Tag Archives: competition law

Brexit and implications for UK Merger Control – Part 3/3: Managing and prioritising the CMA’s mergers workload

The Competition Bulletin is pleased to welcome the third in a three-part series of blogs on Brexit and merger control by Ben Forbes and Mat Hughes of AlixPartners.  Ben and Mat are (with others) co-authors of the new Sweet & Maxwell book, “UK Merger Control: Law and Practice”.

Part one focused on the issues associated with the voluntary nature of UK merger control (and can be found here), and part two considered options for change that in our view should not be adopted (and can be found here).

Introduction

Prioritising the CMA’s work load is clearly important due to Brexit.  This is because the European Commission will cease to have exclusive jurisdiction over large UK mergers that currently fall for consideration under the EU Merger Regulation. In March 2017, the Competition and Markets Authority (CMA) indicated that this could lead to increase in its mergers caseload by 40-50% since 1 April 2014, potentially amounting to an additional 30-50 phase 1 cases and six phase 2 cases per year.

This final blog in our series considers how the CMA could prioritise and manage its mergers workload, with particular focus on the CMA’s consultation of 23 January proposing amendments to its guidance on the application of the exception to its duty to refer a merger in markets of insufficient importance (i.e. the de minimis exception).[1]

The CMA is proposing increasing the upper threshold for markets considered to be sufficiently important to justify a merger reference from £10 million to £15 million, and would raise the lower threshold for markets not considered to be sufficiently important from below £3 million to below £5 million.  Where the size of the market falls between these two thresholds, the CMA would continue to evaluate, on a case-by-case basis, the potential harm caused by the merger against the cost of an investigation.

The importance of the de minimis exception in UK merger control

The de minimis exception is designed to save the CMA[2], and therefore the public purse, money by not referring insignificant mergers to phase 2. These costs are material as the National Audit Office’s 2016 report on the UK Competition Regime estimated that the average cost of a phase 2 investigation to the CMA is £275,000.[3] Moreover, this figure does not include any costs to the merging parties (or third parties), and for a large complex phase 2 investigation, these costs are high and often substantially more than the CMA’s costs.

The de minimis exception has become an important part of UK merger control.  It is particularly important since it only applies where, in principle, clear-cut undertakings in lieu of reference could not be offered, and the parties would thus otherwise face the costs and risks of a phase 2 investigation. In particular, over the last seven years, 28 mergers have been cleared on de minimis grounds, and absent this exception the number of merger references would have increased by 46 per cent (28/61). (Over this period, a further 40 mergers were cleared conditionally at phase 1 on the basis of undertakings in lieu of reference).

As many cases affect markets worth under £10 million per annum, any assessment of merger control risks needs to consider even overlaps in relation to even small parts of the merging parties’ businesses.

The Office of Fair Trading’s (OFT) guidance on exceptions to its duty to make merger references, which has been adopted by the CMA, also indicates that, for now, it draws a distinction between markets with an annual value of below £3 million and those with values of between £3m and £10m.[4] In particular, their guidance notes that it would “expect to refer a merger where the value of the market(s) concerned was less than £3 million only exceptionally, and where the direct impact of the merger in terms of customer harm was particularly significant”. For mergers between £3m and £10m, the OFT/CMA will weigh up the size of the market and the likely harm to customers, as well as considering the wider implications of the decision.

Our analysis of 400+ UK merger decisions since 1 April 2010 also included many cases where the OFT/CMA considered applying the de minimis exception. As set out in the chart below, there were 45 cases between 1 April 2010 and 31 March 2017 where the OFT/CMA considered applying the de minimis exception and how the decision reached varies according to the size of the relevant markets affected.[5]

AP1

Consistent with the OFT’s guidance, there were very few cases where the relevant market was valued at under £3 million per annum where the CMA/OFT nevertheless decided to refer the merger for a phase 2 investigation. An analysis of all the various cases is set out in the next chart, and the two exceptions relate to mergers between local bus operators, where the OFT and CMA respectively decided that these mergers warranted phase 2 investigation.  This reflected a recommendation from the Competition Commission for a cautious approach following its market investigation into local bus services.

