December 14, 2012
In the last few weeks, two judgments of the Court of Appeal of England & Wales and the U.K. Supreme Court have addressed key issues that arise when litigating cartel damages claims in the U.K.’s specialised Competition Appeal Tribunal (CAT). (See BCL Old Co Ltd & Ors v. BASF plc & Ors  UKSC 45, judgment of the Supreme Court of October 24, 2012, and Emerson Electric Co & Ors v. Mersen UK Portslade Ltd  EWCA Civ 159, judgment of the Court of Appeal of November 28, 2012.)
In the U.K., cartel damages actions can be brought in either the High Court or the CAT. Despite the fact that the CAT has been empowered to hear damages claims for a number of years, there are certain fundamental issues regarding its proceedings that have remained unclear, including the time period within which proceedings must be commenced and the identity of the defendants that may be sued. This uncertainty has tended to undermine the attractiveness of the CAT as a forum for litigating cartel damages cases. While the recent judgments bring much-needed clarity, they also confirm that important limitations remain regarding the CAT’s ability to hear cartel damages claims.
Time limits for bringing claims
In the first case, BCL Old Co Ltd & Ors v. BASF plc & Ors  UKSC 45, judgment of the Supreme Court of October 24, 2012, the Supreme Court considered the time limit within which claims must be brought in the CAT. The appeal was commenced by a number of purchasers of vitamins, each of which alleged damages arising from defendant BASF’s participation in the vitamins cartel that had been the subject of a European Commission infringement decision in 2001 (Case COMP/37.512 – Vitamins, Commission decision dated November 21, 2001). The original actions against BASF were under section 47A of the Competition Act 1998, which permits damages claims to be brought in the CAT, where a regulator has already found that a competition law infringement was committed by the defendant. However, the Court of Appeal held that those claims were time-barred, because an appeal brought by BASF against the Commission’s decision did not extend the time for bringing a claim.
Under the CAT’s Rule 31(2), a claim must be brought within two years after the later of the time when the cause of action accrues, any right to appeal expires, or any appeals are finally determined. In 2009, the Court of Appeal held that the two-year period for bringing claims was suspended only by appeals as to the finding of infringement, and not by appeals only as to the level of fine. BASF’s appeal related only to the amount of fine imposed by the Commission, and therefore the claims had expired in January 2004, four years before the claims were brought in 2008. The claimants also sought permission from the CAT to extend the time within which to bring the claims, but the Court of Appeal held in 2010 that the CAT did not have jurisdiction to grant the extension.
On appeal to the Supreme Court, the claimants argued that the difficulty in determining the applicable limitation period, and the absence of any discretion to extend that time, created significant legal uncertainty and made it excessively difficult for the claimants to exercise their EU law right to seek damages for breach of competition law, thereby undermining the effectiveness of this right contrary to EU law.
The Supreme Court disagreed, finding that it was not necessary for the law to provide absolute certainty and that it was sufficiently foreseeable that the law might be interpreted as it ultimately had been on appeal. The Supreme Court considered that the relevant legislation made sufficiently clear distinctions between decisions establishing an infringement and decisions imposing penalties (and thus, as regards the different impact of appeals concerning those different decisions), and further considered that it was inconceivable that the procedural rules on the extension of time in existing proceedings could be applied to extend the time for bringing new proceedings.
The legal position of the claimants should therefore have been sufficiently clear to them, and to the extent that there was any uncertainty, it was open to the claimants to seek to protect their position by bringing the claims earlier (even if they may have needed to seek permission to bring the claims pending the ongoing appeals). In this circumstance, there had been no breach of EU law, because the limitation period was sufficiently clear, precise, and foreseeable such that it was not excessively difficult for the claimants to seek damages.
Interestingly, the Supreme Court held that this conclusion was not altered by either of two facts: (i) that a CAT judgment in 2007 had (while considering a different issue) incorrectly suggested that the two-year period would run from the end of any appeal and that the CAT would have power to extend the deadline, and (ii) that the CAT in the present case had originally held incorrectly that appeals as to the level of fine could extend the time for bringing a claim. These CAT decisions might be seen as an indication that the law was indeed uncertain – and the very fact that the Supreme Court granted permission to appeal the issue arguably indicates how much uncertainty had previously surrounded this question. Nevertheless, the Supreme Court noted simply that it was unfortunate that the CAT had arrived at conclusions that were subsequently held to be erroneous on appeal and that this reflected the ordinary operation of the appellate system rather than a lack of legal certainty that rendered the exercise of EU law rights excessively difficult.
