The European Antitrust Review 2014 • Section 3: Country chapters
United Kingdom: Private Antitrust Litigation
In recent years, private antitrust enforcement has gained considerable momentum (at least in some EU member states), and is now perceived as a credible and effective complement to the public enforcement of competition law undertaken by the European Commission (EC) and national competition authorities (NCAs), such as the Office of Fair Trading (OFT)1 in the UK.
The frequency of private antitrust claims (which usually follow infringement decisions by the EC or NCAs) is increasing and is expected to continue to grow as the European Commission actively seeks to increase the level of private antitrust enforcement by making it easier for businesses who are victims of competition law infringements to seek redress in national courts. Businesses are also increasingly recognising the potential attractiveness of such claims, either to seek financial redress or as a way to improve the terms of ongoing commercial relationships.
England and Wales has become a popular jurisdiction for bringing private antitrust actions.2 In Europe, it is widely recognised as a favourable jurisdiction for potential claimants. Indeed, a large number of antitrust claims have been brought, or are currently ongoing, in the English courts. These cover a number of EC and OFT (or sectoral regulator) infringement decisions, as well as stand-alone claims.
The attractiveness of bringing antitrust claims before the English courts rests upon a number of features of the English legal system that facilitate the way in which a claim can be brought. In addition to the reputation and ability of the English courts to deal with complex cases and the availability of innovative funding arrangements, such features also include the English courts’ flexible approach to establishing jurisdiction and the extensive disclosure regime, both of which make it easier (compared to many other jurisdictions) for claimants to pursue their claims.3
With this in mind, we explore some of the recent developments and practice in antitrust litigation in England and Wales, in particular in relation to the establishment of jurisdiction by the use of ‘anchor defendants’ and the disclosure of leniency materials in the context of follow-on cartel damages claims. We also discuss the role of the Competition Appeal Tribunal (CAT) as an increasingly attractive forum for antirust claims in the UK. In this regard, we briefly consider the first case in which the CAT awarded damages for an antitrust infringement (which was also the first time exemplary damages have been awarded in an antitrust claim in the UK), as well as the proposed reform to the UK antitrust litigation regime which, among other changes, aims to establish the CAT as the primary venue for antitrust litigation in the UK.4
Private antitrust damages actions can be brought before the English courts (the High Court or the specialist CAT), to the extent they have jurisdiction to hear the claim, in respect of any (alleged) breach of EU or UK competition law.5
Such actions can be brought either on a ‘follow-on’ basis (ie, where an infringement of competition law has already been found in a decision of the EC, the OFT or other UK sectoral regulator) or on a ‘stand-alone’ basis (ie, where there is no prior infringement decision by a competition authority or regulator). Follow-on actions can be brought either before the High Court (based on the tort of breach of statutory duty arising out of a breach of the EU or UK competition rules) or the CAT (under sections 47A and 47B CA98).
Stand-alone claims can currently only be brought before the High Court6 although, to date, the number of such claims has been relatively limited.
The issue of whether the English courts have jurisdiction to hear an antitrust damages claim will primarily be determined by the provisions of the Brussels Regulation.7 The general rule under the Brussels Regulation is found in article 2, which provides that a defendant domiciled in an EU member state should be sued in the courts of that member state. An exemption to this rule can be found in article 6(1), which provides that in relation to claims involving multiple defendants in a number of EU member states, claimants can bring a claim in the courts of the member state where any one of the defendants is domiciled, provided the claims are ‘so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments’. A further exemption is provided by article 5(3) of the Brussels Regulation, which provides that, with regard to tort claims (which include antitrust claims), a defendant domiciled in an EU member state can be sued in the courts of ‘the place where the harmful event occurred’.8 Therefore, where the jurisdiction of the English courts is established over one defendant domiciled in the UK (under article 2), the claimant can join to the same action defendants domiciled in other EU member states.
With regard to EU-wide cartel damages claims, the English courts have considered the application of article 6(1) and demonstrated a willingness to accept jurisdiction against defendants domiciled in other EU member states. In a number of cases, claimants have sought to establish the jurisdiction of the English courts in EC cartel cases by bringing claims against UK-domiciled entities (which may not have been subject to the EC infringement decision) rather than against their foreign parent companies to which the infringement decision had been addressed. In such cases, claimants have used UK-domiciled subsidiaries as ‘anchor defendants’.
