ANTITRUST RULES (5127/06)
Letter from Gareth Thomas MP, Parliamentary
Under Secretary of State for Trade and Consumer Affairs, Department
for International Development/Department for Business, Enterprise
& Regulatory Reform to the Chairman
Your Committee asked to be kept informed of
any developments in relation to the Government's thinking with
regard to facilitating private actions in breach of EC Antitrust
rules.
In 2006 the European Commission produced its
Green Paper consultation on private damages actions, to which
the UK responded. The European Parliament's report on the Green
Paper supported further work by the Commission and called on the
Commission to prepare a White Paper with detailed proposals. Although
discussions in the European Parliament were difficult, reflecting
perhaps perceived concerns about creating an overtly litigious
culture, a positive report was produced.
The Commission have said that they will produce
a White Paper in early 2008. The basis of the White Paper will
be that individuals and undertakings who are victims of anti-competitive
behaviour should be able to bring private actions to restore their
loss. Although the situation across the EU is uneven, the UK has
a very positive story to tell with much of the structural and
legal elements for effective private actions already in place.
That said, relatively few private actions in
this area occur. We are strongly of the view that an effective
private enforcement regime will complement public enforcement
and respect rights to compensation where there has been a breach
of anti-trust rules. This does not mean creating a litigious environment,
but rather that against a background of a strong legal framework,
consumers (including business) know their rights and understand
how to bring an action. As in the rest of the civil procedures
regime, settlement is still the key component of a private redress
regime.
We intend to respond positively and constructively,
on the basis of our experience so far, to the White Paper process.
As such, the UK policy departments (Department of Business, Enterprise
and Regulatory Reform, Ministry of Justice, the devolved administrations
and HM Treasury, in co-operation with Office of Fair Trading (OFT)
have produced the attached initial thinking paper (Annex A) which
sets out the issues which we feel are appropriate to explore at
the UK level and avenues that are appropriate at the EU level.
The paper was circulated to the European Policy Committee on 13
June 2007.
We intend to use the paper to encourage further
discussion in the UK and in the EU to develop thinking further.
As part of this, the UK and the Netherlands jointly organised
an informal discussion on 25 May with Member States to help prepare
for the White Paper. This was greatly appreciated by Member States,
as it was the first real opportunity for Member States to consider
the scope to facilitate further private actions and draw the links
to consumer redress. Building on this and with UK support, the
Portuguese are considering follow-up discussions as part of their
Presidency of the EC.
In addition, the OFT have concluded a consultation
on private actions and will report their findings at a seminar
on 24 September 2007. If appropriate, based on their findings
and the European Commission White Paper, along with any possible
wider changes to the UK competition regime, my department will
undertake a public consultation.
My officials are also considering the role of
consumer redress and are working to ensure that the two areas
of work do not conflict.
23 July 2007
Annex A
UK POLICY
DEPARTMENTS' INITIAL
THINKING ON
PRIVATE ACTIONS
FOR DAMAGES
Introduction
1. Together with public enforcement, private
actions are a key component to ensure the application and observation
of competition rules.
2. The UK has therefore enacted legislation
(the Competition Act 1998, which entered into force on 1 March
2000 and the Enterprise Act 2002, which entered into force on
1 April 2003 and 20 June 2003) to encourage and facilitate private
damages actions for those who have suffered loss due to an infringement
of the competition rules.
3. Empowered consumers, who know their rights
and can use them effectively whether shopping and trading nationally
or internationally, are crucial. Where a consumer suffers loss,
the expectation is that they and the responsible company should
seek to settle. If this is not possible the consumer should be
able to use an effective and accessible process in the courts
to obtain redress. An effective court process will encourage and
inform settlements.
4. The UK has a positive story to tell,
but this is a developing issue and it is recognised that there
is more that can be done. We therefore welcome the opportunity
presented by the Commission's Green Paper consultation to consider
the current framework, practice in other Member States and scope
for action at both Member State and EU level.
5. The purpose of this paper is to inform
interested parties what the UK policy departments (Department
of Trade and Industry, Department for Constitutional Affairs,
the devolved administrations and HM Treasury in co-operation with
Office of Fair Trading (OFT) who are producing a separate paper)
are considering and to offer ideas to the European Commission
which it may wish to consider.
