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The UK is the forum of choice for some of the largest damages claims arising from cartel conduct in Europe. This article describes how cartel litigation in the UK is currently in something of an interim phase, having moved past a first phase that was characterised by delays caused by procedural issues, but with a distinct new era around the corner with the implementation of the Consumer Rights Act which entered into force from 1 October 2015.1
This article highlights the key strategic decisions in bringing and defending claims by reference to four interrelated arenas: the regulator’s investigation; the likely appeal of any infringement decision to the EU’s courts; the High Court procedure; and the settlement process.
The key defining feature that sets cartel litigation apart from other types of commercial litigation is the fact that in Europe to date, the vast majority of cartel litigation “follows on" from an infringement finding by the European Commission (or a national regulator such as the Competition and Markets Authority in the UK). This is an unusual feature of commercial litigation – for a prospective claimant to start the case with liability effectively having been established, or at least in the process of being established, by a binding decision that sets out how the cartel operated and who participated in it. Furthermore, the regulator has already gathered and reviewed all of the critical incriminating documents and has made public announcements about the status of its investigation, including encouraging victims to recover their loss when it reaches the final decision.
However, while the findings of the Commission are potentially a substantial asset for any claimant – and a factor that makes third party funding an attractive proposition for potential claimants – what follows is almost inevitably a very long appeal process by the addressees of the infringement decision to the EU’s General Court and on to the Court of Justice.
The appeal process typically takes five to seven years to be resolved from the adoption of the decision. Although the EU’s General Court has recently reported a “dramatic drop” in new cases this year and a boost in productivity2, which could reduce the backlog of appeals, the appeal process has been – and will continue to remain - a feature that influences all cartel litigation in the UK and elsewhere in Europe. It has a very significant effect because the Masterfoods3 judgment means that a national court is under a duty to stay proceedings in circumstances where the outcome depends on the validity of a Commission decision which is the subject of an appeal on the merits to avoid the risk of irreconcilable judgments pursuant to Article 16(1) of Regulation 1/2003.
Therefore, in deciding whether or not to appeal the infringement decision, there is potentially a real incentive for addressees of a cartel decision to challenge not only the size of any fine, but also the infringement decision itself. In practice, this means that by the time of any trial, a national court is likely to be examining events that probably took place at least a decade ago – and in many cases even longer.
As regards the key developments in High Court claims, it is possible to identify the end of a "first phase" of cartel claims and the beginning of a new “interim” phase. Although the basic operating model is essentially unchanged - there are still some new eye-catching features that makes this current interim phase of cartel litigation rather like a technology upgrade: “UK cartel litigation 2.0”. Five of the key features of this interim phase are as follows:
After the test cases of Arkin4, Crehan5 and a few others, there is a distinct phase of claims that started with the Cooper Tire6 case that was issued in December 2007 and ended in the summer of 2014 with the final settlement in that case two weeks into trial in May 2014 (a six and a half year period) and also with the settlement in the National Grid7 case a few days before trial in June 2014 (a case that lasted 5 years).
The reason these cases took so long to get to trial can be explained by the EU appeal process. However, the defendants used this time to raise a number of challenges which took considerable time to resolve. There were challenges to jurisdiction, applications to stay the claim pending the infringement decision appeal process and applications to resist disclosure of the infringement decision, of all of the related material passed to the Commission, and of any documents held in France pursuant to the French Blocking Statute.
What has essentially now changed - and why we are now in a new interim phase - is that a number of these procedural issues have largely been resolved, at least in principle, so that the opportunity for a defendant to delay has been substantially eroded. For example:
In determining jurisdiction, the basic rule is that defendants should be sued in their jurisdiction of domicile. Article 8(1) of the Judgments Regulation 1215/2012 EC is an exception to this rule. Article 8(1) provides that where the jurisdiction of the English courts has been established over one defendant, additional defendants domiciled in other Member States can also be sued in England in the same action, provided the claims are “so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separating proceedings.” It has now been established by Provimi8 and Cooper Tire that jurisdiction can be established under Article 8.1 by pleading that an “anchor” defendant that is within the cartelist group but not an addressee of the decision nonetheless implemented the cartel in the relevant forum. In addition, the Court of Justice’s decision in Hydrogen Peroxide9 establishes that even if there is a settlement with the “anchor” defendant, that does not render Article 8(1) inapplicable.
