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Article: Private Antitrust Litigation in the UK

September 01, 2013
Business Litigation Reports

Companies that have suffered losses from an infringement of EU or national EU Member State competition laws have expanding options for attempting to recover those losses. EU competition enforcement policy in recent years, both at the supra-national and the national Member State levels, has given significant emphasis to facilitating private damages actions. As a result, there has been a steady increase in such filings as claimants realize the benefits of these types of claims.

The UK has developed into a highly favorable forum for pursuing private damages actions for competition law violations. As discussed below, companies considering competition law damages claims—including claims based on collusion among multiple defendants—stand to benefit from assessing their claims under English law and, if appropriate, pursuing those claims through private actions before the English courts.

The Legal Basis for Private Antitrust Claims
Article 101 (the prohibition on anti-competitive agreements) and Article 102 (the prohibition on abuse of a dominant position) of the Treaty on the Functioning of the European Union (“TFEU”) both have direct effect, which means that claims based on those provisions can be brought directly in the national courts of the EU Member States. In addition, Article 6 of Regulation (EC) No. 1/2003 specifically empowers Member States’ national courts to apply Articles 101 and 102. Thus, any person or entity that has suffered loss or damage from a breach of EU competition law can bring a claim in the national courts of the Member States.

Why Bring a Private Antitrust Claim in the UK?
Member States have autonomy with respect to their domestic procedural rules governing private damages claims. As a practical matter, this autonomy generates an inevitable degree of forum shopping by potential litigants hoping to ensure that a claim is brought in the most advantageous jurisdiction available.

The UK is widely regarded as one of the most claimant-friendly jurisdictions for a number of reasons, including: (i) the relative speed, integrity and efficiency of the English courts, as compared with those of many other Member States; (ii) the existence of experienced English judges, familiar with the management of major commercial disputes and accustomed to high damages claims and awards; (iii) the existence of a specialist competition court (the Competition Appeals Tribunal (the “CAT”)) as a forum for competition claims; (iv) disclosure rules that are more extensive than those in other Member States, requiring parties to disclose documents that are harmful to their own case or helpful to their opponent’s case; and (v) a flexible approach to funding arrangements (including, as of April 1, 2013, so-called “damages based agreements,” as discussed below) to manage the potential costs and financial risks of litigation. The availability of the English courts as a forum for competition law claims also has been facilitated by those courts’ generous approach to questions of jurisdiction in these types of claims.

Types of Action and Remedies Under English Law
Under English law, a claim for breach of competition law is generally characterized as a tortious action for breach of statutory duty (Garden Cottage Foods Ltd v. Milk Marketing Board [1984] AC 130). Liability is strict; there is no requirement to prove fault. A claimant, however, still needs to establish a clear causal connection between the competition law infringement and the losses suffered.

Three types of actions that can be brought in the English courts are: (i) stand-alone claims, where there has been no prior infringement decision by the European Commission or UK competition authorities; (ii) follow-on claims, where there has been a prior infringement decision; and (iii) follow-on consumer claims, which are representative damages claims that can only be brought by the Consumers’ Association on behalf of named consumers, where there has been a prior infringement decision. It is also possible to have actions that are hybrid follow-on and stand-alone actions—for example, where claimants rely upon a Commission decision as the basis for their claims, but also allege that the infringement was longer lasting or wider in ambit than found by the Commission.

As the name suggests, a follow-on claim entitles a claimant to rely on a pre-existing decision of the European Commission or the UK competition authorities as evidence of competition law infringement. The underlying legal basis for follow-on claims is Article 16 of Regulation (EC) No. 1/2003, which provides that Member State courts cannot adopt a position that runs counter to a pre-existing European Commission decision. In follow-on actions based on a pre-existing Commission decision, the claimant does not face the often costly burden, as in a stand-alone action, of establishing a breach of the relevant competition law provision. Instead, a follow-on claimant need only prove causation and loss. Not surprisingly, claims that are, at least in part, follow-on claims are the most common type of private competition law actions brought in English Courts.

The remedies available to a private claimant are: (i) damages where the claimant has suffered loss as a result of a breach of EU and/or UK competition law; (ii) declaratory relief (e.g. that a particular contract, or part of it, is unenforceable and void or that particular conduct breaches EU and/or UK competition law); and (iii) injunctive relief either as an interim or final measure. In stand-alone claims there is also the possibility of obtaining exemplary damages—that is, damages awarded as a punitive measure to reflect the nature of a defendant’s conduct. Exemplary damages are an exception to the general English law rule that damages seek only to compensate a claimant for his loss.

