Skype Technologies SA v Joltid Ltd & others [2009] EWHC 2783 (Ch), Lewison J, 6 November 2009 (Chancery Division, England and Wales)
Citation: Journal of Intellectual Property Law & Practice, doi:10.1093/jiplp/jpq015
The High Court, England and Wales, considered whether to grant an anti-suit injunction to restrain US proceedings where an agreement between the parties contained an exclusive jurisdiction clause in favour of the English courts and proceedings in England had already been commenced. Lewison J assessed recent developments in the law relating to anti-suit injunctions and concluded that an anti-suit injunction, although a discretionary measure (which ECJ case law considers an interference with the jurisdiction of another court), was appropriate in this case.
Legal Context
Article 23(1) of Council Regulation (EC) No 44/2001 (the ‘Brussels Regulation’) provides:
If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise ...Whether a dispute falls within an agreed jurisdiction clause is a question of interpretation of that clause and, even in the context of the Brussels Regulation, must be decided according to national law (Benincasa v Dentalkit Srl [1997] ETMR 447; Knorr-Bremse Systems for Commercial Vehicles Ltd v Haldex Brake Products GmbH [2008] FSR 30). The starting point when analysing jurisdiction clauses is an assumption that commercial parties agreeing such clauses intend that any disputes arising out of the relationship are to be decided in the same, agreed forum (Fiona Trust & Holding Corp v Privalov [2007] UKHL 40).
Further, where a court has jurisdiction under the Brussels Regulation (eg under Article 2, because the defendant is domiciled in that jurisdiction), discretionary considerations such as those relating to forum non conveniens (eg harm suffered in another jurisdiction or location of witnesses) cannot play a part in any decision about whether that jurisdiction should stay its proceedings (Owusu v Jackson [2005] QB 801). Also, a court with jurisdiction under the Brussels Regulation should not restrain a party from commencing or continuing proceedings before a court of another Member State; ECJ case law indicates that it is for each court to rule on whether it has jurisdiction to resolve the dispute before it (Turner v Grovit [2005] 1 AC 101; West Tankers Inc v Allianz SpA [2009] 3 WLR 696).
Facts
Skype, domiciled in Luxembourg, offered free-to-download software that enabled users to communicate over the internet. Joltid, a BVI company, owned certain software that was integral to Skype's business. Skype and Joltid entered into a written agreement, by which Joltid granted Skype a worldwide licence to use a form of its software, the object code, but retained sole control of the source code. Clause 19.1 of the licence stated:Any claim arising under or relating to this Agreement shall be governed by the internal substantive laws of England and Wales and the parties submit to the exclusive jurisdiction of the English courts.In March 2009 Joltid, claiming that Skype had breached the licence by using and accessing the source code, purported to terminate it. In response, Skype commenced proceedings in England, claiming that the purported termination was invalid and the licence remained in force. Skype accepted that it had used the source code, but denied this was a breach. According to Skype, Joltid had supplied the source code rather than the object code. This amounted to a variation of the licence. If not, Joltid was estopped from alleging breach or had waived the right to demand strict compliance. In response, Joltid sought a declaration that the licence was validly terminated, as well as an injunction and financial remedies.
Joltid subsequently registered its copyright in the source code in the USA and commenced proceedings in the USA against Skype and its various investors (which were not parties to the licence) for copyright infringement. Skype claimed that these US proceedings were in breach of clause 19.1 of the licence and sought an anti-suit injunction in the UK proceedings to restrain them.
Since Skype was domiciled in Luxembourg, Article 23(1) applies in relation to clause 19.1 of the licence. Lewison J began by assessing whether the claims against Skype in the US proceedings fell within the scope of clause 19.1. Joltid argued that its claims in the US proceedings did not arise out of the licence since they were predicated on the assumption that the licence had been terminated. Lewison J rejected this interpretation as unduly narrow. Interpretation of a jurisdiction clause is a matter of national law (Benincasa, Knorr-Bremse (supra)), and in Fiona Trust, Longmore LJ in the Court of Appeal, applauded by Lord Hoffmann in the House of Lords, stated that ‘the words "arising out of" should cover "every dispute except a dispute as to whether there was ever a contract at all"’. Lord Hoffmann added that clause construction should start from the assumption that commercial parties are likely to have intended that all disputes are to be decided by the same tribunal. Accordingly, Lewison J concluded that the US proceedings initiated by Joltid did relate to a dispute covered by clause 19.1.
