The Supreme Court considered whether FX trading competition law claims should proceed as opt-out collective proceedings. The Court allowed the appeal, finding the Competition Appeal Tribunal was entitled to refuse opt-out certification given the weakness of the claims on causation and the practicability of opt-in proceedings for substantial claimants.
Background
This appeal concerned the collective proceedings regime under section 47B of the Competition Act 1998, as amended by the Consumer Rights Act 2015. The respondent, Mr Phillip Evans, sought authorisation to bring opt-out collective proceedings in the Competition Appeal Tribunal (‘the Tribunal’) claiming damages for losses caused by infringements of EU competition law established by two European Commission settlement decisions issued on 16 May 2019. These decisions — the ‘Three Way Banana Split’ and ‘Essex Express’ decisions — found that traders employed by the appellant banks (including UBS, Barclays, RBS, Citigroup, JPMorgan and Bank of Tokyo Mitsubishi) had exchanged commercially sensitive information in private online chatrooms relating to foreign exchange spot trading in G10 currencies, constituting infringements by object of Article 101 TFEU.
Mr Evans’ claim form proposed two classes of claimants. Class A encompassed persons who entered into FX transactions directly with the proposed defendants during their periods of participation in the infringements. Class B encompassed persons who transacted with other financial institutions during the infringement periods, relying on a so-called ‘umbrella effect’ theory. The total indicative estimate of damages claimed was £2.155 billion. The estimated class comprised between 14,201 and 42,015 members for Class A and between 27,814 and 42,015 for Class B.
The Tribunal (Sir Marcus Smith and Professor Neuberger, with Mr Lomas dissenting on this issue) refused to certify the proceedings on an opt-out basis, finding the claims to be so weak on causation that they were liable to be struck out. Although the Tribunal did not strike out the claims at that stage — giving Mr Evans a further opportunity to address the pleading deficiencies — the majority treated the weakness of the claim as a powerful factor against opt-out certification. The Tribunal also concluded that it was practicable for a significant portion of the class (large, sophisticated financial institutions with substantial potential claims) to bring opt-in proceedings.
The Court of Appeal (Green LJ, with Sir Julian Flaux C and Snowden LJ agreeing) overturned the Tribunal’s decision, holding that it was inconsistent and unfair for the Tribunal to treat its provisional view of the merits as determinative of the opt-in/opt-out issue, that the strength of a claim would generally be a neutral factor, and that the Tribunal had erred in its assessment of practicability. The Court of Appeal also relied heavily on a subsequent European Commission ordinary decision against Credit Suisse (the ‘Sterling Lads ordinary decision’) as having substantial probative value.
The Issues
Four issues arose on the appeal to the Supreme Court:
Issue 1: Relevance of the strength of the claims
Whether the Court of Appeal was wrong to find that the Tribunal erred in relying on its view that the claims were weak as a factor weighing against opt-out proceedings.
Issue 2: Practicability of opt-in proceedings
Whether the Court of Appeal was wrong to find that the Tribunal erred in its assessment of the practicability of bringing opt-in proceedings.
Issue 3: Vindication of rights and deterrence
Whether the principles of facilitating the vindication of rights and deterring future wrongdoers are factors which weigh in favour of opt-out proceedings.
Issue 4: Admissibility of the Sterling Lads ordinary decision
Whether the Court of Appeal was wrong to treat the Sterling Lads ordinary decision against Credit Suisse as admissible and to rely on it.
The Court’s Reasoning
Issue 1: Strength of claims and opt-in/opt-out
The Supreme Court, in a unanimous judgment delivered by Lord Sales, Lord Leggatt and Lady Rose (with Lord Burrows and Lord Richards agreeing), held that the Court of Appeal had no proper basis for interfering with the Tribunal’s assessment. There was no inconsistency between the Tribunal’s decision to postpone striking out the claim and its reliance on the weakness of the claim in deciding against opt-out certification. The Court held that the strength of the claim on a sliding scale is a legitimate and important factor in the opt-in/opt-out decision, contrary to the Court of Appeal’s view that it would ‘generally be neutral’.
“If a claim is weak, that militates against affording claimants the advantages of an opt-out process, with the concomitant disadvantage that a defendant may feel commercial pressure to settle such a claim even though it would be likely to fail at trial.”
The Court emphasised that rule 79(3)(a) of the Tribunal Rules specifically identifies strength of claims as a relevant factor and it would not have been singled out if it were intended to be generally neutral. The Court stated:
“Contrary to the conclusion of the Court of Appeal … it is indeed appropriate, in our view, to view the strength of the claim in terms of a sliding scale.”
