LAW AND INSTITUTIONS (SUB-COMMITTEE E)
ANTITRUST RULES (5127/06)
Letter from the Chairman to Gerry Sutcliffe
MP, Minister for Employment Relations and Consumer Affairs, Department
of Trade and Industry
The Green Paper was considered by Sub-Committee
E (Law and Institutions) at its meeting on 8 February. We are
grateful for the information provided in your Explanatory Memorandum
and agree with the Government firstly that private enforcement
should be kept in perspective and should not divert resources
from public enforcement and, secondly, that the options in the
Green Paper need careful consideration on the basis that they
might feed into draft legislation in the future.
We note that under the heading "Legal and
Procedural Issues" you say that there are none because the
Green Paper is not proposed for legislation. But as the possibility
of legislation cannot be discounted, it would be helpful to have
the preliminary reactions of the Government on two matters. First,
what powers exist in the Treaty to take forward the options set
out in the Green Paper, many of which would require uniform or
harmonised rules to be put in place in the civil procedures of
Member States? Do the Government believe that Article 83 would
provide a sufficient legal base? Or would it be necessary to rely
on Article 65? Or would resort have to be made to Article 308?
Second, if the Treaty does provide the vires, how desirable
would it be to have uniform or harmonised rules of civil procedure
in this area?
Finally, you do not indicate whether the Government
will be responding formally to the Green Paper. If you do so,
we would be grateful if you would provide a copy to the Committee.
The Committee decided to retain the Green Paper
9 February 2006
Letter from Gerry Sutcliffe MP to the
I am writing to provide you with more information
on the above EM as requested following your Committee's meeting
on 8 February.
The Committee has noted that the options in
the Green Paper may feed into draft legislation at the EC level
in the future and has considered the scope for uniform or harmonised
rules of civil procedure in this area. The European Commission
are keen to identify the obstacles to private damages actions
in the jurisdictions of the Member States, recognising in this
the need for effective private enforcement of EC competition rules
in all 25 Member States.
The situation in respect of private actions
in Member States is very uneven and while a few, like the UK and
Germany, have introduced measures within their own jurisdiction
there is considerable room for other Member States to take steps
to ensure that their businesses and consumers have comparable
scope to bring private actions. This may raise issues in respect
of the different legal systems in the Member States but we believe
that the emphasis should be on comparable rules as opposed to
standardised or harmonised rules of civil procedure. Comparable
rules respect the diversity of approach of civil procedures and
are an attainable goal in order to provide for effective private
enforcement in all 25 Member States.
The Committee has noted that the choice of legal
base for any secondary European legislation to implement the proposals
gives rise to some interesting questions. The Committee will appreciate
that, in the absence of a specific measure, any comments on the
choice of legal basis tend to be speculative because the legal
base must be based on objective factors, in particular the aim
and content of the measure.
Article 83 may be relied upon where the draft
regulation or directive gives effect to the principles set out
in Articles 81 and 82. Provisions relating to private damages
actions in competition cases do not, however, appear to fall within
the headings set out in paragraph 83(2). Article 65 refers to
"eliminating obstacles to the good functioning of civil proceedings,
if necessary by promoting the compatibility of the rules on civil
procedure applicable in the Member States". The primary object
of Article 65 would appear to be judicial cooperation in civil
matters having cross border implications. Whereas the proposals
in the Green Paper would apply to private damages in competition
cases generally and are not limited to cases with cross border
As the Committee has suggested Article 308,
would provide a backstop where the "Treaty has not provided
the necessary powers" but we suspect that there might be
reluctance to make use of this given that this may only be relied
upon where the Council acts unanimously on a proposal from the
Commission and after consulting the European Parliament.
In this context, we note that Directive 2004/48/EC
of the European Parliament and of the Council on the enforcement
of intellectual property rights, which requires Member States
to provide for the measures, procedures and remedies necessary
to ensure the enforcement of intellectual property rights and
contains provisions on, inter alia, evidence, right of
information, injunctions, damages and legal costs, was made under
Article 95 of the Treaty. Article 95 provides that "The Council
shall, acting in accordance with the procedure referred to in
Article 251 and after consulting the Economic and Social Committee,
adopt the measures for the approximation of the provisions laid
down by law, regulation or administrative action in Member States
which have as their object the establishment and functioning of
the internal market."
The Commission has drawn some parallels between
their approach to intellectual property and competition suggesting
that procedures and remedies should be dealt with at an EU level
on a sector by sector basis. At this stage, however, the Commission
has not provided any formal indication of the possible legal base
should they initiate legislation.
The Green Paper invites responses from, principally,
the 25 Member States by 21 April and we, in conjunction with the
Department for Constitutional Affairs and the Office of Fair Trading,
are working to reply by this deadline. I will, of course, ensure
that a copy of the UK response is sent to your Committee.
24 February 2006
Letter from the Chairman to Gerry Sutcliffe
Thank you for your letter of 24 February which
was considered by Sub-Committee E (Law and Institutions) at its
meeting on 8 March. We are grateful for the clarification of the
Government's view and also for your comments on the question of
the choice of legal base for any Community legislation which may
flow from the Green Paper. Thank you, in particular, for drawing
our attention to Directive 2004/48/EC on the enforcement of intellectual
property rights. The background to that Directive was, as you
will recall, somewhat different, namely the existence of the TRIPS
agreement. It will be interesting to see what legal base the Commission
put forward should they initiate legislation pursuant to the Green
The Committee decided to clear the Green Paper
from scrutiny. We look forward to receiving the Government's response
to the Commission.
9 March 2006
Letter from Gerry Sutcliffe MP to the
I indicated in my previous correspondence with
you on this issue that I would send the Committee a copy of the
UK response to the Commission's Green Paper consultation. I now
have pleasure in enclosing a copy, which was sent to the Commission
by their deadline of 21 April for replies.
The UK's position is set out in broad terms
in the introduction to the response. Principally, that we support
the wider aim of encouraging and facilitating private damages
actions and that the UK has enacted legislation with this aim
in view. We have also stressed the arguments for action at Member
State level, especially where this relates to matters of substantive
or procedural law. Naturally, we remain open to new ideas and
experience in other countries and to considering these and the
issues arising from the Green Paper exercise in discussions with
the Commission and other Member States.
I will of course ensure that the Committee is
kept informed as this initiative develops.
26 April 2006
COMMISSION GREEN PAPER ON DAMAGES ACTIONS
FOR BREACH OF THE EC ANTITRUST RULES
1. The UK Government warmly welcomes the
Green Paper and the accompanying Commission Staff Working Paper
(SEC (2005) 1732) considering the main obstacles to the private
enforcement of the EC competition rules.
2. The Green Paper suggests a number of
options for consideration and possible action by Member States
in respect of their legal systems as applied to competition disputes,
and for possible action at the Community level. We would like
to underline that we see this consultation as a very useful means
of clarifying the issues, options and possible actions for in-depth
consideration by the Member States.
3. The UK Government supports the wider
aim of the paper, namely to encourage and facilitate private damages
actions to those (consumers and businesses) who have suffered
loss due to infringement of competition rules. In recent years,
the UK has enacted legislation with exactly this aim in view.
We are, therefore, in favour of effective private enforcement
of the EC competition rules in all the 25 Member States, while
recognising the need to avoid creating a litigation culture.
4. Public enforcement is currently the primary
means of enforcing competition law. It is important not to compromise
that, or divert resources from it. Private actions are however
a very important complementary limb of an effective competition
regime. Private actions allow those who have suffered loss to
be compensated and, alongside other means, can in practice provide
an important additional deterrent to those who may cause loss.
[suggest we retain this last sentence] Deterrence can also be
achieved by other means such as fines or imprisonment and disqualification
of company directors.
5. The possibility of private enforcement
of competition lawinjunctions to prevent or halt infringements,
and actions to obtain compensation for breach of competition lawis
an important element in the competition law scheme. It supplements
the resources available to the Member States for enforcement of
6. The UK has taken a number of measures
at national level aimed at encouraging and facilitating the bringing
of claims, as have a number of other Member States. We shall be
pleased to share our experiences and exchange ideas with the Commission
and other Member States in considering possible steps which can
help further to facilitate private actions.
7. Naturally, most of the options outlined
in the Green Paper touch on matters of domestic civil law. The
implementation of some of the options would therefore mean changes
which would either affect the whole domestic civil law system
or create special rules for competition issues only. There would
need to be a very clear justification for making domestic rules
applicable to competition law distinct from other areas of law.
