BritNed Developments v. Abb Revisited: UK High Court Rules Further Reduction in Damages and No Order as to Costs in Follow-on Competition Litigation
On 9 October 2018, the High Court of England and Wales awarded BritNed Developments damages of just over €13 million in the first cartel follow-on damages claim in the jurisdiction. BritNed had claimed €180 million in damages caused by ABB's participation in the power cables cartel. We summarized the Court's original judgment in our previous Advisory.
In two further judgments dealing with consequential matters, the High Court reduced BritNed's damages award by a further 10%, and ruled that in the circumstances of this case each party to the litigation should bear its own costs.
The Supplemental Judgment
In the 9 October judgment, the High Court had considered issues relating to a regulatory cap on BritNed's earnings imposed by UK and Dutch energy regulators. ABB argued that the damages awarded to BritNed would have the effect of overcompensation for its losses by exceeding the regulatory cap. The Court held that any collateral benefit to BritNed should be disregarded for the purpose of assessing BritNed's loss, but the High Court asked BritNed to give an undertaking that the damages awarded would be treated as being subject to the regulatory cap, which would have the effect of eliminating any overcompensation. BritNed refused or was unable to give an undertaking in the terms required by the Court.
In its supplemental judgment on 31 October 2018, The High Court therefore considered how it could avoid overcompensating BritNed. Because it was not in a position to make a determination of whether the cap would be exceeded, the High Court determined that it should err on the side of undercompensation, particularly in a case such as this where it had used a "broad brush" approach to determining the appropriate level of damages, and there was uncertainty as to the actual loss that BritNed had suffered. The High Court therefore concluded that the right approach would be to reduce the original damages awarded of €13 million award by 10% to €11.7 million to reflect the risk of overcompensation.
The High Court also considered the appropriate rate of pre-judgment interest to be applied to the award of damages. As a general principle, an award of interest should not be punitive. The starting point that is generally applied to an award of damages in sterling is the Bank of England Interest base rate plus 1%, but this may be adjusted using as a benchmark borrowing costs incurred by the claimant to fund the loss represented by the award of damages.
The High Court rejected BritNed's claim for compound interest. Since BritNed was funded by its shareholders and had incurred no borrowing costs as a result of ABB's conduct, the High Court determined that pre-judgment interest should be calculated at EURIBOR (as the award was in euros) plus 1% from the date of the contract between BritNed and ABB, i.e., 21 May 2007, until the date of the Supplemental Judgment, i.e., 31 October 2018. Post-judgment interest would apply at the statutory rate of 8% per annum.
Finally, the High Court confirmed that the parties had permission to appeal both the 9 October 2018 judgment and the 31 October 2018 supplemental judgment to the Court of Appeal.
The Costs Judgment
On 16 November 2018, the High Court gave its judgment on costs. The starting point in litigation in the High Court is the general principle that the losing party must pay the reasonable costs (including legal fees) of the successful party. The question before the High Court in this case was which party had been successful, given that BritNed had recovered only €11.7 million out of its claim for damages of €180 million. The High Court concluded that it could not consider BritNed to be the successful party in these circumstances.
However, neither could the High Court make a costs award in favour of the defendant, ABB. ABB had made a formal settlement offer under Part 36 of the Civil Procedure Rules of €17 million, but it chose to withdraw that offer following the trial. Had that offer remained on the table, ABB would have been entitled to recover its reasonable costs of the case because the damages awarded to BritNed were less than ABB's offer. However, ABB gave up that advantage by withdrawing the offer. Accordingly, the High Court concluded that in the particular circumstances of this case it would be appropriate to make no order as to costs, so that each party was required to bear its own costs.
The High Court's supplemental judgment confirms its cautious approach to awards of damages to avoid the risk of overcompensation. The costs judgment emphasizes the risks of overambitious claims, which can result in the loss of the benefit of the English rule on costs, which is frequently a strong factor in the choice of England as a forum for international claims.
© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.