On 4 October 2017, the High Court gave a judgment on a preliminary issue significantly restricting the temporal scope of the claimants’ claims in four air cargo cartel damages actions.
This judgment is the last in a series of adverse judgments for the claimants in these proceedings.
British Airways (“BA”) is defending four damages claims in connection with an air-cargo cartel identified in the European Commission’s Airfreight decision of 2010 (later annulled by the EU General Court in part against British Airways and supplemented with a 2017 re-adopted Commission decision), which is alleged to have caused damages to shippers. It has joined a number of other airlines as Part 20 defendants to the claims. Damages are sought in relation to the period 2001 to 2007.
BA and the other airlines took the position that there can be no reasonable grounds for bringing a claim and/or no real prospect of succeeding on a claim based on an alleged infringement of Article 101 TFEU / Article 53 EEA Agreement, as the claimants had pleaded, in relation to respectively:
the charges for air-freight services provided by airline addressees of the Commission decision on routes within the EEA (but not EU Member States) and third countries for transactions entered into prior to 19 May 2005 (together with 1 May 2004, the “relevant dates”).
- the charges for air-freight services provided by airline addressees of the Commission decision on routes between the EU and third countries for transactions entered into prior to 1 May 2004; and
The issues at stake
In deciding this question, Mrs Justice Rose had to decide:
- Whether or not the High Court, prior to the relevant dates, had to be considered a designated national authority within the meaning of then Article 88 EEC Treaty, empowered to decide whether or not an agreement or concerted practice breached then Article 85 EEC (what is now Article 101 TFEU).
This is relevant because, prior to the relevant dates, the regime implementing the EU competition rules did not apply to air-transport services between the EU and third countries. This changed with the adoption of the new implementation regime set out in Regulation 1/2003. At the relevant time, the competition rules could only be applied to air-transport services on third-country routes via the transitional implementing provisions; under then Article 88 EEC, only a national authority designated by a Member State had jurisdiction to fully apply competition law (under then Article 89 EEC, the European Commission could investigate and adopt a reasoned finding of the existence of an infringement, but did not have full powers to enforce EU competition rules). The question therefore was whether the High Court had been designated in this manner.
- Whether or not as a result of the direct effect of then Article 85 EEC, the High Court had jurisdiction to rule on a possible breach of Article 85 EEC.
It is established case law that, as a matter of principle, then Article 85 EEC has direct effect, meaning that an individual can ask a national court to establish whether there has been a breach of the prohibition on anti-competitive agreements, and if so, award damages. The question arose whether the general principle of direct effect applied fully in the case of air-transport services between the EU and third countries prior to 1 May 2004, when in the absence of an implementing regulation, the transitional regime of Articles 88 and 89 EEC applied.
- Whether or not the implementation regime of Regulation 1/2003, which fully applies to air-transport services, could have retroactive application, so that the claimants could now rely on it in regards to a period prior to its coming into effect.
In deciding this, the Judge had to consider whether the relevant provisions of Regulation 1/2003 extending its scope to air transport were, as the claimants contended, procedural in nature (and therefore retroactively applicable) or, as the defendants argued, substantive (and therefore not retroactively applicable).
Rose J found for the defendants on all three points. She also declined to make a reference to the CJEU, contrary to the claim put forward by the claimants.
Rose J’s judgment signifies a significant victory for the airline defendants. Some interesting points include:
- In respect of designation: Rose J rejected the argument that the reference in Article 88 EEC to “authorities of Member States” who have the power to apply Articles 85 and 86 EEC include any court with a general jurisdiction to apply competition law. In Rose J’s view, just because a national court may directly apply effective law did not mean that it had specifically been given jurisdiction deriving from Article 88 by the relevant Member State. Rose J noted that the question of whether or not a court or body was “designated” for these purposes requires an examination of each Member State’s law and whether or not there had been a domestic regulation or law which conferred authority on the body in question. A review of the various relevant UK regulations showed that the UK had clearly set out the institutions on which it had decided to confer jurisdiction derived from Article 88 (i.e., to apply competition law), and had clearly “never intended that the High Court should be able to exercise [such] powers.”
- In respect of direct effect: Previous EU case law had stated that although (then) Article 86 EEC (prohibiting an abuse of a dominant position) could be enforced by a national court without any implementing legislation, the same was not true of Article 85 EEC; i.e. the direct effect of Article 85 EEC was not fully effective in cases where the transitional regime applied. This conclusion was based on the fact that, in contrast to abuse of dominance cases, restrictive agreements, decisions and concerted practices could qualify for an exemption from being found unlawful under Article 85(3) EEC. In the absence of an implementing regulation, only a competent national authority within the meaning of Article 88 EEC (or the European Commission, in a reasoned decision adopted under Article 89 EEC) could rule on the application of Article 85(3) EEC. As long as no such finding had been made, a national court was not able to rule on the application of Article 85 EEC. The claimants had interpreted this to mean that in a domestic proceeding where there is no issue on the application of Article 85(3) EEC, the national court may make findings based on the principle of direct effect just as is possible in relation to Article 86 EEC. The claimants argued that the alleged cartel was “hard-core” in nature and not, based on case law and on the Commission decision itself, likely to benefit from the Article 85(3) EEC exemption. Rose J rejected this argument; nothing in existing EU case law suggested that just because our “understanding of competition law has moved on or become more sophisticated in its understanding of the anti-competitive effect of such agreements” then case law relating to the application of the Article 85(3) EEC exemption should not apply. In any event, Rose J noted that just because the Commission, in its decision, found that the alleged cartel was a single and continuous infringement not qualifying for an exemption under Article 101(3) TFEU (the current identical version of Article 85(3) EEC), this did not allow the High Court to assume the same was true of the alleged infringement prior to the relevant dates.
- In respect of retroactivity: EU case law had previously held that procedural rules may apply on a retroactive basis, but where the law in question was an indivisible whole consisting of both substantive and procedural parts, then that law needed to include “sufficiently clear indications” that it should be afforded retroactive effect. Rose J held that Regulation 1/2003 is different from the regulations considered in prior case law, in that it is not indivisible—some parts are procedural and can be applied retroactively. However, just because Articles 85 and 86 EEC were in force from the date the EEC Treaty came into effect does not mean that “any regulations dealing with their implementation are enforcement mechanisms which do not create substantive rights.” Accordingly, Regulation 1/2003 could not be applied retroactively.
The case is Emerald Supplies Ltd & Ors v British Airways & Ors, HC-2008-000002; case-managed with HC-2013-000328, HC-2013-000329, HC-2013-000330 and HC-2016-003194.