8. In order to safeguard consistency with
national laws and national competition law generally there are
strong arguments for action being taken at Member State level
rather than at Community level, particularly where these arguments
relate to areas of substantive law such as damages and liability
or to procedural law dealing with disclosure, costs and access
to evidence. In each system, there are different sets of checks
and balances in place, in order to retain a balance between claimants
9. Any debate about how to facilitate private
actions will have to consider carefully the interaction of provisions
including access to evidence and burden of proof, the role of
public enforcement and the availability of damages as well as
how to treat leniency applicants. Therefore, there needs to be
discussion among the Commission and Member States to increase
understanding, disseminate and encourage best practice in this
area, and consider what further action may appropriately be dealt
with at the Member State level and at Commission level.
10.In considering the options put forward by
the Commission, we are open to consider any possible improvements
and ideas that may help to facilitate private actions in the UK
and other Member States and we hope that all Member States will
be encouraged to look at and discuss how the effectiveness of
procedures for private actions could be improved.
11. This paper examines the options set
out in the Green Paper and the extent to which they match, overlap
with or differ from the current UK law position.
Should there be special rules on disclosure of
documentary evidence in civil proceedings for damages under Articles
81 and 82 EC? If so, which form should such disclosure take? (Options
Option 1: Disclosure should be available once a party
has set out in detail the relevent facts of the case and has presented
reasonably available evidence in support of its allegations (fact
pleading). Disclosure should be limited to relevent and reasonably
identified individual documents and should be ordered by a court.
12. The purpose of Option 1, as described
in paragraphs 34 and 89 to 90 of the Commission Staff Working
Paper, is to allow the claimant access to evidence in the possession
of someone else, be it the defendant or a third party. This is
intended to address the problem that a claim for damages may be
unsuccessful because the claimant is not able to provide sufficient
evidence of the constituent elements of a damages claim. The Green
Paper's proposal for a limited form of court-ordered disclosure
of relevant and reasonably identified documents is designed to
avoid excessively broad disclosure.
13. In the UK, competition cases may be
heard in the ordinary civil courts or the Competition Appeal Tribunal
("CAT"), depending on the circumstances. The rules of
disclosure, which are contained in the Civil Procedure Rules ("CPR")
are, in practice, also applied by the CAT under the Competition
Appeal Tribunal Rules 2003.
There are extensive rules requiring the disclosure of documentary
evidence in civil proceedings both by the parties, in the ordinary
course, and when required by a court or tribunal.
14. In Scotland the court has a statutory
power under section 1(1) of the Administration of Justice (Scotland)
Act 1972 to order the production and recovery of documents which
may be relevant to any proceedings before the court or which are
likely to be brought before it. The Rules of the Court of Session
in Scotland contain provisions regarding the production of documents
founded on by a party in a case, and the recovery and preservation
of documentary evidence during or in anticipation of litigation.
These rules are broadly similar in effect to the rules for England
and Wales set out here.
15. The normal procedure for disclosing
documentary evidence is "standard disclosure" which
is set out in the CPR. Each party is required to disclose documents
on which it relies and which adversely affect or support either
party's case, and as required by a relevant practice direction.
Disclosure against third parties is also possible provided certain
conditions are satisfied. Irrespective of whether disclosure is
sought from a party to the proceedings or a third party, disclosure
may be required pre-action.
16. The court has, in addition, a broad
discretion to order additional disclosure since it may, at any
time, on the request of a party or of its own initiative, give
such directions as it thinks fit "to secure the just, expeditious
and economical conduct of the proceedings".
17. Option 1 limits disclosure to "relevant
and reasonably identified" individual documents. This formulation
would appear to be narrower than that required by the standard
Option 2: Subject to fact pleading, mandatory disclosure
of classes of documents between the parties, ordered by a court,
should be possible.
18. The purpose of Option 2, as described
in paragraph 91 of the Commission Staff Working Paper is to address
the obstacle to claims posed by limited disclosure requirements
and the limited powers of national courts in many Member States
to order production of documents.
19. The rules governing disclosure in the
UK are described above in response to Option 1. In the UK a party
which is dissatisfied with the extent of his opponent's disclosure
can obtain a court order requiring the opponent to give further
specific disclosure or conduct a further search.
20. The UK experience has shown that the
disclosure of documents by order of the court is a useful component
Option 3: Subject to fact pleading, there should
be an obligation on each party to provide the other parties to
the litigation with a list of relevant documents in its possession,
which are accessible to them.
21. The purpose of Option 3, as described
in paragraph 92 of the Commission Staff Working Paper, is to facilitate
the identification by the parties of relevant documents in the
possession of another party.
22. In the UK, the standard disclosure procedure
already requires the mandatory disclosure of a list of documents
so that adoption of Option 3 does not appear to be necessary in
Option 4: Introduction of sanctions for the destruction
of evidence to allow the disclosure described in Options 1 to
23. The purpose of Options 4 and 5, as described
in paragraphs 93 and 94 of the Commission Staff Working Paper,
is to preserve evidence and ensure that it is not withheld from
24. A party dissatisfied with the extent
of his opponent's disclosure can obtain a court order requiring
the opponent to give further specific disclosure or conduct a
If such an order is made, failure to comply can amount to contempt
of court and may have serious consequences including the dismissal
of a party's claim or judgment being entered against him.
Option 5: Obligation to preserve relevant evicence.
Under this rule, before a civil action actually begins, a court
could order that evidence which is relevant for that subsequent
action be preserved. The party asking for such an order should,
however, present reasonably available evidence to support a prima
facie infringement case.
25. In the UK the courts have the power
to make an order for pre-action disclosure against the likely
An order is limited to such documents as the defendant ought to
disclose by way of standard disclosure.
In addition, the Court has a similar power to order a third-party
to produce documents before trial.
26. The UK acknowledges that limited powers
on the part of a claimant to demand the production of evidence
may constitute an obstacle to successful claims.
27. As pointed out above, however, in the
UK there is an extensive set of rules in place requiring the disclosure
of documentary evidence in civil proceedings.
28. The proposals give rise to the general
question whether it is appropriate to create specific rules applicable
to competition cases only and, moreover, whether it is appropriate
for EU law to amend the Member States' general rules of civil
procedure (except in certain specific targeted areas). The Commission
describes its rationale for such an amendment, in paragraph 52
to 53 of the Commission Staff Working Paper, to be that civil
litigation in the field of competition touches upon a particular
public interest and offers a number of specific aspects that mean
that the bringing of an action is unusually difficult.
29. We agree that the claimant in a competition
case may face difficulties proving his claim. However, the UK
believes that the Member States have the means to deal with this
problem within their rules of evidence. This has to be done in
a way that does not adversely affect the balance of the domestic
legal system. Therefore, in order to maintain consistency with
national laws, we consider that the rules of access to evidence
are best dealt with at the Member States level.
30. Since UK law already addresses most
of the issues raised in Question A in a comprehensive way, there
seems to be no need for amendments to the current law.
Are special rules regarding access to documents
held by a competition authority helpful for antitrust damages
claims? How could such access be organised? (Options 6-7)
Option 6: Obligation on any party to proceedings
before a competition authority to turn over to a litigant in civil
proceedings all documents which have been submitted to the authority,
with the exception of leniency applications. Issues relating to
disclosure of business secrets and other confidental information
as well as rights of the defence would be addressed under the
law of the forum (ie the law of the court having jurisdiction).
31. Question B appears to go wider than
Options 6 and 7 suggest. The question (whether special rules regarding
access to documents held by a competition authority may be helpful
for antiturst damages claims) raises a number of difficult issues,
including where the balance should be struck between (i) promotion
of private enforcement and avoiding wholly speculative claims;
(ii) promotion of private enforcement and protection of leniency
applicants; and (iii) the burdens borne by the claimant and the
competition authority respectively. These issues will need to
be considered in detail.
32. The purpose of Option 6, as desribed
in paragraph 73 to 77 and 95 of the Commission Staff Working Paper,
is to address the heavy evidential burden on the claimant and
improve his access to evidence in cases often involving a strong
asymmetry of information without losing the protection of business
33. Option 6 has two aspects: (a) the requirement
to disclose documents which have been made available to a competition
authority and (b) the proposal that the law of the forum should
apply to determine the disclosure of business secrets.
34. The first aspect of Option 6 appears
to be a less appropriate solution than standard disclosure. The
proposed test could lead to disclosure of a large number of documents
which are not relevent to the proceedings or, equally, non-disclosure
of documents which are relevant but which have not been submitted
to a competition authority.
35. In the UK, documents held by a competition
authority are not, as a general rule, available to claimants in
a damages claim due to the restrictions on disclosure contained
in Part 9 of the Enterprise Act 2002, in particular. Part 9 stipulates,
inter alia, that information which relates to the affairs
of an individual or any business of an undertaking must not be
disclosed unless certain conditions are met. Information which
has on an earlier occasion been disclosed to the public may be
disclosed, provided that certain conditions are met. Information
may be disclosed if the individual concerned or the person carrying
out the business and the person who provided the information consents.
