In September of 2019, Burford Co-Chief Operating Officer Aviva Will and Deputy Chief Investment Officer Craig Arnott posed a series of questions about antitrust litigation to a respected group of antitrust litigation experts from the US and the UK. Their answers are excerpted below.
What impact has the EU Damages Directive had on implementing global strategies for addressing anticompetitive conduct (as opposed to bringing suit in one jurisdiction)?
Gregory Asciolla and Jay Himes: It’s too early to tell. While defendants likely take it into account, it still appears to be the case that when they settle, a US-only deal is good enough. Defendants seem willing to risk litigation in Europe, which still is not very plaintiff-friendly nor collective litigation friendly.
Jane Wessel: The EU Damages Directive was designed to harmonize EU competition litigation, making it easier for victims of anti-competitive conduct to obtain compensation for loss suffered across the EU. While laudable, it was ambitious given the mix of common and civil law systems and the varying attitudes to private enforcement of competition law across the EU. While all Member States have implemented the Directive as national law as of 6 June 2018, it remains too early to assess the lasting impact this will have on jurisdictional strategies. Although the Directive introduces a series of minimum standards, for example in relation to limitation periods, disclosure and pass on, we have already seen wide divergence in the application of these minimum standards which suggests that EU-wide harmonization is some way off.
The approach of the judiciary in each jurisdiction will be key. Although many of the Directive’s key reforms are not retrospective meaning that the previous regime has some time to run, we are already seeing judges in some jurisdictions making decisions with the spirit of the Directive firmly in mind. This in itself has already created a degree of divergence across Member States. Moreover, although the aim was to create a level playing field, the benefits of particular jurisdictions will remain an influential factor. For example, English judges’ familiarity with ordering wide ranging disclosure is well documented and will continue to attract claimants notwithstanding the ability to secure disclosure in jurisdictions where this was previously unavailable. Finally, significant differences will remain between jurisdictions given that the Directive does not address other important factors such as the ability to bring collective actions or third-party funding, or the level of detail required to initiate proceedings.
Ultimately, the post Directive landscape will still involve an analysis of the pros and cons of particular jurisdictions. The real difference is that new jurisdictions may now enter the private enforcement space. However, there is a lot of ground for emerging jurisdictions to make up. Jurisdictions such as the UK and the Netherlands in particular have built up significant experience handling large-scale competition damages claims over many years. Claimants in these jurisdictions benefit from the experience of judges and a specialist competition bar, and no doubt such factors will continue to influence litigation strategy. The question is whether emerging jurisdictions can overcome this lack of experience, or whether other court systems suffer from structural impediments that will make this difficult to achieve. For example, there have been reports that the Spanish courts are struggling to cope with the large volume of follow-on claims related to the Trucks cartel.
Aaron Panner: With respect to private enforcement, the EU Damages Directive does not seem to have had any significant impact on enforcement strategy within the US. There are exceptions, but most of the lawyers that bring antitrust cases in the US—particularly on behalf of class plaintiffs—are associated with relatively small firms, with a small number of US offices, that have expertise in US antitrust law and litigation and limited exposure to other countries’ antitrust regimes. To be sure, US plaintiffs continue to try to pursue damages based on the impact of domestic conduct outside the US and international conduct within the US, with the scope of US remedies remaining an area of uncertainty and active litigation. Overall, however, the trend seems to be against providing a US forum for claims with a tenuous US connection. That will encourage plaintiffs to explore international options.
Corporate plaintiffs have, for many years, taken advantage of administrative enforcement mechanisms within the EU as part of a global litigation strategy. There are surely opportunities for the small number of plaintiff-friendly firms with international presences to pursue damages actions that encompass the UK, the EU and the US, much as patent litigation has taken on a global cast.
