisdiction. This application, however, was not before the court on this occasion, the parties having agreed that (given the points raised by D2/Sony Corporation’s application) there would be insufficient time. The somewhat unsatisfactory basis on which this particular application was “parked” is described further in Section E below. The upshot is that the Defendants contend:

The Applications were supported by the evidence listed in Annex 2 hereto, to which I shall refer using the abbreviations set out in Annex 2. This evidence was responded to by a further statement of Mr. Murray (“Murray 2”). (Footnote: ¹¹)

The Applications were heard over four days (16 to 19 January 2017). This Judgment determines the Applications and is structured as follows:

It was also contended by the Defendants that the statement in support of Microsoft Mobile’s application to serve D2/Sony Corporation, D4/LG Chem and D6/Samsung out of the jurisdiction (Murray 1) made material non-disclosures and that the order of Master Clark and the service out of the proceedings should be set aside on that ground alone. This aspect is considered in Section H below.

STAY OF THE PROCEEDINGS AGAINST D1/SONY EUROPE IN FAVOUR OF ARBITRATION

Introduction

D1/Sony Europe is domiciled in the United Kingdom within the meaning of Article 63 of the Brussels I Regulation (Recast). It is common ground that the claims advanced by Microsoft Mobile against D1/Sony Europe are civil and commercial matters within the scope of Article 1 of the Brussels I Regulation (Recast) and that – but for the arbitration clause described in paragraph 35 below – the claims against the D1/Sony Europe were commenced as of right by Microsoft Mobile under Article 4 of the Brussels I Regulation (Recast).

By Article 1(2)(d), the Brussels I Regulation (Recast) does not apply to arbitration. D1/Sony Europe contends:

The arbitration clause

Product Purchase Agreement No. 000247 (the “PPA”) is an agreement made in writing and becoming effective on 1 July 2001 (see Article 23.1) between Nokia Mobile Phones Ltd (as “BUYER”) and “Sony Corporation” i.e. D2/Sony Corporation (as “SELLER”). These parties contracted on behalf of themselves and:

Article 25 of the PPA provides as follows:

“25.1

This Agreement shall be governed by and construed in accordance with United Kingdom law.”

Pausing there, it was common ground between the parties that this was a reference to English law. I agree, and so hold.

“25.2

Any disputes related to this Agreement or its enforcement shall be resolved and settled by arbitration in the English language in United Kingdom, in accordance with the Arbitration Rules of the International Chamber of Commerce in United Kingdom. However, any disputes related to BUYER’s Intellectual Property Right(s) (Footnote: ¹³) or Confidential Information, (Footnote: ¹⁴) or for injunctive relief, may, at BUYER’s sole election, be resolved by a court of competent jurisdiction. The decision of the arbitrators shall be final, binding and executable. The arbitration shall be the exclusive remedy of the Parties to the dispute.”

Although the scope of this arbitration clause was contested between Microsoft Mobile and D1/Sony Europe, two matters were common ground:

Section 9 of the Arbitration Act 1996

It will be necessary to consider other provisions of the PPA in due course. For present purposes, however, all that needs to be noted is that D1/Sony Europe relied upon Article 25.2 (set out in paragraph 35 above) to contend that these proceedings should be stayed as against it pursuant to section 9 of the Arbitration Act 1996.

Section 9 provides as follows:

“(1)

A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

(2)

An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures.

(3)

An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.

(4)

On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

(5)

If the court refuses to stay the legal proceedings, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.”

D1/Sony Europe contended that all or some of the claims pleaded against it in the Amended Particulars of Claim were matters to be referred to arbitration under Article 25.2, and it sought a stay of the proceedings against it on this basis.

Microsoft Mobile disputed this, and advanced two points in response:

These points are considered in turn below. There was a third point: this was a question as to who should determine these questions, this court or whatever arbitral tribunal is in due course established. (Footnote: ¹⁵) I should say at the outset that I have decided to determine these questions myself: my reasons for doing so are set out at paragraphs 82 to 84below.

The approach to construction

It was common ground between the parties that arbitration clauses, as contractual provisions, fall to be construed according to the precepts laid down in Investors Compensations Scheme v. West Bromwich Building Society [1998] 1 W.L.R. 896, Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 and Arnold v. Britton [2015] UKSC 36.

Additionally, the parties recognised that whilst arbitration clauses had, in the past, been subject to a series of specific and technical rules, the starting point now for the construction of an arbitration clause was Fili Shipping Co Ltd v. Premium Nafta Products Ltd [2007] UKHL 40, better known as Fiona Trust (from its name before the Court of Appeal: Fiona Trust and Holdings Corp v. Privalov). (Footnote: ¹⁶)

In Fiona Trust, Lord Hoffmann stated: (Footnote: ¹⁷)

“5.

Both of these defences raise the same fundamental question about the attitude of the courts to arbitration. Arbitration is consensual. It depends upon the intention of the parties as expressed in their agreement. Only the agreement can tell you what kind of disputes they intended to submit to arbitration. But the meaning which parties intended to express by the words which they used will be affected by the commercial background and the reader’s understanding of the purpose for which the agreement was made. Businessmen in particular are assumed to have entered into agreements to achieve some rational commercial purpose and an understanding of this purpose will influence the way in which one interprets their language.

6.

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.

7.

If one accepts that this is the purpose of an arbitration clause, its construction must be influenced by whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by national courts. Could they have intended that the question of whether the contract was repudiated should be decided by arbitration but the question of whether it was induced by misrepresentation should be decided by a court? If, as appears to be generally accepted, there is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.

8.

A proper approach to construction therefore requires the court to give effect, so far as the language used by the parties will permit, to the commercial purpose of the arbitration clause…”.

…

13.

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 clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction. As Longmore L.J. remarked, at para. 17: “if any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so.” (Footnote: ¹⁸)

The importance of having a “one-stop-shop” for all disputes – and the likelihood that the parties to an agreement would intend this – is clear. But that is true only to the extent that disputes arise out of the parties’ relationship. Thus, absent extremely clear wording, a court would presume that the parties would have intended the same tribunal to deal with contractual disputes arising out of the relationship, as well as any “parallel” claims in tort. But, what would not be covered, absent extremely clear wording, would (to take a somewhat extreme hypothetical case) be Party A’s case against Party B (Party A and Party B being in a contract with each other containing an arbitration clause) for Party B negligently, but coincidentally and unrelated to the contract, running Party A over in the street. That would not be a dispute arising out of the parties’ contractual relationship.

The spectrum of cases falling within and without a “relationship” was considered in Aggeliki Charis Compania Maritima SA v. Pagnan SpA, the “Angelic Grace” [1995] 1 Lloyd’s 87. This decision was cited to the House of Lords in Fiona Trust, but not mentioned in their Lordships’ opinions. As it pre-dates Fiona Trust, The Angelic Grace must be treated with a degree of caution. I have, nevertheless, derived some assistance from the case, in particular the following passage: (Footnote: ¹⁹)

“The question in a nutshell is whether the relevant claims and cross-claims arise out of the contract. It is common ground that the question must be answered in the light of The Playa Larga [1983] 2 Lloyd’s Rep. 171, in which this court upheld the dictum of Mr. Justice Mustill that a tortious claim does “arise out of” a contract containing an arbitration clause if there is a sufficiently close connection between the tortious claim and a claim under the contract. In order that there should be a sufficiently close connection, as the Judge said, the claimant must show either that the resolution of the contractual issue is necessary for a decision on the tortious claim, or, that the contractual and tortious disputes are so closely knitted together on the facts that an agreement to arbitrate on one can properly be construed as covering the other.”

All of the parties before me contended that Ryanair Ltd v. Esso Italiana Srl [2013] EWCA Civ 1450 was of particular relevance to the present case, no doubt because it involved competition law claims. It is necessary to consider this decision at some length.

In Ryanair Ltd v. Esso Italiana Srl, Ryanair had entered into a contract with Esso for the purchase of jet fuel in Italian airports. The contract was made on the basis of English law and the non-exclusive jurisdiction of the English courts. Subsequently, Esso and other oil companies were found to have been operating an illegal cartel in Italy for the supply of jet fuel to Italian airports in breach of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”).

Ryanair then brought a claim in England for damages against Esso alleging breach of the fuel supply contract in relation to Esso’s cartel activities in inflating the price of the fuel at Italian airports (i.e. a contractual claim) and a claim for breach of statutory duty based upon Article 101 TFEU (i.e. a tortious claim). The question was whether (to use the terms of Eder J. at first instance) the tortious claims were so closely knitted together with the contractual claims that a rational or sensible businessman would expect them to be subject to determination by a single tribunal.

Rix L.J. set out the essential facts: (Footnote: ²⁰)

“1.

This appeal concerns the scope of an English jurisdiction clause and arises on a challenge to jurisdiction in the English courts. Does the clause embrace a claim against a member of an Italian cartel selling jet fuel in Italian airports, a claim advanced on the basis of a statutory tort under English law in vindication of rights arising out of article 101 of the Treaty on the Functioning of the European Union (“TFEU”).

2.

The claimant is Ryanair Ltd (‘Ryanair’), the well-known Irish airline. The defendant is Esso Italiana Srl (‘Esso Italiana’), part of the world-wide Exxon-Mobil group. The jurisdiction clause is contained in their contract, entered into through the agency of ExxonMobil Aviation International Ltd (‘EMAIL’), for the purchase of jet fuel in Italian airports. The jurisdiction clause is found in article 12.1 of Part II of a master contract, made by EMAIL on behalf of group subsidiaries supplying fuel in various countries of the world, which was originally entered into with Ryanair back in 1999, then in a slightly different form in 2000, and subsequently renewed annually until expiry on 31 April 2009.

3.

Article 12.1 provides as follows:

‘The Agreement contains the entire agreement of the parties with respect to the subject matter hereof and there are no other promises, representations or warranties affecting it. This Agreement cannot be modified in any way except in writing signed by the parties. No claims shall be made hereunder for prospective profits or for indirect or consequential damages except as otherwise provided in the footnotes attached to the schedule. This Agreement shall be governed by the laws of England excluding its conflict of laws rules and the United Nations Convention on the International Sale of Goods Act shall not apply. For the purposes of the resolution of disputes under this Agreement, each party expressly submits itself to the non-exclusive jurisdiction of the Court of England.’

4.

Thus, the parties’ contract was made on the basis of English law and the non-exclusive jurisdiction of the English courts. Prospective profits and indirect or consequential damages were excluded. It is not clear what follows from the exclusion of English conflict of law rules, which might be said to be a large exclusion, but no point has been taken on that.”

