The Supreme Court is to consider whether costs should only be awarded against regulators in unsuccessful cases where there is good reason to make an order, it announced today.
The issue arose in a case involving the Competition and Markets Authority (CMA) but the Court of Appeal referenced by analogy the position with solicitors in ruling last year that the starting point should be no order for costs where the unsuccessful regulator was acting purely in its regulatory capacity.
There could be good reason to depart from this, the appeal court said, but the mere fact that the regulator has been unsuccessful was not enough.
A similar principle was established in relation to costs orders by the Solicitors Disciplinary Tribunal (SDT) in the 2007 case of Baxendale-Walker v Law Society, and the Court of Appeal in the CMA case cited this as it reviewed the law in analogous situations.
The issue has become live in the legal world in the wake of a series of unsuccessful prosecutions before the SDT.
There have been three cases this month alone but in only one of them did the tribunal award costs, on the basis that many of the allegations were improperly brought by the Solicitors Regulation Authority.
In the CMA case, the regulator previously fined pharmaceuticals manufacturer Pfizer and distributor Flynn Pharma almost £90m between them in 2016 after determining that a price increase they oversaw for a major epilepsy drug constituted an abuse of market dominance under competition rules.
However, the companies appealed to the Competition Appeal Tribunal (CAT) and the case was subsequently appealed again to the Court of Appeal, which ruled that the fairness of the prices charged to the NHS had to be reassessed by the CMA.
The CAT ordered the CMA to pay a proportion of Pfizer and Flynn Pharma’s costs, but the appeal court overturned this, saying the tribunal had been wrong to start from the position that costs followed the event.
The Supreme Court has granted permission to appeal. The specific issue will be: “When considering what costs to award following an appeal before the CAT from an infringement decision of the CMA, is there a starting point and if so, what is it?
“In particular, was the Court of Appeal correct to decide that there is a starting point that no order for costs should be made against a regulator if it has been unsuccessful, except for a good reason, or is the starting point instead that an order for costs should be made against the regulator where it is unsuccessful?”
In his concurring ruling, Lord Justice Arnold suggested that the issue may be one for the Law Commission to take up.