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||Neutral Citation Number:  EWHC 2665 (Ch)
||Case No: HC09C04733
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
THE CHANCELLOR OF THE HIGH COURT
|| TOSHIBA CARRIER UK LTD AND OTHERS
||- and -
||KME YORKSHIRE LIMITED
KME GERMANY AG
KME FRANCE SAS
KME ITALY S.P.A.
NEMCO METALS INTERNATIONAL LIMITED
B. MASON & SONS LIMITED
WIELAND-WERKE (U.K.) LIMITED
JON TURNER QC and DEREK SPITZ (instructed by Crowell and Moring LLP) for the Claimants
ROMANO SUBIOTTO QC and DANIEL BEARD QC (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the First Defendant and Second, Third and Fourth Defendants
MATTHEW WEINGER (instructed by Herbert Smith LLP) for the Fifth, Sixth, Seventh and Eighth Defendants
KASSIE SMITH (instructed by Hogan Lovells International LLP) for the Ninth Defendant
Hearing dates: 4 - 6 October 2011
HTML VERSION OF JUDGMENT
Crown Copyright ©
The Chancellor :
- In a decision promulgated on 16th December 2003 ("the Decision") the Commission of the European Union ("the Commission") concluded that between 3rd May 1988 and 22nd March 2001 there had been a complex of agreements and concerted practices consisting of price fixing and market sharing in the industrial tubes sector. In article 1 thereof the Commission held, for the reasons given in the previous 432 paragraphs, that the undertakings it named in subparagraphs (a) to (f) had infringed the provisions of Article 81(1) of the Treaty and from 1st January 1994 Article 53(1) of the EEA Agreement by participating in that complex of agreements and concerted practices during the parts of the overall period it respectively specified. By Article 2 the Commission imposed the fines in the amounts and on the particular legal entities it specified. Those named both as undertakings in Article 1 and legal entities by which fines should be paid in Article 2 included:
(1) the second, third and fourth defendants each of which is a company in the KME group;
(2) the fifth defendant, a company in the Wieland-Werke group; and
(3) the ninth defendant, a company in the Outokumpu group.
Those defendants are variously domiciled in Germany, France, Italy and Finland but not in England.
- Over the period identified by the Commission as that during which the complex of agreements and concerted practices existed each of the claimants bought substantial quantities of industrial copper tubes or goods incorporating such tubes. By a claim form issued on 15th December 2009 they sought damages sustained as a consequence of breaches of duty consisting of participation in an unlawful cartel, as described by the Commission and recorded in the Decision. The defendants to the claim thereby commenced include the first defendant ("KME Yorkshire") and the sixth ("Nemco") and eighth ("WW(UK)") defendants, which are respectively companies in the KME and Wieland-Werke groups. (The claim against the seventh defendant has been discontinued.) Each of those defendants is a company domiciled in England and Wales but was not named in either Articles 1 or 2 of the Decision. The particulars of claim, to which I shall refer in some detail later, were served with the claim form.
- On 4th January 2011 the applications now before me were issued. They fall into two groups, namely:
(1) KME Yorkshire, Nemco and WW(UK) (together "the UK Defendants") seek orders (a) striking out the claim against them under CPR Rule 3.4(2)(a) on the ground that there is no reasonable ground for bringing it, alternatively (b) summarily dismissing the claim under Rule 24.2(a)(i) on the ground that no claimant has a real prospect of succeeding on the claim against them.
(2) The 2nd, 3rd, 4th, 5th and 9th defendants ("the Non-Domiciled Defendants") seek orders under CPR Part 11 declaring that the courts of England and Wales do not have jurisdiction to try these claims against them or alternatively declining to exercise it.
Each party relies on witness statements to which I shall refer as necessary later.
- It is not disputed that I should deal with the applications of the UK Defendants first as my conclusion on those applications will affect the extent to which the various arguments in relation to the applications of the Non-Domiciled Defendants need to be considered. But before I can deal with either I should (1) set out certain well known provisions of European Law as the backdrop to all of the later issues, (2) describe the Decision in some detail and (3) consider the amended particulars of claim in similar detail.
Relevant provisions of European Law
- The provision at the root of this case is Article 101 Treaty on the Functioning of the European Union ("TFEU"). Though the references may have changed (originally article 85 of the Treaty of Rome, then article 81 EC and now article 101 TFEU) its substance has not. So far as material it provides:
"1.The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void."
- On 2nd July 2003 the Commission decided to initiate the proceedings which culminated in the Decision. Article 16 of Council Regulation (EC) No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty provides that:
Uniform application of Community competition law
1. When national courts rule on agreements, decisions or practices under Article 81 or Article 82 of the Treaty which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated. To that effect, the national court may assess whether it is necessary to stay its proceedings. This obligation is without prejudice to the rights and obligations under Article 234 of the Treaty."
Thus, whether the claim in this action is to be regarded as a 'follow-on' or 'stand alone' action, this court must ensure that its decision does not run counter to the Decision. I was not addressed on nor shown any cases dealing with the precise application of that provision, in particular the extent to which, if at all, and the basis on which factual conclusions may be implied in the decision of the Commission and given effect by the national court.
- In relation to the applications of the Non-Domiciled Defendants I should refer to Council Regulation EC No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. With the immaterial exceptions specified in Article 1(1) and (2) it applies in civil and commercial matters whatever the nature of the Court or Tribunal. Article 2 lays down the general rule that persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State. Article 3 enables a person domiciled in a Member State to be sued in the courts of another Member State only in accordance with the provisions of specified sections of that Regulation. The two provisions relevant to these applications are laid down in section 2 in Articles 5 and 6.
