Electronic Arts CV v CTO SpA [2003] EWHC 1020 (Comm)

“(1) CTO has sold Products at a higher price than the Trade Price stipulated by EA; (2) CTO has sold or purported to sell Products at a discounted price to an intermediary sub-distribution company, Infomaster, which then sold the Products on at a higher price. Infomaster is a 98% owned subsidiary of CTO; (3) CTO charged EA, and EA paid for, the cost of compulsory SIAE stickers for Products (a form of tax in Italy), whilst at the same time charging customers for the stickers.”

“(1) to ascertain and declare that the Investment agreement and the Distribution agreement are contracts connected with other; (2) to ascertain and declare that the defendants have carried on behaviour violating Article 2 of the Law 287/1990 and, by the effect, to declare void all the clauses contained in the distribution agreement to allow the defendants to determine fixed sale prices for the products supplied to CTO ... in execution of the above-mentioned agreement, or subordinately of the entire contract; (3) to sentence the defendants jointly to pay compensation to CTO and/or Finbox for all the damage suffered resulting from the cancellation of the Distribution agreement, with particular regard, but without limiting intent, to the loss of earnings or any other economic benefit which CTO ... and/or Finbox ... could have realised if the contract were to remain constant until 31 December 2006 and all further damages costs incurred plus the reimbursement to Finbox of the sum of 35 billion lire, equivalent to 18,750,991.47 Euros plus accrued interest ... from the moment of payment until the material restitution which were paid by Finbox ... to Electronic Arts CV for the stipulation of a disputed distribution agreement.”

“3.18 As a result of these circumstances CTO has commenced ordinary legal proceedings before the Court of Appeal of Bologna, Italy, in order to obtain an order against EA and its affiliates concerned with the operation of the Distribution agreement for violation of Italian Antitrust law no. 287/1990. The first hearing is scheduled for 30 May 2003. 3.19 On these grounds, CTO submits that the present arbitral proceedings should be suspended, on the basis that (i) the causes of action relied upon in these proceedings by EA are the same as those which the Court of Appeal of Bologna is to decide upon and (ii) the ordinary proceedings were filed prior to notification to CTO of the Request for Arbitration. 3.20 CTO also contends that the arbitral tribunal cannot rule on the dispute because the Request by EA seeks an illegal ruling that CTO may not sell the Products on the Italian market at a price higher or lower than the Trade Price, with the consequence that EA intends to apply a fixed price on the products ... In any event, as the EU Regulation has direct effect on member states, the same conclusion should be reached by the distinguished Arbitral Tribunal applying English Competition Law.”

“the declaration of the non-arbitrability of the dispute in consideration of the fact that the request by EA to obtain an injunction preventing CTO from breaching the distribution agreement would require an order for CTO to sell the products at a fixed price which is the Trade Price according to EA’s interpretation of the distribution agreement. The above would constitute a violation of the mandatory EU Regulation as well as Italian Antitrust law 287/1990.”

“Should the distinguished Arbitral Tribunal deem the interpretation given by EA [to certain clauses in the distribution agreement] correct, a declaration pursuant to Article 18.3 of the distribution agreement that such clauses are null and void for violation of the EU Regulation, Italian Antitrust Law no 287/1990 and English competition law.”

“(a) CTO’s case in the Italian proceedings is that provisions of the distribution agreement breached antitrust Law 287/1990, which reflects European law now contained in EC Regulation 2790/1999, which derives from Articles 81 and 82 of the Treaty of Rome and which in any event has direct effect on Member States. (b) Because of this and by reason of certain matters under the Italian Procedural Civil Code, Italian courts would not enforce or recognise an arbitration award enforcing such contractual provisions, which would contravene Italian and European public policy. Such points of competition law are not under Italian law arbitrable issues. (c) In Italy special and exclusive jurisdiction to try such issues is conferred on particular courts, and in the present case on the Appeal Court of Bologna. (d) The English proceedings should be stayed under Article 27 or 28 of EC Regulation 44/2001 (the Jurisdiction and Judgments Regulation) as the Court of Appeal of Bologna was the court first seised of the dispute between the parties. (e) An injunction by the English High Court in the terms of the order sought will be regarded by the Italian court as an infringement of Italian sovereignty. Further, pursuant to Article 25 of the Constitutional Charter of the Republic of Italy, no person may be diverted from his natural judge as determined by law. In this case this is the Appeal Court of Bologna and the effect of the injunction would be to deprive an Italian company of its constitutional rights under the Charter.”

“(1) This Regulation shall apply to civil and commercial matters whatever the nature of the court or tribunal. It shall not extend in particular to revenue, customs or administrative matters. “(2) The Regulation shall not apply to ... (d) arbitration.”

