Does the CAT’s fast-track procedure strike the right balance between claimants and defendants?

(by Sebastian Peyer) The Consumer Rights Act 2015 significantly expanded the jurisdiction of the Competition Appeal Tribunal (‘CAT’).[1] The Tribunal can now adjudicate stand-alone damages claims, award permanent and interim injunctions,[2] allow opt-out collective proceedings (see previous blog post) and deal with claims in the new Fast Track Procedure (‘FTP’). Enforcement mechanisms prior to 2015 were ineffective for small and medium sized enterprises (‘SMEs’) because of the high cost associated with bringing such actions before the High Court and the narrow jurisdiction of the Competition Appeals Tribunal (‘CAT’) for follow-on damages actions. A comparative glance at Germany showed that claimants had a strong preference for simply stopping anti-competitive behaviour through an injunction, yet even this simple tool was considered costly and complex in England. Since the introduction of the 2015 Act, a number of claimants have applied for the fast track procedure and the CAT has awarded one injunction in the FTP (Socrates Training Limited v The Law Society of England and Wales).[3]  The FTP appears to be both effective at capping costs to reasonable levels and, more importantly, at providing a credible mechanism to encourage out of court settlements.

Characteristics of the CAT’s Fast Track Procedure

Parties seeking an FTP must apply to the CAT under rule 58 of the CAT Rules 2015. If it is approved, the recoverable costs are capped and the hearing must take place within six months of approval. Claims or part of claims are deemed suitable for the inclusion in the fast-track when one or more parties are SMEs and the estimated time for the hearing is 3 days or less. Other factors that determine the suitability of a claim for the fast-track procedure are complexity and novelty of the issue at hand, whether there are any additional claims, the number of witnesses involved and the nature and scale of documentary evidence (including the disclosure requirements). The FTP does not preclude the use of economic evidence but experts may be asked to limit their statements to a particular question such as market definition.[4] The fast-track also allows the award of an interim injunction.[5] The FTP is open to any remedy but the CAT clarified in Breasley Pillows Limited and Others v Vita Cellular Foams (UK) Limited and Others that damages claims requiring a complex assessments of losses are not suitable for an inclusion in the fast-track.[6]

Fast-track in practice

In the only decided claim so far, the CAT’s use of cost capping and limiting disclosure seemed to be effective, bringing Socrates Training Limited’s injunction claim to a swift conclusion after a four-day hearing. It also encouraged the parties to negotiate the amount of damages sought by Socrates Training Limited via mediation.[7] As for the cost capping, the claimants had an annual turnover of £750,000 and their costs were capped at £230,000 – still a significant amount –  while the defendants’ costs were capped at £402,500. The CAT was rigorous in its cost capping decision. It held that the defendant’s budget was disproportionate and reduced it by more than £200,000. It is important to note that the cap in the FTP is set at the lowest amount reasonable not at the amount that is in the party’s best interest. The idea of the cost cap is to strike “a fair balance between enabling access to justice for the claimant and providing a measure of protection to the defendant not only from unmeritorious claims but  also  from  the  burden  of  having  to  defend  a  claim  which  it  is  assumed  for  this purpose  proves  to  be  unfounded.”[8] Thus, the defendant’s costs that were caused by switching to a more specialised and more expensive City law firm were not deemed to be the lowest amount reasonable.

To allow the claim to move forward in the fast-track the CAT also decided to split the trial and only dealt with the question of liability, i.e. the question of whether the defendant abused a dominant position. In other words, the CAT decided the injunctive claim first and, thus, provided the parties with a starting point for their damages negotiations. Other measures that were used to minimise the costs of procedure were limiting the number of witnesses and directing specific disclosure (as opposed to the usual standard disclosure) which is limited to certain categories of documents. Justice Roth also used a practice known as ‘hot tubbing’ or concurrent expert examination where claimants’ and defendants’ experts take the witness box .

Does the FTP strike the right balance?

Only one substantive decision so far does not look like a great success for the FTP but one must bear in mind that litigated cases are only the tip of the iceberg of legal disputes. Lowering the costs for potential injunctions claims via FTP adds certainty for litigants as to the expected costs of a dispute.  This makes the Tribunal more accessible and increases the potential threat from litigation. The more real litigation threat may encourage parties to settle their dispute before they actually reach the CAT or the trial stage at the CAT. Since the FTP became available three fast-track claims were registered and subsequently withdrawn, two of them after the parties settled.[9] It shows that access to justice is not just about the litigated cases but about the disputes that are settled with the involvement of the courts. The Socrates case also demonstrates that an injunction is a good way of determining the substance of a claim, enabling the parties to settle any damages questions afterwards.[10] On the other hand, making the courts more accessible via the fast-track entails the risk that defendants are left out of pocket, as they normally face higher costs – for example, for disclosure. The defendant’s costs in Socrates were capped at £402,500 from a proposed budget of over £600,000. Whether the FTP overemphasises access to justice or whether it is striking a fair balance between defendants and claimants is not yet clear. We will discuss this and other issues at the CCP’s & UEA Law School’s Conference on Private Enforcement of Competition Law: Current Issues that takes place at UEA on 15 September 2017. The programme and booking form are available here.

[1] Schedule 8.

[2] For an application for an interim injunction see UKRS Training Ltd v NSAR Ltd [2017] CAT 14.

[3] [2017] CAT 10.

[4] Socrates Training Limited v The Law Society of England and Wales [2017] CAT 10 para 8.

[5] Rule 68 CAT Rules 2015.

[6] [2016] CAT 8.

[7] The parties have been given time to come to a mediated agreement with regard the amount of damages to be paid.

[8] [2016] CAT 10 para 14.

[9] See Labinvesta Limited v Dako Denmark; Shahid Latif & Mohammed Abdul Waheed v Tesco Stores Limited; NCRQ Ltd v Institution for Occupational Safety and Health.

[10] In Socrates the CAT gave the parties time for mediation to come to a mutual agreeable solution re quantum.

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