Limitation periods in cartel follow-on damages claims

August 2022  |  SPECIAL REPORT: COMPETITION & ANTITRUST

Financier Worldwide Magazine

August 2022 Issue

In Gemalto Holding BV & Ors v. Infineon Technologies Ag & Ors, the UK Court of Appeal considered the application of section 32(1)(b) of the Limitation Act 1980 (LA 1980) in a follow-on damages claim. Dismissing the claimants’ appeal, the Court of Appeal found that the claim was time-barred under the test laid down by the Supreme Court in Test Claimants in the Franked Investment Group Litigation v. HMRC.

The Gemalto judgment reaffirms the application of the FII test to section 32(1) of the LA 1980, over the statement of claim test applied by the Court of Appeal in Arcadia Group Brands v. Visa and DSG Retail v. Mastercard.

Purpose and history of the LA 1980

Section 32 of the LA 1980 protects prospective claimants in actions: (i) for fraud; (ii) arising from mistake; or (iii) in cases when the facts or existence of the cause of action were deliberately concealed. It prevents limitation from running until the claimants have discovered the fraud, mistake or concealment. Section 32 ensures that “a claimant is not disadvantaged, so far as limitation is concerned, by reason of being unaware of the circumstances giving rise to his cause of action”, while striking a reasonable balance with the competing aim of “protecting defendants from stale claims”, according to Canada Square Operations v. Potter.

Development of cartel damages claims

The right to bring a private action for damages arising from an infringement of competition law is well-established in English law. As of 2001, there were, however, no reported cases of damages being awarded in any competition damages claims, leading the government to introduce reforms to improve claimants’ rights of redress, including the statutory right for claimants to bring follow-on claims in the specialist Competition Appeal Tribunal (CAT), in addition to their existing right to bring such claims in the High Court (section 47A of the Competition Act 1998) (CA 1998). This led to a bifurcation in the limitation periods for follow-on damages claims before the High Court and the CAT.

Claims in the High Court were subject to the LA 1980, providing claimants with six years from the date on which the cause of action accrued to bring a claim, postponed if the material facts of the infringement were deliberately concealed by the defendant, according to sections 2 and 32(1).

Claims in the CAT were governed by the Competition Appeal Tribunal Rules 2003 and the CA 1998, providing claimants with two years to bring a claim from the ‘relevant date’, according to Rule 31, defined as the later of the date on which cause of action accrued, or the date on which the infringement decision becomes final, which is the date of the decision, plus the period for issuing an appeal, or if the decision is appealed, on conclusion of the appeal itself.

In due course, parallel jurisprudence developed as the courts and the CAT sought to interpret the application of the limitation provisions in each of the forums.

Judgments interpreting the CAT limitation rules found that the ‘relevant date’ may vary between defendant addressees of the same infringement decision depending on: (i) whether a defendant had issued an appeal; (ii) if the appeal related to the infringement itself, or the fine or remedies imposed; and (iii) the progress of that appeal. This led to uncertainty for claimants. Further, claimants wishing to bring follow-on claims prior to the expiry of the ‘relevant date’ could only do so with permission of the CAT, giving rise to the threat that prospective claims in the UK would be defeated by defendants seizing courts in other jurisdictions.

Meanwhile, a series of claims issued in the High Court raised questions regarding the application of the LA 1980 to competition claims. In Arcadia and DSG, the Court of Appeal confirmed that the statement of claim test also applied to competition claims, such that limitation ran from the time when a claimant had, or could with reasonable diligence have, sufficient knowledge to properly plead a claim that would not be liable for strike out.

Changes to the law on limitation for cartel damages claims

The limitation regime for cartel damages claims was subsequently amended twice, by the Consumer Rights Act 2015 (CRA 2015) and by Directive 2014/104/EU (the Damages Directive) in 2017.

The CRA 2015 introduced reforms to the CAT, including a collective proceedings regime and the right for claimants to bring standalone claims in the CAT. The CRA 2015 further provided that the LA 1980 applied to any claims issued in the CAT with a cause of action arising on or after 1 October 2015, thereby effectively aligning the limitation period for private damages claims in the CAT with that in the High Court.

