Private Enforcement The situation in the UK

Transcription

1 Private Enforcement The situation in the UK Paolo Palmigiano, solicitor Chairman of the Association of in-house competition lawyers Union Internationale des Avocats London, March

2 Summary Private litigation in the UK in general The UK proposals to foster private actions Unintended consequences Procedural issues in the UK

3 UK Proposals Introduction The story so far OFT workshop in 2005 OFT recommendations on private actions in competition law (2007) UK government announces reform to public enforcement (including creation of CMA) in March 2012 BIS Consultation in April 2012 (129 responses) Government response in January 2013 Draft Consumer Rights Bill (published June 2013) Bill currently going through Parliamentary process and committees Draft CAT rules for collective proceedings and collective settlements (March 2014)

4 The current situation in the UK at the moment Most EU cartel decisions lead to follow-on claims in the UK Claimants are businesses not consumers Most cases settle in Court due to uncertainties and costs Settlement terms confidential Not only follow on but several stand-alone cases

5 Why the UK is considered a forum of choice Advantages Access to documents through wide-ranging discovery Jurisdiction easily established Experience of courts in awarding damages High quality of judges, most with competition law expertise Speed of the process English or foreign claimant seeking damages can seek to recover the entire loss in the English courts, irrespective of where the loss was suffered if there is an English subsidiary that implemented the cartel Disadvantages Expensive Complex and time consuming for jurisdiction disputes

6 UK Proposals The current situation Large companies : competition litigation has increased substantially in 10 years Previously it was not the thing to do but today: Possible duty to shareholders to seek redress Increased awareness of competition law Legislative encouragement Internal legal team as money makers rather than cost centres Individuals and SMEs: perception by Competition Authorities and Governments that individuals are not getting compensation for harm suffered for a competition law infringement the current procedural rules make it difficult Therefore need to make it simpler to allow consumers and small businesses to seek redress from undertakings that have infringed competition law

7 UK Proposals Why reform Competition creates growth and brings benefits to consumers Competition regime led to 810m consumer benefit in 2011/12 (OFT) A strong regime increases innovation and drives investment Private actions seen as the least effective aspect of the competition regime Smaller companies and consumers find it difficult to bring cases Private actions can complement public enforcement Overall aim = increase the volume of private actions

8 UK Proposals Three key proposals 1. Establishing the Competition Appeal Tribunal (CAT) as a major venue for competition actions in the UK 2. Introducing an opt-out collective regime with safeguards 3. Promoting alternative dispute resolution for competition cases

9 UK Proposals The Role of the CAT (I) CAT to become the main court for UK competition private actions Stand Alone actions Jurisdiction extended to hear stand-alone cases (currently stand-alone only to High Court while follow-on to High Court or CAT) Interim injunctions Power to grant injunctions (including cross-undertakings in damages and ability to ensure that injunctions are observed) Transfer or cases High Court will be able to transfer cases (both stand-alone and follow on) to the CAT (and vice versa)

10 UK Proposals The Role of the CAT (II) Fast track procedure for simpler cases - intended to be principally for the benefit of SMEs (but not limited to SMEs) Focus on granting interim relief CAT chair takes decision on suitability but presumption that all SME cases will be fast track cases Not available for collective actions or novel cases Fast track cases to be cost capped (and any cross undertaking for damages capped) determined by the CAT on a case by case basis at an early stage CAT power to limit amount of evidence and expert witnesses

11 UK Proposals Other changes Limitation period - Currently 2 years at the CAT from Cause of action / Expiry of right of appeal / The final decision Harmonised with High Court 6 years from cause of action (5 Scotland) Rebuttable presumption of loss dropped Complex technically to make it work effectively Unlikely to save time (as both parties would seek to rebut presumption by adducing substantial economic evidence) It would violate principle of English law that loss must be proven Decision not to legislate in relation to passing on defence (best addressed through judicial case law)