However, a competition authority must comply with any court order
requiring disclosure (see legislation outlined above).
36. When a case is before the CAT, parties
wishing to claim confidentail treatment of documents or parts
of documents, including business secrets, may apply to the CAT
to have those documents excluded from disclosure provided certain
conditions are met. The request has to be made in writing within
14 days of sending the document to the Registrar and must indicate
the relevant passages and the figures or passages for which confidentiality
is claimed and must be supported in each case by specific reasons.
Whether particular information is to be regarded as confidential
is a matter for the Tribunal to decide in the individual case.
37. Confidentiality in the ordinary courts
follows CPR Rule 5.4(7). On the application of a party or any
person identified in the claim form, the court can restrict the
persons or classes of persons who may obtain a copy of the claim
form, order that they may only obtain a copy if it is edited in
accordance with the directions of the court or make such other
order as it thinks fit.
Option 7: Access for national courts to documents
held by the Commission. In this context, the Commission would
welcome feedback on (a) how national courts consider they are
able to guarantee the confidentiality of business secrets or other
confidential information, and (b) on the situations in which national
courts would ask the Commission for information that parties could
38. Option 7 suggests providing national
courts with access to documents held by the Commission. The purpose
of Option 7, as described in paragraphs 73 to 77 and 96 of the
Commission Staff Working Paper, is to gather feedback on how national
courts would themselves like to co-operate with the Commission.
39. We do not anticipate substantial difficulties
in our national courts guaranteeing the confidentiality of business
secrets or other confidential information. In the UK, there is
a working system of rules and principles dealing with the treatment
of confidential information in the courts.
Although confidentiality is not a bar to disclosure, the court
can conduct hearings in camera, impose reporting restrictions
or limit access to court documents, for example.
Before the CAT, confidential matters are not disclosed unless
they are essential for the decision. Furthermore, in the CAT a
confidentiality ring can be defined, eg restricting disclosure
to the legal representatives, who are subject to professional
codes of conduct, while the parties themselves may be excluded.
More generally, in the ordinary courts, the court can make various
provisions on the treatment of confidential information, eg conduct
hearings in camera, impose reporting restrictions or limit access
to court documents.
40. In relation to Option 6 we do not feel
that there is particular merit in an obligation being placed on
any party to proceedings before a competition authority to turn
over to a litigant in civil proceedings all documents which have
been submitted to the authority, with the exception of leniency
applications. As the second part of Option 6 suggest, however,
issues relating to disclosure of business secrets and other confidential
information as well as rights of the defence should be addressed
under the law of the forum (ie the law of the court having jurisdiction).
41. We understand that the situation set
out in Option 7, in which national courts would ask the Commission
for information, is not expected to arise very often in practice
in the UK because the courts would generally seek information
from the parties rather than from competition authorities. It
is, however, conceivable that a national court would ask the Commission
for a copy of any statement of objections issued by the Commission
in a case where the Commission has for some reason not proceeded
to a decision.
42. It is possible that the CAT might wish
to obtain information from the Commission in the event of a follow
on action for damages under section 47A CA 1998 but we should
have thought that, in general, the CAT would seek the information
from the parties.
Should the claimant's burden of proving the antitrust
infringement in damages actions be alleviated and, if so, how?
Option 8: Infringement decisions by competition authorities
of the EU Member States to be made binding on civil courts or,
alternatively, reversal of the burden of proof where such an infringement
Option 9: Shifting or lowering the burden of proof
in cases of information asymmetry between the claimant and defendant
with the aim of redressing that asymmetry. Such rules could, to
a certain extent, make up for the non-existent or weak disclosure
rules available to the claimant.
Option 10: Unjustified refusal by a party to turn
over evidence could have an influence on the burden of proof,
varying between a rebuttable presumption or an irrebuttable presumption
of proof and the mere possibility for the court to take that refusal
into account when assessing whether the relevant fact has been
43. The purpose of Options 8-10, as described
in paragraphs 36, 78 to 87 and 98 to 100 of the Commission Staff
Working Paper, is to alleviate the claimant's burden of proving
the infringement of competition law, in view of the difficulties
often faced by claimants arising from the unavailability of evidence.
44. Option 8 has two alternatives. The first
suggests that the civil courts should be bound by a decision of
the competition authorities of other Member States. The second
proposes a reversal of the burden of proof from the claimant to
the defendant where such a decision exists. Option 9 argues for
a reversal or lowering of the burden of proof in cases of uneven
access to information. Option 10 considers a range of consequences
for the defendant in case he refuses to turn over evidence without
45. Under UK law the burden of proof of
a breach of a statutory duty is on the claimant. The civil standard
of proof (balance of probabilities) applies. OFT/EU Commission
decisions are binding on the CAT, assuming that all relevant time-limits
for appeal have expired or that any appeal has been completed.
OFT decisions as to infringement and CAT decisions (on appeal
from OFT decisions) are binding in damages actions before the
ordinary courts under broadly similar conditions.
46. In the UK decisions of the OFT and the
EU Commission are binding in follow-on cases before the courts
and the CAT.
It follows from this that Option 8 would mean a widening of the
scope of Section 47A and Section 58 CA 1998 to decisions of competition
authorities of other Member States.
47. German law
already reflects the first alternative of Option 8 by making the
findings of the German and EC competition authorities, as well
as those of other Member States' competition authorities, binding
on courts dealing with private law damages actions.
48. The UK is open to consider this aspect
of Option 8. The binding effect of a decision of a competition
authority appears to be an adequate recognition of the imbalance
of power between claimant and defendant. If it can be shown that
a rule similar to the German one has positive effects on the bringing
of private actions, amendments of the domestic law could be considered.
However, detailed requirements would be needed in relation to
relevant time-limits for appeal. They should have expired or any
appeal should have been completed before decisions of other Member
States' competition authorities become binding on civil courts.
49. In relation to the alternative in the
second part of Option 8, ie changing the burden of proof, there
has to be a balance between the rights of the claimant and the
rights of the defendant, which could be jeopardised in such a
situation. Any changing of the burden of proof could raise issues
under Article 6 of the European Convention on Human Rights (ECHR)
relating to the right of the defendant to a fair trial.
50. Although we understand the problems
Option 9 aims to address, we foresee considerable practical problems
with its implementation. The option does not define what degree
of "asymmetry" would be required for triggering a reversal
of the burden or lowering of the standard of proof. In order to
be useful, a certain threshold of information asymmetry seems
to be required but the definition of this would appear to be difficult.
Moreover, it is unclear how the standard of proof could be lowered
further when the existing standard of proof is "on the balance
of probabilities". Generally, effective disclosure rules
such as those in the UK should obviate the need for any change
in the burden of proof. Furthermore, any lowering of the standard
of proof could increase the risk of gaming by claimants and unwarranted
51. We understand that under German law
the claimant only has to adduce prima facie evidence of
an abuse of dominance before this gives rise to a rebuttable presumption
in his favour.
However, considering the strong domestic rules of disclosure,
we do not see the need for any such provision in the UK.
52. Option 10 raises questions of proportionality
if a case can turn on the refusal to provide one piece of evidence.
One would also have to put forward criteria for defining when
a refusal to turn over evidence is "unjustified".
53. It is preferable for the domestic courts
to have a discretion as to the management of a case. For example,
in the UK, the refusal to hand over evidence may, at the court's
discretion, have similar adverse consequences to the destruction
of evidence eg failure to comply with an order of the court can
amount to contempt of court and may have serious consequences
including the dismissal of a party's claim or judgment being entered
against him. The emphasis should therefore be on dealing with
the failure to provide evidence by means, for example, of contempt
proceedings which would be more effective than altering or reversing
the burden of proof. Again any changing of the burden of proof
could raise Article 6 ECHR issues. In practical terms, it would
be necessary to prove that the evidence existed before any shift
in the burden of proof would be appropriate, which could be very
Should there be a fault requirement for antitrust-related
damages actions? (Options 11-13)
Option 11: Proof of the infringement should be
sufficient (analogous to strict liability).
Option 12: Proof of the infringement should be
sufficient only in relation to the most serious antitrust law
Option 13: There should be a possibility for
the defendant to show that he excusably erred in law or in fact.
In those circumstances, the infringement would not lead to liability
for damages (defence of excusable error).