The practice of the English courts to jurisdiction and the use of anchor defendants
The English courts first indicated that they would take a broad view of jurisdiction in antitrust claims in Provimi,9 a case which followed the EC’s vitamins cartel case.10 The High Court accepted jurisdiction to hear an EU-wide cartel claim brought against the UK subsidiaries of foreign parent companies, notwithstanding that, unlike their foreign parents, the UK subsidiaries were not addressees of the EC’s infringement decision. The basis for claiming the UK courts had jurisdiction was that the UK subsidiaries (the anchor defendants) had allegedly implemented the cartel by selling vitamins at the cartel prices in the UK.11 The court, in establishing its jurisdiction, did not find it necessary to consider whether the UK anchor defendants had ‘knowledge’ of the cartel itself, as long as it was alleged that they had implemented it, noting that, for the purposes of the application of article 101 TFEU:
the legal entities that are part of the one undertaking... have no independence of mind or action or will... the mind and will of one entity is... to be treated as the mind and will of the other entity. There is no question of having to ‘impute’ the knowledge or will of one entity to another, because they are one and the same.12
The conclusions of the High Court in Provimi were reaffirmed in Cooper Tire,13 a case which arose from the EC’s decision relating to the synthetic rubber cartel.14 In Cooper Tire, the claimants (tire manufacturers who had bought synthetic rubber in Europe) sought to establish jurisdiction through three UK anchor defendants (subsidiaries of foreign companies who were addressees of the EC’s decision) on the basis that they had implemented the cartel by selling products at cartel prices. As with Provimi, the High Court concluded that there were sufficient grounds to establish a claim against the UK anchor defendants, irrespective of their state of ‘knowledge’. The court therefore had jurisdiction, under article 6(1) of the Brussels Regulation, to hear the claims against their foreign parents and other cartelists.
On appeal, the Court of Appeal had the opportunity to offer some clarity on the use of UK anchor defendants in establishing the jurisdiction of the English courts and, in particular, as to whether a claim can be founded solely on the basis that the UK anchor defendants had implemented the cartel or whether ‘knowledge’ of the cartel itself would also be required. Although the Court of Appeal did not have to decide the issue (as the claimants’ pleadings were broadly drafted so as to encompass the possibility that the UK anchor defendants had implemented and had knowledge of the cartel), it questioned whether a claim against a UK subsidiary of a cartelist could be brought solely on the basis of implementation of the cartel. In doing so, it expressed some doubts as to whether subsidiaries, by virtue of the EU concept of an ‘undertaking’, should be liable for the acts of their parents and commented that if it had needed to decide on that issue, it would have been inclined to make a reference to the European Court of Justice (ECJ).15
In 2011, the High Court in Toshiba Carrier16 (a case brought in relation to a cartel relating to industrial copper tubes) had the opportunity to reconsider the approach taken in Provimi and Cooper Tire in relation to UK anchor defendants. The claim was brought against three UK anchor defendants (none of which were addressees of the EC’s decision) that were used as a jurisdictional hook for seeking to join to the claim the non-UK addressees of the decision. The anchor defendants sought to strike out the claim, but in October 2011, the High Court refused to do so as it concluded that the claims against the UK anchor defendants were properly constituted (with ‘knowledge’ of the cartel on the part of the UK-domiciled defendants, on the same basis as Cooper Tire, having been sufficiently pleaded by the claimants).17
The Court of Appeal rules on the jurisdiction of the English courts and the use of ‘anchor defendants’
In January 2012, the Court of Appeal granted the defendants permission to appeal the High Court’s judgment in Toshiba Carrier.18 In considering whether to grant such permission, the court considered the earlier judgments in Provimi and Cooper19 and concluded that it was appropriate to do so given that ‘the question of when and where members of an international multi-party cartel may be properly sued is evidently a matter of great importance and concern, perhaps increasingly so’.20 The Court of Appeal was given the opportunity to consider whether implementation of a cartel arrangement alone could be sufficient to establish liability or whether a certain degree of knowledge is required. Although, the judgments in Cooper Tire and Toshiba Carrier highlight the importance of pleading that UK anchor defendants both implemented and had knowledge of the cartel, the Court of Appeal in its decision to grant permission to appeal noted that ‘it may not be enough simply to plead that the UK defendants were aware of anti-competitive arrangements... this makes it all the more important that any allegation of knowledge is pleaded with some precision’.21 On 13 September 2012, the Court of Appeal dismissed the appeal against the High Court’s judgment and found that the claimants had sufficiently alleged in their pleadings that the UK anchor defendant had participated in, and implemented, the cartel arrangements with knowledge of the cartel agreement.22 The Court of Appeal noted that there was a ‘paucity of evidence to support the allegations against the [UK anchor defendant]’, but also emphasised that anti-competitive arrangements are, by their very nature, shrouded in secrecy, and so it is difficult until after disclosure to assess the strength of an allegation that a defendant was a party to, or aware of, anti-competitive conduct by members of the same company group (a point also made by the Court in Cooper Tire).23 Interestingly, the Court of Appeal also chose to comment on the Provimi judgment and, in particular, on the issue of imputation of knowledge or liability to subsidiary companies with regard to the anti-competitive acts of their parent companies. Lord Justice Etherton, expressing his own view, stated that the views expressed by Aikens J in Provimi have been overtaken by subsequent EU case law24 and that it is clear that, ‘save in a case where the parent company exercises ‘a decisive influence’ (in the language of EU jurisprudence) over its subsidiary or the same is true of a non-parent member of the group over another member, there is no scope for imputation of knowledge, intent or unlawful conduct’.25 The claimants subsequently applied to the Supreme Court for permission to appeal against the Court of Appeal’s judgment, but in February 2013, the Supreme Court refused permission on the basis that there was no arguable point of law of general public importance which ought to be considered.26
In view of the above, it seems that the position with regard to the use of anchor defendants for establishing the jurisdiction of the High Court is now sufficiently clarified: a potential claimant would need to plead that a UK subsidiary had implemented and had knowledge of the cartel arrangements. Taking into account the low standard of pleading implementation and knowledge on the part of the UK subsidiary, as well as the lack of a requirement to substantiate any such allegations prior to disclosure, the Court of Appeal’s judgment reiterates the flexible and claimant friendly approach to establishing jurisdiction so far taken by the High Court, and is likely to incentivise potential claimants to bring their private antitrust claims in England and Wales.
