The Court of Appeal last week overturned a decision that £2.7bn collective proceedings over a foreign exchange spot-trading cartel should be on an opt-in, rather than opt-out, basis.
Lord Justice Green said the statistical evidence explained why opt-in was “impracticable”.
He added that “it is now clear from case law that, where there would be no proceedings save on opt-out terms, that is a powerful factor in favour of a claim being certified as opt-out”.
This is the first opt-out collective action primarily on behalf of businesses that the courts have allowed to proceed.
Last year, the Competition Appeal Tribunal (CAT) ruled on two applications for collective proceedings orders relating to European Commission findings that six major banking groups – Barclays, Citibank, Royal Bank of Scotland/NatWest, JPMorgan, UBS and MUFG Bank – took part in foreign exchange spot-trading cartels, fining them more than €1.1bn.
The group representative in one was Phillip Evans, a former panel member and inquiry chair at the Competition & Markets Authority, and the other Michael O’Higgins, former chair of the Channel Islands Competition and Regulatory Authorities.
The majority of the CAT decided that the claims should be brought on an opt-in basis amid concerns about the strengths of the claims and their view that opt-in proceedings would be practicable.
This was despite finding that, if the claims were certified on an opt-in basis, there would be insufficient take up for any claim to be viable.
Applying an overarching principle of access to justice, the tribunal said the class to be represented were well-resourced and sophisticated entities capable of bringing proceedings. If they decided not to, it was to be inferred this was a deliberate decision upon their part. This was not an access to justice problem.
The dissenting panel member said he would have granted an opt-out order, given there were potentially more than 40,000 claimants.
Had they decided on opt-out, the tribunal would have chosen Mr Evans to take the claim forward, the first time the CAT has had to decide what was called a ‘carriage’ dispute.
The Court of Appeal held that the CAT’s criticisms of the strengths of the claims were premature. No evidence had been provided by the banks, while the European Commission had published a further infringement decision (relating to the so-called ‘Sterling Lads’ chatroom) which post-dated the CAT’s judgment and provided more relevant information about the banks’ misconduct and its impact on the market.
In relation to practicability, Green LJ, giving the judgment, disagreed with the inferences the CAT drew from the statistical data, which showed that, while the average claim was £135,000, for most class members it was actually £16,000.
“With respect to the CAT, it is now clear from case law that where there would be no proceedings save on opt-out terms, that is a powerful factor in favour of a claim being certified as opt-out,” he said.
“Access to justice is not just about the size and sophistication of the class members, but encompasses also the size of the claim and whether it would be proportionate or practicable for the class members (whatever their size and degree of sophistication) to commence proceedings to recover that loss.
“In the present case even for the largest class members the sums at stake are relatively modest and on an opt-in basis could be dwarfed by the costs.”
Access to justice was “not the only lodestar which guides this issue”, Green LJ added, citing the Supreme Court ruling in the landmark Merricks ruling.
These were that the “evident purpose of the statutory scheme was to facilitate rather than impede the vindication of those rights”, and that anti-competitive conduct would not be “effectively restrained” if wrongdoers could not be “brought to book” by mass claims.
The Court of Appeal also rejected Mr O’Higgins’ appeal of the CAT’s decision to prefer Mr Evans in the carriage dispute.
Mr Evans commented: “This ruling acknowledges the practical difficulties of opt-in legal proceedings and confirms the access to justice principle which underpins the collective action regime. The opt-out approach is crucial to ensure that claims may be pursued on behalf of all affected individuals and businesses.”
He is represented by class action specialist firm Hausfeld, for whom partner and global co-chair Anthony Maton said: “A judgment of this nature was required for all those UK businesses – big and small – who have suffered loss as a result of the manipulation of the FX markets to achieve restitution.
“The path to restitution can now begin and I ask the banks involved to come forward and agree fair and adequate compensation for those affected by their illegal behaviour.”
Mr O’Higgins, who is represented by Scott & Scott. said: “We are pleased that the Court of Appeal has allowed the opt-out claim against by the banks found guilty of FX rigging to move forward so that at least some members of the class can continue to seek compensation.
“However, we are extremely disappointed that it will be on behalf of a narrower class than the class that we wished to represent, and as a result many will lose out. We are therefore considering our options on how to move forward.”