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Britned Development Ltd v ABB AB And ABB Ltd
Factual and Procedural Background
The appeals concern the principles applicable to the assessment of damages awarded to a victim of a cartel following a breach of competition law, and their application in this case. The claim arose from a tort action for damages for breach of statutory duty regarding a restriction of competition contrary to Article 101 of the Treaty on the Functioning of the European Union ("TFEU") and Article 53 of the Agreement on the European Economic Area ("EEA Agreement"). The claim was brought by Company A against Company B and its subsidiary (together, "Company B").
Company A is a jointly owned corporate vehicle by two grid operators from The State and a neighboring jurisdiction, owning and operating a 1,000-megawatt submarine electricity cable system connecting the two electricity grids. Company B supplied the cable element of the system but did not supply the converters at each end, although it tendered for them.
In a 2014 decision ("the Decision"), the European Commission found that Company B and other undertakings from Europe, Japan, and Korea participated in a global cartel concerning high voltage submarine and underground power cable projects operating from 1999 to 2009.
Company A claimed loss and damage under three heads: (i) Overcharge - paying a higher price for the cable element due to the cartel; (ii) Lost Profit - the inability to acquire a higher capacity cable which would have generated additional revenues; and (iii) Compound Interest - higher capital costs incurred due to the overcharge.
After a trial lasting over four weeks, the trial judge delivered a detailed main judgment and a supplementary judgment in 2018. The judge awarded damages of £15,030,221 plus accrued simple interest to Company A for the Overcharge Claim but dismissed the Lost Profit and Compound Interest Claims.
The judge rejected Company B's argument that damages should be reduced due to the "Regulatory Cap Issue," but required Company A to provide an undertaking to treat damages as subject to the Regulatory Cap to avoid over-compensation. Company A declined, leading the judge to reduce damages by 10% in the supplementary judgment.
Both parties were granted permission to appeal on the Overcharge Claim, Lost Profit Claim, and Regulatory Cap Issue. Company A appeals seeking increased damages, overturning the dismissal of the Lost Profit Claim, and challenging the 10% reduction. Company B cross-appeals on the Overcharge Claim regarding an award related to "cartel savings".
Legal Issues Presented
- What principles govern the assessment of damages in follow-on claims for breach of competition law under Article 101(1) TFEU?
- Whether the trial judge erred in his approach to assessing the competitive price and the quantum of damages for the Overcharge Claim.
- Whether the Lost Profit Claim was correctly dismissed.
- The legal effect of the Regulatory Cap on the damages awarded.
- Whether damages can be awarded based on cartel savings realized by the defendant.
Arguments of the Parties
Appellant's Arguments (Company A)
- The judge erred fundamentally in his approach to assessing the competitive price, failing to properly consider the extent of Company B's lack of competitiveness and the consequent loss.
- The judge wrongly gave Company B the benefit of the doubt and failed to recognize available evidence demonstrating Company B's uncompetitiveness.
- The judge should have considered whether Company B would have won the tender absent the cartel and concluded it would not have.
- The judge erred in dismissing the Lost Profit Claim, which is closely linked to the Overcharge Claim.
- The 10% reduction of damages due to the Regulatory Cap was incorrect, as the Regulatory Cap effect is a collateral benefit and should not reduce damages.
- Damages should reflect full compensation consistent with EU principles of effectiveness and equivalence.
- The judge erred in awarding damages based on cartel savings, which should not form the basis of compensatory damages.
Respondent's Arguments (Company B)
- The judge's approach to assessing the overcharge was correct and supported by the evidence, particularly the margin analysis of comparable projects.
- The Lost Profit Claim was properly dismissed as it was intertwined with the Overcharge Claim, which was correctly assessed.
- The Regulatory Cap issue justifies a reduction in damages to avoid over-compensation, reflecting the risk that damages awarded would be offset by regulatory adjustments.
- Damages cannot be awarded based on cartel savings as there was no loss to the claimant on that basis and such an award would be contrary to established legal principles.