Where the relevant market size is greater than £3 million per annum, a merger reference is more likely. This is set out in detail in the following chart, which covers all 45 merger decisions that considered the de minimis exception from 1 April 2010 through to 31 March 2017.  This chart also covers the phase 2 outcomes of those cases where the OFT/CMA decided not to apply the de minimis exception and referred the merger.

AP2

Note: The OFT/CMA decisions often only included a range for the relevant market size. Therefore, the bars represent the expected market size (i.e. the middle of the range) where applicable. The top of the range is represented by the black triangular dotes.

This review highlights the rather sharp distinction in outcomes between mergers that affect markets with an annual aggregate value of around £3 million per annum and those valued between £3 million and £10 million.

Looking more closely at the 17 cases that were referred at Phase 1 despite the small sizes of the markets affected, seven of these mergers were abandoned. This is entirely unsurprising given the high costs to the parties of phase 2 investigations, which will often exceed merger synergies in small markets.  For non-abandoned mergers, three cases were cleared unconditionally, six were cleared with remedies, and only one prohibited. Accordingly, it seems reasonable to speculate that some of the seven abandoned mergers would have been cleared either unconditionally or with remedies.

The CMA’s proposed changes in market size thresholds

At first sight, the proposed changes in the thresholds at which the de minimis exception will apply suggests that it may be applied substantially more often.

However, some words of caution are warranted.  First, as a matter of policy, the CMA will not apply the de minimis exception if, in principle at least, clear cut undertakings in lieu of reference could be offered.

Second, considering the CMA’s proposed £5 million threshold for mergers where the de minimis exception will generally apply, since 1 April 2010 only another two referred mergers would fall into this category.

Third, turning to those mergers with turnover between £5 million and the proposed £15 million threshold, the de minimis exception may be considered in many more cases. However, historically the OFT/CMA has referred many of the mergers below the £10 million upper bound, and it remains to be seen whether this will be the case in relation to the higher £15 million threshold.

Conclusions

As discussed in part one and part two of this blog series, productively improving the UK merger control regime is not simple. The CMA has had to address the changes associated with becoming a single authority covering phase 1 and phase 2 decisions, and having a full prenotification regime and statutory phase 1 deadlines.

In our view, the CMA’s proposed changes to the de minimis thresholds is sensible. However, it remains to be seen whether this will substantially reduce the CMA’s workload, and the burden of UK merger control on small mergers.

[1]   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/585147/small-mergers-consultation.pdf

[2]   As of the 1 April 2014, the OFT transferred its merger related functions to the newly created CMA. CMA has been used throughout this document, but if any examples occur before this date, read as OFT.

[3] See paragraph 2.2: http://www.regulation.org.uk/library/2016_NAO_The-UK-Competition-regime.pdf

[4] OFT, “Mergers, Exceptions to the duty to refer and undertakings in lieu of reference guidance”, December 2010.

[5]    Note that this excludes certain mergers where the OFT/CMA briefly considered applying the de minimis but where the parties could offer clear-cut undertaking in lieu of reference to address the competition concerns identified. In these cases, the OFT/CMA did not consider the size of the relevant market (see for, example, Reed Elsevier / Jordon Publishing (2015)).

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When is an antitrust/competition claim caught by an arbitration clause? The Microsoft Mobile decision

The decision of the High Court in Microsoft Mobile Oy (Ltd) v Sony offers some helpful guidance as to when a competition law tort claim will be caught by an arbitration clause in a sale or supply agreement.

Competition law claims frequently complain about prices, on ground of collusion or abuse.  Those prices may already have been charged, or they may yet to be charged.  If the price in issue has already been charged then it will almost invariably be contained in a written sale or supply agreement.  It may be the product of a specific contractual mechanism to settle a price.  If the relevant agreement contains an arbitration clause, does it catch a competition law claim complaining about the price charged?

The starting point in this regard is that a detailed semantic analysis of the particular arbitration clause in question is unlikely to provide the answer.  As Lord Hoffmann observed in Fiona Trust v Privalov [2007] 4 All ER 951 at para 13:

“…the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to have entered to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.”

This “one-stop shop” presumption has helped greatly in reducing disputes about the ambit of arbitration clauses.  But its application in the competition law context has been less straightforward, because of debates about precisely what the rational businessman would intend in respect of such claims.

