Opinion 2/15 (EU:C:2017:376)

The EU Court of Justice has delivered a lengthy Opinion on the power of the EU to sign and conclude a free trade agreement with Singapore without the involvement of the Member States.

While the Commission and European Parliament contended that the EU has exclusive competence to sign and conclude the proposed agreement with Singapore, the Council and Member States who intervened argued that the EU could not do so because parts of the agreement fall within areas of competence shared between the EU and Member States, or within the exclusive competence of the Member States.

In its Opinion, delivered by the Full Court and available here, the CJEU has found that most of the matters covered by the agreement fall within the exclusive competence of the EU, including:

•  access to the EU market and Singapore market for goods and services (including all maritime, rail and road transport services), public procurement and energy generation from sustainable non-fossil sources;
•  protection of direct foreign investments of Singapore nationals in the EU (and vice versa);
•  intellectual property;- competition and subsidies;
•  sustainable development; and
•  rules relating to exchange of information, notification, verification, cooperation, mediation, transparency and dispute settlement (except in connection with non-direct foreign investment).

However, the Court found there to be two areas covered by the agreement where the EU has shared competence with the Member States, meaning that the agreement in its current form cannot be concluded without the Member States’ involvement:

• non-direct foreign investment (portfolio investments made without any intention to influence the management and control of an undertaking); and
• investor-state dispute settlement.

The EU-Singapore agreement is representative of a number of bilateral trade and investment treaties that the EU is seeking to enter into. The Court’s Opinion confirms the broad scope of the EU’s exclusive competence to conclude such agreements, other than in a few areas where Member State involvement will continue to be necessary (including controversial investor-state dispute settlement arrangements). This may make it easier for the EU to negotiate and conclude trade deals in the future, including a potential post-Brexit deal with the UK, provided they do not cover investment matters.

The United Kingdom was represented by Daniel Beard QC and Gerry Facenna QC.

To read the Brexit blog post by Panos Koutrakos “Concluding Free Trade Agreements: the EU-Singapore Opinion and Brexit” please click here.

The Grand Chamber of the European Court of Human Rights has unanimously found in Simeonovi v. Bulgaria that Mr Simeonov’s conditions of detention, in combination with the strict regime under which he was serving his sentence and the length of his period of imprisonment since 1999, had subjected him to an ordeal exceeding the suffering inherent in serving a prison sentence which amounted to inhuman and degrading treatment contrary to Article 3 of the European Convention on Human Rights.

However, the Court – by 12 votes to 5 – did not consider that the proceedings against had been irremediably prejudiced by the fact that he had been denied access to legal assistance for the first three days following his arrest. In reaching this conclusion, the Grand Chamber emphasised that no evidence capable of being used against Mr Simeonov had been obtained and included in the criminal file during that period; that, assisted by a lawyer of his own choosing, he had voluntarily confessed two weeks after being charged, when he had been informed of his procedural rights, including the privilege against self-incrimination; that he had actively participated in all stages of the criminal proceedings; that his conviction had not been based solely on his confession but also on a whole body of consistent evidence; that the case had been assessed at three judicial levels and that the domestic courts had provided adequate reasons for their decisions in both factual and legal terms and had properly examined the issue of respect for procedural rights.

The Grand Chamber also declined to depart from its approach of only considering those issues found admissible by the Chamber following the latter’s referral to it of a case. It did so notwithstanding that the inadmissibility ruling in this case – which concerned a complaint that a sentence of life imprisonment was irreducible and thus in violation of Article 3 – had been based on the approach to this issue in a judgment of the Grand Chamber, which the latter had subsequently reversed in a manner that would probably have resulted in Mr Simeonov’s complaint being found admissible if it had been determined later.

However, in application of Article 46 of the European Convention, the Grand Chamber did recommend that Bulgaria: (a) remove the automatic application of the special prison regime to life prisoners to which Mr Simeonov had been subjected and (b) put in place provisions permitting the imposition of that regime on the basis of an individual risk assessment.