The Court also rejected the Court of Appeal’s view that finding a claim has a realistic prospect of success logically precludes a finding that it is simultaneously ‘very weak’:
“Surviving strike-out or summary judgment is a low bar and the merits of the claim may not be the only factor at play when summary disposal is rejected. There is nothing illogical in finding that a claim is not susceptible of being struck out or summarily dismissed and yet finding also that the claim appears to be very weak.”
Fundamentally, the Tribunal had identified a mismatch between the Commission’s findings (information exchanges may occasionally have enabled participating traders to increase spreads for particular transactions) and a claim predicated on the assumption that spreads were increased on every G10 FX transaction throughout the trader’s membership of the chatroom. The Court endorsed the Tribunal’s analysis:
“The mere fact that a person A trades with a counterparty who – in other, unrelated trades, has behaved unlawfully – is of itself no basis for impugning A’s trades with that counterparty. The causal route by which A is harmed is unclear and not clearly stated in the Evans claim form.”
Issue 2: Practicability
The Court held that rule 79(3)(b) requires an objective assessment of practicability. The Tribunal was entitled to segment the class, finding that large, sophisticated financial institutions with substantial potential claims could practicably bring opt-in proceedings, while acknowledging that smaller entities and individuals could not. The Tribunal’s overall assessment — that it should not allow the smaller sub-class (whose total claims were a tiny fraction of the aggregate) to determine the conclusion on practicability — was within its legitimate discretion.
“Access to justice does not, in our judgment, mean that every case that can only be brought on an opt-out basis must be permitted to proceed on that basis. Opt-out certification is not a certification basis of last resort…”
The Court criticised the Court of Appeal for failing to heed its own earlier guidance in Le Patourel v BT Group plc about the deference owed to the Tribunal’s evaluative judgments:
“when it comes to the weighing up of the various factors relevant to the choice of opt-out or opt-in this is essentially an exercise of judgment over facts and evidence by an expert, specialist, body, that will over time accrue an increasing well of experience in how to handle these complex cases.”
Issue 3: Vindication of rights and deterrence
The Court accepted that facilitating vindication of rights and deterring wrongdoers are policy goals underlying the collective proceedings regime, but held these factors do not assist in making specific case management decisions between opt-in and opt-out. The starting point must be one of neutrality:
“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.”
Issue 4: Admissibility of the Sterling Lads ordinary decision
The Court held that the rule in Hollington v Hewthorn applies to proceedings before the Tribunal. The Sterling Lads ordinary decision, addressed to Credit Suisse (a third party to the present proceedings), was inadmissible as evidence of findings of fact against the appellants, who had no opportunity to influence the findings made in that decision.
“It would in those circumstances be fundamentally unfair to admit the findings made by the Commission as evidence against the appellants.”
The Court rejected the Court of Appeal’s suggestion that the Tribunal need not be ‘hidebound by a common law rule on fairness’, holding this was ‘unhappily expressed’ and unsupported by reasoning. The Court also clarified that Lord Hoffmann’s obiter remarks in Crehan v Inntrepreneur Pub Co could not be regarded as authority for treating Commission findings as admissible against third parties. The Court acknowledged a limited exception at interlocutory stages for the purpose of identifying evidence that might be available at trial, but found the Sterling Lads decision did not assist even on that basis.
Practical Significance
This decision provides authoritative guidance on several aspects of the collective proceedings regime under the Competition Act 1998 that are of substantial practical importance:
First, the strength of a claim is a factor that operates on a sliding scale in the opt-in/opt-out determination; it is not generally neutral. Weaker claims militate against opt-out certification because of the leveraging effect and settlement pressure that opt-out proceedings impose on defendants. The Tribunal is not required to disregard concerns about the merits merely because a claim has not been struck out.
Second, the assessment of practicability under rule 79(3)(b) is objective and may involve segmenting the class. The inability of smaller class members to bring opt-in proceedings does not automatically dictate opt-out certification where larger, sophisticated claimants could practicably participate on an opt-in basis.
Third, the decision firmly establishes that the starting point for the opt-in/opt-out decision is one of neutrality, with no presumption or predisposition in favour of either procedure. Access to justice is a two-sided consideration that includes protecting defendants from oppressive litigation.
Fourth, the rule in Hollington v Hewthorn applies to the Tribunal, and findings of the European Commission in decisions addressed to third parties are inadmissible as evidence against defendants who were not parties to those proceedings.
Finally, the decision reinforces the limited scope for appellate interference with the Tribunal’s evaluative case management decisions on opt-in/opt-out, emphasising the Tribunal’s role as an expert, specialist body with a broad discretion.
Verdict: The Supreme Court unanimously allowed the appeal and reinstated the Competition Appeal Tribunal’s decision to refuse Mr Evans’ application for a collective proceedings order to be made on an opt-out basis.
