Competition Cases, Territoriality and Jurisdiction

At the time of writing, the precise nature of the relationship between United Kingdom competition law and European competition law, and the effects that the presumed exit of the United Kingdom from the European Union will have, are not known. Although a great deal of thought has been given to the rules that will take effect in such circumstances, until a settlement or conclusion is finally reached, such matters are ‘writ in water’. This chapter thus looks only to the law as it stands at present, while acknowledging that matters may very soon change.

Jurisdiction is a term fraught with difficulty: that is because it is extraordinarily context sensitive, and the term will be used in several different ways in this chapter. I begin with jurisdiction in the ‘international sense’: what are the limits on a nation state’s – or, because we will be discussing the European Union, a supranational organisation of nation states’ – ability to assert jurisdiction to prescribe (that is, to make law), to adjudicate (that is, to subject persons or things to the process of the courts) and to enforce (that is, to induce or compel compliance)? [2] Competition law, as will be seen, very much tests those limits as traditionally understood.

Traditionally speaking, jurisdiction is asserted either on the basis of territory or on the basis of a personal link – generally, nationality – between a given state and a given person. Jurisdiction based upon territory is self-evidently easy to justify. It is one of the hallmarks of a sovereign state that, within its territory, it is sovereign, making laws and providing for their adjudication and enforcement. Of course, nationals of other sovereign states will, typically, be subject to this jurisdiction, but only because they are present within that state’s territory. Territorial juris­diction is premised on the sovereign equality of states and the principle of non-intervention.

Extraterritorial jurisdiction is less easy to justify. It is perfectly possible – for instance – for a state to prescribe laws that prohibit certain conduct that takes place abroad. However, even in such cases, generally speaking, some kind of link is required, and usually it is provided by the nationality of the actor. In other words, there is a form of personal jurisdiction. States have a link, by way of nationality, that justifies in international law this prescriptive jurisdiction. However, in such cases, it will be very rare for states to assert an extraterritorial adjudicative or enforcement jurisdiction. In short, the national who has infringed such a law will only be adjudicated against or enforced against within the jurisdiction. In this way, comity among nations is preserved.

The problem with infringements of competition law is that such infringements do not respect state boundaries. If we assume that most competition laws will, in some way, seek to prohibit abuses of dominant positions or excessive market power and the use of concerted practices or cartels, it is quite clear that an abuse of a dominant position or a cartel, occurring entirely within one jurisdiction, will have effects outside that jurisdiction’s territorial boundaries. In short, as Barack puts it, while ‘the many antitrust statutes of Western countries might suggest that the antitrust problem is purely domestic in character, since these laws are largely, sometimes exclusively, concerned with restrictions affecting the home market . . . there is in truth no reason to expect that the antitrust problem ends at the water’s edge’. [3]

The United States was the first to recognise that competition, or antitrust, cases required a different jurisdictional approach. In Alcoa, [4] Judge Learned Hand declared it to be settled law that ‘any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognise’. [5] Thus was the ‘effects’ basis for jurisdiction born or declared; and although Judge Learned Hand claimed it to be ‘settled law’, as indeed it became in the United States, this ‘long-arm’ jurisdiction certainly did not receive immediate recognition from other states.

That said, as I have noted, competition law is far from amenable to jurisdiction based purely on the territorial or the personal, and it is unsurprising that where the United States has led, other jurisdictions, notably the European Union, have followed. European competition law now has its own ‘long-arm’ jurisdiction. It is not the purpose of this chapter to explore the limits and controversies of this jurisdiction – that has been done elsewhere [6] – but it is important to note the jurisdictional breadth of European competition law.

This Guide is concerned with private competition litigation. Let us, then, assume two different types of infringement that a claimant seeks to litigate before the English courts. This chapter is indifferent as to whether the infringement involves the abuse of a dominant position or whether it is of a more collusive nature. The distinction that I am going to focus on is territorial and not related to any particular competition law infringement. The first type of infringement I am going to postulate takes place in whole or in part within the territory of the European Union (the ‘domestic infringement’). The second type of infringement takes place exclusively outside the territory of the European Union (the ‘foreign infringement’). The domestic infringement thus assumes at least one actor within the European Union; the foreign infringement assumes no such actor present within this jurisdiction and is intended to test the long-arm effects jurisdiction.

