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You are here: BAILII >> Databases >> United Kingdom Competition Appeals Tribunal >> Baa Ltd v Competition Commission [2009] CAT 35 (21 December 2009) URL: https://www.bailii.org/uk/cases/CAT/2009/35.html Cite as: [2010] Comp AR 23, [2009] CAT 35 |
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Neutral citation [2009] CAT 35
IN THE COMPETITION
APPEAL TRIBUNAL
Case Number: 1110/6/8/09
Victoria House
Bloomsbury Place
London WC1A 2EB
21 December 2009
BETWEEN:
Applicant
Respondent
Intervener
Note: Excisions in this judgment marked "[…] [C]" relate to passages provisionally excluded having regard to Schedule 4, paragraph 1 to the Enterprise Act 2002
Mr. Nicholas Green QC and Mr. Mark Hoskins QC (instructed by Herbert Smith LLP and Freshfields Bruckhaus Deringer LLP) appeared on behalf of the Applicant.
Mr. John Swift QC, Mr. Paul Harris, Mr. Ben Rayment and Mr. Ewan West (instructed by the Treasury Solicitor) appeared on behalf of the Respondent.
Mr. Daniel Jowell and Miss Sarah Love (instructed by Nabarro LLP) appeared on behalf of the Intervener.
I. INTRODUCTION
II. STATUTORY FRAMEWORK
"...if it has reasonable grounds for suspecting that any feature or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of goods or services in the United Kingdom or a part of the United Kingdom."
"The Commission shall, on a market investigation reference, decide whether any feature, or combination of features, of a relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of goods or services in the United Kingdom or a part of the United Kingdom."
"For the purposes of this Part any reference to a feature of a market in the United Kingdom for goods or services shall be construed as a reference to -
(a) the structure of the market concerned or any aspect of that structure;
(b) any conduct (whether or not in the market concerned) of one or more than one person who supplies or acquires goods or services in the market concerned; or
(c) any conduct relating to the market concerned of customers of any person who supplies or acquires goods or services."
"(a) in the case of subsection (2) so far as it applies in connection with a possible
reference, a market in the United Kingdom—
(i) for goods or services of a description to be specified in the reference; and
(ii) which would not be excluded from investigation by virtue of section 133(2); and
(b) in any other case, a market in the United Kingdom—
(i) for goods or services of a description specified in the reference concerned;
and
(ii) which is not excluded from investigation by virtue of section 133(2)."
"For the purposes of this Part, in relation to a market investigation reference, there is an adverse effect on competition if any feature, or combination of features, of a relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of goods or services in the United Kingdom or a part of the United Kingdom."
"(a) whether action should be taken by it under section 138 for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition;
(b) whether it should recommend the taking of action by others for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition; and
(c) in either case, if action should be taken, what action should be taken and what is to be remedied, mitigated or prevented."
134(4) of the Act, the Commission:
"...shall, in particular, have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the adverse effect on competition concerned and any detrimental effects on customers so far as resulting from the adverse effect on competition."
detrimental effect:
"...on customers or future customers in the form of -
(a) higher prices, lower quality or less choice of goods or services in any market in the United Kingdom (whether or not the market to which the feature or features concerned relate); or
(b) less innovation in relation to such goods or services."
"(a) the decisions of the Commission on the questions which it is required to answer by virtue of section 134;
(b) its reasons for its decisions; and
(c) such information as the Commission considers appropriate for facilitating a proper understanding of those questions and of its reasons for its decisions."
"The Commission shall, in relation to each adverse effect on competition, take such action under section 159 or 161 as it considers to be reasonable and practicable—
(a) to remedy, mitigate or prevent the adverse effect on competition concerned;
and
(b) to remedy, mitigate or prevent any detrimental effects on customers so far as they have resulted from, or may be expected to result from, the adverse effect on competition."
"(3) The decision of the Commission under subsection (2) shall be consistent with its decisions as included in its report by virtue of section 134(4) unless there has been a material change of circumstances since the preparation of the report or the Commission otherwise has a special reason for deciding differently."
"179 Review of decisions under Part 4
(1) Any person aggrieved by a decision of the OFT, the appropriate Minister, the Secretary of State or the Commission in connection with a reference or possible reference under this Part may apply to the Competition Appeal Tribunal for a review of that decision.
(2) For this purpose "decision"—
(a) does not include a decision to impose a penalty under section 110(1) or (3) as applied by section 176; but
(b) includes a failure to take a decision permitted or required by this Part in connection with a reference or possible reference.
(3) Except in so far as a direction to the contrary is given by the Competition Appeal Tribunal, the effect of the decision is not suspended by reason of the making of the application.
(4) In determining such an application the Competition Appeal Tribunal shall apply the same principles as would be applied by a court on an application for judicial review.
(5) The Competition Appeal Tribunal may—
(a) dismiss the application or quash the whole or part of the decision to which it relates; and
(b) where it quashes the whole or part of that decision, refer the matter back to the original decision maker with a direction to reconsider and make a new decision in accordance with the ruling of the Competition Appeal Tribunal.
