Factual and Procedural Background
The Claimants comprise approximately 1,300 retailers grouped into seven corporate groups operating across 18 European countries, including 17 EEA countries and Switzerland. They allege that the merchant service charges (MSCs) paid to acquiring banks for MasterCard credit and Maestro debit card transactions were unlawfully inflated due to the multilateral interchange fee (MIF) set by the Defendants, resulting in loss. The Defendants are entities within the MasterCard group, incorporated in Delaware, Belgium, and England, which own and operate the MasterCard payment scheme ("the Scheme"). The claims cover periods from 1992 to the present and include breaches of EU/EEA competition rules and domestic competition laws.
The present trial concerns a preliminary issue under an order dated 11 November 2015 (amended in 2017), focusing on determining the applicable law for claims relating to four test countries: Germany, Italy, Poland, and the United Kingdom. The claims are categorized into those based on the EEA MIF, domestic MIF standalone claims, and claims based on the Central Acquiring Rule (CAR).
The Defendants have pleaded limitation defences and seek an early ruling on applicable law and limitation periods. However, the current trial is confined to the issue of applicable law, with limitation to be addressed later. The factual disputes are minimal, with witness evidence primarily addressing the decision-making process for setting the MIFs and CAR.
Legal Issues Presented
- What is the applicable law governing the claims relating to the setting and application of the EEA MIF, domestic MIFs, and the CAR for the periods 1992 to present, specifically for transactions in Germany, Italy, Poland, and the United Kingdom?
- How should the general choice of law rules, including Regulation Rome II (post-2009), the Private International Law (Miscellaneous Provisions) Act 1995 (1996-2009), and English common law (pre-1996), be applied to these claims?
- Does the double actionability rule apply to the claims for the period governed by English common law, and if so, what is the lex loci delicti?
- Can the applicable law determined under the general choice of law rules be displaced under section 12 of the 1995 Act?
- Are EU law principles, including the Brussels Recast Regulation, effectiveness, and equivalence, engaged to disapply English limitation rules or the double actionability rule in favour of foreign law?
Arguments of the Parties
Claimants' Arguments
- The applicable law for all claims in the 1995 Act period should be Belgian law, as the most significant events constituting the tort—the setting and management of the MIFs and CAR—occurred in Belgium, the location of the Third Defendant’s European head office.
- The restriction of competition should not be treated as a separate event with a distinct location, as it is inherent in the conduct of setting the MIFs.
- The exception to the double actionability rule should apply to disapply English law in favour of Belgian law for the common law period, to avoid the harsher English limitation periods.
- EU law principles require disapplication of English limitation periods and the double actionability rule to ensure the effectiveness and equivalence of claims based on Article 101 TFEU and related domestic laws.
- Belgium is the natural and appropriate forum for limitation rules, and applying multiple limitation laws would be inefficient and unfair.
- Post-IPO changes in decision-making (with final decisions made in the US) did not materially alter the location of the setting of MIFs, which remained effectively Belgium-based.
Defendants' Arguments
- The applicable law under the general rule in section 11 of the 1995 Act is the law of the country where the Merchant was based at the time the MSCs were imposed, as this is where the restriction of competition and loss occurred.
- The setting of MIFs and CAR involved significant decision-making outside Belgium, including in the US after the IPO in 2006 and for the UK MIF after 2004, making Belgium an inappropriate locus for the tort.
- The restriction of competition is a distinct event occurring in the national acquiring markets, separate from the setting of the MIFs.
- The exception to the double actionability rule does not apply; English law is applicable and satisfies the double actionability requirements.
- EU law principles do not require disapplication of English limitation rules or the double actionability rule; limitation periods are reasonable and do not impair the effectiveness of EU law or the Brussels Recast Regulation.
- The final decision-making authority for MIFs lies with senior management in the US, and the final approval is substantive, not a mere formality.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| VTB Capital v Nutritek [2012] EWCA Civ 808 |
Application of section 11 of the 1995 Act: general rule for ascertaining applicable law of tort involving events in multiple countries. |
Adopted as correct approach to identify elements of the tort, their location, and significance to determine applicable law. |
| Cartel Damages Claims Hydrogen Peroxide SA v Akzo Nobel NV (CDC) [2015] QB 906 |
Jurisdictional principle on place of harmful event in cartel damages claims under EU law. |
Distinguished by the court; CDC relates to jurisdiction, not choice of law under the 1995 Act. |
| Groupement des Cartes Bancaires v Commission [2014] ECR |
Clarification that certain cartel conduct can be presumed harmful to competition by object, removing need to prove actual effects. |
Supported court’s rejection of Claimants’ distinction between "object" and "effect" infringements for choice of law analysis. |
| Protea Leasing v Royal Air Cambodge [2002] EWHC 2731 (Comm) |
Flexible principle under section 11 of the 1995 Act; significance of elements of tort varies case by case. |
Applied to emphasize importance of assessing significance of tort elements in context. |
| Trafigura Beheer BV v Kookmin Bank Co [2006] EWHC 1450 (Comm) |
Applicable law determined by location of most significant events constituting the tort. |
Referenced in support of the principle that location of wrongful conduct may govern applicable law. |
| Morin v Bonhams & Brookes Ltd [2003] EWCA Civ 1802 |
Distinction between jurisdiction and choice of law principles. |
Used to reject Claimants’ reliance on jurisdictional cases for choice of law. |
| White Sea & Onega Shipping v International Transport Workers' Federation [2001] 1 Lloyd's Rep. 421 |
Applicable law determined by location of relevant action rather than place of loss. |
