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25/09/2012

Court of Appeal supports willingness of the High Court to entertain Competition law damages actions in the UK
Laura PeirsonOsman Zafar

This note summarises the recent Court of Appeal judgment in KME Yorkshire Limited and others v Toshiba Carrier UK Limited and others [2012] EWCA Civ 1190, in which the Court accepted that a damages action could be brought against a UK defendant who was not an addressee of a European Commission (“Commission”) cartel decision.

Background

In December 2003, the Commission fined participants in a price fixing and market-sharing cartel in the industrial copper tubes sector.
In December 2009, Toshiba Carrier UK Limited and others (“the Claimants”) brought an action before the High Court seeking damages for loss sustained as a consequence of the cartel. Actions were brought against both the addressees of the Commission’s decision (“the Non-Domiciled Defendants”), and companies who were not named in the Commission’s decision (“the UK Defendants”).

High Court

The UK Defendants sought orders to strike out or summarily dismiss the claims against them. However, in October 2011, the High Court handed down a ruling dismissing these applications. It found that the Claimants had disclosed reasonable grounds for bringing the claim by alleging that the UK Defendants engaged in the same economic activity as the Non-Domiciled Defendants and had implemented the unlawful arrangements.
The Non-Domiciled Defendants sought an order declaring that the courts of England and Wales did not have jurisdiction to try the claims against them. The High Court also dismissed this application.
In January 2012, the Court of Appeal granted the defendants permission to appeal.

Court of Appeal

The narrow issue before the Court of Appeal was whether the High Court had been correct not to strike out or summarily dismiss the action against the remaining UK Defendant (“KME UK”). The parties agreed that if the action was not struck out or summarily dismissed, the courts of England and Wales would have jurisdiction over the Non-Domiciled Defendants.

Despite KME UK’s arguments to the contrary, the Court of Appeal held that “acts of implementation alone are capable of amounting to concerted practices where they are carried out pursuant to an anti-competitive agreement made between others and with knowledge of that agreement”. The court found that the Claimants’ clear allegations of unlawful conduct by KME UK sufficiently pleaded KME UK’s knowledge of, and an intention to implement, the cartel arrangements described in the Commission’s decision. It was therefore considered to be a valid stand-alone claim.

The judgment follows the approach taken in Cooper Tire (2010) regarding the level of knowledge of the cartel arrangements required to bring an action against a subsidiary. It suggests that such knowledge must be proven rather than imputed from the actions of the non-UK parent company. The Court questioned the status of the earlier Provimi (2003) judgment where it was suggested that there may be no need to prove a subsidiary company’s knowledge.

The Court of Appeal recognised that the secretive nature of anti-competitive agreements make it difficult to assess the strength of such an allegation before disclosure. It held that the High Court had been entitled to exercise discretion in refusing to summarily dismiss the claim despite a lack of evidence. The appeal was therefore dismissed.

Comment

This case involved a stand-alone action against KME UK, alleging that it participated in and implemented the cartel arrangements with knowledge of the cartel. The ability to bring an action against a UK subsidiary defendant means that it can be used as an “anchor defendant” enabling connected actions against non-UK defendants to be brought in the High Court.

The judgment also suggests that there is a greater scope to bring a private damages action against a UK subsidiary which is not an addressee of an infringement decision, on a stand-alone basis rather than as a follow-on action. The Court readily gave the benefit of the doubt to the claimants in this case, accepting that the case against KME UK was far from a model of clear and comprehensive drafting and veered between a follow-on claim and a stand-alone claim. This again shows the willingness of the UK courts to entertain private actions for damages against UK defendants who are not addressees of a Commission decision.
 


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