HMS Pinafore collides with Gondoliers in competition damages rulings

29/10/14

Peter Smith J has handed down two judgments determining highly-contested issues in damages proceedings concerning alleged cartelisation in the air freight market.

In its 2010 Decision in the Air Freight case the European Commission found that certain airlines had colluded to fix fuel and security surcharges for the carriage of air cargo. The infringement found by the Commission is limited to routes to, from or within Europe. Following the Decision, several hundred Claimants have brought proceedings in London against BA claiming damages for losses said to have been suffered on routes worldwide. So far as the proceedings claim losses on routes wholly outside Europe, they cannot be brought as a follow-on action based on the Commission’s Decision. Those claims have instead been framed as claims in the common law tort of conspiracy. BA has in turn brought contribution proceedings against a number of other airlines.

BA, supported by a number of the Defendants to the contribution proceedings, applied to strike out the conspiracy claims. The argument on the strike-out application was that it could not be shown that the alleged cartelists intended to injure the Claimants, because of the operation of pass-on (whereby any price increases resulting from the cartel are passed by direct purchasers to indirect purchasers by means of increased re-sale prices, and so on down the line). The effect of pass-on, so the argument went, is such that cartelists cannot know where the loss resulting from the cartel will ultimately fall, and it cannot therefore be said that the cartellists had the requisite intention to injure any particular Claimant. This argument drew support from the Court of Appeal Decision in Newson v IMI [2014] Bus. L.R. 156, in which the Court of Appeal held that it was not sufficient to say that the cartellists intended to injure any purchasers whether direct or indirect who, by reason of pass-on, would ultimately end up bearing the loss. Arden LJ remarked that such a contention was “reminiscent of the circularity of the words in The Gondoliers that “when everyone is somebody, then no-one's anybody”.” Peter Smith J held that, despite these remarks, the application to strike out the conspiracy claims was premature, because material to support the allegation of intention to injure might emerge on disclosure. He stated that he found Arden LJ’s remarks difficult to follow, although he conceded that that might be because he was unfamiliar with the oeuvre of Gilbert and Sullivan, with the exception of the song “I am an Englishman”. Peter Smith J refused permission to appeal on the conspiracy point.

In his second ruling Peter Smith J rejected the submission that material contained within the Commission Decision, but falling outside the scope of the infringement finding itself, and which could not therefore be the subject of any appeal to the EU Courts, ought to be redacted from the version of the Decision provided to the Claimants, on the basis of the decision of the Court of First Instance in Pergan Hilfsstoffe Fur Industrielle Prozesse GmbH v Commission [2007] ECR II-4225. Peter Smith J held that it was sufficient that the version of the Decision containing such material be disclosed into a confidentiality club coupled with undertakings by the Claimants not to use such material to bring claims in any jurisdiction without the Court’s permission. In so holding, Peter Smith J made a number of highly critical remarks concerning the Commission’s failure to date to publish any non-confidential version of the Air Cargo Decision, saying for example that the Commission’s approach was “molasses-like” and did not amount to sincere co-operation with the national Courts. On the contrary, the Judge said, “there has been no mutual assistance as between this Court and the EC; the latter has simply declined to do anything beyond saying that it is unable to do anything whether by speeding up a decision or even making a decision”.  Peter Smith J gave permission to appeal his finding on the Pergan point.

The judgment in [2014] EWHC 3514 (Ch) is here.

The judgment in [2014] EWHC 3513 (Ch) is here.