Rix L.J. noted that “[i]t is important to observe that Ryanair at no time asserted that its claim for breach of statutory duty fell within the jurisdiction clause in the absence of a concomitant contractual claim under article IV in respect of the lower quantity of fuel supplied by Esso Italiana itself, which was itself premised on Esso Italiana participating in infringing behaviour in breach of article 101”. (Footnote: ²¹) Indeed, the “whole edifice” of Ryanair’s jurisdictional argument “is built on the initial claim, the contract claim, that Ryanir had a remedy pursuant to article IV of the contract (Footnote: ²²)…it seemed to be a necessary part of Ryanair’s argument based on the Fiona Trustpresumption in favour of the rational and reasonable businessman’s preference for one-stop adjudication, that a contractual claim based on article IV for a breach of article 101 had some prospect of success. If, therefore, there was no contractual claim under article IV by reason of Esso Italiana’s supply of jet fuel at prices inflated by conduct in breach of article 101, then, at any rate arguably, it became harder to see why reasonable businessmen would interpret the jurisdiction clause as covering a separate claim for breach of statutory duty arising out of conduct in Italy in breach of article 101 (Footnote: ²³).”

It was therefore necessary to consider the nature of the contractual claim being advanced. It is not necessary to set out the argument before the Court of Appeal on this point, nor even the detail of the Court of Appeal’s conclusions. For present purposes, what matters is that the Court of Appeal held that:

“40.

In my judgment there is no answer to Mr. Beard’s powerful submissions concerning the construction of article IV. The clause simply was never intended to apply to the use to which Ryanair’s contract claim seeks to put it.

41.

It follows that there is no prospect of Ryanair having a contractual claim under art IV or an implied term as would give a remedy, albeit to goods supplied under the contract itself, which reduplicated the effect of a statutory duty pursuant to article 101.”

Standing by itself, without the buttress of a contractual claim, the Court of Appeal held that the tortious claims fell outside the scope of the non-exclusive jurisdiction clause. Rix L.J. considered The Angelic Grace to be of no assistance to Ryanair in this context. (Footnote: ²⁴) He referred to Fiona Trust, in particular [13] cited at paragraph44 above, and held: (Footnote: ²⁵)

“Such reasoning, however, does not carry over into a situation where there is no contractual dispute (by which I intend to include disputes about contracts), but all that has happened is that a buyer has bought goods from a seller who has participated in a cartel. I think that rational businessmen would be surprised to be told that a non-exclusive jurisdiction clause bound or entitled the parties to that sale to litigate in a contractually agreed forum an entirely non-contractual claim for breach of statutory duty pursuant to article 101, the essence of which depended on proof of unlawful arrangements between the seller and third parties with whom the buyer had no relationship whatsoever, and the gravamen of which was a matter which probably affected many other potential claimants, with whom such a buyer might very well wish to link itself.”

The point is, in many respects, an obvious one. The starting assumption articulated in Fiona Trust is 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. But it is difficult to see how a tortious claim can arise out of a contractual relationship when the only claim in contract that can be said to be related is unarguable.

The relevant provisions of the PPA

As stated in paragraph 34 above, the PPA had an effective date of 1 July 2001. I was told that there was no evidence of any prior business dealings between Nokia and Sony: the parties proceeded, and I proceed, on the basis that the first dealings for the sale and purchase of batteries between Nokia and Sony were under this PPA and would therefore have commenced on 1 July 2001.

By Article 2.1 of the PPA, “[t]his Agreement contains the terms and conditions which apply globally to all sale and purchase of Product(s)”. Under Article 1, “Product(s)” means “certain lithium-ion batteries manufactured by or for SELLER subject to purchase and sale between the Parties as listed in Appendix 2.” Appendix 2 of the PPA lists only one product, the “BPS-2” battery, at a price of JPY770. Below that entry is the following note:

“Prices are agreed on separate negotiations.”

That meshes with the definition of “Price(s)” in Article 1 as meaning “the mutually agreed price(s) for each Product”.

Article 26 provides:

“26.1

This Agreement supersedes all previous arrangements, communication and agreements between the Parties in relation to the subject matter of this Agreement. This Agreement supersedes any general conditions of purchase/sale and other standard conditions. The Appendices shall be an integral part of this Agreement. (Footnote: ²⁶)

26.2

Appendices 1 and 2 may be amended by a mutual written agreement (in paper, electronic or other format), even if not physically incorporated into this Agreement document. Other amendments to this Agreement shall be valid only if in writing and signed by both Parties.”

Although Appendix 2 refers to only a single product, I infer from the terms of Article 2.1 and the relatively informal way in which Appendix 2 could be amended or supplemented pursuant to Article 26.2, that Appendix 2 was, in fact, so amended or supplemented from time-to-time, to reflect the products (and the prices for those products) that Sony was supplying to Nokia. (Footnote: ²⁷) I further infer that all Li-ion Batteries supplied by Sony to Nokia were supplied pursuant to the PPA.

Article 10 provides:

“10.1

The Price(s) are stated in Appendix 2 and shall include all SELLER’s obligations in accordance with this Agreement. Changes in Prices(s) shall be mutually agreed in writing and negotiated in good faith. The Price(s) are set in JPY unless otherwise mutually agreed in Appendix 2 or otherwise.”

Central to D1/Sony Europe’s submissions on the scope and effect of the arbitration clause was the “good faith” obligation contained in Article 10.1. One of the issues between D1/Sony Europe and Microsoft Mobile was the ambit of this good faith obligation. It was common ground that the obligation to negotiate a price in good faith applied when the price for a battery already listed in Appendix 2 was changed. That, however, was as far as Microsoft Mobile contended the obligation went. D1/Sony Europe, on the other hand, contended that the obligation to negotiate in good faith extended to all Prices agreed, even where a new Product was being added to Appendix 2 for the first time.

On this point, I prefer the contentions of D1/Sony Europe:

Article 19 of the PPA provides:

“19.1

EXCLUDING WARRANTY CLAIMS UNDER ARTICLE 16, INDEMNIFICATION CLAIMS UNDER ARTICLE 17, NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY LOST PROFITS, LOST OPPORTUNITIES, LOST REVENUES OF THE OTHER PARTY OR OTHER SIMILAR INDIRECT DAMAGE INCURRED BY THE OTHER PARTY AND ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, UNLESS SUCH DAMAGE IS CAUSED BY GROSS NEGLIGENCE OR WILFUL MISCONDUCT.”

There are two points that need to be made in respect of this clause limiting liability:

Article 21 of the PPA provides:

“21.1

SELLER agrees to promptly inform BUYER in writing of event(s) coming to SELLER’s attention that reasonably may affect SELLER’s ability to meet any of its obligations under the Agreement.

21.2

The affected Party is not liable for a failure to perform any of its obligations under this Agreement to the extent it proves that the failure was due to Force Majeure. The affected Party shall without delay take reasonable steps to limit or minimise the consequences of Force Majeure. If Force Majeure continues for more than seven (7) years, BUYER may cancel the relevant Purchase Orders.”

The force majeure provision is of no interest for the purposes of this Judgment: but D1/Sony Europe did rely upon the provisions of Article 21.1, as a corollary to the good faith obligation in Article 10.1, in that if it came to the attention of SELLER that changes in Prices were not being negotiated in good faith, there was an obligation to inform BUYER under Article 21.1.

Microsoft Mobile disputed this, and suggested that there was a relationship as between Article 21.1 and 21.2, which caused Article 21.1 to be confined, in some way, to cases of Force Majeure. I reject that submission:

The scope of the arbitration clause

D1/Sony Europe contended that the PPA was a “relational” contract, and that its terms should be read in this light. The reference to a “relational” contract was a reference to the analysis of Leggatt J. in Yam Seng Pte. Ltd v. International Trade Corporation Ltd [2013] EWHC 111 (QB). In Yam Seng, Leggatt J. stated at [142]:

“In some contractual contexts the relevant background expectations may extend further to an expectation that the parties will share information relevant to the performance of the contract such that a deliberate omission to disclose such information may amount to bad faith. English law has traditionally drawn a sharp distinction between certain relationships – such as partnership, trusteeship and other fiduciary relationships – on the one hand, in which the parties owe onerous obligations of disclosure to each other, and other contractual relationships in which no duty of disclosure is supposed to operate. Arguably, at least, that dichotomy is too simplistic. While it seems unlikely that any duty to disclose information in performance of the contract would be implied where the contract involves a simple exchange, many contracts do not fit this model and involve a longer term relationship between the parties [to] which they make a substantial commitment. Such “relational” contracts, as they are sometimes called, may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long term distributorship agreements.”

I did not find D1/Sony Europe’s reference to Yam Seng of particular assistance:

I therefore proceed on the basis that the PPA is not a relational contract, and that no question of implication of terms arises. However, it is necessary to have regard to the express terms of the PPA, which I have considered and construed in paragraphs 59 to 61 above.

It is very difficult to see how a party to the PPA, like D1/Sony Europe, could knowingly engage in cartelist behaviour of the sort alleged by Microsoft Mobile without at the same time breaching Article 10.1 and triggering the obligation to inform under Article 21.1. For present purposes, I regard the second of these provisions as less important than the first. Plainly, as Mr. de la Mare, Q.C. submitted, were D1/Sony Europe to comply with Article 21.1, and disclose in writing an intention to negotiate prices in bad faith because of an agreement with other cartelists, the cartel would end before it began.

Assuming, for present purposes, the existence of the Cartel alleged by Microsoft Mobile, it is much more likely that D1/Sony Europe would (and did) breach Article 10.1 and so, incidentally, Article 21.1. But it is the provision in Article 10.1, containing the obligation to negotiate in good faith, that would be key.

In this context, it is necessary to consider whether any contractual claims arising out of the PPA would be 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 (like a contractual dispute) by arbitration pursuant to Article 25.2 of the PPA. I conclude that they are for the following reasons:

I therefore hold that Article 25.2 extends to all pleaded claims made by Microsoft Mobile against D1/Sony Europe, save for those (if any) pre-dating the commencement of the PPA. To the extent that such pre-PPA claims are or can be advanced against D1/Sony Europe, they would fall outside the scope of the arbitration clause. As a continuing tort – or single, continuous infringement – the right of action (under English law at least) accrues afresh every day, but damages can be recovered only for the period covered by the proceedings.

Is Article 25.2 to be applied, even if wide enough to embrace the claims against D1/Sony Europe?

Microsoft Mobile contended that if, contrary to its submissions, Article 25.2 covered all or part of its claims, it should not be applied, either pursuant to section 9(4) of the Arbitration Act 1994 (which can be invoked to deal with an incompatibility between an arbitration clause and EU law (Footnote: ³⁰)) or (by virtue of EU law) in order to give effect to the primacy of EU law. (Footnote: ³¹)

D1/Sony Europe did not seek to deny that it was possible, as a matter of law, to disapply Article 25.2 in this way, provided that an incompatibility with EU law could be shown. What was disputed, however, was that application of the arbitration clause in this case was in any way incompatible with EU law.

