Brick Court Chambers

Brexit Law Blog: Archive

This blog tracked legal issues arising from Brexit. It ran from the referendum in 2016 to last post in May of 2021.

Competition law damages actions in England for violation of Articles 101 and 102 after Brexit: Part 1 [1]

Posted on 23 Sep 2016 by Brick Court

Daniel Jowell QC

If there is a ‘hard Brexit’[2], will it still be possible to bring actions before the U.K. courts seeking damages for breaches of Articles 101 or 102?

As recent cases[3] have reminded us, competition law, including EU and domestic competition law, is territorial in nature.  Following a hard Brexit, Articles 101 and 102 TFEU will no longer apply in the territory of the U.K. and EU law will no longer be a part of our law.  Articles 101 and 102 would continue to apply only if and insofar as the infringing conduct is implemented in (or, arguably, has immediate, foreseeable and substantial effects in) the remaining EU Member States and has an effect on trade within those States.  If and insofar as the conduct amounting to an infringement of competition law is implemented only within the U.K. then just the Chapter I and Chapter II prohibitions of the Competition Act 1998 should apply to such conduct.  The territorial ambit of competition law will therefore respect our border.

But the activities of those infringing competition law is unlikely to do so. Many cartels (and conduct constituting abuses of dominance) will continue to operate across the U.K. as well as on the Continent.  Moreover, some companies based in the U.K. doubtless will continue to infringe EU competition law by their activities on the Continent and victims will suffer loss and damage from anti-competitive conduct that spans the U.K. and some or all of the remaining EU Member States.   In such circumstances, many claimants will understandably wish to bring all of their claims for damages arising out of a single cartel (or similar infringement) in a single jurisdiction – and that most favoured single jurisdiction may well remain the United Kingdom.

If a potential claimant wishes, after Brexit, to bring its claims for a cartel implemented (wholly or in part) on the European continent before the U.K. courts it will, amongst other things, typically wish to consider three fundamental factors: (1) whether the English courts will recognise a justiciable cause of action based on Articles 101 or 102 TFEU; (2) whether it can establish English jurisdiction for such a claim and (3) whether it can rely upon the binding effect of any European Commission decision. I deal with the first of these factors below. Two further blog posts will address the second and third factors.

  1. Establishing a cause of action: a foreign statutory tort

At the present time, our choice of law rules for competition law claims are governed by the Rome II Regulation (Regulation (EC) No 864/2007). Article 6(3) of the Rome II Regulation provides for specific rules for the applicable law to competition law claims and expressly contemplates the application of competition law other than the law of the forum (i.e. the application in the U.K. of foreign competition laws). However, as a previous blogpost has observed, after Brexit, unless other provision is made by Parliament, our choice of law rules for non-contractual claims will cease to be governed by the Rome II Regulation and will revert to the rules embodied in the Private International Law (Miscellaneous Provisions) Act 1995 (“the 1995 Act”).

An alleged tort consisting of an infringement of competition law will, under the 1995 Act,  in summary and so far as likely to be relevant, be governed by the law where the significant elements of the tort occurred: s11(2)(c) of the 1995 Act. In the case of a competition infringement this is likely to be where the immediate damage was suffered (which will typically be where the goods or services in question were purchased by the claimant at an inflated price[4]).  It follows that if and insofar as the damage is suffered in one or more of the remaining Member States, the tort in question will be governed by the foreign law of that Member State.  As continuing members of the EU, the law of those Member States will (by reason of the doctrine of direct effect) incorporate Article 101 and 102 TFEU.

Will the English courts entertain actions based upon the law of remaining Member States incorporating (as they do) EU competition law?

The mere fact that the claim is based on a foreign tort is itself no obstacle.  It has long been established that actions can be brought in the English courts based upon torts governed by foreign, and not English, law. Claims based on foreign torts are fairly common place in commercial litigation in the Commercial Court in London.  What is more, since the 1995 Act itself abolished the ‘double actionability rule’, the mere fact that EU competition law is territorial in nature should itself be no bar to its enforcement here in respect of conduct implemented within the EU (ex UK).