The Damages Directive was implemented into UK law under schedule 8A to the CA 1998. It provides a single limitation period for all competition damages claims with a cause of action arising on or after 9 March 2017, whether follow-on, standalone, individual or collective, and whether in the High Court or the CAT. This regime is separate to, and replaces, the LA 1980 as it applied to competition damages claims. The limitation period under Schedule 8A is six years, beginning with the later of the day on which the infringement of competition ceases, or the ‘claimant’s day of knowledge’ (“the day on which the claimant first knows or could reasonably be expected to know (a) of the infringer’s behaviour, (b) that the behaviour constitutes an infringement of competition law, (c) that the claimant has suffered loss or damage arising from that infringement, and (d) the identity of the infringer”).

FII and the worthwhile claim test

In FII, a tax case, the Supreme Court considered the application of section 32 of the LA 1980 to a claim involving mistake under section 32(1)(c). The Supreme Court found that limitation begins to run from the point in time when a claimant knows, or could with reasonable diligence know, that it made a mistake with sufficient confidence to justify embarking on the preliminaries to the issue of proceedings.

In subsequent cases, the Court of Appeal did not have an opportunity to consider the application of the test in FII to competition damages claims. In DSG, handed down a few months later, the Court of Appeal applied the statement of claim test. The Court of Appeal in OT Computers v. Infineon Technologies, (a case in which Foxton J, at first instance, had applied the statement of claim test), did not opine on whether the FII test applied, as this issue was not on appeal.

The Gemalto decision

The applicable test under section 32(1)(b) of the LA 1980 to competition damages claims was considered by the Court of Appeal in Gemalto. The claimants issued proceedings following on from an infringement decision of the European Commission dated 3 September 2014. As the claim was issued in the High Court and related to a cause of action predating the Damages Directive, the applicable limitation statute was the LA 1980.

Following a preliminary issue trial in January 2022, the High Court held that the claim was statute barred under section 32(1)(b) of the LA 1980, as Gemalto had issued its claim more than six years after it had discovered the infringement, or could with reasonable diligence have discovered the infringement. By the time of the announcement of the Statement of Objections, taking into account all other information available to it, Gemalto had sufficient material to be able to form a reasonable belief as to the essential elements of a claim for damages arising from the cartel and to plead a claim.

On appeal, the Master of the Rolls held that the worthwhile claim test formulated in FII applied to deliberate concealment cases. The Court of Appeal found that limitation begins to run “when the claimant recognises that it has a worthwhile claim, and that a worthwhile claim arises when a reasonable person could have a reasonable belief […] that there had been a cartel”. Once a claimant knows that there may have been a cartel, it can embark on the preliminaries to the issue of proceedings, such that limitation begins to run.

The Master of the Rolls noted that the test in FII does not entitle a claimant to delay the start of the limitation period until it has certainty about its claim succeeding, or the existence or details of the cartel – limitation will start to run when the claimant discovers that a cartel may have been concealed. On the facts, the Master of the Rolls held that Bacon J was correct to find that the proceedings were time barred under the LA 1980, applying the test in FII. Lord Justices Green and Birss agreed with the Master of the Roll’s judgment.

Obiter, Green LJ commented on the implication of this finding on competition damages cases, concluding that it would be inconsistent with FII to interpret the LA 1980 as deferring the running of time until the publication of the infringement decision. The issue of a Statement of Objections was a “pivotal” moment following which “all possible victims of the defendant know that the regulator has reached the point when it considers that there is a real case to answer”.

Ultimately, the Gemalto judgment provides welcome affirmation of the application of the worthwhile claim test in FII to competition damages claims.

 

Oliver Browne is a partner and Hayley Pizzey and Anna Kullmann are associates at Latham & Watkins. Mr Browne can be contacted on +44 (0)20 7710 1825 or by email: oliver.browne@lw.com. Ms Pizzey can be contacted on +44 (0)20 7710 1005 or by email: hayley.pizzey@lw.com. Ms Kullmann can be contacted on +44 (0)20 7710 1135 or by email: anna.kullmann@lw.com.

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Oliver Browne, Hayley Pizzey and Anna Kullmann

Latham & Watkins

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