Competition Appeal Tribunal rules on first ever carriage dispute in UK FX cartel class action
25 April 2022
25 April 2022
On 31 March 2022, the Competition Appeal Tribunal refused to certify two claims advanced against a number of UK banks for their participation in a foreign exchange spot rate manipulation cartel as opt-out collective proceedings. The novel issue before the Tribunal at the certification hearing was a 'carriage dispute', whereby it was invited to consider which of the two rival applicants looking to bring an opt-out claim would be most suitable to represent the interests of the class members. By declining to certify either claim on an opt-out basis, the Tribunal effectively side-stepped the issue.
In summary, the Tribunal found that:
We consider key takeaways from this significant judgment.
Both Mr O'Higgins and Mr Evans applied for certification on an opt-out basis only. Counsel for each of the applicants contended that it was therefore not open to the Tribunal to grant a collective proceedings order on an opt-in basis. The Tribunal disagreed; it did have jurisdiction to decide between opt-in and opt-out proceedings, and cited three principles upon which the discretion is based: (i) the interests of the due administration of justice; (ii) the interests of the proposed class (which are not necessarily the same as those of the applicant); and (iii) the interests of the proposed defendants to the action.
The Tribunal also made the unusual move to consider striking the claims out of its own initiative, which it has the power to do under CAT Rule 41(1)(b). While noting that no strike-out application had been made, the Tribunal thought it appropriate to consider strike-out given the concerns it had as to the merits of the claims, particularly given that they were based on economic theory alone.
The lack of a clearly pleaded position in relation to issues of causation led the Tribunal to conclude that neither claim could plausibly proceed to trial. This was driven by the fact that both claims sought to advance cases of 'market wide' damage based on pure economic theory pointing to potential inefficiencies in the market. In the Tribunal's view, neither applicant successfully articulated a sufficiently pleaded and factually evidenced causal link between these alleged inefficiencies and any consequent losses for consumers, stating that "economic theory does not, in and of itself, constitute an arguable legal claim".
In this case, strike-out was not ordered due to the need for further judicial consideration in this area and the fact that the applicants had not had an opportunity to address the Tribunal's thinking on the adequacy of their pleadings. Nevertheless, it is clear that the CAT will not shy away from striking out collective proceedings claims itself where appropriate.
Following certification of the Merricks, Gutmann, and Le Patourel collective actions as opt-out proceedings, the Evans/O'Higgins judgment provides further guidance on key issues surrounding the bases for certification.
In particular, questions surrounding the relevance of the 'merits' of the claim to its suitability to be brought as collective proceedings are addressed and the common law position clarified. The Tribunal confirmed that it considers itself bound by the Supreme Court's majority judgment in Merricks and, more specifically, Lord Briggs' contention that merits are distinct from issues of suitability. As such, there is "no separate, freestanding 'merits' condition" contained within the legislation as it relates to certification.
The CAT may, however, conduct something akin to a merits assessment when determining whether a claim should be certified on an opt-in or opt-out basis (but only in that context). It confirmed the general principle that the stronger a claim is, the more suitable it will be for opt-out proceedings.
The strength of the claim comprises the first of two factors which must be taken into account when considering the opt-in/opt-out issue in addition to those considered in respect of certification, the second being whether it is practicable to bring the claims on an opt-in basis. Given that these additional factors are specifically identified in the legislation, the Tribunal asserted that they are to be regarded as "intrinsically likely" to be significant in determining the nature of the claim.
Introducing a general test for 'practicability', the judgment confirms that claims should be considered in light of "that which is practicable from the standpoint of the members of the class concerned" (Tribunal's emphasis) and not what is 'theoretically' possible. Consequently, the CAT must have regard to the practical bars to opting in, and the likely attitudes of the class member "on the Clapham omnibus".
Further, buy-in (or lack of it) from the class members will therefore go some way to determining the opt-in/opt-out issue; as the Tribunal sees it, "the choice between opt-in and opt-out proceedings turns on this difference". In circumstances such as this case where the claimant law firms were unable to recruit willing participants to the claims despite sizeable efforts and the relatively significant pay-outs each potential claimant stood to gain, the Tribunal considered it impractical for either claim to proceed as opt-out proceedings. Simply put, "proceedings should not go ahead where members of the class do not want it to go ahead".
While this was the CAT's first ever judgment on a carriage dispute, it did not in fact rule on the carriage dispute, as its refusal to certify the claims as currently formulated rendered the issue moot. However, the Tribunal provided guidance to assist future litigants in selecting appropriate class representatives:
The O'Higgins and Evans applications have been stayed, and the applicants have three months to submit revised applications on an opt-in basis. Both applicants have stated their intentions to appeal in circumstances where they say the proceedings are not viable to be brought other than as opt-out proceedings.
Read the full judgment here (1329/7/7/19 Michael O'Higgins FX Class Representative Limited v Barclays Bank PLC and Others, 1336/7/7/19 Mr Phillip Evans v Barclays Bank PLC and Others)
Authors: Imogen Chitty (Solicitor), Tim West (Senior Associate) and Max Strasberg (Senior Associate)
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