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Amir Soleymani v Nifty Gateway LLC

Judgment Business Law Reports Weekly Law Reports Cited authorities 41 Cited in 13 Precedent Map Related
Vincent
JurisdictionEngland & Wales
JudgeLord Justice Popplewell,Lord Justice Birss,Lord Justice Snowden
Judgment Date06 October 2022
Neutral Citation[2022] EWCA Civ 1297
Docket NumberCase No: CA-2022-000709
CourtCourt of Appeal (Civil Division)
Categories
Between:
Amir Soleymani
Claimant/Appellant
and
Nifty Gateway LLC
Defendant/Respondent

and

The Competition and Markets Authority
Intervener

[2022] EWCA Civ 1297

Before:

Lord Justice Popplewell

Lord Justice Birss

and

Lord Justice Snowden

Case No: CA-2022-000709

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS IN LONDON

CIRCUIT COMMERCIAL COURT

Ms Clare Ambrose (sitting as a Deputy High Court Judge)

[2022] EWHC 773 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Graham Dunning QC, Angeline Welsh and Iain MacDonald (instructed by Russells) for the Claimant/Appellant

David Lewis QC and Andrew Feld (instructed by Osborne Clarke) for the Defendant/Respondent

Toby Riley-Smith QC (instructed by The Competition and Markets Authority) for the Intervener

Hearing dates: 27 and 28 July 2022

Approved Judgment

This judgment was handed down remotely at 10 am on Thursday, 6 October 2022 by circulation to the parties or their representatives by email and by release to the National Archives.

Lord Justice Popplewell

Introduction

1

This appeal raises issues of general importance for consumers in respect of the jurisdictional protections afforded to them in respect of arbitration clauses under the Arbitration Act 1996 (“the AA”), the Consumer Rights Act 2015 (“the CRA”) and the Civil Jurisdiction and Judgments Act 1982 (“the CJJA”), as amended by the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019 No 479 (“the EU Exit Regulations”).

2

The Claimant, Mr Soleymani took part in an auction held on the Defendant's (“Nifty's”) online platform between 30 April and 2 May 2021 placing a successful bid of US$650,000 for a blockchain based non-fungible token (“NFT”) associated with an artwork by the artist known as Beeple called “Abundance”. Nifty's terms of use, contained on the website, contain a New York governing law provision and an arbitration clause providing for arbitration in New York under the auspices of JAMS, a large and well-known private provider of alternative dispute resolution services based in the USA.

3

Nifty commenced an arbitration in New York against Mr Soleymani claiming the US$650,000 which he had bid. Mr Soleymani challenged the jurisdiction of the arbitrator, and brought proceedings in England against Nifty by a Claim Form and accompanying Particulars of Claim dated 9 September 2021. Three distinct claims are advanced:

(1) a claim for a declaration that the arbitration clause is unfair and not binding upon him (“the Arbitration Claim”); the Particulars of Claim allege that Mr Soleymani is a consumer within the meaning of s. 2(3) CRA and 15E(1) CJJA, and that the Terms constitute a consumer contract within the meaning of s. 15E(1); that the Terms are assessable for fairness under s. 62(4) CRA because the contractual relationship had a close connection with the UK within the meaning of s. 74(1) CRA, in particular because, as Nifty knew, Mr Soleymani was habitually resident in the UK and because Nifty solicits business or otherwise directs its activities to the UK; and that the arbitration clause, either alone or in conjunction with the governing law clause, was unfair in that contrary to the requirement of good faith it caused a significant imbalance in the parties' rights and obligations to the detriment of Mr Soleymani.

(2) a claim for a declaration that the governing law clause is unfair and not binding on him (“the Governing Law Claim”); the same statutory protection rights are relied on as for the Arbitration Claim;

(3) a claim that the contract resulting from his bid, if it be a binding contract, was illegal ab initio as contrary to the Gambling Act 2005 (“the Gambling Act Claim”).

4

Mr Soleymani sought to establish jurisdiction in relation to all three claims under section 15B of the CJJA. Nifty brought an application seeking to challenge jurisdiction by way of an application for:

(1) An order pursuant to CPR Part 11 for a declaration that the court has no jurisdiction or will not exercise its jurisdiction in relation to the Arbitration Claim; and/or

(2) An order staying the proceedings under CPR Part 3.1(2)(f) and/or section 9 AA.

