Today, 1 October 2015, marks the introduction of a major overhaul of the competition litigation regime in the UK, as the long anticipated competition provisions of the Consumer Rights Act 2015 (the “CRA”) come into force.
In preparation for these changes, on 8 September 2015, the government published revisions to the Competition Appeal Tribunal Rules (the “CAT Rules”).
The changes to the legislation seek to bolster the UK’s reputation as the primary choice of jurisdiction to bring private actions in competition law by improving procedural efficiency, broadening the scope of the CAT’s jurisdiction and introducing an opt-out collective actions procedure that is unprecedented in Europe. Below we provide a brief overview of the primary reforms to the UK’s competition litigation regime.
1. Collective (or “class”) actions
From today the UK will become the only EU country to allow “opt-out” collective
actions, allowing a representative to bring a claim on behalf of an entire class of members. Previously, collective actions could be brought on an “opt-in” basis only. Where the court permits an “opt out” collective action, claimants within a class will be automatically included unless they actively choose not to be. There will be no need for all individual claimants to be identified and damages can be awarded without assessing each class members’ individual claim.
The new CAT Rules provide a framework for how the CAT will regulate collective actions. The representative (who can either be a third party representative or a member of the class) has to be certified by the CAT, who will consider whether it is reasonable for the proposed representative to act for the class. There is currently little guidance as to the type of person or body that may be deemed a “just” choice of representative or what will happen in circumstances where there is more than one proposed representative for a particular class. Although there is no express prohibition against third party funders or law firms acting as representatives, such a prohibition was considered as part of the consultation process and it is to be expected that the motivation of any third party funder (or similar body) would be closely scrutinised by the CAT before authorisation.
If the CAT deems the action suitable for an opt-out class action, it will certify the action by way of a Collective Proceedings Order.
It will be interesting to see how popular the new class actions are and how many claims are launched in the forthcoming weeks and months. A key issue for many prospective claimants will be the difficulties around funding; although any unclaimed funds collected can be used to cover the representative’s costs, there is a prohibition on the use of any sort of damages based agreements (where the claimant representative or its advisers are entitled to a percentage of any damages received from the defendants) in opt-out actions, and the CAT retains significant discretion as to the level of damages that are awarded. It is likely that the chosen representative will seek to use third party funders but the extent to which the funding arrangement (which would usually allow for the funder to receive a share in the damages at the conclusion of the action) will be subject to scrutiny by the CAT remains to be seen. Opt-out class actions in the USA have thrived on the basis that funders and representative claimants may be entitled to the (often large) residue of the damages which are not claimed by the individuals and corporate entities who potentially form part of the class. However, the CAT will have a wide margin of discretion and may rather exercise this discretion to award all or part of the residue monies to charity.
2. Procedural Revisions
Doubtless partly to arm the CAT for the likely increase in volume and diversity of cases brought before it and to equip it to manage cases effectively, the CAT’s case management arm has been significantly strengthened and procedure in the CAT has been streamlined.
Notable procedural revisions include:
- Increased jurisdiction to hear stand-alone claims (where the claimant needs to prove liability) in respect of alleged infringements of competition law. Previously, the CAT could only hear claims in respect of pre-existing infringement decisions (so called “follow-on” actions) which meant that stand-alone claims had to be brought in the High Court.
- Provision for the CAT to have the same power as the High Court to grant injunctions.
- Changes to the limitation period to align the CAT with the High Court, i.e. 6 years from the date the cause of action accrued unless there was concealment (albeit subject to transitional arrangements, which in practice may mean that certain claims are still subject to the old CAT rules on limitation for the foreseeable future).
- A fast track procedure intended to provide faster less costly means of redress for SME’s and consumers.
- The inclusion of a new ground of strike-out where the CAT has no jurisdiction.
- Detailed disclosure provisions which will allow pre-action disclosure where proportionate.
- A settlement procedure modelled on the Part 36 settlement procedure in the Civil Procedure Rules.