…"
III. THE FACTS
Background to the investigation
"We now think it is time to explore the potential for greater competition within the airport industry as this could ultimately yield significant benefits in terms of timely and adequate investment in UK airports, a better value service to the UK travelling public as well as potentially relieving the industry - and ultimately its customers - of the costs of regulation that may be disproportionate."
Appointment of members to the Investigation and disclosure of interests
"Professor Peter Moizer PhD FCA currently serves on the CC's Reporting Panel. He has been appointed to the CC's Reporting and Utilities Panels from 10 September 2005 until 9 September 2009. He is Professor of Accounting at Leeds University Business School, where he has been employed for the last 16 years. Prior to joining Leeds, he was a lecturer in accounting at the University of Manchester and before that, Assistant Audit Manager at Price Waterhouse. Peter has advised the DTI on issues related to the audit profession and has given strategic advice to the Greater Manchester Pension Fund on how to structure investments. He has sat on a number of committees of the Institute of Chartered Accountants in England and Wales. He is a co-founder of the European Auditing Research Network." (Tribunal's emphasis)
"Peter Moizer is one of the three strategic advisers to the Greater Manchester Pension Fund, dealing with long term funding issues, such as the balance between equity and bonds. External fund managers control the investments of the Pension Fund. Professor Moizer has no involvement in the share selection decisions of the Pension Fund and is unaware of the shares in which it invests. It is possible, however, that the Pension Fund may include investments the value of which could be affected by the outcome of the inquiry…
…The members mentioned above and the [Commission] do not believe that these matters will prejudice the ability of the Group to discharge its functions in an independent and impartial manner. In accordance with our normal practice, the substance of this letter will be placed on the [Commission's] website."
Disclosure by the Commission in 2002
"I was conscious that Manchester Airport was owned by the local councils comprising Greater Manchester, and that I advised the pension fund of those same councils, namely GMPF. Both 2002 Inquiries were concerned with the determination of the charges that could be directly levied by the respective airports. I had a connection to the owners of Manchester airport and I felt that the Commission should be given an opportunity to consider the connection."
"Understandably they revolved around the fact that the inquiry into Manchester airport's charges would determine a significant part of the airport's revenue for the next five years. Professor Moizer explained that as the advisor to a pension fund he advised the local authorities who, through a holding company, also owned Manchester airport. I concluded that had the question arisen the Commission would not have appointed Professor Moizer to the Manchester group. For the sake of consistency it seemed to me that he should not subsequently play a role in the proceedings of the Manchester group."
"Professor Peter Moizer is a member of the inquiry into the BAA Airports. I am writing to you about a financial interest that Professor Moizer has in one of the parties to the Manchester inquiry.
Professor Moizer is one of three external advisers to the Greater Manchester Pension Fund, which is a pooled investment vehicle with a value currently of over £6,000 million. His role is to give independent strategic advice on the management of the Fund's investments: he receives a fee for his advice on an ongoing basis. The Fund's administering authority is Tameside MBC. Employees of all local and joint authorities in the Greater Manchester area (apart from teachers, police officers and fire fighters) and of many other public bodies have automatic access to the Scheme. Employees of a wide range of other bodies providing public services can join the Scheme by means of admission agreements made between the body concerned and Tameside MBC. Consequently, as well as the ten local authorities in the Greater Manchester area, the scheme employers include five Greater Manchester joint authorities and over 100 other bodies. The ten local authorities within the Greater Manchester area are the shareholders of the Manchester Airport holding company.
An issue has arisen because it is planned that three joint meetings of the members of the Manchester and BAA inquiry groups will take place to consider primarily, but perhaps some other, issues common to both inquiries. There are also bilateral working groups between the two inquiries, and Professor Moizer has been a member of one of these groups. There is also a limited exchange of views between the two groups.
In order to ensure the independence and impartiality of the Manchester inquiry the Commission is taking the following steps:
- Professor Moizer should not participate in any joint meeting of the Manchester and BAA groups, or in any smaller bilateral group;
- His interest should be disclosed to the BAA and Manchester inquiry groups;
- Where the views of the BAA group reflect those of Professor Moizer in whole or in part, and are conveyed to the Manchester group, the Manchester group should be so advised; and
- The parties to the BAA and Manchester inquiries, and also third parties who have participated in the inquiries, should be advised of Professor Moizer's position and the steps that will be taken in relation to it.
In accordance with our usual practice a copy of this letter will be placed on our website.
I am copying this letter to those on the attached list"
The Fund and Professor Moizer
The Fund and MAG
MAG's participation in the Investigation
"MANCHESTER Airport bosses have London rival Gatwick firmly in their sights today as the break-up of BAA looms nearer.
…Now Manchester Airports Group, the country's second largest airports operator behind BAA, is lining up a bid if the Spanish-owned company is dismantled.
It already owns East Midlands, Bournemouth and Humberside Airports but would dearly love to add a London gateway to its portfolio.
Gatwick or Stansted would cost billions but MAG chiefs are willing to forge a partnership with private equity or other outfits, such as American investors or the Australian infrastructure and banking giant Macquarie, to achieve their goal.
