On 12 November 2010, the Court of Appeal for England and Wales
ruled that the UK Competition Appeal Tribunal (CAT) does not have
discretion to extend the time period within which follow-on actions
for damages may be commenced. The Court of Appeal's judgment
provides important clarification of the scope of the CAT's
discretion to extend the time limit for lodging a private claim for
damages against a company found to have infringed EU or UK
competition law.
In BCL Old Co Limited v BASF [2010], the Court dismissed
an appeal by BCL for an extension of time in which to bring a
follow-on action for damages against members of a cartel found by
the European Commission to have infringed EU competition rules in
the market for certain vitamins. The judgment is clear that the CAT
does not have discretion under its Rules of procedure to extend the
limitation period. Accordingly, the time limit for bringing
follow-on claims for damages will be two years from the later of
either the date of a decision finding an infringement or a final
appeal upholding an infringement decision. This certainty is to be
welcomed by both claimants and defendants.
Background
The Court of Appeal's judgment is the latest in a
long-running litigation saga, arising from an effort by BCL to
obtain compensation from BASF for damage BCL says it suffered as a
result of BASF's involvement in a price-fixing and
market-sharing cartel for certain vitamins. In January 2002, the
European Commission adopted a formal decision fining BASF and
others for involvement in the cartel. BASF appealed the level of
fine it was required to pay, but did not appeal the infringement
decision itself. Judgment in that appeal was delivered by the
General Court on 15 March 2006.
BCL lodged its claim against BASF on 12 March 2008. BASF argued
that the action was out of time, since it should have been lodged
within two years of the date of the liability decision of the
European Commission, not within two years from the date of the
judgment of the General Court, since BASF had not appealed
liability, only the fine. The CAT rejected BASF's argument and
decided that BCL was in time. According to the CAT, the two-year
limitation period began on the date that BASF's time to appeal
the General Court's decision had expired, without distinction
between appeals on liability or the fine.
BASF appealed, and in May 2009, the Court of Appeal held that
BCL's appeal was out of time. As reported in our prior
alert, the Court concluded that an appeal against an
infringement decision would stop the clock for the commencement of
a follow-on action, whereas an appeal against the level of a fine
would not.
However, the Court of Appeal also noted the CAT's Rules give
the CAT a discretionary power to extend the two-year time limit. In
light of this, BCL applied to the CAT for a discretionary extension
of the limitation period to allow it to bring a follow-on action
for damages. As discussed in another alert, the CAT ruled in
November 2009 that, while BCL had made a reasonable mistake as to
when the limitation period expired, it had not acted reasonably
promptly once the window for bringing an action was open.
Accordingly the CAT refused to extend the limitation period.
Judgment
BCL asked the Court of Appeal to decide whether the CAT's Rules gave the CAT discretion to extend the limitation period for damages actions. If the CAT did not have such power under the Rules, BCL asked the Court to decide whether such a power should be treated as existing by reason of principles of EU law. If the Court found that EU law did confer discretionary power on the CAT, then the Court had to decide whether the CAT had exercised that discretion properly when it refused BCL an extension. The Court of Appeal decided:
- The CAT Rules did not contain a general discretionary power for the CAT to extend the limitation period.
- The discretion to extend time under the CAT Rules was plainly limited to case management directions and did not create a general power to extend time for initiating proceedings.
- A discretionary power should not be treated as existing in EU law. Accordingly, there was no need to consider whether the CAT's refusal to extend time was a proper exercise of a discretion conferred on it under EU law.
Conclusion
It remains to be seen whether BCL will seek leave to appeal to
the highest court in England, the Supreme Court.
This issue is important to claimants and defendants alike. The
Court of Appeal judgment provides certainty concerning the scope of
the discretionary powers of the CAT and the limitation period for
follow-on actions for damages. Claimants must initiate a damages
action within two years from the later of either an infringement
decision by an EU or UK competition authority or the outcome of an
appeal against such an infringement decision. Defendants are not
forever subject to the prospect of private litigation. The
certainty the Court of Appeal has delivered to the procedure for
follow-on actions for damages is welcome.
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.