Microsoft Mobile’s contention was that the operation of the Brussels I Regulation (Recast) must permit the effective protection of rights derived from competition law, including private law rights of action for infringement, these being rights accorded by EU law, and that an arbitration clause which caused the fragmentation of such rights of action was, for that reason, in breach of EU law.

It should be said at the outset that it was not disputed by D1/Sony Europe, and is accepted by me, that the application of the arbitration clause in this case is likely to cause fragmentation, in at least two respects:

The question is whether this fragmentation, caused by the arbitration clause, is an infringement of EU law such as to render the application of the clause ineffective or inoperable. In this regard, Microsoft Mobile placed considerable reliance upon the opinion of the Advocate General (AG Jääskinen) in Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide SA v. Evonik Degussa [2015] QB 609, and rather less reliance on the subsequent decision of the Court of Justice. It is therefore appropriate to set out in a little more detail than would normally be appropriate the reasoning of the Advocate General (emphasis supplied in all quotations):

I have quoted extensively from the opinion of AG Jääskinen because there was considerable resonance between the submissions of Microsoft Mobile and the opinion of AG Jääskinen. Basing itself on the Advocate General’s opinion, Microsoft Mobile contended for a single jurisdiction – England and Wales – to hear all claims, apart from those U.S. claims it had itself brought. Factors – like the arbitration clause – which stood in the way of this outcome were to be set aside pursuant to this higher object.

Opinions of Advocates General are advisory only, and are neither binding on the Court of Justice, nor on me. In a case where the Court of Justice has followed the opinion of an Advocate General, in terms of outcome or (more importantly) reasoning, the opinion of the Advocate General can be of importance in elucidating the judgment of the Court. In this case, however, the Court of Justice took a different approach from that of AG Jääskinen, and placed little (if any) weight on the concerns regarding the fragmentation of actions in competition claims that so troubled AG Jääskinen, and which Microsoft Mobile associated itself with:

In conclusion, whilst I accept that it is possible for the provisions of EU law to permit a court to sideline or declare ineffective an arbitration clause, there is nothing in the decision of the Court in CDC to mandate such a course. Indeed, to the contrary, to do so, would be to disregard the entire trend and direction of the approach of the Court. I appreciate that the Court did not consider arbitration clauses specifically. However, that fact cannot disguise the basic truth that the Court’s approach to the risk of “fragmentation of claims” was fundamentally different to that of the Advocate General, and involved a wholesale rejection of his approach. I can see nothing in the decision of the Court to require me to displace the effect of the arbitration clause as something inimical to EU law. Accordingly, I reject Microsoft Mobile’s contention that the arbitration clause should be set aside or disregarded on the grounds of EU law.

Can and should the court determine the scope of the arbitration clause?

I have already held that the court should determine the scope of the arbitration clause in this case (see paragraph 41 above) and have done so. I set out here my reasons for deciding the issue myself, rather than referring the point to the arbitral tribunal.

The approach to determining an application for a stay under section 9 of the Arbitration Act 1996 was set out by Aikens L.J. in Joint Stock Company “Aeroflot-Russian Airlines” v. Berezovsky [2013] EWCA Civ 784 at [72] to [74] and Popplewell J. in Golden Ocean Group Ltd v. Humpuss Intermoda Transportasi Tbk Ltd [2013] EWHC 1240 (Comm) at [59].

Essentially:

STAY OF THE PROCEEDINGS AGAINST D2/SONY CORPORATION IN FAVOUR OF ARBITRATION

The position of D2/Sony Corporation is materially the same as that of D1/Sony Europe so far as the arbitration clause in the PPA is concerned. The PPA is actually between D2/Sony Corporation and Nokia Mobile Phones Ltd as contracting parties, and Article 25.2 falls to be construed in exactly the same way. Equally, there is no reason for holding the arbitration clause effective in the case of D1/Sony Europe and ineffective in the case of D2/Sony Corporation (or vice versa).

OBJECTIONS TO JURISDICTION: AN OVERVIEW OF THE RELEVANT PRINCIPLES

Three requirements

This is a case where D1/Sony Europe was sued as of right pursuant to Article 4 of the Brussels I Regulation (Recast). All of the other Defendants – including D2/Sony Corporation – are foreign companies not domiciled in the EU. Jurisdiction over the claims against them is determined by English national law, pursuant to Article 6(1) of the Brussels I Regulation (Recast).

The relevant provisions in the Civil Procedure Rules are CPR Parts 6.36 and 6.37. These provide, insofar as is material, that:

“6.36

In any proceedings to which rule 6.32 or 6.33 does not apply, (Footnote: ³⁶) the claimant may serve a claim form out of the jurisdiction with the permission of the court if any of the grounds set out in paragraph 3.1 of Practice Direction 6B apply.

6.37

(1)

An application for permission under rule 6.36 must set out –

(a)

which ground in paragraph 3.1 of Practice Direction 6B is relied on;

(b)

that the claimant believes that the claim has a reasonable prospect of success; and

(c)

the defendant’s address or, if not known, in what place the defendant is, or is likely, to be found.

(2)

Where the application is made in respect of a claim referred to in paragraph 3.1(3) of Practice Direction 6B, the application must also state the grounds on which the claimant believes that there is between the claimant and the defendant a real issue which it is reasonable for the court to try.

(3)

The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim.

…”

Three requirements must be shown before the Court will permit service of claims out of the jurisdiction: (Footnote: ³⁷)

There is naturally a close nexus between these three requirements and the procedural requirements of CPR Part 6.37. Thus:

The duty to make full and frank disclosure

Because the parties in question have ex hypothesi not been joined, applications to serve out of the jurisdiction are generally made ex parte. There is, on such applications, a duty on the applicant to make full and frank disclosure of the material facts, including adverse facts. (Footnote: ⁴¹) The question of whether Murray 1 was full and frank is considered in Section H below.

Challenging an order permitting service out of the jurisdiction

If a party served pursuant to such an order is minded to challenge it, this will be done on the inter partes return date of the applicant’s original ex parte application for permission to serve out of the jurisdiction. At this point, the court will reconsider, and decide de novo, by way of rehearing, whether permission to serve out should be given. It is for the party seeking to serve out – Microsoft Mobile – to demonstrate that this is a proper case for service out. The position is clearly explained in Briggs, Civil Jurisdiction and Judgments, 6^th ed. (2015) (hereafter “Briggs”) at p.460: (Footnote: ⁴²)

“The application is made without the opponent’s being notified that it is being made; the court will almost always grant permission unless there is a very obvious flaw in the application. If permission is granted, as in practice it almost always is, and service is effected in accordance with it, the defendant may dispute the jurisdiction by challenging the order which granted permission, and the service which was made pursuant to it, by applying under CPR Part 11. The inter partes procedure which then follows marks the point in the process at which the court will investigate whether permission to serve should have been granted. The fact that permission was granted to the claimant in the first place is largely irrelevant at this point: it leaves no footprint; no onus is placed upon the defendant who applies to have the permission set aside; the application is in effect a rehearing of an application for permission, with the onus lying on the party who needed the permission in the first place. The court is not inhibited from discharging or varying the order, and for which the claimant now in substance (if not in form) reapplies, by reason of the fact that it has already been made.”

However, the question on the re-hearing is whether it was proper to grant permission on the date upon which the order to serve out was granted, not (in the light of changed circumstances or fresh evidence) whether it would be right to grant it as at the time of the inter partes application. In ISC Technologies Ltd v. Guerin [1992] 2 Lloyd’s Rep. 430 at 434, Hoffmann J. stated: (Footnote: ⁴³)

“Mr. Crystal said I should look at the position today. An application under R.S.C. O.12, r.8 is a rehearing of the application to the Master and the exercise of a fresh discretion. It should therefore take into account whatever has since happened. I do not agree. The application is under R.S.C. O.12, r.8(1)(c) to discharge the Master’s order giving leave to serve out. The question is therefore whether that order was rightly made at the time it was made. Of course, the court can receive evidence which was not before the Master and subsequent events may throw light upon what should have been relevant considerations at the time. But I do not think that leave which was rightly given should be discharged simply because circumstances have changed. That would mean that different answers could be given depending upon how long it took before the application came on to be heard. The position is quite different when the application is for a stay on grounds of forum non conveniens. In such a case, the appropriate time to consider the matter is the date of the hearing.”

As Evans L.J. noted in Mohammed v. Bank of Kuwait and the Middle East KSC [1994] 1 W.L.R. 1483 at 1492, “[t]he question for the court is whether the evidence in support of the application justifies the order which is applied for being made. The evidence may be produced then or subsequently, but it must be directed at the situation at the date when the application is made.” (Footnote: ⁴⁴)

It is now necessary to consider the three requirements set out in paragraph 88 above in greater detail.

THE FIRST REQUIREMENT: SERIOUS ISSUE TO BE TRIED

The law

The requirement that there be a “serious issue to be tried” has been held to be the same as the “reasonable prospect of success” test contained in CPR Part 6.37. In Bas Capital Funding Corp v. Medfinco Ltd [2003] EWHC 1798, Lawrence Collins J. held at [153]:

“It was held by the House of Lords in Seaconsar (Far East) Ltd v. Bank Markazi [1994] 1 A.C. 438 (Footnote: ⁴⁵) that the standard of proof in respect of the cause of action relied on was whether, on the evidence, there was a serious question to be tried, i.e. a substantial question of fact or law, or both, which the claimant bona fide desired to have tried. There is no reason to believe that the standard introduced under CPR 6.21(b) of a “reasonable prospect of success” differs in any material way from the “serious issue to be tried” test.”

In Carvill America Incorporated v. Camperdown UK Ltd [2005] EWCA Civ 645, Clarke L.J. stated at [24]:

“It is common ground between the parties that the merits test under CPR 6.20 is in substance no different from the test of a real prospect of success under CPR 3.4 or 24.2…the underlying rationale is that the court should not subject a foreign litigant to proceedings which the defendant would be entitled to have summarily dismissed. It is, however, important in my opinion to have in mind that the test is not a high one. A claimant has a real prospect of success if its chances of success are not fanciful.”

The parties’ agreement to “park” the issue

Before me, the parties were agreed that I should proceed on the basis, for purposes of the Applications, that the “serious issue to be tried” requirement was met. However, the agreement that they made was incomplete, in that it left certain issues open. Essentially, the position was as follows:

The parties were agreed that this issue did not have to be determined by me now, and I do not do so. The upshot, however, was that the agreement between the parties was not complete: an important element was unresolved, and I am being asked to deal with an important element going to jurisdiction on the basis of this incomplete agreement. In the circumstances, whilst I proceed on the basis that there is a serious issue to be tried, and that the first requirement is satisfied, I should make absolutely clear – particularly given the terms of paragraph 100 of Microsoft Mobile’s written submissions, which seek to suggest that the issue was open-and-shut – that I am making no determination on this point. It is simply that, given the agreement of the parties, I am not going to consider the question and will not set aside the Master’s order on this ground.