In parallel to the appeal in Toshiba Carrier, the Court of Appeal also recently considered an appeal against the CAT’s judgment in Emerson IV.27 In Emerson IV, the claimants sought to bring a claim against a UK subsidiary of one of the addressees of an EC decision (all of which were domiciled overseas) in relation to the carbon and graphite products cartel.28 The CAT took a more restrictive approach compared to the High Court with regard to the issue of jurisdiction and decided to strike out the claim brought against the UK subsidiary on the basis that there had been no finding of infringement against it (within the meaning of section 47A CA98) and the subsidiary was not referred to in the EC decision.29 The CAT concluded that it was not necessary to rule on the legal position had the UK subsidiary not been an addressee of the EC decision but if ‘the recitals contained a clear and unambiguous finding of infringement against [it] which was not reflected in the operative part of the Decision.’ On 28 November 2012, the Court of Appeal dismissed the appeal brought by Emerson against the CAT’s judgment, concluding that the CAT was correct to strike out the claim brought against the UK subsidiary as it was not based on the EC decision.30 In particular, the Court found that the EC’s decision contained no finding that the UK subsidiary had infringed article 101(1) TFEU and therefore the UK subsidiary could not properly be made a defendant to the claim under section 47A CA98.31 The Court clarified that if the EC had intended to impose such a liability for infringement, it could, and should, have either named the UK subsidiary as an addressee in the operative part of the decision or defined the addressee undertaking as including not only the non-UK parent company but also all subsidiary entities owned or controlled by it as being liable for infringements of article 101(1) TFEU.32
The effect of the Court of Appeal’s judgment in Emerson IV is that in follow-on actions before the CAT, UK non-addressee subsidiaries of foreign cartelists will not be available as anchor defendants (reflecting to some extent the limits imposed currently on CAT’s jurisdiction by section 47A CA98). However, given the UK government’s proposals to extend the CAT’s jurisdiction to allow it to hear stand-alone claims (in addition to follow-on cases), the use of UK anchor defendants in order to establish the jurisdiction of the CAT will certainly be revisited.33
Another significant feature of the English legal system that makes England and Wales particularly attractive to claimants is the scope of disclosure of documents in the possession of defendants. Disclosure in the English courts is generally more extensive than in other EU (civil law) jurisdictions, offering claimants good prospects of obtaining access to documents which may assist them in their case. Such disclosure is particularly pertinent in the context of follow-on damages claims (and may be of particular relevance with regard to the calculation of loss).
The rules governing proceedings in the High Court provide for three main types of disclosure: standard disclosure, specific disclosure and pre-action disclosure.34 Standard disclosure usually takes place after the close of pleadings and requires the parties to disclose documents in their control on which they rely, which adversely affect their own case or the other party’s case or which support the other party’s case. Specific disclosure can be sought for documents that have not been disclosed as part of standard disclosure. In addition, upon the request of a claimant (or a potential claimant, as the case may be), the court may order pre-action disclosure against defendants or disclosure against a non-party to the proceedings, where this would be necessary in order to dispose fairly of the claim or save costs.
The procedure for disclosure in proceedings before the CAT is different, with the CAT having wide discretion to order disclosure as appropriate. Disclosure may be ordered at any time upon the CAT’s own initiative or in response to a request from a party.35 Disclosure is not automatic and will be ordered where the CAT is satisfied that it is ‘necessary, relevant and proportionate for the fair disposal of the issues of substance’.36
A potentially significant difference in the approaches taken by the High Court and the CAT exists in relation to the timing of disclosure. In the case of National Grid,37 the defendants sought a stay of proceedings pending the outcome of an appeal against the underlying EC decision to the General Court or any subsequent appeal to the ECJ. The High Court did not order a stay of proceedings and ruled that procedural steps to trial, including disclosure, should continue to take place before a stay is ordered.38 It therefore appears that, in the future, the High Court will continue with procedural steps, including disclosure, even though appeals of the decision underlying the claim remain outstanding and only then order a stay if necessary. This may be a reason why claimants may decide to bring proceedings in the High Court instead of the CAT, which must give permission for a claim to be issued while appeals against the underlying infringement decision are ongoing or still possible.
While the High Court and the CAT will generally require parties to disclose to each other all documents under their control that are material to the issues in the proceedings, certain documents are protected from disclosure on the basis that these attract either legal advice privilege or litigation privilege.39 Of particular importance in the context of follow-on cartel damages claims is the extent to which claimants can request the court to order defendants or a third party (eg, the EC or OFT) to disclose materials produced or submitted in the context of a leniency application (as well as the confidential version of the infringement decision). The long-standing position adopted by competition authorities is that, as a matter of public policy, in order to protect the effectiveness of leniency programmes, leniency materials should not be disclosed in follow-on cartel damages actions.40 However, recent case law shows that this position is changing, with momentum now gathering towards allowing limited disclosure of leniency materials in the context of damages claims.
