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‘Inspired by common law’: EU damages Directive opens door for competition disputes but steers clear of class actions

Monday (10 November) saw the EU Council of Ministers formally adopt the European Commission’s Directive on antitrust damages, a move to standardise multiple aspects of competition litigation across the EU and one which City competition lawyers believe will generate an uptick in potential cases.

Clifford Chance competition partner Matthew Scully notes that the impact will be greater on certain EU member states compared to the UK and says: ‘A lot of the Directive is inspired by common law procedure such as disclosure. Much of that procedural armour exists in England so the effect may be less noticeable.’

Principally, one of the Directive’s main provisions creates an acknowledgment that victims of anti-competitive behaviour have a right to compensation, although this does not include punitive, multiple or over-compensatory damages and is indicative of general wariness towards the US-style system that typically encourages litigation.

‘The Commission are very conscious not to adopt a US system of class actions and give rise to the so called excesses of litigation,’ comments Hogan Lovells partner Nicholas Heaton. ‘There’s a lot of political concern about that on an EU level. One needs to be cautious not to replicate what’s happened in the States.’

Other notable points includes the ability for national courts to order companies to disclose evidence in court proceedings – a system already in place in the UK and Holland – while whistle-blower programmes are protected with safeguards to ensure companies are encouraged to come forward with information on internal misconduct.

Heaton adds: ‘The overall impact will be to encourage further claims and make those claims easier when they’re brought. There isn’t a single element in the Directive, from a UK perspective, that is vastly more significant than any other. It just provides further encouragement to what is already an area with a lot of momentum behind it. If you’ve been fined by the Commission you can expect to be sued for damages, and you can also expect to be sued in the UK because that’s the jurisdiction of choice for claimants’.

On the Directive, EU Commissioner for competition policy Margrethe Vestager noted the need for a more robust competition culture in Europe and said: ‘I am very glad that the Council has now also formally approved the Directive on antitrust damages actions. I am very pleased that it will be easier for European citizens and companies to receive effective compensation for harm caused by antitrust violations’.

The UK notably has made progressive efforts to overhaul the rights of consumers via the Consumer Rights Bill, which will enhance consumer rights by streamlining complex areas of consumer legislation into a single bill and introduce an ‘opt-out’ collective redress mechanism for victims of competition law infringements. Subsequently, this has led to fears from the profession that it could open the door to US-style class actions. While there were originally proposals for the adoption of an EU-wide system of class actions to allow victims to group their claims together when pursuing damages, the issue has notably been avoided by the body within its latest damages Directive.

CC’s Scully says: ‘The EU will probably come back to it at some point – they haven’t steered away definitively. The Consumer Protection Bill is going through Parliament and the French have recently adopted a new class action system. The EU may well come back and revisit if it wants to bring in a European type of class action regime. They’ve parked it for the moment but not completely abandoned it.’

Having received approval by the European Parliament in April, the Directive is expected to be formally signed during the Parliament’s plenary session at the end of this month and Member States will then subsequently have two years to implement it.