The Supreme Court further held that even if the limitation rules had been so unclear that they undermined the effectiveness of the claimants’ rights under EU law, the fault would lie with the Member State for enacting rules in breach of EU law, rather than with the defendants. Thus even if the claimants were entitled to a remedy, it would be against the U.K. State and would not affect the ability of BASF to rely on the limitation period.
The Supreme Court’s judgment now definitively determines that appeals as to infringement extend the limitation period, while appeals only as to the level of the fine do not. This is of significant practical importance, as virtually every cartel infringement decision results in appeals by some or all of the addressees (defendants) (often comprising a mixture of appeals as to fine and as to infringement), which has previously made it difficult to determine when time expired. Another recent judgment of the Court of Appeal (Deutsche Bahn AG & Ors v. Morgan Crucible Company Plc & Ors  EWCA Civ 1055, judgment of July 31, 2012), has added further clarity by confirming that appeals as to infringement by any addressee suspend the limitation period for claims against all of the addressees, irrespective of whether the addressee being sued has itself brought an appeal as to infringement. In light of these judgments, there should now be considerably greater certainty as to the operation of the limitation period in the CAT, which should make it much easier to determine whether a claim in the CAT may be out of time.
Defendants that may be sued
In the second case, Emerson Electric Co & Ors v. Mersen UK Portslade Ltd  EWCA Civ 159, judgment of November 28, 2012, the Court of Appeal considered another area of uncertainty in the CAT’s jurisdiction: the identity of the defendants that may be sued. Under section 47A of the Competition Act 1998, it is clear that claimants may bring damages actions in the CAT only if there is a prior finding of infringement. (In the High Court, by contrast, claims can be brought irrespective of whether there is a prior infringement decision.) What has been less clear is whether the infringement decision enables claimants to bring an action in the CAT against any company within the corporate group found to have committed an infringement, or only against the specific legal entities named in the decision.
The appeal was brought by a number of companies that alleged they had suffered damages caused by Mersen as a result of its alleged participation in the carbon and graphite products cartel that was the subject of a European Commission infringement decision in 2003 (Case COMP/38.359 – Electrical and mechanical carbon and graphite products, Commission decision dated December 3, 2003). In its infringement decision, the Commission had found that Le Carbone Lorraine SA (Mersen’s parent company at the time) had committed an infringement and had named Le Carbone Lorraine SA as an addressee. However, the decision did not name Mersen as an addressee, and there was nothing else in the decision to suggest that the Commission had found that Mersen had participated in the infringement. As there was no prior finding of infringement against Mersen, the CAT held that it did not have jurisdiction under section 47A of the Competition Act to hear the claim, and therefore struck out the claim against Mersen.
On appeal, the Court of Appeal accepted that EU antitrust law is applied to an “undertaking”, which is broader in scope than the English law concept of corporate identity and may encompass a parent company and a number of subsidiaries within the same corporate group. However, the Court of Appeal held that the CAT is bound by the Commission’s finding of infringement and has no jurisdiction to contradict or amend the Commission’s findings on liability. In its infringement decision, the Commission could have, but did not, find that Mersen had committed an infringement. It could have done so by making specific findings to that effect, by directly addressing the decision to Mersen, or by addressing the decision to the whole group of companies within Le Carbone Lorraine SA (which would have included Mersen). In this circumstance, the Court of Appeal held that the CAT did not have jurisdiction under section 47A of the Competition Act 1998 to hear claims against Mersen because there was no prior finding of infringement against Mersen in the Commission decision. The Court of Appeal therefore dismissed the appeal and upheld the CAT’s judgment striking out the claims against Mersen.
The Court of Appeal’s judgment confirms that there is a significant restriction on the jurisdiction of the CAT, as it cannot hear claims against subsidiaries of companies that have been found to have committed an infringement, even if those subsidiaries have arguably participated in the infringement and caused loss to the claimants. This issue may arise fairly frequently, as the Commission often addresses an infringement decision only to parent companies or a limited number of entities within the corporate group, and without fully exploring the involvement of other entities, including national subsidiaries.
As this restriction does not apply to proceedings brought in the High Court, it is likely to undermine further the attractiveness of the CAT as a forum for litigating pan-EU claims. This is because if an infringement decision contains no findings of infringement against a U.K. entity, it may be difficult for a claimant to obtain English jurisdiction in the CAT for any claims arising from that infringement decision, including claims against both the U.K. entity and other non-U.K. entities that the claimant may wish to sue in the same action. It is therefore likely that claims will be made in the CAT only if there is at least one U.K. addressee against which the claimant can establish English jurisdiction.