- So far as material they provide:
A person domiciled in a Member State may, in another Member State, be sued:
3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur;
A person domiciled in a Member State may also be sued:
1. where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;
- The claimants rely on both Articles 6.1 and 5.3. If the proceedings are struck out or dismissed, as the UK Defendants contend, then, as the claimants accept, subject to the potential application of the principle referred to in Reisch Montage AG v Kiesel Baumaschinen Handels GmbH  I.L.Pr.10, they cannot rely on Article 6.1. The claimants contend that they may in those circumstances rely on Article 5.3. That is denied by the Non-Domiciled Defendants. If, by contrast, any of the claims against the UK Defendants is not struck out or summarily dismissed I did not understand it to be disputed that the claims against the Non-Domiciled Defendants were properly brought under Article 6.1.
- The Decision is a substantial document running to over 100 pages, 432 paragraphs or recitals and three articles. In the Introduction (paras 1 and 2) the Commission set out its conclusion. Part B, comprising paragraphs 3 to 55, contains a description of the industrial copper industry. This description includes an explanation of the Cuproclima Quality Association, established under Swiss Law in September 1985, through which it was alleged that information exchanges leading to price-fixing had occurred. In paragraph 9 the Commission recorded that from autumn 1999 the membership consisted of only Wieland-Werke, the KME group and Outokumpu. In paragraphs 17 to 42 the Commission described those members in some detail. The inter-state trade in industrial tube production was described by the Commission in paragraphs 54 and 55 in these terms:
"(54) European industrial tube production is concentrated in a number of sites in several European countries. OTK [Outokumpu] has relevant production facilities in Finland, Spain and Sweden, WW [Wieland-Werke] in Germany and Austria, and KME group in Germany, France and Italy. From these units the three groups supply the Community/EEA market. During the infringement period the undertakings concerned sold their products in most Member States of the Community and EEA directly to end-users in these countries.
(55) Therefore, during the period considered in this Decision, the industrial tube market was characterised by important trade flows between the Member States, as well as some trade between the Contracting Parties to the EEA Agreement."
- In paragraphs 56 to 77 the Commission described the procedure it had adopted. It started with information received in January 2001 alleging the existence of a cartel in the copper tube market. That was followed by a series of "unannounced inspections" of premises of Outokumpu in Finland, Wieland-Werke in Germany and KME in Germany, France and Italy and interviews with personnel from those undertakings. In July 2003 the proceedings were launched by the Commission in the form of a statement of objections against each of the addressees of the Decision and against SMI, the parent company of the KME group. Paragraph 77 of the Decision records:
"Having replied in writing to the Statement of Objections, Outokumpu and KME did not request an Oral Hearing on the case, and Wieland Werke withdrew its initial request by a letter dated 1 October 2003. Consequently, no Oral Hearing was organized in this case. None of the parties substantially contested the facts on which the Commission based its Statement of Objections nor the anti-competitive infringements identified in this Decision. Outokumpu has, however, made some clarifications with regard to certain facts, relating mainly to the so-called "quiet period" explained under heading 10.2.4."
- Section D, comprising paragraphs 78 to 95 is headed "Description of the Events". Paragraphs 78 to 80 state:
"(78) Towards the late 1980's, the producers organised within Cuproclima Association, including Outokumpu, Wieland Werke, Tréfimétaux, Europa Metalli and Kabelmetall (KME since 1995) [Defendants 3, 4 and 2], extended the scope of their cooperation to competition issues. The Cuproclima meetings held twice a year provided a regular opportunity to discuss and fix prices and other commercial conditions for industrial tubes after the official agenda of the meetings. Bilateral contacts between the undertakings concerned supplemented these anti-competitive meetings.
(79) The anti-competitive arrangement consisted primarily of setting target prices and agreeing on concerted price increases. The success of any price increase depended on the producers being content to maintain their market shares at the prevailing level, hence the need to establish a base for comparison and a continuing monitoring system. Accordingly, the participants allocated customers and froze their market shares. Implementation was ensured through a market leader arrangement for European territories and key customers. Compliance was further monitored through regular exchanges of confidential information by fax, e-mail and phone, as well as in the unofficial Cuproclima meetings.
(80) Price cooperation, including the exchange of information on customer-specific sales volumes and pricing, was included in the unofficial agenda of the meetings among Cuproclima members at the latest in May 1988. Towards 1993, Cuproclima members also decided to stabilise their market shares and started to disclose these to each other."
Succeeding paragraphs of that section described the conduct of the unofficial meetings in more detail and the involvement therein of certain outsiders.
- In paragraphs 96 to 118 the Commission described how the cartel was implemented by the fixing of target prices and other commercial terms, the allocation of market shares and customers and the monitoring and implementation mechanism. Paragraphs 119 to 176 contain a detailed account, in chronological order, of the relevant events for the period 1985 to 2001. In paragraphs 177 to 194 the Commission referred to the relevant provisions of the various treaties and certain well established principles in relation to agreements and concerted practices and whether a course of conduct constituted a single or continuous infringement. The Commission then applied those provisions and principles to the facts it had found. It noted in paragraph 221 that Outokumpu, Wieland Werke and KME admitted the existence of the anti-competitive agreements and practices. In paragraph 228 it said:
"In this case, the cartel arrangements covered virtually all trade throughout the Community and EEA. The existence of a price-fixing mechanism and a quota allocation system must have resulted, or was likely to result, in the diversion of trade patterns from the course they would otherwise have followed."
- In section F the Commission considered the application of limitation periods and the identity of the legal persons liable for the infringement. In that connection it noted in paragraphs 234 and 235:
"(234) The subject of Community and EEA competition rules is the "undertaking", a concept that is not identical with the notion of corporate legal personality in national commercial or fiscal law. The term "undertaking" is not defined in the Treaty. It may, however, refer to any entity engaged in economic activity. According to the circumstances, it may be possible to treat the whole group or individual subgroups or subsidiaries as the relevant "undertaking" for the purposes of Article 81 of the Treaty and Article 53 of the EEA Agreement.
