Can the limitation period to bring cartel damages claims ever start running prior to the publication of a competition authority’s infringement decision? That was the question raised by our London antitrust litigation team’s successful representation of Infineon in a recent limitation preliminary issue judgment of the UK’s High Court. You can read the views of our team on the reasons why the claim was held to be time-barred in this case, and on the implications of the judgement, in our latest Risk Blog below.
In an important confirmation of the law of limitation as it applies to cartel damages claims, and applying the principles set out in Granville Technology Group v Infineon Technologies  EWHC 415 (Comm) (another case concerning Infineon), Arcadia Group Brands v Visa  EWCA Civ 883, DSG Retail v Mastercard  EWCA Civ 671 and Nokia v AU Optronics  EWHC 731 (Ch), the High Court (Mrs Justice Bacon) has dismissed as time-barred a claim for over EUR 480 million brought by Gemalto (now a subsidiary of Thales) against Infineon and Renesas in respect of the smart card chip cartel.
Gemalto’s claim followed on from a September 2014 decision of the European Commission that, between 2003 and 2005, Infineon, Renesas and other smart card chip manufacturers had unlawfully coordinated their pricing behaviour. Gemalto’s claim was issued some five years after the Commission decision, and fourteen years after the conduct, in July 2019.
The limitation period applicable to the claim was six years from the date on which Gemalto’s cause of action accrued. Gemalto contended that its claim was in time, despite being issued more than six years after the infringement ceased, because Section 32(1)(b) Limitation Act 1980 provides that, where there is deliberate concealment by the defendant of facts relevant to a claimant’s right of action, the limitation period does not start to run until the claimant discovers, or could with reasonable diligence have discovered, the facts that were essential to establish a prima facie case against the defendant.
Gemalto’s contention was that time did not start running against it until the issue of the Commission’s infringement decision in September 2014. Infineon and Renesas accepted that, in light of the Commission decision, there had been deliberate concealment of facts relevant to Gemalto’s right of action at the time of the infringement, but argued that Gemalto nonetheless had sufficient knowledge of the essential elements of its claim to plead a valid claim more than six years before Gemalto had in fact issued its claim, and that Gemalto’s claim was therefore time-barred.
What must a claimant discover, or be capable of discovering, to start limitation running?
Mrs Justice Bacon applied the “statement of claim test”, meaning that she asked at what point Gemalto knew (or could with reasonable diligence have known) the essential identifying elements of its claim with sufficient certainty to plead a claim which would not be struck out.
It was common ground between the parties that the essential identifying elements of the infringement, which Gemalto had to know in order to plead a non-strikeable claim, were:
- the identity of the undertakings who had participated in the agreement;
- that the agreement involved the coordination of market behaviour for smart card chips in breach of the EU competition rules;
- that the geographic scope of the agreement extended to the EEA; and
- the time period covered by the agreement (although there was a dispute as to how precise that had to be).
If Gemalto had knowledge of those essential elements sufficient to plead a non-strikeable claim more than six years before it in fact issued its claim (i.e. before July 2013), the claim was time-barred.
Did Gemalto have the requisite knowledge?
Infineon and Renesas argued that Gemalto did have knowledge of those essential elements, at the latest by April 2013, through a combination of publicly available material (including reporting of the Commission’s press release in April 2013 announcing that it had issued a Statement of Objections) and, crucially, requests for information (RFIs) sent by the Commission to Gemalto (which was and remains a key purchaser of smart card chips) during the Commission’s investigation.
Mrs Justice Bacon found for the Defendants. She held that the RFIs Gemalto received from the Commission gave Gemalto information not in the public domain regarding the time period the Commission was investigating and the products under investigation. The Commission’s press release announcing the issue of a Statement of Objections confirmed that the Commission had reached a preliminary view that there had been an infringement of EU competition law, in the shape of coordination of behaviour in the market for smart card chips. Although the Commission’s press release did not name the recipients of the Statement of Objections, Infineon and Renesas confirmed in press releases that they had received it. Therefore, at the latest by the issue of the Statement of Objections, Gemalto had knowledge of each of the essential identifying elements of the infringement, sufficient to plead a non-strikeable claim, such that time started to run.
The judgment makes a number of helpful confirmations regarding the application of limitation rules to cartel claims:
- The judgment in the case is a rigorous, yet orthodox, application of the existing limitation authorities as previously applied in the context of cartel damages claims.