The court then considered whether Skype was entitled to an anti-suit injunction to prevent any further steps being taken in the US proceedings. Lewison J began by agreeing with Skype that, following Owusu, the UK court should not decline to exercise its exclusive jurisdiction under Article 23(1) on the basis of discretionary considerations such as forum non conveniens and that the UK proceedings should not therefore be stayed in favour of the US proceedings.
Lewison J rejected Skype's argument that the tests for staying domestic proceedings and granting anti-suit injunctions were ‘two sides of the same coin’ and that it followed that, if the court could not stay its own proceedings, it must grant an anti-suit injunction. In Turner and West Tankers, the ECJ held that where proceedings are initiated in another Member State in breach of a jurisdiction or arbitration clause, a court should not grant an anti-suit injunction; it is for each court to rule on whether it has jurisdiction to resolve the dispute before it. Skype argued that this line of authority only applies where both jurisdictions are Member States, but Lewison J rejected this. He noted that Skype's argument that there was no discretion to stay the UK proceedings was founded on Owusu, where the ECJ drew no distinction between Member and non-Member States. Thus if Skype was right about this issue, the ECJ's approach to anti-suit injunctions must also be equally applicable in the case of non-Member States.
Nonetheless Lewison J concluded that, as a matter of discretion, an anti-suit injunction should be granted. Since there was no dispute that the licence was valid, even if terminated, there was a breach of clause 19.1 and the court would need a good reason before declining to enforce by injunction the parties' contractual bargain on jurisdiction. There was no such reason here. Lewison J considered that the standard forum non conveniens arguments prayed in aid by Joltid should be given little weight where, as here, the parties to an agreement of worldwide application deliberately agreed an exclusive jurisdiction clause appointing a neutral territory, and where such factors were eminently foreseeable when the parties entered into the licence. Otherwise, the clause would be deprived of its intended effect since, the more ‘neutral’ the forum chosen, the less importance the parties must have placed on its convenience for any particular dispute.
Another important factor was whether the grant or refusal of the injunction would enable all disputes between the parties to take place in a single forum. In this case, the court's decision either way could not avoid the risk of parallel proceedings; following Owusu, the court could not stay the UK proceedings, but it had no jurisdiction to restrain the US proceedings in respect of the parties that did not have the benefit of the exclusive jurisdiction clause.
Analysis
These proceedings afforded an opportunity to consider the availability of anti-suit injunctions against parallel proceedings in non-EU Member States.
As discussed in this judgment, the ECJ has held that an anti-suit injunction prohibiting a party from bringing proceedings in another Member State in breach of an exclusive jurisdiction or arbitration clause is an inadmissible interference with the jurisdiction of that court and inconsistent with the principles of mutual trust that underlie the Brussels Regulation (Turner, West Tankers). Although Lewison J did not explain why the court retained its discretion to grant an anti-suit injunction in this case, the decision is consistent with Shashoua v Sharma [2009] EWHC 957 (Comm), in which Cooke J held that West Tankers did not impact upon the use of anti-suit injunctions in relation to proceedings brought in non-Member States; West Tankers sought to ensure the uniform application of the Brussels Regulation and the ‘free movement’ of judgments across the EU, so did not apply to proceedings before a non-Member State court. Similarly, Lewison J exercised the court's discretion to grant an anti-suit injunction to restrain proceedings brought in a non-Member State. Accordingly, anti-suit injunctions remain available to restrain such proceedings in non-Member State courts.
Practical Significance
It is beneficial to both IP owners and licensees to have certainty as to where a dispute will be resolved or litigated, and to know that all disputes will be brought in the same jurisdiction; indeed, this is the purpose of an exclusive jurisdiction clause.
This case indicates that, at least where parallel proceedings are commenced in a non-EU Member State, the English courts are willing to enforce an exclusive jurisdiction clause by granting anti-suit injunctions where appropriate. In exercising the court's jurisdiction, Lewison J rejected arguments relating to forum non conveniens on the basis that it is eminently foreseeable to parties to a global licence agreement that whichever jurisdiction they choose, it may not be the most convenient for a particular dispute for at least one party.
However, as emphasized by the ECJ in Turner and West Tankers, under the Brussels Regulation it is for the courts in each EU Member State to rule on whether it has jurisdiction to resolve the dispute before it. This results in the availability of anti-suit injunctions to enforce an exclusive jurisdiction clause currently depending on where alternative proceedings are initiated.
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