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Recent press reports have suggested that competition lawyers in other Member States have been confidently predicting the death of cartel claims in the UK following Brexit. But reports of the demise of this species of litigation are premature. The European Communities Act 1972 (the ECA 1972) will be repealed following the entry into force of the European Union (Withdrawal) Bill (the Bill).  But this is unlikely to have any significant impact on the ability of claimants to bring claims before UK courts for damages caused by infringement of Article 101 of the Treaty on the Functioning of the European Union (TFEU) – at least for quite some time.  The reason for this is the provisions of the Bill that protect rights that have accrued prior to “exit day”.

 Article 101 TFEU prohibits agreements between companies that prevent, restrict or distort competition in the EU and which have an actual or potential effect on trade between Member States. Infringements of Article 101 TFEU can be enforced in private law claims before national courts. Indeed, the EU has encouraged private law enforcement of the competition provisions by means of the Modernisation Regulation 1/2003 and the Damages Directive (Directive 2014/104/EC).

 Article 101 TFEU currently has legal effect in the UK through the operation of section 2(1) of the ECA 1972 (read with section 1(2) and Schedule 1, Part 1).  In the UK, claimants can bring a claim before either the High Court or the Competition Appeal Tribunal (CAT) for damages suffered as a result of conduct prohibited by Article 101. These claims can either be brought following an infringement decision made by the EU Commission or a national competition authority; or as stand-alone claims. They can be – and frequently are – joined with claims for damages under the domestic competition law of the UK or other Member States.

 What will happen then on exit day when clause 1 of the Bill will repeal the ECA 1972?  The issue for UK competition lawyers in particular is what will remain of accrued but (as yet) unenforced claims for damages under Article 101 TFEU for loss sustained prior to 29 March 2019. That question is answered, in part, by the remainder of the Bill. 

 On the face of it – under the following provisions – the Bill will protect claims under Article 101 TFEU that arose prior to exit day:

 1. Rights recognised under Article 2(1) ECA 1972 prior to exit day are converted into domestic law.  At Clause 4, the Bill provides that any rights, powers, liabilities, obligations, restrictions, remedies and procedures that are “recognised and available” under section 2(1) ECA 1972 and are “enforced, allowed and followed accordingly” immediately before exit day (in short, any “enforceable EU rights” under section 2(1) ECA 1972) continue to be recognised in UK domestic law on and after exit day (Clause 4(1)). The Explanatory Notes to the Bill confirm that Article 101(1) TFEU is a directly effective, enforceable EU right which would be converted into domestic UK law as a result of Clause 4 (see paragraph 89). As an EU regulation, the Modernisation Regulation would also be converted into domestic law under Clause 3 and/or would confer rights which are capable of being recognised under Clause 4.

 2. Commission decisions prior to Exit day remain binding.  At Clause 3, the Bill provides that direct EU legislation, so far as operative immediately before exit day, forms part of domestic law on and after exit day.  Direct EU legislation includes decisions of the EU Commission (Clauses 3(1) and (2) and 14).

 3. The principle of supremacy of EU law continues to apply to legislative acts before exit day.  At Clause 5, the Bill provides that the principle of the supremacy of EU law will continue to apply on or after exit day so far as relevant to the interpretation, disapplication or quashing of any enactment or rule of law passed or made before exit day (Clause 5(2)).

 4. Rights retained under Clause 4 will be interpreted in accordance with relevant EU and domestic case law. At Clause 6, the Bill provides that any questions as to the validity, meaning or effect of any “retained EU law” is to be decided in accordance with “retained case law” and “retained general principles of EU law” (Clause 6(3)).  Definitions of these terms are set out at Clause 6(7), as follows:

a.   Retained EU law is defined as anything which continues to be part of domestic law by virtue of Clause 4.

b.   Retained case law is defined as including both domestic and EU case law.  

c.  Retained domestic case law is defined as any principles laid down by, and any decisions of, a UK court or tribunal that have effect immediately before exit day and relate, inter alia, to anything to which Clause 4 applies.

d.   Retained EU case law is defined as any principles laid down by, and any decisions of, the CJEU that have effect immediately before exit day and relate, inter alia, to anything to which Clause 4 applies.

e.  Retained general principles of EU law are defined as general principles of EU law that have effect in EU law immediately before exit delay and relate to, inter alia, anything to which Clause 4 of the Bill applies.

 The European Convention on Human Rights (ECHR) provides a further layer of protection for these claims.  Under A1P1, causes of action are protected as possessions.  As a result, even if the Bill did not retain the right to make a claim following infringement of Article 101 TFEU, it is arguable that section 3 of the Human Rights Act 1998 would require the Bill to be read in a manner that was compatible with A1P1 (i.e. in a manner that preserved the accrued right).