THE SECOND REQUIREMENT: A GOOD ARGUABLE CASE THAT THE CASE FALLS WITHIN ONE OR MORE OF THE GATEWAYS

Good arguable case regarding one or more of the Gateways

At common law, the court had no power to permit claims to be served abroad. Power to do so was introduced by the Common Law Procedure Act 1852; was from 1883 in Order 11, rule 1 of the Rules of the Supreme Court; and since 2000 has been provided for by CPR 6.36 and paragraph 3.1 of Practice Direction 6B.

All of the Gateways listed in the Practice Direction presuppose some connection – apart from mere presence in the jurisdiction when served – with England and Wales. It is fair to say that the connection is between the pleaded causes of action and this jurisdiction – not any wider jurisdiction, like the EU or the EEA.

The burden of demonstrating that a claim falls within one of the Gateways lies on the party seeking to serve out of the jurisdiction:

The Gateways relied upon by Microsoft Mobile

In its application to serve the Defendants out of the jurisdiction, Microsoft Mobile relied upon Gateways (3) and (9)(a) of paragraph 3.1 of Practice Direction 6B.

The relevant parts of Practice Direction 6B on service out of the jurisdiction provide:

“3.1

The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where-

…

(3)

A claim is made against a person (“the defendant”) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and -

(a)

there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and

(b)

the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.

…

(9)

A claim is made in tort where-

(a)

damage is sustained, or will be sustained, within the jurisdiction…”.

It is, of course, trite that Microsoft Mobile must show that each claim pleaded in the Amended Particulars of Claim falls within one or other of these Gateways. To the extent that service out can be authorised for some, but not for other, claims, those claims must be removed so far as any defendants out of the jurisdiction are concerned. (Footnote: ⁴⁸)

Gateway (3): whether D2/Sony Corporation, (Footnote: ⁴⁹) D4/LG Chem and/or D6/ Samsung are necessary or proper parties to Microsoft Mobile’s claims against D1/Sony Europe

Requirements that have to be satisfied

In Altimo Holdings and Investment Ltd v. Kyrgyz Mobil Tel Ltd [2011] UKPC 7, Lord Collins considered this Gateway in general terms:

“73.

The necessary or proper party head of jurisdiction is anomalous, in that by contrast with the other heads, it is not founded upon any territorial connection between the claim, the subject matter of the relevant action and the jurisdiction of the English courts: The Brabo[1949] A.C. 326, 338, per Lord Porter. Piggott, Foreign Judgments and Jurisdiction (3rd ed, 1910), pt III, p 238, said: “This is perhaps the most important of the sub-rules, for it throws the net of jurisdiction over a wider area; and the principle of considering the nature of the cause of action which pervades the whole subject, appears here to be ignored.” Consequently as Lloyd LJ said in The Golden Mariner [1990] 2 Lloyd’s Rep. 215 at 222:

“I agree…that caution must always be exercised in bringing foreign defendants within our jurisdiction under O.11 r.1(1)(c). It must never become the practice to bring foreign defendants here as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.”

74.

Among the questions which arise on this appeal are these: When is an action “properly brought” against the defendant served within the jurisdiction (and outside the jurisdiction under the English rules), referred to here as D1, or “the anchor defendant”? When will the foreign additional defendant, or D2, be a “proper party”? In particular, what is the merits threshold for each of those claims? Is the claim not “properly brought” against D1 if the motive of the claimant in suing D1 is to add D2? Does it matter that in practice the claimant will not recover against D1?

75.

The leading decisions are the decisions of the House of Lords in Improvement Commissioners v. Armement Anversois SA (The Brabo) [1949] A.C. 32 and Derby & Co Ltd v. Larsson [1976] 1 W.L.R. 202, and of the Court of Appeal in Massey v Heynes & Co. (1888) 21 Q.B.D. 330 and Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd[1983] Ch. 258. The members of those tribunals do not all speak with one voice, but the following propositions may be derived from them.

The motive in suing the anchor defendant

76.

First, the mere fact that D1 is sued only for the purpose of bringing in D2 is not fatal to the application for permission to serve D2 out of the jurisdiction: The Brabo[1949] A.C. 326, 338-9, per Lord Porter; Derby & Co Ltd v. Larsson [1976] 1 W.L.R. 202, 203, per Viscount Dilhorne.

77.

The question was discussed extensively (and somewhat discursively) in Multinational Gas and Petrochemical Co. v Multinational Gas and Petrochemical Services Ltd[1983] Ch. 258, but without reference to the relevant passages in The Brabo and without any citation to the court of Derby & Co. Ltd v. Larsson.

78.

The point arose in Multinational Gas because D1 was in liquidation and therefore the plaintiff had no real prospect of recovery against D1. Lawton L.J. did not treat as fatal to the application the fact that the sole, or predominant, reason for beginning the action against a party duly served within the jurisdiction was to enable an application to be made to serve the parties outside the jurisdiction. It was instead a relevant factor in the exercise of the discretion: at 268. Dillon L.J. said (at 285) that an action was not to be regarded as properly brought against D1 if the true inference from all the facts was that the sole reason for suing D1 was to found an application to join foreign defendants in the action. But although he held that the predominant reason for the action against D1 was to enable foreign defendants to be joined, he regarded the action as bona fide and properly brought: at 286-287. May L.J. considered that if there was a good arguable case against D1 in an action in which any judgment obtained against that defendant might or would not be met owing to lack of funds, the fact that the main or predominant purpose of keeping D1 in the proceedings was to enable the plaintiff to bring in D2 was not a ground for saying that the proceedings were not properly brought against D1: see at 273-279. See also Goldenglow Nut Food Co Ltd v. Commodin (Produce) Ltd [1987] 2 Lloyd's Rep. 569, 578 (CA).

79.

The better view, therefore, is that the fact that D1 is sued only for the purpose of bringing in the foreign defendants is a factor in the exercise of the discretion and not an element in the question whether the action is “properly brought” against D1, provided that there is a viable claim against D1.

“Bound to fail”

80.

Second, the action is not properly brought against D1 if it is bound to fail: The Brabo[1949] A.C. 326, 338-9, per Lord Porter. He also put the point (echoing Witted v Galbraith[1893] 1 Q.B. 577) on the basis that leave will not be granted if the lack of a plausible cause of action against D1 shows that the presence of D1 in the jurisdiction is being used as a device to bring in D2. See also Multinational Gas and Petrochemical Co. v. Multinational Gas and Petrochemical Services Ltd[1983] Ch. 258, 268, 273-274.”

As Lord Collins identified, there are two very distinct requirements to this Gateway:

The first requirement: the claim against the anchor defendant

I do not consider – in light of the agreement reached by the parties regarding the existence of a serious issue to be tried – that it is open to me to debate whether there is a “real issue” – in the sense of an arguable issue – between Microsoft Mobile and D1/Sony Europe. (Footnote: ⁵¹)

However, the first requirement goes beyond a requirement of mere arguability. In Erste Group Bank AG, London Branch v. JSC “VMZ Red October” [2015] EWCA Civ 379, the Court of Appeal considered Lord Collin’s statement in [79] of Altimo Holdings. Gloster L.J. stated: (Footnote: ⁵²)

It is, therefore, necessary to consider wider issues regarding the “reasonableness” of the claim brought by Microsoft Mobile against D1/Sony Europe. The Defendants contended that the claim brought by Microsoft Mobile against D1/Sony Europe was unreasonable on the following grounds:

I consider that the sole reason that Microsoft Mobile’s action is structured as it is, with D1/Sony Europe as the “lead defendant”, has been to found jurisdiction in England against the other Defendants. Apart from D1/Sony Europe, all of the other Defendants are the ultimate parent companies of their respective corporate groups, claimed against as a part of a “single economic unit” or “undertaking”. (Footnote: ⁵³) D1/Sony Europe is the exception: it is a subsidiary of D2/Sony Corporation, which is the parent company of the entire Sony group. (Footnote: ⁵⁴) I can discern no other, additional, reason or benefit accruing to Microsoft Mobile for pursuing this course of action, and it is significant that in Microsoft’s proceedings in the United States, which involved similar issues and similar parties, D1/Sony Europe was not joined.

The Defendants pointed to some (old) authority which they contended suggested that the joinder of an anchor defendant in such circumstances was unreasonable. (Footnote: ⁵⁵) I do not consider that it is open to me on the (later) authorities on this point to reach such a conclusion, and I do not, therefore, consider these authorities further. In Altimo Holdings, Lord Collins considered that the fact that a party had been joined solely for the reason of bringing in other parties as defendants was relevant only to discretion, and not to the question of whether the Gateway was satisfied. In Erste Group Bank AG, Gloster L.J. stated at [43]: (Footnote: ⁵⁶)

“It was obvious from the evidence that the commercial (and indeed only) driver behind the Bank’s issue of proceedings in England against D1 and D2 was to enable a claim to be brought against D3 and D5 and to attempt to execute against their assets, whether in Russia or elsewhere. However, we do not consider that in the present case it is necessary or appropriate for this court to revisit the question whether the fact that a claimant’s motive in bringing proceedings against the anchor defendants was only for the purposes of enabling a claim to be brought against the foreign defendants is a factor which is relevant to the question whether the threshold criteria under paragraph 3.1(3) of PD6B have been satisfied. To do so would involve reconsideration of this court’s decision in Multinational Gas and Petrochemical Co. v. Multinational Gas and Petrochemical Services Ltd [1983] Ch. 258 and the various authorities there cited. That would be a task for the Supreme Court. Accordingly, even if we have reservations on this point, we must accept for the purposes of this case the Board’s conclusion, as expressed in paragraph 79 of AK Investment, that the fact that the anchor defendant is sued only for the purpose of bringing in the foreign defendants is not an element in deciding the question whether the gateway requirements of paragraph 3.1(3)(a) or (b) have been satisfied. That factor is only for consideration under the wider discretionary head of Issue 4.”

On the state of the law as it presently stands, therefore, my conclusion that D1/Sony Europe was joined for the sole purpose of bringing into the proceedings the other Defendants does not render the claim against D1/Sony Europe one that it is unreasonable for this court to try.

For the reasons given in Sections B and C above, I have concluded that the arbitration clause in the PPA is sufficiently wide to embrace the claims brought by Microsoft Mobile against D1/Sony Europe and D2/Sony Corporation. For the reasons I have given, I have stayed the proceedings against these Defendants.

The question is whether this determination – made after Microsoft Mobile’s application to serve out of the jurisdiction, and after that application was determined in Microsoft Mobile’s favour by the Master – is relevant to the question of reasonableness.

Microsoft Mobile contended that such a determination was not relevant, because it post-dates the order for service out, and matters need to be assessed as at that date. I do not accept this contention, for two, related, reasons.

