The UK Supreme Court has reinstated the Competition Appeal Tribunal’s (CAT’s) decision to refuse opt-out certification in the high-profile foreign exchange cartel litigation, Evans v Barclays Bank.
The landmark judgment marks a significant moment for Britain’s collective actions regime, following the Merricks v Mastercard case that resulted in the largest consumer settlement through the English courts.
The Evans case, valued at £2.7bn, was brought by class representative Phillip Evans against six major banking groups – Barclays, Citibank, Royal Bank of Scotland/NatWest, JPMorgan, UBS and MUFG Bank – over their alleged participation in FX spot-trading cartels between 2007 and 2013. These cartels led to fines totalling more than €1.1bn from the European Commission.
City law firms – ranging from A&O Shearman, Latham & Watkins, Gibson Dunn, Baker McKenzie, Macfarlanes, HSF Kramer and others – lined up against Hausfeld in the UK Supreme Court in April.
In March 2022, the CAT certified Evans’ claims but declined to allow them to proceed on an opt-out basis, citing concerns about the strength of causation claims and the practicability of opt-in proceedings for some class members. One tribunal member dissented, favouring opt-out certification.
Evans appealed, and in July 2023 the Court of Appeal unanimously overturned the CAT’s ruling, holding that the tribunal had erred in law and acted prematurely in assessing the merits of the claims. The banks then took the matter to the Supreme Court, which heard arguments in April this year.
Delivering a unanimous judgment, Lords Sales, Leggatt and Lady Rose emphasised that the CAT was entitled to have reached the conclusions that it did, warning that the leveraging effect of opt-out proceedings could be “used oppressively or unfairly” when claims lack merit.
“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,” the judges stated. “That does not enhance the proper enforcement of the competition rules.”
They added: “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 court also endorsed the CAT’s view that opt-in proceedings were practicable for some members, large financial institutions and entities with substantial claims. It noted that the collective proceedings regime was designed to accommodate a spectrum of cases – from lower-value consumer claims to complex commercial disputes.
“In this case, it was difficult to see why the financial institutions and large entities with substantial claims should be allowed to proceed by way of opt-out collective proceedings,” the judgment said. Resorting to opt-out was “more difficult to justify” as a fair and proportionate mechanism for such claims.
The court cautioned against allowing class representatives to assert impracticability of opt-in proceedings merely to secure the advantages of opt-out certification.
“There are obvious dangers in allowing applicant class representatives to make such an assertion… if that stance clinches for them and for the principal members of the class the advantages of the opt-out process,” the judges warned.
Writing on LinkedIn, Slaughter & May partner Camilla Sanger, who represented JP Morgan, said the judgment “provides important clarity for the collective proceedings regime in UK competition law, including in relation to the choice between opt-out and opt-in proceedings and the extent to which findings in regulatory or other decisions may be admissible against non-addressees in CAT proceedings”.
While banks and their legal teams hailed the ruling, Evans vowed to explore options to bring an opt-in class action, saying he was “disappointed” by the decision, adding: “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.”
He added that, despite fines, regulatory findings and billion-dollar compensation claims agreed elsewhere, “the only parties who have been able to pursue [UK] claims are a small group of institutional investors with pockets deep enough to fund High Court litigation”.
Anthony Maton, global co-chair at Hausfeld, who acted for Evans, said the ruling was “profoundly disappointing”.
Discussing the judgment on LinkedIn, he said that the Supreme Court’s conclusion that if a claim is weak, that militates against the advantages of an opt-out process, claimants would be left in a world where, if a claim is not struck out, there is still an uncertain merits test to be applied to opt-out proceedings.
That meant “to be sure of opt-out certification, claimants will need claims which the CAT can view as ‘strong’ – whatever that means – at the time of certification”, Maton said.
He also queried the implications of the Supreme Court test for practicability, adding that the net effect of the ruling was that decisions in such cases were subject to the CAT’s discretion, but within “more limited – and unclear – tramlines”.
That, he said, should be addressed by the UK government’s review of class actions, along with the reversal of PACCAR, “by legislating to blunt the harm that the FX ruling causes”.
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