Britned Development Ltd v ABB AB And ABB Ltd

Damages for an infringement of Treaty on the Functioning of the European Union, article 101(1), are compensatory. The claimant must prove a causal loss by comparing the actual price with the price that would have prevailed in a competitive counterfactual. That counterfactual may involve another supplier, but the court must assess it from the evidence available and may use a broad axe where precision is impossible.

The broad-axe approach does not create a general rule that damages should err towards under-compensation. A cartel member’s cost savings, or general benefits from reduced competition, cannot alone establish loss to the victim. The claimant must show that the savings caused an overcharge in the transaction concerned. A regulatory cap which allows the claimant to retain more profit because of the overcharge may be taken into account as an immediate consequence when assessing net compensatory loss.

BritNed, the operator of an electricity interconnector between Great Britain and the Netherlands, brought a follow-on claim against ABB after the European Commission found that ABB had participated in a worldwide power-cables cartel. BritNed alleged an overcharge on the cable contract, lost profits from choosing a 1,000MW rather than 1,320MW cable, and compound interest.

Marcus Smith J awarded damages for overcharge, including sums for baked-in inefficiency and alleged cartel savings. He dismissed the lost-profits and compound-interest claims. In a supplementary judgment, after BritNed declined to give an undertaking concerning the regulatory cap on its returns, he reduced the damages by 10%: [2018] EWHC 2616 (Ch); [2018] EWHC 2913 (Ch).

BritNed appealed the quantification, lost-profits and regulatory-cap rulings. ABB cross-appealed the award based on cartel savings.

1. BritNed’s appeal was dismissed, but ABB’s cross-appeal on cartel savings was allowed. The court upheld the judge’s assessment of the evidence on the overcharge, the contract value, lost profits and the regulatory cap. It set aside the separate award for cartel savings.

2. A claim for cartel damages under Treaty on the Functioning of the European Union, article 101(1), is a claim for compensatory damages for breach of statutory duty. The claimant must establish a causal loss. The correct overcharge counterfactual is the difference between the actual price and the price that would have prevailed without the cartel, whether from ABB or another supplier. In practice, the court had to work from the available evidence; it could not construct rival bids without the necessary evidence.

3. The court rejected any general requirement to err towards under-compensation when using the broad axe. The aim is the correct amount of compensation. Estimates and assumptions must be evidence-based and must reflect their inherent uncertainty, but the law does not require a systematic discount in the defendant’s favour.

4. The trial judge’s factual and evaluative conclusions on the direct overcharge were open to him. His acceptance of ABB’s margin analysis, his rejection of BritNed’s expert model, and his conclusion that no further direct overcharge had been proved did not disclose an appellate error.

5. The regulatory cap was not a collateral benefit. It was capable of being an immediate consequence of the overcharge, because it could allow BritNed to retain additional profits before the cap applied. Despite reservations about the judge’s method, the 10% discount for the uncertain future risk of over-compensation was within the permissible evaluative range.

6. Cartel savings were benefits to the cartelist, not proof of loss to the customer. There was no evidence translating ABB’s general saving from reduced competition into an increased price paid by BritNed. Moreover, the judge had found that any such savings had been competed away on this project. The compensatory award for cartel savings was therefore unsustainable.

• Court of Appeal (Civil Division): BritNed’s appeal was dismissed. ABB’s cross-appeal succeeded only insofar as the award for cartel savings was set aside: [2019] EWCA Civ 1840.
• High Court (Chancery Division, Business and Property): Marcus Smith J awarded overcharge damages, dismissed the lost-profits and compound-interest claims, and subsequently reduced the damages by 10% following BritNed’s refusal to give an undertaking concerning the regulatory cap: [2018] EWHC 2616 (Ch); [2018] EWHC 2913 (Ch).