Court of Appeal cements CAT’s broad discretion on carriage issues in allowing FX collective claim to proceed on opt-out basis

In Evans v Barclays Bank PLC & Ors, the Court of Appeal overturned the Competition Appeal Tribunal (CAT)’s decision to reject two competing applications for a collective proceedings order (CPO) on an opt-out basis in respect of follow-on claims arising from 2019 infringement decisions from the European Commission (2023 EWCA Civ 876).

The Court of Appeal found that the CAT had erred in its assessment of whether the proceedings should be certified on an opt-in or opt-out basis. It also provided useful guidance on the right to appeal under Section 49(1A) of the Competition Act 1998 and the courts’ jurisdiction in the determination of carriage disputes.

This decision revives the £2.7 billion class action and demonstrates a willingness to certify opt-out claims even where class members might be well-resourced entities that are capable of bringing proceedings independently.

Background

The case concerns rival collective actions brought by two proposed class representatives (PCRs) Michael O’Higgins and Phillip Evans. Both applied for CPO certification on an opt-out basis in pursuit of follow-on claims arising from the European Commission’s 2019 decisions, which stated that the respondents had breached Article 101 of the TFEU by operating cartels related to foreign exchange spot trading.

The opt-out applications gave rise to a ‘carriage dispute’ (ie, the question of who is best placed to proceed with a claim). As the CAT refused to determine this as a preliminary issue, it was to be resolved along with its consideration of whether to certify either action. The tribunal also considered whether the claims could survive a strike-out application.

The CAT determined that:

• it has the power to strike out claims even where there is no strike-out application from the respondents;
• both claims were weak enough to be capable of strike out (but the CAT refrained in light of novel and difficult issues arising from the applications); and
• the claims would not be certified on an opt-out basis because of a lack of clarity in the proceedings, among other reasons.

The CAT also held that it did matter that the class members were likely “sophisticated potential litigants” that could join on an opt-in basis. Finally, while the tribunal did not certify either application and thus did not need to address the carriage question, it indicated that it would have decided in favour of Evans as PCR.

The CAT stayed both proceedings to allow the PCRs three months to refile their claims on an opt-in basis, and both promptly stated their intention to appeal. They also brought protective applications for judicial review to guard against the possibility that there was no jurisdiction to appeal under Section 49(1A) of the Competition Act.

The appeal

The key issues in the appeal were:

• the law governing the difference between statutory appeal and judicial review;
• whether the CAT has the independent power to strike out a claim and if it exercised its power correctly;
• the criteria for determining opt-in versus opt-out, including the relative importance of a claim’s strength; and
• the criteria to apply when selecting between rival class representatives.

The Court of Appeal held that the collective proceedings order should be amended so that the proceedings are certified on an opt-out basis.

Appeal or judicial review?

According to the court, the statutory right of appeal should be construed broadly to minimise the scope of judicial review. Judges on the CAT panel acquire specialist skills and receive specialist training – to utilise judicial review would insert an unnecessary non-specialist step in the progress of an appeal decision. Additionally, judicial review should only be used where no adequate alternative remedy (eg, a right of appeal) is available. The court concluded that “the occasions when the only issue is one of judicial review should be rare”.

CAT’s power to strike out a claim of its own motion

The court confirmed that the CAT does have the power to determine, of its own motion, whether a claim is viable, calling this power “an important tool in the CAT’s gatekeeper armoury”. It also asserted that the CAT exercised this power correctly and was within its broad case-management discretion to defer the strike-out decision in the way that it did.

Opt-in versus opt-out

While the court clarified that the tribunal was correct to hold that it had jurisdiction to choose between opt-in or opt-out – even where the applicants had applied only for opt-out – it found that the CAT erred in its analysis of the claims’ strength and practicability.

As the CAT concluded that it would form no final view on the merits until the applicants submitted reformulated cases, it was illogical to treat its provisional view of the merits as legally definitive when it came to deciding on the issue of opt-in or opt-out, particularly when knowing that doing so would bring the claims to an end. The court also agreed with the applicants that the tribunal should have shown how its assessment of the claims’ strength made opt-in preferable. A claim’s merits are usually a neutral factor, but where they are not, there needs to be a relevant connection with the choice between opt-in or opt-out. The court agreed with the CAT’s dissenting member, Paul Lomas, who said that “it is wrong to treat strength as a sliding scale with a weaker case going to opt-in and a stronger case to opt-out”.

On practicability, the court found the CAT was wrong to infer that because class members were large, sophisticated entities that could afford to bring proceedings on an opt-in basis, if they did not opt in, this was a conscious decision as they did not “want” to litigate. The mostly undisputed evidence indicated that an opt-in action would not be practicable. Where a claim would not be viable other than on an opt-out basis, that is a powerful reason to select opt-out.

Carriage

Perhaps unsurprisingly, the court declined to interfere with the CAT’s decision on issues of carriage, finding that the tribunal considered a variety of factors as to who could best conduct the proceedings and was much better positioned to form a view on the matter. The court did, however, endorse the CAT’s view that the decision should not be made on the basis of:

• who was first to file;
• who had the most funding; or
• which claim covered the broadest class.

Key takeaways: welcome developments

While the Court of Appeal found that the CAT erred in several areas of analysis, it cemented the CAT’s wide discretion on certification and carriage issues. Its finding that carriage is essentially a discretionary evaluation by the CAT that will be difficult to overturn on appeal gives welcome clarification to the market, hopefully avoiding further satellite litigation at the appellate level. Its endorsement of the CAT’s approach that a case’s merits should determine carriage is also a welcome development that should discourage parties from filing weaker claims just so that they can be first in the door.

The judgment also provides guidance on whether grounds of challenge to a CAT decision should be brought by way of appeal or judicial review. The practical effect of this is likely to be that parties save cost and effort in not feeling compelled to bring parallel proceedings to protect their position.

Finally, the judgment provides clarification on the factors – and relative weighting – that the CAT should apply to the opt-in/opt-out decision. It makes clear that the class action regime is not just for consumers’ benefit – it is also for the benefit of businesses where the individual claim value means that they would be unlikely to bring claims on an individual basis.