First, it is clear from the terms of Murray 1 that the arbitration clause was a matter that was before the Master on the application for service out of the jurisdiction:

Secondly, and relatedly, it matters not that the position of D1/Sony Europe quoad the arbitration clause was unknown at the time of the hearing, because it should have been assumed that any point on jurisdiction properly available to D1/Sony Europe would be taken by it. In Tyne Improvement Commissioners v. Armement Anversois S/A, “The Brabo” [1949] A.C. 32, Lord Simonds stated at 347:

“…I do not think that the court ought to assume that the defendants within the jurisdiction would not avail themselves of any defence open to them. In this case it was suggested that the second and third defendants might not assert the immunity of the Crown. But if one valid line of defence is assumed to be abandoned, so might another, until at last any action may be deemed to be properly brought because the defendants might throw down their arms and run away.”

Accordingly, I find that the effect of the arbitration clause on the lis between Nokia and D1/Sony Europe is a factor to be considered on the present Applications. The question whether, in these circumstances, the claim against D1/Sony Europe gives rise to “a real issue which it is reasonable for the court to try”, is straightforward to answer. Given the scope of the arbitration clause, and the fact that D1/Sony Europe is asserting it and seeking arbitration of the claims against it, there is simply no real issue between Microsoft Mobile and D1/Sony Europe for this court to try. The point is so fundamental, it goes beyond any question of reasonableness.

This finding is sufficient to determine the argument in relation to Gateway (3) against Microsoft Mobile. However, in case I am wrong on the question of a stay in favour of arbitration, I consider the alternative scenario where the proceedings against D1/Sony Europe continue. That brings me to the third point: whether – given the manner in which the various claims advanced by Microsoft Mobile have been aggregated – it can be said that the claims against D1/Sony Europe are unreasonable or (if this makes a difference) not reasonable.

As I have already noted, I do not consider that it is open to me to set aside the Master’s order on the basis that the claims advanced by Microsoft Mobile against D1/Sony Europe are unarguable. That is a matter – if at all – for a later and different hearing on summary judgment. (Footnote: ⁵⁷)

However, there is a secondary issue, on the question of reasonableness. I have described above the aggregated nature of the claims being made by Microsoft Mobile, in that claims are made by Nokia and Microsoft Mobile generally, against the various Defendants generally, such that it is not possible to define or identify specific aspects of a claim against (for example) D1/Sony Europe by a specific entity within Nokia.

Although it is true to say that the claims being advanced by Microsoft Mobile are in this sense vague, I do not consider that it can be said that this renders the claims unreasonable. It is perfectly proper to advance claims in the alternative – alternative claimants and alternative defendants – and in this case, of course, any Defendant participating in the Cartel will be jointly and severally liable for the acts of the other participants of the Cartel – whether joined as defendants or not.

Microsoft Mobile has alleged, in terms, that D1/Sony Europe participated in the Cartel, although it has done so by advancing that allegation generally against all of the Defendants. See, for example, the following paragraphs in the Amended Particulars of Claim:

“37.

…the Defendants and/or the undertakings of which they were a part, together with other undertakings (collectively the ‘Cartelists’) in the period from at least August 1999 to May 2011 entered into agreements and/or arrangements and/or concerted practices by which they or two or more of them… (Footnote: ⁵⁸)

…

63.

In summary, beginning no later than 1999, the Cartelists began communicating with each other bilaterally and/or multilaterally with a common goal of cooperating to prevent, restrict or distort competition on the relevant market for Li-ion Batteries.

…

174.

By reason of the Defendants’ participation in and/or implementation of the Cartel as described hereinabove…

…

181.

As an intended and/or foreseeable consequence of the conduct set out above, the Defendants and the undertakings of which they formed part caused the Claimant loss and damage…”

In short, there is a clearly pleaded case against D1/Sony Europe, by way of which all of the claims pleaded in the Amended Particulars of Claim are advanced. I reject the contention – set out most clearly in paragraph 64 of D6/Samsung’s written submissions – that “Sony Europe was not alleged to have directly participated in the cartel or even to have known of the cartel. Instead Sony Europe was sued simply on the basis that it was part of the same economic unit as Sony…and was said to be jointly and severally liable with Sony and the rest of the Japanese and Korean Defendants for the damages caused by the cartel”.

Although, of course, I accept that D1/Sony Europe might be found to be liable in damages to Microsoft Mobile on the basis of what can be termed “group liability” – i.e. because D1/Sony Europe, although not involved in the Cartel, was liable because it was part of the same undertaking, entities within which did participate in the Cartel – that is not the case that is pleaded by Microsoft Mobile. The case that is pleaded, which is verified by a statement of truth and by the witness statements of Mr. Murray, is that D1/Sony Europe itself participated in the Cartel. I conclude that, but for the arbitration clause, the claim against D1/Sony Europe gives rise to real issues which it is reasonable for the court to try.

It is, for this reason, unnecessary for me to determine what the parties called the “Provimi” point. The Provimi point only arises if D1/Sony Europe’s liability is based solely on its being a part of the same undertaking as its parent D2/Sony Corporation – in short, if the claim against D1/Sony Europe is predicated solely on a theory of group liability, without any allegation that it knew or directly participated in the Cartel. Were the case against D1/Sony Europe to be solely a group liability case, very difficult questions of whether D1/Sony Europe was, or was not, a part of the same undertaking as D2/Sony Corporation might arise, in addition to difficult questions of attribution of conduct within an undertaking. (Footnote: ⁵⁹) As it is, my conclusion regarding the nature of the allegations made by Microsoft Mobile against D1/Sony Europe means that I do not have to venture into these difficult waters, and I do not consider the Provimi question further in this Judgment.

The second requirement: necessary or proper party

The next question which arises is whether the Defendants, apart from D1/Sony Europe, are persons who are “necessary or proper” parties to the claim against D1/Sony Europe. It is important to note that “necessary” and “proper” are disjunctive.

Microsoft Mobile did not contend that the Defendants were necessary parties to the action – the Defendants quite rightly pointed out that there is no need to sue every member of a cartel: joint and several liability means that only one cartelist needs to be joined in an action such as this.

Microsoft Mobile did, however, contend that the Defendants were proper parties. Microsoft Mobile contended that the test for being a “proper” party was simply whether – on the assumption that the foreign defendant was within the jurisdiction – that defendant could be joined pursuant to CPR Part 19. This was disputed by the Defendants, who submitted that:

Two questions therefore arise:

The Defendants relied upon a test propounded by Lindley L.J. in Witted v. Galbraith [1893] 1 Q.B. 577 at 579: (Footnote: ⁶⁰)

“The rule that now applies is Order XI, r.1(g), and it is said that the present case comes within that rule. There is a very easy method of testing whether this is true. Supposing that both the defendant firms were resident within the jurisdiction, would they both have been joined in the action? I cannot think so; there is no plausible cause of action against the brokers. I come to the conclusion that the brokers have been brought into the action simply to enable the plaintiff to bring the other defendants within the jurisdiction. It is not a bona fide case of an action properly brought against a person who has been served within the jurisdiction. Consequently there is no right to proceed under the order, and the appeal must be allowed.”

The Defendants submitted that there was significance in the use of the word “would” in Lindley L.J.’s test. The question was not whether the claim could have been brought, but whether it would have been on the assumption that all parties were resident within the jurisdiction. This, of course, is a much narrower and more stringent test than simply whether a defendant could be joined pursuant to CPR Part 19.

The Defendants’ contention places a great deal of weight on a single word. Other cases take a different approach. In Massey v. Heynes (1888) 21 Q.B.D. 330 – another decision of the Court of Appeal, pre-dating Witted v. Galbraith, and where Lindley L.J. was a member of the court – Lord Esher M.R. said at 338: (Footnote: ⁶¹)

“The question, whether the person out of the jurisdiction is a “proper party” to an action against a person who has been served within the jurisdiction, must depend on this, - supposing both parties had been within the jurisdiction would they have been proper parties to the action? If they would, and only one of them is in this country, then the rule says that the other may be served, just as if he had been within the jurisdiction.”

Lindley L.J. did not dissent from this test.

Lord Esher M.R.’s test in Massey v. Heynes is altogether wider than Lindley L.J.’s “counter-factual” “would” test in Witted v. Galbraith. The touchstone of Lord Esher M.R.’s test is whether a defendant would be a “proper” party assuming that party to be within the jurisdiction. That comes very close to the test propounded by Microsoft Mobile: could the defendant be joined pursuant to CPR Part 19?

This wide approach is confirmed by a number of cases relied upon by the Defendants, where service out of the jurisdiction was set aside on the ground that the claim against the anchor defendant had not bona fide been brought. In these cases, the claim against the anchor defendant was no more than a device or sham to enable claims to be brought against other defendants who were out of the jurisdiction. (Footnote: ⁶²) Given these findings, it is easy to see that (in these cases) the joinder of the foreign defendant would be “improper” according to the test propounded by Lord Esher M.R.

I conclude that the circumstances in which a party is a “proper” party to proceedings already commenced or to be commenced against an anchor defendant are significantly wider than those contended for by the Defendants. I consider the test simply to be whether the foreign defendant could, if within the jurisdiction, properly have been joined pursuant to CPR Part 19.

There is a further reason why I reject the approach contended for by the Defendants. Ex hypothesi, if the sole reason for bringing D1/Sony Europe into the proceedings was to found jurisdiction against the other Defendants, then (assuming the other Defendants were already amenable to the court’s jurisdiction) D1/Sony Europe would never have been joined. Such a test is not only inconsistent with the law as I have described it, but also it is not open to me, given Lord Collins’ statement in Altimo Holdings at [79] and the Court of Appeal’s view of that statement in Erste Group Bank AG at [43] (see paragraph 111 above). This approach to what is a “proper” party brings into play precisely the same “reasonableness” arguments in relation to forum-shopping as Lord Collins rejected in Altimo. This is very clear from paragraph 120 of D6/Samsung’s written submissions:

“In this case, it is submitted that the answer to Lindley L.J.’s counterfactual question is plainly “No”…it is obvious (and certainly, Samsung has the better of the argument on the material before the Court, it being more plausible) that Sony Europe would not have been sued were the Japanese and Korean Defendants resident in England, and has been sued solely or predominantly in order to found jurisdiction over the Japanese and Korean Defendants. As a result, those foreign defendants are not “proper parties” to the claims against Sony Europe, and it is not “reasonable” for the English Court to try those claims with the claims against the foreign defendants, within the letter, spirit or substance of sub-paragraph 3…”.

It seems to me that questions as to the propriety of the claim against the anchor defendant are more properly considered at the stage of the first requirement (a reasonable issue for the court to try) and not at the stage of the second requirement (necessary or proper party).