54. The options suggest strict liability
(Option 11), strict liability in the most serious cases only (Option
12) and strict liability but with a defence that the defendant
excusably erred in law or fact (Option 13). The purpose of Options
11-13, as described in paragraphs 32 and 109 to 111 of the Commission
Staff Working Paper, is to facilitate private damages actions
by removing fault as a condition of liability for a breach of
competition law or to consider that the infringement itself constitutes
55. Article 81 is partly effects based as
an agreement is prohibited if it has as its "object or effect
the prevention, restriction or distortion of competition within
the common market". Article 82 requires "the abuse by
one or more undertakings of a dominant position within the common
market or a substantial part of it".
56. Under English case law, breach of Articles
81 and 82 EC constitutes a breach of the statutory duty created
by section 2(1) of the European Communities Act 1972. The cause
of action for breach of statutory duty is generally considered
to impose strict liability, ie there is no requirement of fault.
57. UK law does not contain a provision
equivalent to option 13, under which there would be no liability
if the defendant excusably erred in law or fact.
58. UK domestic law reflects Option 11 in
that it imposes strict liability for breach of Articles 81 and
82 EC. The UK therefore belongs to the large group of Member States
where the fault requirement does not form an obstacle to private
enforcement of competition law. Option 12 does not, therefore,
reflect the position in the UK.
59. Since it appears that it is only a minority
of Member States that do have a fault requirement,
the UK feels that there might be a case for the relevant Member
States to amend their rules rather than for action to be taken
at a European level.
60. Both the content and context of any
proposal along the lines of Option 13 would require careful consideration
because it would import a concept of excusable error, which would
be a new development in the UK.
How should damages be defined? (Options 14-17)
Option 14: Definition of damages to be awarded with
reference to the loss suffered by the claimant as a result of
the infringing behaviour of the defendant (compensatory damages).
Option 15: Definition of damages to be awarded with
reference to the illegal gain made by the infringer (recovery
of illegal gain).
Option 16: Double damages for horizontal cartels.
Such awards could be automatic, conditional or at the discretion
of the court.
Option 17: Prejudgment interest from the date of
the infringement or date of the injury.
61. Options 14-17 suggest compensatory damages,
recovery of illegal gain, double damages for horizontal cartels
and prejudgment interest respectively. The purpose of Options
14-17, as described in paragraphs 112 to 124 and 147 to 151 of
the Commission Staff Working Paper, is to consider the effects
of the definition of damages on incentives for claimants to bring
a case before a court.
62. UK courts apply general principles of
foreseeability and quantum where loss of profits is claimed to
restore the claimant to the position he or she would have been
in but for the unlawful conduct (see Crehan
63. Civil damages in the UK are primarily
focused on providing compensation for the actual loss suffered
by the claimant, and not on deterring or punishing the defendant.
In addition to purely compensatory damages, the courts also have
the power in certain circumstances to award aggravated damages
(which compensate the victim of a wrong for mental distress or
injury to feelings) or restitutionary damages (which aim to strip
away some or all of the gains by a defendant arising from a civil
wrong), or, in very limited circumstances, exemplary damages.
64. Damages must be assessed at the date
of the loss.
65. In cartel cases, a party claiming to
have been affected in the market by the existence of the cartel
will generally claim the "overcharge", ie the amount
by which the price of the goods or services in question have been
inflated over and above the price that would have been charged
had there been no cartel.
66. Pre-judgment interest is already available
at the discretion of the court. This can potentially extend to
interest from the date of the infringement. Interest may additionally
be awarded on the judgment debt at the rate for the time being
specified under section 17 of the Judgments Act 1838 (currently
67. The UK's overarching position is that
the availability, nature and calculation of damages are matters
of substantive law which should be left to Member States. We do
not believe that there is a need for a special regime to be established
at Community level or for competition law cases to be treated
differently from other damages cases.
68. In relation to the specific options
on which views are sought, Option 14 is generally available and
Option 15 is possible under the law in England and Wales but would
go against the general principles of damages in Scottish law.
69. However, we feel that the recovery of
illegal gain proposed in Option 15 may, in practice, give rise
to difficulties of proof, not least because the information is
with the defendant rather than the claimant, and could give rise
to further difficulties of how to divide the illegal gain among
claimants from different levels of the supply chain.
70. Option 16 proposes double damages for
horizontal cartels. While there is some scope in the UK for punitive
damages, they are only available in very limited circumstances
and there is no decided competition case where punitive damages
have been considered, The Governments current policy is that there
should be no further lessening through statute of the restrictions
on the availability of punitive damages in civil proceedings.
This reflects the view that the primary purpose of civil law on
damages is to provide for loss, and not to punish.
71. Option 16 could also raise practical
difficulties, for example, additional arguments might arise between
the parties as to whether a particular fact situation constitutes
a cartel and, therefore, gave rise to double damages. This could
add to the cost and length of proceedings.
72. Deterrence for the formation of cartels
may also be achieved by fines, imprisonment and disqualification
of company directors.
It is important to consider how best to achieve effective deterrence.
Which method should be used for calculating the
quantum of damages? (Options 18-20)
Option 18: What is the added value for damages actions
of use of complex economic models for the quantification of damages
over simpler methods? Should the court have the power to assess
quantum on the basis of an equitable approach?
Option 19: Should the Commission publish guidelines
on the quantification of damages?
Option 20: Introduction of split proceedingsbetween
the liability of the infringer and the quantum of damages to be
awardedto simplify litigation.
73. Options 18-20 ask three questions. Their
purpose, as described in paragraphs 125 to 146 and 152 to 155
of the Commission Staff Working Paper, is to demonstrate the variety
of techniques available for quantifying damages and to collect
views as to the suitability of the described methods in damages
quantification before civil courts.
74. The UK's overarching view is that the
quantification of damages is a matter of substantive law which
should be left to the courts of Member States to determine on
the basis of the evidence provided to them. We do not believe
that it would be appropriate or helpful to adopt uniform levels
of damages or to require the use of complex economic models to
75. In relation to Option 18, we are keen
for the courts to continue to calculate damages by reference to
the loss suffered by the claimant. The compulsory use of complex
economic models would be cumbersome and impractical, as over time
the efficacy of any particular model may be called into question
and different considerations may apply in different cases. In
addition, we are wary of imposing an extra layer of complexity
and expense as a result of the need to employ economists to prepare
the complex economic models.
76. It is unclear what is envisaged by the
"equitable approach", suggested at the end of Option
18. In the UK the courts will determine what is fair compensation
in an individual case on the basis of all the evidence and the
loss that the claimant has suffered. It is our view that a court
should be able to apply the Member State's rules for assessing
damages so that decisions have the merit of consistency and fairness
between cases and between claimants and defendants and may, if
necessary, be readily reviewed by a superior court.
77. In relation to Option 19, we have doubts
that the publication of Commission guidelines on the quantification
of damages would be helpful. It is unclear exactly what kind of
guidelines are envisaged or what status they would have. The damages
that are appropriate in an individual case will depend on the
loss that the claimant has suffered, and any prescriptive models
as to how these should be quantified or tariffs would risk either
over- or under-compensating the claimant.
78. In relation to Option 20, we do not
feel that split proceedings should, as a general rule, be compulsory.
It is already possible for the courts in England and Wales to
determine liability prior to deciding quantum if that appears
appropriate in an individual case. However, it would not be desirable
to introduce prescriptive provisions requiring this to occur in
every case or to attempt to define the circumstances in which
it will be appropriate.
Should there be rules on admissibility and operation
of the passing-on defence? If so, which form should such rules
take? Should the indirect purchaser have standing? (Options 21-24)
Option 21: The passing-on defence is allowed and
both direct and indirect purchasers can sue the infringer. This
option would entail the risk that the direct purchaser will be
unsuccessful in claiming damages as the infringer will be able
to use the passing-on defence and that indirect purchasers will
not be successful either because they will be unable to show if
and to what extent the damages are passed on along the supply
chain. Special consideration should be given in this respect to
the burden of proof.
Option 22: The passing-on defence is excluded and
only direct purchasers can sue the infringer. Under this option
direct purchasers will be in a better position as the difficulties
associated with the passing-on defence will not burden the proceedings.
Option 23: The passing-on defence is excluded and
both direct and indirect purchasers can sue the infringer. While
the exclusion of the passing-on defence renders these actions
less burdensome for the claimants, this option entails the possibility
of the defendant being ordered to pay multiple damages as both
the indirect and direct purchasers can claim.
Option 24: A two-step procedure, in which the passing-on
defence is excluded, the infringer can be sued by any victim and,
in a second step, the overcharge is distributed between all the
parties who have suffered a loss. This option is technically difficult
but has the advantage of providing fair compensation for all victims.