The UK’s Specialist Competition Court
Private antitrust claims can be brought either in the High Court or before the CAT, depending on the type of action and the type of remedy sought. The CAT is an independent specialist judicial body established to hear appeals against certain decisions of the UK competition and sectoral regulatory authorities, as well as follow-on claims. Claims in the High Court are assigned to the Chancery Division or the Commercial Court (pursuant to Civil Procedural Rules 30.8 and 58.1(2), and paragraph 2.1 of the EU Competition Law Practice Direction). Judges in both divisions have undertaken specialist competition law training. Given that the Chancery judges sit on the CAT’s panel of chairmen, there is arguably no substantial difference between the CAT and the High Court in terms of competition law expertise.

In practice, however, there are certain limitations to the CAT’s powers, which have meant that claimants tend to favour bringing claims in the High Court instead. For example, a follow-on claim for damages (i.e. monetary relief) can be brought in either the CAT or the High Court, but if any other relief is sought (i.e. declaratory or injunctive) then the claim may only be brought in the High Court. Furthermore, the CAT is currently not permitted to hear stand-alone claims. Perhaps most significantly, if an infringement decision is under appeal, then a claim cannot be issued in the CAT without the CAT’s express permission.

By contrast, in the High Court a claim can be issued even if an appeal against the infringement decision in question is still pending. In National Grid Electricity Transmission Plc v. ABB Limited & Ors [2009] EWHC 1326 (Ch), a case against members of the Gas Insulated Switchgear cartel, Sir Andrew Morritt refused an application by the defendant companies for a stay of proceedings pending the determination of the appeal against the European Commission’s infringement decision (which most, though not all, of the defendants had appealed). While the actual trial could not take place until the appeals process had been exhausted, the Court ordered that further pre-trial steps should still be concluded before a stay would be imposed. This decision has recently been followed by Mr. Justice Field in the context of claims brought against MasterCard (WM Morrison Supermarkets plc and others v. MasterCard Incorporated and others [2013] EWHC 1071 (Comm)).

Claims in the High Court, pursuant to the Limitation Act 1980, must be brought within six years of the date that the cause of action accrued. Notably, the Limitation Act 1980 also provides an extension of that time period in cases where there has been deliberate concealment. In such circumstances, the six year period will only start to run from the time the claimant discovered the concealment or could reasonably have discovered it. Given the inherently secretive nature of cartel activity, there is typically scope for claimants to argue that the limitation period should only start to run from the date that the cartel was publicly exposed.

Claims in the CAT must be brought within a period of two years from the latest of: (i) the date on which the period for appealing the infringement decision expires; (ii) the date when any such appeal has been determined (where the appeal relates to the substance of the infringement decision, as opposed to only relating to the fine that has been imposed); or (iii) if the claimant does not suffer loss until after the date when an appeal has been determined, then two years from when the loss was suffered.

Generous Approach to Questions of Jurisdiction
Following a series of decisions, the English Courts have confirmed the UK as an attractive jurisdiction in which to bring cartel claims against multiple defendants. The first step for a claimant is to find one defendant that is domiciled in the UK against whom the claimant has an arguable claim (save in certain exceptional circumstances, under EU jurisdictional rules the English Courts are obliged to accept jurisdiction where a defendant is domiciled in the UK). Having found such a UK defendant, sometimes referred to as an “anchor defendant,” it is almost always possible to establish jurisdiction to bring a claim in the same action in England against other non-UK defendants, provided those other defendants were also arguably involved in the same (or very closely related) competition law infringement. If the other defendants are domiciled in the EU, the claimant will have to show that the claim against the anchor defendant and the claim against the other EU defendants are so closely connected that the English Courts would regard it as expedient to avoid the risk of irreconcilable judgments that might otherwise arise from separate proceedings. In practice, this requirement will be satisfied where those other defendants were arguably involved in the same (or very closely related) competition law infringement as the anchor defendant.

Where a Commission Decision expressly finds that a UK-domiciled entity was involved in competition law infringement, then establishing an anchor defendant is straightforward. If, on the other hand, the Commission Decision is not expressly addressed to a UK-domiciled entity, then as a threshold matter any claim would need to be filed in the High Court, because the CAT will only hear follow-on cases where a UK-domiciled entity was found to have infringed competition law. See Emerson Electric and others v. Mersen UK Portslade Ltd, formerly Le Carbone (Great Britian) Ltd [2012] EWCA Civ 1559). Several steps then may be taken to secure an anchor defendant in the English courts.

