Section 18(8) WIA as a Bar to Chapter II Competition Damages Where the Alleged Abuse Depends on Breach of Ofwat Licence Reporting Duties
1. Introduction
Roberts v Severn Trent Water Limited & Severn Trent PLC & Ors ([2026] EWCA Civ 222) is a Court of Appeal decision on the
construction and application of section 18(8) of the Water Industry Act 1991 (“section 18(8)”).
The case arose from an attempt by Professor Roberts, as proposed class representative, to bring
opt-out collective proceedings under section 47B(4) of the Competition Act 1998
against six statutory monopoly water and sewerage undertakings (“the water companies”).
The pleaded theory was that the water companies under-reported pollution incidents to the
Environment Agency (EA) and Ofwat, thereby misleading Ofwat during the periodic price reviews
(“PR14” and “PR19”). This allegedly caused Ofwat to set higher Revenue Allowances under its price control regime,
permitting the water companies to charge consumers more than would otherwise have been permitted.
The central question was whether these competition-law damages claims were excluded by section 18(8).
The Competition Appeal Tribunal refused to make a Collective Proceedings Order,
holding the claims were barred by section 18(8). The Court of Appeal (majority) dismissed the appeal, with a
substantial dissent from Zacaroli LJ.
2. Summary of the Judgment
The Court of Appeal held that section 18(8) barred Professor Roberts’ Chapter II claims in substance because the
remedies sought were only available “by virtue of” the acts complained of constituting a contravention of the water companies’ licence conditions,
in particular the obligation under paragraph 9.2 of Condition B to furnish Ofwat with information required for periodic reviews.
Although the Tribunal’s reasoning focused heavily on the integral role of the price control mechanism in causation and loss,
the Court of Appeal upheld the result on a slightly different basis: the alleged “misleading” of Ofwat was, realistically and purposively,
inseparable from the existence and breach of the regulatory reporting obligation. That breach was an
essential ingredient of the pleaded abuse.
Dissent: Zacaroli LJ would have allowed the appeal, reasoning that the competition claim did not depend on
establishing that the inaccuracy constituted a licence breach; it depended only on (i) inaccuracy, (ii) Ofwat being induced to set higher allowances,
and (iii) consumer overcharging. In his view, the majority conflated manipulation of the regime with reliance on the legal status of “contravention”.
3. Analysis
3.1 Precedents Cited
(a) United Utilities Water Ltd v Manchester Ship Canal Co Ltd (No 2) [2024] UKSC 22, [2024] 3 WLR 356 (MSC2)
MSC2 provided the decisive interpretive framework for section 18(8). The UKSC held that section 18(8)
preserves common law remedies where “the contravention of the 1991 Act is not an essential ingredient of the claim”
(MSC2 at [57]). In other words, if the cause of action exists independently at common law, the fact that the same act also
contravenes the WIA does not bar common law relief.
The Court of Appeal treated MSC2 as authoritative but stressed the “read-across” from nuisance to competition damages is not automatic:
the task remains to decide whether, on the pleaded case, the remedy is sought only “by virtue of” the act constituting a WIA/appointment contravention.
Marcic is the counterpoint to MSC2. The House of Lords held a nuisance claim was barred because the claim’s substance was
failure to provide adequate sewerage capacity—an obligation arising only under statute—making the statutory contravention an “essential ingredient”.
The Court of Appeal used Marcic (as explained and distinguished in MSC2) as an analogy for situations where a claim cannot coherently be made out
without reliance on regulatory duties.
(c) Case T-321/05 AstraZeneca v Commission [2010] 5 CMLR 28, upheld in Case C-457/10 P, [2013] 4 CMLR 7 (AstraZeneca)
The Tribunal and the Court of Appeal accepted AstraZeneca as leading authority that a dominant undertaking may abuse its position by
submitting “highly misleading representations” to public authorities.
However, the Court of Appeal stressed AstraZeneca does not create a free-standing “misleading a regulator” tort:
abuse requires a context-specific assessment. The “misleading” character is assessed in concreto, considering the regulatory environment and effects.
The Court of Appeal used that contextual emphasis to support its conclusion that the alleged misleading of Ofwat could not be assessed “in a vacuum”;
it depended on what Ofwat required under the licence conditions and on Ofwat’s entitlement to assume compliance.
(d) Pride of Derby and Derbyshire Angling Association Ltd v British Celanese Ltd [1953] Ch 149 (Pride of Derby)
Pride of Derby featured in MSC2’s historical analysis distinguishing nuisance liability for discharges from claims that are, in substance, complaints about
a statutory duty to provide an effective system. In this appeal, it served mainly as background to the “essential ingredient” approach and why
nuisance claims can survive despite regulatory overlay—an outcome the Court of Appeal contrasted with the present claim’s dependence on the reporting duty.