Mr Simeonov was represented before the Grand Chamber by Jeremy McBride.

To view the Grand Chamber judgment, please click here.

 

The first ever application for a Collective Proceedings Order (CPO) for an ‘opt out’ competition law class action is to be withdrawn. An order published on the Competition Appeal Tribunal’s website today confirms that the applicant for the CPO “has decided not to pursue her application“.

By the CPO application (which was the first to be made under the new class actions regime introduced by the Consumer Rights Act 2015), the applicant, Dorothy Gibson, had sought an order allowing her to pursue claims for damages on behalf of consumers who had purchased mobility scooters. In May 2014 the Office of Fair Trading (OFT) had issued a decision finding that a wholesaler distributor of mobility scooters called Pride Mobility Products Limited and eight of its retailer customers had infringed the Competition Act’s ‘Chapter I prohibition’. Each of those eight retailers had agreed to a request from Pride that the retailer refrain from advertising on the internet below-RRP prices for certain models of scooter. Ms Gibson sought damages for losses alleged to have been suffered not only by consumers who bought a scooter from one of those eight retailers, but also by other consumers (i.e. consumers who bought from other retailers) whom Ms Gibson claimed had paid higher prices as a result of ‘umbrella effects’.

Ms Gibson’s decision not to further pursue her application for a CPO follows a judgment of the Tribunal on 31 March 2017 in which the Tribunal concluded that the expert economic evidence relied on by Ms Gibson had been prepared on an erroneous basis. That was because the expert had been instructed to analyse the possible effects on prices of Pride’s “policy” of discouraging its retailer customers from advertising on the internet below-RRP prices for the relevant scooter models. Since the CPO application had been brought in respect of what were said to be “follow-on” claims (i.e. claims brought in relation to the infringements already found by the OFT), the economist should have been instructed to estimate only such alleged consumer losses as may have been caused by Pride’s agreements with the eight retailers (i.e. the retailers who were, together with Pride, the addressees of the OFT’s infringement decision).

By its 31 March judgment the Tribunal did not, however, completely close the door on Ms Gibson’s CPO application. Although it was not prepared to grant a CPO on the basis of the material that had been presented by Ms Gibson at the CPO application hearing, the Tribunal decided to adjourn (rather than dismiss) the application, thus leaving open the possibility for her to return to the Tribunal to seek a CPO on the basis of a fresh expert report prepared on the correct basis.

A news item on the 31 March judgment, and a copy of that judgment, is available here.

As Ms Gibson has now decided not to further pursue her application, the Tribunal has directed that the parties seek to reach agreement on costs.

Monckton barristers Alan Bates, Michael Armitage and Jack Williams are instructed on behalf of Pride.

On 11 April 2017 the Supreme Court handed down its judgment in Energysolutions EU Limited (now ATK Energy EU Ltd) v Nuclear Decommissioning Authority [2017] UKSC 34.

A link to the Monckton Chambers case note is here.

Ewan West acted for ATK Energy EU Ltd throughout the Magnox Contract litigation and appeared for ATK before the Supreme Court on the preliminary issues appeal.

Philip Moser QC acted for the NDA in the Court of Appeal in the concurrent substantive appeals in Energysolutions (ATK) v NDA (settled).

Michael Bowsher QC and Ligia Osepciu acted for Bechtel Management Company Limited and Philip Moser QC acted for the NDA in the Bechtel v NDA claim (settled).

The Supreme Court (Lord Mance, Lord Sumption and Lord Carnwath), on 11 April 2017, refused applications by British American Tobacco and Japan Tobacco International for permission to appeal against the Court of Appeal judgment in in R (British American Tobacco and others) v Secretary of State for Health [2016] EWCA Civ 1182.

This brings to an end long running litigation in which the tobacco industry sought to challenge the Standardised Packaging of Tobacco Products Regulations 2015, which make provision for the retail packaging of cigarettes and hand rolling tobacco to be standardised, substantially limiting the ability of tobacco companies to place branding on their products.