(235) With regard to the liability of the parent company over its subsidiaries' conduct the Courts have consistently referred to an absence, on the part of the subsidiary, of "autonomy in determining its course of action in the market" In this regard, it may be presumed that a wholly owned subsidiary, in principle, necessarily follows the policy laid down by the parent company and thus does not enjoy such an autonomous position."
- In paragraphs 237 to 244 it considered the liability of Outokumpu and in paragraphs 245 to 256 that of SMI and the KME group. In paragraph 251 it exonerated SMI on the basis that:
"...the Commission is unable to demonstrate that SMI would have been either involved in the cartel or aware of it, nor could it be established in this case that SMI would have managed the commercial policies of its subsidiaries or given them instructions relating thereto..."
In paragraphs 259 to 284 it expressed its overall conclusion.
- Having considered issues in relation to remedies, attenuating and aggravating circumstances the Commission determined the fines to be paid by each addressee. Its overall conclusion expressed in Article 1 was:
The following undertakings have infringed the provisions of Article 81(1) of the Treaty and - from 1 January 1994 - Article 53(1) of the EEA Agreement by participating, for the periods indicated, in a complex of agreements and concerted practices consisting of price fixing and market sharing in the industrial tubes sector:
(a) Wieland Werke AG [the fifth defendant] from 3 May 1988 until 22 March 2001;
(b) Outokumpu Oyj [the ninth defendant] individually from 3 May 1988 until 30 December 1988, and jointly and severally with Outokumpu Copper Products Oy from 31 December 1988 until 22 March 2001;
(c) Outokumpu Copper Products OY from 31 December 1988 until 22 March 2001 (jointly and severally with Outokumpu Oyj);
(d) KM Europa Metal AG [the second defendant] individually from 3 May 1988 until 19 June 1995 and jointly and severally with Tréfimétaux SA [the third defendant] and Europa Metalli SpA [the fourth defendant] from 20 June 1995 to 22 March 2001;
(e) Europa Metalli SpA.[the fourth defendant], jointly and severally with TMX [the third defendant] from 3 May 1988 to 19 June 1995, and jointly and severally with KM Europa Metal AG [the second defendant] and Tréfimétaux SA [the third defendant] from 20 June 1995 to 22 March 2001.
(f) Tréfimétaux SA [the third defendant], jointly and severally with Europa Metalli SpA [the fourth defendant] from 3 May 1988 to 19 June 1995, and jointly and severally with KM Europa Metal AG [the second defendant] and Europa Metalli SpA [the fourth defendant] from 20 June 1995 to 22 March 2001."
- Of the UK Defendants, only Nemco is mentioned by name, but then only as a subsidiary of the fifth defendant Wieland-Werke AG. Although there are numerous references to the KME group, KME Yorkshire is never mentioned by name nor was it suggested that there was any necessary implication of a reference to KME Yorkshire in the references to the KME group. The claim against the seventh defendant has been discontinued. As in the case of KME Yorkshire, there is no mention of WW(UK), nor is it suggested that references to Wieland-Werke are by implication to be read as references to this defendant.
The amended particulars of claim
- I turn then to the case made in the amended particulars of claim. The purpose of the amendment was to delete the third, eighth and twelfth claimants. In all other respects the particulars of claim are the same now as when the action was commenced in December 2009. Paragraphs 1 to 16 describe the claimants. Paragraphs 17 to 26 describe the defendants. KME Yorkshire is a wholly owned subsidiary of the second defendant, now called KME Germany AG. The claimants allege (paragraph 17) that KME Yorkshire
"carried on business in the sale and/or offer for sale of industrial copper tubes supplied in annealed level wound coils ("LWC")".
In paragraph 18 it is alleged that during the relevant period, being that of the cartel as found by the Commission, the second defendant, KME Germany AG,
"carried on business in the production and sale and/or offer for sale of LWC tubes indirectly through operating subsidiaries including the First....Defendant".
In paragraph 21 it is alleged that the first to fourth defendants
"..form part of a publicly quoted European industrial corporate group with a worldwide presence. The group is the world's largest processor of copper and copper alloys."
- In paragraph 22 it is alleged that Wieland-Werke AG, the fifth defendant,
"..carried on business in the production and sale and/or offer for sale of LWC tubes, both directly and through its subsidiaries, [Nemco and WW(UK)]."
Paragraphs 23 to 25 merely allege that Nemco and WW(UK) are companies incorporated in England and Wales.
- Paragraphs 27.1 and 27.2 are in the following terms:
"27. At all material times
27.1 the First to Fourth Defendants formed part of one economic undertaking ("the KME Group") for the purposes of Art.101 TFEU...The sale and offer for sale of LWC tubes by the First...Defendant[s], and [its] conduct more generally in relation to the supply of LWC tubes across the Community and within the EEA, was in accordance with the policy set by the Second Defendant.
27.2 The Fifth to Eighth Defendants formed part of one economic undertaking ("the Wieland Group") for the purposes of Art.101 TFEU. The sale and offer for sale of LWC tubes by the Sixth to Eighth Defendants, and their conduct more generally in relation to the supply of LWC tubes across the Community and within the EEA, was in accordance with the policy set by the Fifth Defendant."
- Paragraphs 29 and 30 deal with the pricing of LWC tubes and the existence and date of the decision. In paragraphs 31 to 38 the claimants summarised various findings of the Commission in the Decision and made various allegations arising out of them. They included the allegations that
(1) the infringement of Article 101 consisted not only in the agreement between the members of the cartel but also in its implementation (paragraph 36.1);
(2) such implementation extended not only to sales of LWC tubes but in refraining from competitive supply (paragraph 36.2); and
(3) "the cartelists" acted with knowledge of the illegality of their actions and took elaborate steps to conceal their activities (paragraph 36.4).
