Air freight damages claim struck out as “irresponsible” and lacking in authority

The High Court has struck out claims against British Airways for damages allegedly arising from the air freight cartel on the basis of lack of authority.  The claim was issued on behalf of 64,697 claimants, all members of the Chinese Chamber of International Commerce (CCOIC), an organisation that issues certificates of origin when goods are exported from China.

The claim form, particulars and statement of truth were signed by a then partner of the law firm Hausfeld & Co.  The High Court found that none of the claimants had authorised Hausfeld to bring the proceedings at the time the claim form was issued.  The claim was not salvaged by the argument to the Court that 362 members had subsequently expressly ratified the launch of proceedings on their behalf.

The High Court considered alternative submissions from British Airways and accepted that it would also have been appropriate to have struck out the claim as an abuse of process.  This was on the basis that the evidence showed that there were “no grounds for believing at the time [Hausfeld] issued proceedings that any particular claimant had shipped air freight over the relevant period”.  This included some claimants with activities in advertising, investment and banking.  The Court added that those parties may have only signed up for membership because they wanted to apply for a certificate of origin, rather than to authorise a foreign law firm to bring a claim on their behalf in another jurisdiction.

The Court was not sparing of its criticism and described the express ratification letters as “highly misleading”.  The case underscores the lawyer’s duty to satisfy themselves of the accuracy of pleadings and the potential perils when bringing claims on behalf of a large and geographically dispersed class.

Bao Xiang International Garment Centre and Others and Others v British Airways Plc [2015] EWHC 3071 (Ch)

CMA announces possible behavioural remedies in retail banking market investigation

The Competition and Markets Authority (CMA) has stated its preference for behavioural remedies in its interim findings in the ongoing retail banking market investigation.  This represents a sharp contrast to the tougher structural remedies that it has been urged to consider.

The CMA has provisionally found that there are features of the markets for personal current accounts, business current accounts and SME lending in Great Britain and Northern Ireland that give rise to adverse effects on competition.  The features that it has identified relate to themes that have been the subject of scrutiny in the numerous market and sector inquiries that the sector has faced over the years, including low levels of customer engagement, barriers to accessing and assessing information, barriers to switching, incumbency advantages and linkages between different lending products.

The CMA’s proposed remedies are designed to influence customer behaviour and particularly switching, as well as make it easier for SMEs to shop around.  The proposed remedies include a requirement that banks should be required to prompt customers to review banking services at various ‘trigger points’ such as the closure of local branches and changes to terms and conditions.  In relation to SMEs, the CMA proposes that customers should be reminded to switch at the end of free banking periods.  The CMA has also decided not to recommend ending free-if-in-credit banking where there are no account operation charges but the consumer does not receive any interest.  The CMA did not find that this practice distorted competition even though challengers said that this presents an obstacle for switching.

Over the course of the CMA’s inquiry which was launched in November 2014, it has found little shift in the market shares of the four largest banks which account for roughly 75% of personal and SME banking services.   The statistics cited by the CMA make rather dismal reading.  In SME banking it found that half open their accounts with their personal account provider and 90% remain with the same provider after the initial free banking period expires.  Nearly 60% of consumers have remained with their personal account provider for over a decade.  Last year, only 16% explored alternatives and only 3% switched.

The remedies proposed by the CMA generally reflect the trend of informational remedies that the CMA and its predecessor the Competition Commission have adopted in other consumer-focused and financial services markers (e.g. store cards, PPI, Northern Ireland Personal Current Accounts, Home Credit, the list goes on…).  The remedies, inspired by behavioural economics, are essentially aimed at empowering the consumer with the tools to take action. 

The move away from structural remedies is a stark contrast from the pleas to adopt more draconian solutions in the form of divestiture remedies and which reached a high-water mark in the months preceding the launch of the inquiry.  However, far bigger questions perhaps remain as to where challenger banks will come from.  This does not necessarily imply structural remedies but it does put a focus on the existing regulatory barriers such as capital requirements that can hold back such new entry. In fact, some challengers would argue that stimulating competition in the sector is not so much about selling off bank assets but lowering regulatory barriers to entry. 

The CMA invites comments on the provisional findings and proposed remedies by 20 November.  Although there is likely to be some tinkering with the remedies, the broad direction of travel seems clear and for now, at least, radical remedies such bank break-ups are off the table.

Robbing Peter to pay Paul - limitation post-Consumer Rights Act

There are high hopes for the Consumer Rights Act 2015 (CRA) with the expectation that it will remedy the blatant defects of the old style private damages regime.  But the rules on limitation raise complex questions which could deprive the reforms of many of their intended benefits – for some years to come at least.

The content of the reforms is covered in my previous posts.  Essentially, with effect from 1 October 2015 the CRA confers on the CAT the power to hear standalone competition law actions (previously only ‘follow-on’ actions could be brought in the CAT) and introduced new procedures for collective proceedings, including both opt-in and opt-out proceedings.

The limitation ‘problem’ derives from new Rule 119 of the CAT Rules 2015 which, in respect of certain claims arising before 1 October 2015, sets in stone the old limitation rules and provides narrow gateways out of them.  These old limitation rules were intended to cater for follow-on actions and essentially provide that the limitation period expires two years after the later of the date an infringement decision (has become definitive) or the date the cause of action accrued. 

Specifically, Rule 119 preserves Rule 31(1) to (3) of the CAT Rules 2003 so that this continues to apply where the relevant claim arose before 1 October 2015 for the purposes of determining the limitation period which would apply in respect of the claim if it were to be made on or after 1 October 2015. 

The immediate problems appear to be the following: 

(1)   Given the clandestine nature of cartels the transitional rules will hamper the claims that have already crystallised since the trigger point is when the cause of action accrued.

(2)   The continued application of Rule 31 (1)-(3) calls into question the bringing of a true standalone claim in the CAT since that rule – which presumes an infringement decision – was predicated on the basis of old style follow-on claims.

(3)   Follow-on claims accruing in the transitional period will be subject to the old rules.  An important consequence is that claimants will need to seek the CAT’s permission to bring a claim before an infringement decision becomes definitive.

(4)   Collective proceedings may be rare for the next few years, not least since they appear to suffer from the same restrictions which cannot be cured by transfer of proceedings to the CAT.

Claims relating to losses that straddle 1 October 2015 and hybrid claims combining multiple causes of actions will no doubt require more limitation period gymnastics. 

The rationale behind the saving provisions – the text  of which was not consulted on – was apparently to preserve the position of parties who had let usual limitation expire in anticipation of bringing a claim when an infringement decision became definitive.  So, rather like the idiom of ‘robbing Peter to pay Paul’, in seeking to keep open the avenues to compensate those persons the transitional rules may have strangled many other claims in the pipeline.

Possible ways around this conundrum have been suggested such as interpreting the new limitation rules without regard to the need for an infringement decision.  The CAT’s 2015 Guide to Proceedings provides further detail on the time limits for bringing claims but stresses that these are merely general guidelines, and it is beyond the scope of the Guide to provide definitive advice.  It states that determining whether a particular claim is still in time can be a complex matter, and potential claimants should seek legal advice at the earliest available opportunity.  That’s probably right.