Stay of proceedings
It is now clear from National Grid10 - a claim in respect of the gas insulated switchgear cartel - that while the Masterfoods stay will apply before any trial, the court will allow the case to progress in the interim. Where a claim is brought before an infringement decision has been reached, as in the Secretary of State for Health’s claim against Servier relating to the cardio-vascular medicine perindopril,11 it was held that the case should be stayed until 21 days after the oral hearing before the Commission (which is post-Statement of Objections but pre-Decision) to avoid the burden of the defendant fighting simultaneously on two fronts.
Disclosure of infringement decision
Although it will be important to preserve the confidentiality of the decision and to redact references to any leniency material, National Grid,12 Servier13 and Emerald Supplies14 all confirm that claimants will be allowed access to the infringement decision, within the confines of a confidentiality ring that, in particular, protects third party rights. When the litigation has started pending the outcome of the antitrust investigation, disclosure is likely to be restricted to material already disclosed by the parties to the Commission, at least in the first instance, as established by Infederation v Google15 and Servier.16
The French Blocking statute
In the cases of Servier and National Grid, the English Court of Appeal17 dealt with the effect of the French Blocking Statute on the disclosure of documents by French companies in the context of UK damages proceedings. The French defendants in those cases asked the English High Court to make a “court to court” request to obtain the relevant documents / information pursuant to EU Regulation 1206/2001 providing for the taking of evidence in legal proceedings because in the absence of such a request, the French companies would be put at risk of criminal prosecution. It is now clear from the Court of Appeal’s judgment that the Regulation is not mandatory but discretionary and the judges were allowed to use their discretion not to use it and to instead order compliance with English procedural rules. As a result of these cases, the French Blocking Statute is unlikely to be used as a defence to non-compliance with disclosure orders.
Having resolved these more procedural issues in principle, the types of preliminary application that are now before the courts are addressing more substantive issues. For example, where the defendant perceives the claimants to have potentially overreached by striving to claim the absolute maximum amount, this can set up issues to be challenged at a preliminary stage and which probably need to be determined by the court before any sensible settlement discussion can take place. For example:
An obvious but important point is that all cartel claims brought in the UK to date have at some point settled. It was left very late in the Cooper Tire and National Grid cases, but many more cases have been settled on a confidential basis in the meantime and we have not seen any cartel case end with a judgment. In Cooper Tire there were a series of bilateral settlements over the course of the case whereas in the National Grid case there was a group settlement.
In terms of the timing of any settlement in future cases, the removal of the procedural obstacles and the move more quickly to substantive issues sets up an obvious dynamic, which is to explore settlement opportunities while the EU court appeal is pending – notwithstanding that some defendants will always be reluctant to settle while there is a chance that the infringement decision will be overturned. This means a without prejudice track developing in parallel with the litigation to advance both sides’ understanding of the underlying merits of the case and the scope for settlement at a relatively early stage.
Balanced against the prospect of the litigation being stayed for years pending the outcome of the EU appeal process is the fact that interest and costs will continue to mount over that period. The timing of any settlement has consequences for third party funding, after-the-event (ATE) insurance and for lawyers on conditional fee arrangements. So while delaying the case might work to undermine the claimant’s resolve and ultimately lower the settlement payment in the without prejudice discussions, it also creates ever greater obstacles to settle.
On the defendant side, for those companies looking for a way to reach a final resolution to otherwise protracted and costly litigation, there may be appetite to explore the Competition and Markets Authority's voluntary redress scheme – or perhaps a less rigid version of it.20
The Consumer Rights Act 2015 entered into force on 1 October 2015 together with new rules of procedure for the Competition Appeals Tribunal (CAT) (CAT Rules 2015).