In conclusion, the law is well-described in Dicey, Morris & Collins, The Conflict of Laws, 15^th ed. (2012) at paragraph 11-165:

“Y, who is out of England, must be either a necessary or proper party to the proceedings. If Y is a proper party it is not also a requirement that he be a necessary party; but if adding Y is likely in practice to achieve no potential advantage for the claimant, it would not ordinarily be a proper case for service out of the jurisdiction. The question whether Y is a proper party to proceedings against X depends on this: supposing both X and Y had been in England, would they both have been proper parties to the proceedings? If they would, and only one of them, X, is in this country, then Y is a proper party and permission may be given to serve him out of the jurisdiction. Y will be a proper party if the claims against X and Y involve one investigation. It is not necessary that the alleged liability of Y be joint and several with that of X.”

I have no doubt that the Defendants are, according to the test that I have described, “proper” parties to the proceedings against D1/Sony Europe:

Gateway (9)(a): damage within the jurisdiction

The wording of the Gateway

The wording of this Gateway has changed over time. Prior to 1987, the predecessor to paragraph 3.1(9) was RSC O.11 r.1(h), which applied where the claim was “founded on a tort committed within the jurisdiction”. The focus was thus on the place where the wrongful act was done.

In 1987, rule 1(h) became rule 1(f) and was changed substantially to its present form, referring separately to:

This change was made from a desire to incorporate into the common law rules of jurisdiction the effect of what is now Article 7(3) of the Brussels I Regulation (Recast) as interpreted by the Court of Justice in Bier [1978] QB 708. As a result, it may be appropriate (as Ms. Demetriou, Q.C., leading counsel for D4/LG Chem, contended) to take into account, when construing this Gateway, other case-law emanating from the Court of Justice, even though the Gateway is an English and not an EU jurisdictional rule. (Footnote: ⁶⁴) Whilst it might be appropriate to keep an eye on non-English case law as being of potentially persuasive force, in my judgment it would be inappropriate to go further than this: the Gateway is an English and not an EU jurisdictional rule, and must be construed on that basis.

In this case, Microsoft Mobile based its contentions as regards this Gateway entirely on the basis that damage had been sustained within the jurisdiction i.e. paragraph 3.1(9)(a) of Practice Direction 6B. It is not necessary, for present purposes, to consider further the alternative ground of acts committed within the jurisdiction.

Basis upon which Microsoft Mobile contended that there had been damage within the jurisdiction

The factual basis on which Microsoft Mobile sought to demonstrate jurisdiction turned on the following aspects, which were set out in paragraph 33 of Murray 1:

“Based on an initial review of the Claimant’s and Nokia’s sales and purchase data, I understand from the Claimant’s economic experts that the Claimant and/or Nokia suffered damage within the jurisdiction as a result of the Defendants’ unlawful participation in the Cartel.

(a)

In the Cartel Period and the Run-Off Period, Nokia and/or the Claimant purchased 12.1 million units from the First Defendant, which, as set out above, is a company located in the UK and incorporated under English law.

(b)

Nokia entered into a series of Product Purchase Agreements (“PPAs”) with the Second Defendant (which agreement includes the First Defendant as an affiliated company), Third, Fourth, Fifth and Sixth Defendants. Of these PPAs, the agreements with the Second and First Defendants, and with the Fifth Defendant, are governed by “United Kingdom law”. In the absence of any connection between the Claimant and these Defendants to Scotland or Northern Ireland, the reference to “United Kingdom law” can only reasonably be construed as a reference to the law of England and Wales. Pursuant to Article 4(3) of Regulation 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (“Rome II”), this is recognised to establish a close connection between England and Wales and the tortious conduct which the Claimant has identified in its claim.

(c)

In addition, the Claimant and Nokia sold substantial quantities of Handsets in England and Wales over the Cartel Period and Run-Off Period. While the Claimant does not consider that there has been any “pass on” of the cartelised prices to its own customers, if the Defendants were, on the contrary, to show that its higher prices had been passed on to the Claimant or Nokia’s own customers, then any higher sales prices that resulted from an increase in the costs of its component products would have caused the Claimant and/or Nokia to suffer lower volume of sales…That would in turn have caused loss to be sustained by them within England and Wales. Moreover, in that event, it would also be the case that UK consumers and/or businesses also suffered significant damage as a result of the Defendants’ unlawful conduct.”

In its written and oral submissions, Microsoft Mobile appeared to supplement or extend these three bases. Thus, paragraph 116.2 of Microsoft Mobile’s written submissions states that “[t]he entities within Nokia that made purchases of Li-ion Batteries, in respect of whose purchases the claim is brought, include Nokia UK Ltd which is established in the UK”. The significance of Nokia UK Ltd is that it would have its registered office within the jurisdiction which (assuming the approach in CDC is applicable, which I do) could be the place where damage was sustained.

It will be necessary to consider all of these bases, together with the additional evidence relied upon by Microsoft Mobile (Murray 1 being the evidence deployed before the Master: it was supplemented by Murray 2 before me). Before doing so, however, something needs to be said about the nature of the Gateway itself.

Legal aspects regarding the Gateway

There are a number of points that fall to be considered:

These various aspects are considered in turn below. Thereafter, I turn to the specific contentions of Microsoft Mobile.

Clearly, a good arguable case needs to be shown regarding the applicability of the Gateway: see paragraph 101 above. The question is, what law should apply when seeking to determine whether the criteria demanded by a Gateway are met. Briggs at pp.466 to 467 says this:

“The heads set out in Paragraph 3.1 contain various definitional elements. A question which appears important, but which is oddly free of convincing authority, is whether these are to be interpreted by reference to English domestic law, or English rules of private international law, or something else. Suppose the claimant wishes to serve out on the basis ‘the claim is in respect of a contract where the contract was made within the jurisdiction’. Is the question whether there actually was a contract for the claim to be made in respect of answered by reference to English domestic law, or by reference to the rules of English private international law? And is the place where it was made answered by applying the offer and acceptance rules of English domestic law, or the corresponding rules of whichever law is picked out by the rules of private international law, or some other way altogether?”

I was referred to no authority on this question. In a straightforward case, where the facts are clear, it might be possible to determine the applicable law as a matter of law; in other cases, the facts may be capable of determination on the “good arguable case” test, and the applicable law then determined on the basis of those facts.

The present case is, however, altogether more complex. Unsurprisingly, very little has been said before me about the operation of the Cartel, and it is clear from the exchanges with Mr. Beal, Q.C. recorded in paragraph 20 above, that the facts relating to the sale and purchase of the Li-ion Batteries will be difficult to establish, as regards place of purchase; the identity of the vendor; the identity of the buyer; whether there was a “chain” of purchases within Nokia; and how the Li-ion Battery was, in the end, on-sold by Nokia.

The difficulty of the point is stated very clearly in Murray 2:

“139.

As a preliminary comment, I note that this is not a case where it is straightforward to identify the location of damage. There are numerous candidates:

(a)

Where each contract of sale for a Relevant Product (as defined in Section D of the Particulars of Claim) was concluded;

(b)

Where each Relevant Product was delivered;

(c)

Where each entity within Nokia which purchased a particular Relevant Product was located;

(d)

Where each payment for a Relevant Product was made; and/or

(e)

Where each product incorporating a Relevant Product was ultimately sold.

…

141.

Which of these particular locations should be considered appropriate will be a matter for legal submission. How the many millions of Relevant Products that were purchased during the Cartel Period should be divided up on these different bases will be a complex matter requiring expert evidence in due course. In short, the detailed analysis will be a matter for trial…”

In these circumstances, it is simply not possible to make any determination as to what might be the applicable law in the present case; still less have I received factual evidence in relation to all of the potentially applicable laws. None of the Defendants sought to contend that the inability of Microsoft Mobile to identify the applicable law, and so identify more specifically the places where damage had been sustained by Nokia, was fatal to Microsoft Mobile’s contention that its claims fell within Gateway (9)(a). In my judgment, they were right not to do so. In a case such as this, the question of where damage has been sustained must be informed by the jurisdictional rules of the lex fori – by which I mean, the manner in which the Gateway has been formulated and construed, plus (when dealing with questions such as “what is damage?” and “where did that damage occur?”), the sort of “broad internationalist spirit” described by Lord Mance in Raiffeisen Zentralbank Österreich AG v. Five Star General Trading LLC [2001] Q.B. 825 at [27].

Adopting this broad internationalist spirit, I take the approach that if Microsoft Mobile can show damage sustained within the jurisdiction on the basis of any of the candidates described in paragraph 139 of Murray 2, the requirements of Gateway (9)(a) will be satisfied.

The White Book 2016 says this at paragraph 6.37.15.1:

“The applicant must show that each claim made by them [sic] has the attributes set out in at least one of the sub-paragraphs listed under para. 3.1 of 6PDB…The burden is upon the applicant to show in respect of each claim that it comes within one or other of the “jurisdictional gateways” in para 3.1 of 6BPD…”.

In Saipem S.p.A. v. Dredging VO2 B.V., the “Volvox Hollandia” [1988] 2 Lloyd’s Rep. 361 at 371-372, Kerr L.J. stated:

“Given the settled principles governing the jurisdiction under O.11, there can in my view be no doubt that the plaintiffs’ claims for the negative declarations in question were improperly included in their writs for service on the shipowners in Holland, even though their claims for damages could properly be pursued by means of these writs. It requires no authority that a writ for which leave is sought under O.11 may, like the curate’s egg, be good in part and bad in part, in which case the plaintiffs may not proceed with those claims which are bad…”

Each claim that is advanced by a claimant and which that claimant seeks to pursue against a defendant outside the jurisdiction must fall within one or more of the Gateways. The question which arises is how this applies where – as here – there has been an assignment of claims. In such a case, it may – and in this case will – be necessary to consider “who is the claimant?”. Where there has been an assignment, there are two candidates – the person who originally had the claim, the assignor, and the person who now has the claim, the assignee.

In my judgment, where the identity of the person whose “claim” is being considered for the purposes of a Gateway matters, that person is the original holder of the claim, and not the last person to whom that claim was transferred. The jurisdictional rules must be applied not in relation to the claim as assigned (where the ultimate assignee would be regarded as the claimant) but to the claim as it originally subsisted (so that the original assignor would be regarded as the claimant).

This is clearly the approach of English national law. The assignee cannot, by virtue of the assignment, be in a better position than the assignor would have been in. This is reflected in the damages that the assignee can recover if a cause of action is assigned to him (where the rule is that the assignee cannot recover more than the assignor could have done (Footnote: ⁶⁵)) and in the fact that an assignee is bound by choice of jurisdiction and arbitration clauses. (Footnote: ⁶⁶)

Such an approach is, I have no doubt, entirely consistent with Lord Mance’s “broad internationalist spirit”. In the CDC case considered in paragraphs 78ff above, the Court of Justice considered that, for jurisdictional questions, it was necessary to have regard to the status of the original claimant and that jurisdiction clauses binding on an original claimant were also binding on that claimant’s successor in title:

“35.

