Briefing
How long can limitation be delayed? The UK Court of Appeal on deliberate concealment and cartel damages claims
Following our previous article on January’s judgment of the UK High Court (available here), the Court of Appeal has upheld the first instance ruling, confirming that the limitation period to bring a cartel damages claim can, in some circumstances, start to run prior to a formal finding of infringement by a competition authority. The result is a success for our client Infineon, which was represented by our London antitrust litigation team. This blog summarises the judgment and its implications.
The UK Court of Appeal has handed down an important judgment dismissing the appeal of Gemalto against the ruling that its follow-on claim for competition damages (valued at nearly €500 million) was time-barred.
In a unanimous judgment, the Court of Appeal (Vos MR, Green LJ, Birss LJ) upheld the decision of the High Court that Gemalto (now part of the Thales group) brought its claim more than six years after the limitation period began to run pursuant to section 32(1)(b) of the Limitation Act 1980 (dealing with the postponement of the limitation period in cases of deliberate concealment).[1] Accordingly, Gemalto’s claim against the smart card chip manufacturers Infineon and Renesas remains time barred.
The judgment is relevant to any claim where a limitation period is alleged to have been extended due to deliberate concealment on the part of a defendant under the Limitation Act and is of particular (although temporally limited) importance to companies facing cartel damages claims following on from decisions of competition authorities. The impact of the Court of Appeal's judgement is also of relevance to any claim alleging deliberate concealment which has the effect of postponing limitation.
Background and the High Court judgment
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 unlawfully coordinated their pricing behaviour.
Although the infringing conduct ended nearly fifteen years before Gemalto issued its claim, and despite the English law of limitation providing for a six-year period to bring such claims, Gemalto argued that the facts necessary to its claim were deliberately concealed from it by the defendants. In such cases, English law provides that the limitation period only begins to run from the date that the claimant discovers, or could with reasonable diligence have discovered, the concealment.
Gemalto commenced proceedings on 19 July 2019. This was within six years of the Commission’s 2014 infringement Decision, but more than six years since 22 April 2013, when it became public knowledge that the Commission had issued a Statement of Objections (SO) to Infineon and Renesas informing them of its preliminary view that they may have participated in a cartel.
It was not disputed that Gemalto was aware of the Commission’s investigation (which received publicity as early as 2009), or that Gemalto knew that Infineon and Renesas had received an SO. In addition, Gemalto had received (and responded to) requests for information from the Commission prior to the issue of the SO, which contained additional information relevant to the Commission’s investigation, such as the time period under investigation by the Commission.
In a preliminary issue trial, held in January 2022, Infineon and Renesas argued that any concealment was (or could reasonably have been) discovered by Gemalto more than six years before Gemalto brought its claim. Gemalto argued that it could not have brought its claim before the Commission issued the 2014 infringement Decision.
In her judgment, Mrs Justice Bacon DBE applied the so-called “statement of claim test” to identify when time started to run for Gemalto’s claim. The statement of claim test involves asking when the claimant could have pleaded a claim that would not be liable to be struck out as unarguable or lacking a sufficient evidential basis. Bacon J applied this test with the agreement of the parties that the other potential test, the so-called FII Test (discussed below), did not lead to a different practical result.
Applying the statement of claim test, Bacon J found that the cumulative information in Gemalto’s possession meant that Gemalto had sufficient knowledge to plead a non-strikeable claim by the time of the SO at the latest. Time had started to run from at least April 2013 and Gemalto’s claim was therefore time barred.
Bacon J gave Gemalto permission to appeal her judgment on: (1) whether it was wrong to conclude that a claimant may rely on the announcement of an SO as a basis for a reasonable belief in the existence of a cartel; and (2) whether Gemalto could have legitimately pleaded a cartel covering the time period indicated in the European Commission’s requests for information sent to Gemalto.
The Court of Appeal’s ruling on limitation in cases of deliberate concealment
The relevant test – The “FII test”
The Court of Appeal (unanimously) found, going further than previous first instance judgments had done (including in this case), that the “FII test” is the correct test to determine when a claimant could have been said to have “discovered” the facts relevant to a claim where limitation was said to have been paused due to deliberate concealment.
The FII test was set out by the Supreme Court in Test Claimants in the Franked Investment Group Litigation v HMRC [2020] UKSC 47: a case dealing with section 32(1) of the Limitation Act 1980, albeit about limitation periods in cases of mistake (s.32(1)(c)) rather than cases of deliberate concealment (s.32(1)(b)).
The Court of Appeal held that the FII test should also apply in the context of a cartel damages claim alleging deliberate concealment and found that time will start to run when a Claimant knows that it has a “worthwhile claim” such that it can “embark on the preliminaries” to issuing a claim:
"[…] the position after FII is that the proviso to section 32(1) has to be construed consistently as between mistake and deliberate concealment cases. Time begins to run in a deliberate concealment case when the claimant recognises that it has a worthwhile claim. In a case of this kind, a worthwhile claim arises when a reasonable person could have a reasonable belief that there had been a cartel. The claimant can embark on the preliminaries to the issue of a writ (and therefore the limitation has begun) once it knows that there may have been a cartel and the identity of the participants, without knowing chapter and verse about the details..." (Gemalto v Infineon, paragraph 53)
This raises the question of what amounts to a reasonable belief in a cartel in circumstances where there has not yet been a final finding of infringement by the competent authority.