While the most striking feature of the Act is the new procedure for representative litigants to apply to the CAT to bring claims on an “opt-out” basis on behalf of claimants,21 the Act has also removed a number of limitations on the jurisdiction of the CAT which will have significant implications. For example, the CAT will be able to hear stand-alone claims and applications for injunctions for the first time, which may well result in the CAT becoming the forum of choice for damages claims in the UK rather than the High Court - particularly in circumstances where the CAT has been granted wide discretion and has the opportunity to apply procedural rules in a more liberal way than the High Court.
Some of the key changes to the CAT Rules 2015 are set out in summary below:
The effect of the combination of these procedural changes, together with the new UK class action regime, remains untested and there will be a large number of open points which need to be determined. For example, the types of cases deemed suitable for an opt-out class action22 and for the fast-track procedure. It therefore seems likely that for the foreseeable future the new regime could bring us back to the "first phase" of cartel claims – characterised by substantial procedural issues and delays – until it beds down into a “steady state”. Only then will we know the extent to which cartel litigation in the UK has more in common with north America than the rest of the EU.
This article is based on the presentation given by Peter Scott at the Mlex Competition Litigation conference held in London on 24 September 2015.
In the first half of 2015, the General Court received only 376 new appeals, compared with 912 for all of 2014. These figures come at a time where the European Parliament is considering whether to conduct an overhaul of the system which will double the number of judges at the EU’s General Court.
Masterfoods Limited v HB Ice Cream Ltd  ECR I-11369.
Arkin v Borchard  EWHC 687 (Comm).
Crehan v. Inntrepreneur Pub Company  EWHC 1510 (Ch).
Cooper Tire and Rubber Company Europe Ltd and others v. Dow Deutschland Inc and others; Cooper Tire and Rubber Company and others v. Shell Chemicals UK Limited and others
National Grid Electricity Transmission Plc v ABB Ltd & others  EWHC 1326 (Ch), judgment of 12 June 2009
Provimi Ltd v. Roche Products Ltd and other actions  EWHC 961 (Comm).
OJ 2006 L353/54.
National Grid Electricity Transmission Plc v ABB Ltd & others  EWHC 1326 (Ch), judgment of 12 June 2009
Secretary of State for Health and others v Servier Laboratories Ltd and others,  EWHC 2761 (Ch), judgment of 12 October 2012
National Grid Electricity Transmission Plc v ABB Ltd & others  EWHC 1717 (Ch), judgment of 4 July 2011;  EWHC 869 (Ch), judgment of 4 April 2012;  EWHC 822 (Ch), judgment of 11 April 2013
Commission Opinion dated 22.12.2014 following a request by the High Court under Article 15(1) of Regulation 1/2003
Emerald Supplies Ltd v British Airways 
 EWHC 2295 (Ch).
Secretary of State and others v Servier Laboratories Ltd and others, judgment of 31 July 2014  EWHC 2720 (Ch).
Secretary of State for Health and others v Servier Laboratories Ltd and others and National Grid Electricity Transmission plc v ABB Limited and others,  EWCA Civ 1234, judgment of 22 October 2013
WM Morrison Supermarkets Plc and others v MasterCard Incorporated and others  EWHC 1071 (Comm)
WH Newson Holding v. IMI and others  EWHC 3680 (Ch)
See our article UK voluntary redress scheme – An alternative to litigation?
The class of claimants must be adequately defined and all claimants must have the same interests throughout the claim.
IMO 2020 is almost upon us. Readers are well aware of the impending switch to 0.5 percent fuel mandated by Annex VI of MARPOL which will cause an anticipated drop in HSFO demand, the potential hazards of new untested LSFO blends, the concerns around scrubber operations, the debate over open loop versus closed loop, and the myriad of other risks associated with the impending regulatory change.