Court of Appeal confirms that claimants seeking damages for losses suffered as a result of a breach of competition law are only entitled to compensatory damages under English law

23 January 2009

Louise Banér

On 14 October 2008, the Court of Appeal upheld the High Court’s judgment on an award for damages against manufacturers of vitamins who were found by the European Commission to have breached Article 81 of the EC Treaty by entering into a cartel (Devenish Nutrition Ltd v Sanofi-Aventis SA (France) and others [2008] EWCA Civ 1086). The High Court had concluded that on the facts of the case, compensatory damages were the appropriate remedy and that restitutionary damages would not normally be available under English law in relation to cartel damages.

The European Commission found in November 2001 that certain vitamin manufacturers had entered into worldwide cartels in respect of various vitamins in breach of Article 81 of the EC Treaty. The manufacturers which included F. Hoffmann-La Roche AG, Aventis SA and BASF AG received substantial fines.

Purchasers of the vitamins and therefore victims of the cartel brought proceedings following this decision in the English High Court, to claim compensation for damage suffered as a result of the Commission’s Article 81 infringement decision. The judge had to examine whether the claimants were entitled to the following heads of relief:

  • compensatory damages

  • exemplary damages

  • restitution damages and an account of profits.

Only compensatory damages were awarded by the High Court. The claimants appealed to establish a principle that in an action for beach of statutory duty the court can in appropriate circumstances make a restitutionary reward (the decision on exemplary damages was not appealed).

A restitutionary award for damages is one which is measured by reference to the defendants’ gain rather than by reference to the victims’ loss. The claimants sought restitutionary damages for the unfair enrichment of the defendants as a result of their participation in the cartel. The High Court had concluded that where a restitutionary award is available, this is usually only awarded where compensatory damages would be insufficient to compensate the claimant.  It was noted by the High Court that making a restitutionary award is also a problem where there are multiple claimants.

The Court of Appeal dismissed the Appeal because:

  • the doctrine of effectiveness is directed to ensuring sufficient remedies rather than the fullest possible remedies, and in this case an action for compensatory damages fulfils the requirements for sufficiency;

  • restitutionary awards (including an account for profits) should only be used in exceptional cases; and

  • it was concluded that this was not an exceptional case – and therefore the claimant is entitled only to be compensated for any loss it has suffered as a result of the cartel, no more and no less.

The Court of Appeal recognised the ongoing policy issues in its decision, noting the support from the Commission and the Office of Fair Trading for private actions to enforce remedies for breaches of competition law.  The OFT’s response to the EC Commission’s Green Paper on “Damages Actions for Breach of EC Antitrust Rules” (OFT 844, May 2006) contemplated that in some cases that there could be a restitutionary award, although it concluded that it was for the courts to determine how the general principles for determining loss or damage apply to actions for infringement of competition law.  

In his supporting judgment, Lord Justice Longmore stated “The only real argument in favour of an order for an account for profits is the argument of policy that cartels are a notorious evil and the civil courts should in some way provide an incentive for their eradication by making such an order”.  However, he went onto say “But it does not seem to be right for the courts to take this step on their own initiative”.

This is a significant decision as there has been a lack of case law on this issue in the UK and especially in the light of ongoing efforts at both EC and national level to facilitate private actions for damages following breaches of competition law.