The Secretary of State for Health & Anor v Servier Laboratories Ltd & Ors

The EU annulment form of res judicata has absolute, erga omnes effect, but only as to the operative part and the ratio decidendi inseparable from it and necessary to explain it. The effect does not convert every factual finding in a multifactorial assessment into a binding fact for later proceedings. Under Article 266 TFEU, the EU institution must implement the settled conclusion and cannot reopen that issue. Here, the conclusion that the relevant product market was not limited to perindopril was binding. Subsidiary findings on therapeutic substitutability, prescribing inertia and treatment switching were not binding in domestic mitigation, causation or remoteness proceedings.

Servier appealed in three conjoined proceedings from the case-management judgment of Roth J, reported at [2019] EWHC 1004 (Ch). The claims by English, Scottish, Northern Irish and Welsh health authorities concerned alleged infringements of Articles 101 and 102 TFEU arising from conduct affecting the market for perindopril.

In parallel European proceedings, the General Court annulled the Article 102 finding and fine in Servier SAS v EU Commission, ECLI:EU:T:2018:922. Servier argued that factual findings in that judgment were binding under the EU principle of res judicata for an upcoming domestic trial on mitigation. Roth J rejected that submission except as to the conclusion that the relevant market was not limited to perindopril. The central issue was whether the subsidiary factual findings had absolute res judicata effect in the domestic damages proceedings.

The three appeals were dismissed. Lady Justice Rose delivered the principal judgment, with Lord Justice Longmore and Sir Stephen Richards agreeing.

1. The EU annulment strand of res judicata applies directly in domestic proceedings within the scope of EU law. An annulling judgment has absolute, erga omnes effect. That effect attaches to the operative part and to the ratio decidendi inseparable from it and necessary to explain it. The court must identify the specific reasons for the annulment, rather than treat every finding made in the judgment as binding.
2. The purpose of the principle is closely linked to the obligation under Article 266 TFEU to implement an annulling judgment. The institution must identify the error which caused its measure to be annulled and act consistently with the court’s conclusion. It cannot reopen the settled issue, gather further evidence and reach a fresh conclusion. The approach of the General Court in P&O Ferries GC was displaced by the CJEU’s judgment in P&O Ferries CJEU [2006] ECR I-4883. The same approach was illustrated by Asteris [1988] ECR 2181 and Shoe Branding ECLI:EU:T:2018:108.
3. The principle does not make the underlying evidence or every factual component of a multifactorial assessment binding in a different legal context. Commission v AssiDomän Kraft Products and Others [1999] ECR I-5363 showed that the authority of an annulling judgment does not permit factual findings to be borrowed to determine a different dispute. Artegodan GmbH v Commission EU:C:2012:216 similarly demonstrated that only matters actually or necessarily settled by the relevant judgment acquire res judicata effect.
4. The binding conclusion in the Servier Judgment was that the relevant product market was not limited to originator and generic perindopril. That conclusion prevented a stand-alone Article 102 claim based on the narrow market definition. The subsidiary findings concerning therapeutic equivalence, substitutability, prescribing inertia and treatment switching were factors in the General Court’s multifactorial assessment. They were not themselves the specific reasons for the annulment and were not binding in the domestic mitigation inquiry.
5. The duty of sincere cooperation under Article 4(3) TEU prevented the national court from finding an Article 102 abuse on the basis of the rejected narrow market definition, unless the General Court’s judgment was reversed. It did not prevent the national court from assessing the prescribing argument under domestic rules of mitigation, causation and remoteness. Roth J was therefore correct on the res judicata issue.

• Court of Appeal (Civil Division) — In [2019] EWCA Civ 1096, the three appeals were dismissed.
• High Court of Justice, Business and Property Courts — Roth J, in [2019] EWHC 1004 (Ch), held that only the conclusion that the relevant market was not limited to perindopril had absolute res judicata effect. The remaining factual findings were not binding, and the abuse of process argument was rejected.