Travers Smith: The rise and rise of competition litigation in England – what might the future hold in a brave new post-Brexit world?

Caroline Edwards

Partner, Travers Smith

caroline.edwards@traverssmith.com

The reputation of London as a jurisdiction of choice for private competition damages claims is well documented. Recent developments had looked like cementing London’s status even further. These include:

  • Substantial reforms of the competition private actions regime in the UK introduced by the new Consumer Rights Act with effect from 1 October 2015, which has materially expanded the jurisdiction of the Competition Appeal Tribunal to hear private action damages claims and introduced both opt-in and (for UK-domiciled claimants) opt-out class actions, as well as the possibility of collective settlements for collective damages actions.
  • The implementation of the new EU Damages Directive* which is supposed to be implemented by the end of this year. The intention of the Directive is to make it easier for claimants to bring competition damages claims and to harmonise the minimum standard for such claims which are required to be met across the EU. Those standards include certain rebuttable presumptions (for example, as to pass-on) and the requirement to introduce a disclosure regime. In theory, the introduction of a minimum standard might mean that other EU jurisdictions become more attractive destinations to bring a claim than they may previously have been. However, the fact that many aspects of the EU Damages Directive have long formed part of English law (much of the Directive was modelled on the English system) such that England already has an experienced judiciary (and experienced body of legal practitioners), well versed in matters such as disclosure, means that England could expect to retain its status as a go-to jurisdiction following implementation.
  • Recent significant judgments from the English courts, including on issues such as disclosure, limitation and the territorial limits of claims, which have served to develop further English law jurisprudence and to clarify the law in this field, providing greater certainty to litigants.

In 2016 alone, Commission fines for cartel infringements have already exceeded €3bn. On these figures, plus the well-publicised £14bn claim which it is understood will be brought by way of class action against MasterCard on the horizon, the future of cartel damages disputes in England had looked to be well settled. However, following the referendum on 23 June 2016, the question now, naturally, is what the future holds for England as a destination for these claims.

While Brexit may mean Brexit, it is still far too early to tell what the impact will be on London’s status as a premier destination to bring competition damages claims.

While Brexit may mean Brexit, it is still far too early to tell what the impact will be on London’s current status as a premier destination to bring private action competition damages claims. Everything will, of course, depend on the Brexit terms which the UK is ultimately able to negotiate (and, importantly, whether the UK remains part of the EEA or not). Key issues will include:

  • the status of Commission decisions as evidence of infringement in private damages claims;
  • jurisdiction (and the risk of parallel proceedings, inconsistent decisions and possible anti-suit injunctions issued by other courts); and
  • the enforceability of English court judgments in Europe.

However, while there will be a risk of jurisdiction challenges, multiplicity of proceedings and inevitable uncertainty, English and EU competition law are closely intertwined after 43 years of the UK’s membership of the EU and a post-Brexit deal could still preserve much of what underpins England’s status as a go-to destination for these claims (particularly if a post-Brexit deal sees the UK as a member of the EEA). Moreover, with the existing well-established competition disputes infrastructure in London, England still has much to offer as a jurisdiction in which competition disputes should be determined. This includes:

  • the specialist legal and economic expertise of the Competition Appeal Tribunal, and a number of High Court judges with significant competition law expertise;
  • favourable procedural rules (including as to disclosure and limitation), combined with well-established judicial experience in applying those rules and a reputation for efficient and effective case management;
  • ever-increasing depth in the legal and expert economist market; and
  • the well-established presence of litigation funders with substantial familiarity with English law and the bringing of competition damages claims in the English courts, as well as a continuing strong appetite to fund competition damages claims.

If the terms of the Brexit deal enable England to retain jurisdiction of claims for EU-wide losses, we should certainly expect there still to be much for English competition litigators to do. Moreover, with the latest indications being that article 50 will not be triggered until the start of 2017, at the earliest, there is potentially a long tail of claims which may still be brought in the English courts regardless of what the Brexit deal ultimately is and (depending on the transitional arrangements) even the possibility of a sharp spike in cases as claimants look to bring pre-existing claims prior to the actual exit date to ensure that they benefit from the pre-Brexit regime.

*Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and of the European Union.

Caroline Edwards is a partner in the dispute resolution department at Travers Smith and a member of the firm’s regulatory investigations group.  Her practice covers a broad range of high-value complex commercial disputes, including competition disputes. She has acted in a number of high-profile cartel damages cases brought in the English courts, including acting for members of the Schott group in their successful strike-out of the claim brought against them by members of the iiyama group of companies following the European Commission’s CRT glass cartel decision.

 

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Commercial Dispute Resolution Survey: Fighting strong

As Legal Business publishes its third annual Disputes Yearbook, and the second annual survey sponsored by Cornerstone Research, we scope the views of in-house counsel and private practitioners to shine a light on trends within the international disputes market

Results from the annual trends report from Cornerstone Research indicate firstly that the appetite for large-scale commercial litigation has yet to abate in London and, furthermore, that London’s lawyers continue to be lauded as the dominant players of international disputes.