79. Options 21 to 24 set out different possibilities
of alowing or disallowing the passing-on defence and giving or
denying standing to indirect purchasers. The purpose of Options
21-24, as described in paragraphs 38, 39, 156 to 180 and 181 to
187 of the Commission Staff Working Paper, is to examine the possible
benefits and disadvantages the passing-on defence and indirect
purchaser standing could have for private enforcement of competition
80. The Commission Staff Working Paper draws
attention to the need to weigh the problems of proof posed by
tracing an overcharge through the hands of a potentially long
chain of purchasers against the desirability of having an effective
recovery mechanism available to all affected purchasers.
81. Neither the "passing-on" defence
nor "indirect purchaser" standing is the subject of
settled case law in the UK. The broad language of the ECJ in the
suggests that indirect purchasers may have standing when the Court
says that "all" individuals harmed by infringement of
Article 81 EC can sue for loss. However, they will have to prove
loss and causation, among other things, as in any other claim.
82. Different models can be discerned from
a comparative law perspective that may help to illustrate some
of the arguments.
83. The recent 7th Amendment of the German
Act against Restraints of Competition
stipulates, in section 33(3) GWB, that damages are not excluded
simply because the goods or services have been sold on. Although
theoretically it is possible to invoke passing-on as a defence,
practically this can only be done within the very narrow framework
of the German civil law concept of "Vorteilsausgleichung",
ie mitigation of damages by benefits received. Thus, in principle,
German law has not ruled out the passing-on defence, but it has
effectively made it very difficult to use.
84. Under Federal US law the passing-on
defence is not available to a cartelist. A majority of the US
Supreme Court ruled against the passing-on defence in Hanover
Shoe Inc. v United Shoe Machinery Group.
The court held that measuring the impact of passing-on and having
to calculate the total overcharge was too complex and, to go beyond
this and apportion overcharge along the chain of purchasers would
increase the complexity and cost of competition enforcement. Possibly,
the passing-on defence could lead to an enrichment of the cartelist
who would not have to fear claims by indirect purchasers from
further down the chain because they would not be interested in
suing considering the small loss they might have suffered. In
a majority of the US supreme Court stressed that allowing the
passing-on defence would cause massive efforts to apportion the
ovecharge along the supply chain. This again would increase the
complexity of damages suits, thus seriously undermining their
85. In Illinois Brick, the majority
of the Supreme Court also restricted the class of potential claimants,
so that only those who are direct purchasers from the cartelists
may sue. We understand, however, that around 30 states have reversed
the effect of the Supreme Court's judgment as far as actions in
their state courts are concerned.
86. The restriction on indirect purchasers
suing in US Federal law was justified as a necessary adjunct to
disallowing the passing-on defence so as to prevent multiple liability
being imposed on the cartelist. It was also considered more likely
to facilitate successful private enforcement of competition law
if the damage could not be laid off to a more dispersed (and proportionally
less affected) class of claimants who will have less incentive
to bring the necessary claims to hold cartelists to account. Another
argument put forward was that cartelists should not benefit from
the potential difficulties of proof for an indirect claimant in
87. To permit indirect purchasers to sue
could also lead to over-recovery from the infringer. (Consolidation
of claims might, however, be used to reduce or eliminate the risk
of this.) Advocates of indirect purchaser standing
have argued that allowing indirect purchasers to sue might promote
a strong form of deterrence against the infringer.
88. There might be cases where the loss
of an indirect purchaser can be quantified and is sufficient to
justify a case, such that confirming the standing of indirect
purchasers could result in action. This could be especially useful
if a direct purchaser is reluctant to sue an infringer because
it might jeopardise their relationship with suppliers, particularly
when the supplier has a dominant position in the market.
89. The argument of the US Supreme Court
that double recovery should be avoided requires careful consideration,
together with an examination of what may be done to reduce the
risk. However, the requirement of a direct casual link between
the Article 81 infringement and the damage caused, among other
things, already provides a limitation on the class of persons
who can claim. In addition, the claimant still has to show an
overcharge and the amount of it, that he has suffered loss caused
by the breach, that it is not too remote, etc. We believe that
consumers and other end-users should have the right to sue as
they bear the brunt of infringements and, therefore, a marked
disadvantage of Option 22 is that it would appear to preclude
claims by consumers and other end-users.
90. We feel that more work needs to be done
to quantify the risk together with the complexities involved,
especially concerning proof and costs. The difficulties involved
in recognising passing-on and indirect purchasers' standing needs
to be balanced against improving the effectiveness of private
enforcement of competition law.
Should special procedures be available for bringing
collective actions and protecting consumer interests? If so, how
could such procedures be framed? (Options 25-26)
Option 25: A cause of action for consumer associations
without depriving individual consumers of bringing an action.
Consideration should be given to issues such as standing (a possible
registration or authorisation system), the distribution of damages
(whether damages go to the association itself or to its members),
and the quantification of damages (damages awarded to the association
could be calculated on the basis of the illegal gain of the defendant,
whereas damages awarded to the members are calculated on the basis
of the individual damage suffered).
Option 26: A special provision for collective action
by groups of purchasers other than final consumers.
91. Option 25 sets out three aspects that
require consideration in the context of collective actions. These
are standing, distribution and quantification of damages. Option
26 suggests considering some form of group action for groups of
litigants other than final consumers. The purpose of Options 25
and 26, as described in paragraphs 31, 198 to 200 and 201 of the
Commission Staff Working Paper, is to indicate the scope to introduce
additional means of collective consumer redress in those Member
States that do not have specific legislation on the issue.
92. The UK agrees with the Commission that
there may in principle be merit in encouraging claims by final
consumers, because these contribute directly to the overarching
aim of compensating those who have suffered loss and, moreover,
that it will be very unlikely for practical reasons that consumers
and purchasers with small claims will bring an action for damages
for breach of competition law under present conditions.
93. As the Commission acknowledges in paragraph
197 of the Commission Staff Working Paper the UK has already introduced
the possibility for bodies specified by the Secretary of State
for Trade and Industry to bring actions for damages on behalf
of two or more individual consumers before the CAT.
So far the only body to be designated to do this is Which?
(formerly the Consumers' Association), who were awarded these
powers as from 1 October 2005.
94. In order to be specified to bring claims
on behalf of consumers, bodies must meet the folowing criteria:
The body is so constituted, managed
and controlled as to be expected to act independently, impartially
and with complete integrity;
The body is able to demonstrate that
it represents and/or protects the interests of consumers. This
may be the interests of consumers generally or specific groups
of consumers; and
The body has the capability to take
forward a claim on behalf of consumers.
95. Additionally, some consumer bodies also
operate trading arms. The criteria for designation note that the
fact that a body has a trading arm will not disqualify it from
being able to bring consumer group claims, provided that the trading
arm does not control the body, and any profits of the trading
arm are only used to further the stated objectives of the body.
96. Any claims can only be brought as follow
on actions, ie on the back of an infringement decision made by
either the OFT or the EU Commission: Section 47A(5) and (6) CA
97. Section 47B(6) CA 1998 stipulates that
the damages awarded in respect of a consumer claim must be awarded
to the individual concerned, but the Tribunal may with the consent
of the specified body (consumer organisation) and the individual
order that the sum awarded be paid to the specified body.
98. There are several requirements to be
met for a specified body to bring a claim.
As with other claimants, formal requirements include the submission
of a claim form containing the name and address of the claimant,
the defendant and the specified body etc. In addition, the claim
form has to contain a concise statement of the relevant facts
and identify the relevant findings in the decision of the competition
authority on the basis of which the claim for damages is being
99. As a matter of general law, there is
a possibility of Group Litigation Orders (GLOs) under Part 19
of the CPR.
These Orders are subject to strict supervision by the court and
may only be made with the consent of a senior judge. They are
likely to be made when more than one party has the "same
interest" in a claim and there are common issues of law or
related fact. In relation to Scotland, there is no direct equivalent
to this in the Rules of the Court of Session, although it is possible
to arrange administratively for cases to be dealt with together,
provided parties agree.
100. The UK needs to observe the functioning
of its rather recent legislation before any evaluation or conclusions
can be drawn. So far there have not been any cases brought by
Which? under section 47B CA 1998. However, these are still
early days and there appear to be no reasons why Which?
will not bring an action in due course. Additionally, recent reforms
in respect of conditional fees have, to some extent, addressed
any potential issues of funding and may provide a suitable mechanism
for designated bodies wishing to bring claims.
101. We shall be happy to share the UK experience
with the Commission and other Member States that are interested
in passing similar legislation. We feel, however, that it would
be premature for action at Community level at the moment that
would instigate change to the UK systems which have just been
put into operation.
