The Court of Appeal last week upheld the decision of the High Court in the Devenish Nutrition "follow-on" damages action arising from the European Commission's vitamins cartel decision of 2001. The Court of Appeal held that restitutionary remedies are not generally available as damages by victims of cartels and that compensatory remedies are an adequate means of redress.

Background

The case, Devenish Nutrition Ltd v Sanofi-Aventis SA (France) & Ors [2008] EWCA Civ 1086, concerns a "follow-on" damages claim arising from the European Commission's vitamins cartel decision of 2001. In that decision, the Commission found that various vitamin manufacturers had been involved in eight different worldwide cartels, each relating to sales quota allocations and agreements in relation to prices, in breach of Article 81 of the EC Treaty. The Commission initially imposed fines of €855.22 million, however this figure was subsequently reduced by just under €60 million following a successful appeal by BASF.

The claimants in the High Court action had purchased, directly or indirectly, vitamins from one or more of the manufacturers fined by the Commission during the period in which the breaches took place. The High Court was asked to consider, as a preliminary issue, whether exemplary (punitive) damages or restitutionary remedies, such as an account of the profits of the infringing parties, were available as an alternative to a claim for compensatory damages.

High Court decision

The High Court delivered its decision in October 2007. Mr Justice Lewison concluded that the claimants were not entitled to either exemplary damages or restitutionary remedies, although it was common ground that the claimants would be entitled to compensatory damages (i.e. in respect of harm actually suffered).

The High Court found that the imposition of fines by the Commission precluded the award of exemplary damages under the principle of double jeopardy, as both serve the purpose of punishing and deterring anti-competitive behaviour (even if fines have been reduced or commuted through a leniency programme). Inflicting a further punishment would also "run counter" to the decision of the Commission, and therefore offend Article 16 of the Modernisation Regulation (1/2003/EC).

The High Court also found that the claims for restitutionary damages, in particular an account of profits, were not available remedies in anti-trust cases. Devenish appealed this aspect of the judgment to the Court of Appeal.

Court of Appeal decision

The Court of Appeal unanimously dismissed the appeal. The leading judgment was given by Lady Justice Arden.

The Court of Appeal upheld the first instance finding that restitutionary remedies are not generally available for claims in tort, other than proprietary torts. This did not include a claim for breach of statutory duty, which was the basis of Devenish's antitrust claim.

This is subject to the exception in Attorney General v Blake [2001] AC 268. However, the Court of Appeal held that the "exceptional circumstances" of the Blake case did not apply to Devenish's claim, nor did Devenish face any "relevantly exceptional difficulty" in proving its losses on a conventional, compensatory basis. The Court of Appeal noted that "an account of profits is available only where it is necessary to do justice in the case", which test was not satisfied where damages were an adequate remedy.

Importantly, the difficulties that Devenish said it would face in seeking to prove its losses caused by the cartel (not least, in proving that it had not "passed-on" the overcharge to its own customers) were not held to be sufficient reason to justify a restitutionary remedy. (The Court of Appeal left open the question of whether an account of profits could be ordered where a claim for damages cannot be proven due to evidential difficulties which are not the responsibility of the claimant.)

The Court of Appeal also held that European Community law did not prevent a claim for a restitutionary remedy, but neither was such a remedy required to meet the principle of effectiveness. The Court of Appeal declined the invitation to refer this issue to the European Court of Justice, at least while the domestic appeal process had not been exhausted.

Commentary

The approach taken by the Court of Appeal is consistent with existing case law and indeed the reforms currently being advocated to encourage more private actions for breaches of competition law. In particular, the approach chimes with the calls from the Commission in its April 2008 White Paper ("Damages actions for breach of the EC antitrust rules") for "full compensation" for harm suffered.

The Court of Appeal declined the invitation to institute a new regime of "gains-based damages" for antitrust claims in order to pursue a policy objective to encourage private actions. Lord Justice Longmore expressed the view that it was not for the courts to take this step on their own initiative, which circumspection is even more understandable when there are so many other policy-makers actively considering reform in this area.

While claimants will be disappointed that their range of options remains limited by this decision, the focus on compensation for actual harm suffered does retain credibility when contrasted with claimants who might otherwise be tempted to pursue claims for an account of profits having themselves already passed-on the effect of the overcharge to their own downstream customers. It is understood that Devenish is considering an appeal to the House of Lords.