5

Ms Ambrose, sitting as a deputy judge of the High Court (“the Judge”) gave judgment on 24 March 2022 (“the Judgment”). She granted the declaration in respect of the Arbitration Claim and stayed the Governing Law Claim and Gambling Act Claim pursuant to s. 9 of the AA. Mr Soleymani appeals against both aspects of her order.

The Parties

6

Mr Soleymani is of Iranian origin and moved to the UK in 2011 in order to seek political asylum. He lives in Liverpool, which is the place of his domicile. He describes himself as a wealthy individual in part as a result of working in the technology sector, amassing significant crypto currency holdings, and in part as a result of substantial family inheritance, much of which is invested in real estate mainly in the United Arab Emirates, Turkey and the UK. He describes himself as an entrepreneur, activist and philanthropist. He collects fine art, and has collected NFTs associated with art for some time. He has a private gallery to display his art collection. For the purposes of the application under Part 11, Nifty accepts that he has the better of the argument that he is a consumer, and is accordingly to be treated as a consumer for the purposes of that application. Nifty does not, however, accept that he is in fact a consumer for the purposes of the CRA and CJJA, to the extent that that falls to be determined on the balance of probabilities in respect of the stay application or the substantive determination of the claims here or in the New York arbitration. He is not a typical consumer, if he be a consumer at all, and the transaction involving the purchase of an NFT for US$650,000 is not a typical consumer transaction, but nevertheless the arguments with which we are concerned must be tested by reference to the rights and protections afforded to consumers generally.

7

Nifty is a limited liability company incorporated in Delaware, USA and operating the digital platform from New York. The platform involves the display, sale and purchase of digital art which is sold or traded as NFTs. Such NFTs are traded by individual sales and purchases, or by auctions held by Nifty on the website.

The Auction

8

Prior to the auction which gave rise to the current dispute Mr Soleymani had purchased approximately a hundred NFTs through the platform with a combined value of over US$2.5m, and participated in some 24 auctions. Each of those auctions had been what might be described as a conventional auction, in which there was a single winning bid, the highest bid securing the relevant NFT. The auction which has given rise to the dispute was a “ranked” auction in which the 100 highest bidders were successful and each received NFTs associated with the artwork in question. They were in effect awarded a numbered edition of the artwork corresponding to the position of their respective highest bids. The effect was that Nifty/the artist was entitled to be paid the total sum of the 100 highest bids. Mr Soleymani says that he was unaware that the auction was in this form and it made little sense commercially for the bidder; editions which are not the “first edition” carry a significantly lower value, and yet all the bids would have been submitted, he says, on the basis of seeking to obtain the “first edition”. Mr Soleymani's bid of US$650,000 came third in the auction. Some time after his discovery that the auction was a ranked auction of the kind described, Mr Soleymani withdrew his cryptocurrency held on account on the website so as to avoid paying the amount of his bid in what he regarded as a deceptive and unfair transaction.

The Terms

9

Mr Soleymani had opened an account on the platform in February 2020 under the username “Mondoir”. The “sign up for Nifty Gateway” page stated: “By signing up, you agree to the Terms and Conditions and Privacy Policy”. On Nifty's case, the user of the platform accepted the terms by clicking “I Accept” or completing the website registration process or by using the website itself. When Mr Soleymani opened his account with Nifty, the relevant terms of use were those effective as of 4 February 2020. These were subsequently amended on 30 April 2021, but there was no difference in the new terms which is material to the current appeal. We will therefore refer to the February 2020 terms as “the Terms” and use the numbering of the clauses in those terms.

10

Paragraph 1 of the Terms drew attention to the fact that the Terms contained an arbitration clause and that by agreeing to the Terms the customer agreed to resolve all disputes through binding individual arbitration, which meant that the consumer waived any right to have the dispute decided by a judge or jury; and waived any right to participate in collective action whether that be a class action, class arbitration or representative action.

11

Clause 16 was the governing law clause which provided:

“These Terms of Use … your rights and obligations, and all actions contemplated by arising out of or related to these Terms of Use shall be governed by the laws of the State of New York, as if these Terms of Use are a contract wholly entered into and wholly performed within the State of New York. YOU UNDERSTAND AND AGREE THAT YOUR USE OF NIFTY GATEWAY AS CONTEMPLATED BY THESE TERMS OF USE SHALL BE DEEMED TO HAVE OCCURRED IN THE STATE OF NEW YORK AND BE SUBJECT TO THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.”

12

Clause 17 was headed “Disputes” and contained the arbitration clause in the following terms:

“Please read the following agreement to arbitrate (“Arbitration Agreement”) in its entirety. This clause requires you to arbitrate disputes with Nifty...

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