102. Actions being brought by authorised
organisations have the potential advantage of saving time and
money for the parties. We believe that a number of elements are
important in any such system. For example, claims should be brought
only by authorised bodies, to ensure that the organisation bringing
a claim is reputable, suitable and capable of bringing the action.
Also, the court's permission should be sought before a claim is
brought to avoid spurious or tactical claims being brought against
103. The cost and complexity of competition
cases and the need for proportionality would support a de minimis
rule, eg where the effective loss to the indivdual is minimal.
104. There is a view that collective actions
brought other than by a consumer organisation are complex, costly
and time consuming without bringing particular benefits. These
criticisms would have to be taken into account in the design of
any possible rules on such collective actions.
Should special rules be introduced to reduce the
cost risk for the claimant? If so, what kind of rules? (Option
Option 27: Establish a rule that unsuccessful claimants
will have to pay costs only if they acted in a manifestly unreasonable
manner by bringing the case. Consideration could also be given
to giving the court the discretionary power to order at the beginning
of a trial that the claimant not be exposed to any cost recovery
even if the action were to be unsuccessful.
105. Option 27 suggests considering special
cost rules for competition-related damages claims, including giving
special discretionary powers to the court to orderunder
certain conditionsthat the claimant need not pay costs
even if he loses the case. The purpose of Option 27, as described
in paragraphs 43, 214 to 220 of the Commission Staff Working Paper,
is to prevent the disincentive effect of the "loser pays"
principle, especially in those competition-related damages claims
in which the outcome cannot be clearly assessed at the outset
of the action or in cases in which very small amounts of damages
are being claimed. This option seeks to confine the application
of the loser pays principle in relation to the claimants to cases
where it was manifestly unreasonable to being an action.
106. The central principle that applies
to costs in the UK is that the unsuccessful party will normally
be expected to pay the costs of the successful party, but the
court has discretion to order otherwise. In determining what costs
order is appropriate the courts have a wide discretion to consider
all the circumstances of the case, including the behaviour of
the parties and the way that they have conducted the case (for
example whether it was reasonable for a claimant or a defendant
to have made or defended a particular allegation or issue in the
proceedings). In most cases, the parties will agree between them
the amount of costs which should be recoverable. If agreement
cannot be reached, it is open to either party to apply to the
court for it formally to assess the amount of the costs. In the
case of the CAT, the Tribunal has discretion in relation to costs.
The CAT has exercised this discretion so as not to award costs
against an unsuccessful claimant in a number of cases, with the
policy intention of not discouraging appeals against decisions
of the UK competition authorities.
107. Generally speaking, contingency fees
as understood in the USA are not available in England and Wales.
Contingency fees usually work on the basis that the lawyer charges
a percentage of the compensation awarded. Contingency fees are
currently illegal for contentious business (proceedings before
a court) but can be used in non-contentious business (probate,
tribunals and claims up to issue of proceedings) where settlement
is the ultimate objective. Solicitors' practice rules allow the
use of contingency fees in non-cotentious business but barristers
cannot use them at all.
108. Conditional Fee Agreements ("CFAs"),
introduced by the Courts and Legal Services Act 1990, are the
primary form of agreement between clients and solicitors. The
Act made provision for agreements in which it was explicit that
part or all of the solicitor's fees were payable only in the event
of success. CFAs can be used in all civil proceedings other than
family. CFAs are not permitted in criminal proceedings.
109. CFAs allow a solicitor to take a case
on the understanding that, if the case is lost, he will not charge
his client for the work he has done (or he will charge at a lower
rate). However, if the case is successful the solicitor can charge
a success fee on top of his normal fee, to compensate him for
the risk of not being paid. That success fee is calculated as
a percentage of his normal fee and the level at which the success
fee is set reflects the risk involved (the success fee can be
up to 100% of the agreed or taxed expenses paid by the losing
side). The success fee is recoverable from the losing side. In
Scotland, conditional fees and success fees are also now permitted,
but the success fee is paid by the client, not the other side.
It is is open to a party to take out insurance against the possibility
of being ordered to pay the other party's costs.
110. The UK recognises that the high cost
risks involved in competition actions may operate as a disincentive
to bringing private actions. CFAs go someway to reducing this
111. The UK also holds the view that it
is partcularly difficult to asess the prospects of a case before
trial. However, we believe that, as a matter of domestic law,
cost rules in private damages claims following competition law
infringements should not be treated any differently from other
civil cases, in order to keep the domestic cost rules consistent
and fair to all concerned.
112. It is important that the courts have
the discretion to reach a decision on costs in individual cases
that is fair to both parties in all the circumstances of the case,
and we would not support any prescriptive provision which would
restrict that discretion. It is also important to recognise the
interests of the defendantfor example, Option 27 suggests
that even a successful defendant should have to pay costs if the
claimant has not acted "in a manifestly unreasonable manner"
in bringing the case. This may be unfair to a defendant who has
successfully resisted a claim.
113. The first part of Option 27 entails
other potential disadvantages. For example, it is a very high
burden and possibly unfair for the defendant to have to prove
that the claimant "acted in a manifestly unreasonable manner"
and the need to prove this might well result in further costs
and legal argument while this is being resolved; also, even if
the defendant succeeds in the main action and in proving the "manifestly
unreasonable manner" the claimant may prove not to have sufficient
114. In competition cases, the courts and
the CAT have discretion to decide on the costs that should be
awarded, although they do not do this at the beginning of the
trial. Hence, the suggestions made in the second part of option
27 are (at least partly) realised in the UK. However, it may be
unreasonable in private law proceedings for the court to decide
at the beginning that the claimant does not have to pay any costs
115. There are certain other risks involved
in amending the costs rules, for example, that a reduced cost
risk could increase the number of ill-founded actions being brought.
A proliferation of ill-founded actions could result in a significant
increase in the costs to business.
116. We would not, therefore, support any
prescriptive provision in this area. Rather than overriding the
general principles of cost recovery in each Member State, other
proposals in the Green Paper may be more effective, such as providing
for a body like Which? to bring actions for damages on
behalf of consumers, as discussed in our response to Question
How can optimum co-ordination of private and public
enforcement be achieved? (Options 28-30).
Option 28: Exclusion of discoverability of the leniency
application, thus protecting the confidentiality of submissions
made to the competition authority as part of leniency applications.
Option 29: Conditional rebate on any damages claim
against the leniency applicant; the claims against other infringerswho
are jointly and severally liable for the entire damageremain
Option 30: Removal of joint liability from the leniency
applicant, thus limiting the applicant's exposure to damages.
One possible solution would be to limit the liability of the leniency
applicant to the share of the damages corresponding to the applicant's
share in the cartelised market.
117. Options 28-30 set out a variety of
possible ways of dealing with leniency applicants. Option 28 would
exclude discoverability of a leniency application. Option 29 contemplates
a conditional rebate on any damages against the applicant. Option
30 considers ways of limiting the applicant's exposure to damages.
The purpose of Options 28-30, as described in paragraphs 221 to
236 of the Commission Staff Working Paper, is to ensure optimal
co-ordination between leniency programmes and the rules on damages
118. In common with other Member States,
the UK regime displays a number of features which are aimed at
optimising the co-ordination of public and private enforcement
when matters are before the courts. The OFT has the power to act
as amicus curiae in private competition law actions and
submit observations to a national court on issues relating to
the application of Article 81 or 82 EC Treaty.
The OFT may, acting on its own initiative, submit written observations
to a national court on issues relating to the application of Article
81 or 82 of the EC Treaty. With the permission of the court in
question, it may also submit oral observations. For the purposes
of the preparation of the OFT's investigations, the OFT may request
the court to transmit or ensure the transmission to it of any
documents necessary for the assessment of the case.
119. Leniency is an essential tool in the
investigation of cartels. The UK believes that in making it easier
to bring private actions, undertakings must not be discouraged
from applying for leniency.
120. As regards Option 28, the Commission
Staff Working Paper states that "[i]t might ... be necessary
to exclude not only the actual corporate statement but also to
disallow that a claimant seeks through disclosure the documents
in the form submitted by the leniency applciant to a competition
authority." The UK is open to consider a varient of Option
28, subject to the need to accommmodate any exclusion within the
121. The UK believes that any exclusion
could cover not only the national equivalents of the "Corporate
statement", but all material created to support an undertaking's
leniency application also. In the UK, such material could include
transcripts of interviews and witness statements. An exclusion
of this type would ensure that leniency applicants do not place
themselves in a position worse than that of the other members
of the cartel.
122. However, in our view, there should
be no blanket exclusion of discoverability of pre-existing documents,
as this would confer advantages in litigation which would not
have been obtained but for the leniency applicationthird
party rights should, so far as possible, not be affected That
said, it may be that a request in the form of a request for all
documents submitted to a competition authority should be rejected.
