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On appeal from: [2019] EWCA Civ 1096

The Supreme Court has unanimously dismissed this appeal addressing whether findings of fact made by the General Court of the European Union (“the General Court”) are binding in subsequent domestic proceedings, under the EU principle of absolute res judicata.

Servier Laboratories Ltd and Others, the appellants, manufacture pharmaceuticals, including the drug perindopril. The respondents, each of whom is acting for the NHS in one of the four UK nations, brought proceedings against the appellants for damages caused by what they allege was the appellants’ anti-competitive behaviour, which allegedly delayed the introduction of a generic substitute that would have been cheaper.

Previously, in Case T-691/14 Servier SAS v European Commission, the General Court had annulled a part of the European Commission’s decision by which it was found that the appellants had infringed Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). Appeals (by both Servier and the Commission) against the judgment are currently outstanding before the Court of Justice of the European Union (“CJEU”).

In the present proceedings, the appellants sought to rely on a number of factual findings made by the General Court in the course of its judgment and argued that the English courts are bound by those findings.

The High Court and the Court of Appeal have held that the propositions on which the appellants seek to rely are not res judicata as a matter of EU law, and are not binding in these proceedings.

The appellants then appealed to the Supreme Court, arguing that the point of law is uncertain, not acte clair, and that the Supreme Court should therefore refer the question to the CJEU under Article 267 TFEU.

The Supreme Court unanimously dismissed the appeal. It held that the General Court findings the appellants rely on are not binding in the domestic proceedings, and declined to make a reference to the CJEU. Lord Lloyd-Jones gave the judgment, with which all members of the Court agreed.

The EU principle of absolute res judicata only applies to judicial decisions which have become definitive, either after all rights of appeal have been exhausted or after the time limits for exercising those appeal rights have expired. The General Court’s findings are not yet definitive, and may never become definitive, because they may be reversed or rendered redundant in the appeal pending before the CJEU. The findings are not, therefore, binding in the domestic proceedings under the EU principle of absolute res judicata. A reference to the CJEU is unnecessary to decide the issues in this case.

The Court nevertheless sets out its views on the underlying issues of law, in the hope that they might assist at later stages of the domestic proceedings. The leading authority on the EU principle of absolute res judicata is P&O European Ferries (Vizcaya) SA and Diputación Foral de Vizcaya v Commission (Joined Cases C-442/03P and C-471/03P) [2006] ECR I-4845. This explains that, where the EU courts have annulled a Commission decision on substantive as opposed to procedural grounds, the substance of that judgment becomes binding on all the world, not just on the parties. This ensures stability of legal relations, because it means that a matter which has been definitely settled by judicial decision cannot be referred to the courts by different parties for reconsideration.

The purpose of the EU principle of absolute res judicata is to prevent the annulling judgment from being called into question in subsequent proceedings. This purpose provides the key to the principle’s scope and applicability. Absolute res judicata gives dispositive effect to the judgment itself. It therefore extends to the essential reasons for the judgment (or “ratio decidendi”), not just to the outcome set out in the operative part. Only those aspects of the judgment which explain why the Commission decision has been annulled form part of the ratio decidendi, because those are the aspects which must be respected to prevent the annulling judgment from being called into question later on.

The General Court judgment annuls the Commission’s finding that the appellants had infringed article 102 TFEU, on the basis that the Commission was wrong to conclude that the relevant product market was limited to perindopril. The General Court made a number of findings of fact in this regard, including those the appellants rely on. Accordingly, if the General Court judgment becomes definitive and it can be shown that the relevant findings were an essential basis of that judgment, it would not be possible to challenge those findings in later proceedings which sought to contradict the General Court’s conclusions on the relevant product market within Article 102 TFEU.

It is not necessary to treat the General Court’s findings as binding in any other legal context. If the CJEU upholds the General Court judgment that the appellants did not infringe Article 102 TFEU, the respondents will no longer pursue their domestic Article 102 claim. In any case, at present, the domestic proceedings do not concern the relevant product market for the purposes of that article. Instead, the appellants rely on the General Court’s findings to support its defence based on mitigation of loss flowing from alleged anti-competitive agreements contrary to Article 101 TFEU. The General Court’s findings cannot be detached from the authority of the annulling judgment and deployed in this wholly different context.

The appellants contend that the General Court’s findings are binding in any EU law proceedings which raise the same factual issues. The Supreme Court rejects this argument because it is not supported by the EU or domestic case law. This is not surprising, because it would be inconsistent with the purpose of the principle of absolute res judicata.

The appellants’ proposed approach also raises practical difficulties because it has no workable defined limits. More generally, if it is confined to the context of the consequences of an annulling judgment, the principle of absolute res judicata promotes legal certainty, the effective judicial control of EU institutions and the maintenance of the EU legal order. However, once freed from this restriction, it could operate in way that is arbitrary and unjust, binding persons not party to the original dispute in a wholly different legal context in a way which would be inconsistent with the principles of a fair trial. The respondents’ claims in the domestic proceedings do not call into question or undermine the General Court judgment or its consequences in any way, nor do they contradict the General Court’s decision as to what needs to be done to comply with EU law. The Supreme Court is therefore satisfied to the standard of acte clair that the EU principle of absolute res judicata does not apply.

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For a non-PDF version of the judgment, please visit: BAILII

 

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09 June 2020 Morning session Afternoon session

 

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06 November 2020 Judgment summary