ViaSat v Commission (Case T-734/17)

ViaSat, a US communication services provider, has launched proceedings before the General Court to challenge the European Commission’s refusal to intervene to prevent national regulatory authorities from authorising its competitor, Inmarsat, from launching its in-flight satellite broadband service. Its appeal (Case T-245/17) challenges the Commission’s alleged failure to act on competition law, regulatory and public procurement grounds.

In support of that case, Viasat has made a separate application (Case T-734/17) under the public access regime in Regulation 1049 for access to all the information submitted by Inmarsat as part of its participation in the EU tender process. Inmarsat took part in the selection process which led to the adoption of Commission Decision 2009/449/EC of 13 May 2009, where it was selected as one of two operators granted spectrum frequencies to operate pan-European mobile satellite services (MSS).

ViaSat sought access to Inmarsat’s tender bid even though it decided not to participate in the tender process itself.

The General Court has declared that there is no need to rule on the lawfulness of the European Commission’s rejection of Viasat’s application. The General Court refused the application on the basis that the documents represented confidential and strategic information that could affect competition in the market. It also dismissed Viasat’s argument that the information was over five years old since the content of Inmarsat’s documents were still of strategic importance to its commercial policy. ViaSat also failed to establish a public interest case – mere general assertions regarding the importance of transparency requirements were not sufficient.

Inmarsat was awarded all of its costs in full which is extremely rare for an intervener.

This case has ongoing relevance to ongoing proceedings before the EU Courts, the UK Court of Appeal, Belgium, France and Germany where ViaSat is challenging the national authorisation decisions that have been given to Inmarsat to operate its in-flight satellite broadcasting services for European airlines.

Read full judgment here.

Anneli Howard acted for the intervener Inmarsat Ventures.

The Competition Appeal Tribunal has upheld the CMA’s decision to block the merger between Ecolab Inc. and The Holchem Group Ltd, rejecting in its entirety a judicial review challenge to that decision brought by Ecolab: Ecolab Inc. v Competition and Markets Authority [2020] CAT 12.

Ecolab and Holchem both supply formulated cleaning chemicals and ancillary services to professional food and beverage customers in the UK. These goods and services are used by such customers to clean manufacturing and processing equipment and premises. In November 2018, Ecolab (a large US corporation) acquired Holchem (a UK company), thus combining two of the four largest suppliers in the market and triggering an investigation by the CMA under the Enterprise Act 2002.

In a final report issued in October 2019, the CMA found that the merger had resulted or may be expected to result in a substantial lessening of competition (SLC) in the relevant market. In particular, it found that the parties exerted a strong competitive constraint on each other, and that the elimination of such competition as a result of the merger would have an adverse impact both on their existing customers and new customers. The CMA decided that the appropriate remedy was for Ecolab to sell Holchem Laboratories (a subsidiary of Holchem) to a suitable purchaser. In reaching that decision, it rejected an alternative divestiture proposal (ADP) submitted by the parties, whereby a portfolio of one of the parties’ customers would be divested to another existing supplier, concluding that the ADP had “serious shortcomings” and would not effectively remedy the merger’s adverse impact on competition.

Ecolab challenged the CMA’s decision by way of judicial review before the Competition Appeal Tribunal. It advanced four grounds, arguing that the SLC decision was irrational and unsupported by evidence (Ground 1), and that the decision to reject the ADP was irrational, procedurally flawed, and based on an error of law (Grounds 2 to 4).

