On 23 March 2022, the Court of Appeal handed down another judgment in the case between investment funds Allianz Global Investors GmbH and Others and several banks including Barclays, Citibank and JPMorgan in the context of the forex-cartel.^[1]Court of Appeal (Civil Division) 23 March 2022, [2022] EWCA Civ 353, Case NO: CA-2021-000556 (formerly A4/2021/0726). The claimants had applied to strike out the banks’ defence that the funds had avoided or “passed on” to investors all or part of the losses they are claiming against the Banks in these proceedings.

The defendants argued that the funds passed on their losses to investors who cashed out on assets with reduced value, and who could thus claim these damages themselves. The claimants, on the other hand, argued that the investors themselves would have no cause of action.

The UK High Court had sided with the defendants in February 2021 (which we reported on in Q2021-1), in considering that the alleged pass-on would not be impossible or bound in law to fail. The Court of Appeal, however, now ruled otherwise and concurred with the claimants instead. The court said the lower court was wrong to decide that the individual investors had independent causes of action and besides, that any potential benefit of lower redemptions for the funds is to be regarded as “collateral” and therefore would fall under the exception for collateral payments, which the law treats as not making good the claimant’s loss.

On 17 January 2022, the Court of Appeal ruled that the CAT was correct in not permitting ball-bearing cartelist NTN to continue to trial and plead that any damages were mitigated, or avoided, through cost reductions.^[1]Court of Appeal (Civil Division) 7 January 2022, [2022] EWCA Civ 16, Case No: C3/2021/1441 & A. The position taken by NTN was that purchasers offset any increase in prices by decreasing prices elsewhere, i.e. by securing increased discounts from other suppliers (than the cartelist(s)). In particular, the question was whether such a defence would be permissible without any actual evidence that the claimant did in fact mitigate its loss in this manner but only upon the hypothetical basis that it is a “reasonable” inference that can be drawn that the purchaser would have mitigated its costs in this manner.

The Court of Appeal found no errors in the CAT’s ruling and agreed with its conclusion that NTN’s pleadings failed to meet the appropriate test to proceed to trial. The Court of Appeal agreed with the CAT and concluded: “I agree that the pleaded offsetting defence lacks particularisation or evidential underpinning. It is hypothetical and theoretical and, in some respects counterintuitive. It lacks realism. There are no policy considerations which justify permitting this defence to continue to trial.”.  

In other words, the appropriate test does require actual evidence and a mere hypothesis is not sufficient in order for a defence to be allowed to proceed to trial.

In Q1, we wrote about the decision of the High Court that was detrimental to investment funds Allianz Global Investors et al. The High Court had not given them permission to appeal the decision that allowed the banks that participated in the foreign exchange cartel in the proceedings instituted against them by the funds to assert in those proceedings that the investment funds passed on the damage they believed to have suffered to investors. The High Court initially had not given permission for reasons concerning case management because it feared a delay in the proceedings if the appeal were allowed.

In Q2, both the investment funds and the other claimants were given permission to appeal this decision. This will give them another opportunity to challenge the passing-on defence of the cartelists. According to the claimants, only the investment funds have a possible legal claim against the cartelists and this does not apply to independent investors. In addition, they believe that if the District Court were to agree with this passing-on defence of the banks, this would have far-reaching (and undesirable) consequences for the scope of future claims and thus also for the necessary provision of proof and the surrender of and access to documents in these and similar proceedings. The hearing is scheduled for 8 December 2021,[1] so that we will report on it in Q4.

[1] According to MLex, ‘Allianz Global Investors, others win permission to appeal UK forex cartel ‘pass-on’ ruling’, 1 July 2021.

On 13 April 2021, the German Bundesgerichtshof set aside an earlier judgment of the Schleswig-Holstein Court of Appeal in the German antitrust case against Daimler and ruled that the case be heard again.[1] This judgment stated that Daimler was liable for paying damages to an anonymised freight forwarder, that had purchased nine vehicles from Daimler and DAF.

The judgment of the German Bundesgerichtshof shows that the Schleswig-Holstein Court of Appeal made a legal error in assessing the circumstances in order to determine whether damage had occurred. The Schleswig-Holstein Court of Appeal had wrongly failed to take into account the advice from the private expert report submitted by Daimler and DAF, which contained a comparative market analysis that concluded that there had been no cartel-related price increases. According to the Bundesgerichtshof, the argument that the claimant was able to pass on the increase of its purchase costs was also wrongly rejected.

[1] Bundesgerichtshof 13 April 2021, ECLI:DE:BGH:2021:130421UKZR19.20.0 (Klägerin v. Daimler AG).

