Tribunal issues first ruling on the interpretation of Brexit legislation in competition claims
In July 2023, the UK’s Competition Appeal Tribunal ruled that the European Court of Justice’s 2022 Volvo judgment on limitation periods did not change the Tribunal’s interpretation of English limitation rules. The Tribunal also found against arguments that it was required to follow post-Brexit EU case law developments where a competition law infringement took place prior to the completion of the UK’s exit from the EU. This ruling is the first time that the Tribunal has reviewed and applied the Brexit withdrawal legislation in the context of competition claims.
1. Background: ECJ rulings in Cogeco and Volvo AB and DAF Trucks NV v. RM
The 2014 Damages Directive introduced substantive changes aimed at standardising and facilitating the redress available for EU competition law damages claims. The Directive introduced a minimum limitation period of five years to harmonise the time available across the EU - however, the Directive did not apply retrospectively to claims arising prior to its implementation. The European Court of Justice (“ECJ”) has provided guidance on limitation periods in its responses to the preliminary references from the Portuguese court in Cogeco[1] and the Spanish court in the Trucks cartel case (Volvo)[2].
In Cogeco, the ECJ confirmed that national laws on limitation must conform to the European law principle of effectiveness, which requires EU Member States to ensure that the exercise of the right to claim compensation under national laws is not practically impossible or excessively difficult.
In Volvo, the ECJ went further and established that limitation periods under national law will not comply with the principle of effectiveness if they start to run regardless of a claimant’s knowledge of the damage suffered. For the claimants in Volvo, this ruling significantly shifted the start of the limitation period as time only began from the publication of the Commission’s summary decision, rather than the press release relating to the decision.[3]
Given that Cogeco and Volvo were both preliminary reference rulings, they specifically apply and relate to facts which only arise in each case’s respective national limitation laws. However, it is notable that Volvo was applied in full by the Portuguese competition court in an action for damages based on the same Trucks cartel.[4]
2. Claimants’ pleadings to the Tribunal
Following the ruling in Volvo, the Tribunal heard arguments on the implications of this judgment from claimants in two cases currently proceeding through the Tribunal in relation to unlawful interchange fees: Merchant Interchange Fee Umbrella Proceedings[5] and Merricks[6].
Under the Limitation Act 1980, a claim for damages must be brought within six years unless there has been a deliberate concealment of relevant facts from the claimants (for example, a cartel arrangement). However, this did not apply to follow-on damages claims lodged with the Tribunal as the Tribunal’s 2003 Rules set a limitation period of two years for follow-on damages claims, running from the expiry of any appeal deadline or the final determination of any court appeal of an infringement decision. Sweeping reforms to competition law claims were introduced by the Consumer Rights Act 2015, including the introduction of ‘standalone’ competition claims and changes to the limitation rules. For competition law breaches arising after 1 October 2015, the time limit for English claims brought to the Tribunal is now six years, in line with the Limitation Act.[7] The Court of Appeal affirmed in Arcadia[8] that six years is the limitation period for standalone claims such as the Umbrella Proceedings, and that this is compatible with the principle of effectiveness.
Broadly, the following contentions were pleaded at the hearing: (i) first, the Volvo judgment established, under the principle of effectiveness, that time in which to bring a competition damages action does not begin until the infringement has ceased; and (ii) second, the Volvo judgment was binding on the Tribunal because claims with “accrued EU law rights” remained subject to EU law and post-Brexit EU court judgments.
A judgment in the claimants’ favour would have positively impacted the ability of wronged parties to recover damages in competition law claims by expanding the length of claim periods in other cases beyond six years, and broadening claimants’ rights to file claims which were otherwise ‘out of time’ to recover damages (such as some of the claims in the Umbrella Proceedings).
For the follow-on damages claim Merricks, the claimants sought to apply Volvo in order to reverse the Tribunal’s earlier ruling that some of the follow-on Merricks claims were time-barred due to the limitation rules which applied to the earlier period.[9]
Split into four questions in the judgment, the Tribunal effectively made its decision by examining (i) the outcome and impact of Volvo on limitation periods under EU law, and (ii) whether the Tribunal was obliged to follow Volvo under UK law – and if not, the extent to which it had any persuasive effect.
The implications of the Volvo judgment was a matter for the Tribunal to decide, as the UK's withdrawal from the EU meant it could no longer make a preliminary reference to the ECJ.
3. Tribunal’s ruling on the Volvo judgment and limitation periods under EU law
The Tribunal assessed which aspects of the Volvo judgment it would need to follow if the UK had not left the EU in 2020. The Tribunal’s approach was to examine the operative part of the ECJ judgment and interpret it in light of the reasoning set out in the preceding sections of the judgment.
In interpreting Volvo, the Tribunal found that it was necessary for the ECJ to consider when the limitation period began to run under the “old rules” in order to determine the applicability of the Damages Directive. In this case, the “old rules” referred to the national limitation laws read in accordance with the principle of effectiveness.
The Tribunal recognised that the Volvo judgment expressed that the principle of effectiveness encompassed a requirement that the limitation period applicable to damages actions “cannot begin to run before the infringement has ceased.” In other words, Volvo appeared to introduce a “Cessation Requirement” for determining a limitation period which complied with the principle of effectiveness. However, the Tribunal disagreed that this formed any part of the operative – i.e., binding – part of the judgment. The Tribunal’s interpretation of the Volvo judgment is that its conclusion on the applicable limitation period was entirely based on the claimants’ knowledge of the cartel. The Opinion of the Advocate General supported the Tribunal’s interpretation, as he examined the application of the principle of effectiveness and reached his conclusion on the applicable limitation period without any mention of the Cessation Requirement.[10]
The Tribunal described the ECJ’s expression of a Cessation Requirement as an obiter observation. While it would have had regard to the observation if the UK were a part of the EU, the Tribunal was satisfied that it would not have needed to follow it. No previous ECJ case law – such as Cogeco – had articulated that the principle of effectiveness required a Cessation Requirement to be built into national limitation rules. In any event, as the Tribunal considered the expression of a Cessation Requirement to be non-binding commentary, it remained bound by the principles set out in Arcadia.[11] Indeed, even if the UK had remained in the EU, the Tribunal would have been mandated to follow Arcadia in any event.
4. Tribunal’s ruling on the extent to which Volvo Decision binds the Tribunal post-Brexit
Despite the Tribunal’s conclusion that the claimants’ reliance on Volvo would not apply under EU law, it recognised the wider significance in addressing the arguments on whether the Tribunal must follow ECJ decisions.
The European Communities Act 1972 (the “ECA”) was the primary legislation incorporating EU law into the UK. As part of the UK’s withdrawal from the European Union, the ECA was repealed by the European Union (Withdrawal) Act 2018 (the “EUWA”).
The Umbrella Proceedings claimants contended that the repeal of the ECA only applied prospectively. Any cause of action which accrued before the ECA’s repeal (such as the Umbrella Proceedings) was governed by EU law, not the EUWA. The claimants cited section 16 of the Interpretation Act 1978, which sets out that the repeal of legislation is presumed not to apply retrospectively unless otherwise stated. In the absence of any clear indication of retrospective application in the EUWA, it followed that post-Brexit judgments such as Volvo should apply where “accrued EU law rights” are engaged. Because they were unaffected by the withdrawal legislation, accrued EU law rights developed organically in accordance with the development of EU law and jurisprudence.[12]
The Tribunal disagreed with the claimants’ arguments and found that it was not obliged to follow European judgments handed down after the UK’s EU exit. However, the Tribunal panel was split 2-1 on the reasons underpinning this ruling.
i. The majority decision
The majority ruling by the Tribunal President Sir Marcus Smith and Ben Tidswell was that the claimants’ case ran contrary to the purpose of the EUWA, which was to transfer the sovereignty of the UK laws away from the EU and into the ambit of Parliament.
In order to achieve this, Parliament replaced the “gateway” in which EU law became UK law by “translating” the body of EU law as it existed immediately before its exit from the EU into the UK’s domestic law.[13] This translation process ensured that the substantive rights remained unchanged, as they continued to be available and enforceable under UK law.
What had been altered by the EUWA was the procedure by which these rights were enforced. Section 16 of the Interpretation Act did not need to be satisfied in this case but, in any event, the EUWA was clear in its intention to remove the aspects of EU law which would affect the translation process.[14]
Given the new constitutional environment, the majority judgment stressed that the procedural manner of litigating EU competition law claims in the UK must reflect the “paradigm shift” that had taken place.[15]
An important consequence of the UK’s exit from the EU was that no court in the UK could make a reference to the ECJ for a preliminary reference. The existence of accrued EU law rights would create an “immediate and unavoidable procedural vacuum” because UK courts would be unable to resolve any uncertainty arising from the claims before them which engage EU law.[16] The claimants’ position would also create parallel jurisdictions for cases depending on when the rights accrued, and this could not have been Parliament’s intention when passing the EUWA.[17] Ultimately, the claimants’ position cut across the entire purpose of the EUWA and created an “unreasonably complex and uncertain” regime.[18]
ii. The minority ruling
The minority ruling by Mr Justice Roth arrived at the same conclusion on different grounds. Justice Roth examined the purpose of the EUWA in view of how EU law applied in British laws and society during the UK’s several decades of EU membership. It would have been an impractical exercise to (i) individually determine what laws in effect derived from directly applicable EU legislation or domestic implementing legislation, and (ii) decide whether each law should be re-introduced into UK legislation and in what form. The purpose of the EUWA was therefore to adopt the entirety of EU law as domestic law, subject to certain exceptions and the government’s broad powers to remove or adapt the retained EU law.[19]
Justice Roth’s view was that the rights accrued prior to the EUWA were converted into domestic law, and the EUWA now formed the legal basis for pursuing and asserting those rights in the UK. Post-Brexit, claims under Article 101 TFEU should be regarded as claims under retained EU law, and the EUWA clearly articulated an intention that the interpretation of an accrued right or obligation should be according to EU jurisprudence as it stood immediately before the UK’s exit.[20]
5. To what extent is new EU case law persuasive authority?
The Tribunal unanimously held that the EUWA permitted the Tribunal to “have regard” to post-Brexit EU judgments such as Volvo.[21] However, the Tribunal was not persuaded that Volvo was good authority for interpreting the principle of effectiveness as incorporating a Cessation Requirement into existing English limitation rules. Introducing such a requirement would be an “inappropriate and unnecessary” change to the current scheme, and would in fact run counter to the principle of effectiveness.
6. The significance of the Scottish law of limitation
The Tribunal also considered pleadings made only by the Merricks claimants, as part of the class in this case comprised of claims governed by Scottish law. The Scottish law of limitation is more generous than its English counterpart, and the Merricks claimants contended that the English rules should be disapplied to avoid the unfairness of inconsistent treatment. The Tribunal ruled against “levelling up” members of the class asserting English law claims in this manner, as this would not respect the constitutional autonomy and diversity operating within the UK’s devolved constitutional structure.[22]
Impact of the judgment
Following the Tribunal’s ruling, the standard six-year limitation period for competition damages cases remains unchanged. The judgment as it stands will have implications for the Umbrella Proceedings and Merricks claimants in terms of the breadth of their claims going forward, and this may impact the level of damages claimed as redress. It is unknown whether the judgment will be appealed by either party.
The Tribunal’s judgment offers for the first time its interpretation of how the UK’s withdrawal from the EU impacts the substantive and procedural rights of pre-Brexit claims. Although the same outcome was ultimately reached, the two different judgments show that the assessment was not straightforward. The ruling shows a clear consistency in how the Tribunal viewed the pleadings on “accrued EU law rights” and “matching” English class members to Scottish class members: legal jurisdictions each have their own rights and obligations, and the Tribunal will respect these constitutional boundaries when they arise.
The judgment does not completely close off the possibility of new EU competition law judgments influencing cases in the UK. Despite finding it did not agree with the claimants’ interpretation of Volvo, it still considered whether it should have regard to it in this case. This consideration is in line with past comments made by the President of the Tribunal that it “will never, consciously, turn its eyes away from the international horizon, including the law of the EU”.[23] This judgment is therefore unlikely to be the last time in which the Tribunal is invited to consider and apply European court decisions to UK competition cases. In that regard, it is notable that there is a pending reference to the ECJ from the Czech court which queried the application of a Cessation Requirement in a non-cartel case.[24] A ruling in this case may be published before the end of the year, and so limitation periods applicable to UK competition cases may yet be shaped by EU law.
*Wessen Jazrawi is Partner and Nanret Senok is an Associate in London.
Footnotes
[1] C-637/17 Cogeco Communications Inc. v. Sport TV Portugal SA.
[2] C-267/20 – Volvo AB and DAF Trucks NV v. RM
[3] For an overview of the judgment and its impact, see Hausfeld’s Competition Bulletin article – ECJ rules on temporal applicability of the cartel Damages Directive and clarifies the statute of limitation in cartel damage cases
[4] Trucks cartel: Portuguese competition court grants a 15.4% compensation and applies its national law in line with recent EU case law
[5] Case 1517/11/7/22
[6] Case 1266/7/7/16
[7] The Damages Directive was fully implemented in the UK in 2017, although its implementation did not impact the limitation period as the six-year rule already complied with the Directive.
[8] Arcadia Group Brands Ltd v. Visa Inc. [2015] EWCA Civ 883
[9] [2023] CAT 15
[10] [2023] CAT 49, [27]
[11] [2015] EWCA Civ 883, [77]-[78]
[12] [2023] CAT 49, [50] and [51]
[13] Id., [44] and [45] set out the majority decision’s interpretation of how the translation of direct EU legislation and enforceable EU rights was achieved by the EUWA.
[14] Id., [69(4)]
[15] Id., [69(2)]
[16] Ibid
[17] Ibid
[18] Id., [71]
[19] Id., [91]
[20] Id., [111] and [112]
[21] Section 6(2) of the EUWA
[22] [2023] CAT 49, [80]
[23] Competition After Brexit: Divergence for differentiation or parallelism for consensus (13 February 2023)
[24] Case C-605/21, Heureka Group a.s. v. Google LLC, mentioned in [2023] CAT 49, [28(3)]
