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Charlotte_Bamford_phBackground

On 3 December 2003 the European Commission found that Morgan Crucible plc and six other suppliers of electrical and mechanical graphite products had participated in a price-fixing cartel. It imposed fines of Euro 101.44 million on six of the defendants, whilst Morgan received a 100% reduction in its fine, on the basis that it had reported the cartel and benefitted from the Commission’s 1996 Leniency Notice for whistleblowers. The six other cartel members brought an appeal which was dismissed on 8 October 2008. The time for bringing a further appeal expired on 18 December 2008.

On 15 December 2010, the respondents filed civil claims for their losses arising out of purchasing products from the members of the cartel during the period of price-fixing. Morgan contested that these claims had been brought against it outside of the limitation period set at law, and that accordingly the claim should be struck out.

Legal issues

Morgan’s case rests on the Competition Act 1998, s 47A which states that ‘a person who has suffered loss or damage as a result of the infringement of a relevant prohibition’ (price fixing falling within the definition of an infringement of a relevant prohibition) may bring a claim for damages under civil proceedings in the Competition Appeals Tribunal (CAT). Such a ‘follow-on’ claim may be brought once a ‘decision’ has established the infringement: ‘decisions’ include decisions of the CAT, the Office of Fair Trading and the European Commission.

S 47A(8) sets out ‘periods during which proceedings in respect of a claim made in reliance on a decision or finding of the European Commission may not be brought without permission’. Such periods include (a) the period during which proceedings against the decision or finding may be instituted in the European Court; and (b) if any such proceedings are instituted, the period before those proceedings are determined.

The CAT rules state – at Article 31 – that claims for damages must be made within two years of the later of (1) the end of the period referred to in s 47A(8); or (2) the date on which the cause of action accrued.

The argument between the parties fell to construction of the word ‘decision’. Morgan argued that a ‘decision’ could be reached in relation to different defendants at different times and that in relation to each individual defendant, a decision was finalised (and the limitation period referred to in Article 31 started running) once a decision had been made which that party could not appeal. The respondents argued that a decision was only final when it had addressed every party and none of the parties had scope to appeal.

On Morgan’s construction the limitation period commenced on 13 February 2004 (the date at which the limitation period for an appeal by Morgan expired). On the respondent’s construction the limitation period commenced on 18 December 2008 (the date upon which all cartel members’ rights to appeal had expired).

Decision of the Court Below

The CAT held that the limitation period had ended and that the respondents were out of time. The Court of Appeal reversed that decision, concluding that it would not make sense for the respondents to have to bring an action against Morgan whilst the infringement was still being disputed by the other cartel members. The judgment stated that ‘national courts are entitled to proceed on the reasonable assumption that the limitation provisions were intended to operate in a sensible way and not to create avoidable injustice, practical difficulty and inconvenience’. It was therefore considered that any civil claim should be brought only once a final decision on infringement had been handed down ‘so that all questions of causation, quantum and contribution could be resolved at the same time’.

The Court of Appeal interpreted ‘decisions’ as being quite general in their natural and ordinary meaning, and not referring to ‘a decision against, or as regards, a particular party or particular addressee of the Commission Decision’.

Decision of the UK Supreme Court

Allowing the appeal, the UK Supreme Court unanimously rejected the Court of Appeal’s reasoning, finding that it was clear that ‘decision’ was a reference to a decision of the European Commission under European law and that European law subsequently made clear that decisions would be binding on each party individually.

The Court cited Article 249 EC which states that ‘a decision shall be binding in its entirety upon those to whom it is addressed’ and the case of AssiDomän Kraft Products AB v Commission of the European Communities [1999] ECR I-5363 (Case C-310/97).

In the AssiDomän case the European courts held that where 36 companies were fined and 28 successfully appealed, the eight that had not appealed were not entitled to share in the consequences of the annulment, for ‘a judgment annulling a measure cannot apply to the situation of persons who were not parties to the proceedings and with regard to whom the judgment cannot therefore have decided anything whatever’. The Court re-iterated that ‘it is settled case-law that a decision which has not been challenged by the addressee within the time-limit laid down by article 173 of the Treaty becomes definitive as against him’.

On the basis of the above precedent (and a number of similar cases also cited), the UK Supreme Court found that it was evident that the appeal by the other six cartel would have absolutely no bearing on the decision made against Morgan and that, consequently, the only ‘decision’ made in relation to Morgan was the original Commission decision. As the time for Morgan to appeal against that decision had expired on 13 February 2004, the respondents had two years from that date within which to bring their action for damages. As their action was brought on 15 December 2010, it was out of time and judgment was for Morgan.

Comment

Following this judgment, there can no doubt as to the position of individual parties accused of breaching the Competition Act as part of a larger group. The Supreme Court clearly explains that, whilst a single decision may be handed down by a European court, such a decision will apply to each individual as if it were a distinct and personal decision. Thus the consequences of any appeal will only be felt by those parties who participate in an appeal, regardless of whether the findings would be equally applicable to a non-appealing party. It logically follows that limitation periods will begin to run according to the final steps taken by individual parties, rather than the group as a whole.

On the basis of this decision, parties – especially claimants in follow-on claims – should be conscious of the possibility of different limitation periods applying in relation to different parties. Parties accused of breach should also be live to the fact that they will not benefit from any results of an appeal that they do not participate in.

It should be noted that the Consumer Rights Bill, currently making its way through the parliamentary process, provides for the limitation periods in relation to private competition law claims to be brought into line with those for other civil suits.