Given that the circumstances of the present case are characterised by the consolidation of a number of potential claims for damages brought by the applicant in the main proceedings which had been assigned to the applicant by several undertakings allegedly victims of the Hydrogen Peroxide cartel, it should be pointed out from the outset that the transfer of claims by the initial creditor cannot, by itself, have an impact on the determination of the court having jurisdiction under Article 5(3)…

…

65.

Only where a party not privy to the original contracting party’s rights and obligations in accordance with national substantive law as established by the application of the rules of private international law of the court seised of the matter could that third party nevertheless be bound by a jurisdiction clause to which it had not agreed…”

In Berezovsky v. Forbes [2000] 1 W.L.R. 1004 at 1012, Lord Steyn – considering the old formulation of the Gateway – held that “a tort committed within the jurisdiction must be a real and substantial one”.

Unlike the equivalent jurisdictional base under the Brussels I Regulation (Recast), where jurisdiction only exists in respect of such damage as was sustained within the jurisdiction, this Gateway gives jurisdiction in respect of damages sustained both within and without the jurisdiction. In Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391 at 437, the Court of Appeal noted: (Footnote: ⁶⁷)

“As the rule now stands it is plain that jurisdiction may be assumed only where (a) the claim is founded on a tort and either (b) the damage was sustained within the jurisdiction or (c) the damage resulted from an act committed within the jurisdiction…Condition (b) raises the question: what damage is referred to? It was argued for A.C.L.I. that since the draftsman had used the definite article and not simply referred to “damage”, it is necessary that all the damage should have been sustained within the jurisdiction. No authority was cited to support the suggestion that this is the correct construction of the Convention to which the rule gives effect and it could lead to an absurd result if there were no one place in which all the plaintiff’s damage has been suffered. The judge rejected this argument and so do we. It is enough if some significant damage has been sustained in England.”

In this case, when approaching the question of whether Microsoft Mobile can show substantial damage sustained within the jurisdiction, two points must be borne in mind:

It is clear that the damage that needs to be established under this Gateway is direct, and not indirect or consequential, damage. In Erste Group AG, London Branch v. JSC “VMZ Red October” [2015] EWCA Civ 379, Gloster L.J. stated: (Footnote: ⁶⁸)

“106.

…it seems to us that the tort gateway is not satisfied in any event on the claim pleaded because, largely for reasons already given in relation to applicable law, we have reached the clear view that the relevant damage for this purpose was sustained in New York rather than London. None of the first instance cases had treated as relevant damage a non-payment of money in England which is simply and precisely dependent upon an earlier non-payment outside England, in circumstances where there were prior arrangements, for example with an agent, that the offshore payment would be followed by an onward payment to an account within the jurisdiction. On the contrary, the damage successfully relied upon was, in each of those cases, ‘direct’ damage, whether it consisted of payment of funeral expenses or a continuing loss of earnings, arising afresh month by month when salary would otherwise have been paid to the victim, but for his injury.

107.

In the present case, the relevant loss was the destruction of the value of the Bank’s receivables under the Loan Agreement and Guarantee which, for reasons already given, is properly to be regarded as having occurred in New York, that being the place of payment. The knock-on consequence, namely non-payment by the Facility Agent to the Bank’s facility office in London was merely reflective of that earlier loss. In relation to the Bank’s share of repayments it was, dollar for dollar, the same. It was not in any rational sense a fresh, different or separate loss. Nor was it a continuing loss, like loss of earnings.”

In Brownlie v. Four Seasons Holdings Inc [2015] EWCA Civ 665, the Court of Appeal also drew a distinction between direct losses and indirect/consequential losses. A claim for damages brought by the claimant on her own behalf and on behalf of her husband’s estate for injuries suffered as a result of an accident in Egypt was consequential loss; on the other hand, the claimant’s claim under the Fatal Accidents Act 1976 had been sustained within the jurisdiction, as it was a separate statutory cause of action brought to recover compensation for the claimant’s loss of dependency, and was not consequential loss. At [91], Arden L.J. stated:

“To sum matters up on this issue, concerning Lady Brownlie’s tort claims, therefore, I would agree with the doubts expressed by this court in Erste Group Bank AG London Branch v. JSC “VMZ Red October” [2015] EWCA Civ 379 about claims for consequential loss for foreign accidents being within the tort gateway. I would allow the appeal in respect of Lady Brownlie’s personal claim and in respect of the LRMPA34 claim…However, for the reasons given above, I would dismiss the appeal in so far as it relates to Lady Brownlie’s own tort claim under the FAA76.”

Application in the present case

I turn to consider whether Microsoft Mobile has demonstrated a good arguable case that, as a result of the tortious claims alleged by it, damage has been sustained within the jurisdiction.

The relevant part of Murray 1 – paragraph 33(a) – was set out in paragraph 144 above. Essentially, it is said that 12.1 million units of Li-ion Batteries were purchased from D1/Sony Europe by one or more companies within the Nokia group and/or Microsoft Mobile, without differentiating between these entities. No further information is provided.

This point is very clearly highlighted in Wheeler 2:

“The only potentially relevant factor identified by Mr. Murray is the statement at paragraph 33(a) that “in the Cartel Period and/or the Run-Off Period, Nokia and/or the Claimant purchased 12.1 million units from the First Defendant, which, as set out above, is a company located in the UK and incorporated under English law”. As to this:

13.1

Purchases from an English company do not equate to damage suffered in England and Wales. In order to establish that any of this damage was suffered in England and Wales, the Claimant must address the following:

a)

which Nokia entity bought the products;

b)

where payment for the products was made from; it appears from the Amended Claim Form (para 4) that the relevant bank accounts are likely to have been in Switzerland;

c)

where payment for the products was made to; just because the products were purchased from an English incorporated company, it does not follow that payment was made to an English bank account; and

d)

where the products were delivered to and what they were used for following delivery; just because batteries were bought from an English company, it does not follow that they were delivered to England and Wales or that they were used in England and Wales.

13.2

The alleged number of purchases is in any event not sufficient to demonstrate that significant direct damage was suffered in this jurisdiction. As LG Chem has pointed out (Botteman 1/para 24), even if all of the 12.1 million units of sales relied upon reflect direct damage suffered in this jurisdiction, these are less than half of one percent of the sales in issue.”

Taking a point against himself, Mr. Wheeler identified (in paragraph 15 of Wheeler 2) “at most €592,659 worth of the relevant products (i.e. approximately 200,000 units) to Nokia companies in the UK in the relevant period (all between 2002 and 2009)”, which Mr. Murray seized upon in paragraph 142 of Murray 2 to bolster Microsoft Mobile’s arguments. Before me, it was common ground that some €250,000 of these sales – being sales to a former Nokia subsidiary, Vertu Ltd – could not count, but apart from these sales to Vertu Ltd, I take these additional sales in the UK into account.

In paragraph 24 of Botteman 1, an attempt is made to put the volume of UK sales into perspective:

“…the figure of 12.1 million sales is vanishingly small in the context of this claim. The Claimant’s case is that during the alleged infringement period it purchased over three billion units. Even if 12 million units were sold to Nokia in England and Wales during the infringement period…those sales would be less than half of one percent of the sales which are in issue in the case.”

Apart from referencing the Sanyo sales mentioned in Wheeler 2 (see paragraph 142 of Murray 2), paragraphs 138 to 141 of Murray 2 really only repeat the facts stated in Murray 1, and no further substantive factual point is made.

In these circumstances, I hold that Microsoft Mobile has not made out a good arguable case that the requirements of Gateway (9)(a) have been met:

It is common ground that the PPA between D2/Sony Corporation is governed by English law: see paragraph 35 above. Other PPAs are also governed by English law, albeit not all.

Article 4 of Rome II provides:

“1.

Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.

2.

However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the same time when the damage occurs, the law of that country shall apply.

3.

Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 and 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.”

Microsoft Mobile is thus relying on the second alternative choice of applicable law – what Recital (18) of Rome II refers to as an “escape clause” – as indicating that English law is the applicable law. The reason it is said the escape clause is triggered is because there is a manifestly close connection between the torts pleaded in the Amended Particulars of Claim and the English choice of law provisions in (some of) the PPAs.

I find this argument entirely unpersuasive, and I reject it for the following reasons:

The third contention advanced in paragraph 33(c) of Murray 1 is that Nokia and/or Microsoft Mobile sold substantial quantities of handsets in England and Wales over the Cartel Period and Run-Off Period, and that there is the potential that Nokia and/or Microsoft Mobile suffered loss through “volume effects”.

By volume effects, I mean that Nokia and/or Microsoft Mobile may have passed on to their customers (the ultimate purchasers of the handsets containing the Li-ion Batteries) any overcharge paid by them to the Cartelists. To this extent, therefore, neither Nokia nor Microsoft Mobile would have sustained any loss through the overcharge, but they might have sustained a loss by selling fewer handsets because of the higher price that was passed on to consumers.

Damages arguments of this type are fairly common in competition cases. But in my judgment, in order to found a good arguable case that the claims fall within the Gateway, something more than a theoretically possible contention must be advanced. Whilst, for the sake of argument, I am prepared to accept that Nokia and/or Microsoft Mobile sold considerable volumes of handsets in the UK market, there is no evidence before me of:

Indeed, it is important to note that both in the Amended Particulars of Claim and in Murray 1, damage of this sort is expressly disavowed. All Microsoft Mobile does is keep open the option of taking the point (for whatever it may be worth) later on. Paragraph 33(c) of Murray 1 states: (Footnote: ⁶⁹)

“While the Claimant does not consider that there has been any “pass on” of the cartelised prices to its own customers, if the Defendants were, on the contrary, to show that its higher prices had been passed on to the Claimant or Nokia’s own customers, then any higher sales prices that resulted from an increase in the costs of its component products would have caused the Claimant and/or Nokia to suffer lower volume of sales…That would in turn have caused loss to be sustained by them within England and Wales. Moreover, in that event, it would also be the case that UK consumers and/or businesses also suffered significant damage as a result of the Defendants’ unlawful conduct.”

I reject the suggestion that a contention that a claimant is in terms not advancing can amount to a good arguable claim. Furthermore, were Microsoft Mobile to make such a positive case, then it would once again be important to understand at least something of the factual basis for the assertion that damage has been sustained within the jurisdiction. For instance, I have been told nothing about how Nokia sold its handsets to the ultimate consumer; nor has there been any kind of explanation as to how such volume effects might manifest themselves.

Paragraph 116.2 of Microsoft Mobile’s written submissions states that “[t]he entities within Nokia that made purchases of Li-ion Batteries, in respect of whose purchases the claim is brought, include Nokia UK Ltd which is established in the UK”, and has its registered office in the UK.