 In practical terms, accrued rights to damages for breach of Article 101 TFEU will therefore be capable of being enforced post-Brexit. Since it can take many years for claimants to become aware of competition infringements, especially in cartels conducted with a degree of secrecy, this means that there will not be a wholesale export of competition law litigation on exit day. It will take many years for competition claims to be processed through to a Court decision or settlement. Litigants can therefore still take advantage of those aspects of the UK’s civil justice system which have been considered to be favourable to competition actions - and for some years to come.

 It is right to point out that the following provisions of the Bill may place some modest limitations on the future scope of accrued Article 101 TFEU claims.  

 1. The principle of supremacy of EU law ceases to apply after exit day.  This is set out at Clause 5(1). But this applies only to any rule of law or enactment made or passed on or after exit day. Clause 5(2) confirms that the principle of the supremacy of EU law continues to apply on or after exit day so far as relevant to the interpretation, disapplication or quashing of any enactment or rule of law passed or made before exit day. Future enactments could in principle jeopardise the enforceability of accrued Article 101 TFEU rights, but in practice it would be hard to see how retrospective changes to those accrued rights could be made in a manner that was compatible with A1P1. See Pressos Compania Naviera v Belgium (App 17849/91) (1996) 21 EHRR 301 at [31] to [44].

 2. Neither decisions of the CJEU nor the Commission made after exit day will be binding on UK courts. This is set out at Clause 6(1)(a) and (2).  However, the UK courts may have regard to these decisions if they consider it appropriate (also see the Explanatory Notes at paragraph 104). This will not have any material impact, however, on accrued rights that exist as at 28 March 2019. Moreover, in so far as future EU Commission decisions identify and penalise cartels, then those decisions will have persuasive effect. They can still be relied upon evidentially to support claims for breach of Article 101 TFEU in relation to cartels which caused losses prior to exit day.

 3. UK courts cannot refer cases to the CJEU on or after exit day.  This is set out at Clause 6(1)(b). Happily, many of the legal issues concerning the enforcement of competition law have been resolved in the CJEU jurisprudence to date. Complex issues concerning overcharge, pass-on and the like are typically issues for expert evidence, rather than extensive legal debate.

 4. The Supreme Court is not bound by retained EU case law.  This is set out at Clause 6(4).  However, when considering whether to depart from retained EU case law, the Supreme Court must apply the same test as it would when considering whether to depart from its own case law (Clause 6(5)).  As a result (on the wording of an existing practice statement, the Supreme Court will normally treat retained EU case law as binding but will depart from retained EU case law “where it appear[s] right to do so”.   

 5. Repeal of rights. All rights (such as Article 101 claims) converted into domestic law under Clause 4 may subsequently be subject to amendment or repeal via a statutory instrument under Clause 7. But that power is only exercisable where a deficiency in the retained EU legal regime in issue is identified. Moreover, by Clause 7(6)(b), such domestic regulations as the Minister might make cannot “make retrospective provision.” In short, they cannot revoke accrued rights to damages.

6. General principles of EU law.  Although UK courts will be required to interpret retained EU law in light of these principles, they (1) will not be able to apply any principles recognised in CJEU case law decided after exit day; and (2) will not be able to disapply domestic law or quash particular acts post-exit on the basis that they are incompatible with these principles (Schedule 1, paragraphs 2-3). However, assuming that the competition law regime in the UK otherwise remains intact, there should be no need for claimants in private proceedings to invoke these general principles against domestic legal provisions in any event.

 In conclusion, it appears that Brexit and the Bill will have little immediate effect on Article 101 claims before the High Court and the CAT.  As set out above, rights under Article 101 will be converted into English law.  Where the Commission has found (prior to March 2019) that a company has infringed Article 101 that decision will bind the relevant company and can result in follow-on damages claims being brought in the UK after March 2019.  Commission decisions on or after 29 March 2017 will remain persuasive authority for the UK courts.  EU principles and case law applicable in March 2019 will continue to bind UK courts (with the exception of the Supreme Court) when considering Article 101 claims brought after that date.  This will protect most claims that arise in respect of infringements that took place prior to March 2019.  The practical risk of legislative interference with accrued but unenforced claims is slight. Moreover, if the Brussels Recast Regulation and the Rome II Regulation are maintained (substantially) in effect, then domestic UK claims for breach of Article 101 TFEU can continue to be brought alongside claims for breach of the domestic competition laws in other Member States if the jurisdiction of the UK Courts or the CAT can be established. In short, Brexit will not be a gift for competition lawyers in other Member States – at least not for a good few years.

Clerks

Staff