The net effect of the law to date is that competition law claims will be regarded as coming within an arbitration clause only if they are closely related factually to a viable contractual claim which has already been, or could be, made.  Thus, for example, in ET Plus SA v Welter [2006] I.L.Pr. 18, the key consideration for Gross J in finding that competition law claims were within an arbitration clause was that they were “simply a variant on the familiar factual theme” which could be discerned from contractual claims already made (see para 51).

Conversely, in Ryanair Ltd v Esso Italiana Srl [2015] 1 All ER (Comm), the Court of Appeal held that the absence of any viable form of contractual complaint about an allegedly cartelised price rendered it impossible to claim that a competition law complaint about the same price was within an exclusive jurisdiction clause.  Having referred to the one-stop shop presumption in Fiona Trust, Rix LJ then held at para 53 that:

“Such reasoning, however, does not carry over into a situation where there is no contractual dispute (by which I intend to include disputes about contracts), but all that has happened is that a buyer has bought goods from a seller who has participated in a cartel. I think that rational businessmen would be surprised to be told that a non-exclusive jurisdiction clause bound or entitled the parties to that sale to litigate in a contractually agreed forum an entirely non-contractual claim for breach of statutory duty pursuant to article 101, the essence of which depended on proof of unlawful arrangements between the seller and third parties with whom the buyer had no relationship whatsoever, and the gravamen of which was a matter which probably affected many other potential claimants, with whom such a buyer might very well wish to link itself.”

The English Courts therefore treat competition law claims essentially as falling outside the one-stop shop presumption unless they are, factually, simply a variant on the theme of an arguable contractual claim.  This was, furthermore, the approach of the CJEU in Case C-352/13 CDC v Akzo [2015] QB 906, in which it was held that a clause “…which abstractly refers to all disputes arising from contractual relationships” would not cover tortious liability as a result of a cartel, because “…the undertaking which suffered the loss could not reasonably foresee such litigation at the time that it agreed to the jurisdiction clause” (paras 69-70).

The latest word on this topic is the Microsoft decision.  Microsoft brought a claim in the English Courts for damages for the allegedly anti-competitive tortious conduct of Sony, LG and Samsung in relation to the pricing of Li-Ion batteries.  All the allegedly cartelised supplies by Sony had been made pursuant to an agreement with an arbitration clause requiring “any disputes related to this Agreement or its enforcement” to be settled by ICC arbitration.  Sony applied to stay the proceedings under section 9 of the Arbitration Act 1996, arguing that the arbitration clause covered the tort claims made against it.

Mr Justice Marcus Smith held that, on an orthodox application of the principles identified in Ryanair, the question of whether the tortious claims were within the arbitration clause depended on whether the conduct giving rise to the tortious claims also gave rise to an arguable contractual claim.  As he observed, “…it is difficult to see how a tortious claim can arise out of a contractual relationship when the only claim in contract that can be said to be related is unarguable” (para 54).

The unusual incentives created by this (correct) understanding of Ryanair can be seen from the fact that Sony was accordingly required, in order to succeed in its application, to formulate a contractual claim against itself which Microsoft had not advanced.  Sony argued that because the relevant prices had been subject to an express obligation that they be negotiated in good faith, and because Sony was subject to a further obligation to disclose events that reasonably may affect its ability “to meet any of its obligations” under the agreement, the operation of a cartel would have been a clear breach of contract as well as tortious.

The Court accepted this submission, holding that it was “very difficult” to see how Sony could have engaged in the conduct complained of in the tort claims, without also breaching the contract.  On that basis, the competition law claims fell within the arbitration clause.  It did not matter in this regard that Microsoft had not advanced the contractual claim which Sony successfully contended it could have done, because otherwise “…it would be easy for a claimant to circumvent the scope of an arbitration or jurisdiction clause by selectively pleading or not pleading certain causes of action” (para 72(ii)).

The upshot for practitioners is that a decisive consideration when assessing whether a competition law claim falls within a jurisdiction clause is likely to be whether there are any viable contractual claims which “…would be sufficiently closely related to the tortious claims actually advanced by the Claimant so as to render rational businessmen likely to have intended such a dispute to be decided (like a contractual dispute) by arbitration” (Microsoft at para 72).  The existence and extent of any express or implied contractual obligations to observe competition law therefore looks set for detailed examination in competition law claims in the future.