6. The Office of Fair Trading (OFT) is producing
a separate, detailed paper due to be published in April. The Budget
2007 explicitly referred to the OFT paper, stating that the Government
welcomes the progress the OFT has made on this issue and will
continue to work with the OFT to identify the key barriers to
private actions. Over the coming year the Government intends to
identify and consult on measures needed to overcome the barriers
to redress without encouraging ill-founded claims, in particular
examining the arrangements for representative actions.
7. Issues for the UK to Consider:
The UK is exploring a number of issues with
regard to private actions for damages, as follows:
(a) Representative actions
Representative actions could be brought by representative
bodies which would enable more cases to be brought and redress
obtained for those who have suffered loss as a result of anti-competitive
practices. A number of issues arise that need to be considered:
(i) the basis criteria for designation;
(ii) the possibility of also designating bodies
which represent business in addition to those representing consumers;
(iii) possibly designating non UK representative
bodies;
(iv) in addition to an opt-in approach, to consider
whether to adopt an opt-out approach. An opt-out regime could
increase the potential access to redress for consumers but it
does raise further issues eg how to quantify the loss suffered
by customers at large, how to make customers aware of litigation
brought on their behalf (this is important otherwise individuals
may find themselves precluded from bringing their own claim),
how to decide on the allocation of damages recovered, who manages
funds of damages recovered pending claims on them by customers,
what happens to any surplus funds and conversely what happens
if the money runs out before all claims are made;
(v) the possibility of allowing representative
actions to cover stand-alone cases as well as follow-on cases;
(vi) possible options for funding of representative
actions.
(b) Guidance
The possibility of producing guidance on private
actions for breach of the UK and EC competition rules, including
guidance on the steps that prospective claimants and their advisers
may wish to consider with a view to bringing an action or settling
a claim. Such guidance could include:
(i) Template letters for use by consumers; and
(ii) Raising awareness that infringement decisions
of the OFT, a concurrent regulator, the CAT or the European Commission
are binding on the ordinary courts, including those dealing with
small claims.
(c) Loss and causation
Investigating what role, if any, competition
authorities can reasonably play in facilitating the assessment
of loss and causation.
(d) Procedure
Investigating whether the small claims track
would be suitable for some follow-on claims.
(e) Evidence
Investigating certain disclosure rules whereby
the parties to a competition case may obtain information from
each other and/or from third parties, including from competition
authorities. The extent of access to information held by competition
authorities would require very careful consideration in the light
of its possible impact on public enforcement and the general rules
governing the confidentiality of information which is supplied
to the Government.
(f) Competition Appeal Tribunal
The possibility of activating Section 16(1)
of the Enterprise Act so that "infringement issues"
can be transferred from the High Court to the Competition Appeal
Tribunal. This has potentially significant implications for the
UK system of competition law enforcement and needs to be carefully
considered.
8. Avenues for European Commission to Explore
The following are initial thoughts on areas
that the European Commission may wish to consider exploring further
in order to facilitate private actions. We would be grateful for
comments from other Member States and the Commission on practicalities
of the suggestions and also further ideas:
(a) Producing a review, at a fairly "micro"
level, of the desirable features and practices in the legal systems
of different Member States, so as to present a number of possible
models for adoption in individual Member States.
(b) Passing on defence. A complex issue
that needs to be considered further on the basis that it should
be for the cartelist to show that loss has been passed on by a
purchaser.
(c) Ensuring, by legislation, that decisions
of a national competition authority (NCA), in one Member State,
on the application of Articles 81 and 82, carry sufficient weight
in the national courts of other Member States. One option
could be to make decisions of NCAs, on whether Article 81 or 82
has been breached, binding on courts in other Member States. However,
it is proposed that this should at first be limited to those Member
States who have made decisions by their own NCAs binding on their
own courts. This could in turn help encourage all Member States
to make decisions by their NCAs binding on their own courts.
(d) An enhanced role for EU level representative
bodies such as The European Consumers Association (BEUC).
BACKGROUND
PAPER—ON
HOW THE
UK DEALS WITH
PRIVATE ACTIONS
Introduction
Public enforcement is the primary means of enforcing
competition law in the UK. Private action acts as a complement
to this.