The issue of disclosure of leniency materials in court proceedings was recently considered, for the first time, by the ECJ in Pfleiderer.41 The ECJ, on reference from the German District Court of Bonn, was asked to consider whether granting a claimant access to the file of the German Federal Cartel Office (FCO), containing documents submitted under its leniency programme, would be in breach of EU law (on the basis that it might discourage the making of leniency applications and thereby reduce the effectiveness of EU competition law). The ECJ held that EU law does not automatically preclude the disclosure of leniency documents and that it is for national courts to decide on a case-by-case basis (and under their national law) whether such documents should be disclosed. In order to do so, national courts would have to balance the importance of safeguarding the effectiveness of leniency programmes (so as not to discourage potential leniency applicants and maintain strong public enforcement) with the rights of claimants to bring actions seeking compensation in respect of competition law infringements.42 In January 2012, the District Court of Bonn, having weighed the interests identified by the ECJ, held that Pfleiderer should be denied access to the leniency applications to avoid jeopardising the future of the FCO’s leniency programme.
Following the ruling in Pfleiderer, the balancing exercise envisaged by the ECJ was carried out by the English High Court in National Grid, a damages action following the EC’s decision in the gas insulated switchgear cartel. The claimant in this case, NGET, sought disclosure by the defendants43 of several documents containing leniency material including the confidential version of the EC decision, responses to the EC’s Statement of Objections and responses to the EC’s requests for information on the operation or effects of the cartel. In accordance with the provisions of regulation 1/2003, the EC submitted to the High Court its views on the disclosure application. The EC acknowledged that the principles set out by the ECJ in Pfleiderer also apply with regard to leniency materials submitted to the EC and stated that it is open to a national court to order the disclosure of such materials (suggesting however that national courts should take into account the potential impact on the EC’s leniency programme of ordering disclosure of leniency materials).44 The EC nevertheless concluded that, taking into account the availability of other sources of equally effective evidence, it appeared disproportionate to order the disclosure of the leniency materials.45
Subsequently, the High Court, in deciding whether or not to order disclosure, considered a number of issues including the legitimate expectation of leniency applicants that their leniency statements would be protected from disclosure, the deterrent effect that disclosure may have on potential leniency applicants and whether it would be proportionate to order disclosure. In April 2012, the High Court set out in its judgment the results of its balancing exercise, and contrary to the approach previously taken by the District Court of Bonn in Pfleiderer, ordered disclosure to NGET of selected leniency materials and in particular of limited parts of the confidential version of the EC’s infringement decision, as well as parts of the defendants’ responses to the EC’s information requests.46 The judgment of the High Court is particularly important since it confirms that some leniency materials may have to be disclosed in antitrust damages claims brought in England and Wales.47 However, the judgment clearly distinguishes between documents created for the purposes of applying for leniency and pre-existing documents (which may be particularly important in seeking to prove a claimant’s case). This distinction between the two types of documents was also made by the EC in relation to National Grid,48 as well as by the advocate general in his Opinion in relation to Pfleiderer.49
More recently, on 6 June 2013, the ECJ50 issued an important ruling in Donau Chemie concerning the rights of potential claimants to gain access to leniency materials. The ECJ, on reference from the Austrian Cartel Court, was asked to consider whether a national law that prohibits third-party access to documents held on the file of an antitrust authority (including documents made available under a leniency programme) without the consent of the parties involved in the proceedings is compatible with EU law (in particular in light of the judgment in Pfleiderer, ie, that EU law does not prevent a claimant from obtaining access to leniency materials). The ECJ held that EU law, in particular the principle of effectiveness, precludes a provision of national law whereby access to documents is made subject solely to the consent of all the parties to the proceedings, without leaving any possibility for the national courts of weighing up the interests involved.51
The ECJ, however, failed to provide the much-needed clarity with regard to the protection of leniency materials. Having regard to the importance of actions for damages brought before national courts (in particular, in ensuring the maintenance of effective competition in the EU), the ECJ noted that the risk that access to evidence contained in a file in competition proceedings may undermine the effectiveness of a leniency programme cannot justify a refusal to grant access to that evidence.52 Nevertheless, the ECJ stated that any refusal of access should be considered document by document, and that non-disclosure may be justified only if there is a risk that disclosure of a given document may actually undermine the public interest relating to the effectiveness of the national leniency programme.53
Some clarity for leniency applicants?