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Islands of jurisdiction for competition damages claims in a post-Brexit world

By Naina Patel and Andrew Scott

When the UK leaves the EU, the rules governing jurisdiction in cross-border competition damages claims will likely change. Most immediately, this will impact those who had acquired pre-Brexit causes of action for breach of statutory duty under section 2(1) of the European Communities Act 1972, based on Articles 101 and Articles 102 TFEU. The doctrine of acquired rights would preserve such causes of action;[1] but it is unlikely to preserve EU rules of jurisdiction in relation to them. Thereafter, the changes will impact those able to establish post-Brexit causes of action based on foreign laws, as Kieron Beal QC has explained. In either case, Claimants may wish to establish English jurisdiction, including as against EU domiciled defendants. This post considers some of the issues likely to be encountered.

Currently, jurisdiction in such cases is governed by the Recast Brussels Regulation (EU) No. 1215/2012 (the “Recast Regulation”). Despite the Prime Minister’s suggestion that the Great Repeal Bill will convert the entirety of the ‘acquis’ into British law, it seems unlikely that the Regulation will survive without more. It is a prime example of EU legislation predicated on reciprocity and the principle of mutual trust and recognition: see e.g. Recitals (3) and (26) of the Recast Regulation. In the absence of an arrangement between the UK and the rest of the EU to maintain post-Brexit common rules on jurisdiction and the recognition and enforcement of judgments, the premise for the Recast Regulation falls away.

At present, there are no such arrangements in place between the EU and third states.[2] It is true that Denmark entered into an agreement with the rest of the EC in relation to the predecessor of the Recast Regulation, the Brussels I Regulation. But Denmark was and remains a Member State. Whether a similar agreement is sought by or available to the UK as a non-Member State remains to be seen.

An alternative would be for the UK to seek to accede to the Lugano Convention 2007, which applies between the EU and Norway, Switzerland, Iceland and Denmark. However, Article 70 of the Convention restricts accession to members of EFTA, members of the EU acting on behalf of non-European territories which form part of them or for whose external relations they are responsible, and those states that can satisfy the conditions in Article 72, which include the unanimous consent of the Contracting States. It is reasonable to think that a condition of any such consent would include submission in some form by the UK to the jurisdiction of the CJEU in relation to interpretation of the Lugano Convention. Even if such consent were forthcoming, it is worthwhile noting that there are important differences between the Lugano Convention and the Recast Regulation. For example, Article 31(2) of the Recast Regulation has gone some way to disarming (in exclusive jurisdiction clause cases, at least) the “Italian torpedo” which still fires under the Lugano Convention owing to its rigid “first seised” lis pendens rule.  Further, the process of recognition and enforcement of judgments under the Recast Regulation is more streamlined than that which prevails under the Lugano Convention.

Failing either of these options, there is a serious question over whether the UK remains a party to the Brussels Convention, having acceded to it in its own right in 1978.  The Recast Regulation and its predecessor make clear that these instruments superseded the Convention as between Member States, except as regards the territories of the Member States which fell within the scope of the Convention but were excluded from the Regulations pursuant to Article 299 TEC and Article 355 TFEU respectively. The UK was a Member State when these Regulations were adopted and was not excluded from their provisions superseding the Brussels Convention. Brexit will not turn the UK into a territory of a Member State excluded from the Recast by virtue of Article 355 TFEU, only into a country to which TFEU does not apply at all.  It is therefore difficult to see how the application of the Brussels Convention to the UK can be revived. In any event, as Adrian Briggs QC has underscored, no country ratified the Convention after 2001 so it would not create a framework for jurisdiction with all EU Member States.

In the absence of an agreed bilateral framework, the UK will revert to applying its domestic rules on jurisdiction. These would permit the English Court to assume jurisdiction over EU domiciled defendants based on a far broader range of factors than are presently provided for by the Recast Regulation. Defendants with a mere (including fleeting) presence in the jurisdiction would be liable to be served here, even if domiciled elsewhere. Defendants with no such presence would also be liable to service outside the jurisdiction, with the Court’s permission, based on a far broader range of territorial and other connections under CPR r. 6.37 and PD 6B than are presently available under the Recast’s jurisdictional rules.

