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False Dawn? How the 2015 CAT Rules Have Managed to Tie Themselves in a Knot

Related Lawyers: Antonio Delussu
Related Practice Areas: Competition Disputes

October 1, 2015 saw the introduction of a new set of rules in the UK Competition Appeal Tribunal (the “CAT”), designed to sweep away the old regime and make private actions for damages in relation to breaches of competition law in the UK much more accessible. Yet, to for all intents and purposes, far from the old 2003 CAT Rules being put to rest, they continue to linger in the form of a transitional limitation provision which is so broad in its scope that it could be many years before antitrust actions in the UK move out of its shadow.

Aside from ushering in a new US style approach to collective redress, and enabling the CAT to hear stand-alone claims, as opposed to merely follow-on claims, the amendment of the Competition Act 1998 (the “CA”) by means of the Consumer Rights Act 2015 (the “CRA”) was intended to align litigation procedure in the CAT more closely with that of the UK High Court. Primary in this regard was ensuring that the new post CRA scheme would no longer apply Rule 31 (1) to (3) of the 2003 CAT Rules, which in essence had provided that the CAT limitation period ran for two years from the date that an infringement decision became final. Instead, Section 47 E of the CA, as introduced by the CRA, effectively applies the Limitation Act 1980 to the new post CRA scheme. In other words, the limitation time period in the CAT under the new regime is the same as in the High Court – namely six years from when a claim arises.

Crucially, however, the CRA provides that Section 47 E can only be introduced with prospective effect. Hence, only cartels implemented entirely after October 1, 2015 will fall exclusively under the new CAT rules. Drafters of the new legislation realized the ‘gap’ in the law that such prospective effect created rather late in the day and hurriedly inserted a transitional provision into the revised Rules – Rule 119 – in an attempt to stop the gap. This, more than any other aspect of the legal revision, has inhibited the impact of the new regime.

Too broad?

Rule 119 applies to all types of damages actions (be they standalone, follow-on, or actions brought under the new collective regime) for which the cause of action arose before October 1, 2015. Most damages actions against cartels are brought as tort claims, and the cause of action is regarded as arising when the damage is suffered. By their very nature, the damage inflicted by a cartel is not only ongoing but will most likely have been concealed for a number of years prior to the claimant being aware of the fact. On this basis, Rule 119 captures, at least in part, all cartels that were implemented and had an effect on downstream parties before October 1, 2015. It will most certainly take many years before cartels implemented entirely after October 1, 2015 will come to light, and therefore will then fall exclusively under the new regime.

One of the key problems with this broad scope is the legal conundrum which it generates in relation to stand alone competition claims, one of the key elements which the new regime is designed to facilitate. Critically, if an action is captured by Rule 119, the effect is that the 2003 CAT Rules, and specifically Rule 31(3) to 31(3)) on limitation of claims, continues to apply. On the one hand, the CRA now permits standalone claims which are already extant to be brought before the CAT. Yet on the other, due to the wide scope of Rule 119, the 2003 CAT Rules on limitation continue to apply. Since these rules stipulate that limitation runs for two years from the date on which an infringement decision is final, and since by their very nature stand-alone claims do not require a prior finding of liability, the new legislation appears to act confusingly at cross-purposes.

Creative interpretation

There are two potential ways out of the impasse. The first solution is in the reference to an infringement decision in the 2003 CAT Rule. The effect of the transitional regime does not apply to standalone actions whose cause of action arose before October 1, 2015. Yet this seems to clearly contradict Paragraph 4(2) of Schedule 8 of the CRA, which refers to the newfound power of the CAT to hear claims extends to all standalone claims, regardless of when the cause of action arose. Thus, the conflict cannot be reconciled in this way, unless we admit that the new CAT Rules are at odds with the very piece of legislation that created the power for them to be amended in the first place.

The second possible solution is to ignore the reference to an infringement decision in the old limitation rules. Leaving aside qualms on whether such a creative construction of the plainly- drafted old limitation rule is plausible, the effect of this interpretation would be to almost render these standalone claims impossible in practice. With a mere two-year limitation period in the CAT, a claimant could only ever hope to recover a very paltry sum.

In practice, this means that standalone actions are unlikely to be brought before the CAT in the next five to ten years, that is, until the day in which the entire or most of the cartel period falls after October 1, 2015. It remains to be seen whether the controversial point of the true scope of application of Rule 119 will be tested and clarified before the courts. Until then, the rules as currently drafted leave both potential claimants and defendants in cartel claims in a grey area of legal uncertainty that does not foster the objective of making it easier to bring damages action for anti-competitive conduct, and encourage cartelists to resolve pending legal claims against them.

*James Groves is an associate and Antonio Delussu is a legal intern in Hausfeld's London office.

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