Inntrepreneur Pub Company v Crehan [2006] UKHL 38

In July 2006, the House of Lords overturned the Court of Appeal's decision in Inntrepreneur Pub Company v Crehan in relation to the applicability of EU Competition Law to UK cases. The case is of interest as it is the first time that a decision to award damages for a breach of Article 81 of the European Treaty has been overturned.

Background

The case began 14 years ago when Mr Crehan leased two pubs from the Inntrepreneur Pub Company and under the terms of the lease was obliged to enter into a beer tie and buy beer from Courage Brewery at their list prices. The pubs were unsuccessful and Courage Brewery sued Mr Crehan for unpaid debts. Mr Crehan counterclaimed against Courage Brewery and Inntrepreneur, claiming that the businesses had failed due to his obligation to buy beer from Courage Brewery at substantially marked-up prices so that he was unable to compete. He argued that the beer tie was uncompetitive and infringed Article 81 of the EU Treaty.

In 2004, the Court of Appeal looked at the decision which the European Commission had made on beer tie agreements in the case of Whitbread [1999] OJL 88/26 and followed the decision in Whitbread that the beer tie agreements denied access to new domestic and foreign competitors. The Court of Appeal held that the beer tie was uncompetitive and breached Article 81 of the EC Treaty as well as infringing the Chapter I prohibition of the Competition Act 1998. In its judgment, the Court overrode the English common law principle that a party to an illegal agreement cannot sue the other party for damages. It awarded Crehan damages of £131,336 (plus interest) for his resulting loss.

Inntrepreneur was granted leave to appeal to the House of Lords. In its appeal, Inntrepreneur argued that the Court of Appeal should have used the evidence of the case to decide whether beer ties were uncompetitive and should not have simply followed the Commission's decision in Whitbread.

House of Lords Decision

In 2006 the House of Lords considered whether the UK courts must follow European Commission decisions if the Commission decision at issue had not been specifically addressed to the parties before the courts.

The House of Lords looked at existing case law on conflicts between decisions of national courts and the European Commission, including Delimitis v Henninger Brau [1991] ECR I-935 and Masterfoods Ltd v HB Ice Cream [2000] ECR I - 11369. In Delimitis it was held that a network of beer tie arrangements would infringe Article 81 if:

  1. the agreements in their economic and legal context had the cumulative effect of denying access to new national and foreign competitors; and

  2. the agreements contributed to the cumulative effect of the totality of similar contracts on the market.

In Masterfoods the European Court of Justice held that domestic courts when determining domestic disputes must follow European Commission decisions on the validity of agreements.

However, in Inntrepreneur Pub Company v Crehan the House of Lords came to the conclusion that the first limb of Delimitis was not satisfied; there had been no infringement of Article 81 and it dismissed Crehan's claim. The award of damages for a breach of Article 81 was subsequently overturned. The Lords also commented that European Commission decisions are only binding if they involve the same parties and the same agreement. Lord Hoffmann in the ruling stated that the European Commission decisions will always have evidential value and UK courts will always find these highly persuasive.

Effect

It is anticipated that the judgment will make it more difficult for UK claimants to rely on European Commission findings when they are bringing actions against parties not addressed in the relevant decision. However it will be beneficial to those seeking to distinguish their own cases from Commission decisions.

Authors