The decisions of Pfleiderer, National Grid and now Donau Chemie have and will continue to be the subject of much debate, leaving potential leniency applicants in a state of uncertainty regarding the position on disclosure of certain leniency materials. However, recent developments in the EU aimed at facilitating private damages claims provide some welcome clarity regarding the likely treatment of leniency materials and promise to offer leniency applicants some comfort by protecting leniency materials as far as possible.54
On 11 June 2013, the EC adopted a proposal for a Directive on damages actions for breaches of EU competition law.55 The draft Directive is set to remove a number of practical difficulties that potential claimants face in follow-on damages actions before the courts of EU member state. The main objectives of the draft Directive are to optimise the interaction between the public and private enforcement of competition law and to ensure that victims of infringements of the EU competition rules can obtain full compensation for the harm they suffered. With these objectives in mind, the draft Directive covers a number of key areas,56 such as the disclosure of documents and access to evidence for potential claimants. According to the draft Directive, member states shall ensure, subject to the conditions set out within it, that where a claimant has presented reasonably available facts and evidence showing plausible grounds for suspecting that it has suffered harm caused by the defendant’s infringement of competition law, national courts can order the defendant or a third party to disclose evidence (whether or not this evidence is also included in the file of a competition authority). Member states would also need to ensure that national courts limit disclosure of evidence to that which is proportionate (by considering the legitimate interests of all parties and third parties concerned).57 Leniency applicants may, however, take some comfort from the draft Directive as it provides for absolute protection against disclosure of leniency corporate statements and settlement submissions in follow-on private damages actions (although national courts could order the disclosure of information and documents prepared in the course of proceedings of a competition authority, after the conclusion of such proceedings).58 The draft Directive will now be discussed by the European parliament and the Council according to the ordinary legislative procedure, and if adopted by these institutions, member states will have two years to implement the provisions into their legal systems.
In the meantime, the UK government in its Response to options for reforming the private antitrust actions regime, in anticipation of EU legislation on this issue, decided that the issue of the protection of leniency materials from disclosure would not be addressed in legislation in the UK (although it recognised that it is important that reforms to the private actions regime do not inadvertently undermine a leniency regime).59 The UK government did note that if EU legislation is not adopted it will then consider further whether it would be desirable to legislate at national level to protect the leniency regime.
In light of the Pfleiderer, Donau Chemie and National Grid cases, as well as the EC’s recent draft Directive, it seems that the issue of disclosure of leniency materials in the context of follow-on antitrust damages claims will remain a topic of debate into 2013 and beyond. The approach so far adopted by the EU and English courts as well as the EC suggests that certain leniency materials may have to be disclosed in order to facilitate follow-on antitrust damages claims (although no blanket disclosure of such materials is likely to take place). While leniency applicants will need to take into account the possibility that pre-existing materials submitted in the course of their leniency application could be used against them in follow-on antitrust damages claims, the incentives offered by the EC or national leniency programmes (and in particular the immunity from substantial fines) would still appear to outweigh the potential negative effects of materials from leniency applications being made available to claimants – not least the extent to which claimants need to quantify their loss.60
If implemented, the proposals put forward by the EC will not only offer some welcome clarity concerning the potential disclosure of certain leniency materials, but could also reduce, at least to some extent, the likelihood of inconsistent approaches being adopted by national courts in carrying out the Pfleiderer balancing exercise (thereby reducing the possibility of forum shopping by claimants when deciding where to bring an action for damages).
Recent developments in the CAT
On 5 July 2012, the CAT handed down its judgment in the Cardiff Bus case,61 awarding damages in a follow-on claim for the first time. This was also the first case in which exemplary damages for a breach of competition law have been awarded in the UK.
In January 2011, 2 Travel brought a claim against Cardiff Bus following a 2008 decision of the OFT which found that, by engaging in predatory conduct, Cardiff Bus had infringed the CA98 by abusing a dominant position in the Cardiff bus market. In particular, when 2 Travel launched a new ‘no-frills’ bus service, Cardiff Bus introduced its own no-frills service, on the same routes and at similar times of the day, with exclusionary and predatory intent. Shortly after 2 Travel’s exit from the market, Cardiff Bus withdrew its own no-frills services. In its claim before the CAT, 2 Travel claimed for losses under a number of heads including loss of profits, loss of capital asset, loss of commercial opportunity, wasted staff and management time, and liquidation costs. 2 Travel also claimed exemplary damages, whose purpose is to ‘punish and deter’ the defendant in addition to any compensatory damages that might be awarded. While the CAT dismissed most of 2 Travel’s claims, it awarded damages for loss of profits (of £33,818.79, plus interest) and also exemplary damages of £60,000.
The fact that damages were awarded on an exemplary basis is particularly noteworthy.62 While the primary purpose of a damages award is to compensate a claimant for his loss, exemplary damages can be awarded where compensatory damages alone would be insufficient to punish the defendant for ‘outrageous conduct’ including, as in this case, when the defendant was or should have been aware that its conduct was probably illegal. In Devenish,63 the High Court had previously held that claimants are entitled to compensatory damages but not to exemplary or restitutionary damages. This was on the basis that to make such an award where fines have already been imposed by a competition authority would be inconsistent with the principles of double jeopardy as both fines and exemplary damages intend to punish and deter anti-competitive behaviour. In Cardiff Bus, as no fines had been imposed, the CAT held that there were no policy reasons not to award exemplary damages. The CAT also stated that when exemplary damages are considered they should have some bearing to the compensatory damages awarded (in this case awarding exemplary damages about double the size of the compensatory award), and that they should have regard to the economic size of the defendant in order to be ‘of an order of magnitude sufficient to make the defendant take notice’.64 While the CAT concluded that it was ‘under no illusions that this judgment is likely to incentivise the bringing of claims for exemplary damages in competition cases’,65 in reality it is unlikely that they will be awarded in many cases.
