Payward, Inc. v Maxim Chechetkin
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bright |
| Judgment Date | 14 July 2023 |
| Neutral Citation | [2023] EWHC 1780 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2023-000029 |
[2023] EWHC 1780 (Comm)
Mr Justice Bright
Case No: CL-2023-000029
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Hugh Sims KC and Lucy Walker (instructed by Squire Biggs Law Ltd) for the Claimants
Chloë Bell and Henry Reid (instructed by Blake Morgan LLP) for the Defendant
Hearing date: 3 July 2023
Approved Judgment
A: Introduction
A1: The claim
This judgment concerns the Claimants' claim, by an arbitration claim form issued on 23 October 2022, for the enforcement of an arbitration award in the same manner as a judgment or order of the Court to the same effect. The award in question is the Final Award dated 18 October 2022 (“the Final Award”) in an arbitration under the Judicial Arbitration and Mediation Services (“JAMS”) Rules, Case No. 5100000163. The seat of the arbitration was San Francisco, California. The claim is brought pursuant to s. 101 of the Arbitration Act 1996.
The Defendant (“Mr Chechetkin”) contends that the Final Award should not be enforced by this Court. He relies on the following exceptions, provided for in s. 103 of the Arbitration Act 1996:
i) Recognition or enforcement may be refused if it would be contrary to public policy: s. 103(3).
ii) Recognition or enforcement may be refused if the award deals with matters beyond the scope of the submission to arbitration: s. 103(2)(d).
A2: The parties
The Claimants are corporate entities within the same group (“the Payward group”). The business of the Payward group is the operation of the Kraken global digital online cryptoasset exchange. The group headquarters are in San Francisco, California, USA.
The First Claimant (“Payward”), a Delaware corporation with an address in San Francisco. The Second Claimant (“Payward Ventures”) is also a Delaware corporation and has the same address in San Francisco.
The Third Claimant (“Payward Ltd”) is a company incorporated in England. It is the corporate entity by which the Payward group provides the services of Kraken in the UK, to UK customers – including Mr Chechetkin.
The Defendant (“Mr Chechetkin”) is a British citizen resident in England. He qualified as a lawyer in Russia and has an LLM from the Connecticut School of Law in the US. He has worked as a lawyer for a number of international organisations but has never qualified as a lawyer in England or in the USA.
At all material times until 31 December 2021, he was employed full-time as in-house legal counsel for the European Bank for Reconstruction and Development. Since then, he has not had a job. Much of his time and resources have been devoted to the litigation between himself and the Payward group, both in the JAMS arbitration and in this country.
A3: The evidence
This being an arbitration claim, commenced by way of a CPR Part 8 claim form, the evidence was essentially written. I received witness statements made by Mr Grant Squire of the Claimants' solicitors and by Kimberly Pallen of Withers Bergman LLP, the Claimants' US attorneys; and from Mr Chechetkin.
One of the main issues between the parties was whether Mr Chechetkin was a consumer for the purposes of the Consumer Rights Act 2015. Mr Chechetkin gave evidence on this in his witness statement. The Claimants' skeleton argument indicated an intention to apply for permission to cross-examine Mr Chechetkin on this point, an application that Mr Sims KC (leading counsel for the Claimants, along with Ms Walker) duly made. The skeleton argument submitted by Ms Bell and Mr Reid (counsel for Mr Chechetkin) indicated that there was no objection to this.
While oral evidence is unusual in an arbitration claim, I considered that the question whether Mr Chechetkin should be considered a consumer was likely to be so critical that it was appropriate to permit cross-examination. I therefore heard Mr Chechetkin's oral evidence at the beginning of the hearing.
B: Mr Chechetkin's contract with Payward Ltd
B1: Conclusion of the contract
In March 2017, Mr Chechetkin opened an online trading account via the Kraken website. The website is set up such that, in whatever country or territory the customer may be located, that customer's contract will be with a Payward group entity local to that country or territory. In the USA, this would be Payward Ventures. In the UK, it is Payward Ltd. Thus, Mr Chechetkin contracted with Payward Ltd. He had no contractual nexus with any other Payward group entity.
Opening an account required Mr Chechetkin to fill out a standard on-line form. As well as giving conventional details as to name, address and age, he was asked to state his occupation – he said “Lawyer” – and give his source of wealth – he said “Employer”. A box in relation to “Crypto Trading Experience” was left blank.