The purpose of the Recast Regulation and its predecessors is to protect EU domiciled defendants from such national rules of jurisdiction: see Article 5(2). A post-Brexit world in which the EU refuses to agree a new bilateral arrangement on cross-border jurisdiction with the UK will result in the application of English domestic law rules against EU citizens for the first time since accession to the Brussels Convention. Depending on how the English Court’s discretionary powers to stay proceedings or permit service out on forum conveniens grounds are exercised, there is real potential for the English Courts to enlarge their effective jurisdiction over competition law claims against EU domiciled defendants.

To take a few examples:

  • At present, an EU domiciled defendant can only be sued in England in “matters relating to tort etc.” where England is the place where the “harmful event” “occurs or may occurs”: see Article 7(2) of the Recast. That requires showing in a cartel case that England is where the cartel was “definitively concluded” or that England is where “the [victim’s] own registered office is located”: see CDC (C-352/13) [2015] Q.B. 906. The equivalent common law gateway for service out in CPR PD 6B, para 3.1(9) is broader in scope, e.g. it would require only that the damage sustained results from an act committed… within the jurisdiction” (emphasis added). It would likely suffice that some substantial and efficacious aspect of the cartel could be located in England.
  • At present, an EU domiciled defendant can only be joined as a co-defendant to English proceedings where an English-domiciled anchor defendant has been sued here: see Article 8(1) of the Recast. There is no such limitation under the common law necessary or proper party gateway in CPR PD 6B, para. 3.1(3). Thus, if English jurisdiction can be established by service on an anchor Defendant – whether within or outside the jurisdiction – that suffices to expose other Defendants to the risk of joinder to English proceedings. In a cartel case, for example, the requirements of the necessary and proper party gateway will ordinarily not be difficult to satisfy.
  • At present, an applicable jurisdiction clause for another Member State court has a “trump card” status under the Recast. Even if the party able to rely on that clause is one of many sued in England, and even if the sound administration of justice would favour not giving effect to it in the circumstances, the English Court is nonetheless bound to do so under Art. 25(1) of the Recast. Not so at common law, where the Court would retain a discretion – and in an appropriate case could decline to give effect to the clause so as to ensure that the entire dispute remain in the English Court: see e.g. Donohue v Armco [2001] UKHL 64; [2002] 1 All E.R. 749.
  • On account of the common jurisdictional rules in place under the Recast Regulation and the underlying principle of mutual trust, EU law prevents English Courts from granting anti-suit relief in respect of proceedings before courts elsewhere in the EU.[3] In the absence of a similar multilateral arrangement post-Brexit, English Courts are unlikely to feel inhibited from applying ordinary principles on anti-suit relief, e.g. to restrain a party from pursuing in the EU proceedings brought in breach of jurisdiction or arbitration clauses, or proceedings which are vexatious and oppressive or otherwise unconscionable.

Perhaps then, at least in the context of competition damages claims, if the effect of Brexit is that we return to common law rules, there will be some hidden treasure.

So in what direction should clients be advised to row their boats in the run up to Brexit?  English jurisdiction and arbitration clauses are likely to remain valuable tools in dispute resolution so it will continue to make sense to include them in new contracts; it may also be prudent to review old contracts to insert such clauses or to revise those drafted by reference to EU legislation. In doing so, it will be important to pay close attention to the remarks made by Rix LJ and the CJEU respectively in Ryanair Limited v Esso Italiana Srl [2013] EWCA Civ 1450 and the CDC case. The effect of each is that (at least some) tort claims founded on breaches of competition law will not ordinarily be caught by even broadly-worded jurisdiction clauses (e.g. those providing for jurisdiction over “all disputes arising from contractual relationships”): express words will be necessary. The scope of the principles stated in these decisions is likely to be a fertile area of dispute in competition law cases, not least because some claims (e.g. those in a bid-rigging context) have a more obvious connection to contracts containing such jurisdiction clauses than others (e.g. the price-fixing cartel contexts of Ryanair and CDC).

