A Judgement: Territorial Limits Set to EU Cartel Damages Claims

Yesterday, the English High Court gave judgment striking out a €1bn cartel damages claim. The judgment is significant as it is very unusual for a cartel damages claim to be struck out. However, the judgment is of much wider interest because, in striking out the claim, the Court gave a clear indication of the territorial limit of claims for breach of EU competition law.

A recent trend in cartel damages claims in the UK has been attempts by claimants to claim for damages arising from purchases outside the EU - in other words, attempting to bring worldwide claims. This judgment will curtail those attempts, and sets important territorial limits on EU cartel damages claims.

Background

The claim related to two separate cartels which were subject to decisions by the European Commission (the "Commission"): the Cathode Ray Tube (“CRT”) cartel; and the CRT Glass cartel. Before LCD screens were common, TVs and PC monitors were manufactured using CRTs, which were made from CRT glass.

The claim was brought by the iiyama group, a seller and distributor of computer monitors, which had purchased monitors containing both CRT and CRT glass. Importantly, however, the CRTs and CRT glass incorporated in the monitors iiyama purchased had been purchased outside the EU.

The issue

The defendants argued that the claim, which alleged breach of EU competition law, disclosed no cause of action because the purchases on which it was based had been made outside the EU and so were beyond the territorial scope of EU competition law. iiyama sought to argue that the fact that the monitors containing the CRT and CRT glass were sold in the EU provided sufficient connection to the EU for EU competition law to apply, ‎even if the CRTs and CRT glass had been purchased outside the EU.

The judgement

The Court held that, if the sales by the alleged cartelists said to be subject to the cartel had occurred outside the EU (whether they were sales of the cartelised product itself or a product incorporating it) that had insufficient connection with the EU to involve a breach of EU competition law. In reaching this conclusion the Court, for the first time, applied the established EU case law on the territorial scope of EU competition law to a damages claim. The Court found that sales outside the EU could not be said to be "implementation” of anticompetitive behaviour in the EU (applying the Woodpulp case), and nor was there a foreseeable, immediate and substantial effect within the EU (applying the Gencore case). There was, therefore, no basis for a claim for breach of EU competition law in respect of those sales, and the claim must fail for that reason.

In fact, the Court also found that iiyama’s claim must be struck out on two further grounds:

• The claim in respect of the CRT Glass cartel was pleaded solely as a follow-on claim, relying on the Commission’s CRT Glass decision, which found a cartel in the EEA. iiyama had not alleged any anticompetitive behaviour outside the EEA and so as the claim related to sales outside the EU it could not be regarded as a follow-on claim, it must therefore fail on that basis.

• In addition, the Court found that, when seeking permission to serve the claim outside the jurisdiction on an ex-parte basis, iiyama's solicitors had misrepresented the claim, failing to disclose either that it related to sales made outside the EU or the legal issues that would arise from that. The non-disclosure was considered by the Court as being so serious that it would be appropriate to overturn service of the claim.

Importance

This judgment is important in the development of cartel damages claims in the EU because it sets territorial limits to such claims. It is becoming increasingly difficult for claimants to make competition damages claims in the UK for non-EU sales. It is also a salutary warning to claimant lawyers not to overreach in bringing claims, both in relation to the scope of the claim and to how the claim is pleaded and described.

Hogan Lovells acted for one of the successful defendants.

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