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Stewarts Law: The green shoots of English securities litigation

Clive Zietman

Head of commercial litigation, Stewarts Law

czietman@stewartslaw.com

Unbeknown to many English lawyers there is an area of the law that has matured and developed in the US over the past 80 years but which, until recently, has hardly been recognised as a separate practice area. There are flickers of light that suggest that the situation may be on the verge of changing.

In the 19th century, when English company law was, in many ways, still in its genesis, a few leading cases established the building blocks for what survived thereafter and still exists today. One of those cases, frequently referred to on day one at most law schools is Foss v Harbottle (1843), a ruling that essentially established that if a wrong is done to a company, the company itself and only the company can sue, as opposed to any individual shareholder or group of shareholders. Over the years, that harsh rule was tempered such that shareholders were not left completely without protection and gained the ability to sue in what is now a raft of different circumstances. Case law developed to create exceptions to the rule in Foss and, with the added assistance of statute, derivative actions and minority shareholder petitions became just two examples of how matters moved on from first principles. What we have never had in this country, however, is anything akin to the well-developed structures that took root in the US in the 1930s and gave rise to wide-ranging statutory shareholder rights that enabled shareholders to sue with a direct cause of action against the company in a raft of circumstances where wrongdoing has been committed by the company itself, its directors or others. In the US there is a long history of securities litigation – cases in which aggrieved shareholders have sued the company when the company’s fortunes deteriorated and the value of its shares dropped as a result. No such regime exists here and there is no clamour for us to adopt an American approach any time soon.

This said, the sands have shifted over the past few years or so and investors who once saw the US as the only jurisdiction to assert claims have turned their attention elsewhere. The reason for this has been twofold. First, as a result of the well-publicised decision in Morrison v National Australia Bank, the US decided that it would no longer play host to cases involving foreign securities that have little or no connection with their home patch. Second, other countries such as Australia, the Netherlands and England have come to the attention of investors, keen to find a credible and palatable alternative.

‘In the US there is a long history of securities litigation. No such regime exists here and there is no clamour for us to adopt an American approach any time soon.’

In England two avenues for investor protection litigation were forged by sections 90 and 90A of the Financial Services and Markets Act 2000, which created statutory causes of action that go well beyond the ambit of the rather constrained common law options that had existed for centuries beforehand. In essence, section 90 makes a company that is responsible for listing particulars and prospectuses liable to compensate a person who has acquired shares to which the listing particulars or prospectus apply; and has suffered loss as a result of either: any untrue or misleading statement or omission. No reliance by the claimant needs to be proven, as it would in, for example, a common law misrepresentation case. Section 90A creates a cause of action for persons who have suffered loss as a result of a dishonest misleading statement or omission in a wide range of published information relating to shares, or a dishonest delay in publishing such information but in this instance the claimant must prove reliance. Statutory defences exist, including a ‘reasonable belief’ defence.

Apart from the well-publicised current case brought against The Royal Bank of Scotland (RBS) by its shareholders under section 90, there have been precious few cases commenced at all (and no reported case law) that can properly be described as English securities litigation. The reasons for this are manifold but they include the following:

  • Prospectuses and other published material are generally accurate and reputable companies go to great lengths employing expensive corporate lawyers to ensure that this is the case.
  • There is nothing in England akin to an opt-out American-style class action system, which makes the framework of a shareholder action very difficult if there are disparate claimant shareholders.
  • Bringing a shareholder claim against a substantial company is not for the faint-hearted – it is time-consuming and very expensive and requires considerable resource and expertise.
  • The risk of adverse costs liability puts off many prospective claimants although there are avenues for insuring against this, nowadays these are often built into a third-party funding package.
  • Whereas the US system actively encourages ‘roll-of-the-dice’ litigation with jury trials, limited adverse costs and mega-damages, ours does the very opposite.

Notwithstanding the above, there are some who believe that we are witnessing a new dawn for investor protection litigation in England and there are strong signs of new cases being developed. There would appear to be a number of reasons for this. First, there seems to be a growing mood among sophisticated institutional investors (such as pension funds and asset managers) that on one level, they have a duty at least to consider possible claims. Second, new funding and after-the-event insurance models and the permissibility of contingent fee arrangements have made feasible claims that perhaps once would not have been. Third, there is a growing awareness of investor protection generally. The Morrison case has forced institutions who historically limited their horizons to the US to look elsewhere. England has the advantage of being a well-respected and stable forum for dispute dissolution coupled with a disclosure regime which, although not as extensive and probative as that administered in the American courts, does make England a more attractive place than continental Europe where reliance discovery tends to be the order of the day. There is much talk in the media about shareholder ‘class actions’ often discussed in the context of a growing compensation culture. In reality there is little reason to believe that in the short term we are likely to see a full-blooded US-style class action system here that would make cases of this kind much easier to run and administer. That said, the mood music suggests that the times they are a changing.