The request for a reference to the European Court of Justice was rejected. All EU law issues had been considered thoroughly by the courts below. The judgments of Mr Justice Green in the Administrative Court and the Court of Appeal, dealing with a multitude of grounds, 27 witness statements and 30 expert reports, run to nearly 500 pages. The volume of expert economic and econometric evidence presented a significant challenge to the courts given the limitations of the judicial review procedure, which is discussed in the High Court and Court of Appeal judgments: see news items here and here for links to the relevant judgments.

The stakes in this litigation were high. A report produced by Sir Cyril Chantler for the Government in 2014 concluded that “standardised packaging, in conjunction with the current tobacco control regime, is very likely to lead to a modest but important reduction over time on the uptake and prevalence of smoking and thus have a positive impact on public health”. The Government’s Impact Assessment considered that the expected societal benefits from reduced smoking prevalence and the resultant lives saved would be materially larger than the expected costs to society from reduced taxation revenue and costs to businesses, producing a net benefit to the public of approximately £25 billion. The tobacco industry’s claim for compensation against the Secretary of State for Health had been estimated by industry analysts to be up to £11 billion.

Ian Rogers QC, Julianne Kerr Morrison and Nikolaus Grubeck acted for the Secretary of State for Health.

The UK standardisation provisions went further than the EU-wide legislation introduced by the Tobacco Products Directive, particularly in relation to tobacco branding. One of the many issues in the domestic judicial review proceedings concerned the scope of the power to introduce further standardisation requirements, and the competence of the UK to do so. The tobacco industry also challenged the UK’s implementation of the Directive, on grounds including the invalidity of the Directive itself, in related proceedings: Case C-547/14 R (Philip Morris Ltd and others) v Secretary of State for Health. The challenge to the Directive was rejected by the European Court of Justice in May 2016 (see news item here).

Ian Rogers QC and Eric Metcalfe appeared for the United Kingdom in the Luxembourg proceedings.

The Supreme Court decision is reported in The Guardian here.

The Supreme Court has unanimously allowed HM Revenue & Customs’ appeal and dismissed the ITCs’ cross-appeal in both parties’ appeals from the Court of Appeal’s decision, [2015] EWCA Civ 82.

In HMRC’s appeal, the Supreme Court held that (1) the ITCs, as end customers, had no direct claim against HMRC in the English law of unjust enrichment in circumstances where the customers had paid their suppliers (and the suppliers had accounted to HMRC for) “VAT” that was not due, because the supplies should have been exempt (2) that any such claim was in any event excluded by statute (s.80(7) of the Value Added Tax Act 1994) and (3) EU law required no different result (in particular, in respect of tax periods when the taxpayer’s own claim for repayment against HMRC was statute-barred under the VAT Act).  In the ITCs’ appeal, the Supreme Court upheld the Court of Appeal’s decision that HMRC were only enriched by the net amount of over-declared output tax less over-claimed input tax, not by the gross amount of the over-declared output tax.

The judgment is available at: The Supreme Court and here.

Andrew Macnab (led by Stephen Moriarty QC, Fountain Court Chambers) represented HM Revenue & Customs.

The Supreme Court has unanimously allowed HM Revenue & Customs’ appeal and dismissed the ITCs’ cross-appeal in both parties’ appeals from the Court of Appeal’s decision, [2015] EWCA Civ 82.

In HMRC’s appeal, the Supreme Court held that (1) the ITCs, as end customers, had no direct claim against HMRC in the English law of unjust enrichment in circumstances where the customers had paid their suppliers (and the suppliers had accounted to HMRC for) “VAT” that was not due, because the supplies should have been exempt (2) that any such claim was in any event excluded by statute (s.80(7) of the Value Added Tax Act 1994) and (3) EU law required no different result (in particular, in respect of tax periods when the taxpayer’s own claim for repayment against HMRC was statute-barred under the VAT Act).  In the ITCs’ appeal, the Supreme Court upheld the Court of Appeal’s decision that HMRC were only enriched by the net amount of over-declared output tax less over-claimed input tax, not by the gross amount of the over-declared output tax.

