The High Court has delivered its decision in the claim brought by BritNed Development Limited (BritNed) against ABB AB and ABB Ltd (together ABB). The case is significant as it is the first cartel damages claim to reach final judgment in the English courts.
BritNed alleged that it suffered damages in excess of €180 million by reason of an alleged overcharge in the price of the UK-Netherlands electricity interconnector cable, which ABB contracted to supply to BritNed in 2007. The much-anticipated judgment of Mr Justice Marcus Smith found that ABB did not deliberately overcharge BritNed for the cable and awarded BritNed only a small portion of the damages sought, entirely rejecting BritNed’s claims for alleged lost profits and compound interest.
With a proliferation of competition damages claims, including many other cartel damages actions, making their way through the English Courts, the judgment in the BritNed case will provide useful guidance for both claimants and defendants on the approach of the English courts to the quantification of damages for breaches of competition law. The judgment also sheds light on the complex inter-relationship between a breach of duty and quantification of loss in tort cases more broadly.
BritNed’s claim concerned the contract for the supply of the UK-Netherlands electricity interconnector, a 245-kilometre submarine cable connecting the British and Dutch electricity networks. ABB contracted to supply the interconnector to BritNed during the period of its participation in the power cables cartel. BritNed contended that it paid over 20% more than it should have done for the interconnector, and also claimed for lost profits and compound interest.
Grappling with conflicting expert economic evidence against the backdrop of a lengthy Commission infringement decision, the Court awarded only a small portion of the damages sought by BritNed on the basis of: (i) a finding that as ABB was not operating in a competitive market it was insulated from a technical inefficiency in its cable design for this particular type of submarine cable; and (ii) certain cost “savings” found to have been made by ABB due to its participation in the cartel. The Court dismissed BritNed’s claim for lost profits and found that its claim for compound interest was “unarguable”.
The judgment provides important guidance in relation to the approach to economic and factual evidence in cartel damages cases. There are five key points:
First, as to the weight to be placed on findings in a Commission infringement decision: The judgment emphasises that only the operative part of the infringement decision, and those recitals of the decision that are core to the operative part, are binding on the Court. The other recitals in the decision, which may refer to individual customers or sales affected by the conduct, are not binding if the Court is presented with factual evidence to the contrary. In BritNed, ABB adduced evidence from witnesses, including a former employee involved in the cartel, and from contemporaneous documents, which was crucial to the judge’s consideration of the impact of the cartel on the sale of the BritNed interconnector cable.
Second, there is no presumption of overcharge in cartel damages cases: The Court held that there could be no presumption that the cartel conduct had caused harm in this particular case (this may be different when future cases arise to which certain provisions of the EU Antitrust Damages Directive apply). The judge made clear that he did not consider that a presumption of harm “particularly assists in the assessment of damages in cartel cases”. He considered that the challenges of informational gaps in cartel cases are “fully factored into” the approach of the English courts to determining whether there was any overcharge on the claimant, and if so, how much.
Third, the importance of underlying factual evidence for expert economic analysis: The Court relied in large part on ABB’s economic expert’s approach to the quantification of damages, finding that economic analysis should be rooted in the factual evidence of the case and focussed on the specific project in relation to which compensation is sought. Analysis which aims to show generalised effects of a cartel across other sales during the period of infringement will likely not be persuasive, or at least conclusive, if the position varied significantly from one sale to another.
Fourth, the danger of introducing too much complexity in a statistical model: The Court agreed that it was appropriate to rely on ABB’s reported costs as the foundation for an economic analysis comparing prices during and after the cartel. In this case, the judge held that reliance on a range of proxy measures in an econometric regression analysis introduced significant uncertainty into the modelling, as the model produced by BritNed’s expert had poor predictive power and could not produce reliable estimates of the alleged overcharge.
Fifth, the judgment provides important guidance on the interaction between the concepts of statistical significance and confidence intervals, and the standard of proof in civil claims: The judgment considers in detail the probative value of the output of regression models by reference to the concepts of statistical significance and confidence intervals, and considers the relationship between the legal standard of proof and the conventions used by economists. It holds clearly, and rightly, that aligning the conventional level of probability required by statisticians and economists in assessing the results of economic analysis (typically 95%) with the 51% balance of probabilities standard in civil litigation would be fallacious, as the concepts are distinct.
The limited nature of the damages awarded to BritNed raises important issues as to costs, which will be considered at an upcoming consequential matters hearing.
Freshfields acted for ABB in its defence of the BritNed claim. The team was led by partners Mark Sansom and Nick Frey, assisted by the associate team led by Lara Hall and comprising Natalie Puddicombe, Ramya Arnold and George Lumbers. Freshfields acted alongside a counsel team from Brick Court Chambers, comprising Mark Hoskins QC, Sarah Ford QC, Jennifer MacLeod and Jon Lawrence. ABB’s expert economist was Zoltan Biro of Frontier Economics.
The judgment in BritNed Development Limited v ABB AB and ABB Ltd [2018] EWHC 2616 (Ch) is available here.