Scott Campbell: The implementation of the Directive throughout the EU has produced an identifiable uptick in competition damages claims in jurisdictions that had hitherto seen very few claims coming forward. For example, we have witnessed a dramatic rise in the number of damages claims being brought before the Spanish Courts, particularly arising from the EU Trucks cartel. A similar trend is taking place in Italy, France and elsewhere. We expect this trend to continue in terms of damages claims being brought in places other than the traditional triumvirate of England, the Netherlands and Germany. This is positive and is likely to help claimants pursue claims in the jurisdictions which make most sense in their own case, in terms of where the defendant is domiciled and/or where the loss was suffered. If that is correct, then we are likely to see fewer jurisdictional challenges in the early stages of cases.
While it is unlikely for a single claimant to be pursuing multiple suits in the courts of EU Member States (however one can envisage a conglomerate with multiple business units pursuing several claims in key jurisdictions where a product was purchased), in respect to losses arising from one cartel, defendants now do face the specter of handling multiple claims in several jurisdictions based on one Commission Decision in tandem. The foremost example of this at the moment is the litigation arising from the EU Trucks cartel, with litigation ongoing in multiple Member States’ courts.
What are the most significant challenges facing the collective action regime in the UK, and what impact do they have on advising claimants?
Scott Campbell: The regime is in its infancy and we are yet to see a case get fully certified by the Tribunal. Clearly the staying of existing cases due to the Merricks Supreme Court appeal is an unusual situation, and so it is hoped that the delay can be minimized and certification hearings can take place sooner rather than later. We will therefore have to wait and see how the various tools at the parties’ disposal are used once a case has been certified.
However, from the collective cases that have been issued—Dorothy Gibson, Merricks, UK Trucks Claims and the Road Haulage Association—we have learned a lot about how the Competition Appeal Tribunal will approach the early stages of a collective claim. The CAT has paid particular attention to funding structures and documentation, providing useful guidance for claimants and funders alike.
Overall, there are a good many reasons to be very positive about UK regime and, indeed, there has been no letup in funders’ appetite to bring these types of claims, and so we expect to see many more in next couple of years.
Gregory Asciolla and Jay Himes: Right now, the Mastercard collective action lawsuit in the UK is on appeal to the UK Supreme Court. That should provide clarity on whether the UK adopts the current Canadian approach (relatively easy to certify)—which was essentially the US approach 20 years ago—or an approach that requires a more rigorous inquiry before permitting certification. Defense attorneys can be expected to keep exporting US approaches into UK cases to see what’s accepted and what isn’t. The outcome of this case will provide an important roadmap to bringing collective actions in the UK.
Therefore, expect the upfront cost of collective litigation in the UK to keep increasing. Even if the UK Supreme Court affirms the Court of Appeals decision, defense attorneys will find argument-obstacles to test drive before the UK lower courts.
Jane Wessel: The introduction of the collective action regime via the Consumer Rights Act 2005 was intended to herald a new dawn in group actions in the UK. However, several years on, the UK courts are still grappling with the appropriate test to be applied at the class certification stage, as is well illustrated by the conflicting approaches in Merricks v Mastercard. While the CAT refused to certify the claim as suitable for the collective actions regime, the Court of Appeal concluded earlier this year that the bar to certification had been set too high and ordered the CAT to reconsider. Mastercard has now obtained permission to appeal the Court of Appeal decision before the Supreme Court and the case is set to be heard on 12-13 May 2020. Given the conflicting approaches to certification thus far, guidance from the Supreme Court on certification will be welcomed, particularly with respect to issues such the correct approach to the level of proof required from each individual claimant and the distribution of an aggregate award when a party is applying for collective proceedings status. Beyond the issue of certification, various other complex questions remain unanswered, including how the Courts will address conflicting claims between class members at different levels of the supply chain. These issues will need to be addressed as the collective action regime develops over time.
Looking ahead, there is little to doubt that the number and size of collective actions brought in the English courts and the CAT are set to increase. Consumer based claims such as Merricks are likely to become increasingly common, with claims involving personal data and GDPR set to dominate along with cartel follow-on actions. Recent data breaches by British Airways and Facebook have only served to demonstrate that this is an area ripe for growth in the context of collective actions. The Court of Appeal decision in Lloyd v Google LLC illustrates that damages can be awarded to compensate for an individual’s loss of control of personal data, without the need to establish financial loss or distress.
