Introduction

In the case of Allianz Global Investors GmbH & Ors v Barclays Bank Plc & Ors ([2022] EWCA Civ 353), the England and Wales Court of Appeal deliberated on a pivotal issue within competition law—the validity of the "pass-on" or "avoided loss" defence in damages claims against banks accused of anti-competitive manipulation of foreign exchange (FX) markets. The appellants, comprising various investment funds managed by Allianz Global Investors, sought to dismiss claims from the respondents, predominantly Barclays Bank Plc, asserting that the funds had mitigated or passed on their losses to investors who redeemed their investments at lower net asset values (NAVs) than would have been the case absent the alleged wrongdoing.

Summary of the Judgment

The Court of Appeal upheld the decision to strike out the "pass-on" defence asserted by the banks. The judges determined that the appellants' argument—claiming that losses had been avoided or passed on to investors—was unfounded. Fundamental principles concerning reflective loss, the rights of beneficiaries in trusts, shareholders in companies, and partners in limited partnerships were reaffirmed. Additionally, the judgment clarified the relationship between domestic law and European Union (EU) competition law post-Brexit, emphasizing that Article 101 obligations did not mandate a direct right for investors to claim their losses independently of the investment funds.

Analysis

Precedents Cited

The judgment extensively referenced several key precedents:

• Marex Financial Limited v Sevilleja [2020] UKSC 31: Clarified the application of the reflective loss principle, limiting it to companies and shareholders.
• Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204: Established that shareholders cannot claim for losses that are merely reflective of the company's losses.
• Swynson Ltd v Lowick Rose LLP [2017] UKSC 32: Provided a coherent approach to avoided loss and collateral benefits.
• Young v Murphy [1996] 1 VR 279: Addressed trustees' rights in suing for trust asset damages, reinforcing that beneficiaries do not independently hold cause of action.
• Courage Ltd v Crehan [2002] QB 507: Highlighted the necessity of allowing individuals to claim damages for losses arising from competition law breaches.

These precedents collectively influenced the court's stance on the non-viability of the "pass-on" defence in the current context.

Legal Reasoning

The core legal reasoning centered on whether亏 the investment funds could legitimately claim that losses had been mitigated or passed on to investors, thereby reducing the amount recoverable from the banks. The court dissected the "reflective loss" principle, concluding that it does not extend to investors once they redeem their investments. The investment funds, as trusts, companies, or partnerships, hold separate legal identities, and losses to these entities are not directly transferable to individual investors through redemption actions.

Furthermore, the court addressed the interplay with EU law, particularly Article 101 concerning anti-competitive agreements. Post-Brexit, the principle of effectiveness from EU law does not override established domestic principles that govern corporate, trust, and partnership losses. The judges underscored that introducing a direct right for investors to claim losses independently would undermine the legal framework designed to prevent double recovery and maintain clear lines of liability.

Impact

This judgment has significant implications for future competition law cases, particularly those involving damages claims against financial institutions. By rejecting the "pass-on" defence in this context, the court has:

• Reaffirmed the sanctity of the reflective loss principle within specific legal entities.
• Clarified the boundaries between domestic law and residual EU principles post-Brexit.
• Ensured that the calculation of damages remains straightforward without necessitating exhaustive assessments of individual investor redemptions.

Practically, this decision deters defendants from relying on complex defences that could potentially cloud straightforward claims for damages, thereby promoting more efficient judicial processes and reinforcing accountability in anti-competitive conduct.

Complex Concepts Simplified

• Reflective Loss: A principle that prevents members of a company (like shareholders) from claiming for losses that are mere reflections of the company's losses resulting from the same wrongdoing.
• Pass-On Defence: An argument used by defendants claiming that the plaintiff has mitigated their losses by transferring or passing them on to another party.
• Collateral Benefit (Res Inter Alios Acta): A doctrine where benefits received by a plaintiff are deemed independent of the loss they are claiming for, thus not reducing the recoverable damages.
• Derivative Action: A lawsuit brought by a shareholder on behalf of the company against a third party, typically internal management or directors.
• Article 101 of the TFEU: A provision in the Treaty on the Functioning of the European Union that prohibits anti-competitive agreements and practices.

Conclusion

The Court of Appeal's decision in Allianz Global Investors GmbH & Ors v Barclays Bank Plc & Ors fortifies established legal boundaries regarding the calculation and recovery of damages in competition law cases. By dismissing the "pass-on" defence, the court has emphasized the importance of maintaining clear distinctions between the losses of legal entities and those of their individual constituents. This ruling not only streamlines future litigation by preventing convoluted defences but also upholds the integrity of competition law by ensuring that wrongful conduct by large financial institutions does not find refuge behind intricate legal safeguards. Legal practitioners and stakeholders should take note of this precedent, as it delineates the contours of liability and the mechanisms through which damages can be pursued effectively.