The Court of Appeal’s judgment in the recent BCMR costs case is a stark warning to all those considering challenging a regulatory decision in the Competition Appeal Tribunal: even if you win, you may still face a big costs bill. See British Telecommunications plc v Office of Communications  EWCA Civ 2542.
Unlike the position in most civil courts under the CPR, in the CAT there is no prima facie rule that the unsuccessful party must pay the costs of the successful party. By rule 104(2) of the CAT Rules 2015, the CAT has a discretion to make “any order it thinks fit in relation to the payment of costs in respect of the whole or part of the proceedings.” Rule 104(4) sets out a list of factors that may be taken into account when making an order under rule 104(2) determining the amount of costs which includes, amongst others, whether a party has succeeded on part of its case, even if that party has not been wholly successful.
The previous practice of the CAT in relation to costs distinguished between certain categories of case. In relation to “dispute resolution appeals” (i.e. appeals against decisions made by Ofcom resolving a price dispute under s.185 of the 2003 Act) the starting point was that there would be no order as to costs against Ofcom if it had acted reasonably and in good faith. That made good sense because, in such a case, Ofcom simply acts as an arbiter between two competing private parties. However, in the case of “regulatory appeals” (i.e. appeals made against decisions made by Ofcom in the regulatory context) the starting point was that costs follow the event. This approach was developed by the CAT in Tesco plc v Competition Commission  CAT 26 and PayTV  CAT 9.
Ofcom’s principal submission in the BCMR case was that the Tesco and PayTV decisions were based on a fundamental misunderstanding of the applicable authorities. The Court of Appeal agreed, finding that the CAT had taken inadequate account of principles set out in analogous cases in the regulatory context. Principally, in Perinpanathan  EWCA Civ 40 at §76, Lord Neuberger summarised the position as follows:
“[i]n a case where regulatory or disciplinary bodies, or the police, carrying out regulatory functions, have acted reasonably in opposing the granting of relief, or in pursuing a claim, it seems appropriate that there should not be a presumption that they should pay the other party’s costs.”
The Court of Appeal held that those principles are directly applicable to the current case even though, as it acknowledged, Perinpanathan was not a competition case and did not concern an appeal in a specialist tribunal such as the CAT (at §69).
The important point was that, in each case, the regulators were acting solely in pursuit of their public duty and in the public interest in carrying out regulatory functions. The question which the CAT should have asked was whether there were specific circumstances of the costs regime which rendered the principles inapplicable. As a matter of principle, if Ofcom has acted purely in its regulatory capacity in prosecuting or resisting a claim before the CAT and its actions were reasonable and in the public interest, the Court of Appeal concluded that “it is hard to see why one would start with a predisposition to award costs against it, even if it were unsuccessful.” (at §§72, 83). The decision has therefore been remitted to the CAT for reconsideration, in view of the principles set out in the judgment.
The Court of Appeal added for good measure the CAT had made the same error, of giving inadequate weight to the relevant authorities, in the Tesco case (at §§70, 82). Tesco concerned a successful judicial review under s.179(1) of the Enterprise Act 2002 of the Competition Commission’s decision to introduce a competition test as part of planning applications. The CAT ordered the Commission (now Competition and Markets Authority) to pay Tesco’s costs.
Given the Court of Appeal’s comments, it seems likely that the CAT will be required to reconsider the appropriateness of the loser pays principle not only in regulatory appeals but also in statutory judicial review applications against the CMA’s decisions when the issue next arises. It is still open to the CAT to decide that, notwithstanding that there is no presumption in favour of costs following the event, it would still be appropriate for the regulator to pay the costs of the losing party, perhaps to avoid what BT says would be the ‘chilling effect’ of depriving the winning party of its costs in such cases. However, the Court of Appeal has made clear that successful appellants can no longer assume that their claims for costs will be looked on favourably.