In the first case, the one concerning a domestic infringement, the relevant jurisdictional rules will be those contained in the Brussels I Regulation (Recast), which provides a code for the allocation of jurisdiction in these cases. [7] The default rule is that persons domiciled in a Member State should be sued in the courts of that Member State, [8] and that this rule may only be derogated from in the circumstances specified in the Brussels I Regulation (Recast). [9] If the intended defendant is domiciled in the United Kingdom, there is clearly no difficulty in bringing that defendant before the English courts. This is the default jurisdiction, assuming an infringement in England and Wales, rather than Scotland or Northern Ireland. Any other parties involved can be joined as a co-defendant, provided that the claims against the defendants are so closely connected that it is expedient to hear and determine these claims together. [10]

Of course, where the ‘anchor’ defendant is domiciled outside the United Kingdom, but within another Member State, the default rule operates against a claimant who might want to sue in an English court. There are many reasons why a claimant may favour a particular jurisdiction – rules of disclosure, speed of process, perceived competition law expertise, etc. – and equally a number of devices that can be used to bring a claim in that jurisdiction. Obviously, where there are multiple defendants, it may be that their domicile varies among them. In such a case, there is no reason why a claimant cannot select a particular defendant as anchor and join the rest as necessary and proper parties. Normally, such a course is straightforward, but it can give rise to issues, as where the claim against the anchor defendant is liable to be struck out, for instance, on grounds of limitation. [11]

Where there is no obvious anchor defendant, claimants have in the past sought to join a subsidiary as the anchor, and then use that subsidiary to draw into the proceedings other parties. [12] For this course to succeed, it is necessary for the claimant to be able to plead that there is a cause of action against the subsidiary itself, and not just the parent.

Other jurisdictional bases are, on the whole, less satisfactory. Competition law infringements are, generally speaking, tortious in nature – in England, in form, they amount to a breach of statutory duty. The Brussels I Regulation (Recast) permits a claimant to sue a defendant not domiciled in a particular Member State, in the Member State where, in tortious matters, the harmful event occurred or might occur. [13] It has long been established that the place where the harmful event occurred is either the place where the event that gave rise to the damage occurred or the place where the damage occurred. [14] If there is no anchor defendant within the jurisdiction, it is less likely that the event giving rise to the damage will have occurred within the jurisdiction and a claimant will most likely be relying on the jurisdictional base of where the damage occurred. The problem is that the claimant will only be able to recover for the damage actually suffered in that territory. If significant damage was suffered outside the English jurisdiction, it will be irrecoverable in the English proceedings. [15] If the claimant wants to recover all its losses, multiple claims will have to be brought.

Should jurisdiction satisfactorily be established, then the relevantly applicable law is straightforwardly going to be English competition law. Indeed, since English competition law is in substance the same as European competition law, there are unlikely to be any meaningful choice of law arguments arising.

Turning to the second case, which concerns an exclusively foreign infringement, the traditional common law rules for the establishment of jurisdiction apply. These have been traversed in many cases, including many competition cases. [16] Where there is a foreign defendant, permission to serve out of the jurisdiction must be obtained from the court. For permission to be granted, a claimant must first satisfy the court of three things. First, in relation to that defendant, there must be a serious issue to be tried on the merits.

Next, the second requirement, the claimant must show a good arguable case that each claim being made against the defendant falls within one of the ‘gateways’ for service out defined in Paragraph 3.1 of Practice Direction 6B. [17] These gateways are all cases where, even though the defendant is not within the territorial jurisdiction, there is some factor justifying an English jurisdiction. The third gateway – Paragraph 3.1(3) of the Practice Direction – permits service out where a claim can be commenced against another defendant within the jurisdiction, and the foreign defendant is a necessary and proper party to that claim. In the case we are supposing, this use of an anchor defendant does not arise. The gateway that would, in the second case, most likely be relied upon, would be the ninth gateway, which permits service out of the jurisdiction where a claim is made in tort and damage is sustained or will be sustained within the jurisdiction. [18]

Thirdly, an English jurisdiction must clearly and distinctly be the proper forum for the trial of the claims.