- In paragraphs 40 to 43 the claimants allege consequential breaches of statutory duty. Paragraphs 42 and 43 allege:
"42. Further, the First Defendant and, it is believed, the Sixth to Eighth Defendants each engaged in acts of implementation of the unlawful arrangements identified in the Decision, on behalf of the respective economic undertakings to which they belonged. In doing so, they similarly breached their statutory duties. Pending disclosure from the Defendants and/or the provision of further information, the best particulars that the Claimants can provide are that such implementation will have taken place by reason of:
42.1 the fact that the First Defendant and, it is believed, the Sixth to Eighth Defendants each carried on business at all material times in the supply of LWC tubes within the EEA; and
42.2 the fact that the First Defendant and, it is believed, the Sixth to Eighth Defendants may be presumed to have followed the unlawful policy set by their parent companies with respect to the supply of LWC tubes.
43. The implementation by the First Defendant and, it is believed, the Sixth to Eighth Defendants of the unlawful arrangements is likely to have taken the form of:
43.1 the sale and/or offer for sale of LWC tubes to customers only at artificially inflated prices, or subject to other anti-competitive terms and conditions of supply; and/or
43.2 refraining from selling or offering for sale LWC tubes to customers at all, in order to allow other members of the cartel to secure the business; and/or
43.3 exchanging confidential information with competitor companies, as part of the monitoring of the operation of the cartel arrangements to ensure their success."
In paragraphs 44 to 50 the claimants plead loss and damage in conventional form.
- Following service of the particulars of claim there was an agreed stay of the proceedings pending the decisions of first Teare J and then the Court of Appeal in Cooper Tire and Rubber Co. v Shell Chemicals UK Ltd  EWHC 2609 (Comm) and  EWCA Civ 864. In the course of the stay, on 23rd March and 5th May 2010, the solicitors for the Wieland-Werke Defendants sought particulars of the claimants' 'beliefs', as averred in paragraphs 42 and 43 of the amended particulars of claim. No such particulars have been given. On 3rd September 2010, after the stay had been lifted, the solicitors for the claimants replied to the effect that they could not provide further particulars prior to disclosure.
- On 27th August 2010 the solicitors for the Wieland-Werke defendants asked the solicitors for the claimants by reference to paragraphs 42 and 43 of the particulars of claim whether it was the claimants' case that Nemco and WW(UK) had knowledge of the alleged anti-competitive practices upon which the claims are based and if so what is the basis for that view. In their response dated 3rd September 2010 the solicitors for the claimants confirmed that it was the case for the claimants that Nemco and WW(UK) were involved in and parties to the anti-competitive practices and, in any event, liable for their acts of implementation alleged in paragraphs 42 and 43 of the particulars of claim. That contention was repeated in a letter from the solicitors for the claimants to the solicitors for the KME defendants. On 13th September 2011 the solicitors for the KME defendants wrote to those for the claimants contending that there was no sufficient allegation that KME Yorkshire was aware of or had knowledge of the anti-competitive arrangements alleged. On 19th September 2011 the solicitors for the claimants refuted the suggestion that the knowledge of KME Yorkshire had not been properly pleaded relying on its response to the solicitors for the Wieland-Werke defendants dated 3rd September 2010 and contemporaneously copied to the solicitors for the KME defendants.
Provimi v Roche Products Ltd and Cooper Tire and Rubber Co. v Shell Chemicals UK Ltd
- Before considering the submissions for the parties it is convenient to refer to these two cases which were minutely dissected in the course of argument. Provimi v Roche Products Ltd  EWHC 961 (Comm) concerned the operation of a cartel in the sale of vitamins in the EU and EEA areas as found by a decision of the Commission promulgated in November 2001. The Commission concluded that a holding company called La Roche had participated in the cartel in relation to all the relevant vitamins and another holding company called Aventis had participated in relation to some only of the relevant vitamins. Purchasers of vitamins from companies within those two groups then commenced proceedings in England against sellers and associated companies within those two groups on the basis that those companies had participated in the relevant cartel. The defendants applied to strike out or summarily dismiss the claims.
- In his judgment Aikens J set out the decision of the Commission in some detail. He considered (paragraph 6(8)) that when in its decision the Commission referred to La Roche as an undertaking it was embracing other companies within that group which entered into, participated in or implemented the cartel arrangements because they would not have operated as functionally separate entities from their parent. He continued:
"But this leaves open the difficult question, much debated before me, of the circumstances (if any) in which a corporate entity that is not specifically an addressee in the Decision can be sued as having infringed Article 81(1)."
- Aikens J considered the rival arguments of counsel on that question in paragraphs 23 and 24. In the discussion which followed he noted that it had not been alleged that the particular companies which were defendants had knowledge of the infringing agreements entered into by the parent companies. Aikens J continued:
"30. Therefore the point comes down to this: what knowledge of the infringing agreement by the legal entity being sued, if any, does a claimant have to plead and prove in order to succeed in a claim for damages for infringement of Article 81(1)? There are no cases or even textbook opinions to provide me with a ready answer. Moreover there is a tension between English law and EU Competition law concepts. In English law the separate identity of corporations is respected and knowledge of one corporation will not be readily imputed to another. But EU Competition law maintains the concept of an "undertaking", which is more flexible than a legal entity. It can embrace a number of legal entities, so long as they act as a single economic unit and no legal entity acts independently for any relevant purpose.