Subsequently, on 28 March 2013, the CAT handed down its judgment in Albion Water66 awarding damages in a private damages action for only the second time. However, while the CAT ordered Dwr Cymru to pay damages totalling £1.85 million (plus interest)67 to Albion for losses resulting from Dwr Cymru’s abuse of dominance, it dismissed Albion’s claim for exemplary damages.68 Although the CAT’s judgment in Albion Water underlines the high threshold that potential claimants must meet in order for exemplary damages to be awarded, it seems that exemplary damages are likely to become another feature of antitrust damages claims in the UK over the next few years.
The CAT’s judgments in Cardiff Bus and Albion Water will no doubt provide encouragement for potential claimants considering competition-based damages actions in the UK as they clearly demonstrate the willingness and ability of the CAT to successfully deal with the complex issues of causation and quantification of losses in the context of damages claims in competition cases.
These judgments also come at a time when there is a genuine appetite to expand the role of the CAT as the UK government currently proposes to make the CAT the major venue for antitrust litigation in the UK, considering that it has the necessary expertise and capacity, and that both claimants and defendants are likely to benefit from its efficient case management and flexible procedures. To this end, the draft Consumer Rights Bill (Bill) published in June 2013 contains provisions which, if implemented, will rationalise and significantly enhance the CAT’s private enforcement role.69 The key reforms proposed by the government are:
- to extend the CAT’s jurisdiction to allow the CAT to hear stand-alone as well as follow-on cases;70
- to enable the courts to transfer (stand-alone and follow-on) competition law cases from the High Court to the CAT and vice versa;71
- to harmonise the limitation periods for the CAT with those of the High Court;72
- to enable the CAT to grant interim and final injunctions (both in stand-alone actions and cases under the new collective redress regime);73 and
- to introduce a fast-track procedure for simpler antitrust claims in the CAT (principally for the benefit of SMEs).74
In addition to the above, the UK government also proposes to introduce a limited opt-out collective actions regime (under which claims could be brought either by claimants or by genuine representative of the claimants, such as trade or consumer associations).75 The regime would apply to both follow-on and stand-alone cases, with cases to be heard only in the CAT, and the CAT would have a gatekeeping role as it would be required to certify whether a collective action brought under the regime should proceed under an opt-in or an opt-out basis.
The reforms proposed by the government represent a broad overhaul of the current UK antitrust litigation landscape and, if implemented, are likely to lead to more antitrust claims, especially in the CAT.
- From 2014, a new body, the Competition and Markets Authority, will take over the functions of the Competition Commission and the competition functions of the OFT. ↑
- Germany and the Netherlands are also currently relatively attractive jurisdictions for EU-wide cartel damages claims. ↑
- Sections 58 and 58A of the Competition Act 1998 (CA98) provide that findings of fact and findings of infringement are binding on the court (except where the court otherwise directs so far as findings of fact are concerned, but such discretion will be used carefully). This means that claimants do not need to establish liability in a follow-on action, although they will need to prove causation and loss. The application of section 58 CA98 in relation to follow-on claims was considered in Enron Coal Services Limited v English Welsh & Scottish Railway  EWCA Civ 2 (EWS). In EWS, the Court of Appeal held that section 58 CA98 does apply to follow-on claims in the CAT under section 47A CA98 (overturning a previous decision of the CAT). The position in the UK is different to that in some other member states. The position may, however, change following the recent proposals by the EC aiming to improve the national legal frameworks governing actions for damages which include a rebuttable presumption that a cartel infringement has caused harm (see footnote 63 below). ↑
- On 29 January 2013, the UK government’s department for Business, Innovation and Skills (BIS) published the government’s response to its 2012 consultation on options for reform of the private actions regime (Response) (see www.gov.uk/government/uploads/system/uploads/attachment_data/file/70185/13-501-private-actions-in-competition-law-a-consultation-on-options-for-reform-government-response1.pdf). The government proposed three key reforms aimed at the promotion and facilitation of competition litigation:
• establishing the CAT as a major venue for competition actions in the UK (including providing for stand-alone claims to be brought before the CAT and giving it the power to grant injunctions);
• introducing a limited opt-out collective actions regime, with safeguards, for competition law (similar to opt-out mechanisms successfully adopted in some jurisdictions including Denmark, Norway, the Netherlands, Portugal and Spain); and
• promoting alternative dispute resolution, to ensure that the courts are the option of last resort.