Geoff Muirhead, chief executive of Manchester Airports Group, said today: "We have a strong track record when it comes to running airports - we have a lot of skilled people who have developed very good relationships with airlines and other partners.
"The group is interested in acquiring assets that will add value for our shareholders."
…BAA, which is owned by Ferrovial, could decide to press ahead with a break-up of its own accord before being ordered to do so by competition regulators, which would prevent a `fire sale' of its assets.
That could mean an announcement by the end of the year.
"It's a question of when, rather than if, this happens, and MAG has to be ready to act very quickly when the opportunity arises," said a group source.
"The group does not have the resources to buy Stansted or Gatwick in its own right, and linking up with another party looks the most sensible option.
"However that does not apply in Scotland, where Edinburgh or Glasgow are seen as the most likely to come on to the market."
"MAG, which is owned by the 10 local authorities of Greater Manchester, would be keen to bid alone for one of those and, with its current low levels of debt, sees no problem raising the finance."
The course of the Investigation and the marketing of Gatwick airport
"Manchester Airport Group, the largest UK-owned airports group, which is controlled by the 10 local authorities of Greater Manchester, said it had gained the backing of its shareholders to investigate bidding for BAA assets. A bid for Gatwick, the second largest UK airport, would only be mounted as part of a consortium, but a bid for Glasgow could be made alone."
"Thank you for the copy of the letter from BAA. My response would be as follows:
1. Professor Moizer provides strategic investment advice to the GMPF and continues to do so. The Fund uses external and internal fund managers and he gives advice to the trustees on the fund managers' performance. He does not comment on the choice of individual investments.
2. Professor Moizer made clear to the GMPF that should they have any interest in being part of a bid for Gatwick that he could not offer advice in relation to that bid and should receive no communication in relation to that bid. Hence, he was not aware the bid until it became known in the financial press.
He had had no communication with the GMPF in relation to this investment."
IV. FIRST GROUND: APPARENT BIAS
The issues
Apparent bias: BAA's submissions
(a) the Emerging Thinking report in April 2008, which made clear that the Commission was considering divestiture – a remedy which would clearly favour MAG and its shareholders (who were Professor Moizer's clients).
(b) the various ways in which MAG's interests showed themselves to be opposed to those of BAA, including: BAA's submission of evidence to the Commission to contradict MAG's contention about its neutral stance in other operators' planning applications; BAA's submissions to the Commission refuting the validity of unfavourable comparisons made by Professor Moizer and the Commission between its performance and that of MAG.
(c) the various press comments from March 2008 onwards about MAG's interest in buying Stansted or Gatwick or a Scottish airport to add value for its local authority shareholders.
(d) the fact that MAG was known to be preparing to act quickly in the event of a "fire sale" of BAA's assets – this being the phrase used in one of the press articles in March 2008.
(e) the fact that at about the same time as such press speculation the Fund was considering the setting up of an investment vehicle for rapid and opportunistic purchases, with the benefit of Professor Moizer's advice and approval.
(f) that although Professor Moizer states he was not aware at the time that the purpose of the vehicle was to carry the joint indicative bid for Gatwick, it was in fact used for that purpose.
(g) that by August 2008 the press were saying, in anticipation of the Commission's Provisional Findings report, that a break up of BAA's ownership of London and Scottish airports was expected and that MAG had gained the backing of their local authority shareholders to consider bidding for BAA assets, either alone or as part of a consortium.
(h) that MAG was also quoted in the press as saying that the prices being quoted for BAA airports were "far too high".
(i) that while all this was going on Professor Moizer, as a member of the Group, was involved in deciding whether divestiture of airports should be ordered, and if so what should be the purchaser suitability criteria, how many airports should be divested, over what timescale and with what sequencing etc., all of which are decisions capable of favouring MAG and its shareholders who were Professor Moizer's clients.
(j) that in September 2008 MAG itself was making submissions to the Commission about inter alia the nature of the purchaser suitability criteria.
(k) that once the sale of Gatwick was announced by BAA in September 2008 MAG pressed the Commission to require the appointment of a divestiture trustee to ensure that BAA would conduct the sale fairly.
(l) that at the meeting of the Fund on 21 November 2008 Professor Moizer advised and approved the adoption of a so-called "special opportunities portfolio" giving access at that time to about £400 million for investment, in the context of the need to be able to move quickly to acquire assets at distressed values.
(m) that MAG was seeking to interest the Fund in the Gatwick bid at the suggestion of one of their local authority shareholders, and that at the time of the meeting between the Fund and MAG on 26 November 2008, MAG and its consortium partner Borealis had been working on the project "for some time."
Apparent bias: the Commission's submissions
Apparent bias: Ryanair's submissions
Apparent bias: legal principles
"Appearance of bias
14. In his extempore judgment in R v Sussex Justices, Ex p McCarthy [1924] 1 KB 256, 259, Lord Hewart CJ enunciated one of the best known principles of English law:
"… it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done."