Considered but distinguished due to different factual circumstances. |
| Phillips v Eyre LR 6 QB 1 |
Double actionability rule for torts committed abroad. |
Discussed as part of common law applicable law framework for the earliest claim period. |
| Boys v Chaplin [1971] AC 356 |
Refinement of double actionability rule allowing application of foreign law in appropriate cases. |
Applied in explaining exception to double actionability rule. |
| Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 |
Confirmed refined double actionability rule and exception. |
Accepted as authoritative on English law. |
| Church of Scientology of California v Commissioner of Police (1976) 120 S.J. 690 |
Defamation tort occurs where publication takes place. |
Used analogously to support finding on lex loci delicti. |
| Pearce v Ove Arup Partnership Ltd [1997] Ch 293 |
Exception to double actionability rule applied where lex fori would bar claim; relevance of EU law principles. |
Considered by Claimants but distinguished by the court on facts and principles. |
| Courage v Crehan [2001] ECR I-6297 |
Principle of effectiveness of EU law in damages claims under Article 101 TFEU. |
Referenced in assessing whether limitation rules impair effectiveness. |
| Manfredi [2006] ECR I-6619 |
Principle of effectiveness and features of limitation rules. |
Applied to reject Claimants’ argument that English limitation rules impair effectiveness. |
| Arcadia Group Brands Limited v Visa Inc [2015] EWCA Civ 883 |
Application of English limitation rules to EU competition damages claims. |
Confirmed limitation rules do not infringe EU law principles. |
| Fiona Trust & Holding Corporation & Ors v Skarga [2013] EWCA Civ 275 |
Endorsed approach to section 11 and 12 of the 1995 Act on applicable law of tort. |
Applied by the court as authoritative guidance. |
| Dicey, Morris & Collins, The Conflict of Laws |
Authoritative commentary on choice of law principles including sections 11 and 12 of the 1995 Act and double actionability rule. |
Extensively relied upon to explain legal principles and their application. |
Court's Reasoning and Analysis
The court began by outlining the nature of the MasterCard Scheme and the roles of issuing and acquiring banks, including the structure of MSCs and the MIFs. It then addressed the applicable law for three distinct periods: post-11 January 2009 (Rome II), 1 May 1996 to 10 January 2009 (1995 Act), and 22 May 1992 to 30 April 1996 (English common law).
For the post-2009 period, the parties agreed that the applicable law is that of the country where the Merchant was established, consistent with Article 6(3) of Rome II.
For the 1995 Act period, the court applied section 11(2)(c), requiring identification of all elements of the tort, their locations, and a value judgment as to which country had the most significant connection. The elements identified were (a) adoption of MIFs and CAR by decision of an association of undertakings, (b) the restriction of competition, and (c) loss or damage caused to the Claimants.
The court rejected the Claimants' argument that the restriction of competition was not a separate event with its own location, emphasizing that the restriction manifests in the national acquiring markets where the Claimants suffered loss. The court also rejected the Claimants' distinction between infringements by "object" and "effect" as irrelevant for this purpose.
Regarding the location of setting MIFs and CAR, the court found that prior to the IPO in 2006, decisions were predominantly made in Belgium by the Europay and European Boards. After 2006, and for the UK MIF after 2004, final decisions were made by senior management in the US, a fact the court found to be substantive rather than a mere formality.
On the relative significance of elements, the court held that the restriction of competition in each national market and the associated loss suffered there were the most significant elements of the tort. The setting of MIFs and CAR, while relevant, were of lesser significance and could not displace the applicable law of the Merchant’s country.
The court then addressed the Claimants' alternative argument under section 12 of the 1995 Act for displacement of the general rule. It found no clear preponderance of connecting factors in favour of Belgian law and thus no justification for displacement.
For the common law period, the court identified the lex loci delicti as the law of the country where the restriction of competition and loss occurred, i.e., the Merchant’s country. It rejected the Claimants’ argument for disapplication of the double actionability rule or the 1984 Act.
The court considered EU law arguments invoking the Brussels Recast Regulation, and the principles of effectiveness and equivalence, and concluded that application of English limitation rules and the double actionability rule did not impair the effectiveness of EU law or the parties’ exclusive jurisdiction agreement, nor did it cause undue hardship.
In summary, the court found that the applicable law for the claims is the law of the country where each Merchant was based when the MSCs were imposed, for all relevant periods. The setting of MIFs and CAR, including decisions made in Belgium or the US, does not determine the applicable law.
Holding and Implications
HOLDING: The court ruled that the applicable law governing the claims relating to the setting and application of the EEA MIF, domestic MIFs, and the CAR is the law of the country where each Merchant was established at the time of the relevant transaction. This applies for the period governed by Rome II (post-11 January 2009), the 1995 Act period (1 May 1996 to 10 January 2009), and the common law period (22 May 1992 to 30 April 1996).
The court further held that the Claimants failed to establish any basis for displacing the general choice of law rules under section 12 of the 1995 Act or for disapplying the double actionability rule or English limitation law under EU law principles.
IMPLICATIONS: The decision means that claims must be evaluated under the national laws of the countries where the Claimants operated and suffered loss, rather than under Belgian law or any other jurisdiction. The ruling emphasizes the primacy of the location of the restriction of competition and loss over the location of decision-making regarding MIFs and CAR. No new precedent altering established choice of law principles was set; rather, the court applied existing legal frameworks to the complex multinational context of competition law damages claims.