BritNed's damages reduced by Court of Appeal
This article is part of the November/December 2019 edition of our competition law newsletter, focusing on some recent key developments.
BritNed Development Limited ("BritNed") brought a claim against ABB arising from the European Commission's 2014 power cables cartel decision. In October 2018, the High Court found that there had been no overcharge but awarded damages for "baked-in inefficiencies" and "cartel savings" plus simple interest, which were reduced in a subsequent judgment by 10% to account for the relevant regulatory cap on profits. BritNed appealed, seeking an increase in damages, and ABB brought a cross-appeal in relation to the "cartel savings". BritNed's appeal was dismissed in full, while ABB's was allowed.
what you need to know - key takeaways |
---|
|
The Court of Appeal judgment set out some clear approaches in relation to the correct approach to assessing "cartel damages" generally, and the assessment of overcharge.
Assessment of "cartel damages"
The Court of Appeal confirmed that the correct measure of damages in respect of losses caused by a cartel is in principle the difference between the price actually paid and the price which would have been agreed had the cartel not operated. It also emphasised that only a compensatory award of damages is available in the English courts, and a restitutionary remedy is not required to give effect to the EU principle of effectiveness.
The Court of Appeal also rejected BritNed's argument that the European Court of Justice's recent judgment in Skanska meant that cartel damages should have a punitive as well as a compensatory/deterrent purpose.
Recognising the difficulties of proving loss, the Court of Appeal reaffirmed that the "broad axe" principle developed by the English courts was the correct approach to follow when assessing damages in cartel cases. The Court of Appeal also emphasised that there is no general principle that courts should err on the side of under-compensation, but noted that caution should generally be had when using estimates.
Cartel savings
ABB cross-appealed the High Court's award of damages to BritNed for cartel savings made by ABB. It argued that such savings did not translate into a loss to BritNed and, accordingly, that the High Court's award of damages was based on an error of law that, if upheld, would upset the principles of compensatory damages. The Court of Appeal accepted this argument and overturned the award of cartel savings damages.
Assessment of overcharge
Although the operation of the cartel was a serious breach of competition law, the Court of Appeal endorsed the High Court's conclusion that it represented the starting and not the end point of the quantification process in this case, which concerned a single transaction. Citing Marcus Smith J, the Court of Appeal confirmed that the narrower issue of loss to BritNed in the one transaction in issue was more relevant.
The Court of Appeal found the High Court had been correct to construct a counterfactual based on the price that would have been agreed with ABB had the cartel not operated; a lack of third party evidence would have rendered it impossible to construct a counterfactual using another bidder. It further recognised that, in this case the High Court could not have reliably made any factual findings enabling it to assess the impact of ABB's pricing on its appetite to win projects during and after the cartel period.
BritNed is subject to a regulatory cap on its profits. Initially, BritNed argued that the reduction of damages awarded based on this cap allowed ABB to be "refunded" the overcharge. The Court of Appeal expressed some reservation as to the High Court's exact approach on this point, noting it was strange that the High Court (and not the regulator) to deal with it. Ultimately, however, the Court of Appeal upheld the reduction, on the basis that it would not remit the case back on this point alone, and, in any event, it would be generally inconsistent with the regulatory regime to allow BritNed to retain excess profits.
Lost profits
The High Court had rejected BritNed's claim for loss of profit arising from the fact that it used a lower capacity interconnector as a result of the cartelised bid price. This was also rejected by the Court of Appeal. The Court of Appeal held that the High Court's dismissal of this claim stemmed from an assessment of the counterfactual which it had been entitled to adopt.
Comment
The BritNed case was the first cartel follow-on damages action in England & Wales to go to full trial and produce a judgment (see our previous article). The appeal was also the first of its kind in the jurisdiction. The case was closely watched as it unfolded and the approach of the Court of Appeal will be instructive.
On the one hand, both judgments serve as a reminder to claimants of the difficulties they could face in proving loss, particularly in the context of an object infringement. On the other, the High Court's willingness to engage with lengthy and detailed economic evidence is likely to encourage parties on both sides to focus their efforts on producing a cogent economic case supporting their respective positions.
However, the outcome should not be overstated. The facts were very specific – the case involved just a single transaction. It remains to be seen whether or not English Courts will adopt a similar approach to follow-on damages claims engaging a considerable number of affected transactions.
With thanks to Helen Chamberlain of Ashurst for her contribution.
Contents
- No crossed wires - first ECJ judgment in power cables saga upholds General Court
- ECJ rules on three power cables cartel appeals
- Campine's car battery recycling cartel fine halved
- Cartel damages also available to State lenders
- Benelux competition authorities joint paper on challenges of digitisation
- Astre transport group fined for anticompetitive practices
- French court upholds €20 million fine for breach of merger commitments
- BMW, Daimler and Volkswagen fined for anti-competitive purchasing practices
- Algorithms and competition law: Franco-German joint study published
- CNMC fines two major Spanish audiovisual communication groups for antitrust practices
- CAT upholds Ofcom's Royal Mail fine
- Ofcom focuses on parcels
- BritNed's damages reduced by Court of Appeal
- ACCC customer loyalty schemes report: data practices, disclosures and emerging trends
- A floor on roof prices? ACCC achieves first public enforcement outcome for alleged concerted practices
Key Contacts
We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need.
Keep up to date
Sign up to receive the latest legal developments, insights and news from Ashurst. By signing up, you agree to receive commercial messages from us. You may unsubscribe at any time.
Sign upThe information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.