Aaron Panner: I’m the opposite of an expert in UK law, so my perspective on the challenges facing the collective action regime in the UK reflects my US-law sensitivities. And from that perspective, the Court of Appeals decision in Merricks—assuming it remains undisturbed—may remove a significant obstacle by liberalizing the standards for certifying a collective proceeding. In the US, of course, class certification is a critical inflection point in class-action litigation. A high barrier to certification gives defendants incentives to “hang tough” through certification; denial of certification can end litigation almost as effectively as a merits judgment in a defendant’s favor. Once a few collective actions have been certified in the UK and the procedural and substantive standards governing certification have begun to take shape, that will help to provide a roadmap for further actions.
Another question is how UK rules governing attorneys’ fees—and claimants’ potential liability for fees—may affect the risk profile of collective actions. That’s not a risk that US plaintiffs face, and it limits the downside of unsuccessful actions. If fee awards are modest, this may not be a significant factor in the overall calculus regarding whether to bring a collective action, but large fee awards may wind up as a complicating factor in maintaining collective actions in the UK.
Burford’s research shows that there is a gap between general awareness of legal finance and real understanding of how it can be used. What do you think accounts for that gap—and what do you think is the biggest benefit to claimants and firms?
Aaron Panner: The lawyers at our firm have worked with Burford, as well as other firms, for many years in a variety of capacities. We appreciate that litigation finance is not one-size-fits-all, but a tool that can be adapted to meet various challenges associated with maintaining litigation, particularly when there is an imbalance in resources and appetite for risk. It is generally recognized that litigation finance makes it easier for plaintiffs and counsel to take on well-funded defendants. More generally, such finance, like all finance, can manage and spread risk to allow litigants to pursue or defend cases in ways that create value.
Scott Campbell: Litigation funding has been a key element in the growth of private antitrust litigation over last decades or so. Indeed, clients expect funding to be on the menu of engagement structural options. London has become a very sophisticated market for funded claims with a range of funders, law firms and ATE products. However, whilst use of litigation funding is broadening, some firms—like Hausfeld—have a good deal more experience and knowledge with regard to deploying funding in the most suitable cases, working with third party funders to get the best funding profile in place and understanding how to budget realistically.
Perhaps the main reason for a gap in awareness of legal finance as a tool and how it can be used is that it does not fit traditional law firm business models, at least from a defendant perspective but less so on the claimant side. However, given that corporate claimants expect to see litigation finance on the “menu” there are powerful reasons for awareness to improve.
Jane Wessel: As the third-party funding market has matured, corporates have become increasingly aware of litigation legal finance as a tool to manage litigation costs. While the general concept is now familiar, there is still a knowledge gap in terms of the sheer variety of ways in which funding arrangements can be structured. As the legal sector itself becomes more attuned to the options available, corporate clients are gaining further awareness of the possibilities. There may also be a lingering conceptual bias that funding is for parties unable to fund litigation themselves as opposed to those who have the means but choose not to do so, preferring to finance the costs of litigation. Corporate claimants watching their competitors enter into bespoke arrangements are likely to have pointed questions for legal advisers who failed to highlight the full range of options.
The key benefits of funding will vary depending on the claimant’s profile. The classic scenario is that of a small company seeking funding for a claim against a better resourced opponent. In this scenario, funding tips the balance away from the deeper pockets of the defendant, enabling Davids to take on Goliaths in a less uneven playing field. The situation is different for larger companies. Here, funding arrangements help transform litigation from cash drain to a contingent asset. In-house legal departments can effectively operate as self-standing profit-making units. Significant funds that would have been earmarked for the costs of litigation are free to be reinvested into the business. For these companies, litigation funding just makes good business sense. For law firms, litigation funding enables greater flexibility, particularly with portfolio arrangements becoming increasingly popular. These arrangements allow multiple cases to be funded under a single facility through a streamlined process and on agreed terms, thereby reducing the risk to firms in taking on certain cases and reducing the cost of funding.
Read more of "Expert insights: Antitrust roundtable":
Part I • Part II
To read the article in full, download the Autumn 2019 Burford Quarterly.