Regulations implementing the EU Damages Directive in the UK are now in force.
On 09 March, the claims in respect of loss or damage arising from Competition Infringements (Competitions Act 1998 and Other Enactments (Amendment) Regulations 2017 (SI/2017/385) (the Regulations) came into force. The Regulations retrospectively transpose the EU Damages Directive (Directive 2014/104/EU) into UK law, by way of amendment to the Competition Act 1998.
Changes to existing UK law
The UK Government stated that it considered UK domestic legislation on competition damages actions already to be broadly in line with the Damages Directive. Despite this, the Regulations do make a number of changes to the existing rules in the UK.
The Regulations do not change the general limitation periods in the UK and Scotland (six years for the UK other than Scotland, five years for Scotland). Instead, the Regulations set out separate limitation provisions for competition actions. Under the Regulations (and as set out in the Damages Directive), the date on which the limitation or prescriptive period for a competition claim against an infringer commences will be the later of::
- the day on which the infringement of competition law which is the subject of the claim ceases, or
- the day on which the claimant either knows or could reasonably be expected to know of the infringement (that is, the claimant is aware of the infringer and his/her behaviour, that it constitutes a breach of competition law, and that the claimant has suffered loss or damage as a result of the infringement).
If an investigation is undertaken by a competition authority (in the UK or elsewhere in the EU) the limitation period is to be suspended from the date the investigation commences, up until one year following the end of an investigation. The limitation period can also be suspended indefinitely as a consequence of instigating a consensual dispute resolution process between the parties. This suspension can be brought to an end when either the claimant or the defendant notifies the other that it has withdrawn from the process.
The Regulations impose limits on the UK courts’ approach to disclosure. For example, cartel leniency statements and settlement submissions that were not withdrawn (or documents referring to them) cannot be the subject of a judge’s disclosure order in an antitrust damages action.
Additionally, new rules regarding the admissibility of evidence into competition proceedings have also been introduced. For example, the competition authority’s files are not admissible in evidence in proceedings before the competition authority has closed the investigation to which those files relate. Any documents obtained from a competition authority’s file are admissible only where the proceedings relate (entirely or in part) to a competition claim made by a person who has a right to make a claim.
Joint and several liability
The principle of joint and several liability is established in UK law. Under this, a claimant is able to seek full compensation from any one or subset of the infringers and the defendant who has paid damages to the claimant must pursue other infringers for contribution, to the extent that others are responsible for the loss. However, the Regulations contain exceptions to this principle:
- SMEs: The Regulations offer small and medium-sized enterprises (SMEs) an exemption so that an SME is only liable for its own direct and indirect sales. For the exemption to apply, the SME must have acted alongside one or more other undertakings and have a market share of less than 5%. However, the exemption will not apply where the SME led the infringement, coerced one or more of the other undertakings to participate, or the undertaking has previously been found to have infringed competition law.
- Immunity applicants: Companies that have been granted immunity under European Commission or national leniency programmes will not be jointly and severally liable for the whole harm caused by the cartel, meaning that they are only liable for loss concerning their own sales. However, there are a number of exceptions to this. The applicant will be liable if a person acquired a product or service that was the object of the cartel infringement (including if the relevant item was contained or derived from a product or service that was the object of a cartel infringement), in other words, the sales made by the immunity applicant. The applicant will also be liable if the claimant is unable to obtain full compensation for the loss or damage from other undertakings involved in the cartel infringement.
Changes that go beyond the requirements of the Damages Directive
For the most part, the Regulations reflect the UK government’s stated approach of ‘copying out’ the Damages Directive. However, in some circumstances, it has chosen to go beyond what is required in the Damages Directive and also address elements the Damages Directive does not cover.
The Damages Directive is drafted to apply in relation to claims made relating to a breach of EU competition law (and corresponding national law). The Regulations make it clear that the new provisions will also apply to those claims which are only made under UK competition law. This creates a simpler regime for claimants, but does increase the potential pool of claims that can be made.
Application of transitional and procedural provisions
The Damages Directive specified that "substantive" provisions of the Damages Directive should not be applied retroactively, whereas "procedural" provisions can. The Regulations make this distinction through Part 10 of the new Schedule 8A, which specifies that:
- Substantive provisions (Parts 2 to 5, 8 and 9 of Schedule 8A): apply in relation to claims brought where the infringement occurred and the loss was suffered by the claimant on or after the day the Regulations come into force.
- Procedural provisions (Paragraphs 4(7) and (8) and 5(3) and (4) and Parts 6 and 7): apply in relation to claims brought after the Regulations came into force.
The Regulations confirm that all references to a "competition authority" also include decisions made by concurrent regulators. In the UK, for instance, this would cover an infringement decision issued by the Financial Conduct Authority under its competition powers.
What is next?
Although the implementation deadline was missed by the UK, the additional time has resulted in some helpful clarifications to the original suggestions put forward by the UK government eg the single regime for claims made under breaches of EU and UK competition prohibition. In any case, other jurisdictions have also experienced similar delays - Ireland implemented the Damages Directive in February and France did so in March.
The UK should also not expect to see the substantive rules of the Regulations being applied in the near future. The provisions on limitation mean that the substantive provisions of the Regulations will likely not take hold for several years, given the average length of delay between the beginning of a cartel and a finding by a competition authority that an infringement has occurred. Many cartels remain undetected for several years and a competition authority investigation will also add years on top of this.
Please also see our analysis of the Regulations actually implementing the Damages Directive in the UK.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.