In recent years the UK has enacted legislation
(the Competition Act 1998, which entered into force on 1 March
2000 and the Enterprise Act 2002, which entered into force on
1 April 2003 and 20 June 2003) to encourage and facilitate private
damages actions for those who have suffered loss due to an infringement
of the competition rules.
(a) Competition Act—Competition Act 1998
is designed to make sure that businesses compete on a level footing.
It does so by prohibiting certain types of anti-competitive behaviour.
(i) Super-complaints can be made to the OFT
by a designated consumer body when it thinks that a feature, or
combination of features, of a market is, or appears to be, significantly
harming the interests of consumers. The OFT will consider the
evidence submitted and undertake whatever work is necessary to
establish the extent, if any, of the alleged problems. The OFT
must then publish a response within 90 days from the day after
which the super-complaint was received stating what action, if
any, it proposes to take in response to the complaint and giving
the reasons behind its decision.
(ii) A "specified body" may bring
proceedings before the Competition Appeal Tribunal (CAT) on behalf
of two or more consumers for damages. Before they can commence
proceedings before the CAT for damages, the OFT or other sectoral
regulators, the European Commission or CAT need to have ruled
that an infringement of UK or EU competition law took place and
appeal concluded. The evidentiary burden of proof on claims has
been reduced as litigants can rely on infringement decisions of
the OFT and European Commission as determinations of fact.
The following sections outline the civil law
and procedures applicable in the UK. Some aspects are specific
to competition law while others apply more generally.
As a matter of general principle, it is expected
that a claimant will attempt to settle with the defendant before
proceeding with litigation.
UK System for Private Actions
1. Alternative Dispute Resolution (ADR)
As the ADR scheme is comparatively new it is
not yet clear what role it will have in competition cases.
(a) In the 1996 report "Access to Justice",[79]
it was identified that fair, speedy and proportionate resolution
of disputes was needed. Those principles lay at the heart of the
Civil Procedure Rules, which came into force in April 1999. The
Civil Procedure Rules included references to ADR in rules of court
and introduced pre-action protocols, with their emphasis on settlement,
even before court proceedings are issued the objective being that
parties should be encouraged to consider alternative dispute resolutions
to try to settle before the case comes to court. As a result the
following initiatives are in the process of being implemented:
(i) The introduction of the National Mediation
Helpline, providing disputing parties with access to a quality,
low-cost, time-limited mediation anywhere in England and Wales.
(ii) The introduction of a best practice
toolkit to encourage courts proactively to refer court users to
engage in mediation using the National Mediation Helpline.
(iii) The provision of a trained in-house
mediator to provide a free service for court users to settle small
claims giving parties the option of a mediation session. Mediations
normally last up to one hour. This was initially piloted at Manchester
County Court but is now being expanded to all areas by April 2008.
(b) While the Civil Justice Reform Group made
a recommendation in its report of 2000 that an ADR pilot scheme
be established in Northern Ireland, it has not been established
as an alternative forum for the resolution of disputes to the
same extent that it has in England and Wales.
(c) In Scotland, the Scottish Executive supports
the use of ADR options, including mediation, where it is appropriate
to do so.
(i) The aim is that the Scottish public have
a range of options to resolve disputes and the Executive recognise
that mediation has an important role in helping resolution of
disputes. If it is entered into voluntarily, outside the formal
court system, it can be more cost effective and less stressful
than going to Court. For this reason funding is currently being
provided for a number of mediation projects across a range of
policy areas including health, justice, housing and education.
(ii) At present the use of mediation is not
included in any court rules or procedures. The Sheriff Court Rules
Council Mediation Committee completed a consultation exercise
recently looking at ADR and in particular, whether a new rule
on ADR could be incorporated into the Sheriff Court rules. A detailed
analysis of the responses is taking place now and the Sheriff
Court Rules Council will consider once this has been completed.
2. Procedure
(a) Private actions for breach of the EC competition
rules in the UK are heard by both the ordinary courts and by the
Competition Appeal Tribunal (CAT). In England and Wales, the ordinary
court cases are assigned to one of three tracks: the Multi Track,
the Fast Track or the Small Claims Track. While the small claims
procedure outlined below is not currently used in competition
cases, we are proposing to look at whether it may be used in appropriate
cases in the future.