This principle was quoted with approval by the European Court of Human Rights in one of its very early decisions: Delcourt v Belgium (1970) 1 EHRR 355, 369, para 31. There is, as Lord Steyn on behalf of the House ruled in Lawal v Northern Spirit Ltd [2003] UKHL 35, [2003] ICR 856, para 14, now no difference between the common law test of bias and the requirement under article 6 of the European Convention of an independent and impartial tribunal. As Lord Hewart's aphorism recognises and later case law makes clear, justice is not done if the objective judgment of a judicial decision-maker (whether judge or juror) is shown to be vitiated by actual partiality or prejudice towards any of the parties. But actual bias, hard as it usually is to prove, is rarely alleged….
15.The test of apparent bias has been developed through a succession of cases. In R v Barnsley Licensing Justices, Ex p Barnsley and District Licensed Victuallers' Association [1960] 2 QB 167, 187, Devlin LJ recognised that "Bias is or may be an unconscious thing and a man may honestly say that he was not actually biased and did not allow his interest to affect his mind, although, nevertheless, he may have allowed it unconsciously to do so". Lord Denning MR, in Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577, 599, said:
"The court looks at the impression which would be given to other people. Even if he was as impartial as could be, nevertheless if right-minded persons would think that, in the circumstances, there was a real likelihood of bias on his part, then he should not sit. And if he does sit, his decision cannot stand…"
Lord Goff of Chieveley, in R v Gough [1993] AC 646, formulated the test of apparent bias in terms a little different from those now accepted, but echoed (at p 659) Devlin LJ's observation in the Barnsley Licensing Justices case in referring to "the simple fact that bias is such an insidious thing that, even though a person may in good faith believe that he was acting impartially, his mind may unconsciously be affected by bias . . .". Following the decision of the Court of Appeal in In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700, the accepted test is that laid down in Porter v Magill [2001] UKHL 67, [2002] 2 AC 357, para 103: "whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased". As the House pointed out in Lawal v Northern Spirit Ltd, above, para 14, "Public perception of the possibility of unconscious bias is the key", an observation endorsed by the Privy Council in Meerabux v Attorney General of Belize [2005] UKPC 12, [2005] 2 AC 513, para 22. The characteristics of the fair-minded and informed observer are now well understood: he must adopt a balanced approach and will be taken to be a reasonable member of the public, neither unduly complacent or naïve nor unduly cynical or suspicious: see Lawal v Northern Spirit Ltd, above, para 14; Johnson v Johnson (2000) 201 CLR 488, 509, para 53.
16.The analysis of the European Court in Strasbourg has been to distinguish between a subjective test, directed to identification of actual bias, and what it calls an objective test, directed to what in this country would be called apparent bias: see, for instance, Hauschildt v Denmark (1989) 12 EHRR 266, 279, paras 46-49. The court has not regarded a defendant's perceptions as decisive, but has required that his suspicions of bias be objectively justified. By this is meant that there must be some demonstrable and rational basis for what he suspects. The court has accepted that appearances are not without importance (see, for instance, Hauschildt, above, para 48)."
"The observer who is fair-minded is the sort of person who always reserves judgment on every point until she has seen and fully understood both sides of the argument. She is not unduly sensitive or suspicious, as Kirby J observed in Johnson v Johnson (2000) 201 CLR 488, 509, para 53. Her approach must not be confused with that of the person who has brought the complaint. The "real possibility" test ensures that there is this measure of detachment. The assumptions that the complainer makes are not to be attributed to the observer unless they can be justified objectively. But she is not complacent either. She knows that fairness requires that a judge must be, and must be seen to be, unbiased. She knows that judges, like anybody else, have their weaknesses. She will not shrink from the conclusion, if it can be justified objectively, that things that they have said or done or associations that they have formed may make it difficult for them to judge the case before them impartially." (paragraph 2)
"The Court must first ascertain all the circumstances which have a bearing on the suggestion that the Judge was biased…." (paragraph 86)
"Where that explanation is accepted by the applicant for review it can be treated as accurate. Where it is not accepted, it becomes one further matter to be considered from the viewpoint of the fair-minded observer. The Court does not have to rule whether the explanation should be accepted or rejected. Rather it has to decide whether or not the fair-minded observer would consider that there was a real danger of bias notwithstanding the explanation advanced." (paragraphs 83 to 86 of the judgment)
"Nor will the reviewing court pay attention to any statement by the judge concerning the impact of any knowledge on his mind or his decision: the insidious nature of bias makes such a statement of little value…"
"an approach which is based on broad common sense, without inappropriate reliance on special knowledge, the minutiae of court procedure or other matters outside the ken of the ordinary, reasonably well informed member of the public.." (Locabail, paragraph 17)
The Commission's guidance on conflict of interest
"A conflict of private interest (or duty) and public duty arises where a member has any interest which might influence, or be perceived as being capable of influencing, his or her judgement even unconsciously….