Reasonable belief in a cartel
In this case, the Court of Appeal found that a reasonable belief in a claim could have been formed after the regulator (in this case, the European Commission) publicised its belief that there was a prima facie case that Infineon and Renesas had infringed competition law by publicising that it had sent an SO, following a multi-year and in-depth investigation.
"It is, in my judgment, obvious that, once the regulator publicises the fact that it believes, subject to defences, that there is prima facie case that certain persons have participated in an unlawful cartel, a claimant knows that it has a worthwhile claim. A claim pleaded on the basis of that information and inferences drawn from it would never be struck out without the court being able to see the Statement of Objections itself, which would provide many of the details that a claimant from whom the cartel had previously been concealed would be lacking.
[…]
The FII test does not mean that the claimant must have everything it needs to succeed in its claim on the day that the limitation period begins to run. No ordinary claimants with claims under other torts that have been concealed from them have such an advantage. They need to have discovered the facts relevant to their right of action which have been deliberately concealed from them by the defendant […] To do so, they need objectively to know they have a worthwhile claim. A public statement by a regulator after a four-year investigation (as in this case) that they think there is evidence that there may have been a cartel must be powerful evidence in support of that knowledge." (Gemalto v Infineon, paragraphs 58 and 60)
The Master of the Rolls emphasised the importance, however, of the additional evidence of what Gemalto did in fact know (see above), and that cases will turn on their facts. The relevance of an SO may not be the same in every case of this type.
Application to other cartel damage claims alleging deliberate concealment
A case-by-case analysis is required
The Court of Appeal’s judgment has confirmed, if it was in doubt, that claimants should not assume that time only starts to for the purposes of the Limitation Act 1980 in follow-on cartel damages claims once a regulator reaches a final finding of an infringement.
Instead, practitioners will need to consider the circumstances of each case to determine when the claimant could reasonably have recognised that it had a worthwhile claim, without knowing “chapter and verse” about the details.
Publicity around the issue of an SO by any competent regulator will be a major event in any such analysis (though not all SOs are publicised), particularly if that publicity contains information on the parties, time period, and relevant product market.
Other triggers might include the bringing of other claims, whether in the UK or elsewhere, in relation to the conduct.
Characteristics of the claimant
Green LJ’s judgment clarifies that he does not expect the application of the FII test in these claims to prejudice consumer claims. The FII test is fact and context sensitive, and takes into account the nature of the claimant and its resource, including access to legal advice:
"The position of a consumer relative to that of a corporate litigant might be very different. Time might well not begin to run from the same point as it did in relation to a corporate claimant. A typical consumer might be oblivious to the facts of the unlawful conduct, or as to its concealment, or as to the existence of an SO even if the fact of the SO was in the public domain, or as to its significance even if known of." (Gemalto v Infineon, paragraph 89)
How this would apply, however, in the context of collective consumer proceedings brought by a proposed class representative backed by a large litigation funder and claimant law firm (who may well have originated the claim), remains to be seen.
Further forward – diminishing relevance
Green LJ also noted the limited temporal implication for this judgment as it pertains to cartel damage claims. Green LJ referred to claims (such as Gemalto’s) to which this judgment applies as “legacy” cases.
This is because Schedule 8A of the Competition Act 1998 contains a new limitation regime for claims arising out of infringements of competition law occurring on or after 9 March 2017. The new regime, which was brought in to implement the EU Damages Directive,[2] includes a suspension of the limitation period during the investigation by a competition authority. While a significant number of claims currently before the courts will therefore concern the regime to which this judgment applies, that number will steadily decrease over time.
Conclusion
In the meantime, for “legacy” cases applying the limitation regime under the Limitation Act 1980, the judgment of the Court of Appeal is an important case on limitation in circumstances of deliberate concealment, particularly claims alleging cartel damages. The judgment reminds claimants that, after recognising that they have a worthwhile claim, they have six years to act: claimants can use that time to formulate their litigation strategy and to undertake the preliminaries to the issue of proceedings. Claimants should not unduly delay filing a claim beyond this time.
The judgment also reminds both claimants and defendants that the identification of limitation periods requires a nuanced and fact-specific analysis and cannot be presumed to follow only from the publication of a formal infringement decision. Defendants should look to the specific circumstances of claims they are defending to determine at what point time started running against their claimant. To adapt a statement made by the majority of the Supreme Court in Test Claimants:
“It is true that this approach involves a more nuanced inquiry than a mechanical test based on the date on which an authoritative appellate judgment determined the point in issue [for which, in a cartel damage context, perhaps read “the date on which a competent regulator formally issues a finding of infringement”]. But it would be unduly pessimistic to conclude at this stage that it will prove to be unworkable in practice, or too uncertain in its operation to be acceptable.” (Adapted from Test Claimants v HMRC, paragraph 212)
Freshfields acted for the Infineon Defendants. The team comprised partner Mark Sansom, senior associates Daniel Hunt and Jess Steele, associates Sophie Tang, Adrian Wright and Alisha Wright. Infineon’s counsel team was Sarah Ford QC, Tim Johnston and Emma Mockford of Brick Court Chambers.
[1] Gemalto Holding BV and another v Infineon Technologies AG and others [2022] EWCA Civ 782, judgment of 10 June 2022.
[2] EU Directive 2014/104/EU on damages for competition law infringements, as implemented in the UK by The Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations (SI 2017/385).