31. It seems to me to be arguable that where two corporate entities are part of an "undertaking" (call it "Undertaking A") and one of those entities has entered into an infringing agreement with other, independent, "undertakings", then if another corporate entity which is part of Undertaking A then implements that infringing agreement, it is also infringing Article 81. In my view it is arguable that it is not necessary to plead or prove any particular "concurrence of wills" between the two legal entities within Undertaking A. The EU competition law concept of an "undertaking" is that it is one economic unit. The legal entities that are a part of the one undertaking, by definition of the concept, have no independence of mind or action or will. They are to be regarded as all one. Therefore, so it seems to me, the mind and will of one legal entity is, for the purposes of Article 81, to be treated as the mind and will of the other entity. There is no question of having to "impute" the knowledge or will of one entity to another, because they are one and the same.
32. In my view the fact that, in the Decision, the Commission identifies only one particular legal entity as the "infringing undertaking" does not detract from my conclusion. EU competition law has to bow to the practical fact that in national laws it is legal entities that exist; and it is legal entities that own the funds from which fines are paid. So particular entities need to be identified in order to enforce the Decision. But those practical considerations cannot determine a prior question which is whether, if one entity of an undertaking is an infringer by agreeing to fix prices, another entity that has implemented the same infringing agreement, is also an infringer."
- In Cooper Tire and Rubber Co. v Shell Chemicals UK Ltd [EWHC] 2609 (Comm) Teare J considered an application, similar to this, by certain defendants domiciled in England, referred to as the Anchor Defendants, to strike out or summarily dismiss the claim against them. The claim concerned the operation of a cartel, as found in a decision of the Commission, in which their parents were found to be participants. There was an allegation that the Anchor defendants knew of the Cartel but only in the context of a claim for exemplary damages. Teare J considered (paragraph 48) that the question before him was whether a subsidiary of an undertaking, as found by the Commission, which had implemented the infringing agreement was liable for breach of statutory duty as an infringer of Article 101. After referring to the decision of Aikens J in Provimi Teare J concluded in paragraph 56:
"In order to be liable a subsidiary must be part of the undertaking which has infringed Article 81. An undertaking "covers any entity engaged in an economic activity"; see Akzo Nobel at paragraph 54. There is a good arguable case that the Anchor Defendants are a part of the undertaking involved in the economic activity of producing and selling BR and ESBR because they sell those products."
- The Anchor Defendants appealed. In the judgment of the Court of Appeal given by Longmore LJ it was noted in paragraph 29 that the judge had construed the particulars of claim as merely alleging that the Anchor Defendants were subsidiaries who were neither party to nor aware of the anti-competitive practices agreed by other companies in the undertaking. The Court of Appeal took a different view on the construction point. At paragraph 43 they said:
"In these circumstances it seems to us that the particulars of claim encompass both the possibility that the Anchor Defendants were parties to or aware of the anti-competitive conduct of their parent company and the other Addressees and the possibility that they were not. It is only if they were not that what we have called the Provimi point will arise. But it is unnecessary to decide it on this application because it is open to the claimants on the pleadings to prove that the Anchor Defendants were parties to (or aware of) the Addressees' anti-competitive conduct. The strength (or otherwise) of any such case cannot be assessed (or indeed usefully particularised) until after disclosure of documents because it is in the nature of anti-competitive arrangements that they are shrouded in secrecy. But the case that the Anchor Defendants were parties to the cartel arrangements or were aware of them when they sold BR and ESBR to the Claimants is not a case that is susceptible to being struck out at the present stage."
- Although it was not necessary to decide the Provimi point, as they called it, the Court of Appeal revisited it in paragraphs 45 and 46. They said:
"45. As to the Provimi point, we can readily agree that, as Aikens J said, it is "arguable". We would, however, add that it is also arguable the other way. Although one can see that a parent company should be liable for what its subsidiary has done on the basis that a parent company is presumed to be able to exercise (and actually exercise) decisive influence over a subsidiary, it is by no means obvious even in an Article 81 context that a subsidiary should be liable for what its parent does, let alone for what another subsidiary does. Nor does the Provimi point sit comfortably with the apparent practice of the Commission, when it exercises its power to fine, to single out those who are primarily responsible or their parent companies rather than to impose a fine on all the entities of the relevant undertaking. If, moreover, liability can extend to any subsidiary company which is part of an undertaking, would such liability accrue to a subsidiary which did not deal in rubber at all, but another product entirely? These and other difficulties have been ventilated by Mr Nicholas Khan in the 2003 volume of European Lawyer page 16 and Mr Brian Kennelly in the May 2010 issue of the CPI Anti-Trust Journal.
46. If it had been necessary to address the Provimi point, we would have been inclined to say that it would be necessary to make a reference to the ECJ before coming to a conclusion on jurisdiction. It would be possible to say that, because a claimant only has to show that he has a case against an anchor defendant which cannot be struck out, the fact that the Provimi point is arguable should not deter the English court from assuming jurisdiction. But that would mean that the Provimi point could never be decided in a jurisdiction (and possibly, therefore, in any other) context. That would not be a satisfactory state of affairs."
The applications of the UK Defendants
- Counsel for KME Yorkshire, whose submissions on the law were adopted by counsel for Nemco and WW(UK), contended that:
(1) there was no sufficient allegation, or, if there was, sufficient evidential support for such allegation that such defendants were or were part of an undertaking found by the Commission to have infringed Article 101;
(2) even if such defendant had implemented an unlawful arrangement concluded by its parent such implementation alone is not sufficient to constitute an infringement of Article 101;
(3) on the facts relevant to the claim against KME Yorkshire, Nemco and WW(UK) respectively such defendant had not, in any event, implemented any such arrangement.
These submissions were founded on the premise that the claim was only a 'follow-on claim', that is to say one founded on and brought to enforce the conclusions of the Commission as expressed in the Decision. In his oral submissions counsel for the claimants indicated that this assumption was not correct. He contended that the claim as pleaded included a 'stand alone' claim, that is to say one based on the direct effect of Article 101 and its infringement. In his response counsel for KME Yorkshire accepted that such a 'stand alone' claim was possible but contended that it was not open to the claimants on their amended particulars of claim. Accordingly, I should deal with the merits of the arguments advanced by the UK Defendants in opening their cases before considering the details of the amended particulars of claim.
