In a decision of significance for public bodies, the Court of Appeal has held that HMRC has power to raise assessments against public bodies who have been overpaid VAT refunds under section 41 of the Value Added Tax Act 1994.

Milton Keynes Hospitals NHS Foundation Trust argued that HMRC’s power to make an assessment under section 73 (2) of the Value Added Tax Act 1994 did not apply where the person to whom the refund was made under section 41 (3) is not a taxable person as regards the supplies which were the subject of the refund. They contended that the effect of the Principal VAT Directive and the domestic legislation implementing it is to put a public body performing statutory (non-business) functions outside the scheme of VAT.

The Court of Appeal dismissed the Trust’s appeal.

Valentina Sloane QC represented HMRC at all stages. A link to the decision by the Court of Appeal is here.

An Immigration Exemption within the Data Protection Act 2018, which allowed the Government and others within the private sector a blanket power to refuse information and use it secretly has been ruled unlawful. The court of Appeal was unanimous in concluding that the Government’s “Immigration Exemption” is incompatible with the requirement for such exemptions as outlined under Article 23(2) of the EU General Data Protection Regulation (GDPR). A further hearing will take place later in the summer to determine how to fix the unlawfulness.

The appeal was brought by Open Rights Group, a digital rights organisation that seeks to promote and uphold privacy and data protection rights and the3million, a grassroots organisation of EU citizens resident in the UK, with an intervention in the Court of Appeal case brought by the Information Commissioner.

Open Rights Group and the3million had argued that the Immigration Exemption is unlawful because it is overbroad and there are no legislative safeguards in place to protect against unnecessary and disproportionate interference with the fundamental rights of data subjects.

Julianne Kerr Morrison, led by Ben Jaffey QC of Blackstone Chambers, and instructed by Waleed Sheikh and Erin Alcock of Leigh Day, represented the appellants Open Rights Group and the3million.

See Leigh Day news release and judgment for further information.

The Court of Appeal has handed down its judgment in the long-running saga about the ownership of the original gearbox of a 1962 Ferrari 250 GTO sold for US$ 44m in 2018. The GTO was sold and delivered by the Appellant seller, Mr Carl, to the Respondent buyer, Gregor Fisken Limited (“GFL”) but, as the sale contract recognised, without the original gearbox which had gone missing. The contract contained various provisions concerning the seller’s obligations to deliver up the gearbox to the buyer should he be able to find and retrieve it. In certain circumstances, he was entitled to a fee of US$ 500,000 for his efforts in so doing. The gearbox was subsequently discovered, the parties fell out, and GFL sued the seller for specific performance of the obligations to deliver up the gearbox.

The seller had argued at first instance that GFL was not a proper party to sue on the contract, lacking standing on the alleged basis that it had acted at all times as an agent for a disclosed but unidentified principal. GFL had been described as an agent in the header to the contract, but had signed it in an unqualified manner. As a matter of fact, GFL was not an agent: it had resold the GTO to a third party.

The seller also maintained that, if GFL was a proper party, it had repudiated the contract and could not enforce the seller’s obligations to deliver up the gearbox. In the alternative, if the contract remained in force, the seller claimed entitlement to the US$ 500,000 in exchange for delivering up gearbox.

The High Court held that GFL was a proper party to sue, there had been no repudiation, the seller was obliged to deliver up the gearbox and was not entitled to the US$ 500,000. The seller’s principal argument on appeal was that GFL lacked standing. The Court of Appeal rejected that argument, affirming GFL’s right to sue on the contract and to the gearbox. The Court of Appeal further confirmed that there had been no repudiation by GFL, but that the seller was to be paid the US $500,000 for his efforts in locating and retrieving the gearbox, as well as the shipping costs for sending the gearbox to GFL. Otherwise, the Court dismissed the appeal.

The Court of Appeal’s judgment will be of particular interest to car enthusiasts, the motor industry, and commercial practitioners alike. It also includes detailed analysis of the signature principle which dates back 150 years, and shows that when, as to apparent capacity, there is a mismatch between description and signature in a contract, it is the signature which prevails. The Court expressly affirmed that principle.

The Court of Appeal’s judgment is available here.

William Hooper appeared for GFL, instructed by Simon Walton and Nick Leigh of Rosenblatt.

The Grand Chamber of the European Court of Human Rights has handed down a landmark judgment on the compatibility of bulk surveillance regimes with the ECHR.

In the joined cases of Big Brother Watch, 10 Human Rights NGOs and Bureau of Investigative Journalism v United Kingdom the Court held that the former UK bulk interception regime in the Regulation of Investigatory Powers Act 2000 was incompatible with Articles 8 and 10 of the European Convention on Human Rights. The Court found that the regime was incompatible with the right to privacy more generally and specifically as regards the right of journalists to the protection of journalistically confidential information.

The Grand Chamber’s judgment marks a significant evolution of the court’s case law on these issues and has potential implications for the UK’s current surveillance legislation, the Investigatory Powers Act 2016.