Clive Zietman is a well-known commercial litigator who has been involved in a wide range of complex high-value claims, including a number of very high-profile fraud, professional negligence and banking disputes. His work regularly involves an international dimension. He has acted in several well-publicised cases, including the bankers’ bonus case against Commerzbank and the RBS shareholder litigation.

He leads the commercial litigation team at Stewarts Law and over the past few years he has been involved in several actions against banks, a task which most central London law firms are unable to undertake as a result of conflicts of interest.

 

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Signature Litigation: Contractual interpretation – eyes on the Financial List

Abdulali Jiwaji

Partner, Signature Litigation

abdulali.jiwaji@signaturelitigation.com

Sarah Kelly

Associate, Signature Litigation

sarah.kelly@signaturelitigation.com

Disputes over contractual interpretation find their way to the courts relatively frequently, leaving judges to unpick the wording of complex commercial agreements which will often have been negotiated in detail over many months. The courts will have to weigh up the natural meaning of the words in the contract after hearing arguments driven by the commercial implications of different interpretations for the parties involved, and what one might conclude after applying business common sense. The establishment of the Financial List is itself testament to the complexities encountered by the court in resolving financial markets disputes, and in these types of cases the exercise of contractual interpretation can involve more complexities than most.

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Hardwicke: International commercial arbitration: security for costs and third-party funding

Nigel Jones QC

Hardwicke

nigel.jones@hardwicke.co.uk

Frederico Singarajah

Hardwicke

frederico.singarajah@hardwicke.co.uk

‘As arbitration clauses are widespread in some sectors of economic activity, there has been a serious impediment to the development of the common law by the courts in the UK [though] the UK has not reached the stark example… in the United States, where mandatory arbitration clauses in contracts are removing whole classes of claim from the jurisdiction of the courts and undermining aspects of the law’s development,’ noted Lord Chief Justice Thomas in his 2016 Bailii lecture. As he tries to reverse the arbitration tide so the common law can continue to develop public precedents, others are still promoting arbitration as the best way forward.

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Niederer Kraft & Frey: Does transparency make arbitration more efficient?

Daniel Eisele

Partner, Niederer Kraft & Frey

daniel.eisele@nkf.ch

Tamir Livschitz

Partner, Niederer Kraft & Frey

tamir.livschitz@nkf.ch

In recent times, a lot has been said and written in favour of, or against, transparency in international commercial arbitration. The transparency discussion has thus far culminated in the promulgation of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration and the new policy adopted by the International Chamber of Commerce (ICC) International Court of Arbitration to publish certain information on arbitrators also in commercial arbitration. According to the ICC Court website, the new policy is ‘aimed at enhancing the efficiency and transparency of arbitration proceedings’. Parties can opt out of this limited disclosure and can request the ICC Court publish additional information about their case. The new rules and policies promoting transparency in arbitration seem to be an attempt by the ICC Court and others to address the increased criticism launched against arbitration in recent times as being an inefficient means to resolve disputes.

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The Commercial Litigation Summit 2016: The modern Commercial Court

In the opening speech for our 2016 litigation summit, Essex Court heavyweight Sir Bernard Eder reflects on the challenges facing the Commercial Court

The Commercial Court was established in 1895. At that stage, it was called the Commercial List, but I am not sure that matters. The reason why it was set up may be found in a brilliant article, which appears at the beginning of volume one of a set of law reports now no longer referred to, generally called Commercial Cases. That article is a must-read for anyone interested in modern commercial litigation. It is as if nothing has changed in 120 years.

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The Commercial Litigation Summit 2016: Marked to market

In a centrepiece debate, a group of heavyweight disputes veterans came together to discuss London’s much-lauded new finance court. Can it live up to expectations?

Even amid a packed programme at Legal Business‘s second annual Commercial Litigation Summit, the discussion on the newly-launched Financial List, the dedicated court backed by specialist judges and an innovative appeals track, was a highlight of the day.

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The Commercial Litigation Summit 2016: Dangerous territory

In an unusual session, Legal Business united top M&A lawyers and litigators to forecast the next wave of disputes to come when the deal cycle turns

It is a received wisdom of the legal industry that the economic cycle inevitably turns from market excesses and greed of the boom to the recrimination and disputes in the following recession. Yet in detail, the pattern – and corresponding risks – never play out the same way.

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Duelling dragons – the Asia disputes outlook

Hong Kong remains Asia’s disputes capital but Singapore continues to close the gap with sustained investment attracting more litigation and arbitration work

For so long the epicentre of dispute resolution in Asia, events have conspired in recent history to undermine Hong Kong’s status. Two years ago, hundreds of members of the judiciary led a silent march in response to a diktat from Beijing challenging the judicial independence of Hong Kong from the mainland. It was the start of what became known as the ‘umbrella movement’ protests.

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