In a judgment issued on 21 April 2020, the Tribunal unanimously dismissed all four of Ecolab’s grounds. It held in summary that:

• Ground 1: the evidence cited in the report was clearly sufficient to support the CMA’s finding that there was an SLC across the market as defined. Ecolab argued that any SLC should have been limited to large UK only customers. However, the Tribunal found that the CMA was entitled to rely on a lessening of competition for small UK only customers as part of its SLC finding, even though the effect on large UK only customers was more marked.
• Ground 2: the decision to reject the ADP was neither irrational nor based on an error of law. In particular, the Tribunal held that, since the CMA’s intervention in merger cases was a one-off, as a matter of policy it was entitled to seek a remedy in which it had a “high degree of confidence” that it would achieve its intended effect. In the present case, the CMA was fully entitled on the evidence to reject the ADP on this basis.
• Ground 3: the CMA had been well within its “wide margin of appreciation” to decide that further consultation on the ADP was unnecessary, especially when there was no reason to suppose that this would overcome the ADP’s shortcomings, and when it would have required the CMA to extend the statutory deadline for delivery of its report. Whilst the CMA was empowered to extend the deadline for “special reasons”, parties could not expect it to invoke this power where they proposed a remedy only shortly before the deadline, or prevented the CMA from consulting on crucial aspects of the remedy for commercial reasons.
• Ground 4: the fall-back ADP put forward by the parties did not address or mitigate any of the CMA’s principal objections to the ADP. As such, it did not merit any further consideration by the CMA of affect the rationality of its assessment.

The CMA was represented by Rob Williams QC and Ben Lask, both of whom are standing counsel to the CMA. A copy of the judgment is here.

On 5 March 2020, and with much publicity, Flybe Limited formally entered into administration. On the same day, the Civil Aviation Authority’s Consumer & Markets Group issued a proposal to revoke Flybe’s Operating Licence and two associated Route Licences. It did so on the basis that, following an in-depth financial assessment, there was no reasonable prospect that Flybe could meet its actual and potential obligations for the following 12 month period for the purposes of Article 9(1) of EC Regulation No 1008/2008 (“the EU Regulation”). A hearing before the CAA Panel took place at which evidence was considered and submissions made as to the prospects of Flybe being acquired as a going concern within a reasonable period of time in order that the test under Regulation 9(1) of the EU Regulation might be met. The CAA’s Panel have concluded that there is no such prospect and further concluded that Flybe’s request for a Temporary Operating License must also be rejected for the same reasons. The decision takes effect 14 days from the date of the decision. Flybe have a right to appeal the decision to the Secretary of State for Transport and it remains to be seen whether that right will be exercised.

Brendan McGurk acted for the Consumer & Markets Group of the CAA.

On 15 April 2020, the Upper Tribunal released its decision on appeals by HMRC in the cases of Done Bros and Rank. A copy is available here.

HMRC appealed against two decisions of the First-tier Tribunal (Tax Chamber) (“FTT”) relating to VAT in respect of supplies to retail customers of the ability to play various games of chance on gaming machines. The appeals concerned a common issue relating to the EU test of fiscal neutrality.

The Rank dispute concerned the VAT liability of gambling made using certain slot machines dating back to the period from 1 October 2002 to 5 December 2005. As the Upper Tribunal observed, the procedural history of the Rank claims has been long and tortuous, involving decisions of the VAT and Duties Tribunal, the FTT, Upper Tribunal, Supreme Court and Court of Justice of the EU.

The Done Bros dispute related to supplies of gambling by means of fixed odds betting terminals (“FOBTs”) during the period from 6 December 2005 to 31 January 2013.

In both cases, the taxpayer argued that UK legalisation breached the principle of fiscal neutrality because taxed supplies were sufficiently similar to exempt supplies. The FTT allowed the taxpayers’ appeals.

On appeal to the Upper Tribunal, HMRC’s position was that the FTT had erred in its approach to the evidence on the similarity of supplies, in particular in relation to the average consumer’s needs and characteristics.

The Upper rejected HMRC’s appeal, holding that the CJEU case law does not prescribe any particular methodology which must be adopted or evidence which must be available in making the determination of the needs and point of view of the average consumer.

Valentina Sloane QC acted for Done Bros and Rank. George Peretz QC and Eric Metcalfe acted for HMRC.