“26. In order to determine whether a dispute falls within the scope of the Convention, reference must be made solely to the subject-matter of the dispute. If, by virtue of its subject-matter, such as the appointment of an arbitrator, a dispute falls outside the scope of the Convention, the existence of a preliminary issue which the court must resolve in order to determine the dispute cannot, whatever that issue may be, justify application of the Convention. … 28. It follows that, in the case before the court, the fact that a preliminary issue relates to the existence or validity of the arbitration agreement does not affect the exclusion from the scope of the Convention of a dispute concerning the appointment of an arbitrator. 29. Consequently, the reply must be that Art 1.4 of the Convention must be interpreted as meaning that the exclusion provided for therein extends to litigation pending before a national court concerning the appointment of an arbitrator, even if the existence or validity of an arbitration agreement is a preliminary issue in that litigation.”

“The originating summons contains a claim for a declaration and claims for three injunctions, and it is necessary here, as in other contexts in this judgment, to bear in mind that the same considerations may not apply to each. A declaration that a defendant is entitled and obliged to arbitrate a particular dispute or disputes might be regarded as more closely related to arbitration than injunctions requiring him not to pursue and to discontinue foreign proceedings. Even so, such a declaration is not integral to the arbitration process in the same way as an application to the Court to appoint an arbitrator (cf Marc Rich & Co AG v Societa Italiana ImpiantiPA (The Atlantic Emperor) [1992] 1 Lloyd’s Reports 342 (ECJ)). It may be designed to do no more than to establish the basis for a claim for damages for breach of contract in failing to arbitrate or for an issue estoppel in relation to foreign proceedings. In the former case, a claim for such a declaration would not seem to me to fall within Art 1.4 of the Convention. In the latter case, if the decision in Partenreederei m/s Heidberg and Another v Grosvener Grain Feed Co Ltd and Others (The Heidberg) [1994] 2 Lloyd’s Rep 287 is right, it would also not fall within Art 1.4. The claims for injunctions, although based on the asserted existence of binding and applicable arbitration clauses, are also directed to stopping foreign proceedings rather than actually bringing any arbitration into existence. As I have said, Toepfer’s response to any suggestion that there could actually be any effective arbitration would be time bar. For present purposes, I shall proceed on the basis that the Brussels Convention does apply to all the claims made by Toepfer’s originating summons.”

“This passage from his judgment suggests that Mance J considered that the applicability of the Art 1.4 exclusion depended upon the extent to which the remedy claimed could be said to be integral to the arbitration process in the same way as an application to the court to appoint an arbitrator. If by that approach he was, as I believe, confining the applicability of Art 1.4 to proceedings claiming remedies facilitating or regulating arbitrations as distinct from remedies enforcing arbitration agreements, I consider that this approach was too narrow. Since the enforcement of agreements to arbitrate is within those matters covered by the New York Convention, an application to the courts of the seat of the arbitration to enforce an agreement to arbitrate by stay or injunction, the latter in relation to foreign proceedings, must, on the reasoning in Marc Rich be excluded by Art 1.4.”

“Does the exception in Art 1.4 of the Brussels Convention extend to the proceedings commenced before the English courts seeking: (a) a declaration that the commencement and continuation of proceedings before a French Court constitutes a breach of an arbitration agreement; (b) an injunction restraining the appellants from continuing the proceedings before the French court, or instituting any further proceedings before any other court, in breach of the arbitration agreement?” (a) a declaration that the commencement and continuation of proceedings before a French Court constitutes a breach of an arbitration agreement; (b) an injunction restraining the appellants from continuing the proceedings before the French court, or instituting any further proceedings before any other court, in breach of the arbitration agreement?”

“I have concluded that the nature of the subject-matter of both the claims in the present case falls within the ‘arbitration exception’ in Art 1(4). (1) The first claim, for a declaration that there is a valid arbitration agreement between the parties, clearly concerns arbitration. That is the principal focus or ‘essential subject-matter’ of that claim. The tenor of the decision in Marc Rich, the reports of Jenard and Schlosser and the decision of the ECJ in the Van Uden case all lead me to the conclusion that the subject-matter of this claim is outside the scope of the Brussels Convention. Insofar as the decision of Judge Diamond QC in The Heidberg case takes the contrary view I respectfully disagree with it. (2) The object of the claim for an ‘antisuit’ injunction (assuming the arbitration agreements are valid and binding) is to make the defendants adhere to their contractual agreement to resolve disputes by arbitration in London by using the English court’s powers to grant injunctive relief. The principal focus or essential subject-matter of that claim is therefore also arbitration, because the claim is for relief to enforce the arbitration agreement.”