- The trial judge's findings on factual and expert evidence were entitled to deference and not plainly wrong.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Courage Limited v Crehan [2002] QB 507 | Recognition of directly effective rights under Article 101(1) TFEU; right to claim damages for harm caused by anti-competitive conduct. | Confirmed that national courts must ensure full effectiveness of Article 101 and protect individuals' rights to damages. |
| Manfredi v Lloyd Adriatico Assicurazioni SpA [2007] Bus LR 188 | Any individual can claim compensation where a causal relationship exists between harm and prohibited cartel conduct. | Reiterated principles from Courage; affirmed entitlement to damages for harm caused by cartel conduct. |
| Kone AG and Others v BB-Infrastruktur AG EU:C:2014:1317 | Cartel damages may include "umbrella damages" caused by higher prices charged by undertakings not party to the cartel. | Confirmed principles on causation and damages; upheld the compensatory nature of cartel damages claims. |
| Garden Cottage Foods Ltd v Milk Marketing Board [1984] 1 AC 130 | Competition law breaches constitute actionable breach of statutory duty giving rise to civil claims for damages. | Established domestic law basis for claims arising from breaches of Articles 101 and 102 TFEU. |
| Devenish Nutrition Ltd v Sanofi-Aventis SA [2009] Ch 390 | Restitutionary damages, exemplary damages, or account of profits not available for cartel damages claims under English law; compensatory damages suffice. | Affirmed compensatory damages as adequate remedy under EU and domestic law principles. |
| Watson Laidlaw & Co Ltd v Pott Cassels & Williamson 31 RPC 104 | Damages aim to restore claimant to status quo ante by way of compensation, often requiring "sound imagination and the practice of the broad axe". | Guided the court's approach to quantification of damages with inherent uncertainties. |
| Vantaan kaupunki v Skanska Industrial Solutions Oy and Others C-724/17 | Liability for cartel damages extends to corporate successors continuing the commercial activities of original cartel members. | Clarified the concept of "undertaking" in EU law as autonomous and consistent across enforcement mechanisms. |
| Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041 | Parties are entitled to know the case against them; unpleaded theories cannot form basis for liability. | Referenced in discussion on contract value used for damages calculation. |
| Parry v Cleaver [1970] AC 1 | Whether a benefit should be taken into account in damages depends on justice, reasonableness, and public policy. | Invoked in submissions on whether Regulatory Cap effects should be disregarded as collateral benefits. |
| Tiuta International Ltd v De Villiers Surveyors Ltd [2017] UKSC 77 | Definition and treatment of collateral benefits in damages assessment. | Applied in analyzing whether Regulatory Cap benefits are collateral or must be netted off damages. |
| British Transport Corporation v Gourley [1956] AC 185 | It is a fallacy to consider that allowing a wrongdoer to abate damages confers a benefit on them. | Supported reasoning that Regulatory Cap effect is not a benefit to Company B. |
| Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12 | Use of broad brush and assessment of risks and probabilities in damages quantification. | Referenced in the judge’s approach to the Regulatory Cap and risk of over-compensation. |
| Fage UK Limited v Chobani UK Limited [2014] EWCA Civ 5 | Principles of appellate restraint in reviewing factual findings and expert evidence. | Guided appellate deference to trial judge’s findings on overcharge assessment. |
| Henderson v Foxworth Investments Ltd [2014] UKSC 41 | Appellate intervention only if trial judge’s decision is one no reasonable judge could have reached. | Applied in determining no error in trial judge’s factual and evaluative conclusions. |
| Swynson Ltd v Lowick Rose LLP [2017] 2 WLR 1161 | Definition of collateral benefits as benefits arising independently of the circumstances giving rise to loss. | Considered in evaluating whether Regulatory Cap benefits qualify as collateral. |
Court's Reasoning and Analysis
The court began by establishing the legal framework governing cartel damages claims under EU and English law. It confirmed that Article 101(1) TFEU creates directly effective rights for individuals to claim compensation for harm caused by anti-competitive conduct, and that domestic courts must apply procedural rules consistent with EU principles of equivalence and effectiveness.
The court affirmed the established English law position that damages for breaches of competition law are compensatory and do not extend to exemplary or restitutionary damages absent exceptional circumstances. The court rejected submissions that EU law requires a presumption of harm or a punitive element in damages.
Turning to the facts, the court reviewed the trial judge’s detailed findings on the operation of the cartel, the tender process for the submarine cable project, and the evidence from witnesses and experts. The judge found that although Company B participated in the cartel, key personnel involved in the tender were unaware of it and conducted the bid competitively.
The court accepted the judge’s approach to quantifying the overcharge as the difference between the price actually paid and the price that would have prevailed absent the cartel, whether offered by Company B or another supplier. It noted the practical difficulties in constructing counterfactual bids from other suppliers due to lack of evidence and disclosure.
The court upheld the judge’s rejection of the expert evidence relying on complex regression analysis and accepted the margin analysis comparing Company B’s bid with post-cartel bids as a reliable method. It agreed that the judge was entitled to give Company B the benefit of doubts and to use a broad brush approach in the absence of precise evidence.
The court also considered and upheld the judge’s rejection of a presumption of harm, the dismissal of the Lost Profit Claim based on detailed factual findings, and the approach to the Regulatory Cap. It found that the Regulatory Cap effect was not a collateral benefit and could be taken into account in assessing damages to avoid over-compensation, justifying the 10% reduction.
Regarding cartel savings, the court found the judge erred in awarding damages on this basis because such savings represent a benefit to the cartelist, not a loss to the claimant, and there was no evidence linking these savings to an inflated price paid by Company A. It noted that the judge found any cartel savings in the specific project had been competed away.
Overall, the court emphasized the necessity of appellate restraint in factual and expert evidence evaluation and found no basis to interfere with the judge’s findings except for the award relating to cartel savings.
Holding and Implications
The court DISMISSED Company A's appeal in its entirety, upholding the trial judge's assessment of damages for the Overcharge Claim, the dismissal of the Lost Profit Claim, and the 10% reduction due to the Regulatory Cap issue.
The court ALLOWED Company B's cross-appeal concerning the award of damages based on cartel savings, holding that such damages were not recoverable as compensatory damages because they did not represent a loss to Company A.
The direct effect of this decision is to affirm the compensatory damages awarded to Company A, reduced by 10% for the Regulatory Cap risk, and to exclude damages based on cartel savings. No new legal precedent altering the principles of cartel damages assessment was established, and the judgment reinforces the established approach that damages are compensatory, requiring proof of loss causally linked to the infringement, and that benefits which are collateral or represent gains to the defendant are to be netted off or excluded.
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