Virgin Media Ltd v HM Revenue and Customs [2020] UKUT 0100 (TCC), 8 April 2020

The Upper Tribunal has dismissed VML’s appeal against the decision of the First-tier Tribunal [2018] UKFTT 556 (TC). VML’s appeal concerns the correct operation of the Prompt Payment Discount (PPD) provisions of paragraph 4(1) of Schedule 6 to the Value Added Tax Act 1994, which provided (prior to its amendment with effect from 1 May 2014) that “[w]here goods or services are supplied for a consideration in money and on terms allowing a discount for prompt payment, the consideration shall be taken for the purposes of section 19 as reduced by the discount, whether or not payment is made in accordance with those terms.” VML provides telecommunications services to customers through fixed lines. Those services include fixed line rental (FLR) with related broadband and telephone services. In the relevant period, VML provided FLR services in return for either (i) monthly payments (e.g. £13.90) or (ii) a single payment for 12 months’ service (e.g.£120). VML contended that the 12 month “saver” option was a “discount for prompt payment” and that paragraph 4(1) applied to deem the monthly customers to have given consideration for the FLR supply to them by reference to a notional monthly figure of £10 (i.e. £120/12), not the actual monthly payment of £13.90. The FTT dismissed VML’s appeal, holding that VML’s services to monthly customers were not “supplied on terms allowing a discount for prompt payment”, because the supply to monthly customers and the supply to saver customers were different supplies on different terms. The Upper Tribunal dismissed VML’s appeal, for the reasons given by the FTT. Having decided the case on that basis, the Upper Tribunal did not find it necessary or appropriate to deal with various further or different arguments for dismissing the appeal relied on by HMRC, which had been rejected by the FTT.

Andrew Macnab, led by Kieron Beal QC (Blackstone Chambers), represented HMRC in the First-tier Tribunal and the Upper Tribunal. Read the full decision here.

The European Commission is investigating whether Broadcom restricted competition in various markets for chipsets for TV set-top boxes and modems. As part of its investigation, the Commission has taken the novel step of imposing “interim measures” for the first time under Regulation 1/2003. The interim measures decision concludes that Broadcom is, prima facie, infringing competition rules by abusing a dominant position and that interim measures are urgently warranted to prevent serious and irreparable damage to competition.

Josh Holmes QC and James Bourke are acting for Broadcom in its annulment action against the Commission’s decision. Broadcom’s case is that the Commission made a series of errors of law and fact in its prima facie assessment of a restriction of competition and in its assessment of urgency.

This will be the first time that the General Court adjudicates on an interim measures decision since the IMS case of 2001.

The Court of Justice of the EU has found in favour of Pfizer in its action for annulment of a European customs classification regulation.

Pfizer imports into the United Kingdom products falling under the registered trade mark ThermaCare. The products are presented and marketed for the purposes of heat therapy, to deliver benefits such as analgesia, reduced stiffness and acceleration of healing to damaged tissue.

The European Commission issued a classification regulation which had the effect of classifying Pfizer’s ThermaCare range of therapeutic heat products as “chemical products and preparations” and rejecting their classification as “wadding, gauze, bandages and similar articles..for medical purposes”. HMRC issued a Binding Tariff Information in accordance with the regulation.

Pfizer appealed to the First-tier Tribunal against HMRC’s classification decision and applied for a reference to the CJEU on the ground that the European Commission classification regulation was invalid.
HMRC contested the application and argued that the relevant test was whether the Commission had made a manifest error. The First-tier Tribunal rejected that argument and allowed Pfizer’s application, with an interesting and useful analysis of the appropriate threshold for making a reference in challenges to the validity of EU legislation.

The Court of Justice of the EU has now ruled that the European Commission exceeded its powers and the commission regulation is invalid. Its judgment contains helpful principles on the concept of “medical purposes”, which is not defined in the Combined Nomenclature or the explanatory notes.

Valentina Sloane QC represented Pfizer and was instructed by Hogan Lovells.

A copy of the national court’s judgment on Pfizer’s application for a preliminary ruling is here.