The Commission must be seen to be above suspicion". (paragraph 1)
"Members should disclose to the Chief Executive any interest which might give rise to a conflict when the prospect of their serving on a group dealing with a reference is first raised. Similarly, such interests which emerge during the course of an investigation should be disclosed immediately." (paragraph 4)
Automatic disqualification
Apparent bias: the Tribunal's conclusions
(a) that Professor Moizer, as a chartered accountant and professor of accounting, and having sat on other Commission inquiries, was well aware of the importance of impartiality, and of the public perception of impartiality, on the part the members of the Group;
(b) that the Fund has no separate corporate identity; it sits within the ten local authorities making up Greater Manchester, one of which (Tameside MBC) has had delegated to it the role of administering the Fund; there is further delegation of the Fund's management to the Management Panel made up of councillors from the same ten local authorities; this Panel, which has duties equivalent to those of a pension fund trustee, is assisted by the Advisory Panel; day to day administration is carried out by a Director of Pensions;
(c) that the administrators of the Fund are subject to rules and fiduciary duties which require them to have regard to the suitability and diversification of investments and to take proper advice in relation to investment decisions;
(d) that Professor Moizer has been a fee-paid adviser to the Fund continuously since about 1987, attending quarterly joint meetings of the Management and Advisory Panels, and giving advice at other times as and when required, sometimes frequently; that his advice and comments are sought on whatever issues happen to arise, and would be sought on an investment such as Gatwick "as a matter of course"; that Professor Moizer is very well regarded by those whom he advises at the Fund; he is trusted and highly influential, a "wise man"; his influence is such that he has virtually a power of veto over a proposed investment; his role is effectively at "officer" level in the Fund;
(e) that for many years the same ten local authorities have also owned all the shares in MAG, which owns and operates Manchester airport and certain other UK airports; that between them these ten local authorities appoint two members to the board of MAG from among their councillors; that the local authorities also exercise control over MAG's business through a shareholder committee, which can constrain the acquisition of assets and the making of other transactions by MAG, and which receives regular reports from MAG's board on its business plans, investments and financial results; that there are other connections between MAG and the Fund or between MAG and its local authority owners, including: the grant of dividends by MAG to its shareholders, substantial lending to MAG by at least one of the shareholders, and substantial pension contributions by MAG to the Fund (circa £250 million);
(f) that the connection between the Fund and MAG is sufficiently close that it could lead the Fund to make a type of investment it would otherwise be highly unlikely to make;
(g) that in 2002 the Commission's legal adviser considered that Professor Moizer's links with MAG, through its local authority owners, were such that the Commission would not have appointed him to the 2002 Manchester QR whose decisions would affect a significant part of the revenue of Manchester airport for the following five years; and that therefore he should not be put in a position where it would be possible for him through joint meetings between the two 2002 inquiry groups, indirectly to influence the outcome of the inquiry which concerned MAG;
(h) that in 2002 Professor Moizer himself had been sufficiently concerned about his links with MAG to raise the issue with the Commission at that time;
(i) that in making the reference to the Commission in March 2007 the OFT had limited the scope of that reference so as to require the Commission to focus on BAA and the airport services it supplied in the UK; that the OFT had identified BAA's common ownership of Heathrow, Gatwick and Stansted in England, as well as of Glasgow and Edinburgh in Scotland, as being a likely cause of adverse effects on competition and on airline customers and consumers who used BAA's airports; and that the OFT had expressly envisaged divestiture of BAA's airports as a possible outcome of the Investigation;
(j) that as a large airport operator with a number of UK airports to its name MAG and all other airport operators in the UK, and even beyond, could be regarded at least to some extent as competitors.
Waiver: the Commission's submissions
"The vital requirements are that the party waiving should be aware of all the material facts, of the consequences of the choice open to him, and given a fair opportunity to reach an unpressured decision."
Waiver: Ryanair's submissions
Waiver: BAA submissions
Waiver: legal principles
"In most litigious situations the expression 'waiver' is used to describe voluntary, informed and unequivocal election by a party not to claim a right or raise an objection which it is open to that party to claim or raise. In the context of entitlement to a fair hearing by an independent and impartial tribunal, such is in my opinion the meaning to be given to the expression."
"(iv) A full explanation must be given to the parties. That explanation should detail exactly what matters are within the judge's knowledge which give rise to a possible conflict of interest. The judge must be punctilious in setting out all material matters known to him. …
(v) The options open to the parties should be explained in detail. Those options are, of course, to consent to the judge hearing the matter, the consequence being that the parties will thereafter be likely to be held to have lost their right to object. The other option is to apply to the judge to recuse himself. The parties should be told it is their right to object, that the court will not take it amiss if the right is exercised and that the judge will decide having heard the submissions. They should be told what will happen next. If the court decides the case can proceed, it will proceed. If on the other hand the judge decides he will have to stand down, the parties should be told in advance of the likely dates on which the matter may be re-listed.
(vi) The parties should always be told that time will be afforded to reflect before electing. That should be made clear even where both parties are represented…"
"Waiver would never operate if "full facts" meant each and every detail of factual information which diligent digging can produce. Full facts relevant to the decision to be taken must be confined to the essential facts. What is important is that the litigant should understand the nature of the case rather than the detail. It is sufficient if there is disclosed to him all he needs to know which is invariably different from all he wants to know…"
"When an application like the present is made it is necessary for the applicant to satisfy the court that he had no knowledge of the point at the time when it might have been raised."