12 Current collective mechanisms in the UK Section 47B CA98 : allows opt-in follow-on representative consumer actions brought by specified body (Which) CPR 19.6: representative action (representative class need not to be individually identified in proceedings where members have the same interest in a claim) (Emerals Supplies Ltd v BA plc.) CPR and Group Litigation Orders (GLOs) Group claims where a number of claims raise common or related issues of fact or law Opt-in model each claimant has to originate a claim and become a party before becoming a member of the group

13 UK Proposals Opt-out collective action (I) The most controversial aspect of the reform - only one consumer redress case so far (Football Kits) Both for follow-on and stand alone cases Only in the CAT and available to businesses and consumers Only by claimants or genuine representatives of the claimants such as trade or consumer associations (no predefined list - but not by law firms, 3 rd party funders, SPV) Damages assessed on total loss caused to all relevant purchasers in the UK Subject to safeguards

14 UK Proposals Opt-out collective action (II) Safeguards Certification of cases by the CAT Preliminary merits test, assessment of the adequacy of the representative, collective action is the best way of bringing the case UK-domiciled only (non-uk must opt-in) No treble or exemplary damages No contingency fees (but no win no fee conditional fee arrangements and after the event insurance will remain available) Loser pays principle remains to prevent unmeritorious claims Unclaimed funds to be given to Access to Justice Foundation (and possibility to make order to change that in the future)

15 UK Proposals - ADR ADR to be promoted as advocated by the CBI Voluntary - not mandatory A new opt-out collective settlement regime for competition law in the CAT CMA to certify voluntary redress scheme

16 UK Proposals - ADR (collective settlement) New opt-out collective settlement Representative and defendant apply to the CAT to approve on an opt-out basis a mutually agreed settlement offer CAT would certify that case is suitable for settlement, that it is fair, just and reasonable and the most satisfactory way of ensuring that as many members of the identifiable class as possible receive redress Legal costs must be reasonable Possible directions of the CAT on how to distribute compensation or impose requirements that identifiable class must be aware of settlement and possibility to opt-out Only for UK-domiciled claimants (but others could opt-in)

17 UK Proposals - ADR (CMA) CMA (not sectoral regulators) will have discretionary power to Certify voluntary redress schemes (in respect of process followed not whether the amount is reasonable) before infringement decision Process by Order which is likely to include Effect Redress scheme to be overseen by independent panel Plans to notify consumers of the existence of the scheme Scheme must be easy to follow and understand Independent appeal process binding on defendant beneficiaries can take enforcement action against a business that fails to comply with the terms of the voluntary redress scheme potential reduction of fines

18 UNINTENDED CONSEQUENCES

19 What are the downsides? - 1 Increases the cost of doing business in the UK Enough safeguards for opt-out actions? Will it depend on the judge? Is this too good for lawyers in this field? Policy decision compensation at large v individual compensation. Is this the right decision? Meritorious claims for damages should be aimed at compensating, in a fair way, the victims of an infringement for the harm done (EU Commission) And is there really individual compensation if residual goes to Access to Justice Foundation?

20 What are the downsides? - 2 Appeals by cartelists just not to be left out Has its impact on leniency been underestimated? Large costs and uncertainty on key aspects (such as passing on or assessment of damages) lead to settlement rather than compensation. Is this the right outcome?

21 KEY ISSUES IN UK

22 Procedural issues in the UK Disclosure of leniency documents Timing / limitation Standing Jurisdiction Remedies Injunctive relief

23 Disclosure of leniency documents - 1 National Grid (04/13) High court considered Pfleiderer balancing exercise Legitimate expectations : no legitimate expectation that leniency materials would not be disclosable in damages claims Damage to the effectiveness of the leniency regime: given the scale of fines imposed by the Commission, participants in serious cartels would continue to be incentivised to apply for leniency Proportionality : whether disclosure is proportionate (taking into account whether the information is available from other sources and its relevance) Court considered disclosure on a point by point basis and ordered disclosure of a limited number of redacted passages from the confidential version of the Commission s decision and certain passages from responses to the Commission s RFIs which explained some contemporaneous documents and the operation of the cartel