The majority of the proposed reforms require changes to primary legislation. In this regard, on 12 June 2013, BIS published a draft Consumer Rights Bill, schedule 7 of which contains provisions to implement the government’s proposed reforms by making amendments to the CA98 and Enterprise Act 2002.↑
- Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) or Chapters I and II of the CA98. ↑
- The position will, however, change when the recent proposals for reform by the UK government, suggesting that stand-alone claims may also be brought before the CAT, are implemented. There are also provisions to enable claims to be transferred from the High Court to the CAT and vice versa (section 16 of the Enterprise Act 2002). ↑
- Council Regulation (EC) No.44/2001 of 22 December 2002 on the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L12/1). ↑
- A further exemption is provided by article 5(3) of the Brussels Regulation which provides that with regard to tort claims (which include antitrust claims) a defendant domiciled in an EU member state can be sued in the courts of ‘the place where the harmful event occurred’. ↑
- Provimi Ltd v Aventis Animal Nutrition SA  EWHC 961. ↑
- COMP/37.512. ↑
- The non-UK entities within the same group of companies and other non-UK cartelists could then be added as co-defendants by virtue of article 6(1) of the Brussels Regulation. ↑
- Para 31 of the Provimi judgment. ↑
- Cooper Tire & Rubber Company Europe Ltd and others v Dow Deutschland Inc and others  EWCA Civ 864. ↑
- COMP/38.638. ↑
- Para 46 of the Court of Appeal’s judgment in Cooper Tire. ↑
- Toshiba Carrier UK Ltd & others v KME Yorkshire Ltd & others  EWHC 2665 (Ch). ↑
- Para 45 of the High Court’s judgment in Toshiba Carrier. The court, however, noted that even if ‘knowledge’ on the part of the anchor defendants had not been properly pleaded, the allegations were, on the basis of the earlier decision in Provimi and Cooper Tire, sufficiently alleged. ↑
- Toshiba Carrier UK Ltd & others v KME Yorkshire Ltd & others  EWCA Civ 169. ↑
- The High Court in Provimi had found it arguable that implementation of the cartel alone could amount to an infringement of article 101 TFEU but in Cooper Tire it was observed that the opposite could also be argued. ↑
- Para 28 of the Court of Appeal’s judgment in Toshiba Carrier of 31 January 2012. ↑
- Para 31 of the Court of Appeal’s judgment in Toshiba Carrier of 31 January 2012. ↑
- KME Yorkshire Ltd and others v Toshiba Carrier UK Ltd and others  EWCA Civ 1190. ↑
- Para 32 of the Court of Appeal’s judgment in Toshiba Carrier of 13 September 2012. This approach was also taken in Nokia Corporation v AU Optronics Corporation ( EWHC 731) in dismissing an application to strike out or to grant summary judgment against the claimant in proceedings for damages for infringement of article 101. ↑
- See para 39 of the Court of Appeal’s judgment and ECJ judgment in P Siderurgica Aristain Madrid SL v Commission, Case C-196/99  ECR I-11005 (at para 99), according to which the mere fact that the share capital of two commercial companies is held by the same person or the same family is insufficient in itself to establish that those two companies are an economic unit with the result that, for the purposes of article 101, the actions of one company can be attributed to the other. ↑
- See para 37 of the Court of appeal’s judgment in Toshiba Carrier of 13 September 2012. ↑
- See Supreme Court, Permission to Appeal results – January 2013 and February 2013, at www.supremecourt.gov.uk/docs/permission-to-appeal-2013-0102.pdf ↑
- Emerson Electric Co and others v Morgan Crucible Company plc and others  CAT 4. ↑
- COMP/38.359. ↑
- Para 52 of the CAT’s judgment in Emerson IV. Proceedings in follow-on actions under section 47A CA98 can be contrasted with the position in the High Court, where claimants usually advance stand-alone claims (whether or not in addition to follow-on claims) against UK anchor defendants, alleging they were part of the of the infringing undertaking and that they knowingly took part in and implemented the cartel in breach of their own statutory duties. As such, claimants in those cases do not require a pre-existing EC or NCA decision in order to bring a claim. ↑
- Emerson Electric Co & Ors v Mersen UK Portslade Ltd  EWCA Civ 1559, judgment of 28 November 2012. ↑
- Ibid, at para 82. ↑
- Ibid. at para [?]. ↑
- Once the government’s proposals set out in the Response are adopted, potential claimants would have the opportunity to bring before the CAT a stand-alone claim against a UK anchor defendant in addition to a follow-on claim brought against the addressees of the EC decision. ↑
- CPR part 31. ↑
- The CAT’s procedural rules also give the CAT considerable flexibility to ask third parties to produce documents or papers relating to the case (Rule 19 of the Competition Appeal Tribunal Rules 2003 (S.I. 2003/1372). ↑
- See Tesco Stores Ltd v OFT  CAT 6 at para 13. ↑
- National Grid Electricity Transmission Plc v ABB  EWHC 1326 (Ch). ↑
- In Masterfoods Ltd v HB Ice Cream Ltd (C-344/98)  ECR I-11369, the ECJ held that if an EC decision is on appeal, the national court should stay its proceedings pending final judgment. ↑
- Legal advice privilege covers confidential communications between a client and his lawyer that have been entered into for the purpose of giving or receiving legal advice, whereas litigation privilege covers confidential communications between a client and his lawyer or between one of them and a third party which comes into existence when litigation is pending, reasonably contemplated or existing and is made for the dominant purpose of litigation. ↑
- See for example, paragraph 40 of the EC’s Leniency Notice (OJ 2006 C298/22). ↑
- Pfleiderer AG v Bundeskartellamt C-360/09. ↑
