Evans: Disappointed
The Supreme Court has reinstated 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.
Overturning the ruling of the Court of Appeal, it said the Competition Appeal Tribunal (CAT) was right to take into account its assessment of the claim as weak in deciding that it should not be opt-out.
The CAT had observed the “leveraging” effect of opt-out collective proceedings, and incentives which they create to settle even weak claims for more than merely ‘nuisance value’.
Lord Sales, Lord Leggatt and Lady Rose, giving the Supreme Court’s unanimous decision, agreed with this.
They said: “The sophistication of the collective proceedings regime shows that it was not intended simply to provide a stick with which anyone who claims, however implausibly, to have suffered loss can beat infringing undertakings into paying them substantial damages. That does not enhance the proper enforcement of the competition rules.
“If clearly unmeritorious claims are allowed to proceed on an opt-out basis which involves an unjustified leverage advantage for claimants of the kind we have described, the result will not be due enforcement of the competition rules but over-enforcement, contrary to the public interest.”
The claim follows on from 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 is Phillip Evans, a former panel member and inquiry chair at the Competition & Markets Authority.
The majority of the CAT decided that the claim should be brought on an opt-in basis amid concerns about its strength 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.
In overturning this decision, the Court of Appeal held that the CAT’s criticisms of the strengths of the claims were premature, while the statistical evidence explained why opt-in was “impracticable”.
In restoring the CAT decision, the justices said it was “neither illogical nor unfair to Mr Evans” for the CAT to decide not to strike out his case at that stage but also take into account its assessment of the claim as weak in deciding that he should not be allowed to proceed on an opt-out basis.
The Supreme Court stressed that if the merits of a claim were very weak, as here, “it is likely to be more difficult to justify resort to the opt-out procedure as striking a fair procedural balance between the claimants and the defendant(s).
“It is also likely to be difficult to justify resort to the opt-out procedure as a proportionate way of providing access to the tribunal for the vindication of such a claim.”
The CAT was also right not to treat the likely collapse of the claim “as if it were a trump card”.
The justices explained: “There are obvious dangers in allowing applicant class representatives to make such an assertion in terrorem if that stance clinches for them and for the principal members of the class the advantages of the opt-out process.
“The tribunal rightly recognised that the potential collapse of the case meant that particular care was needed in assessing the strength of the claim and deciding what weight to give it.”
Ultimately, there was “no ground” on which the Court of Appeal was justified in interfering with the CAT’s “fully and convincingly reasoned” decision – it should not interfere “simply because it might have arrived at a different conclusion” to the CAT’s exercise of its discretion.
The court added that reliance on ‘access to justice’ as requiring certification on an opt-out basis “does not recognise sufficiently that access to justice is something to which both claimants and defendants are entitled”.
In a statement, Mr Evans, who is represented by class action firm Hausfeld, said he was disappointed by the decision.
“The practical reality is that opt-in proceedings are unlikely to deliver meaningful redress for the tens of thousands of ordinary individuals and businesses affected by the banks’ unlawful conduct.
“The UK was the epicentre of this cartel: the traders operated from London dealing rooms and even named their chatrooms after their morning commute from Essex into the City. The banks have admitted their wrongdoing, paid over €1.1bn in regulatory fines, and handed more than $2.4bn in compensation to victims in the United States, Canada and Australia.
“Yet here in the UK, where the manipulation actually took place, the only parties who have been able to pursue claims are a small group of institutional investors with pockets deep enough to fund High Court litigation. Everyone else has been left behind. That cannot be right.”
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