The Vattenfall jurisdiction decision: Watt’s it all about?

On 04 July 2018, the English High Court handed down its judgment in Vattenfall AB and others v Prysmian SPA and others [2018] EWHC 1694 (Ch).

The court rejected a challenge to jurisdiction by companies within the NKT and Prysmian groups (the “Defendants”), producers of submarine and underground power cables based in Europe. The jurisdiction challenge related to competition claims brought against the Defendants by Swedish power company, Vattenfall and others.

In summary, the court reconfirmed that a UK domiciled company, which is not an addressee of a Commission Decision on anticompetitive conduct, can nevertheless be used to anchor a claim in the English court and thus bring in non-UK domiciled defendants (who are addressees), where it can be shown that the UK anchor knowingly implemented the cartel.

Background

On 02 April 2014, the European Commission (the Commission) found that NKT and Prysmian (as well as nine other producers of high voltage underground and submarine power cables) had been party to an illegal global market sharing cartel between 1999 and 2009.

In the Commission’s decision (the “Decision”), it named multiple entities within the corporate groups of the producers which were found to have “participated in a network of multilateral and bilateral meetings and contacts aimed at restricting competition” by:

• using such meetings to agree on market and customer allocation, predominantly on a territorial basis, to distort the normal competitive process
• exchanging information on prices to ensure that the designated supplier for a given pitch submitted an offer with the lowest price, whilst the other producers in the cartel would submit higher or unattractive bids in tandem, and
• collectively refusing to supply accessories or technical assistance to competitors to cement the agreed allocations.

The Commission held the producers liable for a single and continuous infringement of Article 101 of the Treaty on the Functioning of the European Union (TFEU).

Vattenfall’s claim, issued in England on 06 March 2017, seeks damages caused by (i) direct overcharging by the cartel and (ii) losses caused by the inflation of prices of non-cartel suppliers which occurred as a result of the cartel arrangements. The claim was brought against six Prysmian and five NKT corporate entities.

Vattenfall’s jurisdiction argument

When dealing with questions of jurisdiction, the English court (like all EU Member State courts) must apply the rules contained within the Recast Brussels Regulation (Reg 1215/2012). The default provision is that an entity should be sued in the court of the country in which it is domiciled (Article 4). Accordingly, those Prsymian and NKT entities which were domiciled in England (the “UK Anchor Defendants”) could be sued in England as of right.

Article 8 allows defendants who are domiciled in other Member States to be joined into an action in the anchor defendant’s court where claims against those other defendants are so closely connected to the anchor defendant claims that it would be expedient to hear them in the same court, in order to avoid the risk of conflicting judgments (if matters proceeded in another court).

Vattenfall thus sought to anchor the claims in England by suing the UK Anchor Defendants and then to bring in all other defendants, by virtue of Article 8.

The Defendants’ argument to resist jurisdiction

NKT and Prysmian applied to the court seeking to strike out Vattenfall’s claim or alternatively to obtain a reverse summary judgment on the basis that:

• whilst the Prysmian and NKT entities were domiciled in the UK they were not addressees of the Decision, and
• all other NKT/Prysmian entities against which the claim had been brought and which were addressees of the Decision were domiciled in other EU Member States.

Decision

The court held that it was sufficient to establish jurisdiction against the UK Anchor Defendants if they had knowingly implemented the cartel activity.

In Cooper Tire & Rubber v Dow Deutschland [2010] EWCA Civ 864, the Court of Appeal had been satisfied that where knowing implementation was pleaded in the Particulars of Claim, verified by a statement of truth, this was sufficient, at the jurisdiction stage, for the claim to proceed (and avoid a strike out).

However, the High Court in the present case conducted a more detailed analysis, accepting that whilst it was not appropriate to conduct a mini trial at the jurisdiction phase, it was appropriate to take into account evidence presently available and evidence reasonably expected to be available at trial.

Guidance on Knowing implementation

The court first established that it was sufficiently arguable that the UK Anchor Defendants were part of the same undertaking as the non-UK defendants within their respective corporate groups.

Guidance was then given on the appropriate standard of knowing implementation to be considered in a jurisdiction application. 

Implementation

The judgment identified several activities by one or both UK Anchor Defendants which indicated that they had implemented cartel activity:

(A)   Indirect sales of cartelised products to Vattenfall via another defendant entity

(B)   Involvement in business activities falling within the scope of the cartel activity by employees of the UK Anchor Defendants

(C)   Identification of one of the UK Anchor Defendants as an addressee entity’s “fiscal representative” on its invoices, and

(D)    Fulfilment of an international customer liaison role for the rest of the corporate group by employees of UK Anchor Defendants (ie supporting customers and passing on market information).

The court also found it significant that the Defendants were implicated in other High Court claims brought by National Grid and Scottish Power against power cable cartelists and that other claimants in those claims had included the UK Anchor Defendants in proceedings alleging implementation of the cartel.

Additionally, the court confirmed that there is no de minimis value below which a cartel damages claim may not be brought, after Prysmian sought to rely on the fact that the invoices for cartelised goods it had sold in the UK only amounted to around £8,000.

Knowledge

The court noted that in cartel damages claims there is a stark information asymmetry between the parties; participation in the cartel is usually, by its very nature, secret. Consequently, the court accepted that Vattenfall would have had difficulty particularising the specific knowledge of the Defendants in its claim and would likely be unable to do so until full disclosure had been given. However, it was satisfied that there was some basis to allege that the UK Anchor Defendants’ knowingly implemented the cartel.

Observations

The judgment of Elleray J confirms that the English Court applies a low bar when considering whether to allow claimants to use UK- domiciled defendant companies to anchor a claim in the jurisdiction.

The guidance on the behaviours likely to constitute knowing implementation of cartel activity by such companies sends a clear message: details which might seem peripheral in the context of an organisation (eg being named as a fiscal representative on an invoice) may be used by claimants to establish a connection to the jurisdiction. The fact that the court held there was no de minimis threshold is also significant.

Elleray J’s comments in respect of the asymmetry of information in cartel claims will also be attractive to claimants making speculative competition claims against subsidiaries of entities named in Commission decisions, since the need to particularise a detailed case on knowledge appears to be unnecessary prior to disclosure.