Secretary of State for Health and others v Servier Laboratories Ltd and others

The EU principle of absolute res judicata applies only to a definitive judgment, after appeal rights have been exhausted or expired. An EU judgment annulling an institutional measure binds everyone as to its operative part and the grounds forming its essential basis. Those grounds are binding only so far as necessary to preserve the annulment and secure compliance with it.

Factual findings cannot be detached from an annulling judgment and treated as conclusive in litigation arising in a materially different legal context. Findings made when determining a product market under article 102 TFEU therefore did not bind a national court deciding mitigation and related issues concerning alleged infringements of article 101 TFEU.

National health authorities claimed that Servier had delayed the market entry of generic Perindopril through conduct infringing articles 101 and 102 TFEU and domestic competition law. Servier pleaded that any damages should be reduced or extinguished because the authorities should have encouraged prescribing of cheaper ACE inhibitors.

The General Court subsequently annulled the European Commission's finding of an article 102 infringement, holding that the relevant product market extended beyond Perindopril. Servier argued that four factual findings underlying that judgment were binding in the domestic trial under the EU principle of absolute res judicata.

Roth J rejected that argument in [2019] EWHC 1004 (Ch). The Court of Appeal dismissed Servier's appeal in [2019] EWCA Civ 1096; [2020] Ch 193. The Supreme Court considered whether the findings were definitive and whether findings supporting an EU annulling judgment could bind parties in a different legal context.

1. The appeal was dismissed unanimously. Lord Lloyd-Jones delivered the judgment, with which Lord Reed, Lord Briggs, Lord Sales and Lord Hamblen agreed.

2. Absolute res judicata applies only to a judicial decision which has become definitive after appeal rights have been exhausted or the relevant time limits have expired. The General Court judgment was under appeal to the CJEU. Its findings on market definition could be reversed or rendered redundant. They therefore had no binding effect at that stage: paras 31–32.

3. A preliminary reference under article 267 TFEU was neither necessary nor appropriate. The questions proposed by Servier concerned the binding effect of findings which might not survive the pending appeal. The pending appeal was therefore an insuperable obstacle to a reference at that time: para 31.

4. The authority erga omnes of an EU judgment annulling an institutional measure extends to its operative part and to the ratio decidendi inseparable from it. The latter comprises only the grounds forming the judgment's essential basis and the precise reasons for the illegality. Its scope is determined by the purpose of preserving the annulment, ensuring effective judicial control of EU institutions and defining what the institution must do to comply under article 266 TFEU: paras 38–42.

5. The court rejected Servier's broader conception of the principle. A factual finding has no binding force independent of the annulling judgment. It may be conclusive where necessary to prevent the annulment from being undermined, but it cannot be transplanted into unrelated litigation merely because the same factual issue arises: paras 45–58.

6. The General Court's findings concerned market definition and dominant position under article 102 TFEU. Servier sought to use them in a different context concerning mitigation, remoteness and causation in claims based on alleged anticompetitive agreements under article 101 TFEU. The domestic claims neither questioned the annulment nor contradicted what was required to secure compliance with EU law. The principle therefore had no application, and that conclusion was acte clair: paras 46–49 and 62.

1. United Kingdom Supreme Court: The court unanimously dismissed Servier's appeal in [2020] UKSC 44. The General Court's findings were not definitive and absolute res judicata did not make them binding in the distinct domestic context.

2. Court of Appeal: The court dismissed Servier's appeal and held that none of the relied-on factual findings constituted res judicata for the preliminary-issues trial: [2019] EWCA Civ 1096; [2020] Ch 193.

3. High Court: Roth J held that none of the findings constituted res judicata and that the claimants could contest them at trial: [2019] EWHC 1004 (Ch); [2019] 5 CMLR 6.