- Counsel for the UK Defendants point out that an infringement of Article 101 involves some personal responsibility of the defendant. They rely on The Commission v Anic Partecipazioni  ECR I - 4125 and ETI v Autorita  ECR I - 10893 and in particular the opinion of Advocate-General Kokott in paras 71 and 72 in the latter. It is sufficient for present purposes to refer to paragraphs 86 and 87 of the judgment of the Court in the first case. In those paragraphs the Court pointed out that:
"87. When, as in the present case, the infringement involves anti-competitive agreements and concerted practices, the Commission must, in particular, show that the undertaking intended to contribute by its own conduct to the common objectives pursued by all the participants and that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk.
88. The Court of First Instance found, at paragraph 204, cited above, that all the efforts of the participating undertakings were in pursuit of a common anti-competitive aim. It is clear from all the findings of fact made by the Court of First Instance, at paragraphs 63 to 178 of the contested judgment, with regard to the various aspects of the infringement, that it reached the finding that Anic had participated in each of those aspects only on the basis of Anic's own conduct, the contribution it thus intended to make towards those aspects and of its knowledge of the conduct planned or put into effect by other undertakings gained through its participation in the regular meetings of polypropylene producers. In those circumstances, the Court of First Instance was entitled to consider that Anic's participation, through its own conduct, in the infringement rendered it co-responsible for the entire infringement committed during its participation."
- Counsel point out that although upward attribution of responsibility for an infringement from a subsidiary company to its parent is well recognised in, for example, Akzo Nobel NV v the Commission  ECR I - 8237 there is no corresponding downward attribution from a parent to its subsidiary. This, they submit, is the consequence of the relevant principles as described in Akzo. In that case the Court pointed out that competition law refers to the activities of 'undertakings' and that an undertaking is an economic unit engaged in an economic activity regardless of its legal status or the manner in which it is financed. Accordingly, an undertaking may consist of several persons both natural and legal; but when it comes to imposing a remedy for an infringement, such as a fine, it must be imposed on one or more legal persons. In paragraphs 58 and 59 the Court continued:
"58. It is clear from settled case-law that the conduct of a subsidiary may be imputed to the parent company in particular where, although having a separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company (see, to that effect, Imperial Chemical Industries v Commission, paragraphs 132 and 133; Geigy v Commission, paragraph 44; Case 6/72 Europemballage and Continental Can v Commission  ECR 215, paragraph 15; and Stora, paragraph 26), having regard in particular to the economic, organisational and legal links between those two legal entities (see, by analogy, Dansk Rørindustri and Others v Commission, paragraph 117, and ETI and Others, paragraph 49).
59. That is the case because, in such a situation, the parent company and its subsidiary form a single economic unit and therefore form a single undertaking for the purposes of the case-law mentioned in paragraphs 54 and 55 of this judgment. Thus, the fact that a parent company and its subsidiary constitute a single undertaking within the meaning of Article 81 EC enables the Commission to address a decision imposing fines to the parent company, without having to establish the personal involvement of the latter in the infringement."
- Counsel submit that Article 101 requires two or more independent undertakings engaging in agreements or concerted practices. Accordingly, there is no need for any downwards attribution of responsibility in cases where both parent and subsidiary are part of the same undertaking. They point out that there was none in this case. There is nothing in the decision to suggest that any of the UK Defendants were themselves engaged in any of the agreements or concerted practices of which the Commission complained. None of them is named in either Article 1 or 2 of the Decision. They contend that even if they had been referred to in any of the earlier paragraphs that would not have been sufficient unless there had been some ambiguity in the operative part, see Suiker Unie v The Commission  ECR 1663 at para 315; Wegenbouwmaatschappij Heijmans v The Commission  ECR II - 110 and Van Bael and Bellis: Competition Law of the European Community 5th Ed. (2010) 1234 n.116.
- The second submission is, in substance, a development of the first. The UK Defendants submit that they cannot be held liable for the damage caused by their respective parents merely because they have, as assumed, participated in the implementation of the agreements or concerted practices in which their parents allegedly engaged. They point out that the concept of an agreement to which Article 101 applies requires a concurrence of wills between two or more undertakings, see Bayer v The Commission  ECR II - 381 para 69; that of a concerted practice predicates the knowing substitution of practical co-operation between two or more undertakings for the risks of competition, see ICI v The Commission  ECR 619 para 64. In neither case will an agreement made or practice concerted between companies in a single undertaking suffice. In that connection they contend that the observation of Aikens J in Provimi paragraph 31 quoted in paragraph 27 above, cited by Teare J in paragraph 56 of his decision in Cooper Tire quoted in paragraph 28 above and by the Court of Appeal, without disapproval in its judgment in the same case at paragraph 35, is wrong in law.
- In relation to the third submission summarised in paragraph 31 above counsel for KME Yorkshire, relying on the witness statements of Mr R.J.McLean the managing director of KME Yorkshire since 23rd February 2001, submitted that the case on implementation had no real prospect of success because there was no sufficient allegation of knowledge and, in any event, the actions of that defendant in the sale of industrial tubes was only as agent for other companies in the KME Group. As such it was not in a position to influence the price or other terms on which the industrial tubes were supplied in the market and did not engage in any relevant activity on its own behalf. In the case of Nemco and WW(UK) counsel submitted that there was no sufficient allegation of knowledge and no acts of implementation of any infringing agreement or concerted practice. Each of these defendants relied on witness statements adduced on its behalf and substantially unchallenged by any witness statement adduced by any claimant. In the case of Nemco it was contended that there was no evidence that it had ever supplied any of the claimants with LWC and in any event it set its own prices without any consultation with its parent company, the fifth defendant. In the case of WW(UK) the evidence demonstrated that it never supplied any of the claimants with LWC in the relevant period but acted solely as agent for its parent, the fifth defendant.