A copy of the judgment of the Court of Justice of the EU is here.

Elgizouli v Secretary of State for the Home Department [2020] UKSC 10

The Supreme Court has today handed down judgment in a “leapfrog” appeal from the Divisional Court concerning a decision by the Government to provide mutual legal assistance to the United States to facilitate the prosecution of offences carrying the death penalty, without seeking assurances that the death penalty would not be imposed. The Supreme Court’s judgment is significant, in particular, in the field of data protection law.

The questions that were certified by the Divisional Court were:

(i) Whether it is unlawful for the Secretary of State to exercise his power to provide mutual legal assistance so as to provide      evidence to a foreign state that will facilitate the imposition of the death penalty in that state on the individual in respect of whom the evidence is sought; and

(ii) Whether (and if so in what circumstances) it is lawful under Part 3 of the Data Protection Act 2018, as interpreted in light of relevant provisions of EU data protection law, for law enforcement authorities in the UK to transfer personal data to law enforcement authorities abroad for use in capital criminal proceedings.

On the first question, the majority (Lord Carnwath and Lord Reed, with whom Lady Black, Lord Lloyd-Jones, and Lord Hodge agreed) concludes, in agreement with the Divisional Court, that the common law does not recognise a right to life that prevents the Secretary of State from providing mutual legal assistance to, or sharing intelligence with, a foreign country where that might lead to a risk of the death penalty. Lord Kerr, in a powerful dissenting judgment, concludes that it is unlawful at common law for the state to facilitate the execution of the death penalty against its citizens or others within its jurisdiction anywhere in the world.

The Supreme Court is, however, unanimous in holding that the Secretary of State’s decision was unlawful under the Data Protection Act 2018. Much of the information provided, or to be provided, to the US authorities consisted of personal data, and the Court concludes that the processing of such data by the Secretary of State required a “conscious, contemporaneous consideration” of the relevant criteria under the 2018 Act. “Substantial compliance” with those criteria, as found by the Divisional Court, was not enough. (It was not in dispute that the Secretary of State, when making the decision in question, did not address his mind to the 2018 Act at all.) The judgment notes that the Supreme Court was assisted on the data protection points by a helpful intervention from the Information Commissioner, which had not been available to the Divisional Court.

The judgment is significant, in particular, for the analysis of Part 3 of the 2018 Act (Law Enforcement Processing), the test of necessity under that Act, and the rules on transfers of personal data to third countries. The analysis of Lord Kerr and Lord Reed on how the common law develops, and the state of UK and international law on the death penalty, is also required reading.

The judgment and Supreme Court press summary is available here.

Julianne Kerr Morrison acted for the Appellant. Gerry Facenna QC and Conor McCarthy acted for the Information Commissioner.

The Court of Appeal today handed down judgment in the appeal by Bayer and Novartis against a High Court decision that upheld a policy of various NHS Commissioning Groups (CCGs) of recommending that NHS prescribers use Avastin to treat a common and serious eye disease known as wet AMD. The marketing authorisation (MA) for Avastin, which is held by Roche, does not cover its use to treat wet AMD, though NICE has accepted that it is a cost-effective treatment. Bayer and Novartis supply drugs that do have an MA covering treatment of wet AMD, but those drugs are much more expensive than Avastin.

The High Court had held that the CCGs’ policy was lawful. The Court of Appeal agreed, but accepted submissions from the Secretary of State for Health and Social Care, who is responsible both for the NHS and for the MHRA (the UK body responsible for medicines licensing), that the High Court had been wrong to hold that Avastin, in a form repackaged for use to treat wet AMD, could be supplied without an individual prior prescription system being in place: the Court of Appeal expressly adopted the Secretary of State’s argument that the High Court’s conclusion could weaken the licensing system. However, the Court of Appeal also agreed with the Secretary of State that NHS Trusts could, subject to that condition, lawfully use Avastin to treat wet AMD, and dismissed the pharmaceutical companies’ appeal.

