Admitting facts and abusing process: regulatory settlements and subsequent litigation

Can it be an abuse of process for a party benefitting from a regulatory settlement to deny (or not admit) a fact it admitted in that settlement in subsequent litigation?*

The answer, following a recent judgment of the Court of Appeal, is yes.** At least where the settlement is with the European Commission and for a breach of competition law.

The judgment at first instance

The question arose during a number of private damages actions following on from the European Commission’s settlement with certain truck manufacturers (the Addressees) for breaches of European competition law (the Settlement Decision). Various of these claims have been brought against some or all of the Addressees and are being heard at first instance by the Competition Appeal Tribunal (CAT).

In March 2020 the CAT made a preliminary issue ruling upon which recitals of the Settlement Decision were binding upon the Addressees in follow-on litigation in the domestic courts.

The CAT found that European law required the domestic court to be bound by certain parts of the Settlement Decision. The CAT specified the way in which those binding parts might be identified.

The CAT further found that, unless certain exceptions (set out in paragraph 141 of its judgment) apply, it would also be an abuse of process for the Addressees to deny (or not admit) the non-binding elements of the Settlement Decision that related to facts admitted by the Addressees during the settlement procedure.

This latter finding enhances the treatment of the admissions made by the Addressees beyond typical treatment of admissions in English civil proceedings. Generally speaking, admissions made outside of the immediate proceedings are admissible in evidence against the admitting party but nevertheless remain open to challenge. The CAT’s judgment removes the possibility for challenge where the admission is of a fact appearing in the Settlement Decision unless the limited exceptions apply.

The appeal

The appeal was brought by the Addressees and dealt solely with the CAT’s finding that it was potentially abusive for an Addressee to deny (or not admit) non-binding elements of the Settlement Decision. The Addressees argued that (i) the application of the abuse of process doctrine was contrary to EU law (specifically Article 16 of Regulation 1/2003 and the fundamental right to effective judicial protection), and (ii) was inconsistent with the existing authorities.

The Court of Appeal unanimously dismissed the appeal and endorsed the judgment of the CAT. In so doing, the Court of Appeal found, among other things, that:

• EU law did not preclude the operation of the abuse of process doctrine in this case;
• for the purposes of the abuse of process doctrine the Settlement Decision was not to be taken as a series of decisions, some binding and some not binding, but rather as a unitary 'final decision';
• the CAT appropriately applied the requisite high threshold in determining the application of the abuse of process doctrine. The Court was satisfied that the CAT was justified to conclude that it would create unfairness to require the facts admitted in the settlement proceedings to be proven in subsequent litigation. This was the case despite the fact that the issues had not previously been ventilated between the present litigants; 
• the administration of justice would be brought into disrepute if the Addressees were entitled to contest admissions they had made to the European Commission; and
• the abuse of process doctrine was engaged regardless of the subjective motivation of the Addressees - i.e. it was irrelevant whether the Addressees had intended to make their admissions only for the purposes of the settlement process or for some other pragmatic purpose.

The Court of Appeal rejected the Addressee’s argument that the abuse of process doctrine should not apply in circumstances where it not been possible for the Addressees to challenge the non-binding elements of the Settlement Decision in an independent forum prior to the instant claims.***

Multi-party settlements

A further finding of the Court with potential importance for parties considering entering into a multi-party settlement with the European Commission is that every fact set out in the Settlement Decision was found to be equally admitted by every Addressee unless the Settlement Decision itself says otherwise. In other words, Party X will be taken to have admitted all of the facts in the decision – not just those facts that were within Party X's settlement submission – unless Party X’s non-admission of any facts is clearly indicated in the decision itself.

This could give rise to difficulty where Party X finds itself asked to conclude a settlement requiring an admission of facts outside its individual knowledge (for example, facts originating from Party Y that are outside of Party X's knowledge and where the European Commission declines to clearly record that Party X does not admit the facts originating from Party Y). In such a circumstance Party X faces a dilemma. It must either: (a) admit Party Y’s facts and accept that it may be bound by that admission in subsequent litigation; or (b) abandon the settlement procedure and return to a fully contested investigation.

Scope of the judgment

While the Court of Appeal’s ruling related to a particular infringement and settlement process pursued with the European Commission, the judgment is likely to be of interest to anyone contemplating making admissions to a regulatory authority.

It is worth noting in particular that the UK competition regulator – the Competition and Markets Authority – operates a settlement procedure for infringements of competition law along very similar lines to that of the European Commission.

It remains to be seen, at the time of writing, whether the Addressees will attempt a further appeal of the Court of Appeal’s judgment.

* where the regulator is not a party to the subsequent litigation.

** AB Volvo (Publ) & Ors v Ryder Ltd & Ors [2020] EWCA Civ 1475 (11 November 2020)

*** The Addressees’ position was that there was no avenue to challenge the non-binding parts of the Settlement Decision in the European Courts as appeals to that forum only lie where they relate to the operative part of a decision or to its essential basis. As the CAT had found that the non-binding elements of the Settlement Decision were co-extensive with those elements that are not essential to the operative part, those non-binding elements of the Settlement Decision were not open to independent challenge until they became the subject of review in domestic proceedings – such as the instant claims.