Originally published 20 November 2009
Keywords: BCL Old Co Limited, Ors, BASF, Competition Appeal Tribunal, CAT, extension of time, Article 81, EU Treaty
Competition Appeal Tribunal sets out test for exercising its discretion to grant an extension of time in which to bring claims
In a judgement delivered on 19 November, the Competition Appeal Tribunal (the "CAT") dismissed applications by the BCL and Grampian Claimants for an extension of time in which to bring follow-on claims for damages against members of a cartel in the 1990s found by the European Commission to have infringed EU Competition rules in the market for vitamins A, E and B2.
These claims had already been found by the Court of Appeal to be time-barred, and the Claimants had asked the CAT to use its discretion to lift the time bar in their case. The CAT refused.
This case indicates that the CAT will not exercise its discretion lightly and that the time limit for damages claims, the second anniversary of a Commission decision finding an infringement, or a final appeal upholding the decision, will be strictly applied.
Background
In 2001, the European Commission fined several vitamin manufacturers for their participation in a worldwide price-fixing and market-sharing cartel, in breach of Article 81 of the EU Treaty. The decision was formally adopted in January 2002.
BASF, one of the companies fined by the European Commission, appealed not against the infringement decision itself, but against the level of the fine imposed. Judgement on that appeal was handed down by the Court of First Instance on 15 March 2006. BASF had until 25 May 2006 to lodge a further appeal, to the European Court of Justice, but chose not to do so.
Under s47A of the Competition Act 1998 ("s47A"), once the European Commission has issued a decision finding that an infringement has taken place, a person who has suffered loss as a result of that infringement may bring a "follow-on" claim for damages before the CAT. S47A provides that any application must be made in accordance with the CAT's rules - Rule 31 states that a claim for damages must be made within a period of two years of the decision, unless it is appealed, in which case time runs from the date on which the appeal process is exhausted.
Facts
BCL and Grampian lodged claims under s47A against BASF, and in the case of Grampian, against other cartel participants as well (the "Defendants") on 12 March 2008 and 14 May 2008, respectively. The Defendants submitted that these claims had not been brought within the limitation period, which had expired in 2004, two years after the date of the original EC decision. Following a preliminary issue hearing in the BCL claim, the CAT ruled on 25 September 2008 that the two-year limitation period had begun on the date when BASF's time for appealing the Court of First Instance's decision had expired, namely 25 May 2006, and that both the BCL and Grampian claims were therefore in time.
The CAT refused the BASF Defendants permission to appeal against this preliminary issue ruling, on the basis that the appeal had no real prospect of success and that there was no other compelling reason for the appeal to be heard. The Court of Appeal, however, granted permission and allowed the appeal. The Court of Appeal held, on 22 May 2009, that the claims were out of time since on the plain and ordinary meaning of s47A, only challenges to the infringement element of the EC decision, not challenges to the level of the fine imposed, were relevant to a determination of when the two-year limitation period began to run.
The Court of Appeal also noted, however, that under Rule 19(2)(i) of the CAT Rules, the CAT had the discretionary power to extend the two-year time limit in Rule 31.
The BCL and Grampian Claimants therefore applied to the CAT for an extension of the limitation period to allow them to bring their s47A claims. They argued that they should not be precluded from advancing their claims on account of a self-evidently reasonable mistake - shared by the CAT in the BCL preliminary issue hearing - about when the two-year limitation period actually expired.
Decision
The CAT concluded that the decision whether or not to extend time was subject to a two stage test. At stage one, the CAT must consider whether the claimant has demonstrated good reason for an extension - essentially a question of fact. If, and only if, the claimant succeeds in establishing a good reason can the CAT then proceed to stage two, a discretionary exercise involving an assessment of the balance of hardship.
The CAT held that, while the BCL Claimants satisfied the requirements of stage one - a legally excusable lapse was responsible for the delay in bringing their claims - it could not exercise its discretion under stage two. The BCL Claimants should have taken at least some steps to establish and pursue their claim during the period when they wrongly thought that they were precluded by section 47A from actually starting proceedings. They should have alerted BASF, for example, to the fact that they intended to lodge a claim once the two-year window opened. The CAT also found that the BCL Claimants had not acted reasonably promptly once they thought the window for claiming had opened. The fact that the Defendants had participated in a cartel and so had contravened the competition rules was not relevant in determining whether the CAT should exercise its discretion under Rule 19(2)(i).
In relation to the Grampian Claimants, the CAT found that they had adduced no witness evidence to establish a good reason why they did not lodge their claim before the expiry of the limitation period. The Grampian Claimants' application therefore did not satisfy stage one of the test.
Comments
This is the first case in which the CAT has had to decide whether to exercise its discretion under Rule 19(2)(i) to extend the period for bringing otherwise time-barred follow-on damages claims.
In deciding to adopt a two-stage test, the CAT has clarified how it will approach the exercise of its discretion in other similar circumstances. It remains to be seen whether the BCL and Grampian Claimants will appeal the CAT's decision. For now, however, the judgment should go some way to ending the uncertainty surrounding the manner in which the CAT will tackle follow-on damages claims brought out of time.
Mayer Brown International LLP acted for the BCL Defendants and the Fifth to Seventh Grampian Defendants in these cases.
Learn more about our Antitrust & Competition practice.
Learn more about our Litigation practice.
Visit us at www.mayerbrown.com.
Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
Copyright 2008. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.