As for litigation strategy more generally, depending on which jurisdictional framework the UK ends up embracing, there may be significant value in re-considering the torpedoes and injunctions which we have seen submerged in EU competition litigation in recent years.

[1] Subject, of course, to any transitional arrangements to the contrary.

[2] While the EU and several third states are party to the Hague Convention on Choice of Court Agreements 2005, it deals only with exclusive jurisdiction agreements.

[3] See, for example, the decisions in Turner v Grovit (C-159/02 [2004] ECR I-3565) and West Tankers (C-185/07).

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Competition Law claims post-Brexit: the issue of applicable law

Once notification is given by the UK Government of its intention to withdraw from the European Union under Article 50 TFEU, EU law will cease to apply in the UK after the expiry of two years (absent an agreement between all 28 Member States extending the relevant period). What then happens to the UK’s competition law regime, which is closely intertwined with EU law, both substantively and procedurally?

The answer will depend to a large extent on the terms of the Great Repeal Bill. What is clear, however, is that the provisions of Article 101 and 102 TFEU will no longer apply within the territory of the United Kingdom. Those Articles presently have direct effect in the UK legal order. General principles of EU law, including the principle of direct effect, are binding in the UK under Article 6 TEU, read in conjunction with sections 2 and 3 of the European Communities Act 1972. But it seems inevitable that the Great Repeal Bill will remove the direct effect of substantive EU competition law. Moreover, Regulation 1/2003 (the Modernisation Regulation) will no longer be directly applicable in this jurisdiction. But the terms of the Competition Act 1998 (‘CA 1998’) will still apply. The Chapter I prohibition, for example, prohibits cartel conduct producing an actual or potential effect on trade within the United Kingdom. The provisions of the CA 1998 can no doubt continue in force largely unamended, save of course for section 60 CA 1998 with its focus on aligning as far as possible the position adopted by domestic and EU law on parallel issues.

It will be no secret to those reading this blog that competition law claims in the UK have increased in number in recent years. The ‘mystery of the reluctant plaintiff’ finally seemed to have been resolved.[1] Many of these claims have been brought on the basis of Articles 101 TFEU, Article 53 of the EEA Agreement and the Chapter I prohibition contained in section 2 CA 1998. Indeed, some of these claims have also incorporated claims based on the applicable laws of tort in other Member States of the EU. Does the departure of the UK from the EU mean that these claims will no longer be brought? The answer is very likely to be no. There are two principal reasons.

First, there has been no suggestion that claims seeking to enforce accrued rights to damages cannot be brought once the UK leaves the EU. Anyone who is the victim of cartel conduct, for example, will continue to have rights under EU law which confer a right to damages up until the UK’s departure from the EU. The Great Repeal Bill cannot lawfully deprive victims of the benefit of these accrued rights without seriously risking falling foul of Article 1 of Protocol 1 to the European Convention on Human Rights. The English legal system should accordingly continue to recognise the tortious liability of Defendants for damage that occurred while EU law was applicable in this jurisdiction.

Secondly, a distinction needs to be drawn between jurisdiction and applicable law. Once jurisdiction is established against one or more Defendants within this jurisdiction, the question of which claims may be pleaded and proved against them is a question of the applicable law of the tort. At the moment, the applicable law for competition claims for loss arising after 10 January 2009 is determined by the application of the Rome II Regulation[2] (and principally by Article 6(3)). That Regulation will no longer be binding on English courts once we leave the EU. But absent any legislative intervention in the Great Repeal Bill, the default position will then be that the pre-Rome II legislative framework will continue to apply. Section 15A of the Private International Law (Miscellaneous Provisions) Act 1995 (‘PILMPA 1995’) suspends the application of that Act when the Rome II Regulation applies. It follows that, when the Rome II Regulation is not applicable (either by virtue of its temporal or geographical scope), then the provisions of PILMPA 1995 remain fully effective.