(i) The small claims track provides a simple
and informal way of resolving disputes. The amount in dispute
should not be more than £5,000 and the process aims to take
a maximum of 15 weeks after allocation to the track. The claim
should require only straightforward preparation for the final
hearing as a solicitor is not usually required, for example, cases
in the small claims track will not normally involve many witnesses
or difficult points of law. The winning party would only be able
to recover limited costs from the losing side, and cannot recover
legal costs except the costs of an injunction. This means that
if a claimant loses then they only have limited exposure to costs,
making it more likely that a claimant will bring a claim in these
circumstances.
(ii) For fast track claims the amount in
dispute would normally be between £5,000 and £15,000;
cases allocated to the fast track will generally require only
limited "disclosure", a period of no more than around
30 weeks from allocation to the fast track to the trial, written
expert evidence only, if it is needed at all, and a trial lasting
no more than one day.
(iii) If the judge feels the claim could
not be dealt with justly in the fast track, for example, because
the amount in dispute is more than £15,000, it requires more
disclosure than the fast track allows or requires oral expert
evidence at trial, and then the claim will be allocated to the
multi-track. The process aims to take on average 50 weeks from
allocation to the track until trial.
(b) In Northern Ireland, there are also three
distinct venues in which an action may be pursued.
(i) The small claims court is part of the
county court and its procedural rules are to be found in the County
Court Rules (Northern Ireland) 1981. It has jurisdiction to deal
with claims which are for less than £2,000 and provides a
relatively inexpensive, fast and informal means by which litigants
can bring an action before the court. Many actions are actually
settled outside of court but, if they are not, they will be heard
by a district judge on the day specified for the hearing, which
will usually take place within three months of the application
being submitted. The hearing is informal and the normal rules
of evidence do not apply. Neither of the parties can recover costs,
so any expenses incurred such as travel expenses or legal fees
will generally have to be borne by the party that called the witness
or instructed the lawyer.
(ii) Where the amount in dispute is less
than £15,000, the action will be heard in the county court,
which is generally initiated by the plaintiff issuing a document
called a "civil bill". The matter will be heard by a
judge sitting without a jury. If the defendant wishes to dispute
the civil bill, he has three weeks to notify the plaintiff and
the court by lodging and serving a notice of intention to defend
and the plaintiff thereafter has six months in which to deliver
a Certificate of Readiness to indicate that the matter is ready
for hearing. If he does not do so, the matter is referred to the
judge who can either, set a date for the hearing, stay the proceedings
or dismiss the case.
(iii) If an action cannot be dealt with in
either the small claims court or the county court, it will be
dealt with by the High Court, which is restricted neither geographically
or by the value of the claim.
(c) In Scotland, an action for damages could
be brought in either the Court of Session (if it is for a sum
of at least £1,500) or in the sheriff court. The procedure
in the sheriff court would depend on the amount claimed. Up to
£750 it would be a small claim, between £750 and £1,500
a summary cause, and above £1,500 an ordinary cause. These
three different procedures are very roughly comparable with the
three tracks in England and Wales.
The CAT has four main functions. It hears appeals
from decisions of the OFT and sectoral regulators under the Competition
Act 1998. The CAT hears monetary claims arising from infringement
decisions made under the Competition Act or the EC Treaty. The
CAT deals with applications for the review of decisions of the
OFT, the Secretary of State or the Competition Commission in relation
to mergers and market investigations. The CAT hears appeals from
penalties imposed by the Competition Commission.
3. Disclosure of evidence
(a) The normal procedure for disclosing documentary
evidence in the ordinary courts is "standard disclosure"
as governed by the Civil Procedure Rules, "discovery"
in Northern Ireland, as governed by the Rules of the Supreme Court
(Northern Ireland) 1980 and the County Court Rules (Northern Ireland)
1981, or "recovery" in Scotland. Each party is required
to disclose documents on which it relies and which adversely affect
or support either party's case, subject to rules of privilege.
(i) Disclosure of evidence between the claimant
and defendant is automatic in England and Wales and in the High
Court in Northern Ireland but not in the Northern Ireland county
courts.
