Summary: The High Court has ruled on the law applicable to claims brought by German railway operator Deutsche Bahn and six other claimants against MasterCard following on from the European Commission's decision finding MasterCard’s interchange fee arrangements to be anti-competitive. As the first judgment focusing on applicable law in competition damages actions, the court’s findings have significant consequences for other future and current private damages actions in the UK courts.
This case is the latest judgment in a long line of claims brought by retailers and other claimants against MasterCard, relying on the European Commission’s decision of 19 December 2007 in COMP/34.579 MasterCard in which it found that multilateral interchange fees set by MasterCard resulted in higher fees being charged between acquiring banks. Had those fees been lower, merchants and subsequent purchasers would ultimately have benefitted. MasterCard unsuccessfully appealed the decision to the General Court and to the Court of Justice. This particular claim is a damages action brought by Deutsche Bahn and six other claimants against MasterCard, seeking damages for overcharges paid on interchange fees from 22 May 1992 to date.
The facts of this particular case are perhaps less important than the legal principles which are articulated in the court’s judgment. As such, they are explained only briefly here and only in as far as they are relevant to determination of the applicable law.
The issue to be determined by the court was what the law applicable to the claimants’ claims were, in circumstances where the claimants operate in 18 different European countries whilst the defendant’s anticompetitive conduct was argued, by the claimants, to have occurred predominantly in Belgium. In summary: Is Belgian law applicable to the claim or do multiple laws apply – each to a different part of the claim – based on each claimant’s place of operation?
The law applicable to cartel damages claims is of significant importance because different applicable laws carry different limitation periods. A defendant may therefore be able to defeat claims if they can establish that the applicable law is one with a shorter limitation period than the law contended by the claimants – in this case the claimants argued Belgian law.
The court’s analysis
The very nature of cartel damages claims leads to a complex position on applicable law. As anticompetitive conduct is often long running and, by the time it has been investigated and the relevant competition authority has made an infringement finding, historic, the legal basis for actually determining the law applicable to the claim has often changed during the course of the anticompetitive conduct. Indeed, in this case, three different legal regimes governed different periods of the claim.
The period 11 January 2009 to date
All transactions entered into during this period were governed by Article 6(3) of E.U. Regulation 864/2007/EC (“Rome II”). The court’s analysis of the law applicable to transactions undertaken during this time period was brief, given that Rome II is relatively clear in setting out the legal test to be applied.
The parties were in agreement that the law applicable to those transactions, that is the country “where the market is, or is likely to be, affected”, is the country in which the claimant was based at the time the transaction took place. Therefore, for example, claims by organisations based in Germany would be governed by German law and claims by organisations based in Switzerland would be governed by Swiss law.
The period 1 May 1996 to 10 January 2009
The court’s analysis of transactions undertaken during this period is of the most significance for other current and future cartel damages claims and is determined by the Private International (Miscellaneous Provisions) Act 1995 (the “1995 Act”). Contrary to the relatively straightforward test set out in Rome II, the legal test under s.11 of the 1995 Act involves a weighing up of different aspects of the tort to determine “the country in which the most significant event or elements of those events occurred”.
It was on the issue of what events constitute the most significant element of the tort that the parties disagreed and the perhaps the court’s most important findings were made. The claimants argued that MasterCard set its anticompetitive interchange fees in Belgium and, therefore, the anticompetitive conduct (and therefore the tort) was actually committed in Belgium. They contended that, as a result, Belgian law applied to all of the claimants’ claims during this period. The defendants disputed this argument on the facts, arguing that the relevant interchange fees from 25 May 2006 onwards were actually set in the U.S. (a position which the court, on the facts, agreed with). However, MasterCard also argued that the location of the meetings during which the relevant interchange fees were set was not the most important element of the tort and, as such, it did not follow that Belgian law would govern the transactions during this period even if the interchange fees were indeed set there.
Mr Justice Barling distinguished competition damages actions from other tort cases, holding that the most important element of the tort is the restriction of competition on a market (as opposed to the location where the anticompetitive conduct took place, or where the claimant suffered the loss). As competition occurs on a given market, the court held that the law applicable to the transactions during this period is that of the relevant market on which the relevant transactions took place. On the facts of this case, it was not in dispute between the parties that the relevant markets were national in scope. Therefore, for example, transactions entered into in Germany during this period are governed by German law and transactions entered into in Switzerland are governed by Swiss law.
The period 22 May 1992 to 30 April 1996
The court’s determination of the applicable law governing transactions during this period is potentially of less practical importance than its determination in respect of transactions governed by the 1995 Act, as most cartels that have been the subject of recent infringement decisions do not extend back as far as prior to 1 May 1996. It will therefore be discussed only briefly here.
The applicable law pertaining to these transactions is determined by the common law choice of law rules that were in force prior to the 1995 Act. Applying the “double actionability” rule (a claim can only succeed if the tort committed in a foreign jurisdiction would be actionable under both the laws of that foreign jurisdiction and under English law), the court held that the claimants must satisfy the limitation rules of both English law and the law of the jurisdiction where the anticompetitive conduct was committed. The court held, consistently with its analysis of the relevant place where the tort occurred under the 1995 Act, that the jurisdiction where the anticompetitive conduct was committed was the country in which competition was restricted.
Conclusions and consequences
The court’s judgment in this case gives important guidance on an area of considerable debate in competition damages actions. Claimants and defendants in such actions frequently lock horns over what constitutes the location of the most significant element of the tort, for the purposes of determining applicable law under the 1995 Act. Is it the location in which the loss was suffered by the claimant or the location of cartel meetings? This judgment now takes a strong view on these issues and finds that the most important aspect of the tort for determining the applicable law under the 1995 Act is the restriction of competition on a market. The law of the location of that market is therefore applicable.
It is, at present, unclear whether the claimants will appeal this judgment. On the assumption that this judgment is not overturned, it will have a significant impact on current and future competition damages actions in which the applicable law is in dispute between the parties.
This case is slightly unusual on its facts, as for the vast majority of the relevant period the anticompetitive conduct was concentrated in a single location (Belgium). Most cartel cases involve meetings in various jurisdictions across the EU. In this case, anticompetitive conduct was concentrated in a single location and the law of that single location was held not to constitute the applicable law of the claim. In a more usual scenario where cartel meetings have taken place across a range of different countries, it now appears even less likely that the law applicable to follow on claims will be determined by reference to where those meetings took place.