UK: Claimants In Competition Damages Claims Put To Proof On Causation - Court Of Appeal Upholds CAT Decision In Enron Coal Services v EWS

Last Updated: 17 March 2011
Article by Peter Scott

January 2011

Introduction

On 19 January 2011 the English Court of Appeal dismissed an appeal in Enron Coal Services Ltd v English Welsh & Scottish Railway Ltd1 - the first damages action to have gone to trial in the Competition Appeal Tribunal (CAT). The Court of Appeal confirmed that findings of fact in an infringement decision by a competition authority are binding on a court2 considering a damages claim, but held that this does not mean that a claimant can rely upon a finding that the claimant has been the target of infringing conduct to establish causation. The judgment emphasises that claimants in "follow-on" actions must prove that the infringing conduct has resulted in the loss claimed. This has significant implications for companies looking to recover damages on the back of decisions by the European Commission, the Office of Fair Trading and the UK sectoral regulators, as well as defendants.

Background

The appeal concerned a claim issued in the CAT by Enron's administrators, seeking damages from English, Welsh & Scottish Railway (EWS) for practices on the rail haulage market for coal in Great Britain. The claim followed a decision of the Office of Rail Regulation (ORR) that EWS had infringed Article 82 of the EC Treaty (now Article 102 of the Treaty on the Functioning of the European Union) and the Chapter II Prohibition in the Competition Act 1998 by abusing its dominant position in rail haulage. The ORR's decision stated that EWS's abusive conduct included discriminatory treatment of Enron Coal Services Ltd (ECSL) and that this had placed ECSL at a competitive disadvantage in its contractual negotiations with Edison Mission Energy. The Enron administrators sought to recover damages arguing, among other things, that EWS's conduct had deprived ECSL of the chance of winning a lucrative contract to supply coal to one of Edison's power stations.

As a follow-on action, the claim relied upon the ORR's decision that EWS had infringed competition law to establish liability. The Enron administrators also sought to rely upon the ORR decision to prove causation (i.e. that EWS's abusive conduct in breach of the competition rules had caused ECSL to suffer loss), arguing that causation could be inferred from the ORR's finding that EWS's abusive conduct had put ECSL at a disadvantage and from other statements in the decision that referred to ECSL's business. The Enron administrators asserted that these inferences were binding on the CAT due to section 58 of the Competition Act, which states that a finding of fact by a competition authority3 made in the course of its investigation is binding unless the court decides otherwise.

The CAT decision

The CAT rejected the argument that causation was proved by the ORR's findings, and held that the claim failed. Specifically, the CAT concluded that the ORR's finding of discrimination resulting in competitive disadvantage was not in itself a finding that ECSL had suffered loss. Reviewing the additional evidence put forward by the parties, the CAT did not accept that ECSL had suffered any loss because ECSL had no real or substantial prospect of supplying coal to Edison regardless of EWS's conduct4.

The Enron administrators subsequently appealed to the Court of Appeal.

The Court of Appeal's decision

The Court of Appeal considered two questions:

  • a broader question concerning the extent to which findings in an infringement decision by a competition authority are subsequently binding on the High Court and the CAT when considering a damages claim that relies upon the decision; and
  • a narrower question concerning whether the claimant could rely upon inferences drawn from the ORR decision to establish that an infringement has caused loss.

On the broader question, the Court of Appeal confirmed that section 58 equally applies to damages claims before both the High Court and the CAT, requiring that findings of fact in an infringement decision are binding, subject only to the court's power to direct that a particular finding shall not be binding. However, for a statement to be binding the party seeking to rely on it must be able to demonstrate that the competition authority has made "a clearly identifiable finding of fact to a given effect". Not every statement in the ORR's decision will be a binding finding of fact, and it is not enough to point to passages in the decision from which a finding of fact might arguably be inferred. An inference that might arguably be made from a statement in the decision could not therefore be a finding that is binding on the court.

Answering the narrower question, the Court of Appeal agreed with the CAT that the ORR's specific reference to ECSL having been at a competitive disadvantage was not sufficient to demonstrate that the infringement established by the ORR's decision had caused ECSL any loss.

Implications

The distinction the Court of Appeal has drawn is a fine one. But it is important. It meant that the CAT could not disagree with the finding that ECSL had suffered a disadvantage as the result of EWS's unlawful conduct, but it could not be inferred from this that the disadvantage had result in loss.

The Court of Appeal's judgment emphasises that while claimants in follow-on actions can rely upon an infringement decision for a cause of action on which to base a claim, they will need to adduce clear evidence of causation and loss to recover damages. This means showing that "but for" the infringement a different outcome would have resulted, where the claimant would have been in a more favourable position. It will not be enough to assert that the losses and/or the causal link between the infringement and loss are established by inferences drawn from statements made about market effects in the competition authority's decision.

This case also demonstrates that statements about an infringement being targeted at, or even having effects on, a particular company are not really that helpful in proving that loss has been caused by that conduct. To be binding in a damages case, the competition authority would have to make a finding that the infringement actually caused damage to specific companies. However, this type of conclusion is unlikely to be made in an infringement decision, where findings on specific effects are not generally required for a competition authority to make an infringement finding and impose sanctions.

The failure of the ECSL claim may give cause for potential claimants to think more carefully about whether they can prove causation and loss, before they issue a claim. Relying merely upon assertions drawn from isolated phrases contained in the infringement decision will not be enough.

Footnotes

1. 2011] EWCA Civ 2.

2. Including the CAT.

3. Including one of the UK sector regulators (e.g. Ofcom, the ORR and Ofwat) exercising its competition powers.

4. [2009] CAT 36.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.