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Slaughter and May wipes £600m from cartel claim against British Airways

Three months after forcing High Court judge Mr Justice Peter Smith to recuse himself from deciding on a £1bn claim against British Airways (BA) over a rant about his luggage, Slaughter and May has had Smith J’s refusal to strike-out about £600m from the claim overruled.

The Court of Appeal has ruled Smith J’s decision to adjourn a strike-out application from BA, on the grounds that its alleged cartel activities had not intended to injure flower importer Emerald Supplies and 564 other shippers, caused ‘delay’ and should be struck out.

Smith J, who recused himself from the case after becoming embroiled in a dispute with the airline after his luggage went missing on a BA flight, had originally suggested that the question of BA’s intent to damage users of its air freight services be heard in trial.

BA is the lead defendant in the case against 23 airlines, including Air Canada, Air France-KLM, Cathay Pacific Airways and Singapore Airlines which stems from a finding by the European Commission in 2010 that BA had colluded with 11 other air carriers to inflate air freight prices by fixing fuel and security surcharges. BA was fined €104m for its involvement in the cartel.

The Court of Appeal disagreed with Smith J’s decision to adjourn the strike-out application against the economic tort claims and held that BA did not have the necessary intention the damage the parties as it did not know where the loss would fall, unknowing if the shippers would pass on the costs.

As a result, 60% of the claim has been struck-out, reducing the size of the claim from £1bn to £400m.

The Court of Appeal ruled: ‘It seems to us that if these economic tort claims could be advanced, it would have two results, both of which seem to us to be undesirable.  First, it would extend the effect of competition law and upset the balance which the draftsman had thought appropriate when framing the rules for unfair competition. Second, it would in reality dilute the concept of intention and bring it unacceptably and perilously close to a concept of foreseeability.’

The decision is a milestone in the evolution of competition damages litigation and the size of the claims that can be made against corporates in the English courts on the back of decisions by the European Commission.

The Slaughter and May team acting for BA was led by litigation partners Richard Swallow and Jonathan Clark. The pair instructed Jon Turner QC of Monckton Chambers and Conall Patton and Gideon Cohen of One Essex Court as counsel.

Competition law boutique Hausfeld & Co acted for the claimants and instructed Iain Milligan QC of 20 Essex Street and Paul Harris QC of Monckton Chambers as its counsel.

In related proceedings in the US last year, BA was one of 25 airlines that agreed to a $900m settlement with shippers claiming damages from cartel behaviour. BA’s share of the settlement was $89.5m.