On 13 May 2021, the CAT ruled that DAF could not amend its pleas by adding general mitigation defences at the current stage of the proceedings against Royal Mail Group Limited (Royal Mail) and BT Group Limited & Others (BT). The case is expected to come to trial in April 2022.[1] DAF sought to amend its pleas by adding additional general mitigation defences in relation to the passing-on of damage, i.e. that Royal Mail and BT mitigated any loss by negotiating lower input costs and/or otherwise reducing its costs of supply. The test for allowing such an amendment at a rather late stage in the proceedings is whether there is a realistic prospect of the plea succeeding at trial. The CAT ruled that for a defendant to be permitted to raise a plea of mitigation in such general terms as proposed by DAF, “there must be something more than broad economic or business theory to support a reasonable inference that the claimant would in the particular case have sought to mitigate its loss and that the steps taken by it were triggered by, or at least casually connected to, the overcharge (..)”.[2] The CAT further held that where a defendant is in the position to make specific averments as to the alleged overcharge, it will be bound to plead them, rather than plead a wholly general allegation of mitigation of loss. The CAT added that in such circumstances, a general plea is liable to be struck out, or permission to amend refused.[3] DAF had not pleaded such specific averments. Even though DAF could not could not be expected to know the detail of the internal operations of Royal Mail and BT, it could at least be expected to be aware of its own commercial dealings with each of them, according to the CAT.[4] As there was therefore no factual support identified by DAF, the CAT was not persuaded that DAF currently had a sufficiently arguable case. Consequently, the application for permission to plead the general mitigation defence was dismissed.

[1] CAT 13 May 2021, [2021] CAT 10, Case Nos. 1284-1290/5/7/18 (T).

[2] Para. 36.

[3] Para 37.

[4] Para 38.

On 13 April 2021, the Federal Court of Justice rendered another antitrust damages judgment, this time regarding the truck cartel.[1] Daimler initiated the appeal in cassation after it had lost before Schleswig-Holstein Higher Regional Court in a case against an (anonymised) freight forwarder that claimed damages from the manufacturer for nine trucks it had purchased from Daimler and DAF. Daimler, along with DAF, Volvo-Renault, MAN and Iveco, was fined in 2016 for infringing agreements on prices and introduction of emission standards in the period 1997-2011. In 2017, Scania was also fined for these infringements. The lower courts had therefore ruled that the infringing acts caused damage to the anonymous claimant and had ordered Daimler to compensate it. In April 2021, the Federal Court of Justice ruled that Schleswig-Holstein Higher Regional Court had correctly held that the cartel was likely to have caused damage due to a price increase, but the Higher Regional Court had failed to take sufficient account of the fact that the price increases could (partly) be passed on to customers of the injured party. Moreover, Daimler and DAF had submitted their own economic investigations that concluded that no price increases had been observed. According to the Federal Court of Justice, those investigations were insufficiently taken into account in the assessment. The Federal Court of Justice referred the case back to the Schleswig-Holstein Higher Regional Court for further assessment.

[1] Federal Court of Justice 13 April 2021, case KZR 19/20.

On 23 June 2021, in an action for damages with regard to the lift cartel, Rotterdam District Court ruled that the possibility of damage is plausible for 41 housing corporations represented by the claimant Stichting De Glazen Lift (DGL).[1] In its interlocutory judgment of 29 May 2019, the District Court gave DGL the opportunity to enter documents into evidence showing that during the period of the cartel each member of the foundation had purchased at least one lift from the cartelists or had had at least one lift maintained or modernised by the cartelists.[2] In this judgment, the District Court confirms that evidence of a single transaction is sufficient to (be able to) make the possibility of damage plausible and to achieve the threshold for referral to the determination of damages, at which stage the scope of the damage can be addressed.[3] DGL has sufficiently done so by submitting the additional documents; the District Court rejected the cartelists’ defences against these.

The District Court then discussed the pass-on defence put forward by the cartelists, with regard to which the District Court had ruled in the interlocutory judgment that it would be up to them to substantiate this defence and, if necessary, prove it, for which purpose DGL should, however, offer sufficient starting points by submitting documents unavailable to Kone and Otis.[4] Kone and Otis argued that DGL did so insufficiently, that they are therefore unable to substantiate the passing on, and that DGL’s claims should therefore be denied. The District Court agreed with Kone and Otis that DGL submitted a very limited number of documents, but the District Court nevertheless did not proceed to deny the claims because, based on the documents, the District Court in any event deemed it plausible that the participants did not or could not pass on all additional costs, so that it was nevertheless plausible that the members suffered damage.[5]

The District Court issued a declaratory judgment to the effect that Kone and Otis are jointly and severally liable for the damage suffered by the participants and refers the case to follow-up proceedings for the determination of damages.

[1] Rotterdam District Court 23 June 2021, ECLI:NL:RBROT:2021:6635.

[2] Para. 2.1.

[3] Para. 2.6.

[4] Paras. 2.1, 2.11

[5] Para. 2.13.

