Court of Appeal dismisses appeal against High Court cartel damages ruling

17 September 2010

Jeremy Robinson

On 23 July 2010, the Court of Appeal dismissed an appeal against a judgment of the Commercial Court, which had declined to stay an action for damages where proceedings based on the same decision had also been brought in the Italian courts, in Cooper Tire & Rubber Company Ltd & Others v Dow Deutschland Inc & Others.

Background

In November 2006, the European Commission announced its decision in the butadiene rubber and emulsion styrene butadiene rubber cartel case.  It found that, between 1996 and 2002, companies in the ENI, Bayer, Shell, Dow, Unipetrol and Trade-Stomil groups had operated a cartel to fix prices and share customers.  None of the addressees of the decision were domiciled in England.  The addressees, other than Bayer, appealed against the decision to the General Court, whose judgments are (at the date of writing) still awaited.

In July 2007, companies in the Eni Group (Eni SPA and Polimera Europa SpA – together, Enichem) brought proceedings in Milan against twenty-eight defendants, being companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups, for declarations that the cartel did not exist; that Enichem had never adopted anti-competitive behaviour in relation to the activities covered by the Commission’s decision; and that the alleged cartel had had no effect on the prices for butadiene rubber and emulsion styrene butadiene rubber.  The defendants in this action did not counterclaim for damages in the Italian courts.  This was regarded as an ‘Italian torpedo’, an action seeking to delay the matter in the Italian courts and at the same time preventing proceedings (for damages) on the same subject matter in the English courts.

In December 2007, twenty-six companies brought proceedings in England against twenty-three defendants for damages for breach of Article 101 of the TFEU, in relation to the cartel.  Of the claimants in these proceedings, fourteen had been named as defendants in the Italian proceedings, while twelve were subsidiaries or affiliates of the defendant companies in Italy.  Only four of these twenty-six were English companies.  All of the defendants were members of the undertakings subject to the Commission’s decision.  Only two of these are domiciled in England, although neither was itself an addressee of the Commission’s decision (Shell Chemicals UK Ltd and Bayer plc).

In May and June 2008, companies in the Dow and Bayer groups intervened in the Italian proceedings, adopting the Enichem claims.  In June 2008, Enichem issued further proceedings in Italy, joining as parties those of the claimants in England who had been party to the first Italian proceedings.

In June 2008, the defendants in the Dow group issued an application in the English proceedings, challenging the jurisdiction of the English court, and, in the alternative, issuing a stay.

In July 2008, the claimants in the English proceedings also began an action against Dow Chemical Company Limited, which is domiciled in England.

The question to be decided and the parallel proceedings

The principal question was who had jurisdiction over the case.  In April 2009, the Italian court dismissed the Italian proceedings.  It held that under Article 6(1) of Regulation 44/2001 on jurisdiction and judgments in civil and commercial matters (the “Brussels Regulation”), it had jurisdiction to decide on the existence of the cartel, Eni’s involvement in it, and the effect on prices for the cartelised products; however, under Article 16 of Regulation 1/2003 (which prohibits national courts from taking decisions running counter to a decision of the European Commission), these aspects were inadmissible.  The court also held that the evidence relating to damage caused to the defendants was insufficiently detailed and thus void.  This judgment is under appeal.  If the appeal is successful, the Italian court will then consider merits.  In that case, a decision is not expected until 2014.

In July 2009, the Commercial Court in England refused an application to stay a hearing on jurisdictional issues until resolution of the Italian proceedings.  Jurisdiction was established, under Article 2 of the Brussels Regulation, against three English-domiciled defendants in the Shell and Bayer Groups, and against Dow Chemical Company Limited – together, the “Anchor Defendants.”

A dispute arose under Article 6 of the Brussels Regulation about whether the claims against the Anchor Defendants should be heard together with claims against the other defendants, on the basis that the claims against all of them were so closely connected that it would be expedient to hear and determine them together.  This in turn depended on whether there was a real issue between the claimants and one of the Anchor Defendants that could not be struck out.  The Commercial Court found that the English Courts did have jurisdiction, and was not required to stay the proceedings under Article 27 of the Brussels Regulation, which provides that courts other than that first seised of an action shall stay the proceedings between the same parties in the same cause of action.  The Court also declined to exercise its discretion not to grant a stay under Article 28 of the Brussels Regulation (for situations where related actions are pending in the courts of different Member States).  The principles in Provimi were discussed, whereby a subsidiary could be liable for the anti-competitive practices of its parent or a fellow subsidiary.  The Dow defendants argued that the Commercial Court had erred, and in particular, the Provimi point above was referable to the Court of Justice. 

Judgment

The Court of Appeal held that the English courts had jurisdiction based on the apparent knowledge of the cartel on the part of the UK subsidiaries of the addressees of the EC cartel decision.  (By contrast, in Provimi the subsidiaries’ lack of such knowledge was an issue.)  Absent knowledge of the cartel, a reference to the European Court of Justice for a preliminary ruling could have been required.

The Court of Appeal avoided the necessity of considering the issues in Provimi as it found that the particulars of claim encompassed the possibility both that the Anchor Defendants were parties to or aware of the anti-competitive conduct of their parent company, and the possibility that they were not.  The Court of Appeal upheld the findings in relation to Article 6 of the Brussels Regulation. 

The Commercial Court declined to grant a stay under Article 27 of the Brussels Regulation because the proceedings in England and Italy did not involve exactly the same parties.  The Commercial Court found that a stay would not be justified under Article 28 of the Brussels Regulation because the English proceedings were more advanced than those in Italy, since the latter had been dismissed (albeit, subject to appeal).  Further, no court could be said to be the centre of gravity of a Europe-wide cartel.  The Court of Appeal was not persuaded that the Commercial Court had erred in law, or had made an unreasonable decision or exceeded the bounds of its discretion.

The Court of Appeal thus dismissed the appeal.

Conclusion

This case is important for its analysis, albeit inconclusive, of the Provimi case in particular as regards the liability of a subsidiary for acts of its parent or fellow subsidiary.

The case is also notable for the robust approach taken by the English courts to an attempted “Italian torpedo.”

Source: http://www.bailii.org/ew/cases/EWCA/Civ/2010/864.html