- Paras 25-32 of the Pfleiderer judgment. ↑
- NGET originally asked that disclosure of the documents be requested by the court from the EC under article 15 of Regulation 1/2003. However, following the decision in Pfleiderer, it sought disclosure directly from the defendants. ↑
- Paras 10 and 17-19 of the Observations of the European Commission in the case of National Grid v ABB (↑
- Para 21 of the Observations of the European Commission in the case of National Grid v ABB. ↑
- National Grid Electricity Transmission Plc v ABB  EWHC 869 (Ch). ↑
- Both Pfleiderer and National Grid concern applications for disclosure of leniency materials from the defendants under national civil procedure rules. However, in December 2011 the General Court in the case of CDC Hydrogen Peroxide v EC (Case T-437/08) annulled the EC’s decision refusing CDC full access to the statement of contents of its case file in the Hydrogen Peroxide and Perborate Cartel (COMP/F/38.620), strengthening the ability of undertakings potentially affected by cartel activity to gain access to documents prepared and/or submitted in the context of leniency programmes in order to facilitate follow-on damages claims. ↑
- Paras 7-8 of the Observations of the European Commission in the case of National Grid v ABB. ↑
- Paras 46-47 of the Advocate General’s Opinion in Pfleiderer. (http://curia.europa.eu/juris/document/document_print.jsf?doclang=EN&docid=83076 &cid=109107). ↑
- Case C-536/11 – Bundeswettbewerbsbehörde v Donau Chemie AG and others, judgment of 6 June 2013. ↑
- Para 49 of the ECJ’s judgment in Donau Chemie. ↑
- Ibid at para 46. ↑
- Ibid at paras 47 and 48. ↑
- This follows a resolution of the European Competition Network (ECN), published on 23 May 2012 (http://ec.europa.eu/competition/ecn/leniency_material_protection_en.pdf), stating that protection of leniency materials is fundamental to the effectiveness of anti-cartel enforcement and must be protected (so far as possible). ↑
- Proposal for a Directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, COM(2013) 404 final. On the same date, the EC also published a Recommendation on collective redress as well as a Communication on quantifying harm in EU competition law damages actions. ↑
- Such as the status of decisions of NCAs, rules on limitation periods, passing-on defence, rebuttable presumption that cartel infringements cause harm, limitations on joint and several liability principle for leniency applicants, quantification of harm, and settlements. ↑
- Article 5 of the draft Directive. ↑
- Article 6 of the draft Directive. ↑
- The government recognised that this is an area where action at European level would be preferable, both for reasons of consistency and effectiveness, as well as in terms of providing certainty for those considering applying for leniency. Previously, in its consultation paper, the UK government emphasised the need to continue incentivising leniency (while upholding the right to redress) and – consistent with the judgment in National Grid – stated that it is ‘minded to protect certain aspects of leniency documents from disclosure’. ↑
- It should be noted that the draft Directive includes a rebuttable presumption that a cartel infringement has caused harm (although it provides no presumption as to the level of harm), also stating that ‘Member States shall ensure that the burden and the level of proof for the quantification of harm does not render the exercise of the injured party’s right to damages practically impossible or excessively difficult’ (article 16). This provision conflicts with the UK government’s decision in its Response to drop its proposal of a rebuttable presumption in cartel cases, in light of the UK law principle that a claimant must prove the loss suffered. ↑
- 2 Travel Group Plc (in liquidation) v Cardiff City Transport Services Limited  CAT 19. ↑
- It should also be noted that although 2 Travel’s claim was before the CAT, the circumstances in which it considered exemplary damages to be appropriate are likely to apply equally to competition claims before the High Court. ↑
- Devenish Nutrition v Sanofi Aventis  EWHC 2394. ↑
- Para 596(2) of the CAT’s decision in Cardiff Bus. ↑
- Para 598 of the CAT’s decision in Cardiff Bus. ↑
- Albion Water Limited v Dŵr Cymru Cyfyngedig,  CAT 6, judgment of 28 March 2013. ↑
- The CAT awarded compensatory damages under two heads: £1.69 million (plus interest) for loss of profits (as in the absence of the infringement Albion could have supplied its customer more profitably) and £160,150 (plus interest) for loss of an opportunity (for losses arising from Albion’s lost opportunity to supply another customer). ↑
- Despite an earlier ruling by the CAT that Albion’s claim for exemplary damages should be allowed to proceed. ↑
- The Bill has been published for pre-legislative scrutiny. As part of this scrutiny, BIS has invited comments on the Bill by 13 September 2013. ↑
- Proposed amendment to section 47A CA98 (Schedule 7, para 4 of the Bill). ↑
- The government intends to enable the courts to transfer (stand-alone and follow-on) competition law cases to the CAT and vice versa, through activation of section 16 of the Enterprise Act 2002 or by other means. ↑
- Proposed new section 47E CA98 (Schedule 7, para 8 of the Bill). ↑
- Proposed new section 47D CA98 and amendment to Schedule 4 of the Enterprise Act 2002 (Schedule 7, paras 7, 24 and 34 of the Bill). ↑
- Proposed amendment to Schedule 4 of the Enterprise Act 2002 (Schedule 7, para 31 of the Bill). ↑
- Proposed new section 47B CA98 (Schedule 7, para 5 of the Bill). Law firms, special purpose vehicles and third-party funders will not be permitted to bring collective actions under the regime. ↑
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