Microsoft Mobile has pleaded that Nokia UK Ltd was a part of the Nokia group: see Appendix 1 to the Amended Particulars of Claim. It may be that (as pleaded) Nokia UK Ltd purchased Li-ion Batteries – but beyond that it is impossible to go. It is not said how many units were purchased; it is not said from whom these units were purchased or where; it is not said whether these purchases were direct purchases or indirect purchases, or at what prices. The only point that is of any evidential substance is the fact that Appendix 1 of the PPA lists various Nokia “manufacturing centres”. None are UK based; all save one (which is based in Germany) are outside the EU. One “distribution centre” is identified: it is based in Hong Kong. Nokia UK Ltd is not listed, and the inference must be that Nokia UK Ltd did not purchase Li-ion Batteries directly from D1/Sony Europe or D2/Sony Corporation.

I do not consider the bare assertion that Nokia UK Ltd purchased some Li-ion Batteries somewhere from someone to be sufficient to bring the claims in the Amended Particulars of Claim within Gateway (9)(a).

Conclusion on Gateways

For the reasons I have given, Microsoft Mobile cannot demonstrate that the claims pleaded in the Amended Particulars of Claim, or any of them, fall within either Gateway (3) or Gateway (9).

CLEARLY AND DISTINCTLY THE PROPER FORUM FOR THE TRIAL

The claimant must show that England and Wales is clearly and distinctly the proper forum for the trial of the claims. The test derives from the well-known decision of the House of Lords in Spiliada Maritime Corporation v. Cansulex Ltd, [1987] 1 A.C. 460 at 481:

“The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so. In other words, the burden is, quite simply, the obverse of that applicable where a stay is sought of proceedings started in this country as of right.”

The factors that need to be taken into account are easily stated in general terms. They comprise: (Footnote: ⁷⁰)

In the present case, the status of the proceedings against D1/Sony Europe polarised the submissions of Microsoft Mobile on the one hand and the Defendants on the other. Microsoft Mobile stressed that with a claim commenced as of right against D1/Sony Europe in this jurisdiction, the natural jurisdiction for the rest of the claims against the other Defendants was this jurisdiction too. In paragraph 125 of its written submissions, Microsoft Mobile stated:

“England and Wales is the proper forum for these proceedings. Where, as in this case, there is a multi-jurisdictional cartel operating globally, there is in principle no unique natural home for any particular litigation. However, as set out above, C has a viable, and substantial, claim against D1 for the entirety of its losses on a joint and several basis which will proceed in this jurisdiction. In the light of that, the Master correctly concluded that the clearly and distinctly more appropriate forum for the rest of the claims against D1’s joint tortfeasors was also England and Wales. That represents the most economic and timely use of resources; it will minimise the risk of conflicting decisions; and it will prevent the unnecessary duplication of costs for the parties. Indeed, if the Ds were acting rationally, rather than strategically, they would agree.”

The Defendants, by contrast, stressed the following points:

As Microsoft Mobile has stressed, and as cannot be gainsaid, proceedings have been commenced against D1/Sony Europe as of right. However:

It follows that, on the basis of these findings, we do not actually get to the third requirement: Microsoft Mobile’s claim to serve out of the jurisdiction fails at the second hurdle, and the order of the Master permitting service out of the jurisdiction will have to be set aside. However, it follows from what I have said so far, that were I to decide the third requirement, I would conclude that Microsoft Mobile had failed to show – let alone show clearly – that England and Wales is clearly and distinctly the proper forum.

If, however, I am wrong on the application of the arbitration clause or on its relevance to the application of Gateway (3), then matters take on a different complexion. There are two possibilities:

The problem is that, whereas under the English rules, a claim commenced as of right against a defendant could, in appropriate circumstances, be stayed, under the Brussels I Regulation (Recast) there is no such power. The proceedings against D1/Sony Europe will continue and there is at least the prospect:

Both of these are powerful points indicating in favour of this jurisdiction, and they clearly would need to be taken into account when deciding the proper forum for trial as against the Defendants apart from D1/Sony Europe.

Two questions arise:

Briggs suggests (at p.473) that the “correct analysis may be that if the court would have set aside service if it had not been for the decision in Owusu, it should still generally set it aside notwithstanding the effect of Owusu”. In effect, the approach suggested by Briggs is – as regards defendants not subject to the Brussels I Regime (Recast) – to pretend that the anchor defendant who is subject to that regime is not so subject. That, as it seems to me, is a denial of reality which has the consequence of causing the court simply to disregard the very real adverse consequences of proceedings continuing against the anchor defendant but not against the other defendant(s). This is an approach that I accordingly reject.

On the other hand, it would be wrong to allow the fact that proceedings will inevitably continue against the anchor defendant automatically and without more to determine what should happen in relation to the other defendants.

The proper course, as it seems to me, is to apply the forum conveniens test as I have described it, but taking these factors into account. Obviously, this has the effect of skewing the scales in favour of proceedings continuing in this jurisdiction (since the proceedings against the anchor defendant cannot be stayed), but it is not the case that these weighty factors cannot be outweighed by factors going the other way. There have been a number of cases where – notwithstanding the continuation or threatened continuation of proceedings against the anchor defendant – a court has been prepared to decide that the proceedings against the other defendants should not so continue:

Considering, therefore, whether England and Wales is clearly and distinctly the proper forum for the hearing of the claims against D2/Sony Corporation, D4/LG Chem and D6/Samsung on the assumption that the proceedings against D1/Sony Europe continue in this jurisdiction, it would have been my conclusion that this third requirement was satisfied and that the Master’s order should stand. My reasons are as follow:

Accordingly, had my decision regarding the section 9 stay been otherwise, my decision on this part of the Applications would have been different also. As it is, I set aside the order of Master Clark and with it the service of these proceedings on D2/Sony Corporation, D4/LG Chem and D6/Samsung.

NOT FULL AND FRANK

It follows that I do not need to determine whether the order of the Master should be set aside on the ground of material non-disclosure by Microsoft Mobile. However, because I was addressed on the point, and in case the matter goes further, I deal with it.

The relevant principles that I must apply were set out by Warby J. in Sloutsker v. Romanova [2015] EWHC 545 (QB) at [51]:

“The relevant general principles are these:

i)

An applicant for permission to serve proceedings outside the jurisdiction is under a duty of full and frank disclosure which applies on all applications without notice.

ii)

The duty requires the applicant to make full and fair disclosure of those facts which it is material for the court to know: Brinks Mat v. Elcombe [1988] 1 W.L.R. 1350, 1356 (1) and (2) (Ralph Gibson L.J.). Put another way, disclosure should be made of “any matter, which, if the other party were represented, that party would wish the court to be aware of”: ABCI v. Banque Franco-Tunisienne [1996] 1 Lloyd’s Rep. 485, 489 (Waller J.).

iii)

Non-disclosure of material facts on an application made without notice may lead to the setting aside of the order obtained, without examination of the merits. It is important to uphold the requirement of full and frank disclosure.

iv)

But the court has a discretion to set aside or to continue the order. Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues that were to be decided. The answer to the question whether the non-disclosure was innocent is an important, though not decisive, consideration. See Brinks Mat at pp1357 (6) and (7) and 1358 (Balcombe L.J.).

v)

In the context of permission for service outside the jurisdiction the court has a discretion to set aside the order for service and require a fresh application, or to treat the claim form as validly served and deal with the non-disclosure by a costs order: NML Capital Ltd v. Republic of Argentina [2011] UKSC 31, [2011] 2 A.C. 495, [136] (Lord Collins).”

A helpful distillation of the correct approach was given by Kerr J. in B.P. Exploration v. Hunt [1976] 3 All E.R. 879 at 894: (Footnote: ⁷⁸)

“…the court should not consider the supporting affidavit as though it were marking an examination paper, deciding one way or the other merely on the basis of the extent to which the affidavit could have been improved. The primary question should be whether in all the circumstances the effect of the affidavit is such as to mislead the court in any material respect concerning its jurisdiction and the discretion under the rule.”

In DSG Retail Ltd v. Mastercard Inc. [2015] CAT 7 at [44], Roth J. noted:

“44.

This application was heard without notice, as is usually the case for an application for permission to serve out. As on any application without notice, the applicant is under a duty to make full and frank disclosure of matters material to the application. That means not only that care needs to be taken in setting out the factual basis for the application, but also that the Tribunal's attention should be drawn to any significant objections to the application that the defendants could reasonably be expected to raise if they were before the Tribunal. The duty does not require disclosure to the same degree as on an application for a without notice injunction, such as a freezing order, where granting the application has immediate and potentially serious consequences for the defendant. The factors relevant to an application to serve out are only those which relate to the limited inquiry the Tribunal carries out in determining whether to grant such permission. Nonetheless, within the limited scope of that inquiry, if the claimant is aware of such factors as might cause the Tribunal to doubt whether permission should be granted, they should be clearly disclosed...

45.

In applications before the Tribunal, it will often be more appropriate for such disclosure to be made in a statement accompanying the claim form and similarly attested by a declaration of truth, rather than in the claim form itself. The Tribunal cannot be expected to go through a long claim form or Particulars of Claim teasing out material objections to service out of the jurisdiction. Moreover, since the Tribunal will generally seek to deal with such applications on the papers, compliance with the duty of full and frank disclosure cannot be left to counsel's skeleton argument for a hearing since in most cases there will not be a hearing.”

Four points were taken by the Defendants in relation to what were said to be material deficiencies in the evidence before Master Clark:

In response, Microsoft Mobile could do little more than refer me to Murray 1 and suggest that these matters – to the extent they needed to be drawn to the attention of the court – had been properly adverted to in Murray 1. I have, therefore, reviewed this statement with particular care bearing in mind the points raised by the Defendants. I have also borne in mind that the mere fact that the statement might be improved upon is not the point. The question is whether the court has been misled.

The points raised by the Defendants are all connected to the fact that – in reality – the centre of gravity of the Cartel was actually Asian, whether one has regard to the participants (both corporate and individual); the sales of the cartelised products (the Li-ion Batteries); and many of the purchasers. Microsoft Mobile, in my judgment, wrongly downplayed these important matters by:

These are major criticisms, going to the heart of the issue that the Master had to decide. I consider that Murray 1 fell far short of what should have been said to the Master on the application to serve out.

In The Arena Corporation Ltd v. Schroeder [2003] EWHC 1089 (Ch) at [213], the principles according to which the court should exercise its discretion in this case are helpfully set out:

“On the basis of the foregoing review of the authorities, I would summarise the main principles which should guide the court in the exercise of its discretion as follows:

(1)

If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2)

Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.

(3)

That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4)

The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.

(5)

The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6)

The court can weigh the merits of the plaintiff’s claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle.

(7)

The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8)

The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.

(9)

There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.”

In all the circumstances, given the seriousness of the non-disclosure and importance of the issues it went to, I would have discharged the order of the Master and set aside the service out on the grounds of non-disclosure.

DISPOSITION

For the reasons given in this Judgment: