Kate Pollock and Matthew Tighe have provided an expert analysis chapter to the International Comparative Legal Guide – Competition Litigation 2022. This claimant’s guide to recovering cartel damages in England is part of a book offering practical cross-border insights into competition litigation.
Below is the second of four parts of the chapter, examining losses recoverable in cartel litigation and practicalities. The full chapter is available to read for free here.
Losses Recoverable in Cartel Litigation
Damages are awarded on a compensatory basis, i.e. damages equivalent to the losses that flowed from the infringement. Interest also has an important role in cartel damages claims because there is usually a long delay between the time of the wrongdoing and any award of compensation. In fact, the interest can sometimes be greater than the damages net of interest.
In certain European jurisdictions such as England and the Netherlands, claimants can recover their actual interest losses; for example, lost return on investments, rather than merely simple interest. Claimants in England can recover compound interest subject to leading evidence on how they borrow/invest.
Once a business suspects that it has been significantly impacted by a cartel, it will usually at least investigate the options for recovery. The sections below consider timing and limitation, the practical steps for investigating the harm that may have been caused, the approach to selecting jurisdiction, and disclosure.
Timing and limitation
Assessing limitation in cross-border cartel claims is highly complex. In fact, different national limitation rules can apply to different aspects of the same claim. For example, purchases by a claimant group’s French operating company might be governed by French limitation law, whereas English limitation law may apply to other purchases within the same claim.
Many national rules provide that accrual of the limitation period is delayed where, as is the case with secret cartels, the wrongdoing was concealed. However, the precise point at which limitation will begin to accrue can be unclear, particularly when it is triggered by the claimant having sufficient knowledge of a concealed cartel.
Accordingly, it is important to review the likely limitation timelines for the claim at an early stage. While it may not be possible to deduce precise limitation milestones, a scoping exercise will at least inform the claimant of the general timeline to which they should work.
It is possible to attempt to agree standstill agreements with potential defendants while any settlement discussions take place. However, this approach comes with some risks, including prompting an “Italian Torpedo”, whereby the defendant knows it is likely to be issued with a claim in England and files proceedings pre-emptively in a defendant-friendly jurisdiction.
Aside from the limitation risk, there can be advantages in moving promptly when asserting a claim. Each case must be assessed on its merits, but assertive and prompt action will help signal to defendants that the claimant is committed to making a recovery and will not be bought out by a low-value settlement.
Investigating a claim
A key early step in any investigation is to perform an analysis of losses suffered. The early analysis need not be in depth, and typically can be completed without any need to search for underlying purchase records (even where available).
However, it is important to have a broad picture of the potential recovery, as this informs internal decision-making on matters such as staffing and allocating resources to the project. Also, if early settlement offers are received, it is not possible to assess whether they represent good value absent some form of claim valuation.
Commercial relationships may discourage businesses from asserting claims against their key suppliers. These concerns are often manageable; for example, because follow-on claims do not often allege unproven egregious conduct as they rely on regulatory infringement decisions and/or admissions of liability. There is no accusation of wrongdoing as this is already proven.
If liability is already established, it can depersonalise the claim and assist in relationship issues with suppliers. If a cartel victim decides to seek recovery, it is necessary to perform further investigative steps. These can be approached proportionally, but purchase and sale channels should be scoped, and contracts with cartelists (if any) should be identified and considered.
Claimants can frequently recover all their international losses in a single claim and may have a choice of where to file proceedings. Compared with some jurisdictions, it can be relatively straightforward to file proceedings in England.
The key document is the Particulars of Claim. This document must be accurate, but it does not need to set out the full details of the wrongdoing (which in many cases will be in the hands of the cartelists). Also, it need not even specify the exact sum sought from the defendant(s); this can come later in proceedings.
Germany, by contrast, requires more upfront investment, as claimants must present a reasoned analysis of their economic arguments at an early stage. The EU rules on jurisdiction are set out in the Recast Brussels Regulation (“RBR”). The general rule is that a defendant can be sued in the jurisdiction where it is domiciled. The RBR continues to apply to proceedings if they were issued before the end of the UK’s EU exit transition period.
As things stand, cartel damages claims outside of the scope of the RBR are subject to English common law rules. Under both sets of rules, England has developed a long-arm view of its jurisdiction. Usually, a UK defendant that is arguably liable for the cartel conduct can be used to anchor a claim against other, foreign, defendants, which can be joined to the proceedings if they are part of the same cartel. Damage suffered within the jurisdiction can also be used to secure jurisdiction under both regimes.
Evidence and disclosure
Cartels are, by their nature, concealed, and so claimants are initially disadvantaged by marked information asymmetry. The individual wrongdoers often know that their conduct is improper and so may hide their behaviour even from their colleagues. Owing to the concealment, cartel claims are often asserted many years after the underlying wrongdoing, which can cause data (both claimant and defendant data) to further atrophy.
Broad disclosure in England significantly assists in overcoming the informational asymmetry. Where the court orders standard disclosure, the parties must disclose all documents that are either helpful or unhelpful to their case or the case of another party to the dispute. Privileged documents and those submitted to a regulator as part of any leniency process are exempt. The parties must make a reasonable search for such documents.
The modern approach of the English courts is to take disclosure in stages, requiring the parties to disclose pre-identified and collated documents in parallel with searching for documents that have not yet been identified. This may include claimants obtaining early access to the documents collated by and submitted to a competition regulator that has investigated the wrongdoing.
These documents should be relatively straightforward for the cartelists to provide as it is essentially “off the shelf” disclosure which has been gathered previously for the purpose of regulatory proceedings. The staged approach to disclosure keeps the litigation moving forwards and delivers documents to the claimants even as the defendants are required to search for further materials relevant to the claim. Documents held by a competition regulator go to the nature of the wrongdoing, such as anticompetitive communications between cartelists. Defendants are, therefore, sensitive about disclosing these materials.
Disclosure is not a one-way process; claimants are required to provide the defendants with relevant internal materials. The areas of most interest to the defendants are those indicating the claimants’ purchases of cartelised products, and internal documentation indicating how much, if any, of the overcharge the claimants passed on to their customers (including materials regarding pricing models).
Materials that go to pricing can be highly confidential. Accordingly, the court will often order a “confidentiality ring”, whereby sensitive documents will only be available to external legal advisors and experts, and will not be available to employees of the parties to the dispute (or only available to employees in a solely legal rather than commercial role).
Significantly restricting dissemination of these materials goes some way to protecting their confidentiality. At trial, the English courts expect parties to lead the best evidence available. While claimants cannot avoid the proper search and collation of evidence, the courts are, to a degree, sympathetic to claimants that face evidential difficulties, particularly where the difficulties were caused by the defendants (i.e., concealing the wrongdoing delays the claimant in asserting a recovery).
Helpful documentation can sometimes be obtained other than through inter partes disclosure. U.S. claims are frequently brought in advance of European claims, and information from their filings and economic reports can be very helpful.
Either where the same cartel is the subject of litigation in foreign courts or where foreign courts have jurisdiction over a potential defendant, there can be means to obtain materials with the support of the foreign court. An example of the latter is the device in Section 1782 of Title 28 of the United States Code, which gives the U.S. district court the power to order a person to provide evidence for use in a foreign proceeding or international tribunal. This applies to legal proceedings that have already been initiated and also those “in reasonable contemplation”.
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