(ii) Disclosure against third parties is
also possible provided certain conditions are satisfied. These
are where an application is made to the court under any Act which
provides for disclosure by a person who is not a party to the
proceedings. The application must be supported by evidence. The
court may make an order under this rule only where the documents
of which disclosure is sought are likely to support the case of
the applicant or adversely affect the case of one of the other
parties to the proceedings; and disclosure is necessary in order
to dispose fairly of the claim or to save costs. Such an order
may require the respondent to indicate what has happened to any
documents which are no longer in his control; and specify the
time and place for disclosure.
(iii) The court has, in addition, a broad
discretion to order additional disclosure since it may, at any
time, at 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". No analogous
discretion exists in Northern Ireland, although the overriding
objective in both the Rules of the Supreme Court (Northern Ireland)
1980 and the County Court Rules (Northern Ireland) 1981 provides
that, in the exercise of their powers under the respective Rules,
the courts must give effect to the need to ensure that a case
is dealt with fairly, justly and expeditiously.
(iv) If a party is dissatisfied with the
extent of his opponent's disclosure they can obtain a court order
requiring the opponent to give further specific disclosure or
conduct a further search. 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.
(v) An order can also be made (referred to
as a "search order") under section 7 of the Civil Procedure
Act 1997 requiring a party to admit another party to premises
for the purpose of preserving evidence etc. Similarly, in Northern
Ireland, the courts may, on the application of a party to an action,
make an order preserving property and/or making it available for
inspection.
(vi) There are rules of court in Scotland
regarding the production of documents and evidence which are broadly
similar in effect to the above.
(b) In the CAT disclosure is not automatic. The
Tribunal will decide which of the documents requested are relevant
and therefore need to be disclosed. The disclosure rules are flexible
in order for the CAT to decide the right approach in each case.
4. Confidential information
(a) Any person may ask the court that a witness
statement or other document should not be open to inspection.
The court will not make a direction unless it is satisfied that
a witness statement/document should not be open to inspection
because of, among other things, the interests of justice; the
public interest; or the nature of any confidential information
(including information relating to business secrets) in the statement/document.
The court may direct that the witness statement/document be dealt
with as it considers appropriate, such as excluding from inspection
words or passages in the statement
(b) A witness statement may be used only for
the purpose of the proceedings in which it is served except where
the witness gives consent in writing to some other use of it;
the court gives permission for some other use; or the witness
statement has been put in evidence at a hearing held in public.
(c) The general rule in Scotland is that material
which a party uses in preparing his own case is confidential.
Witness statements (known as precognitions) obtained by a party
as part of the preparation of the case would not be admissible
as evidence and the court would not order them to be disclosed
to the opposing party.
(d) When a case is before the CAT, parties wishing
to claim confidential treatment of documents or part of documents,
including business secrets, may apply to the CAT to have these
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 with specific reasons. Whether
particular information is to be regarded as confidential is a
matter for the Tribunal to decide in the individual case. Before
the CAT confidential matters are not disclosed unless they are
essential for the decision.
5. Expert evidence
(a) 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.
(b) Courts also have the discretion to appoint
assessors to advise the judge.
6. Role of the Office of Fair Trading
(a) The OFT has the power to intervene in private
competition law actions and submit observations to a national
court on issues relating to the application of Article 81 and
82 EC Treaty. The OFT may, acting on its own initiative, submit
observations to a national court and it may submit oral observations.
The OFT also has the power to intervene before the court where
issues of the Chapter I and Chapter II prohibitions of the Competition
Act 1998 are at stake.
(b) Information held by the OFT, which come to
it in connection with the exercise of its functions under the
Enterprise Act 2002 or legal provisions which are referred to
in that Act, are not, as a general rule, available to claimants
in a damages claim due to the confidentiality restrictions on
disclosure contained in Part 9 of the Enterprise Act 2002. This
stipulates that information which relates to the affairs of an
individual or any business 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 provides the information consents. However, a competition
authority must comply with any court order requiring disclosure.
(c) OFT and EU Commission decisions on whether
competition rules have been breached are binding on the ordinary
courts and the CAT in follow-on cases. Decisions on damages are
decided by the courts and the CAT. Decisions by national competition
authorities from other Member States are not binding on UK courts
and the CAT.