123. Adoption of Option 29 or 30 would create
an additional incentive for an undertaking to apply for leniency
but these options could bring some disadvantages. For example,
adoption could also mean that a claimant is not fully compensated
for his loss and thereby reduce his incentives to bring an action.
Also, if other infringers are insolvent, say, the ability of the
claimant to recover damages in full from the leniency applicant
would be essential. As regards Option 30, claimants are likely
to be discouraged from bringing an action if they have to define
the relevant market. If market definition is to play a role, it
must be for the cartelists, rather than the claimant, to convince
the court at their own cost of the correct market definition.
124. As mentioned above, the UK's view is
that policy options should not confer advantages in litigation
which would not have been obtained but for the leniency applicationthird
party rights should, so far as possible, not be affected (and
certainly not in contravention of the ECHR). A compromise may
be to allow third parties to sue and obtain judgment against the
leniency application under normal principles of joint and several
liability, but allow the leniency applicant, in turn, to seek
contributions of up to 100% from the other cartelists if they
have sufficient financial resources.
125. Various types of leniency are available
in the UK in respect of both horizontal cartels and vertical price
fixing. The OFT has the power to grant full immunity or a lesser
reduction in the level of fines, depending on (i) whether an administrative
or criminal investigation is already under way and (ii) whether
undertakings have already come forward. The various types of lieniency
available in the Member States would need to be taken into account
in any implementation of Options 29 and 30 and we feel that this
whole area merits further detailed consideration.
Which substantive law should be applicable to
antitrust damages claims? (Option 31-34)
Option 31: The applicable law should be determined
by the general rule in Article 5 of the proposed Rome II Regulation,
that is to say with reference to the place where the damage occurs.
Option 32: There should be a specific rule for damages
claims based on an infringement of antitrust law. This rule should
clarify that for this type of claims, the general rule of Article
5 shall mean that the laws of the states on whose market the victim
is affected by the anti-competitive practice could govern the
Option 33: The specific rule could be that the applicable
law is always the law of the forum.
Option 34: In cases in which the territory of more
than one state is affected by the anti-competitive behaviour on
which the claim is based and where the court has jurisdiction
to rule on the entirety of the loss suffered by the claimant,
it could be considered whether the claimant should be given the
choice to determine the law applicable to the dispute. This choice
could be limited to choose one single applicable law from those
laws designated by the application of the principle of affected
market. The choice could also be widened so as to allow for the
choice of one single law, or of the law applicable to each loss
separately or of the law of the forum.
126. The purpose of Options 31-34, as described
in paragraphs 241 to 254 of the Commission Staff Working paper
is to address the specific difficulties that may arise in damages
claims following cross-border infringements of competition law.
The Commission fears that in subsequent civil action, the laws
of several states could be applicable to the claim. We agree with
the Commission that this would make litigation extremely complicated
and should therefore be avoided.
127. As to handling, Question K is already
being debated at the EU level in the context of the negotiations
of the proposed Rome II Regulation. We understand that it is likely
that polictical agreement on that Regulation within the Council
will be made during the course of the next few months so that
we question whether it is necessary for there to be further discussion
of Question K in the context of the Green Paper, until the final
form of the Regulation is clear.
128. On the assumption that breaches of
competition law are to be characterised as being tortious in nature,
the applicable UK law in such cases is governed by the Private
International Law (Miscellaneous Provisions) Act 1995.
Under that Act, as a general rule, the applicable law in tort
claims is "the law of the country in which the events constituting
the tort in question occur". Where elements of those events
occur in different countries, the applicable law under the general
rule is to be taken as being "the law of the country in which
the most significant elements of those events occurred."
129. However, the general rule can be displaced
if it appears from a comparison of the significance of the factors
which connect a tort with the country whose law would be applicable
under the general rule and the significance of any factors connecting
the tort with another country "that it is substantially more
appropriate for the applicable law for determining the issues
arising in the case, or any of those issues, to be the law of
that other country".
130. It is likely that in cases for breaches
of competition law, the acts alleged to give rise to the tort
and the corresponding injury or damage to competitors, downstream
purchasers and ultimately consumers may occur in more than one
country. Applying the legislation above, the applicable law would
then be determined by reference to where the "most significant
elements of the events" constituting the tort occur. This
would necessitate looking at the facts of each particular case
and consideration of in which countries the conduct causing the
harm took place and where the relevant damage occurs. It would
then be necessary to assess the significance of those elements.
131. The current UK law has created a system
that allows for flexibility in dealing with different circumstances.
132. This is the option favoured by the
UK. Stakeholders in the UK have also commented that this approach
appears the most workable and likely to lead to greater certaintythose
wishing to pursue a damages claim will know that once jurisdiction
has been decided under the Brussels I Convention/Regulation 44/2001,
the law of the Member State in which the proceedings are being
heard will apply. If there is one applicable law, rather than
several, the costs of bringing an action will be reduced and may
encourage private enforcement of competition rules. The "law
of the forum" would always be a Member Statethus avoiding
the situation described in Option 31 above where jurisdiction
might be in an EU country, but the applicable law may be that
of a non-EU country.
Options 31 and 32
133. These options propose that the applcable
law should be determined by reference to Article 5 of the proposed
Rome II Regulation. The UK has previously expressed concerns about
Article 5 of the Rome II proposal. These arise because we think
that the proposal may result in more than one applicable law.
We consider this an unduly complex result that will not help to
encourage claims, or reduce legal costs. In addition, commercial
stakeholders in the UK have expresed their concern that the proposal
134. Furthermore, we would be concerned
if the law of a non-EU-state were able to determine conditions
of competition within the single market. This could occur when
an event within the EU caused damage both within and outside the
EU. Although an EU country might have jurisdiction the applicable
law may be that of a non-EU country. Whether the law of such a
country would recongise breaches of competitition law in the same
way as the EU does is outside our field of expertise.
135. The purpose of Option 34 as set out
in paragraph 250 of the Commission Staff Working Paper is to avoid
the specific difficulties which may arise under Options 31 to
33 and which could render litigation very complex. This would
particularly be the case where the court has the power to rule
on the entirety of the loss suffered and in cases in which the
markets affected are situated in more than one state.
136. We feel that there are some advantages
in providing the parties to an action with the freedom to choose
the relevant applicable law. It would be "consumer friendly"
to provide a claimant who might have a special preference for
a particular jurisdiction with a choice. We question, however,
whether the ability to choose needs to be confined to claimantsdefendants
might also have a preference. That said, the ability merely to
choose one single applicable law from the laws designated (by
the application of the principle of affected market) would facilitate
claims for the claimant and the handling of a case for the court
dealing with it. We understand, however, that in the context of
the Rome II Regulation there is little support among the other
Member States for a choice of law to be available in competition
Should an expert, whenever needed, be appointed
by the court? (Option 35)
Option 35: Require the parties to agree on an expert
to be appointed by the court rather than by themselves.
137. Option 35 suggests that the parties
would have to agree upon an expert, who would then be appointed
by the court. The purpose of Option 35, as described in paragraphs
259 to 260 of the Commission Staff Working Paper, is to increase
the expertise available in court especially where Member States
do not provide for specialist courts. While external experts may
increase the expertise available in court they may also boost
the costs of litigation. It is on this basis that the Green Paper
argues that a provision requiring the parties to agree on an expert
to be appointed by the court may serve to both increase the expertise
and save costs.
138. In the UK, parties may usually appoint
one or more experts to provide evidence before the court on technical
issues, provided that the court gives permission.
Written questions may be put by the parties on the opponent's
expert report for clarification purposes. The court may direct
experts to narrow down issues in proceedings. Single joint meetings
are rare. It follows that experts are party-led, not court appointed.
The CPR provide that no party may use an expert without the court's
permission, and the court may direct that evidence is to be given
by a single joint expert. Joint court appointed experts are not
known before the CAT, although the CAT has the power to make such
139. The UK notes that the Commission has
taken up the question of how to increase the available expertise
in court. As the Commission Staff Working Paper itself stresses
in paragraph 259, this option is particularly aimed at Member
States that do not provide for specialist courts or panels. In
the UK, competition cases are heard both by the general courts
and by the CAT, which was created by the Enterprise Act 2002.
140. For the purpose of ensuring consistency
of decision-making by national courts experience of applying Articles
81 and 82 of the EC Treaty will be concentrated in a small number
of judges in the Chancery or Queens Bench Divisions of the High
Court. The judges in the Chancery Division have been appointed
to the panel of chairmen of the CAT.
