The Supreme Court has unanimously allowed appeals brought by two pharmaceutical companies, Flynn and Pfizer, concerning the correct approach to costs in litigation against public authorities.
In 2018 Flynn and Pfizer successfully appealed to the Competition Appeal Tribunal (“CAT”) against findings by the CMA that they had charged excessive prices for an anti-epilepsy medicine, phenytoin sodium capsules. The appeal hearing took place over 13 days and had been preceded by an investigation lasting several years. The CAT remitted the issues of abuse and penalties to the CMA for reconsideration.
The CAT made an order that the CMA pay Flynn and Pfizer a proportion of their costs of the appeal. The Court of Appeal set aside the CAT’s costs ruling and ordered that there be no order as to costs. This was on the basis that the Court of Appeal considered that the CAT had disregarded a general legal principle (based on a line of cases from Bradford Metropolitan District Council v Booth  164 JP 485 (“Booth”)) that, absent an express procedural provision that costs should follow the event, public authorities should not, as a starting point, be ordered to pay costs unless there is a good reason to do so.
In a ruling which will have important implications for many types of litigation against public bodies, the Supreme Court held that there is no general principle that all public bodies should enjoy a protected costs position when they lose a case. Rather, the true principle of Booth is that the question of whether the prospect of adverse costs orders would produce a chilling effect on a public authority’s functions is no more than an important factor to take into account. The risk of a chilling effect cannot be assumed for all public bodies and all types of litigation (-).
The Supreme Court held that the prospect of adverse costs orders in competition infringement appeals had no real risk of ‘chilling’ the CMA’s enforcement activities, given the way in which it is funded through penalty income (-). Moreover, adverse costs orders imposed an important discipline on the CMA’s activities (). The Supreme Court accordingly upheld the CAT’s long-standing practice of applying a starting point that ‘costs follow the event’ in competition infringement appeals ().
A link to the judgment is here.
Daniel Jowell QC and Tom Pascoe appeared for Flynn, instructed by Macfarlanes LLP.
Tim Johnston appeared for Pfizer (and Robert O’Donoghue QC appeared for Pfizer at an earlier stage in the costs proceedings) instructed by Clifford Chance LLP.
David Bailey appeared for the CMA, instructed by the Legal Service of the CMA.
Daniel Piccinin appeared for two interveners, the Association of the British Pharmaceutical Industry and the British Generic Manufacturers Association, instructed by Bristows LLP.