(e) Rossendale Borough Council v Hurstwood Properties [2021] UKSC 16, [2022] AC 690 (Rossendale) and Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 52 (2003) 6 ITLR 454
The majority invoked Rossendale (and Arrowtown) for the proposition that statutory construction and application should be
purposive, realistic and “unblinkered”. This became a central methodological move:
the Court declined a purely formal separation between “misleading” and “breach of licence condition”, holding that realism required recognising
that Ofwat was only “misled” because the statutory scheme entitled it to assume accurate compliance.
(f) R (on the application of Wang) v Secretary of State for the Home Department [2023] UKSC 21, [2023] 1 WLR 2125
Wang was cited as an example of Rossendale’s “realistic” approach being applied beyond tax/rates contexts, supporting the majority’s claim that
this interpretive stance should inform section 18(8)’s application.
(g) Case 27/76 United Brands v Commission
United Brands was cited for the classic definition of dominance (ability to behave independently of competitors, customers and consumers),
supporting the Tribunal’s (unchallenged) conclusion that a statutory monopoly can be dominant and can, in principle, commit exploitative abuse.
(h) Case COMP/38.636 Rambus, 9 December 2009 (Rambus)
Rambus was deployed to show that “misleading by omission” theories in competition law often depend on a duty of disclosure (good faith in a standard-setting context).
The majority used it to reinforce the idea that “under-reporting” closely resembles non-disclosure, which typically becomes legally salient only where a duty exists.
(i) Albion Water v Water Services Regulation Authority [2006] CAT 23, [2006] All ER (D) 222; Albion Water v Water Services Regulation Authority [2008] CAT 31; Albion Water v Dwr Cymru Cyfyngedig [2013] CAT 6
These decisions were cited to illustrate that not all competition claims in the Ofwat-regulated sector are barred;
section 18(8) excludes some claims, not competition law wholesale. The majority used this to reject the argument that the WIA’s references to CA 1998
enforcement mean competition damages can never fall within section 18(8).
(j) Hoffmann-La Roche v Commission, Case 85/76 EU:C:1979:36
Cited in the dissent as “settled case law” on abuse as an objective concept involving recourse to methods outside normal competition on the merits.
The dissent used this to argue that “abuse” need not be predicated on the conduct also constituting an independent legal wrong (such as a licence breach).
3.2 Legal Reasoning
(1) The statutory question framed by MSC2: “essential ingredient” and “by virtue of”
Section 18(8) excludes remedies that are available “by virtue of” an act constituting (or contributing to) a contravention of an appointment condition,
while preserving remedies available “otherwise than” by virtue of that contravention. Following MSC2, the majority treated the statutory bar as targeting claims where
the contravention is an essential ingredient of the cause of action, not merely background coincidence.
(2) Identifying the “abuse” in context, not in the abstract
Although AstraZeneca shows that misleading a public authority can constitute abuse, the Court of Appeal insisted this label is not self-executing:
whether conduct is “misleading” (in the relevant competition-law sense) and abusive depends on the regulatory context.
Here, “misleading Ofwat” was said to consist of under-reporting incidents that Ofwat required under Condition B for price review purposes.
(3) Why the reporting obligation and its breach were treated as indispensable
The majority’s key move was to say: Ofwat could only have been misled because it was entitled to assume the information it required under Condition B
was supplied accurately and completely. The alleged misleading character of the information, and the causal mechanism leading to higher Revenue Allowances,
depended on a comparison between what was reported and what should have been reported under the regulatory duty.
Without the duty, inaccurate reporting would be normatively and causally “neither here nor there” for Ofwat’s price-setting function.
On that footing, the majority held that breach of a condition of appointment was an essential element of the pleaded abuse.
The claim could not realistically be pleaded and proved without that contravention; therefore, the remedies were sought “by virtue of” the contravention,
and section 18(8) barred them.
(4) Purposive realism: rejecting “blinkered” formalism
The majority explicitly preferred a purposive and realistic construction (Rossendale; Arrowtown) over a purely “black-letter” separation
between (i) providing misleading information and (ii) the information being misleading because it breached a legal reporting duty.
They treated these as inseparable “two sides of the same coin” in the statutory context.
(5) The statutory scheme point: regulated monopoly, consumer protection, and internal enforcement routes
The Court emphasised that WIA creates the monopoly framework and a consumer-protective price control regime, with Ofwat enforcement tools (sections 18–22, 22A),
and with Ofwat’s concurrent competition functions (section 31). Allowing a private Chapter II collective damages action whose substance was
“abuse of the price control regime through breach of reporting conditions” was viewed as inconsistent with Parliament’s allocation of remedies and responsibilities
under WIA, which section 18(8) was designed to police.