“In our view the decisive matter is that the bank applied for the injunction to restrain the defendants’ clear breach of contract. In the circumstances, a claim for damages for breach of contract would be a relatively ineffective remedy. An injunction is the only effective remedy for the defendants’ breach of contract. If the injunction is set aside, the defendants will persist in their breach of contract, and the bank’s legal rights as enshrined in the jurisdiction agreements will prove to be valueless. Given the total absence of special countervailing factors, this is the paradigm case for the grant of an injunction restraining a party from acting in breach of an exclusive jurisdiction agreement. In our judgment the continuance of the Greek proceedings amounts to vexatious and oppressive conduct on the part of the defendants.”

“In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign court in breach of an arbitration agreement governed by English law, the English court need feel no diffidence in granting the injunction, provided that it is sought promptly and before the foreign proceedings are too far advanced. I see no difference in principle between an injunction to restrain proceedings in breach of an arbitration clause and one to restrain proceedings in breach of an exclusive jurisdiction clause as in Continental Bank NA v AeakosCompania Naviera SA [1994] 1 WLR 588. The justification for the grant of the injunction in either case is that without it the plaintiff will be deprived of its contractual rights in a situation in which damages are manifestly an inadequate remedy. The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.”

“24. If contracting parties agree to give a particular court exclusive jurisdiction to rule on claims between those parties, and a claim falling within the scope of the agreement is made in proceedings in a forum other than that which the parties have agreed, the English court will ordinarily exercise its discretion (whether by granting a stay of proceedings in England, or by restraining the prosecution in proceedings in the non-contractual forum abroad, or by such other procedural order as is appropriate in the circumstances) to secure compliance with the contractual bargain, unless the party suing in the non-contractual forum (the burden being on him) can show strong reasons for suing in that forum. I use the word ‘ordinarily’ to recognise that where an exercise of discretion is called for there can be no absolute or inflexible rule governing that exercise and also that a party may lose his claim to equitable relief by dilitariness or other unconscionable conduct. But the general rule is clear: where parties have bound themselves by an exclusive jurisdiction clause effect should ordinarily be given to that obligation in the absence of strong reasons for departing from it. Whether a party can show strong reasons, sufficient to displace the other party’s prima facie entitlement to enforce the contractual bargain, will depend on all the facts and circumstances of the particular case.”

“33. Thus Mr Donohue’s strong prima facie right to be sued here on claims made by the other parties to the exclusive jurisdiction clause so far as the claims may fall within that clause is matched by the clear prima facie right of the Armco companies to pursue in New York the claims mentioned in the last three paragraphs. The crucial question is whether, on the facts of this case, the Armco companies can show strong reasons why the court should displace Mr Donohue’s clear prima facie entitlement. If strong reasons are to be found (and the need for strong reasons is underlined in this case by the potential injustice to Mr Donohue, already noted, if effect is not given to the exclusive jurisdiction clauses) they must lie in the prospect, if an injunction is granted, of litigation between the Armco companies on one side and Mr Donohue and the PCCs on the other continuing partly in England and partly in New York. What weight should be given to that consideration in the circumstances of this case? 34. I am driven to conclude that great weight should be given to it. The Armco companies contend that they were the victims of a fraudulent conspiracy perpetrated by Messrs. Donohue, Atkins, Rossi and Stinson. Determination of the truth or falsity of that allegation lies at the heart of the dispute concerning the transfer agreements and the sale and purchase agreement. it will, of course, be necessary for any court making that determination to consider any contemporary documentation and any undisputed evidence of what was said, done or known. But also, and crucially it will be necessary for any such court to form a judgment on the honesty and motives of the four alleged conspirators. It would not seem conceivable, on the Armco case, that some of the four were guilty of the nefarious conduct alleged against them and others not. It seems to me plain that in a situation of this kind the interests of justice are best served by the submission of the whole dispute to a single tribunal which is best fitted to make a reliable, comprehensive judgment on all the matters in issue. A procedure which permitted the possibility of different conclusions by different tribunals, perhaps made on different evidence, would in my view run directly counter to the interests of justice. … 36. In my opinion, and subject to an important qualification, the ends of justice would be best served by a single composite trial in the only forum in which a single composite trial can be procured, which is New York, and accordingly I find strong reasons for not giving effect to the exclusive jurisdiction clause in favour of Mr Donohue.”

“The question whether anti-suit injunctions fall within the arbitration exception in the Jurisdiction and Judgments Regulation EC44/2001 is one of difficulty on which there are conflicting previous first instance decisions. Permission to appeal questions of discretion refused.”