In this article, Chris Owen and Duncan Green reflect on the High Court's preliminary judgment in Deutsche Bahn v MasterCard. The judgment considers which laws should apply to a multi-jurisdictional competition damages action.
The latest judgment in the interchange fee saga is an important one. In Deutsche Bahn v MasterCard, Justice Barling has considered applicable law in the context of pan-European damages claims traversing periods covered by three legal regimens: Rome II, PILA and the common law. PILA in particular is famously difficult to apply to multi-jurisdictional competition damages actions and Justice Barling’s judgment offers welcome guidance in this area.
Justice Barling is something of an interchange fee veteran. Wearing a "Chairman of the Competition Appeal Tribunal" hat in 2016, he awarded Sainsbury’s c.£69m in damages as a result of (he considered) MasterCard’s setting of multilateral interchange fees (MIFs) at unlawful levels (see our previous articles on the topic here and here ). That judgment, together with two High Court judgments stemming from similar facts, is due to be considered by the Court of Appeal later this month.
In Deutsche Bahn v MasterCard Justice Barling is faced with a more complicated jurisdictional picture. Whereas MIFs cases decided to date have related to credit card transactions in the UK and Ireland only, the Deutsche Bahn claim is comprised of 1,300 retailers, from seven corporate groups, operating across seventeen EEA countries plus Switzerland. Each entity claims to have suffered loss in the form of overcharges in fees paid to banks, arising from the level at which MIFs were set within the MasterCard scheme. The question of applicable law is crucial to those claims, not least as it goes to determining which rules relating to limitation shall apply. The claimants seek damages for losses stretching-back to 1992.
MIFs are essentially the main component of charges imposed on a merchant in processing a debit or credit card transaction. More detail on interchange fees and the background to the litigation can be found in our previous articles.
The claim periods
It was common ground that the applicable law(s) must be determined separately in respect of the following three periods:
- for 22 May 1992 to 30 April 1996, English common law
- for 01 May 1996 to 10 January 2009, the Private International Law (Miscellaneous Provisions) Act 1995 (PILA)
- for 11 January 2009 to date, Regulation 864/2007/EC (Rome II).
To complicate matters further, the claims really fall within three separate categories: (a) claims based on the EEA MIF; (b) claims based on domestic MIFs; and (c) claims based on the Central Acquiring Rule.
In the interest of efficiency, the preliminary question of applicable law was considered in respect of four "test" jurisdictions: the UK, Germany, Poland and Italy. The claimants hoped to convince the Court that Belgian law should be applied to the entire claim for the period up to 11 January 2009. The application of Belgian rules on limitation would be advantageous to the claimants. The defendants on the other hand argued that the applicable law for each period should be that of the country in which a particular merchant (claimant) was based - so eighteen different national laws should be applied to separate elements of the claim.
Rome II (11 January 2009 to date)
There was no real issue for the Court to determine as regards applicable law under the Rome II regime. The parties agreed that the governing provision was Article 6(3). Article 6(3)(a) provides that “the law applicable to a non-contractual obligation arising out of a restriction of competition shall be the law of the country where the market is, or is likely to be, affected”. On the facts of this case, the parties agreed that that "country" would be the one in which a merchant was based at the time of a relevant transaction.
PILA (01 May 1996 to 10 January 2009)
Section 11(2)(c) PILA provides that where events constituting a tort have elements occurring in different countries, the applicable law is taken as being “the law of the country in which the most significant event or elements of those events occurred” . To determine this country, Justice Barling held that the Court should perform three exercises: (a) identify all the (English law) elements of the events constituting the alleged tort; (b) identify the countries in which those elements and/or events took place; and (c) decide in which country the most significant element(s) occurred.
Justice Barling identified three "elements" of the event constituting the tort: (a) the adoption of the relevant MIFs by means of a decision by an association of undertakings; (b) the decision having the object or effect of restricting competition within the EU; (c) loss/damage being suffered by the claimant.
The claimants argued that Belgian law should prevail, being the country where decisions were taken in respect of the MasterCard scheme. The taking of MIF-setting decisions, they said, set the ball rolling for any resulting restriction on competition and was, as such, the most significant event of the tort.
The defendants disputed whether all relevant decisions were, in fact, taken in Belgium, but ultimately this was not relevant to the Court’s finding as Justice Barling held that the restriction of competition on the market was the most significant element of the tort. In reaching this conclusion Justice Barling referred to the aim of Article 101 (and its domestic equivalents) as being the protection of the competitive process, the corollary of this being that the distortion of competition lay at the heart of the tort. In this case the "restriction" was felt wherever a merchant was based at a time of a relevant transaction. That the loss suffered may also have occurred in that place simply reinforced Justice Barling’s view, though he thought it of less significance. Justice Barling also dismissed the claimants’ arguments that the general rule under Section 11 PILA should be displaced in favour of any "substantially more appropriate" country, per Section 12 PILA.
English common law (22 May 1992 to 30 April 1996)
A substantial portion of the judgment is devoted to a detailed discussion of whether, and if so how, the "double actionability" rule under common law should be applied. The rule requires that a tort be actionable under both English law (the law of the Court) and the law of the place where harm was done, to give rise to a cause of action. The problem for the claimants was that if both English law and a foreign law applied (the claimants hoped Belgian), then both countries’ rules on limitations must be satisfied – so the shorter limitation period would prevail.
In determining the place where harm was suffered, Justice Barling referred back to his analysis in respect of PILA: this was to be wherever the relevant merchant was based when accepting a card payment. Having decided that this place was not Belgium (save for where merchants themselves were based in Belgium), the point was of less consequence. In any case, Justice Barling held that where the double actionability principle was engaged, the claim would indeed be subject to both English and the relevant foreign limitations rules.
The judgment canvasses various interesting issues, but the conclusions that are most likely to have practical impact upon future competition damages claims are those reached in respect of the application of PILA. On the one hand, Justice Barling stressed that a court must make a "value judgement" as to the significance of the relevant events/elements in light of the facts of the particular case – and this judgement can vary from case to case, even in respect of the same tort. Different facts could lead to a different outcome. Notably, it was not alleged that the act of setting MIFs is inherently unlawful, only the level at which they were set. And in this case the place at which decisions were taken was merely "fortuitous". A court might see things differently, for example, when considering a more classic price-fixing infringement, where the very act of making an agreement between competitors is a clear violation of competition laws.
However, Justice Barling’s comments as to the "restriction of competition on the market" lying at the core of Article 101 are forceful. In spite of the requirement for a "fact specific" analysis, the principle could potentially be applied in respect of any damages actions founded upon an allegedly anti-competitive agreement / concerted practice. While the judgment gives some clarity as to how applicable law(s) governing a competition damages action should be determined, the practical result is often likely to be that several different laws will apply to a single claim (where the cause of action arises between 1996 and 2009). This is particularly true in respect of global cartels, which may be orchestrated from one location, but take effect in multiple markets worldwide. That said, Deutche Bahn have appealed the judgment so the principles articulated in it remain subject to approval or disapproval by the UK’s appellate courts.
MIFs litigation continues to create a bedrock of legal principles to govern the increasing number of competition damages actions. It will be interesting to follow the Deutsche Bahn action further as it moves towards consideration of liability (if it gets that far). First though attention will turn to the Court of Appeal’s hearing, this month, of the MIFs cases in which first instance decisions as to liability have been made so far.
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