141. There is, however, a marked reluctance
in the UK among the parties to use joint experts and we feel that
any requirement for a single, court appointed expert is likely
to prove unpopular.
Should limitation periods be suspended? If so,
from when onwards? (Option 36)
Option 36: Suspension of the limitation period for
damages claims from the date proceedings are instituted by the
Commission or any of the national competition authorities. Alternatively,
the limitation period could start running after a court of last
instance has decided on the issue of infringement.
142. Option 36 looks at extending the time-limit
for bringing claims by suspending limitation periods from the
moment a competition authority (Commission or national competition
authority) institutes proceedings. The alternative links the commencement
of the limitation period to the time of a judgment of a court
of last instance. The purpose of Option 36, as described in paragraphs
271 to 272 of the Commission Staff Working Paper, would appear
to be to keep the claimant's right to claim open until administrative
proceedings have run their course.
143. In England and Wales, the time limit
in which to institute proceedings is six years.
The time limit starts on the date the wrongful act caused the
damage in issue, subject to fraudulent concealment.
The equivalent time limit in Scotland is determined by the prescriptive
period of five years as laid down by section 6 of the Prescription
and Limitation (Scotland) Act 1973. The time limit runs from when
the loss occurs, but any delay in raising an action that is caused
by fraud or the inducement of error, or the legal disability of
the claimant, will not count towards this period (section 6(4)
of the 1973 Act).
144. Damages claims to the CAT must be brought
within two years of the OFT/EU Commission decision relied upon
under section 47A CA 1998 (see CAT Rules of Procedure).
145. We appreciate that suspension of the
limitation period may be appropriate in certain cases. However,
the UK's view is that any suspension of the limitation period
should only be available in certain narrowly defined cases and
there is a need to avoid open-ended liability which could create
uncertainty and unfairness. We believe limitation periods are
best dealt with at Member State level.
Is clarification of the legal requirement of causation
necessary to facilitate damages actions?
146. The purpose of Question N, as described
in paragraphs 273 to 276 of the Commission Staff Working Paper,
is to consider a possible clarification of the legal requirement
of causation in order further to facilitate damages actions. The
Commission Staff Working Paper refers to the diverse approaches
different legal systems of the Member States adopt, such as "foreseeability",
"direct cause" and "adequate cause" but concedes
that, arguably, these will not lead to diverging results.
147. The principle of causation requires
a causal link between the tort and the injury or loss suffered
and that the injury or loss is not too remote because it is not
reasonably foreseeable. In order to prove causation, in the UK
the claimant must show that it is more likely than not that the
damage would not have occurred "but for" the breach
of duty. In other words, if the damage would have occurred irrespective
of the infringement, the "but for" test would not be
148. The requirement of causation is a core
element of any domestic law of damages. The legal principles governing
causation are very well-established and form a central part of
the common law in the UK. It is a fundamental principle that the
loss suffered by the claimant must have been caused by the act
or omission of the defendant.
149. Any modification in one particular
area of the civil law would have implications for the civil law
generally. As this is an area of substantive law, it should be
a matter for the courts of each Member State, and provisions at
Community level would be inappropriate,
150. The potential obstacles to private
actions stem from the problem of obtaining evidence to show that
in a given case the requirement of causation is fulfilled, rather
than from each Member State's formulation of principles of causation.
Given that the principles of causation are already clear in UK
law and that very wide rules of disclosure of information address
the problems of evidence,
we do not feel the need for any further action in this area.
Are there any further issues on which stakeholders
might wish to comment ?
151. There are no further issues on which
the UK would wish to comment.
152. The UK has taken a number of measures
to strengthen the means of private enforcement of competition
law in recent years. The Competition Act 1998 and especially the
Enterprise Act 2002 in particular have introduced new mechanisms
for bringing private actions on an individual and a collective
153. We believe that where Member States
(including the UK) are facilitating private actions it must remain
open to those Member States to take full stock of the experience
gained. Before further changes are made, therefore, the Member
States must have the opportunity to evaluate their relatively
154. We are aware that there is a significant
amount of variation among the 25 Member States as regards the
shape of a system for damages claims for infringements of competition
rules. The questions raised in the Green Paper correctly identify
the issues which will have to be considered in any debate about
private damages actions for breach of EC competition law.
155. Any such debate will have to consider
carefully the individual civil law systems of the Member States
and how issues such as access to evidence and the burden of proof,
the role of public enforcement, the availability of damages and
how to treat leniency applicants interact. We support the general
aim of facilitating and strengthening private enforcement of competition
law by way of private actions for damages throughout the whole
of the European Union.
156. We feel that the next steps should
be detailed discussion of the key issues in order to increase
understanding, to disseminate and encourage best practice and
to consider what further action might be taken by the Member States
and by the Commission.
97 These include the introduction of provisions on
follow on actions (after public law enforcement) before the Competition
Appeal Tribunal by the amendments to the Competition Act (CA)
1998 made by the Enterprise Act (EA) 2002; the ability of consumer
bodies to bring claims pursuant to the amendments to the Competition
Act 1998 made by the Enterprise Act 2002; and the binding effect
of decisions (before the CAT and the ordinary courts) and section
16 of the Enterprise Act 2002 on provisions on transfer of proceedings
between the High Court and the CAT. Back
SI 2003/1372. Back
CPR Rule 31.6. Back
CPR Rule 19. Back
CAT Rules 19(2)(k) and in CPR Rule 31.12. Back
CPR Rules 31.5, 31.6, 31.8 and 31.10. Back
See above, CAT Rule 19(2)(k) and in CPR Rule 31.12. Back
Supreme Court Act 1981, section 33(2) and the County Court Act
1984, section 52(2). Back
CPR Rule 31.16(4) and (5). Back
Supreme Court Act 1981, section 4(2) and the County Court Act
1984, section 53. Back
See CAT Rule 53. It applies to claims for damages as well as
to other proceedings before the CAT (see CAT Rules 3 and 30). Back
Paragraph 1(2) of Schedule 4 to the EA 2002 which applies to
the CAT, CAT Rule 16(8), see also CPR Rule 5.4. Back
See CPR Rule 5.4. Back
See CPR Rule 5.4. Back
Section 47A (6) and (7) of CA 1998 (inserted by Section 18 EA
Section 58A(2), (3) and (4) of CA 1998. Back
See above. Back
Section 33 (4) of the German Act against Restraints of Competition
("Gesetz gegen Wettbewerbsbeschrankungen",
Section 20(5) Act against Restraints of Competition (Gesetz
gegen Wettbewerbsbeschrankungen, "GWB"). Back
See paragraph 102 of the Commission Staff Working Paper. Back
Crehan v Inntrepreneur Pub Company  EWHC 1510 (Chancery
Division);  ALL ER (D) 354 (Jun); CA,  EWCA Civ 637,
21 May 2004. Back
Arkin v Borchard Lines Ltd  Eu LR 232, QBD (preliminary
issues); judgment  EWHC 687 (Comm),  ALL ER (D) 173. Back
Crehan v Inntrepreneur Pub Company,  EWCA Civ 637 [CA)
at paragraphs 172 et seq. Back
Section 36 et seq CA1998 (penalties); section 188 et seq EA2002
(cartel offence); Company Directors Disqualification Act 1986. Back
Case C-453/99 Courage Ltd v Crehan (2001) ECR I-6297. Back
Gesetz gegen Wettbewerbsbeschrankungen ("GWB"). Back
392 US 481, 88 S Ct 2224, 20, L Ed 2d 1231 (1968). Back
Illinois Brick Co v Illinois, 431 U.S. 270 (1977). Back
See Davis, Ronald W, Indirect Purchaser Litigation: ARC America's
Chickens Come Home to Roost on the Illinois Brick Wall,
65 Antitrust L J 375 (1997) for further background. Back
Landes, Posner, University of Chicago Law Review 46 (1979),
p 602-635. Back
Section 19 EA 2002 amending the CA 1998 by inserting new sections
47B and 47A. Back
See CAT Rules 30 to 33. Back
CPR Rule 19.11, Civil Procedure (Amendment) Rules 2000, Statutory
Instrument 2000 No. 221 (L.1). Back
CAT Rule 55. Back
Article 15 of Regulation 1/2003. Back
Practice Direction-Competition Law-Claims relating to the Application
of Articles 81 and 82 of the EC Treaty and Chapters I and II of
the competition Act 1998. Back
The applicable jurisdiction is determined by EC Council Regulation
CPR Rule 35.4. Back
CAT Rule 19(h). Back
Section 2 Limitation Act 1980 (LA 80) (dealing with tort damages). Back
Section 32 LA 80. Back
For details please refer to the discussion of Question A. Back