24 Disclosure of leniency documents - 2 Air Freight cartel (28 Oct 2014) Action against British Airways No EU decision published because of confidentiality claims The decision contained references to airlines not part of the final decision Effort in court to delete confidential information made decision completely useless High Court Expressed concerns about delay by the Commission 4 years even just to consider working out the non-confidential part of the decision is completely unacceptable Rights of claimants to have matters tried justly and fairly with all requisite information Unredacted version to be made available Confidentiality ring and bar on claimants to bring further proceedings against others ordered

25 Timing / limitation CAT High Court Basic rule 2 years 6 years When is a decision final - Appeals against penalty only will not suspend time limit (BCL v BASF [2012]) Supreme Court - Final against who did not appeal original decision (Morgan Crucible, Apr 2014) Stay of proceedings while case pending in Europe Yes. Courts must consider whether it is necessary to stay proceedings to avoid taking decisions counter to Commission s decisions (Mastefoods [2000}, ECJ & Art 16(1) Reg 1/2003) Yes but (Siemens v National grid 2009) : timing of stay is up to the High Court. It needs not be immediate. Action could continue until close of pleadings

26 Standing CPR 19.6 a claimant may bring a claim as representative of other parties who have the same interest Emerald v British Airways [2010] Court of Appeal Emerald used CPR 19.6 to bring representative damage claims on behalf of itself and 178 direct and indirect importers against air cargo cartel CA determined a high standard of commonality was required Direct and indirect purchasers of cargo services were not considered to have the same interest due to for example, the differing impact of the passing on defence CA rejected opt-out class action by back door

27 Jurisdiction Council Regulation 44/2001 (The Brussels Regulation) Article 2 : persons are sued in the state in which they are domiciled But also where the harmful event occurred (article 5(3)) If action brought by consumer, where he is domiciled Article 6(1) : where more than one defendant, defendants can be sued in jurisdiction where any one is domiciled, providing claims closely connected Can UK subsidiaries of a foreign based cartelist be sued if not addressees of EC decision? HIGH COURT YES - Provimi [2003] High Court - English subsidiaries of a cartel sued in E&W (even though not addressees and did not know of the cartel) because they had implemented the cartel agreed by parent - But CA in Cooper Tire v Dow [2010] and Toshiba Carrier [2012] suggested Provimi might not be correct (implementation and knowledge are needed) but did not need to deide CAT NO - Emerson Electric v Morgan Crucible [2012] UK subsidiary must be an addressee of the decision (otherwise there is no infringement decision) - Not enough to argue defendant was a wholly owned subsidiary

28 Remedies Compensatory claims available but restitutionary not available as a matter of national law, especially if compensatory damages are available and constitute an adequate remedy (Devenish 2007) Exemplary damages (set to punish a defendant) should not be awarded where fine paid or commuted under leniency (Devenish 2007) The same person cannot be sanctioned twice for the same conduct Awarding exemplary damages would mean concluding that the Commission s fines were inadequate and this is not permitted But otherwise available (CAT in 2 Travel Group and Albion Waters) 2 Travel Group PLC v Cardiff Bus [2012] First Chapter II/ Article 102 damages action (follow-on but no fine low turnover and conduct of minor importance) Award = loss of profit + interest + exemplary damages Necessary to punish the defendant s outrageous conduct

29 Injunctive relief Available in the High Court Purple Parking v Heathrow Airport [2011] Abuse of dominance in relation to the provision of access to the forecourts at Heathrow Terminals by applying dissimilar conditions to equivalent transactions with other trading partners thereby placing them at a competitive disadvantage Heathrow Airport hindered access for third party valet parking services Injunctive relief sought at High Court Expedited trial Relief granted

30 Conclusions Companies already use competition law Interesting developments in UK Courts in this context Real issues about consumer claims Proposals to introduce opt-out contain several important modifications which should make it easier for individuals But serious concerns about its consequences Interaction between EU directive and UK proposal Watch this space!!