- Each of these submissions was challenged by counsel for the claimants. In respect of each of them he contended that the claimants were entitled, as was not disputed, to sue each defendant for its own participation in the agreements and concerted practices which infringed Article 101, see Pfleiderer v Bundelskartellamt  5 CMLR 7, 244 paras 28 and 29. He maintained that the claims of liability were advanced not only on the basis of the Decision but independently in accordance with the allegations made in the amended particulars of claim in respect of which the Decision has probative value. He submitted that an infringement of Article 101 also occurred when an undertaking implemented the infringing agreement or concerted practice and such implementation by an undertaking could be constituted by the actions of a subsidiary company part of the undertaking which did not have knowledge of the infringing agreement or concerted practice. He contended that there was a sufficient allegation of knowledge in the correspondence and, as implementation is in its nature covert no particulars should be required at this stage. He relies on the statement of Aikens J in Provimi and of Teare J in Cooper Tire for the proposition that the knowledge of the parent is to be attributed to the subsidiary.
- In reply counsel for KME Yorkshire, whose submissions on the law were again adopted by counsel for Nemco and WW(UK), acknowledged that a "stand alone" action was possible, but denied that in any such action the Decision had any probative value at all. In his submission if a defendant was not an addressee named in Article 1 of the Decision it is not open to a claimant by extraneous evidence to add a defendant to the infringing undertaking without proving that it was itself an infringing undertaking.
Conclusion on specific issues.
- The submissions of counsel I have sought to summarise raise a number of issues which arise from time to time and in different contexts. It is convenient to express my conclusion on them at this stage. They are:
(1) whether knowledge of the unlawful agreements and concerted practices found by the Commission to have been made and carried out by the Non-Domiciled Defendants has been sufficiently pleaded by the claimants against the UK Defendants;
(2) whether I am satisfied that the decisions of Aikens J in Provimi and Teare J in Cooper Tire are plainly wrong so that I ought not to apply them;
(3) if I am not so satisfied, whether I should make a reference to the ECJ to test their correctness;
(4) whether the Decision has any and if so what probative effect in proceedings against a party which is not an addressee of it.
I will deal with these issues in turn.
- CPR 16PD para 8.2 obliges the claimant, if he wishes to rely on it in support of his claim, specifically to set out in his particulars of claim any allegation that a defendant had knowledge of a fact. The making and/or implementation of agreements or concerted practices in contravention of Article 101 are plainly facts. It is clear that there is no express allegation of knowledge of those facts on the part of any UK Defendant in the body of the amended particulars of claim. That is why the matter was taken up by the UK Defendants' solicitors in correspondence, the solicitors for Nemco and WW(UK) in the summer of 2010 and the solicitors for KME Yorkshire in the summer of 2011. The response of the claimants' solicitors to the solicitors for Nemco and WW(UK) dated 3rd September 2010 was copied to the solicitors for KME Yorkshire; similarly the response to the solicitors for KME Yorkshire dated 28th June 2011 was copied to the solicitors for the other parties. In the former the claimants' solicitors wrote "…the claimants' case is that these companies were involved in and parties to the anti-competitive practices…". In the latter they stated that "…the First Defendant was involved in, party to or aware of the anti-competitive arrangements…".
- Accordingly, by 28th June 2011 at the latest all UK Defendants knew that such knowledge was alleged. It was suggested by counsel for Nemco and WW(UK) that this was not enough. He pointed out that a formal application for permission to re-amend the amended particulars of claim had not been made and should be required because, as they stood, no stand alone claim had been alleged and would now be statute-barred. I do not accept that submission. The amended particulars of claim were apt to raise both a follow-on and a stand alone claim. The initial failure to plead knowledge has been remedied by the information subsequently provided and is not a good reason to exercise the powers conferred by CPR Rule 3.4(2)(a) summarily to strike out the claim.
- I am required to follow a decision of a judge of co-ordinate jurisdiction unless I am convinced that it is wrong. The decisions of Aikens and Teare JJ are, in this court, those of judges of co-ordinate jurisdiction. Whatever view I might have taken uninstructed by the views of the Court of Appeal in Cooper Tire it is clear from what that Court said in paragraph 45 of its judgment quoted in paragraph 30 above that I cannot conclude that the decisions of Aikens and Teare JJ are plainly wrong.
- I have, of course, noted and carefully considered what the Court of Appeal there said about making a reference to the Court of the European Union. In my view it would not be appropriate to make a reference at this stage. First, the point will not arise unless and until the allegation of knowledge is not established at the trial. Second, it is usually better to withhold a reference until the facts have been found lest the Court of the European Union be troubled by points which are academic and therefore not necessary for the decision of the national court.
- As I have already pointed out I was not addressed on the effect of Article 16 of Council Regulation (EC) No 1/2003 quoted in paragraph 6 above. Its terms require a national court to avoid "decisions running counter to the decision adopted by the Commission" when the national court is ruling "on agreements, decisions or practices under Article 81 or Article 82 of the Treaty which are already the subject of a Commission decision". I can see no reason why the effect of that provision should be confined to follow-on actions. It is at least as important that in stand alone actions conflicting decisions are avoided. If the Commission has investigated certain trade practices pursued by specified undertakings and reached the conclusion that they infringed Article 101 that will bind the addressee. If a national court concludes on evidence adduced before it that X Ltd was a part of the same undertaking and involved in the same trade practices as that addressee it would be contrary to Article 16 to conclude that X Ltd or that undertaking had not infringed Article 101 in pursuing those same trade practices. And if the national court is precluded by Article 16 from reaching a conflicting decision why should it undertake the task of re-investigating the same matters. Even if the national court is entitled to revisit the issues of agreements and concerted practices infringing Article 101 the decision of the Commission is at its lowest evidence properly admissible before the court in England, see Crehan v Inntrepreneur Pub Co.  1 AC 333, 357. As such it would be sufficient to satisfy the test imposed by CPR Rule 24.2(1)(a) in relation to those issues.