7. Fault requirement
Actions under Articles 81 and 82 of the Treaty
and Chapters I and II of the Competition Act 1998, which mirror
Articles 81 and 82, do not require proof of an intention to prevent,
restrict or distort competition or abuse a dominant position.
8. Limitation periods
(a) In England and Wales and Northern Ireland
the time limit to institute proceedings is six years and starts
on the date the wrongful act caused the damage in issue, subject
to fraudulent concealment. Suspension of the limitation period
is appropriate in certain narrowly defined cases. The equivalent
time limit in Scotland is determined by the prescriptive period
of five years. 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.
(b) In general, appeals must be made to the CAT
within two months of the date of the publication of the decision
which is being appealed. Follow on actions must be brought within
two years of the OFT/EU Commission decision.
9. Loss and causation
The principle of causation requires a casual
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 satisfied.
10. Passing on Defence and Indirect Purchaser
Standing
(a) Neither the "passing on defence"
nor indirect purchaser standing is the subject of settled case
law in the UK. However in the two judgments set out below, the
European Court of Justice suggest that the indirect purchaser
may have standing and in addition in the second case that Member
States are free to exclude the passing on defence or not at their
option.
(i) The broad language of the European Court
of Justice in Case C-453/99 Courage and Crehan [2001] ECR
I-6297 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.
(ii) The European Court of Justice held that
in Joined Cases C-295/04 to C-298/04 Vincenzo Manfredi and Others
v Lloyd Adriatico Assicurazioni SpA and Others 2006 that "any
individual can rely on the invalidity of an agreement or practice
prohibited under [Article 81 EC] and, where there is a causal
relationship between the latter and the harm suffered, claim compensation
for that harm". It also held that "it is settled case-law
that Community law does not prevent national courts from taking
steps to ensure that the protection of the rights guaranteed by
Community law does not entail the unjust enrichment of those who
enjoy them".
11. Representative Actions and Group Litigation
Orders
(a) There are three types of collective action
that are possible in the UK. The first of these is applicable
on a UK basis. The other two are applicable for England and Wales
only. There is no group litigation or representative action procedure
in the Scottish courts.
(i) Representative Actions
The UK has 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 (opt-in only). Which?, a consumer
organisation, is currently the only body in the UK to be designated.
It was awarded this designation in Oct 2005. Which? is
currently preparing its first action for damages, following-on
from the OFT's decision of 1 August 2003 concerning price-fixing
of replica football kit. The action was filed at the CAT on 8
March 2007.[80]
The Department of Trade and Industry has recently consulted on
a proposal to introduce representative actions for breach of consumer
protection legislation.[81]
The Department is in the process of analysing responses.
(ii) Representative Party Actions
Where a number of people have an interest in
a dispute, one of that number can act as a representative for
the others to bring, continue or defend a claim.
(iii) Group Litigation Orders
Under the Civil Procedure Rules in England and
Wales there are provisions for the case management of a group
of individual claims which give rise to common issues of fact
or law. Group litigation orders can be complex and may involve
a large number of individual claims. These procedures have ensured
that a balance can be achieved between the rights of claimants
and defendants to pursue and defend cases individually, and the
interests of a group of parties to litigate the action as a whole
in an effective manner. They are seen to work well and to encourage
settlement before litigation. However, there is no such provision
in Northern Ireland. In 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.
(b) Assignment of claims. The District Court
in Dusseldorf, Germany, has ruled as admissible the cement
cartel "class action" lawsuit filed by Brussels-based
company, Cartel Damage Claims. The case is one of the first tests
of civil claims for damages from cartels under the new German
law. Limitations in the UK on the way in which damages claims
can be brought include the following:
(i) Champerty is contrary to public policy
in England and Wales and Northern Ireland. Champerty is defined
as "a bargain between a party to legal proceedings and another
who finances or assists these proceedings, that the latter will
take as his rewards for the assistance a portion of anything which
may be gained as a result of the proceedings". However, recent
developments suggest that access to justice is becoming an increasingly
important consideration in determining what is contrary to public
policy.
(ii) In Scotland it is legally possible for
someone who has a claim to damages for some kind of loss or injury
(ie a right of action) to assign it to someone else who can then
pursue the claim in their own name. This would be one possible
mechanism to allow representative actions in Scotland.