Nor does it matter that the foreign tort is quasi-statutory in nature.  As Dicey & Morris put it in the Fourteenth Edition (2006)of the Conflict of Laws (the edition preceding the introduction of the Rome II Convention)  at 35-033: “There is no reason in principle why an English court should not give effect to [foreign] statutory liabilities as exist in the applicable law of the tort…”.   In accordance with this, the UK Supreme Court has held that, in accordance with what was called the “modern trend”, there was no impediment in principle to the enforcement in the UK courts of claims for damages for infringement of a foreign copyright.[5] If a claim based on foreign copyright can be brought here, a claim based on foreign competition law (including Articles 101 and 102) seems promising.

However, Dicey & Morris go on to note (in the same section) that such foreign statutory liabilities will only be given effect “…provided such liabilities are properly characterised as sounding in tort and no questions of extra-territoriality, public policy or non-enforceability of penal or public law arise”.  Do any of these provisos arise?

As to the first, a claim under Article 101 and 102 has long been characterised in English law as a claim sounding in tort.  There is no obvious reason why a foreign competition law would not be similarly classified.

As regards questions of ‘extra-territoriality’, as noted above EU competition law respects the principle of territoriality.  EU competition law should apply only to conduct implemented (or having a substantial, foreseeable and immediate effect) on the territory of the EU.

As regards “public policy” generally, there seems to be little reason to suppose that the private enforcement in England of the competition laws of EU Member States (including EU competition law) would contradict any aspect of English public policy.  There is no good reason to suppose that applying EU competition law would be any more objectionable than applying any other foreign competition law. If anything, as our own Competition Act 1998 has been modelled on EU competition law, there is good reason to suppose that it should be less objectionable. Insofar as there is some specific instance of the application of EU competition law were to be seen as objectionable, there is statutory power for the UK government to take appropriate steps under the provisions of the Protection of Trading Interests Act s.5.

This leaves the common law rule against the enforcement in the U.K. of foreign “penal” or “public” laws, which has been expressly preserved by s.14(3)(a)(ii) of the 1995 Act.

It is likely that procedures for the imposition of a fine by the European Commission for violation of Article 101 or 102 is penal in nature, at least by the standards of the European Court of Human Rights[6].  However, it is more difficult to argue that private actions in the national courts for compensatory damages for infringement of EU competition law could properly be characterised as such.  (Such an argument would be stronger in relation to private law actions for damages for violation of foreign competition laws based on criminal statutes, such as the Sherman Act of the United States[7]).

The ambit of claims to enforce foreign “public law” has long been uncertain but was apparently regarded by the (pre Rome II) 14th Edn (2006) of Dicey & Morris at s5-33 as including “anti-trust legislation”.  However, more recent authority is to the effect that such “public law” claims are confined to those that involve the assertion of a sovereign right or seek to enforce a (foreign) governmental interest (such as a foreign exchange control provisions)[8]. It remains an open question whether (absent Rome II) foreign competition law claims would today be regarded as enforcing a foreign ‘governmental interest’ in any relevant sense.

[1] I am grateful for comments on a previous draft of this Blogpost from Robert O’Donoghue, Daniel Piccinin and David Bailey and for discussions with Anneli Howard. The opinions expressed, and any errors, remain my own.

[2] By ‘hard-Brexit’ I mean a withdrawal from both the EU and the EEA with no other agreement relevant to competition law.

[3] Iiyama Benelux BV & Ors v Schott AG & Ors [2016] EWHC 1207 (Ch);  Iiyama (UK) Ld ) & Ors v Samsung Electronics Co Ltd & Ors [2016] EWHC 1980 (Ch)

[4] See Iiyama (UK) Ld ) & Ors v Samsung Electronics Co Ltd & Ors [2016] EWHC 1980 (Ch)

[5] Lucasfilm Ltd v Ainsworth [2011] UKSC 39 at [105] – [109].

[6] Appn 43509/08 Menarini Diagnostics v Italy, judgment of ECHR of 27 September 2011 and Opinion of Advocate General Sharpston in Case C-272/09P KME Germany at [61] – [64].

[7] Dicey & Morris, The Conflict of Laws (14th Edn) at s35-119. Such a claim based on the Sherman Act would, in any event, likely be precluded by the fact that such claims can only be pursued in a U.S. District Court: see British Airways Board and British Caledonian Airways Limited v Laker Airways Limited [1983] E.C.C. 503 at [13].

[8] Iran v Barakat Galleries [2007] EWCA Civ 1374 at [125] – [128].