The judgment is available at: The Supreme Court and here.

Andrew Macnab (led by Stephen Moriarty QC, Fountain Court Chambers) represented HM Revenue & Customs.

NCA v N and Royal Bank of Scotland plc

The Court of Appeal today allowed the appeal of the National Crime Agency (“NCA”) against several interim orders made by Burton J which “in effect disapply” the Proceeds of Crime Act 2002 (“POCA”).

Part 7 of POCA imposes requirements on banks which are triggered when they suspect money in a customer’s account is criminal property. In such circumstances, banks must seek and receive the consent of the NCA before carrying out transactions relating to the suspect funds. Banks face criminal penalties where the POCA regime is not followed.

N held a number of bank accounts with RBS. RBS suspected that the credit balance on certain of those accounts constituted criminal property. It froze those accounts and, in compliance with POCA, sought and received the consent of the NCA to return the funds in the accounts to N. Meanwhile, N commenced proceedings for an interim mandatory injunction requiring the bank to operate N’s accounts by carrying out specified past payment instructions. Burton J ordered that RBS make the specified payments and also declared that in doing so the bank “will not commit any criminal offence under the Proceeds of Crime Act 2002 or otherwise” and that it is “not obliged to make any disclosure as would or may be required by the Criminal Law or any other law”. Further similar orders followed.

Whilst not going so far as to say that POCA ousts the jurisdiction of the court to grant interim relief, the Court of Appeal accepted the NCA’s submission that the statutory procedure is highly relevant to the exercise of the court’s discretion to grant such relief. Parliament’s statutory scheme, which represents a “workable” and “reasonable” balance of conflicting interests in the fights against money laundering, cannot be displaced merely on consideration of the balance of convenience as between the interests of the private parties. Cases justifying such intervention are likely to be exceptional, including such extreme scenarios as demonstrable bad faith by the bank. The instant case was not sufficiently exceptional to justify the grant of an interim declaration.

Philip Moser QC and Imogen Proud (who did not act below) represented the National Crime Agency in the Court of Appeal. A copy of the judgment is here.

The Competition Appeal Tribunal (CAT) has today given its judgment on the first ever application for a Collective Proceedings Order (CPO) under the new competition damages collective actions procedures introduced by the Consumer Rights Act 2015. The CAT has refused to grant a CPO on the basis of the Claimant’s proposed case on consumer losses as set out at the application hearing, but has left the door open for the Claimant to return to the CAT with fresh economic evidence estimating alleged consumer losses on an alternative basis.

Background

Under the procedures introduced by the Consumer Rights Act 2015, any person can apply to the CAT for permission to bring claims for damages for competition law infringements acting as representative of a class of persons (such as consumers who bought a particular product) who are alleged to have suffered losses as a result of the infringement. Such actions can be brought on an ‘opt-out’ basis, so that, for example, every person in the UK who purchased a particular product during a particular time period will be within the scope of the proceedings unless he or she actively chooses to ‘opt out’.  If the action results in an award of damages, such class members will be able to submit claims for a share of those damages, and the amount that is left over in the damages fund after those claims have been processed may be given to charity.

The application for a CPO was issued in June last year by Ms Dorothy Gibson (the General Secretary of an unincorporated association calling itself the National Pensioners’ Convention) against Pride Mobility Products Ltd, an Oxfordshire-based distributor of mobility scooters.

The proposed action is a ‘follow-on’ action brought to recover damages for losses alleged to have been suffered by consumers in consequence of infringements found by a decision of the Office of Fair Trading (OFT). The OFT’s decision was issued in May 2014 and found that Pride and eight of its retailer customers had infringed the Chapter I prohibition in the Competition Act 1998.   By each of those eight agreements, Pride and a retailer (a “Relevant Retailer”) agreed that the retailer would not advertise below-RRP prices on the internet for particular models of scooter (“Relevant Models”).  Pride advised the retailers that they should instead state on their websites, “Call for best price”.  Pride had been concerned about the promotion of heavily discounted prices on the internet undermining the viability of ‘bricks and mortar’ stores and their ability to offer buyers of mobility scooters pre-sales physical assessments and after-sales support; but the OFT found that the way Pride had gone about trying to address that concern was unlawful.  No penalty was imposed on Pride, and Pride did not seek to appeal the OFT’s decision.

