On 9 October 2018, the English High Court handed down judgment in a €180+ million damages claim brought by BritNed Development Limited ("BritNed") against ABB, a high voltage power cable supplier, arising from the European Commission's decision dated 2 April 2014 in respect of the Power Cables Cartel (the "Decision").
The judgment, delivered by Mr Justice Marcus Smith, is the first to be produced by an English court in a follow-on cartel damages claim. Smith J held that ABB did not deliberately overcharge BritNed, but awarded BritNed damages of approximately €13 million.
| What you need to know - key takeaways |
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- The Court was unwilling to apply a presumption of harm prematurely: the Court declined to apply the presumption of harm that was brought into existence by Directive 2014/104/EU (the "Damages Directive"). The Court noted that the English regulations implementing the Damages Directive had not entered into force when the case was issued and therefore did not apply to it.
- Not all of the Commission decision is binding: the Court provided a useful reminder of the extent to which it was bound by the findings contained in a European Commission decision. In line with EU law principles, the Court held that it was bound only by the Decision itself (i.e. the 'operative part' that follows the recitals) and those recitals which form part of the 'essential basis' for the Decision.
- Complex and theoretical economic evidence carries a danger of being disregarded in favour of simpler and more fact-based alternatives: the Court preferred ABB's approach of undertaking a comparative analysis of its own reported data during and after the cartel to BritNed's approach of using economic proxies. The Court considered that actual data (when it existed) should be used rather than proxies for actual data, unless there was a good reason for disregarding actual data.
- Damages for losses resulting from an inferior product: the Court's approach confirms that the evidential burden for proving an overcharge is a high one. However, Smith J's willingness to award damages for losses suffered as a result of ABB supplying a less efficient product than it would have had to provide in order to win the BritNed contract absent the cartel may open new doors for claimants in the future.
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BritNed is a joint venture between Tennet (a Dutch power transmission operator) and the National Grid set up to operate the submarine electricity link between Great Britain and the Netherlands, commissioned in 2011. ABB was appointed by BritNed to supply the cable for that link.
On 2 April 2014, the European Commission found that ABB (specifically ABB AB and ABB Limited) and 10 other power cable suppliers were involved in a 10 year cartel from 1999 to 2009 in the market for underground and submarine high voltage power cables.
BritNed issued a claim for damages against ABB arising from the Decision, alleging that it had suffered losses of over €180 million (including lost profits and compound interest) as a result of an alleged overcharge applied to the cable supplied by ABB.
The Court awarded approximately €13 million of the damages claimed by BritNed on the basis that:
- the cartel facilitated ABB's appointment to supply BritNed with an inferior product to that which it would have had to offer absent the cartel. Because ABB was not challenged by any of the cartelists, it was able to win the contract with a less efficient cable design. The inefficiency was passed-on to BritNed;
- ABB's participation in the cartel allowed it to save costs more generally.
Smith J awarded BritNed around €7.5 million in respect of the inefficient cable design and around €5.5 million in respect of the broader savings ABB was able to make by participating in the cartel. BritNed's lost profits and compound interest claims were dismissed.
Presumption of harm
The Court declined to apply the presumption of harm introduced by the Damages Directive on the basis that the UK regulations implementing it into English law had not entered into force at the time BritNed issued its claim.
BritNed sought to persuade the Court that the presumption should nonetheless be applied in line with the EU law principle of effectiveness (i.e. national law should ensure the full effectiveness of EU law). Smith J rejected this analysis, reasoning that implementing legislation would not have been required if courts were nonetheless bound to apply it through other means. Further, Smith J considered that BritNed would either be able to prove its case on the facts and evidence (in which case a presumption would not be needed) or fail to do so (in which case he saw no basis to support a weak claim with a presumption).
Binding parts of the Decision
Smith J considered the extent to which the Court was bound by the Decision. In particular, he held that the Commission instrument contained three broad types of provisions:
- the Decision itself (i.e. the operative part) which was binding on its addressees and the court;
- recitals which form a constitutive part of the essential basis for the Decision, which are also binding; and
- other recitals, which are not binding.
Smith J made clear that non-binding recitals to the Decision were open to assessment by the Court and need only be accepted where they constitute findings that the Court can itself properly make based on the evidence before it as a whole.
Economic evidence
When assessing damages, the Court relied extensively on ABB's economic evidence to quantify damage. ABB's approach comprised a during-and-after price comparison analysis based on its own reported data. In contrast, BritNed's approach involved a more complex regression analysis using economic proxies.
BritNed's economic experts justified the use of proxies on the basis that the market would have been very different absent the cartel, and this rendered ABB's data unreliable. Smith J did not agree. He stated that actual data should be used where this existed, unless there was a particular reason not to use it.