- It was neither the Defendants’ case, nor the judge’s finding, that time starts to run in all cases from the issue of a Statement of Objections. However, subject to a fact-sensitive analysis, time can in principle start running from the issue of a Statement of Objections (or before) if a claimant has (or could with reasonable diligence have discovered) the information needed in order to plead a claim in damages. There is, in other words, no firm rule in cases like this
postponing the running of time until the date of the infringement decision if the claimant in fact has (or could reasonably have discovered) the requisite information earlier.
- In response to Gemalto’s argument that a Statement of Objections could not as a matter of principle provide information capable of satisfying the statement of claim test, because it does not constitute either first-hand knowledge or unequivocal proof of the underlying infringement, the Court held that a claimant “can properly infer that [the Commission’s position that an infringement has been committed] does not represent merely speculation or suspicion, but is founded upon evidence that has been gathered during the course of the investigation”. Mrs Justice Bacon noted that this conclusion is supported by Nokia, in which the claimants issued a standalone claim on the basis of a Statement of Objections issued by the Commission, with very little detail as to the parties to the cartel and its duration, and survived an application for strike out by the defendants.
- It is in the nature of a cartel claim that when pleading its claim, the claimant will often have no direct knowledge of the underlying facts but will rely on second-hand information and inference. There is “nothing inherently objectionable” about this: reasonable belief in the existence of primary facts in the exclusive knowledge of the defendant is sufficient. Claimants cannot take the advantage this provides in the standard applied to their pleaded cases without acknowledging the consequences for limitation. Indeed, Mrs Justice Bacon noted that Gemalto had itself pleaded loss and damage in reliance not on any primary facts regarding the overcharge Gemalto alleged it had paid due to the cartel, but on a 2009 Oxera study of cartel overcharges, identifying an average international cartel overcharge of 26%. Gemalto could not explain why it considered it appropriate to infer that it had suffered loss (an essential element of its claim) based on a study of other cartel cases, but inappropriate to infer the existence of a cartel based on the issue of a Statement of Objections by the Commission in the case in hand.
- The test of whether a claimant has sufficient material to give rise to a reasonable belief of the facts necessary to plead its claim is objective. The fact that Gemalto’s witnesses, who had been involved in the consideration of potential legal action arising out of the Commission’s investigation, testified that they did not consider that Gemalto could (or should) bring a claim until the Commission issued a decision, was irrelevant. So too was the fact that Infineon had denied any wrongdoing, which Mrs Justice Bacon recognised as common and in the nature of litigation. The fact that a defendant disputes an element of a claim cannot postpone the running of a limitation period.
- Mrs Justice Bacon applied the “statement of claim” test rather than the more generous test in Test Claimants in the Franked Investment Group Litigation v HMRC  UKSC 47 (the “FII” test) in which time begins to run from the point when the claimant has, or could with reasonable diligence, have knowledge about the cause of action to justify embarking on the preliminaries to the issue of proceedings such as submitting a claim, taking advice and collecting evidence. FII concerned a mistake of law rather than a fraud or deliberate concealment case, and it has been left open in the authorities whether the “statement of claim” or FII test should apply to a case involving deliberate concealment of the conduct (such as a cartel damages case). Infineon and Renesas agreed that it made no difference to their case which test was applied, so Mrs Justice Bacon declined to express a view on whether the FII test should displace the “statement of claim” test in deliberate concealment cases, finding that this best be decided on the facts of a case where it makes a difference to the outcome.
- Notwithstanding the clarity of her findings, Mrs Justice Bacon granted Gemalto permission to appeal on the basis that "irrespective of the prospects of success on appeal... the ruling is likely to have significant practical implications for the operation of limitation periods in claims founded on infringements under investigation by a competition authority (including the CMA)". The principles underlying the judgment, and their application to the facts of this case, will therefore be considered by the Court of Appeal later this year.
- Although not an issue discussed by the Court, it is worth noting that the future impact of this judgment is itself limited. Claims arising out of cartel behaviour that occurred on or after 9 March 2017 are subject to a new limitation regime under the new schedule 8A to the Competition Act. This new regime includes a suspension of the limitation period during investigation of the cartel by a competition authority.
Freshfields acted for the Infineon Defendants. The team comprised partner Mark Sansom, senior associates Daniel Hunt and Jess Steele, associates Sophie Tang and Adrian Wright. Infineon’s counsel team was Sarah Ford QC, Tim Johnston and Emma Mockford of Brick Court Chambers.