Non-Appealing Cartelists Beware

Tucked away at the back of last week’s Supreme Court decision on time-limits for follow-on claims is a very important development for private competition actions.

The context is section 47A of the Competition Act 1998, a provision which has generated an extraordinary amount of litigation in view of the fact that it was intended to streamline private damages actions. The apparently dreary issue addressed in Deutsche Bahn AG and others v Morgan Advanced Materials Plc [2014] UKSC 24 related to the two-year time limit in which follow-on damages claims must be brought under section 47A. Anyone wanting more background might want to look here. The simple summary is that the law is now that:

  1. The start of the two-year limitation period will only be delayed by an appeal against liability – an appeal against penalty only does not suffice to delay the start of the limitation period. This was decided in BCL No.1.
  2. In a multi-party infringement, an appeal by one party will only delay the start of the two-year period for claims against that infringing party. It will not delay the start of the period in respect of claims against other parties. This was the Supreme Court’s decision last week in Deutsche Bahn.
  3. Once the two-year limitation period has expired, the CAT has no power to extend the time limit to allow claims to be brought late. This was decided in BCL No.2.

Now for the interesting bit.

One of the issues relevant to the argument in Deutsche Bahn was whether, if some cartelists (call them A and B) had successfully appealed against a decision that they had been party to a cartel, cartelist C, who chose not to appeal, would still be bound by the decision that A, B, and C had been members of a cartel. Could a claimant seek damages from C and contend that C is bound by the decision that it was in a cartel with A and B?

The Supreme Court held, in a single unanimous judgment, that the answer is yes. It held at paragraph 21 that as a matter of European law:

“a Commission Decision regarding the existence of a cartel constitutes a series of decisions addressed to its individual addressees, which remain binding or not according to the lodging and outcome of any individual appeals. A successful appeal by one addressee, establishing that there was no cartel, has no effect on the validity and effects of the Decision determining that there was such a cartel and levying a fine as against another addressee who has not appealed. This is so although article 81(1) (and now article 101(1)) applies to agreements and concerted practices (concepts which postulate the involvement of more than one party), and although a Commission Decision, such as that in question on this appeal, addresses in a single document all addressees by reference to one or more particular agreements or practices found to exist between all of them.”

In some ways, this is the mirror-image of the domestic law principle whereby non-appealing infringers are fixed with penalties even if other alleged infringers succeed in overturning the decision – a principle endorsed very recently by the Court of Appeal (see my blog). But the Supreme Court’s decision further raises the stakes: non-appealing parties may be stuck not only with penalties, but also with liability for all damages caused by the cartel, the existence and scope of which they cannot deny even if it has been disproved on appeal.

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