The Court of Appeal in Emerald Supplies Ltd and others v British Airways (2015) has struck out a significant portion of the claims in the on-going air cargo cartel damages litigation.  The claims, based on the "economic torts" of interference with business by unlawful means and unlawful means conspiracy, were struck out primarily on the basis that the Claimants could not show that BA had the requisite intention to injure.

Background

Emerald Supplies, a flower importer, and 564 other claimants (the "Claimants") have brought three separate types of claim against British Airways ("BA") arising out of an alleged global cartel between airlines to coordinate the pricing of air cargo services. The Claimants are all shippers of air freight which usually acquired these services indirectly via freight forwarders, which contracted directly with the airlines.  The claims "follow-on" from a decision of the European Commission in 2010 which found that BA and eleven other airlines had breached European competition law. This decision is currently being appealed before the European courts.

The claims against BA were originally based on the tort of breach of statutory duty relating to breaches of EU competition law (Article 101 Treaty on the Functioning of the European Union and/or Article 53 of the Agreement on the EEA), but this was subsequently expanded to include two common law torts: i) the interference with business by unlawful means and ii) unlawful means conspiracy (the "economic torts").  The effect of these economic tort claims was to expand the scope of the claim to cover alleged cartel behaviour which falls outside the jurisdiction of EU competition law, such as flights between non-EU-EEA countries.  It is estimated that around 60% of the damages claimed concern such routes.

BA applied to strike out the economic tort claims, on the grounds that the Claimants could not establish that BA intended to injure the Claimants, which is an essential component of both economic torts.  Peter Smith J refused the application, adjourning it until after disclosure had taken place.  He held that the question of intention was heavily fact-sensitive and could not be decided until disclosure had taken place.  BA and a number of other airlines appealed Peter Smith J's decision.

Decision

The Court of Appeal considered the scope of the economic torts, and focused in particular on the requirement in both that the defendant must have an intention to injure the claimants.  The Court referred to the judgment of the House of Lords in OBG v Allen (2007) which held that actual intention to harm the claimant must be a cause of the defendant's conduct.  It must be distinguished from foresight that a course of conduct would probably harm the claimant.  The Court also considered Newson Holding v IMI Plc (2013), a recent judgment of the Court of Appeal in a cartel damages case.  It was held in Newson that the intention of the cartelists "to make a profit at the expense of a class of persons to whom the wrongful acts were targeted", regardless of whether they were direct or indirect customers, was not sufficient intention to satisfy the requirements of the economic torts. 

In this case, the Claimants are mostly indirect purchasers of air freight services through freight forwarders.  The Claimants sell on to their own customers, such as manufacturers and distributors.  The Court of Appeal held that if it is established that BA was part of a cartel to increase prices, BA may have charged the freight forwarders more, but it could not have known whether the freight forwarders would pass on this cost to the Claimants, or whether the Claimants would themselves pass on this increased cost to their own customers.  The Court held that the possibility of pass-on is central to the question of intent, and that "an intention to harm the claimant cannot properly or sensibly be described as a cause of the defendant's conduct if the defendant is not even sure that the claimant will suffer loss at all."  The conclusion of the Court of Appeal was that the airlines had no intention of harming any specific class within the supply chain and that indifference to where the loss falls, or knowledge that part of the supply chain will absorb the cost, is not enough to demonstrate the required intent.

It is not sufficient to say that the alleged cartelists must have intended to injure anyone in the supply chain, down to the ultimate consumers, as this would open up "an unknown and unknowable range of potential claimants" and as a result there could be no intent to injure a particular claimant. 

The Court of Appeal held that the issue of intention was not fact-sensitive and should not be delayed until after disclosure.  It therefore upheld the appeal and ordered that the economic tort claims be struck out.

Comment

The decision of the Court of Appeal, following on from its similar judgment in Newson, has important implications for the scope of cartel damages claims brought in the English High Court.  This judgment appears to limit (subject to any appeal to the Supreme Court) the ability of claimants to bring cartel damages claims on the basis of the economic torts and limits the ability of claimants to widen the scope of such claims beyond a claim based upon breaches of statutory duty.  It is unlikely that a claimant will be able to show the requisite intention to injure a specific part of a supply chain, given the possibility of passing-on in most circumstances.  As a result this limits claimants' ability to use these torts to recover losses in relation to cartel behaviour which is not caught by UK or EU competition law (although they may still bring claims in the English courts based directly on the breach of foreign competition laws).