The 1995 Act abolished the common law requirement of “double-actionability.” So free-standing claims for breach of the competition laws of other Member States – and of Articles 101 and 102 TFEU – can still be advanced in the courts of England and Wales, if the criteria for liability under those laws is met. Where, for example, a claimant sustains loss both in the EU markets and in the UK, there is no reason in principle why a claim for all of its loss cannot be brought in England. Expert evidence would be needed as to what the contents of those laws – including of EU law – are. See section 4(1) of the Civil Evidence Act 1972. But it is common for commercially significant cases to involve the pleading and proof by experts of causes of action based on foreign laws. Sections 11 and 12 of the PILMPA 1995 determine how the applicable law of the relevant tort or torts is to be selected.

One potential issue that arises is whether or not the enforcement of a foreign competition law would fall foul of the prohibition on English courts enforcing foreign, penal laws. Section 14(3)(a)(ii) of the 1995 Act provides that nothing in Part III of that Act “(a) authorises the application of the law of a country outside the forum as the applicable law for determining issues arising in any claim in so far as to do so— . . .(ii) would give effect to such a penal, revenue or other public law as would not otherwise be enforceable under the law of the forum.”

But this provision is highly unlikely to prevent a claim being brought for compensation on the basis of the foreign laws of one or more jurisdictions. A claim for compensation based on a breach of a foreign competition law (or foreign law of tort or delict) is not the enforcement of a penal law. Such claims do not amount to an attempt to enforce a competition law which gives the national competition authorities in those foreign jurisdictions powers to fine cartelists. In Huntington v. Attrill [1893] AC 150, PC, Lord Watson at p. 157-158 stated: “A proceeding, in order to come within the scope of the rule, must be in the nature of a suit in favour of the State whose law has been infringed.” That is not the case where a claimant (who is in any event not likely to be a public body in a foreign state) is claiming a compensatory remedy rather than enforcing a fine or penalty. See United States Securities and Exchange Commission v. Manterfield [2009] EWCA Civ 27; [2010] 1 W.L.R. 172, CA per Waller LJ at [19] to [23].

It follows that if jurisdiction of the English Courts can be established, then there is no insuperable impediment to claimants bringing claims for loss arising from cartels and other anti-competitive conduct in much the same way as they do at present.

[1] The “mystery of the reluctant plaintiff” was a reference by J. Maitland-Walker at a conference in London, 1982, cited in Enric Picañol, Remedies in national law for breach of Articles 85 and 86 of the EEC Treaty – a Review, Legal Issues of European Integration, Deventer No. 2 (1983) 1 at page 2. Comprehensive reasons why there were not more claims under the pre-Modernisation competition regime were provided by John Temple Lang in EEC Competition Actions in Member States’ Courts – Claims for damages, declarations and injunctions for breach of Community Antitrust Law (1983-4) vol. 7 Fordham Intl L.J. 389 at page 407.

[2] Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations.

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Competition law and covenants restrictive of land use

Covenants restricting use of land to particular commercial purposes are commonplace. Until recently, the potential for competition law to regulate them was limited, because “land agreements” were excluded from the reach of the Chapter I Prohibition under the Competition Act 1998. The exclusion has, however, been revoked by the Competition Act 1998 (Land Agreements Exclusion Revocation Order) 2010. The OFT has also provided guidance on the application of competition law in this field. Continue reading

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Private enforcement: the Commission speaks at last

The trio of documents published by the Commission last week mark an important moment in private competition enforcement in the EU. After years of debate and consultation, it is now clear that, whilst the Commission is determined to take some important steps to assist claimants in private actions, it is not prepared to bring about the sorts of fundamental changes which would be needed to realise the full potential of private enforcement.

The three documents each deserve close scrutiny. This blog is intended only to provide a broad overview. Continue reading

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Collective Actions: loss in complex cases

The big news from last week’s UK announcement on reforming private competition enforcement is that the government plans to introduce opt-out class actions for competition claims.

The proposals incorporate various “safeguards” designed to ensure that the perceived excesses of US class actions do not become a problem here. Some of the safeguards are really no more than statements of the obvious – no-one can be surprised that we will not have US-style triple damages, or that law firms won’t be able to bring a claim without even having a claimant. On the other hand, some safeguards – such as the prohibition on contingency fees – will surely serve to limit the usefulness of UK class actions.

Financing aside, the big unanswered question is how attractive claimants will find such class actions (or “collective actions”, as the government prefers to call them, emphasising the differences with the US). Continue reading

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