The UK’s Competition Appeal Tribunal (CAT) has handed down an important ruling on the extent to which recitals of a Commission decision are binding for the purposes of domestic damages claims.
The judgment was on a preliminary issue concerning seven Trucks cartel follow-on damages claims. In addition to considering the extent to which recitals are binding, the CAT also considered whether it was an abuse of process for defendants to deny facts that they had previously admitted to during a settlement process with the Commission.
The claimants sought damages for harm allegedly caused by the behaviour set out in the Commission’s 19 July 2016 Decision in Case 39824 – Trucks. The addressees of the trucks Decision had availed themselves of the Commission’s settlement process. By the Decision, the Commission found that the addressees had breached Article 101 TFEU in the market for medium and heavy trucks in the EEA, including by “colluding on pricing and gross price increases in the EEA for medium and heavy trucks.”
The Decision comprises a short operative part of four articles, preceded by recitals which summarise the background to the Decision and the Commission’s reasoning. It was common ground that Article 1 in the operative part is binding on the parties and on the CAT. As to the non-operative parts, the claimants submitted that all the Decision’s recitals were binding as a matter of EU law. Of the defendants, DAF contended that nothing in the Decision was binding outside Article 1, save for those recitals which could be used to clarify that article. The other defendants advanced the alternative position that only those few recitals constituting the “essential basis” of the statements made in the Decision’s operative part were binding.
The two principal issues were: (1) whether and to what extent non-operative parts of Commission decisions are binding on the parties and the CAT as a matter of EU Law; and (2) whether it would constitute an abuse of process under English law for a defendant to resist a damages claim by denying or putting to proof facts which it had previously admitted to the Commission during the settlement process.
Are recitals binding as a matter of EU law?
The CAT’s analysis centred on the proper application of Article 16(1) of Council Regulation (EC) 1/2003, which codified prior EU jurisprudence and states that:
"[w]hen national courts rule on agreements, decisions or practices under Article  or Article  of the Treaty which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission…"
The Tribunal conducted a full review of EU case law and identified that those recitals constituting an “essential basis” or “necessary support” for the operative part, or those which are “necessary to understand” the operative part of a decision, are binding on the parties and national courts “on any sensible interpretation of Article 16”.
Having clarified the legal test to be applied in determining which recitals are binding, the CAT then applied this test to the trucks Decision. Clearly those particular findings are case-specific, but the CAT’s approach in applying that test is interesting and may have broader application. In particular, having identified that the recitals which broadly described the collusive behaviour were binding, the CAT went on to rule that recitals which set out “details and examples of occasions when and how the collusion took place” were not binding but rather those “details are essentially evidence, and indeed merely illustrative evidence in support.”
It is not unusual for infringement decisions to detail examples of specific conduct which infringed competition law. Contested decisions tend to provide numerous such examples and settlement decisions (which are considerably shorter) tend to provide far fewer examples. The CAT’s approach will encourage defendants to contend that recitals which set out examples of allegedly anti-competitive conduct are not strictly binding on the Courts.
Abuse of process
The claimants contended that defendants should not be permitted to deny facts set out in the recitals to the Decision, because the defendants had accepted the accuracy of those facts as part of the settlement process with the Commission.
The Tribunal reviewed the relevant law on abuse of process. The CAT considered in particular, Secretary of State for Trade and Industry v Bairstow  EWCA Civ 321, which provided, “…it will only be an abuse of [the] process of the court to challenge the factual findings and conclusions […] in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated; or (ii) to permit such relitigation would bring the administration of justice into disrepute.” The Tribunal also noted that it was difficult to formulate a single test for abuse of process, and that judgments should be broad and merits-based, and that “one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not”.
The CAT concluded that the correct approach was to “apply a broad, merits-based approach in asking whether it would bring the administration of justice into disrepute and/or be unfair to the claimants if the defendants are able simply to deny the facts which the Decision records them as having admitted, or to “not admit” those facts in their defences to these claims and thus require the claimants to prove them,” concluding that “it would be an abuse of process here on both accounts.” In reaching this conclusion the CAT was significantly influenced by the advantages that settling parties obtain from that process, including reduced fines and a shorter and less detailed infringement decision and that the “lack of detail in a settlement decision… presents a handicap to claimants… and a corresponding benefit to the addressees of the decision.”
Having ruled that settling defendants cannot deny or “not admit” facts which are set out in the recitals to a settlement decision, the CAT identified a discrete set of circumstances where a settling defendant can plead a positive case in its defence which contradicts recitals in a decision, including: (a) where the defendant contradicts a recital, on the basis that the recital does not accurately reflect the underlying document referred to therein; and (b) where a defendant relies on new evidence which it could not reasonably have had access to at the time of the Commission investigation.
This judgment gives helpful clarity on the extent to which recitals of infringement decisions are binding, and the restrictions on a settling party from denying facts that it had previously accepted during the settlement process. Corporates under investigation for potential breaches of competition law must carefully weigh the advantages/disadvantages of the settlement process in this light. Inability to deny facts set out in recitals (save in limited circumstances where the defendant pleads a positive case) should be considered as part of that cost/benefit analysis. We recommend that specialist competition litigators should be consulted as and when a business is considering the benefits of the settlement process, in order to advise on how the client’s options impact on its exposure to follow-on damages claims.
A copy of the full judgment is available here.
The seven cases are: Royal Mail Group Limited v DAF Trucks Limited & Others; BT Group plc & Others v DAF Trucks Limited & Others; Ryder Limited & Another v MAN SE & Others; Suez Groupe SAS and Others v Fiat Chrysler Automobiles N.V. & Others; Veolia Environnement S.A. & Others v Fiat Chrysler Automobiles N.V. & Others; Wolseley UK Limited & Others v Fiat Chrysler Automobiles N.V. & Others; Dawsongroup plc & Others v DAF Trucks N.V. & Others
See below for a list of the cases and a summary of the background to the claims.
The provisional non-confidential version of the decision is available here. A further non-settlement decision was made in Trucks, with Scania as the sole addressee. That second decision was not the subject of the present CAT ruling.
Article 1 of the decision.
Including: Europese Gemeenschap v Otis NV and Others; NBV and NVB v Commission (“Dutch Banks”); Lagardère SCA and Canal+ SA v Commission; Adriatica di Navigazione SpA v Commission (“Greek Ferries”); Provincie Groningen and ors v Commission; Netherlands v Commission, Coppens v Commission, Air Canada v Commission; ABB AB and ABB Ltd v Commission (“Power Cables”); HSBC Holdings plc v Commission, BritNed Development Ltd v ABB AB  EWHC 2616 (Ch), Enron Coal Services Ltd (in liquidation) v English Welsh & Scottish Railway Ltd (“Enron No 2”)  EWCA Civ 2.
Because they were an “essential basis” or “necessary support” for the description of the collusion as set out in the operative part of the Decision.
Johnson v Gore Wood & Co  2 AC 1