Conclusion on the UK Defendants' Applications
- The principles to be applied on applications under CPR Rules 3.4(2)(a) and 24(2)(a)(i) are well known. In the case of the former the question is whether the statement of case, here the amended particulars of claim, discloses a reasonable ground for bringing the claim. I have set out the relevant parts of the amended particulars of claim in paragraphs 18 to 24 above. Paragraphs 27 and 28 of the amended particulars of claim allege in terms that each of the UK Defendants was part of the undertaking and engaged in the same economic activity as the Non-Domiciled Defendants. Paragraphs 30 to 39 aver that that activity as undertaken by the Non-Domiciled Defendants infringed Article 101. Paragraphs 42 and 43 allege that the UK Domiciled Defendants implemented the unlawful arrangements. Even if knowledge of the unlawful arrangements on the part of the UK Defendants had not been properly pleaded, the allegations I have summarised are, on the basis of the decisions of Aikens J in Provimi and Teare J in Cooper Tire, sufficiently alleged to satisfy the test imposed by CPR Rule 3.4(2)(a). As the allegations of knowledge have, in my view, been sufficiently pleaded, then on the basis of the decision of the Court of Appeal in Cooper Tire that test is amply satisfied. I have no hesitation in dismissing the applications of the UK Defendants insofar as they were based on CPR Rule 3.4(2)(a).
- In the case of CPR Rule 24(2)(a)(i) all parties relied on the relevant propositions formulated in the oft-cited and oft-approved judgment of Lewison J in Easyair Ltd v Opal Telecom Ltd  EWHC 339 para 15 in these terms:
"i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman  1 All ER 91 ;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel  EWCA Civ 472 at 
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at 
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725."
- In considering whether the claimants have a real prospect of success in their claims against the UK Defendants my conclusions on the application made under CPR Rule 3.4(2)(a) expressed in paragraph 45 above apply equally to the application under CPR Rule 24(2)(a)(i) insofar as the UK Defendants rely on the first two points summarised in paragraph 31(1) and (2) above. But I should deal in more detail with the contentions of the UK Defendants on the facts.
- The evidence of Mr R.J.McLean for KME Yorkshire is to the effect that although KME Yorkshire is a wholly owned subsidiary of the second defendant and was engaged in the trade of LWC it only ever supplied such tubes as delivery agent for the Second Defendant. His evidence is supported by a further witness statement of Mr Mormentyn. It is accepted that it supplied them to the first claimant but not as principal or on terms it imposed. In these circumstances it is suggested that as KME Yorkshire, as agent for a disclosed principal, was not contractually liable to any of the claimants it cannot have been part of the undertaking found to infringe Article 101 or to have implemented any of the offending agreements or concerted practices.
- I do not accept that these contentions, assuming them to be proved in due course, would absolve KME Yorkshire from liability under Article 101. It is clear that KME Yorkshire was a company in the KME group and engaged in the same economic undertaking. It is accepted that it sold LWC to one or more of the claimants. The fact, if it be one, that it did so only as agent for the Second Defendant would, at least arguably, amount to implementation of the agreement or concerted practice even if it was not contractually liable on the contract of sale. Contractual liability and implementation of an illegal cartel are distinct concepts. In my view KME Yorkshire has not shown that the claim against it does not have a real chance of success.
- In the case of Nemco and WW(UK) there is a witness statement from Mr Weyler on behalf of Nemco its joint managing director since 1st October 1989. He states that Nemco did not sell any LWC product to any of the claimants and set its own prices independently of the fifth defendant. He denies that it was implicated in any information exchanges or other conduct described in Article 101. In addition there is a witness statement of Mr Herold on behalf of WW(UK), its managing director for the whole of the relevant period. He states that WW(UK) did not sell any LWC products to any of the claimants at any time in the relevant period. He contends that WW(UK) set its own prices and other terms of supply independently of the fifth defendant. He states that to the best of his information WW(UK) did not participate in any information exchanges with competitors. Accordingly he submits that there is no basis for any allegation that this defendant knew of or played any part in the implementation of the offending agreements or concerted practices.
- There is no evidence from the claimants in response to that of Mr Weyler and Mr Herold. But there has been no disclosure. As the Court of Appeal pointed out in Cooper Tire paragraph 43 the strength of the claimants' case cannot be assessed, let alone particularised, until after disclosure of documents. The fact that the claimants do not now have evidence to refute that of Mr Weyler or Mr Herold does not enable me to conduct a mini-trial, let alone, predict the outcome of the actual trial. The fact is that these defendants too were part of the same group and were involved in the same economic activity as the undertaking found by the Commission to have infringed Article 101. In my view these defendants have not shown that the claim against them does not have a real prospect of success.
- For all these reasons I dismiss the applications of the UK Defendants.
The applications of the Non-Domiciled Defendants
- As I indicated in paragraph 9 above my conclusion on the applications of the UK Defendants has the corollary that the claimants are entitled to rely on Article 6.1 of Council Regulation EC No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters as founding jurisdiction against the Non-Domiciled Defendants. Accordingly, the alternative arguments in relation to the application of Article 5(3) do not arise. I see no reason to lengthen an already long judgment by expressing any view on the arguments advanced by counsel for the Non-Domiciled Defendants and the Claimants in relation to Article 5(3).
- For these reasons I dismiss the applications of the Non-Domiciled Defendants too.
Summary of conclusions
- For all these reasons I dismiss the various applications of all the defendants.
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