Let us assume that the first requirement – that there be a serious issue to be tried on the merits – is satisfied. If so, then it would appear, in the case we are hypothesising, that the ninth gateway will also be satisfied, because there will have been harmful effects suffered within the jurisdiction. There might very well be some argument as to what ‘damage’ has to be shown in order to meet this requirement, but generally speaking the concept is broadly drawn.

That gives rise to the third question, as to whether England is the appropriate jurisdiction. The factors relevant to this question are case specific, but it will be appreciated that the only factor (in this hypothetical case) tying the proceedings to England is the fact that damage has been suffered within the jurisdiction. That would suggest multiple factors pointing away from England and towards the Ruritanian jurisdiction where the infringer or infringers are (hypothetically) situated. The claimant might very well face an uphill battle in showing that England was clearly and distinctly the proper forum. Of course, another factor that an English court will consider is whether a claim can be made in the foreign jurisdiction and it is here that potentially very interesting issues might arise. Suppose Ruritania itself has a sophisticated antitrust regime, albeit different to that pertaining in England. Suppose that under Ruritanian law, the proposed defendant is not dominant, whereas under English law it is. A private claim alleging abuse of a dominant position will therefore fail in Ruritania but be arguable in England. Equally, it can well be appreciated that there is an element of subjectivity or at least uncertainty in what constitutes an abuse of a dominant position. The same problem arises, where a claim is not possible in Ruritania, when it would be in England. How far is this a relevant factor for an English court when considering whether England is clearly and distinctly the more appropriate forum? On the one hand, it is unattractive to deprive a claimant of a jurisdiction when there is no alternative jurisdiction in which to litigate. On the other hand, given that I am assuming a foreign defendant who has properly complied with the laws of its ‘home’ jurisdiction – and those laws are not worse, only different, to the English rules – it seems a little harsh to subject such a defendant to the rules of a (to it) foreign jurisdiction that only apply because of fact that ‘damage’ was suffered in that jurisdiction. These are difficult questions, which have yet properly to be resolved. Wrapped up in these is a further difficult question. I have so far assumed that the choice of law rules would favour English law. Of course, were Ruritanian law to be the relevantly applicable law in an English court, then the claimant – even if an English jurisdiction could be established – would end up losing on the merits. [19]

I am not even going to begin to seek to answer these questions. But, in an increasingly international world, it is appropriate that they at least be raised.


Notes

1 Sir Marcus Smith is a Chairman of the UK Competition Appeal Tribunal and a Justice of the High Court of England and Wales. All views expressed are personal.

2 These categories of jurisdiction are generally accepted. See the clear articulation in the American Law Institute, Restatement of the Law 3d: The Foreign Relations Law of the United States, Section 401.

3 Barack, ‘The Application of the Competition Rules (Anti-Trust Law) of the European Economic Community’, 1st ed (1981), 1.

4 US v. Aluminium Co of America, (1945) 148 F 2d 416.

5 At 443.

6 See the standard competition and private international law texts. See also, for specific works in this area, Barack, op cit; Roth, ‘Reasonable Extraterritoriality: Correcting the Balance of Interests’, (1992) 41 ICLQ 245.

7 Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

8 Article 4.

9 Article 5.

10 Article 8(1).

11 See the Deutsche Bahn litigation, in particular, Deutsche Bahn AG v. Morgan Advanced Materials plc, [2013] CAT 18.

12 See the description of the case law in Danov, Becker & Beaumont (eds), ‘Cross-Border EU Competition Law Actions’, 1st ed (2013), 150-151.

13 Article 7(2).

14 Case 21/76, Bier v. Mines de Potasse d’Alsace SA, [1976] ECR 1735.

15 Case C-68/93, Shevill v. Press Alliance, [1995] ECR I-415.

16 See, for instance, Microsoft Mobile Oy (Ltd) v. Sony Europe Ltd, [2017] EWHC 374 (Ch).

17 See CPR 6.36.

18 There is a second limb to this gateway, which relates to where the tortious act took place. I am assuming that this gateway will not pertain.

19 Assuming, of course, that the first requirement for service out continued to be made. It is actually a little difficult to see how the claimant could show a good arguable case on the merits in these circumstances.

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