12. Injunctions
(a) Interlocutory Injunctions
(i) In England, Wales and Northern Ireland
the essential principles governing the grant or refusal of an
interlocutory injunction were authoritatively expounded by the
House of Lords in American Cyanamid Co. v Ethicon Ltd [1975]
AC 396.
(ii) In this case it was stated that the
governing principles in determining whether to grant an interim
injunction are (1) whether there is a serious issue to be tried,
(2) where the balance of convenience lies, and (3) if the interlocutory
injunction is not granted, whether it will cause irreparable injury
to the applicant.
(iii) In defining the "balance of convenience",
the House of Lords held that the objective of the injunction was
to protect the plaintiff against injury resulting from the violation
of his legal rights for which he could not be adequately compensated
in damages recoverable from the defendant if he were successful
at trial. The plaintiffs need for protection had to be balanced
against the defendant's need to be adequately compensated by the
plaintiff's cross-undertaking in damages if the defendant were
prevented from exercising his legal rights and the matters were
resolved in the defendant's favour at trial.
(i) In England, Wales and Northern Ireland
a final injunction will only be made after a full hearing on the
merits of the case and after a full trial.
(i) In Scotland the equivalent are interim
interdict and full interdict, and Scotland has its own line of
legal authority on the circumstances in which these orders may
be granted. To obtain an interim interdict a prima facie case
must be established and the balance of convenience must favour
the granting of the order. To obtain full interdict there must
be a full hearing on the merits of the case.
13. Damages
(a) Civil damages 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),
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.
(b) 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.
(c) Damages are assessed at the date of the loss.
In the case of agreements under Article 81, a party claiming to
have been affected in the market by the existence of the agreement
will generally claim the "overcharge" and may also wish
to claim the value of lost sales, unless it is an end user. 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 8%). In Scotland the court can award interest
on damages from the date the right of action arose.
(d) These provisions mean that the UK courts
take a flexible approach, which ensures that appropriate damages
can be awarded to suit the individual circumstances of each case.
The availability of these measures obviates any need for multiple
damages.
14. Costs
(a) In the ordinary courts, the unsuccessful
party is normally expected to pay the costs of the successful
party, but the court has discretion to order otherwise. The position
is the same in Scotland. The CAT also has complete discretion
in relation to costs. In BCL Old Co Ltd v Aventis [2005]
1028/5/7/04 the CAT questioned whether it was appropriate to order
security for costs against a claimant who even if successful was
unlikely to be awarded costs due to the possibility that the effects
of the actions of the defendant were passed on by the claimant.
In this situation the CAT considered that the possible risk as
to costs should be borne by the defendants, who were before the
Tribunal as subjects of an infringement decision of the Commission.
In Deans Foods Ltd v Aventis (2004) (1029/5/7/04) the CAT
questioned whether it would be appropriate to award costs in favour
of a defendant which is successful in defending follow-on action.
(b) It is possible for competition cases to be
funded by a Conditional Fee Agreement (CFA). CFAs take the form
of an agreement between clients and solicitors and provide for
an alternative to contingency fees. Introduced by the Courts and
Legal Services Act 1990, they allow for part or all of the solicitor's
fees to only be payable in the event of success. They can be used
for all civil proceedings, other than family, and allow a solicitor
to take a case on the understanding that if the case is lost he
will not charge his clients for the work he has done (or charge
at a lower rate). 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. The success fee is recoverable
from the losing side. It is open to a party to take out insurance
against the possibility of being ordered to pay the other party's
costs. In Scotland conditional fees (termed "speculative
fees") and success fees are now permitted, but the success
fee is paid by the client, not the other side. The availability
of CFAs outside of personal injury cases is relatively limited,
mainly due to the difficulties in obtaining after the event insurance
cover to protect the litigant against the risks of losing and
having to pay the other side's costs. Within the Access to Justice
(Northern Ireland) Order 2003, there is provision for CFAs in
Northern Ireland. However, the relevant provision has yet to be
commenced. The Northern Ireland Legal Services Commission is currently
considering the options for CFA-type arrangements in Northern
Ireland and has consulted with interested parties although it
is unlikely that any firm decisions will be made for some time.
