Out-Law News 4 min. read
16 Oct 2015, 4:38 pm
The economic tort claims were brought in addition to the claim for breach of statutory duty to try and provide a remedy for damages caused by the cartel where the anti-competitive conduct falls outside the scope of the EU/EEA. In this case, this was conduct in relation to non-EU/EEA freight routes or in relation to airline routes prior to their regulation under EU/EEA law in May 2004.
The Court of Appeal said that the main problem with those claims in the context of competition damages actions was that the possibility that loss could be passed on through the supply chain meant that there was not the requisite intention to injure that particular claimant.
"It is not known whether anyone from the alleged class (whether that be the shippers or the shippers and freight forwarders together) will in fact suffer at all," the court said in its judgment. "BA is not seeking to gain at their expense, even if it is foreseeable that this is in fact what may happen ... It cannot be said that there is ... an intent to injure the particular claimant."
"In any event, we respectfully do not understand why it follows that a claimant has necessarily suffered a loss from the actions of the cartel. He might not have chosen to increase his prices at all even if the proper costs had been charged and so his profit would have remained the same. More importantly, even if he would in fact have increased his prices, or if he suffered a loss because the increase in prices resulted in a reduced volume of business … we do not accept that these complexities about potential loss affect the question of intent," it said.
The court said that allowing the claimant companies to argue these claims would "extend the effect of competition law" and "dilute the concept of intention and bring it unacceptably and perilously close to a concept of foreseeability".
"The Court of Appeal has made it clear that claimant companies will now need to think again in terms of how to plead for damages going beyond the scope of the EU/EEA," said competition law expert Ben Lasserson of Pinsent Masons, the law firm behind Out-Law.com. "The so-called 'economic torts' are not appropriate for these types of claims."
BA had applied to the Court of Appeal to strike out the economic tort claims as part of ongoing litigation in relation to the cartel, which is alleged to have operated between 1999 and 2007. The cartel was said to have coordinated and fixed prices for air cargo services, particularly in relation to fuel and security surcharges. In 2010, the European Commission ruled against BA and 11 other named cartel members, and fined BA over €104 million for its part in the cartel. BA is currently appealing the Commission's ruling.
A large number of claimants were pursuing BA for some form of damages ahead of the Court of Appeal's ruling. However, BA had made 23 other airlines 'Part 20 defendants' to the claims, which will be required to contribute to any losses for which BA is found legally responsible. Some of these airlines are 'addressees' that were also subject to the Commission's 2010 decision, while others are 'non-addressees'. The non-addressee airlines were mentioned in the Commission's decision, but not identified as infringers.
As of the date of the initial hearings, there was no non-confidential version of the Commission's decision available. The claimants had applied to the court for disclosure of BA's copy of the un-redacted, confidential decision. Some of the airlines, including both addressees and non-addressees, objected to this disclosure unless certain information about them was redacted. However, the trial judge ruled that only information that was legally privileged and information contained in leniency submissions should be redacted.
In 2007, the EU's General Court ruled that decisions by the Commission on breaches of competition law should be redacted to the extent that they contained references to involvement in the breach by parties that were subsequently not addressees of the final decision. The principle, taken from German company Pergan Hilfsstoffe für industrielle Prozasse GmbH's case against the Commission, is designed to protect companies that have not had the opportunity to contest any statements regarding alleged infringements in court.
The original trial judge in this case had refused to grant applications by the airlines to redact for 'Pergan' material. Both addressee and non-addressee airlines had raised 'Pergan' concerns on the basis that the decision contained findings or allusions to infringements which were not part of the operative part of the decision and so could not be contested by an appeal; specifically, findings that went beyond the temporal scope and geographical scope of the decision. However, the trial judge ruled that the Commission's decision should be disclosed in full to the parties to the English proceedings "in the interests of justice", within the confines of a 'confidentiality ring' made up of those parties. This disclosure would be on the condition that the claimants would not be able to use anything in the decision to begin additional proceedings without the permission of the court.
However, the Court of Appeal overturned this decision. It found that the trial judge was prevented under European law from "relax[ing] or amend[ing] the Pergan safeguards".
"[The judge] failed, in our judgment, to give due recognition to the nature of the protection afforded by Pergan to the presumption of innocence and wrongly put in place a regime which was not sufficient to protect the rights which both the addressee and the non-addressee airlines enjoyed in respect of Pergan materials," the court said.
"If there is a presumption of innocence, which under Article 48 [of the Charter of Fundamental Rights of the EU] the national court has to respect, then there is no rational justification for allowing third parties, such as claimants in proceedings in national courts in existing or future damages actions ... to have access to incriminatory material ... which, without any right of challenge or appeal to the party concerned in the relevant forum, namely the European Court, suggests that that party has been guilty of conduct infringing [EU competition law]," it said.
"The practical effect of this going forward will be that a decision will need to be redacted for privileged material, leniency material and also 'Pergan' material," said competition law expert Ben Lasserson.