(6) The dissent’s contrary application of MSC2
Zacaroli LJ accepted MSC2’s “essential ingredient” test but applied it differently. In his view, the competition claim’s essentials were:
inaccuracy → Ofwat induced to set higher allowances → higher charges → consumer loss. Whether the inaccuracy also constituted a licence breach was not required.
He warned against conflating “manipulation of the regime” with “dependence on contravention” and pointed out that abuse may exist without the conduct being
independently unlawful (drawing on AstraZeneca/Hoffmann-La Roche principles). The dissent thus treated the licence breach as evidential context, not a legal ingredient.
3.3 Impact
(1) Practical restriction on collective competition claims in regulated utility contexts
The majority’s approach makes it substantially harder to plead Chapter II “misleading regulator” / “overcharging via regulatory distortion” claims
where the alleged deception is inseparable from licence-based reporting obligations.
In such cases, section 18(8) can operate as a gatekeeping bar, even where the claim is framed in competition law and pursued via opt-out procedures.
(2) Clarification (and possible expansion) of section 18(8) beyond nuisance
The decision is significant because it transposes MSC2’s “essential ingredient” analysis from nuisance into
private competition enforcement. It suggests that section 18(8) is not confined to excluding “statutory duty dressed up as nuisance” claims
(Marcic-type), but can also exclude claims whose economic loss theory depends on a regulatory contravention being what makes the conduct “misleading” and harmful.
(3) Increased importance of Ofwat remedies and redress mechanisms
The Court noted Ofwat’s position that enforcement orders may be capable of directing reimbursement, and that undertakings have in practice included reimbursement.
If private damages routes are blocked by section 18(8) in similar cases, pressure will increase on regulatory enforcement, undertakings, penalties,
and political/regulatory mechanisms for consumer redress.
(4) Litigation strategy implications: separating “wrong” from “contravention”
Claimants may attempt to plead around section 18(8) by identifying a wrong whose elements do not require showing a regulatory contravention (analogous to MSC2’s
nuisance). The majority’s “realistic” approach, however, indicates courts may look through drafting to ask whether, in substance, the claim is only coherent
because the statutory duty exists and was breached.
(5) Uncertainty and appellate potential
The strong dissent highlights genuine interpretive tension: (i) a purposive/realist reading of “by virtue of” versus (ii) a more strictly element-based
inquiry into what must be proven as a matter of law. This division may generate future appellate scrutiny in cases where regulatory duties supply the factual
setting for competition harms.
4. Complex Concepts Simplified
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Section 18(8) WIA (“ouster”/exclusivity clause): limits what private remedies can be pursued where the complained-of act is a breach of
a water company’s appointment/licence conditions. After MSC2, the key question is whether proving a WIA contravention is an essential ingredient
of the claim.
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“Essential ingredient” test (MSC2): a claim is barred if it cannot succeed without proving the statutory/licence breach; it is not barred
if it can succeed on an independent cause of action even though the same facts also amount to a breach.
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Chapter II prohibition (section 18 CA 1998): prohibits abuse of a dominant position. Dominance can exist in a statutory monopoly.
Abuse can be exclusionary (blocking rivals) or exploitative (overcharging consumers).
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Collective Proceedings Order (CPO): the Tribunal’s order allowing a class representative to bring collective competition claims
(here, opt-out—consumers are included unless they opt out).
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Revenue Allowances / price control: Ofwat caps the revenue a company may collect; the company may set prices up to that cap.
Under-reporting incidents could (on the pleaded case) improve performance measures and increase the cap.
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“Purposive and realistic” construction (Rossendale; Arrowtown): courts interpret and apply statutes in a way that fits their purpose and
the real-world substance of arrangements, not only formal labels.
5. Conclusion
The majority decision establishes a significant extension of section 18(8)’s practical reach:
competition-law damages claims (including opt-out collective proceedings) may be barred where, on a realistic appraisal, the alleged abuse depends on
the existence and breach of Ofwat licence conditions—so that the remedy is sought “by virtue of” a contravention of the WIA regime.
The Court’s analysis places heavy weight on statutory context and the regulatory architecture of monopoly protection and price controls, and it adopts a
purposive “realistic” methodology to identify when an apparently free-standing competition claim is, in substance, a claim whose viability depends on
regulatory contravention.
Zacaroli LJ’s dissent underscores the difficulty of applying MSC2 outside nuisance and raises a sharp question for future cases:
whether “essential ingredient” should be determined strictly by legal elements of the cause of action or more broadly by substantive dependence on the
regulatory duty that makes the conduct deceptive and harmful in the first place.