The claimant Ms Gibson (who did not herself purchase any mobility scooter) is claiming damages on behalf of everyone who purchased a Pride scooter in the UK during the 2-year period from February 2010 to February 2012 within which the eight infringements were operating.

A hearing of her CPO application took place over three days in December last year. At that hearing she relied on evidence from an economic expert who estimated the losses suffered by consumers at between £2.7m and £3.2m (not including interest).  The basis for that estimate was that the eight agreements identified in the OFT’s decision were pursuant to a “policy” of Pride to restrict retailers from advertising below-RRP prices on the internet.  The economic expert, who was cross-examined at the hearing, explained that he intended to quantify the consumer losses by comparing sold prices for the Relevant Models during the 2-year period during which the infringement place, with sold prices for those models in subsequent years.

The Tribunal’s judgment

The Tribunal’s judgment first dealt with Pride’s case that the CPO application should be refused because the provisions of the Consumer Rights Act 2015 allowing the bringing of collective actions on an ‘opt-out’ basis should not be permitted to have retroactive effect. Both at the times when the infringements occurred, and at the time of the OFT decision, it was not possible for actions to be brought on an ‘opt-out’ basis so as to claim damages for consumers who had not indicated any wish to bring a claim and who might never receive those damages personally.  The Tribunal rejected Pride’s argument that to allow an ‘opt-out’ action in these circumstances would contravene the principle against retroactivity which under the Human Rights Act and/or EU law.  The Tribunal found that there was no such contravention because the introduction of the ‘opt-out’ regime, although a radical procedural change in the UK, was not a change in substantive law.  The Tribunal also considered that Pride could have anticipated the change at the time when it was deciding whether or not to appeal the OFT’s decision in May 2014.

By its judgment, the Tribunal has declined to grant Ms Gibson a CPO at this time because her proposed basis for quantifying losses did not stand up to scrutiny in the context of a ‘follow on’ claim. Given that the proposed action was a ‘follow-on’ action, any estimate of consumer losses would have to be in relation to the alleged losses suffered by consumers specifically as a result of the eight infringements found by the OFT.  Ms Gibson’s economic expert should therefore not have sought to quantify damages by reference to Pride’s “policy”, since such an approach would effectively allege that Pride committed infringements in addition to the eight found in the OFT’s decision.

The Tribunal also expressed doubts the approach that the economic expert proposed to use for quantifying the losses, namely to compare sold prices for the Relevant Models during the 2-year period during which the infringement place, with sold prices for those models in subsequent years. Such an approach risked confusing ‘cause’ and ‘effect’.  If such a comparison were to be useful, it would be necessary to show that any reduction over time in the average sold prices of the Relevant Models was attributable to the cessation of the eight infringements, since this could not be assumed.

The Tribunal has, however, left the door open for Ms Gibson to return to the Tribunal with fresh economic evidence seeking to quantify the alleged consumer losses on an alternative basis. In that regard, the Tribunal considered that, given the effects on the interests of any consumers who may have suffered losses, it would not be proportionate to now exclude the possibility for Ms Gibson’s economic expert to reformulate his proposed approach for quantifying damages on the basis of a legally correct approach.  Any such quantification would need to be in relation to consumer losses attributable specifically to the eight infringements found in the OFT decision, and would therefore need to exclude any losses attributable to the conduct of any other retailers who chose to abide by Pride’s “policy”.  The economic expert would also need to explain how he proposed to show that any changes in sold prices for Relevant Models over time were attributable to the cessation of the infringements.