Various recent judgments of German Regional Courts have raised questions about the validity of litigation vehicles and assignment of claim models under German law, in particular the German Legal Services Act (RDG).[1] On 24 February 2021, the Regional Court of Hanover was critical of a claimant, Cartel Damages Claims (CDC), in a lawsuit for damages against the sugar producers Pfeifer & Langen, Nordzucker and Südzucker.^[2] CDC had asserted claims from a total of 63 companies and groups of companies. The amount in dispute was around 180 million euros.

CDC had bundled and asserted assigned claims from numerous companies in its action vehicle Retail Cartel Damage Claims SA. The companies involved are numerous large and small manufacturers of confectionery and other sugar-containing foods, as well as food retailers such as Rewe.

As in the decision in the Kaufland suit of 20 May 2020,[3] the court took the view that there was a violation of the Legal Services Act because CDC was pursuing claims from direct and indirect sugar buyers at the same time. The court considered that the decisive factor for the existence of a conflict of interest in this case was that the claimant was indisputably asserting claims from cedants from different market levels for the same sugar supply.

The defendants had argued that manufacturers’ damages would be mitigated if the manufacturers had passed on inflated sugar prices to retailers. The Regional Court therefore considered the bundled assertion of assigned claims of food manufacturers and traders to be a prohibited representation of conflicting interests:

“If claims for damages are asserted by direct customers and indirect customers at the same time, this constitutes a fundamental and irresolvable conflict of interests.

(aa) This applies at least with regard to the question of a possible passing-on of damages, i.e. the so-called passing-on. With regard to passing-on, direct customers must claim that they did not pass on the cartel-related excessive prices they paid, as the claimant does here for the direct customers; indirect customers, on the other hand, must claim the exact opposite in order to substantiate the damage they suffered.

(…) In the present lawsuit, the claimant must therefore simultaneously assert the non-reselling and the reselling, which, however, is logically mutually exclusive.”

The fact that the conflict of interests actually applied only to “less than 3.5%” of the total purchase volume could not help the claimants. The court considered “this would not change the fundamentally conflicting interests” and that article 4 RDG does not provide for “partial incompatibility”.

The claimants, on the other hand, had emphasised that they were all pursuing precisely the same goal. The judgement is not yet final.

[1] See Press release of 7 February 2020, Regional Court of Munich, case Az. 37 O 18934/17 and Regional Court of Hanover 20 May 2020, case no. 18 50/16.

[2] Regional Court of Hanover 24 February 2021, Case 18 O 34/17.

[3] Regional Court of Hanover 20 May 2020, case no. 18 50/16.

On 18 March 2021, the High Court issued a ruling stating that it does not grant Allianz Global Investors and others permission to appeal a High Court ruling. In that ruling the High Court had stated that cartel members Barclays, UBS and other banks can argue that the damage allegedly suffered by the claimant investment funds as a result of the foreign-exchange markets cartel were mitigated because the damage had been passed on to investors. The main reasons for not allowing the appeal was because it would not be efficient in terms of case management.[1] The court stated that the appeal at this time might delay the case, while it would be more efficient for there to be a (potential) appeal on all issues at the end of the trial. The banks were fined €1.07 billion by the European Commission (EC) in 2019 for participating in a foreign exchange spot trading cartel between 2007 and 2013.[2]

[1] According to Mlex, ‘Allianz Global Investors, others refused UK appeal bid over ‘pass-on’ forex cartel ruling, 18 March 2021.

[2] European Commission press release of 16 May 2019, Antitrust: Commission fines Barclays, RBS, Citigroup, JPMorgan, and MFUG €1.07 billion for participating in foreign exchange spot trading cartel.

On 25 February 2021, the UK High Court ruled on an application by banks including Barclays, UBS and Citibank to put forward “pass-on” arguments in order to defend themselves against damages claims brought by 175 claimants, including investment funds Allianz, Pimco and Brevan Howard.[1] The claims rely on two EC decisions released in 2019 in which several banks were fined for collusive behaviour regarding forex manipulation. The banks requested certain pass-on issues to be advanced and heard during the proceedings, against which the claimants protested. This case is not a typical case of pass-on; pass-on is said to occur when an investor redeems or withdraws its investment. The banks wanted to argue in the requested proceedings that damage suffered by the investment funds was passed on to investors who cashed out on assets with reduced value, and who could thus claim such damage themselves. The claimants argued that the investors themselves do not have a cause of action, which is why the defendant’s argument of pass-on mitigation has no real prospect of success and should be struck out. The claimants also noted that the pass-on defence of the defendants could lead to wide-ranging disclosure in respect of a bare assertion. The High Court concurred with the defendants, however, in considering that the alleged pass-on cannot be shown to be impossible or bound in law to fail and should therefore be admitted to the case.

[1] UK High Court, [2012] EWHC 399 (Comm), Case No: CL-2018-000840.