In this article, Jeremy Robinson, Senior Associate in Bird & Bird’s International Competition Group, considers how the fight against cartels will be affected by today’s rulings in the House of Lords.
Ian Norris, former Chief Executive of Morgan Crucible, will have a further opportunity to fight extradition to the United States. Mr Norris, who is wanted by the US for his alleged participation in a price-fixing conspiracy, has been resisting extradition for five years.
Mr Norris had to take his fight all the way to the House of Lords. After the High Court's ruling last year, nothing short of a reversal of at least one of its major findings would have kept Mr Norris in the country. And yet this is precisely what happened.
The US Government had to show that cartel behaviour was at the relevant time an offence in the UK as well as the US in order to seek extradition. It had argued that before 20 June 2003 (when the Enterprise Act cartel offence into effect), price-fixing was still a crime at common law in the United Kingdom and could be charged as conspiracy to defraud. This argument had developed intellectual respectability after an article in 2005 by Leading Counsel had reviewed over a century of case law to conclude that price-fixing could be so charged.
This was a question of such fundamental importance, not merely for Mr Norris, but also for the individuals charged with conspiracy to defraud for their participation in price-fixing generic drugs supplied to the NHS. This is a case in which five companies and nine individuals (who were at the relevant times employees or directors of these companies) are being prosecuted by the Serious Fraud Office for conspiracy to defraud the Secretary of State for Health and others by fixing and maintaining the price, and manipulating the supply, of certain drugs.
Today, the House of Lords ruled that price-fixing was not a crime in the United Kingdom before 20 June 2003, when the Enterprise Act cartel offence came into force. It could not be said that the act of price-fixing was itself inherently fraudulent: rather, price-fixing could not be conspiracy to defraud unless there were an extra element of fraud or deception. This has two consequences for these cases.
First, since the act for which Mr Norris is wanted in the US took place before the cartel offence of the Enterprise Act came into force, the US Government relied on the argument that price-fixing in itself was conspiracy to defraud before then. Their Lordships’ ruling rejected this argument. Therefore the only basis on which Mr Norris can now be extradited to the US is for his alleged obstruction of justice which is criminal in essence in both the US and the UK. At the moment, the extradition of Mr Norris is on hold, whilst the case is remitted to a District Judge to consider Mr Norris’s human rights arguments.
Secondly, if a prosecution is to proceed against the individuals in the NHS price-fixing case, the indictment must be redrafted so that it makes clear that what is being charged as conspiracy to defraud is not the price-fixing itself, but the fact that the Defendants had made false statements to the authorities about their activities, thus falling within the exception identified in the Norris case (paragraph 63) that there had to be an additional element for it to be criminal.
Cartels are inherently unstable: many collapse before they are uncovered. Cartel enforcement is designed to make them more unstable, with a combination of carrots (leniency, immunity, possibility of settlement) and sticks (fines, damages, director disqualification, criminality – including extradition to the US). For the UK and the US authorities, the possibility of imposing criminal penalties is considered to be a major weapon in the fight against cartels. In the UK, the prospect of businessmen being extradited to the US provokes a very real fear. But competition authorities also need good publicity of effective enforcement, to communicate to cartelists the risks of their actions.
On the one hand, today’s ruling suggests that the competition authorities have suffered a major blow. Britain’s cartelists of yesteryear will be able to stay in the country. But cartelists today and tomorrow are not so safe. First, if a cartelist is wanted in the US for activities after 20 June 2003, in circumstances where the act would fall within the Enterprise Act cartel offence, there is no reason why the US Government could not have the cartelist extradited to the US. Secondly, even for historic cartels, the act of obstruction of justice meets the necessary “dual criminality” feature of the Extradition Act for extradition to take place.
Other than these specific examples, we may question how much practical effect these rulings will have. For conspiracy to defraud, the number of cases where cartelists not only engage in price-fixing activity, but also go on record denying anything of the sort, may be very few.
It is true that in government procurements, participants are often required to confirm officially that they have not colluded with competitors in the preparation of their tenders. But whether there is blatant evidence of this additional degree of deception may be open to doubt if the authorities have not already brought prosecutions for other frauds taking place before June 2003.
Finally, today’s rulings do not affect the ongoing fight against criminal cartels using the Enterprise Act. Nor will it affect future extradition in the case of price-fixing cases dating from after June 2003.