Could Servier treat findings about the market for a medicine as binding answers to different questions in an English damages action? The Supreme Court held that it could not. The General Court’s partial annulment of a competition decision did not settle how prescribers would have acted or what losses health authorities could recover.
Servier developed and sold perindopril, marketed as Coversyl, for cardiovascular disease and high blood pressure. It belongs to a class of medicines called ACE inhibitors. Health authorities in England, Wales, and Scotland and Northern Ireland sued Servier. They alleged breaches of articles 101 and 102 of the Treaty on the Functioning of the European Union and of the Competition Act 1998: agreements under which potential generic suppliers would stay off the market for payment, and an abuse of dominance through patents and the purchase of rights to another way of making the drug. They said this delayed generic entry, kept prices higher, and caused them substantial loss. A separate English claim for causing loss by unlawful means had been struck out, and an appeal against that strike-out was still pending. The competition claims were essentially the same in all three sets of proceedings, which were being managed together.
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Servier was permitted to plead that, if liability and causation were established, damages should be reduced or extinguished for failure to mitigate, contributory negligence, or remoteness. This prescribing argument rested on contentions that ACE inhibitors have a class effect, that there was no material clinical difference between perindopril and alternatives, and that the authorities should have encouraged switching to cheaper ACE inhibitors already available as generics. Roth J ordered a trial of preliminary issues on that argument. It was later vacated pending this appeal.
The EU proceedings
On 9 July 2014 the European Commission found that Servier had infringed articles 101 and 102 and imposed fines. For dominance, it defined the market as perindopril alone and rejected Servier’s argument that it comprised at least all ACE inhibitors. The English claimants had limited interested-party status at the administrative stage. The other claimants did not.
Servier challenged the decision in the General Court. On 12 December 2018 the General Court annulled the article 102 finding entirely, because the market was wider than perindopril and Servier was not dominant on that wider market. It upheld the remaining article 101 findings except the finding about a settlement with Krka. The claimants had not intervened. Both the Commission and Servier appealed to the Court of Justice, and those appeals were pending. The domestic claims could not proceed to a final trial until the EU proceedings were finally resolved. The claimants confirmed that, if the annulment of the article 102 finding was upheld, they would no longer pursue that claim. The national claim would then be for breach of statutory duty based on article 101.
The alleged binding findings
Servier said findings in the General Court judgment were binding on the preliminary issues: that there was no significant therapeutic difference between perindopril and other ACE inhibitors; that prescribers widely regarded them as substitutable; that nothing limited physicians’ discretion to prescribe other ACE inhibitors for new patients; and a modified finding that the Commission had not established a high degree of prescribing inertia, and that treatment changes were significant. It relied on absolute res judicata and, alternatively, abuse of process. The claimants admitted two propositions about some Primary Care Trusts, so those did not arise. Roth J held that none of the disputed findings was res judicata for the preliminary trial and that contesting them was not an abuse of process. Permission to appeal was limited to res judicata. The Court of Appeal agreed on that issue. The Supreme Court granted permission because the point was arguably not acte clair.
No reference, and the limits of the principle
Lord Lloyd-Jones, with whom Lord Reed, Lord Briggs, Lord Sales and Lord Hamblen agreed, refused a reference under article 267. Absolute res judicata applies only to decisions that have become definitive after appeals are exhausted or time limits expire. The Commission’s appeal attacked the market definition, so there was no definitive ruling, and the Court of Justice might differ. Questions about particular General Court findings were not necessary for judgment, because those findings might be reversed or made redundant.
The court nevertheless stated its view of the principle. Absolute res judicata is distinct from relative res judicata, which concerns a later action between the same parties on the same subject matter and grounds, and from English issue estoppel and abuse of process. It gives an annulling judgment effect against everyone, not only the parties. Its purpose is effective control of EU institutions and stability of the EU legal order. Annulment on substantive grounds makes the act disappear retrospectively as against all persons, and identifies what the institution must do to comply. Binding effect attaches to the operative part and to the grounds that are its essential basis: the precise reasons for the illegality. A finding has that effect only if it must be respected to prevent the annulment from being undermined, or to prevent contradiction of what compliance requires. Findings short of the ultimate legal conclusion can form part of that basis, but only in a later challenge to the conclusion they support.
Why the findings did not bind these proceedings
Servier sought to use the findings on substitutability for causation, remoteness and mitigation in the national damages claim. The court held that this detached them from the annulling judgment, which alone could make them binding. No issue arose before the national court about the article 102 market or the application of article 102. The findings had no significance independent of the annulment, and treating them as binding was unnecessary to preserve it.
Earlier EU cases supported that limit. In AssiDomän, grounds explaining an annulment did not require the Commission to reopen decisions against producers who had not challenged them in time. Pérez-Díaz and Asteris concerned an institution’s duty to comply with an annulment and the further consequences of that duty, not the transfer of a finding into different litigation. Asteris refused relief for earlier years even where the same illegality was said to exist. The separate rules governing Commission infringement decisions in national courts, including article 16 of Regulation 1/2003, were not analogous; res judicata is not engaged by a Commission decision as distinct from a decision of the EU courts.
Lord Lloyd-Jones also agreed with Rose LJ that Servier’s approach had no workable limits. It would be difficult to decide how detailed a finding must be, which findings were essential, and how to handle findings pointing different ways. Outside the setting of an annulling judgment, the principle could bind strangers to the original dispute in another legal context in a manner difficult to reconcile with a fair trial. He was satisfied to the standard of acte clair that absolute res judicata had no application, and would dismiss the appeal.
Verdict: The Supreme Court unanimously dismissed Servier’s appeal and declined to refer a question to the Court of Justice. The disputed findings did not bind the English court on the preliminary damages issues. The justices did not decide those issues themselves.