The Court held that while it is, in principle, within a state’s margin of discretion to operate a bulk surveillance regime, it must have detailed and effective safeguards to ensure that any interference with Convention rights is necessary and proportionate.  The safeguards must be “end- to-end”, covering the entire process from the interception of information through to its destruction. The Court laid down detailed new guidance as to what these safeguards must entail, including as regards judicial or independent authorisation and supervision of the surveillance process. The Court found that the Regulation of Investigatory Powers Act 2000 did not provide for adequate safeguards and was therefore incompatible with the Convention.

As regards journalistically confidential information and the right to source-protection, the Court said that specific additional protections are required.  The Court held that judicial or independent authorisation is required prior to the use of selectors or search terms which would make the obtaining of confidential journalistic material highly probable. The use of such search terms could only be “justified by an overriding requirement in the public interest”. Where journalistic material is obtained inadvertently, the continued storage and examination of such material is only permissible where approved by a judge or independent body on grounds of overriding public interest. As the UK regime lacked these safeguards the Court found that it was inconsistent with Articles 8 and 10 ECHR.

Conor McCarthy was instructed by the Bureau of Investigative Journalism before the Chamber and Grand Chamber.

Eric Metcalfe was instructed by Liberty, the ACLU and 5 other international human rights groups before the Chamber and by ARTICLE 19 as third party intervener before the Grand Chamber.

The Competition Appeal Tribunal has handed down judgment in Sabre Corporation v. CMA, a significant case concerning the CMA’s jurisdiction over mergers under the Enterprise Act 2002.

The case concerned an intended merger between Sabre Corporation and Farelogix Inc, companies which provide technology and software to airlines. The CMA found that it had jurisdiction over the merger on the basis of the share of supply test and concluded that the proposed merger may be expected to give rise to a substantial lessening of competition in two markets: the supply of merchandising solutions to airlines and the supply of distribution solutions to airlines, both of which are worldwide markets. The CMA prohibited the merger.

Sabre challenged the description of services used by the CMA to assess the share of supply test, the application of the share of supply test to Farelogix’ contractual arrangements with BA in the UK and the determination of whether the merger gave rise to an increment over Sabre’s existing share of supply. The CAT upheld the CMA’s findings on each of these issues. The judgment contains detailed consideration of a number of sub-sections of section 23 of the Enterprise Act which have not been in focus in previous cases, as well as a detailed consideration of the standard and intensity of review which ought to be adopted by the CAT in relation to findings of jurisdiction.

Rob Williams QC and Conor McCarthy, were instructed by the CMA.

Tim Ward QC, Nik Grubeck and Alison Berridge and were instructed by Skadden, Arps, Slate, Meagher & Flom on behalf of Sabre Corp.

Daniel Beard Q.C., Brendan McGurk and Jack Williams acted for Heathrow, Global Blue and WDFG in the first post-Brexit case considering WTO law in domestic proceedings, Heathrow Airport v HMT [2021] EWCA Civ 783.

The Claim concerned HMRC’s and the Treasury’s decision to abolish two long-standing VAT schemes, namely HMRC’s extra-statutory concession (“the ESC”), which allowed VAT-free airside sales of goods to passengers travelling outside the EU; and the VAT Retail Export Scheme (the “VAT RES”), which allowed refunds of VAT on landside sales of goods to non-EU travellers subject to certain conditions being met (together, “the Schemes”).

In deciding to abolish the Schemes, HMRC and the Treasury relied upon their understanding of the UK’s WTO law obligations, in particular the Most Favoured Nation (“MFN”) principle. The decision was partly based on a justification that it was necessary either to abolish the VAT RES or to extend it globally, else it would not be compliant with non-discrimination obligations in WTO law.

Lord Justice Green and Mrs Justice Whipple (sitting as both the Court of Appeal and Divisional Court) dismissed Heathrow’s appeal and application for judicial review. However, in doing so, they rejected the Defendants’ contention that the matter was non-justiciable, and made findings as to the appropriate test and standard of review when considering questions of public international law in domestic judicial review proceedings. The judgment’s findings and reasoning will be of great interest to all public law practitioners, but are especially important in a post-Brexit world where public authorities choose to take into account WTO law and other public international law instruments into account in their decision-making. See, in particular, [135] – [183] of the Judgment.

The Judgment also provides a detailed exploration of the interaction between UK-EU Trade and Co-operation Agreement (“the TCA”) and the EU (Future Relationship) Act 2020, which will be of broader application and interest: see, for example, [224] – [239].

Royal Mail and BT v DAF Trucks Limited [2021] CAT 10

The Competition Appeal Tribunal has delivered an important judgment on the implications of the Supreme Court’s decision in the interchange fee litigation for other competition damages claims (Sainsbury’s v Visa Europe [2020] UKSC 24).

