Striking out allegations of breach of competition law would be contrary to the EU law principle of effectiveness

17/02/20

In a judgment handed down on Friday, Peter MacDonald Eggers QC (sitting as a Deputy Judge of the High Court) dismissed an application by Gazprom Export LLC (“GPE”) to strike out allegations made against it by way of defence and counterclaim of breach of EU and Bulgarian competition law in relation to its conduct in supplying natural gas to Bulgaria from 2007 to the present day. This included GPE’s cessation of supplies to the gas wholesaler and trader, Overgas Inc. AD (“Overgas”), the 4^th Defendant, on 31 December 2015. Until 31 December 2015, GPE had supplied gas to Overgas since 1 January 1997 under a supply contract agreed between them.

GPE’s strike out application was made on the basis that the pursuit of the competition law allegations was an abuse of the process of the High Court by way of a collateral attack on a Swiss-seated ICC arbitration award between GPE and Overgas. Overgas’ challenge to that award had failed before the Swiss courts. The competition law allegations are pursued as a defence by the Defendants to GPE’s claim other than Overgas (“the Principal Defendants”), and by way of counterclaim by the gas distribution company, Overgas Mrezhi AD (“Mrezhi”), the 3^rd Defendant. It was common ground, for the purposes of the application, that none of the Principal Defendants was party to the ICC arbitral award or a privy of a party to it. GPE nonetheless argued that the legality of its conduct towards Overgas should be determined exclusively by the contractual mechanism agreed between the parties to the supply contract.

While the Judge concluded that the allegations of breach of competition law made by the Principal Defendants in the English proceedings depended upon essentially the same factual allegations as made by Overgas in the ICC arbitration, he found that Mrezhi was claiming for a different loss sustained in a different market (§§48-51). Mrezhi was entitled to bring its claim for damages, and the Principal Defendants were entitled to defend GPE’s claim against them. It would be manifestly unfair to preclude them from doing so, in circumstances where they could not participate in the ICC arbitration (§§61-63, §75). There was nothing to suggest the allegations were not made genuinely but for the purpose of an ulterior collateral attack on the ICC arbitral award (§75). Overgas and the Principal Defendants’ interests were insufficiently aligned for the Principal Defendants to be precluded from making the competition law allegations in the English proceedings (§70). There  was no special reason or factor in this case which made the pursuit of those allegations abusive (§66).

The Judgment contains an extensive review of the authorities on abuse of process by way of collateral attack under the principle established in Hunter v Chief Constable of the West Midlands [1982] AC 529 (§§12-36) and summary of the applicable legal principles (§37). The Judgment also clarifies a number of other important points of principle about abuse of process by way of collateral attack where there is an application to strike out allegations of breaches of EU competition law.

First, to have precluded Mrezhi from bringing its counterclaim on the basis of an arbitral award to which it was not a party or a privy would have amounted to a breach of the EU law principle of effectiveness, which permits any person who alleges they have suffered loss as a result of a breach of EU competition law to bring a claim for damages. That was consistent with the approach adopted by the Court of Justice of the European Union that arbitral awards rendered in breach of EU competition law should be denied recognition and enforcement by the courts of EU member states on the ground of public policy (§§67-68).

Second, GPE’s argument that to permit the principal Defendants to pursue the competition law allegations would undermine the recognition of the ICC arbitral award under the New York Convention was not a material consideration. Whether the ICC award should be recognised or enforced was a matter to be considered on a relevant application being made (§69).

Third, an important material consideration was the absence of documentary disclosure in the arbitration compared with what would occur in the English Proceedings. A claimant in a competition law context will often not have access to documents held by the defendants which it needs properly to articulate its claim (§72).  

The Judgment of the Court can be read here.