Case Update: Epic Games, Inc v Apple Inc: choice of forum clauses and public policy grounds – Epic Games, Inc v Apple Inc [2021] FCAFC 122

On 9 July 2021, the Federal Court of Australia overturned a decision to award a stay based on an exclusive jurisdiction/choice of forum clause on the basis that public policy considerations require that most claims brought under Part IV of the Competition and Consumer Law Act 2010 (Cth) (CCA) should be determined in Australia. The practical implication of this decision is that while companies should be aware of any exclusive jurisdiction or choice of forum clauses in agreements they enter into, they should also be aware that there may be some limited instances, including where a claim is brought under Part IV of the CCA, where there are “strong reasons” to allow the suit to proceed in Australia instead.

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On 9 April 2021, the Federal Court of Australia stayed proceedings brought by Epic Games (Epic) against Apple for various breaches of the CCA on the basis of a clause in the underlying agreement between the parties requiring that all disputes be heard by courts in the Northern District of California (an Exclusive Jurisdiction Clause). Our summary of this decision can be found at link.

On 9 July 2021, the Full Federal Court overturned this stay. Epic’s 17 grounds of appeal were concerned with the reasoning of the primary judge in evaluating whether there were “strong reasons” to enable Epic to proceed before an Australian Court notwithstanding the Exclusive Jurisdiction Clause. Such grounds were characterised by the Court as two reasons:

  1. that there were public policy considerations that require Epic’s claim be determined by the Federal Court, which “override” the Exclusive Jurisdiction Clause; and
  2. that either the Exclusive Jurisdiction Clause was unenforceable for public policy reasons or, if the clause was found to be enforceable, there were “strong reasons” for not enforcing it in the circumstances of the proceeding.

The first point did not need to be determined, as the High Court in Akai Pty Ltd v People’s Insurance Co Ltd (1996)188 CLR 418 included public policy as part of its assessment of whether strong reasons against a stay exist (rather than as some special rule that necessarily trumps all other considerations). In respect of the second point, the Court found that the primary judge’s reasoning involved three errors of principle:

  1. failure to make a cumulative assessment: while the primary judge explained that a stay may be refused where an Exclusive Jurisdiction Clause offends the public policy of the jurisdiction, and set out reasons that may satisfy this criteria, he did not find these were sufficient to permit a refusal of the stay application. On appeal, the matters which the primary judge had identified were said to constitute “strong reasons” which arguably demonstrated that the stay should not be granted. Accordingly, the Court inferred that the primary judge did not cumulatively weigh up these considerations in reaching his conclusion that “strong reasons” had not been demonstrated.
  2. failure to recognise juridical disadvantages of proceeding in the US Court: in the primary proceeding, the primary judge identified that litigating the issue in the US would be cumbersome as Australian law would need to be addressed by expert evidence, the ACCC could not intervene in any proceedings and any findings made in the decision would not be able to be used as persuasive precedent in later decisions. However, his view was that these were insubstantial issues. On appeal, the Court found that these were not insubstantial given that ss 83 and 87 of the CCA reinforce that that proceedings under Pt IV of the CCA can involve fundamental public interest issues. In addition, the difficulty of litigating in the US, including with respect to the different remedies available should have informed the primary judge’s decision.
  3. the role of Apple Pty Limited: the primary judge wrongly characterised the role of Apple Pty Limited in Epic’s proceedings as merely “ornamental” or “parasitic” because an important aspect of Epic’s claims involved claims under Pt IV of the CCA and s 21 of the ACL against an Australian company, Apple Pty Limited, for conduct undertaken in Australia in connection with arrangements affecting Australian consumers in an Australian sub-market.

 

The Court stated that all 3 kinds of error set out above are material, and any one was sufficient to vitiate the primary judge’s decision to grant the stay.

Not every claim brought under the CCA will automatically provide  ground to find that there are “strong reasons” which weigh against a stay of proceedings, as not every CCA claim benefits consumers if successful, for example where the dispute in question is a commercial dispute such as a claim for misleading or deceptive conduct. Rather, it is important to look at the particular proceedings before the Court to determine whether public policy considerations apply. However, the Court stated that there is a legislative policy that Part IV claims should be determined in Australia, given the economic significance of conduct regulated by Pt IV for Australia, reflected in the legislative intention that, with limited and carefully prescribed exceptions, Part IV contraventions should be heard by the Federal Court of Australia.

 

The Court also rejected Apple’s arguments on “forum non conveniens” grounds (to the effect that the Australian Court was an inappropriate forum to hear the matter). As the primary judge explained, ‘this was a case about the Australian App Store, the developers of apps for distribution in that store and the Australian users of iOS devices. It arose under Part IV (and ACL s 21) and it was a case commenced in Australia in reliance on Australian competition law, involving Australian markets and consumers.

 

Accordingly, the proceedings for the Australian CCA claims brought by Epic are set to proceed. The US decision in respect of the US App store claims is yet to be handed down but has led to various other suits in the US, including an action by a coalition of 36 states and the District of Columbia against Google, alleging an illegal wielding of monopoly power over its app store. We await the outcome of both proceedings.

Key contacts: Sophie Dawson, Thomas Jones, Joel Parsons  

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