The Tribunal has formally adjourned the CPO application and invited submissions from the parties as to the form of order it should make.

Comment

The judgment will be of great interest to competition law practitioners as a first example of the approach that the Tribunal will take to examining the merits of proposed ‘opt-out’ collective actions before allowing such actions to proceed.

At the present time, it remains to be seen whether or not Ms Gibson will take up the opportunity to submit a new economic case for quantifying consumer losses. The judgment notes that there were some 250-300 retailers who regularly sold Pride scooters during the 2-year infringements period, and the number of Relevant Models sold by the Relevant Retailers during that period was 944 (many of which were sold in‑store rather than online or by telephone) .

A copy of the judgment is here.

Monckton barristers Alan Bates, Michael Armitage and Jack Williams are instructed on behalf of Pride.

Case C-72/15 OJSC Rosneft Oil Company v. HM Treasury; the Secretary of State for Business, Innovation, and Skills; the Financial Conduct Authority

The Grand Chamber of the EU Court of Justice has handed down an important judgment concerning the validity of the EU’s sanctions on Russia in response to Russia’s actions in Ukraine, and the scope of the CJEU’s jurisdiction to review the validity of decisions adopted under the EU’s Common Foreign and Security Policy.

The case was referred by the High Court in February 2015 (see [2015] EWHC 248 (Admin)) following a challenge by Rosneft to UK statutory instruments giving effect to the sanctions, and the legality of the underlying sanctions against the Russian oil sector.

In its judgment, available here, the CJEU finds that:

1. the Court has jurisdiction to give preliminary rulings on the validity of CFSP acts, provided that it relates either to the monitoring of the act’s compliance with Article 40 TEU, or to reviewing the legality of restrictive measures against natural or legal persons. The exclusion of the Court’s jurisdiction in the field of the CFSP should be interpreted strictly;
2. the adoption by the Council of restrictive measures against Russia in CFSP Decision 2014/512 did not breach Article 40 TEU by impinging on the Union’s competences under the TFEU;
3. in so far as it prohibits / requires prior authorisation for the sale, supply, transfer or export of technologies or services suited to specific categories of oil exploration and production, the CFSP measure does not prescribe restrictive measures against natural or legal persons, because the scope is determined by objective criteria;
4. on the other hand, measures applicable to specific entities including Rosneft were targeted at he named entities and the Court has jurisdiction to review their validity under Article 275 TFEU;
5. it was within the Council’s broad discretion to determine that the measures adopted against Russia were necessary for the protection of essential European Union security interests and the maintenance of peace and international security, within the meaning of Article 99 of the EU‑Russia Partnership Agreement;
6. the measures did not involve any breach of the Council’s obligation to state reasons, nor of Rosneft’s right of access to the file, rights of defence or right to effective judicial protection, nor any misuse of power, or breach of the principle of proportionality;
7. the fact that the measures were targeted at the oil industry did not infringe the principle of equal treatment. The Court agreed with the United Kingdom that it was open to the Council to target specific sectors of the Russian economy particularly reliant on products, technologies or services imported from the EU;
8. the fact that certain of the terms used in Regulation No 833/2014 are general in nature and may be subject to clarification by the Court does not breach the principle of legal certainty and does not prevent a Member State from establishing criminal penalties for breach of the Regulation.

The Court also clarified the use of the term ‘financial assistance’ in Article 4(3)(b) of Regulation No 833/2014, to exclude processing of payments by a bank or other financial institution, and the application of the prohibition on the issuance of global depositary receipts representing shares issued by one of the sanctioned entities before 12 September 2014.

The significance of the judgment lies, in particular, in the clarification of the scope of the CJEU’s jurisdiction to review CFSP acts under the preliminary reference procedure, and the degree of deference to be accorded to the Council in respect of the content of such acts.

Gerry Facenna QC acted for the United Kingdom in the Court of Justice. Gerry, Tim Ward QC and Julianne Kerr Morrison also acted for HM Treasury and the Secretary of State for Business in associated domestic proceedings leading to the reference.