The judgment has been eagerly awaited by the NHS and by pharmaceutical companies. Avastin has been the subject of litigation across Europe, with several cases having reached the Court of Justice of the EU: and the Court of Appeal’s judgment is likely to be carefully read across the EU.

George Peretz QC acted for the Secretary of State.

Case C-125/18, “Marc Gomez del Moral Guasch vs. Bankia SA“

Earlier this month, the Grand Chamber of the European Court of Justice (ECJ) ruled on the legal test for assessing the transparency and fairness requirements for mortgage interest rates under the Unfair Terms in Consumer Contracts Directive 93/13 (UCTD).

Case C-125/18, “Marc Gomez del Moral Guasch vs. Bankia SA” concerned a multi-question request from the Barcelona court to the ECJ for guidance on what information must be provided to a consumer at the time of entering into a variable interest rate (in the context of a long term mortgage agreement) in order to meet the plain and intelligible language test. The reference involved a test case, following multiple litigation proceedings challenging variable rates based on the official Spanish average “IRPH” rate which is much higher than the Euribor rate. In Spain, over 1 million borrowers have IRPH loans totalling over 15.5 bn euros.

Application of UCTD

In response to the three questions referred to the ECJ by Spanish courts about an allegedly unfair mortgage deal, the ECJ found variable mortgage rates, which are not mandated by law, fall within the scope of the UCTD. Even if the UCTD had not been fully implemented into domestic law, EU consumer law requires Member States to ensure mechanisms by which national courts have the power to scrutinise the fairness of all contractual terms that have not been individually negotiated. National courts must therefore review, by reference to the particular circumstances of the case, whether such terms meet the requirements of good faith, balance and transparency laid down in the UCTD.

Transparency requirements

So far as transparency is concerned, regardless of the exception in Article 4(2), national courts must ensure that contract terms and drafted in plain intelligible language so that an average consumer, who is reasonably well-informed and reasonably observant and circumspect, is in a position to understand the specific functioning of the method used for calculating the variable interest rate and thus evaluate, on the basis of clear, intelligible criteria, the potentially significant economic consequences of such a term on his or her financial obligations. The precontractual information and promotional materials are important in that regard to communicate all the information likely to have a bearing on the extent of the borrower’s commitment, the nature of the services provided and the to enable the consumer to estimate the total cost of the loan.

The ECJ accepted that, by definition, variable rates mean that it is not always possible to set out the amount of the loan repayments for the entire term of the agreement. It would be sufficient to refer the borrower to a published index (such as the IRPH) that was easily accessible to the average consumer and to other essential information that was published or required to be circulated to the borrower concerning the calculation or fluctuation of the rate.

Importantly, the ECJ underlined that fairness and transparency are fact specific and national courts will be responsible for deciding the legality of financial contracts terms on a case-by-case basis.

Remedies

The third question raised the issue of remedies if a contract term is found to be unfair and consequently null and void. Article 6 of the UCTD requires the national court to “exclude” or strike out that clause so that it can no longer produce any binding effects against the consumer. The ECJ confirmed that national courts are not allowed to modify or re-write the terms of the contract as that would dissuade lenders from complying with consumer protection law if they could seek their subsequent judicial amendment.

Crucially, the Grand Chamber recognised that the removal of certain terms could lead to the annulment of the loan agreement in its entirety which could put the consumer in a worse position than the situation with the unfair clause in place. For instance, the invalidity of the mortgage might mean that the entire loan became immediately repayable in full, forcing the borrower to sell his home. In such circumstances, where the invalidity of the term created unfavourable circumstance to the detriment of the borrower, the national court is permitted to substitute the unfair term (here a variable interest rate) with a statutory index provided by national law.

The outcome is likely to cause a number of lending institutions to review and re-think the drafting of any credit agreements and the clarity of any precontractual and promotional materials falling within the scope of the UCTD.

Read full judgment here.

Anneli Howard acted for the United Kingdom Government whose observations on remedies were upheld by the ECJ.