(c) Generally speaking, contingency fees as understood
in the USA (where fees are a percentage of the damages awarded)
are not available in the UK, for contentious proceedings before
a court, but can be used in non-contentious cases such as probate,
tribunals and claims up to issue of proceedings where settlement
is me ultimate objective.
(d) The Competition Pro Bono Scheme has recently
been set up by the Solicitors Pro Bono Group (also know as Lawworks)
to provide an independent source of expert advice to individuals
and businesses who believe that their rights under competition
law have been infringed or who are concerned that they may be
infringing. This will entail some advice or representation by
lawyers to individuals, businesses and other community groups
who cannot afford to pay for that advice or representation and
where public funding is not available. The work is provided without
payment to the lawyer or law firm and provided voluntarily by
the lawyer or his/her firm.
There is no similar scheme in Northern Ireland
as yet although a culture of "pro bono" assistance is
well-established within the jurisdiction.
15. Legal Aid
Competition cases brought by corporate bodies
(eg businesses) will not qualify for legal aid, as legal aid is
only granted to individuals. In relation to claims by individuals,
legal aid is not normally available for matters which arise in
relation to the carrying on of a business (including company and
partnership law), as these cases are excluded from the scope of
the Community Legal Service by Schedule 2 to the Access to Justice
Act 1999. This is because these cases do not have sufficient priority
to justify funding, or because there are viable alternatives (eg
conditional fee agreements). In certain exceptional circumstances,
individual applicants who pass the means and merits tests may
be granted legal aid for a business case by the Lord Chancellor,
subject to very strict criteria.
(a) Unlike England and Wales, there is currently
no statutory bar under the Legal Aid, Advice and Assistance (Northern
Ireland) Order 1981 to legal aid being granted in relation to
"business cases" although it is very unlikely that any
case would meet the statutory means and merits test. However,
Schedule 2 to the Access to Justice (Northern Ireland) Order 2003
does provide for such a statutory bar, which will bring Northern
Ireland into line with England and Wales once it has been commenced.
Finally, like England and Wales, there is existing provision in
the 1981 Order and in the 2003 Order (albeit not yet commenced)
for exceptional funding and, as each case is treated on its merits,
there may be business cases that will be funded under those provisions.
(b) In Scotland legal aid can only be made available
in respect of an individual not a partnership or company etc.
Civil Advice and Assistance or civil legal aid might be available
for issues arising in respect of an action for damages as there
is no blanket exclusion. Advice and Assistance is available for
any matter of Scots law. Civil legal aid would be available for
an action once it was being raised. A solicitor is entitled to
admit a client to advice and assistance subject to a financial
eligibility test. An application for civil legal aid needs to
be made to the Scottish Legal Aid Board who will assess the application
on three statutory tests—financial eligibility, probable
cause and reasonable to the Board that it is reasonable in the
particular circumstances of the case that legal aid should be
received. It is unlikely, where issues relate to aspects of a
business, that such cases might meet the reasonable test as it
would be assessed on the individual's interests. There is no exceptional
case status in Scotland.
16. Joint and several liability
Joint and several liability can arise under
UK law, for example, where there is a breach of duty imposed jointly
on two or more persons, where persons take "concerted action
to a common end" and in the course of executing that joint
purpose any one of them commits a tort, or where persons' tortious
acts combine to produce the same damage. Joint and several liability
does not arise where two or more persons not acting in concert
cause different damage to the same claimant.
Letter from the Chairman to Gareth Thomas
MP
Thank you for your letter of 23 July. I have
forwarded a copy to Sub-Committee E, who you may recall examined
the Green Paper last year.
It is helpful for us to learn what work your
Department and the OFT have been undertaking since then and we
are particularly grateful for your providing a copy of the Department's
"initial thinking" on the issues raised by the Green
Paper and to learn of the consultant exercise now being undertaken.
The Committee has a continuing interest in this subject and will
no doubt wish to return to it in detail when the Commission produces
its White Paper in 2008. In the meantime it would be most helpful
if you could keep us informed of developments.
26 July 2007
79 Access to Justice Final Report to the Lord Chancellor
on the civil justice system in England and Wales Lord Woolf (1996). Back
80
Case number 1078/7/9/07. http://www.catribunal.org.uk/current/default.asp Back
81
A copy of the consultant can be obtained from http://www.dti.gov.uk/files/file31886.pdf Back
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