Kraken accounts are offered to customers at various levels, entitled “Starter”, “Express”, “Intermediate” and “Pro”. Each level has different limits for withdrawals and deposits, the highest limits being for “Pro” accounts. This was what Mr Chechetkin selected, checking a box to indicate that he did so because of the higher withdrawal limits.
The application form asked, “Are you creating the account on behalf of a 3 rd party” and “Do you intend to use your account as a bitcoin reseller or reseller of other digitals as a business.” The form stated in relation to both these questions: “If yes you will need to apply as a corporate client.” Mr Chechetkin answered “No” to both questions.
He checked boxes indicating that his net worth was “$1mil–2mil” and that his liquid net worth was “$250k–1mil”, and that his source of wealth was “Employment income”. These answers were reflected in a “T4 risk score”, along with other items.
One such item was including: “Works in Crypto or Fintech Industry – No”. That item made a contribution of zero to his risk score. I assume that the T4 risk score is used to evaluate and accept Mr Chechetkin as a customer.
His T4 risk score was evidently acceptable, and he was accepted as a customer, with a “Pro” account. I am not sure of the precise date when his account was opened, but some time in March 2017. It is common ground that, in legal terms, this was when a contract was concluded between Mr Chechetkin and Payward Ltd.
B2: The Payward Terms
All such contracts are subject to the Payward Terms of Service (“Payward Terms”). The Payward Terms are set out in a clickwrap agreement through the account sign-up page, with a blue hyperlink to the Payward Terms. Mr Chechetkin checked a box, by which he purported to confirm that that he had read and agreed to the Payward Terms. These include clause 23, providing as follows:
“23. Applicable Law; Arbitration
PLEASE READ THE FOLLOWING PARAGRAPH CAREFULLY
BECAUSE IT REQUIRES YOU TO ARBITRATE DISPUTES WITH US
AND IT LIMITS THE MANNER IN WHICH YOU CAN SEEK RELIEF.
You and Payward agree to arbitrate any dispute arising from these Terms or your use of the Services, except for disputes in which either party seeks equitable and other relief for the alleged unlawful use of copyrights, trademarks, trade names, logos, trade secrets or patents. ARBITRATION PREVENTS YOU FROM SUING IN COURT OR FROM HAVING A JURY TRIAL. … You and Payward further agree…(b) that any arbitration will occur in San Francisco, California; (c) that arbitration will be conducted confidentially by a single arbitrator in accordance with the rules of JAMS; and (d) that the state or federal courts in San Francisco, California have exclusive jurisdiction over any appeals of an arbitration award and over any suit between the parties not subject to arbitration. … Any dispute between the parties will be governed by these Terms and the laws of the State of California and applicable United State law, without giving effect to any conflict of laws principles that may provide for the application of the law of another jurisdiction.”
B3: The JAMS Rules
The main rules governing the JAMS arbitration process are the JAMS Comprehensive Arbitration Rules & Procedures (“the JAMS Rules”). Rule 1 provides that parties are deemed to have made the JAMS Rules a part of their arbitration agreement whenever they have provided for arbitration by JAMS.
Rule 4 provides as follows:
“ Rule 4. Conflict with Law
If any of these Rules, or modification of these Rules agreed to by the Parties, is determined to be in conflict with a provision of applicable law, the provision of law will govern over the Rule in conflict, and no other Rule will be affected.”
Also relevant are the JAMS Consumer Arbitration Minimum Standards. These apply:
“… where a company systematically places an arbitration clause in its agreements with individual consumers and there is minimal, if any, negotiation between the parties as to the procedures or other terms of the arbitration clause. A consumer is defined as an individual who seeks or acquires any goods or services, primarily for personal family or household purposes, including the credit transactions associated with such purchases, or personal banking transactions.”
Rule 3 of the JAMS Consumer Arbitration Minimum Standards provides as follows:
“3. Remedies that would otherwise be available to the consumer under applicable federal, state or local laws must remain available under the arbitration clause, unless the consumer retains the right to pursue the unavailable remedies in court.”
C: Mr Chechetkin's trades and his FSMA claim
C1: Mr Chechetkin's trades
Mr Chechetkin placed trades on the Kraken trading platform from March 2017 until 16 October 2020, when he closed the account.
Mr Chechetkin's use of the Kraken...
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