1. Opt-out class action proposed for competition claims

On 24 April the government published its anticipated consultation on competition law private actions, including radical proposals for a new "opt-out" collective action for competition claims on behalf of both consumers and businesses in the Competition Appeal Tribunal (CAT).

Under an opt-out regime claims can be brought on behalf of a defined group, without the need to identify individual group members; all those who fall within the group will be bound by the result unless they actively opt out of the case. This is a significant departure from existing procedures for multi-party litigation in England and Wales, which generally require potential claimants to make a positive decision to opt in to the proceedings. (The one exception, for representative actions under Civil Procedure Rule (CPR) 19.6, is not widely used due to the strict test that applies, as confirmed by the Court of Appeal in the Emerald Supplies case - see e-bulletin.)

The consultation recognises concerns that an opt-out class action may encourage vexatious or unmeritorious claims, and the perceived "excesses" of the US class action model which is often alleged to encourage defendants to settle for large sums in order to avoid the cost of further litigation. The government believes these concerns can be addressed by various safeguards, including a thorough certification process, retention of the "loser pays" rule, and a continued prohibition on contingency fees in collective action cases. We therefore assume, though it is not stated expressly in the consultation, that such actions would be carved out from the proposals currently before Parliament to permit contingency fees, or "damages-based agreements", for civil litigation.

The government has made it clear that it does not support a generic collective redress mechanism which would apply to all sectors. However, if these proposals are successfully implemented for competition law claims, it may make it more likely that similar initiatives will be brought forward for other sectors. Click here for more detail on the proposals from our competition litigation group.  

  1. High Court finds that tribunal has power to award damages for breach of arbitration clause in West Tankers case

The court has found that the majority of the arbitral tribunal was wrong to decline jurisdiction over a claim for equitable damages for breach of an obligation to arbitrate, in the latest decision in the long-running West Tankers dispute: West Tankers Inc v Allianz SPA & Generali Assicurazione Generali SPA [2012] EWHC 854 (Comm). The judgment leaves scope for a tribunal to award damages for a breach of an arbitration clause, or to grant an indemnity against any award made in parallel proceedings which exceeds the innocent party’s liability as established in the arbitration.

Subject to any appeal (for which permission has been granted) this case illustrates that a party facing parallel proceedings in breach of an arbitration agreement should consider amending its claim to include a claim for damages and/or a declaration for an indemnity as soon as the respondent brings parallel proceedings. Click here to read more about the decision on our arbitration blog.  

  1. Application of litigation privilege to competition investigations

In a ruling on 20 March, the Competition Appeal Tribunal has held that notes of third party witness interviews conducted by a party’s lawyers during an OFT investigation under the Competition Act 1998 were subject to litigation privilege under English law, as by the time the interviews took place the OFT’s investigation could be regarded as “sufficiently adversarial” to amount to litigation.

This is the first time the English courts have addressed the question of whether litigation privilege is available for competition investigations. The question is significant because this head of privilege offers protection for communications with third parties, unlike legal advice privilege which is restricted to lawyer / client communications. However, litigation privilege only applies when litigation is in reasonable contemplation, and for these purposes litigation means proceedings which are "adversarial” rather than investigative or inquisitorial. This line is not always easy to draw, and difficult questions can arise in the regulatory context as to whether a particular process gives rise to litigation privilege. It is therefore welcome to have some clarification of the position for competition investigations.

However, the ruling leaves a number of issues unresolved. The CAT considered whether the OFT’s investigation could properly be classified as adversarial at the particular time the witness interviews had taken place, by which point the OFT had issued two “Statements of Objections” alleging infringements of the Act and the appellant was contesting the OFT’s case. The CAT said it had deliberately framed the question in this manner to focus on the particular facts of this case and not wider questions of principle which were not raised in it. Therefore, although the ruling demonstrates that litigation privilege can arise in competition investigations, it remains untested whether the privilege will be available for all such investigations and at what stage it might arise in a given case. For more detail on the decision and its implications see our Competition, regulation and trade e-bulletin.

  1. No legal advice privilege for claims consultants

The High Court has confirmed that communications between a party and his construction claims consultants (in relation to a claim for extensions of time) were not subject to legal advice privilege: Walter Lilly and Company Limited v Mackay and DMW [2012] EWHC 649 (TCC). This was because the claims consultants had not been retained as solicitors or barristers, even if certain individuals dealing with the matter were qualified barristers.

The court applied the Court of Appeal decision in R (on the application of Prudential PLC) & Anor v Special Commissioner of Income Tax & Anor [2010] EWCA Civ 1094 confirming that legal advice privilege does not apply “in relation to any professional other than a qualified lawyer: a solicitor or barrister or an appropriately qualified foreign lawyer” (click here for more on that decision). Prudential’s appeal to the Supreme Court will be heard in November.

The judgment in Walter Lilly did not address litigation privilege, which applies where litigation is in reasonable prospect and (unlike legal advice privilege) can cover third party communications. It remains an open question whether advice and other communications from claims consultants may attract such privilege. The court noted that there was “little authority” on this issue, and policy issues might have to be considered if and when the question arose in another case.  

  1. MoJ's "Call for Evidence" re proposed Common European Sales Law

The Ministry of Justice has published a Call for Evidence in relation to the European Commission’s proposals for a Common European Sales Law (see here). The consultation is open until 21 May, and responses to it will help the UK government develop its position on the Commission’s proposals.

The government has always robustly challenged the need for an instrument such as the Common European Sales Law and has raised serious doubts about the legal basis on which the EU is pursuing it.  The foreword to the Call for Evidence indicates that the government is still not convinced that the benefits of the proposals will be as significant as the Commission claims and is concerned that there may be costs which should also be taken into account.  The MoJ is therefore seeking views on whether the Commission’s proposals would actually deliver the suggested gains and what the costs would be and would particularly welcome responses with supporting evidence and numerical data.

The Call for Evidence is split into two parts; the first part asks for views on the principle of a Common European Sales Law, its scope, its content and the impact that it will have.  The second part poses questions in relation to the actual drafting of the Common European Sales Law, such as whether the provisions provide sufficient clarity and certainty.  The MoJ has also published a checklist document which sets out a more detailed consideration of the potential impact of the proposed Common European Sales Law.