June 14, 2022

Court of Appeal rejects appeal in time-barred cartel damages action

On June 10, 2022, the English Court of Appeal dismissed a case on appeal from the High Court of Justice, agreeing that the statutory six year  time bar had been correctly applied by the lower court.  At the heart of the appeal was the meaning of Section 32 of the Limitation Act 1980, in particular the meaning of “discovery” in the context of a concealed cartel.

In July 2019, Gemalto Holdings BV and others brought a claim against Infineon Technolgies AG, Renesas Electronics Corporation, and related entities for damages arising from an unlawful cartel in the supply of smart card chips between 2003 and 2006.  The existence of the cartel was established by a decision of the European Commission dated 3 September 2014.  Gemalto argued that the limitation period for bringing the action for damages began with the publication of the Commission’s decision in 2014, whereas the defendants argued that time started running at an earlier date.   

The court first considered the legal test to be applied, namely the Statement of Claim test (did Gemalto have, should with reasonable diligence have had, enough knowledge to allow it to plead a claim that would not be struck out as lacking in evidentiary basis?) or the FII test* (time runs from moment the claimant knows or should know that it has a claim, with sufficient confidence to justify initiating the claim). The trial judge concluded the former, but it was common ground there was little significant difference in practice between the tests on the fact of the case. 

The case turned on the application of section 32 of the Limitation Act in the context of a cartel.  Section 32 provides in pertinent part:

(1)…where in the case of any action for which a period of limitation is prescribed by this Act, either
. .
(b)  any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant…

The period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake … or could with reasonable diligence have discovered it.”
. . .
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

Turning to the application of the facts to the test, the trial judge concluded that time started to run at the end of April 2013, when the European Commission issued a press release announcing that a Statement of Objections had been sent to cartel participants.  At that time, the judge concluded Gemalto could have pleaded its claim.  Significantly, prior to that date, Gemalto itself, a customer of the cartelists, had received Requests for Information about the cartel from the European Commission referring to the period being investigated and the companies that were being investigated.  Starting an action in July 2019, the court concluded, was therefore too late.

The appeals court concurred.  In doing so, the court referred to the second RFI received by Gemalto in 2012 which referred to Renesas and Infineon, among other smart chip suppliers, and the Statement of Objections issued by the EC in April 2013 which made clear that European enforcers were focused on potential infringement of Article 101 of the Treaty on the Functioning of the European Union by smart card chip suppliers that had coordinated their behavior within the European Economic Area. It also pointed to 2013 internal correspondence in which Gemalto executives demonstrated familiarity with the EC press release regarding the Statement of Objections, and referred explicitly to the reported involvement of both Infineon and Renesas in the cartel.  The court concluded that in a case of concealment, the period of limitation begins to run when the claimant recognizes that it has a worthwhile claim; a worthwhile claim arises when a reasonable person would have a reasonable belief that there had been a cartel.  There is no justification for waiting until a regulatory investigation has concluded:  “The claimant can embark on the preliminaries to the issue of a writ… once it knows that there may have been a cartel and the identity of the participants, without knowing chapter and verse about the details.”
*Named after the Test Claimants in the Franked Investment Group Litigation v. HMRC case.