Three new judgments of the Court of Appeal are likely to expand the scope for competition damages claims to be brought in England, as follows:
- Deutsche Bahn AG & Ors v Morgan Crucible Company plc & Ors (today) broadens the scope to rely on the "place of harm" as the basis for English jurisdiction - creating greater exposure for non-UK domiciled corporates;
- Ryanair Ltd v Esso Italian Srl (yesterday) although a defeat for the claimant in this case, reduces the scope to rely on contractual choice of forum clauses to avoid English jurisdiction for competition damages claims; and
- WH Newson Holding Ltd & Ors v IMI Plc & Ors (last week) points to a willingness to give a broad definition to "competition" claims for the purposes of rules specific to such claims.
Beyond their immediate impact, all the decisions have a particular significance in the context of proposed reforms to introduce opt-out collective actions in the Competition Appeal Tribunal ("CAT"), as discussed below.
Brief summary of the judgments
The Deutsche Bahn decision is the latest instalment in three years of litigation seeking damages flowing from the electrical and mechanical carbon and graphite products cartel, the subject of a Commission decision in 2003. The latest decision concerns the issue of jurisdiction.
The claimants had sought to sue a UK-domiciled party in order to get jurisdiction for all their claims in the English courts but failed in their attempt to do so because it was held that their claim was out of time given certain peculiarities of the CAT rules. That decision is currently on appeal to the UK Supreme Court, due to be heard in March 2014, but the claimants have meanwhile argued that the CAT could have jurisdiction over some of the claims anyway on the basis that purchases by UK claimants of goods ultimately sourced from non-UK domiciled defendants gave rise to harm within England allowing the CAT to seize jurisdiction on the basis of Article 5(3) of the Brussels Regulation. Article 5(3) is an exception to the default rule allocating jurisdiction on the basis of the defendant's domicile; it allows a court to take jurisdiction for tortious claims where the harm occurred in the relevant jurisdiction or where the acts giving rise to the harm occurred in the jurisdiction. The Court of Appeal has now refused permission to appeal the decision of the CAT that this is a sufficient basis for the CAT to have jurisdiction in this case.
The Ryanair case involved a novel attempt by the airline to sue in the English courts for damages caused by an Italian air fuel cartel. It argued that it had a contractual claim against its supplier arising from the cartel and that its English jurisdiction clause was broad enough to cover that contractual claim and any associated breach of statutory duty tortious claim (even in relation to losses arising from its purchases from other suppliers). This argument was accepted in the High Court but rejected by the Court of Appeal. The Court of Appeal concluded that there was no contractual claim and that the jurisdiction clause was not broad enough to cover the tortious claims. In so doing, the Court of Appeal gave a clear steer that such tortious claims would rarely be caught by contractual jurisdiction clauses.
The WH Newson case is a claim for damages arising out of the copper tubes cartel. The appeal concerned an attempt by the claimants to plead their case on the basis of the tort of conspiracy as well as breach of statutory duty. Conspiracy potentially allows a more generous measure of damages. The Court of Appeal has agreed that a conspiracy claim can be considered a "follow on" action within the relevant provision giving the CAT jurisdiction to hear damages claims but concluded on the facts of this case that the decision in question did not establish the ingredients necessary for bringing a conspiracy claim.
Implications for potential claimants and defendants
Two out of the three judgments stem from much-criticised peculiarities of the CAT rules. The Deutsche Bahn claimants only failed in their original attempt to sue the UK subsidiary because of CAT-specific rules on limitation. The WH Newson claimants only failed in their attempt to plead conspiracy because the "follow on" nature of their claim limited them to the facts established in the Commission decision. The Government has announced proposals to change these elements of the CAT rules so these issues are unlikely to be directly relevant for long - though there probably will still be some further claims initiated under the old rules before the new rules come into force.
The more interesting implications of Deutsche Bahn and WH Newson are in relation to the associated Government proposals to introduce opt-in and opt-out collective actions in the CAT. In brief:
- More exposure to opt-out collective actions for non-UK domiciled defendants - The Deutsche Bahn decision implies that an opt-out collective action could be brought in relation to all UK sales of the allegedly cartelised product even if none of the alleged cartelists have any UK domiciled entities in their corporate groups and even if the UK purchases were made indirectly through third parties (the defendant never having made any direct sales to the UK).
- A less restrictive interpretation of competition claims - The Government has sought to quell concerns over the new collective actions by saying they will be limited to competition claims, but practitioners have pointed out that there is not necessarily a universally-accepted definition of what is a competition claim. The WH Newson decision provides one example of how the definition may expand. Thus, for example, it may become easier to characterise LIBOR claims or claims for periods predating the Competition Act as competition claims within the collective actions regime.
The UK reform proposals are awaiting comment from a parliamentary committee and are expected to formally enter the legislative process before May 2014 with a view to becoming law before the end of 2014.
Application of Article 5(3) of the Brussels Regulation to cartel damages claims, the subject of the Deutsche Bahn case, is also the subject of one of the questions referred to the Court of Justice of the European Union in a German competition damages case. We may therefore get further clarification in due course, albeit probably not before 2015.
The Ryanair decision is interesting both for claims now and after the proposed reforms take effect. An earlier first instance decision in Provimi Ltd v. Roche Products Ltd had already suggested it would be difficult for defendants to escape the jurisdiction of the English courts by relying on contractual jurisdiction clauses specifying foreign courts. In the meantime, however, there was a House of Lords decision that suggested that choice of forum clauses should be given a much broader scope. Ryanair has now provided appellate court support for the earlier Provimi views on jurisdiction clauses.
Apart from the immediate impact on claims, Ryanair also has a significance for future collective actions as it will make it harder for defendants to resist certification on the basis that different choice of forum clauses require a splitting of the claims between different jurisdictions.
It is still possible, though, that arbitration clauses may be given a broader scope as there are additional policy reasons for doing so. For those involved in drafting contracts the message (as always) is to be very clear. The claimants in Ryanair would at least have been able to maintain their contractual claims in England if their contract had simply included an obligation on the supplier not to participate in a cartel or other anti-competitive conduct. Of course, hindsight is always twenty/twenty…