British Airways has attended a High Court hearing with the aim of preventing around 180 new claimants from joining an existing action brought against the airline in relation to its involvement in an alleged air cargo cartel. If allowed, a representative action such as this is likely to have important repercussions both for other airlines and for representative actions in the UK and beyond.
The initial claim was lodged last autumn by Emerald Supplies Ltd and Southern Glass House Produce Ltd, both cut-flower wholesalers based in the south of England. The claimants imported flowers from Colombia and Kenya and allege that they suffered loss between 1999 and 2006 as a result of the cartel due to inflated prices, a decrease in sales volume, and ultimately damage to their brands. The claimants are seeking damages and interest.
The potential 180 new claimants are thought to include companies in the same sector, as well as direct and indirect purchasers from sectors such as the engineering industry. British Airways has stated that 150 of those seeking to join the proceedings are subsidiaries of the same group, Dana Holding, a supplier of engineering parts.
Representative actions in the UK
In the US, class actions allow a named claimant to bring a claim on behalf of a class of unnamed claimants, where individuals must opt-out in order not to be bound by the outcome of the class action. An equivalent system does not exist in the UK. Nevertheless, in the UK there are certain procedural mechanisms which can be used to allow a group of claimants to bring a group action, although in contrast to the US, these generally operate on an “opt-in” rather than an “opt-out” basis.
- A representative action may be brought by, or against, parties that have the “same interest” in every part of a claim. A judgment given in a representative action is binding on all the parties represented in the claim (and may, with permission, apply to non-parties). The legal basis for this is set out in part 19.6 of the Civil Procedure Rules (CPR). Traditionally, this has been a relatively uncommon way of bringing a group action, as the “same interest” test is difficult to satisfy.
- Group Litigation Orders (GLO’s) were introduced to deal with problems encountered in bringing representative actions and the test for inclusion is broader. A GLO is an order by the court allowing for the case management of multiple claims which involve common issues of law and fact. The legal basis for this is part 19.11 of the CPR.
- In addition, the Enterprise Act 2003 makes it possible for “specified bodies” to bring proceedings before the Competition Appeal Tribunal on behalf of two or more consumers for damages. Which? (formerly the Consumer Association) was granted specified body status in 2005 enabling it to bring representative actions and is currently is the only recognised “specified body” capable of bringing representative actions.
The claimants are seeking to rely on part 19.6 CPR and have put forward arguments supporting the view that there are “elements common to the claims” of the potential new claimants, which are sufficient to satisfy the “same interest” requirement. They argue that the new claimants will include purchasers of airfreight services either directly from British Airways (or other airlines involved in the cartel) or indirectly through a freightforwarder.
Conversely, British Airways is seeking to demonstrate that the additional parties do not have the “same interest” as the two lead claimants and are arguing that the term “same interest” should be narrowly interpreted. In support of their argument, British Airways have sought to highlight potential difficulties in clarifying the scope of the extended claim and have questioned where the line should be drawn in admitting new claimants who could potentially extend all along the distribution chain and across an almost limitless range of products.
In seeking to undermine the idea that the claimants all pursue the “same interest”, British Airways has pointed to an inherent conflict of interests among the extended group of claimants. This conflict allegedly arises from the fact that the claimants derive from different levels of the distribution chain, therefore some will have passed on the suspected cartel overcharge, while others will have absorbed it.
The judge raised the issue of a scenario where a party, unaware that he falls within the class of claimants, later discovers the fact and wishes to lodge a claim at some point in the future, unaware that the case has already been litigated. The claimants pointed out that there were still unresolved policy issues throughout Europe and the US but which do not in themselves prevent group litigation.
If British Airways are found to have participated in the cartel, they will be held jointly and severally liable for all those suspected of being active in the price-fixing ring which includes, amongst others, Lufthansa, Qantas, Air France-KLM of SAS Cargo. If the judge allows this application, it could potentially make it easier for claimants to join proceedings in the future and reduce the costs associated with lodging a separate action. It has also been argued that purchasers outside of the UK would also have grounds for a claim.
If, on the other hand, the application is refused, British Airways will have avoided potentially huge costs. Perhaps more significantly, the “same interest” test will remain a significant hurdle to overcome for those seeking redress through the courts.
A changing legal landscape?
A move towards the increased use of group actions in the UK would be indicative, not only of the increased trend of private damages actions for breaches of UK or EU competition rules but also of a shift towards a more claimant-friendly forum. Indeed, the Office of Fair Trading has signalled its support for representative actions, and the Civil Justice Council and the European Commission have also been considering the merits of a universal opt-out approach towards group actions.
However, there are still hurdles to be overcome before representative actions can be said to be part of the UK culture. Which? launched the first-ever representative action against JJB Sports bringing a claim for damages before the Competition Appeal Tribunal on behalf of – only - 130 consumers following the price fixing of replica football shirts. At the time many commentators thought such action would be the first of many involving damages for cartel activity for consumer goods, but Which? struggled to find consumers willing to join the action, despite the case being relatively high profile. Which? eventually agreed to settle out of court with JJB Sports, after the retailer agreed to pay up to £20 each for the affected England and Manchester United shirts bought between 2000 and 2001.