"This special remedy [ie certiorari] will not be granted ex debito justitiae to a person who fails to state in his evidence on moving for the rule nisi that at the time of the proceedings impugned he was unaware of the facts on which he relies to impugn them. By failing so to do a party grieved precludes himself from the right to have the writ ex debito justitiae and reduces his position to that of one of the public having no particular interest in the matter. To such a one the granting of the writ is discretionary."
"Mr. Batt suggested that once an irregularity was established, the onus was on the respondent to prove waiver or election or other conduct disentitling the applicant to relief… I doubt if Mr. Batt's analysis as to the onus of proof is the correct analysis. I think the ultimate question is whether on the whole of the facts the applicant is entitled to certiorari, and I think this is particularly true where the challenge to the order is based on an allegation of a denial of natural justice. In such a situation the Court might well look to the overall question of the justice of the whole situation."
Waiver: the Tribunal's conclusions
Impact on co-decision-makers: submissions of the Commission
Impact on co-decision-makers: submissions of Ryanair
"I am unable to accept that there is an invariable rule, or it is necessarily the case, that where one member of a tribunal is tainted by apparent bias the whole tribunal is affected second-hand by apparent bias, and therefore should recuse themselves, or should be excluded, from the proceedings. After all, it is common practice when a juror has to be discharged (for example, because he or she recognises a witness) for the judge to consider whether there is a risk of "contamination" of other jurors, and if there is no reason to think that there is, to continue the trial with the remaining jurors…
…I reject the suggestion that it follows from the authorities cited…or it follows as a matter of law from the finding of apparent bias on the part of [one member of the arbitral tribunal] that the whole of the arbitral tribunal and each member of it are tainted by apparent bias. The enquiry depends upon the particular facts of the case." (Paragraphs 44 and 46 of the Judgment)
Impact of apparent bias on co-decision-makers: submissions of BAA
Impact on co-decision-makers: legal principles
"…it seems clear to me both as a matter of principle and authority that once proceedings have been successfully impugned for want of independence and impartiality on the part of the tribunal, the decision itself must necessarily be regarded as tainted by unfairness and so cannot be permitted to stand."
"…The trial had reached an advanced stage by the time that it was interrupted by the appellants' application. Dr Rowlatt must have discussed the economic issues with the other members of the court. We concluded that it was inevitable that the decision that Dr Rowlatt should be disqualified carried with it the consequence that the other two members of the court should stand down."
Impact on co-decision-makers: the Tribunal's conclusions
(a) Professor Moizer was selected as a member of the Group in the light of his previous experience in the 2002 BAA QR. As Mr. Clarke explains in his witness statement "I valued his contribution for his grasp of the issues and for his expertise and sound judgment in our decision making." Indeed Mr. Clarke valued his contribution so highly that even after the Fund's participation in the Gatwick bid was known and some steps had been taken to isolate Professor Moizer from issues relating to that bid, Mr. Clarke persuaded the Commission not to stand him down immediately, but to allow him to continue until 3 March so that he could comment on draft regulatory proposals. (In the event he did not comment on them.)
(b) Professor Moizer had from the outset of the Investigation been in a position to exercise his influence over the Group's thinking and decision-making in the course of numerous Group meetings and discussions.
(c) In relation to the period after he had become aware of the Fund's participation in the Gatwick bid, there was some limited quarantining from discussion of matters relating to the bid; this was implemented from 20 January 2009. However by this time seven weeks or so had passed since the telephone call on 2 December alerting Professor Moizer to the Fund's involvement. Further, apart from that quarantining he continued to be active as a Group member until 17 February 2009. For example, he attended meetings of the Group on 9, and 14 January 2009 and 3, 11, and 17 February 2009. He cross-questioned BAA at a meeting with the company on 20 January 2009. He continued to receive documents relating to the Investigation.
(d) As Mr. Clarke also states, there had been a consistent chain of thinking and decision making through the Emerging Thinking report in April 2008 and the Provisional Findings report in August 2008, and the divestment of airports including Gatwick had been envisaged "long before" the Group and Professor Moizer knew of the Fund's participation in a bid.
The time bar point
"(1) Any person aggrieved by a decision of...the Commission in connection with a reference or possible reference under this Part may apply to the Competition Appeal Tribunal for a review of that decision
(2) For this purpose "decision"... (b) includes a failure to take a decision permitted or required by this Part in connection with a reference or possible reference."
"must be made within two months of the date on which the applicant was notified of the disputed decision, or the date of publication of the decision, whichever is the earlier."
Ground 1: Conclusion
V. SECOND GROUND: PROPORTIONALITY
The issue
The Commission's consideration of remedies and their timing
Considerations on timing
10.156 In determining an appropriate divestiture period, the CC seeks to find an appropriate balance between factors that would favour rapid disposal and factors that favour slower divestiture. The former include addressing the AEC promptly and avoiding deterioration of the business. The latter include providing sufficient time to attract and retain suitable purchasers to the divestiture.