Royal Mail and BT are seeking damages from DAF arising from the European Commission’s 2016 infringement decision relating to Trucks. Their claims are the first of several to be set down for trial, with the trial due to commence in April 2022. Following the Supreme Court’s decision in Sainsbury’s, which considered issues of pass-on and mitigation, DAF applied to introduce a mitigation defence, arguing that the Claimants would have mitigated any overcharge arising from the infringement by negotiating costs reductions with their other suppliers. The Claimants opposed the application and, following a two day hearing in March, the Tribunal rejected it in a judgment issued this week.

The Tribunal held, in summary, that the Supreme Court’s decision does not permit a defendant to plead a defence of mitigation on the basis of broad economic theory alone (e.g. that a business faced with increased supply costs in one area will seek to compensate for that increase by reducing other costs). Rather, there must be some plausible factual basis for alleging that the claimant would have taken action to reduce its losses as a result of the overcharge. The Tribunal noted the evidential burden which would otherwise be imposed on claimants to demonstrate how they conducted their businesses, not only in in competition claims but in many commercial damages claims. The Tribunal acknowledged that a defendant is unlikely to have sufficient evidence available at the pleading stage to prove what the claimant did in response to the overcharge, but explained that it must nevertheless have some plausible factual foundation for the application of the economic theory relied on in order for the pleading to be permitted. Examples of the sort of points which could support a prima facie inference that other supply costs may well have been mitigated were given in paragraph 42 of the judgment. As a practical matter, the Tribunal noted that DAF could reapply for permission to introduce a mitigation plea once it had reviewed the Claimants’ disclosure.

The Tribunal’s judgment provides important guidance on the requirements for a pleading of mitigation. It will be of keen interest to competition practitioners and commercial practitioners more generally.

Royal Mail and BT were represented by Ben Lask and Anneliese Blackwood. DAF was represented by Daniel Beard QC, Rob Williams QC and Daisy Mackersie.

A copy of the judgment in here.

Facebook v Competition and Markets Authority [2021] EWCA Civ 701

The Court of Appeal has dismissed an appeal by Facebook concerning the CMA’s use of interim measures in merger investigations.

The CMA is investigating Facebook’s acquisition of GIPHY, a provider of short soundless videos (GIFs) and stickers, which are used on apps such as WhatsApp, Instagram, TikTok and Snapchat. As is standard practice in merger investigations, the CMA imposed an Interim Enforcement Order (IEO) on the parties at the outset of its investigation, prohibiting any further integration of their businesses and imposing various obligations for the purpose of preventing pre-emptive action (i.e. action which might prejudice the investigation or impede the imposition of any remedies at the end of the investigation). Given the need to act quickly to “hold the ring” with completed mergers, the CMA uses a broad template IEO from which it then grants appropriate derogations in response to reasoned requests.

Facebook applied to the Competition Appeal Tribunal for judicial review of the CMA’s refusal to grant a number of derogations that it had sought from the IEO. It complained that the effect of the IEO was to “freeze” hundreds of Facebook’s businesses and more than 50,000 employees worldwide. The Tribunal dismissed the claim, holding that, since Facebook had refused to provide the information requested by the CMA in order to consider its derogation requests, the CMA had been entitled not to grant the derogations sought. Facebook appealed to the Court of Appeal but, in a judgment handed down on 13 May 2021, its appeal was dismissed. The Court held, in summary, that:

1. Facebook’s case was based on the misapprehension that the CMA’s final remedial were limited to requiring the divestiture of GIPHY, whereas in fact they were wider than that.
2. The problem of which Facebook complained had been entirely of Facebook’s own making. Rather than engaging properly with the CMA, it had made its derogation requests and then “sat on its hands”, refusing to answer the CMA’s questions.
3. A consequence of the UK’s prospective merger regime was that the CMA had to act quickly in appropriate cases. Accordingly, it had developed a broad template for IEOs, which were intended to hold the ring whilst it obtained further information, and which Facebook had not specifically challenged. However, the process broke down if addressees of the IEOs refused to cooperate as Facebook had.

The CMA’s investigation of the Facebook / GIPHY merger is ongoing, with a final decision due in September 2021.

Ben Lask represented the CMA in the Court of Appeal. A copy of the judgment is here.

Ronit Kreisberger is joint lead counsel for the legal team representing Dr Rachael Kent, an expert in the digital economy and lecturer at King’s College, University of London, in this representative opt-out collective action against Apple.

A claim in the Competition Appeal Tribunal on behalf of around 19.6 million eligible UK iPhone and iPad users, alleges that Apple’s conduct violates section 18 of the UK Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union.

Ronit, who has been instructed by Hausfeld, says she is “delighted to be involved in this significant case, at a time when opt out collective actions – especially those seeking compensation for consumers – are dominating the competition litigation landscape in the UK, in the wake of the Supreme Court’s judgment in Merricks.”

For further information see Hausfeld press release here.

The case is being reported widely in the media:
BBC News
Bloomberg
City A.M.
The Times
Yahoo!