First, one can show that a UK Company (such as a subsidiary company that is part of the same group as one of the addressees of the Commission decision) has sold the cartelised product (thereby “implementing” the cartel), even if those sales have not been made to the claimant itself. In these circumstances, it will also be necessary to allege that the UK subsidiary knew (directly or indirectly) of the cartel. Claimants have a great deal of latitude to make allegations of knowledge on the part of such “implementers,” as the English Courts recognise that cartels are by definition shrouded in secrecy and that in most circumstances such knowledge can usually be inferred (KME Yorkshire Ltd & Ors v. Toshiba Carrier UK Ltd [2012] EWCA Civ 1190).

Second, one can show that the UK company (although not actually an addressee of the Decision) arguably participated in the competition law infringement, for example, by active involvement in the unlawful arrangement or agreement with a competitor.

Finally, one can show that the UK Company is a parent of a company that either participated in or knowingly implemented the cartel in question. It may even be possible (although this has not yet been established in law) to establish a UK anchor by bringing a claim against a UK company that has been involved only in the manufacture or production of the cartelised product (and not in any selling or marketing activities), or by bringing a claim against a UK company that sold products incorporating the cartelised product. In such cases, it would be necessary to show that the UK Company in question is part of the same “undertaking” or group that was found by the Commission to have participated in the cartel.

Even where there is no UK-domiciled defendant, the English Courts could still accept jurisdiction over a follow-on claim if the breach of competition law occurred, or the damage was suffered, in England, or where there is a contractual agreement between the parties that the English Courts should have jurisdiction over their disputes. Where all of the potential defendants are domiciled outside the EU, the anchor does not have to be UK domiciled; it can simply be any defendant against whom a claim can be brought in the English Courts. Provided there is a closely related claim against other defendants that are domiciled outside the EU arising out of the same infringement, it should be possible to join those other defendants as “necessary or proper parties” to the English action (pursuant to Civil Procedure Rule Practice Direction 6B paragraph 3.1(3)).

When a Commission decision finding infringement is issued, a private claimant seeking relief in the UK courts should move promptly to secure that jurisdiction, given that the defendants may attempt to bring their own action in another EU Member court concerning the same competition law infringement. Defendants may bring actions for negative declarations of non-liability in jurisdictions known for their inefficient legal procedures (often called “the Italian torpedo;” see, for example, Cooper Tire v. Shell Chemicals UK Ltd [2009] EWHC 2609 (Comm)). If such a prior action has already been instituted and is still pending, an English court is likely to decline jurisdiction.

Flexible Options for Funding Claims
Recent changes in the economics of English litigation, including the emergence of litigation finance companies and, as of 1 April 2013, the advent of so-called “damages based agreements,” afford litigants the opportunity in the right cases to structure new and innovative funding arrangements whereby they may mitigate all or a substantial portion of their cost exposure. “Damages based agreements” are contingency fee arrangements that permit solicitors and barristers to represent their clients in exchange for a share in any damages, dependent on the success of the claim and recovery from the opponent. Thus, the potential now exists to finance each element of the costs of litigation with no up-front payment by the client and with financial support provided on a non-recourse basis. This means the client would not have to pay anything if the claim were not successful, and the lawyers and/or third party funder would receive any payment from a share of the proceeds in the event of a successful outcome.

Strong Political Support for Private Antitrust Litigation
In 2012, the UK government’s Department of Business Innovation and Skills conducted a public consultation to consider proposed reforms to improve the current approach to private antitrust litigation. The government’s final plans for reform were published in January 2013 and include the following: (i) to introduce an “opt-out” collective actions regime (both for stand-alone and follow-on claims) for both businesses and consumers—these cases would only be heard in the CAT; (ii) to introduce an “opt-out” collective settlement regime to be supervised by the CAT; (iii) to bolster the powers of the CAT to ensure that it becomes a “major venue” for antitrust litigation, by (a) permitting the CAT to hear stand-alone claims, (b) permitting the CAT to grant injunctions to stop anti-competitive behaviour, (c) enabling the transfer of competition law cases between the High Court and the CAT, (d) harmonizing the limitation periods in the CAT with those in the High Court, and (e) introducing a fast track procedure for simpler competition claims in the CAT. These reforms are far-reaching and demonstrate a clear intention to further facilitate and encourage private damages actions as far as possible.

Similarly, after approximately a decade in the making, in June 2013 the European Commission finally published its own equally far-reaching proposals to further advance private damages actions and the options for collective redress within Member States. With this level of political support and interest, the scope for these types of private claims within the EU (and, particularly, the UK) should only increase going forward.