10.157 BAA, in responding to our Remedies Notice and provisional decision on remedies, considered that it should be allowed to take longer than the standard period of six months to complete the divestiture process as, among other factors, separating airports from group linkages would take time and there was no need to stipulate a short divestiture period to mitigate the risk of degradation to assets. BAA noted that 'specifying a shorter divestiture period than twelve months at the outset, or requiring the divestments to be carried out concurrently, would create risks for the divestment process that could have a significant impact on the value achieved from the disposals', although it acknowledged that divestment could be achieved on a more rapid time-scale. In fact, BAA had itself decided to accelerate the divestiture of Gatwick so that it would take seven months to agree a sale if this went according to plan, although prospective purchasers thought that this was unrealistic. BAA indicated to us that this had been prompted by [..].
10.162 On the basis of the evidence set out above, we have decided that a divestiture period of [..], on a stand-alone basis, is appropriate, including a preliminary period of up to [..] prior to the issue of an information memorandum. In the case of Gatwick, given that it is the first of BAA's three airports to be divested, we have decided to allow BAA [..] months to complete divestiture, on top of the stand-alone period of [..], from the time of the announcement of its sale by BAA (17 September 2008).
"10.178 BAA was particularly concerned [..]. MAG considered that a sequential divestiture process would be preferable to the concurrent sale of several BAA airports, as bidders might have a limited ability to mount effective bids simultaneously and capital availability in the current market was restricted. In its view, sequential sales would ensure the most effective bids and most competitive process.
10.179 We recognize that the simultaneous marketing of BAA airports might, in current market conditions, constrain the opportunity to sell to a suitable purchaser and restrict prospective proceeds. However, we consider that the marketing of one airport can overlap with preliminary preparations for the sale of another airport without impacting the pool of purchasers or the prospective proceeds.
10.180 While maximizing proceeds may be the principal objective of BAA, our objective is to achieve a comprehensive remedy to the AECs we have found, while having regard to the principle of proportionality.
10.181 We have therefore decided to permit the sequential marketing of the divestiture air-ports, with an overlap of [..], during which preliminary preparations for the sale of the next airport can be carried out."
Decision on the timing of the divestments
10.182 As noted elsewhere, the sale of Gatwick is under way. We consider that Stansted airport should be divested before Edinburgh or Glasgow, due to its relative scale and importance in addressing the AECs and detriments we have found and in the interests of resolving uncertainty with respect to the SG2 planning inquiry so as to facilitate the development of new capacity as soon as it may be required.
10.183 Therefore, after taking account of the various factors considered above, we have decided that:
(a) the sale of Gatwick should be completed [..] after BAA's announcement on 17 September 2008;
(b) the sale of Stansted should be completed [..] after acceptance of undertakings or [..] after publication of this report, whichever is earlier;
(c) the sale of Glasgow or Edinburgh should be initiated no later than [..] prior to the end of the period permitted for the divestiture of Stansted; and
(d) the sale of Glasgow or Edinburgh should be completed no later than [..] after the completion of the sale of Stansted.
10.184 The above requirements would imply, in the absence of any permitted delays, that the sale of Gatwick should be followed by that of Stansted; and that BAA should complete the sale of Gatwick no later than [..], Stansted no later than [..] and either Edinburgh or Glasgow no later than [..]. So as not to prejudice an effective sales process, these dates are not being published, but the end date is less than two years from the date of this report. This would mean that each of Gatwick, Stansted and either Edinburgh or Glasgow would have been divested, and be under separate ownership from BAA's other airports, within [..] months from the date of this report and [..] months from the date when BAA announced the sale of Gatwick. This time-table may be subject to revision by the CC, should a material change in circumstances make it appropriate.
BAA's submissions
"In determining what factors are important the Commission will carry out an investigation. Where the investigation must as a matter of necessity be an inquiry made of the party on whom it is proposed that a remedy should fall the Commission is obviously dependent in large measure on material submitted by the party. At no stage in the Inquiry did BAA suggest or volunteer a quantitative assessment of how disposal proceeds might vary on different assumptions of timing or sequence of divestiture. This omission is not surprising because, given market uncertainties and limitations of empirical evidence with regard to such circumstances, such an analysis would be highly speculative and unreliable. In the light of BAA's conduct and these circumstances, the Commission was perfectly entitled not to examine whether the timing of the three divestments would lead to loss of value to BAA in the manner that BAA now alleges, far less that it should carry out a quantitative assessment of that supposed loss. The fact that BAA never raised the issue strongly suggests that quantitative assessment was not an issue for BAA at the time and that it is an after-the-event construct for the purposes of the current challenge."
The Commission's submissions
(a) that separating the airports from group linkages would take a long time;
(b) that there was no reason to stipulate a short divestiture period to mitigate the risk of degradation of assets;
(c) that a period of shorter than […] [C] or requiring […] [C] would create risks that could have a significant impact on the value achieved through the disposals;
(d) that divestment could, however, be achieved more quickly than this (Report, paragraph 10.157).
"Uncertainty around market conditions indicates that the Commission should take a flexible approach to extending the divestment period if this becomes necessary. BAA would expect the Commission's decision on such issues to be informed by advice from the monitoring trustee concerning BAA's conduct of the sales process. BAA would expect the Commission to exercise such powers to extend the first divestment period where the sale process had been run efficiently but had been slowed down by external factors such as economic conditions, rather than factors under BAA's reasonable control".
