Claimants In Competition Damages Claims Put To Proof On Causation - Court Of Appeal Upholds CAT Decision In Enron Coal Services v EWS

January 2011

Introduction Background The CAT decision The Court of Appeal's decision Implications Introduction

On 19 January 2011 the English Court of Appeal dismissed an appeal in Enron Coal Services Ltd v English Welsh & Scottish Railway Ltd1 - the first damages action to have gone to trial in the Competition Appeal Tribunal (CAT). The Court of Appeal confirmed that findings of fact in an infringement decision by a competition authority are binding on a court2 considering a damages claim, but held that this does not mean that a claimant can rely upon a finding that the claimant has been the target of infringing conduct to establish causation. The judgment emphasises that claimants in "follow-on" actions must prove that the infringing conduct has resulted in the loss claimed. This has significant implications for companies looking to recover damages on the back of decisions by the European Commission, the Office of Fair Trading and the UK sectoral regulators, as well as defendants.

Background

The appeal concerned a claim issued in the CAT by Enron's administrators, seeking damages from English, Welsh & Scottish Railway (EWS) for practices on the rail haulage market for coal in Great Britain. The claim followed a decision of the Office of Rail Regulation (ORR) that EWS had infringed Article 82 of the EC Treaty (now Article 102 of the Treaty on the Functioning of the European Union) and the Chapter II Prohibition in the Competition Act 1998 by abusing its dominant position in rail haulage. The ORR's decision stated that EWS's abusive conduct included discriminatory treatment of Enron Coal Services Ltd (ECSL) and that this had placed ECSL at a competitive disadvantage in its contractual negotiations with Edison Mission Energy. The Enron administrators sought to recover damages arguing, among other things, that EWS's conduct had deprived ECSL of the chance of winning a lucrative contract to supply coal to one of Edison's power stations.

As a follow-on action, the claim relied upon the ORR's decision that EWS had infringed competition law to establish liability. The Enron administrators also sought to rely upon the ORR decision to prove causation (i.e. that EWS's abusive conduct in breach of the competition rules had caused ECSL to suffer loss), arguing that causation could be inferred from the ORR's finding that EWS's abusive conduct had put ECSL at a disadvantage and from other statements in the decision that referred to ECSL's business. The...