It’s all in the Timing – Case Comment on Deutsche Bahn AG and Others v Morgan Advanced Materials Plc [2014] UKSC 24

Christy Burzio LLB, BVC , LLM, ACIARB, PhD Candidate at King’s College London.

Deutsche Bahn AG and others (Respondents) v Morgan Advanced Materials Plc (formerly Morgan Crucible Co Plc) (Appellant)

 

Before, Lord Neuberger (President), Lord Mance, Lord Sumption, Lord Toulson, and  Lord Hodge.

 Judgement given on 9 April 2014.

The Facts

Morgan Advanced Materials Plc (‘Morgan’) participated in an illegal cartel in the sector of electrical and mechanical carbon and graphite products. Morgan, as whistleblower, disclosed the existence of the Cartel to the Commission, and a Commission decision finding that Article 81(1) (Now Article 101(1)) had been infringed by the members of the cartel was issued on 3 December 2003. Morgan obtained immunity and escaped a fine, whilst the other members received heavy fines; Carbone Lorraine €45.05million, Schunk €30.87million, SGL €23.64million, Conradty €1.06million and Hoffman €2.82million. [1]

Most of the cartel members appealed to the General Court, contending that the decision of 3 December 2003 should be annulled, or the fines reduced significantly. Morgan did not appeal the Commission’s decision. The General Court dismissed their appeals on the 8 October 2008, and the time for any further appeal to the Court of Justice against the infringement expired on 18 December 2008. Two companies further lodged appeals, which were dismissed by the Court of Justice on 12 November 2009.[2]

On 15 December 2010, Deutsche Bahn AG and others filed a claim with the Competition Appeals Tribunal (‘CAT’) for damages against Morgan as a result of the cartel. The claims were ‘follow-on claims’ made in reliance of the Commission’s decision.

The Law

Section 47A of the Competition Act 1998

A person who has suffered loss or damage by virtue of an infringement of relevant EU or UK Competition law is entitled to bring a claim for damages suffered as a result of that infringement.[3]

It is important to note that s.47A does not create any new cause of action. Rather, it establishes a new route for pursuing a claim for damages which a person may otherwise make in civil proceedings. The amendment was to enable victims of anti-competitive conduct to ‘piggyback’ on infringement findings to recover their loss in the CAT. Furthermore, the White Paper on this issue stated that the policy intention was to reduce the legal costs incurred in recovering this loss, and to enable such claims to be heard by the specialist competition tribunal.[4] Under s.47A (9) the Tribunal is bound by the Commission’s decision, which establishes that the prohibition in question has been infringed. [5]

The Limitations

Under s.47A(7)-(8), unless a claimant obtains the permission of the CAT, it may not bring proceedings during the period when the relevant decision may be, or is being, appealed against.

Once the period for bringing an appeal has ended (or once the appeal has been determined) a claim may be brought.  Rule 31 of the CAT Rules 2003 (SI 2003/1372) introduces a two year period for the bringing of any follow-on claim after:

a)       The date on which the right to bring an appeal against a relevant date expires,

b)       The date on which such an appeal is determined, or

c)        The date on which a cause of action accrued.

When did the Time start to run for Deutsche Bahn AG and others?

The Supreme Court considered that the main issue in this case was whether the ‘decision’ referred to in s.47A of the Competition Act 1998 and Rule 31 of the CAT Rules was:

a) The Commission’s decision of 3 December 2003 against Morgan, which Morgan did not appeal. The expiration of time to appeal being on 13 February 2004, and therefore the time limit for follow-on damages being 14 February 2006.  (Morgan’s Route)

b) The Commission decision being considered as a decision against all cartel members, appealed by the majority of them and finally upheld (as to liability) by the General Court in October 2008, with the time starting to run from the 18 December 2008. Therefore, the time limit for follow-on damages being 19 December 2010.  (Other members Route)

 

 

The Outcome

The Supreme Court overturned the reasoning of the Court of Appeal and held that it was necessary to consider EU Law so as to inform the mechanism of a decision by the Commission.

Article 249 TEC provides that ‘a decision shall be binding in its entirety upon those to whom it is addressed’ (Article 288 TFEU having similar terms). The question being, does the decision operate on a unitary basis against all addressees (including Morgan) or as against each addressee separately?

The Supreme Court was heavily influenced by previous case law, in particular the Wood Pulp Cartel [6] decision, in which the Commission fined 36 of the 40 producers. As a result, 28 addressees filed appeals. The ECJ[7] annulled the operative part and found an administrative breach in the procedure against the allegation. The court then annulled or reduced the fines imposed by the Commission, and further annulled the undertakings imposed in consequence of the Commission’s findings of infringements which had now been annulled. Those cartelists that didn’t appeal asked the Commission to re-examine their legal situation and refund them their fines to the extent of their potentially reduced liability.  The Court of First Instance agreed but was overturned by the Court of Justice who held that;

• It would be Ultra Vires for the Community Judicature to rule Ultra Petita (the scope of the annulment not being extended beyond the appellant applicants);
• The appeal review by the Community judicature relates only to those aspects of the decision which concern that addressee. Unchallenged aspects concerning other addressees are outside this scope;
• The annulment decision, both operative parts and ratio decidendi, cannot annul an act not challenged before the courts, but alleged to be vitiated by the same illegality; and
• The principles of legal certainty preclude any necessity for the Commission which adopted the decisions to re-examine, by the request of other addressees, the legality of the unchallenged decisions. [8]

Therefore, in the current case it was founded that any appeal against the finding of infringement by any other addressee is irrelevant to a non-appealing addressee. The relevant decision establishing an infringement of Art 81(1) on 3 December 2003, and the expiry to Morgan’s right to appeal on 14 February 2004, is when the limitation started to run. The follow on Claim made on 15 December 2010 was thus out of time.

Implications of the Judgement

The Supreme Court’s decision is welcomed as one which brings clarity in relation to the limitations of follow-on actions under S.47A of the Competition Act 1998, where appeals have been bought against a Commission decision by some addressees but not others. It follows that, even if the appeals by the other cartel members had succeeded, the Commission decision would have remained in full force and effect against the appellants. Therefore damage claims against non-appealing addressee must be brought within two years of the date from which the right to appeal the decision against the particular addressee expires.

I will also take this opportunity to mention the Amicus Curiae brief of Nicholas Khan of the European Commission’s Legal Services team.[9] At Paragraph 20 an inventive legal argument is substantiated. It states that in a damages case, giving effect to the definitive character of the infringement decision does not imply choosing legal certainty over material justice; whereas in the Wood Pulp decision, the liability for damages depends not only on the Commission’s findings but the Claimants ability to show that they suffered losses that were caused by the cartel. Therefore, if the annulments secured by successful participating appellants reflected a lack of evidence of their participation in any infringement, it would be very difficult for purchasers to show that the prices they paid were cartelised prices. However, this argument falls short on the basis of reductions in fines against procedural anomalies by the Commission in finding an infringement.

While this decision clarifies the current position, it is important to note that the Consumer Rights Bill (the Bill) proposes harmonisation of the limitation period for bringing damages claims under the Competition Act 1998 with the six year period to bring a claim before the High Court. The Bill is currently before the House of Commons and is expected to receive Royal Assent in late 2014.

For a live viewing of President Lord Neuberger communicating the judgement to the parties can be found here; http://www.youtube.com/watch?v=-uBtdJdJhT4

---