"This timetable may be subject to revision by the CC, should a material change in circumstances make it appropriate."
Ryanair's submissions
The Tribunal's discussion and conclusions
"135. The Commission accepts that any remedies which it recommends or adopts must satisfy proportionality principles (paragraph 4.9 of the Commission Guidelines). We agree with the Commission that consideration of the proportionality of a remedy cannot be divorced from the statutory context and framework under which that remedy is being imposed. The governing legislation must be the starting point. Thus the Commission will consider the proportionality of a particular remedy as part and parcel of answering the statutory questions of whether to recommend (or itself take) a measure to remedy, mitigate or prevent the AEC and its detrimental effects on customers, and if so what measure, having regard to the need to achieve as comprehensive a solution to the AEC and its effects as is reasonable and practicable.
136. A useful summary of the proportionality principles is contained in the following passage from the judgment of the ECJ in Case C-331/88 R v Ministry of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte Fedesa [1990] ECR I-4023, paragraph [13], to which we were referred by the Commission:
"By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued".
137. That passage identifies the main aspects of the principles. These are that the measure: (1) must be effective to achieve the legitimate aim in question (appropriate), (2) must be no more onerous than is required to achieve that aim (necessary), (3) must be the least onerous, if there is a choice of equally effective measures, and (4) in any event must not produce adverse effects which are disproportionate to the aim pursued.
138. The first thing to note is that the application of these principles is not an exact science: many questions of judgment and appraisal are likely to arise at each stage of the Commission's consideration of these matters. This is perhaps most obviously the case when it comes to the balancing exercise between the (achievable) aims of the proposed measure on the one side, and any adverse effects it may produce on the other side. In resolving these questions the Commission clearly has a wide margin of appreciation, with the exercise of which a court will be very slow to interfere in an application for judicial review.
139. That margin of appreciation extends to the methodology which the Commission decides to use in order to investigate and estimate the various factors which fall to be considered in a proportionality analysis (and indeed in its determination of the statutory questions of comprehensiveness, reasonableness and practicability). There is nothing in the governing legislation, or in the general law, which requires the Commission to follow any particular formal procedure or methodology when it comes to consider the effectiveness of a possible remedy, or its relevant costs, adverse effects and benefits. … The Commission can tailor its investigation of any specific factor to the circumstances of the case and follow such procedures as it considers appropriate. … Ultimately the Commission must do what is necessary to put itself into a position properly to decide the statutory questions. As the Commission itself accepts, this includes examining and taking account of relevant considerations, such as the effectiveness of the remedy, the time period within which it will achieve its aim, and the extent of any adverse effects that may flow from its implementation."
"79. It is also common ground that when considering Tesco's challenge the Report should be read as a whole and should not be analysed as if it were a statute. In its Defence the Commission referred to R v MMC ex parte National House Building Council [1993] E.C.C. 388 in which Auld J (as he then was) (upheld on appeal: [1995] E.C.C. 89) after confirming the fact that reports prepared by the former Monopolies and Mergers Commission are susceptible of judicial review, held:
"…the Court in the exercise of this jurisdiction, as in its exercise in other contexts, must take care not to subject the [Commission's] Report to fine textual or legal analysis as if it were a statute or other legal document. I respectfully adopt the words of Hodgson J about this in R v MMC ex parte Visa International Service [1991] ECC 291 … "…the Report must not be read as if it were a statute or a judgment … It should be read in a generous not restrictive way and the Court should be slow to disable the MMC from recommending action considered to be in the public interest or to prevent the [Secretary of State] from acting thereon unless perceived errors of law are both material and substantial"" (at p.398).
80. Whilst the Act sets up a different legal framework from that which existed under the Fair Trading Act 1973 (the Commission is here required to answer specific questions pursuant to a structured statutory scheme, and expressly to decide, amongst other matters, whether to take or to recommend remedial action in respect of any AEC identified) we agree with the Commission that those observations are also applicable to a case such as the present. As the Commission said in the Defence
"applying the forensic magnifying glass only to particular parts of the analysis fails to do justice to the overall appraisal and assessment made by the Commission" (paragraph 37)."
"10.156 In determining an appropriate divestiture period, the CC seeks to find an appropriate balance between factors that would favour rapid disposal and factors that favour slower divestiture. The former include addressing the AEC promptly and avoiding deterioration of the business. The latter include providing sufficient time to attract and retain suitable purchasers to the divestiture."
"… that the simultaneous marketing of BAA airports might, in current market conditions, constrain the opportunity to sell to a suitable purchaser and restrict prospective proceeds. However, we consider that the marketing of one airport can overlap with preliminary preparations for the sale of another airport without impacting the pool of purchasers or the prospective proceeds."
VI. CONCLUSION AND RELIEF
Ground 1: apparent bias
Ground 2: proportionality
The President |
Lord Carlile |
Sheila Hewitt |
Charles Dhanowa Registrar |
Date: 21 December 2009 |