NCA v N and Royal Bank of Scotland plc

The Court of Appeal today allowed the appeal of the National Crime Agency (“NCA”) against several interim orders made by Burton J which “in effect disapply” the Proceeds of Crime Act 2002 (“POCA”).

Part 7 of POCA imposes requirements on banks which are triggered when they suspect money in a customer’s account is criminal property. In such circumstances, banks must seek and receive the consent of the NCA before carrying out transactions relating to the suspect funds. Banks face criminal penalties where the POCA regime is not followed.

N held a number of bank accounts with RBS. RBS suspected that the credit balance on certain of those accounts constituted criminal property. It froze those accounts and, in compliance with POCA, sought and received the consent of the NCA to return the funds in the accounts to N. Meanwhile, N commenced proceedings for an interim mandatory injunction requiring the bank to operate N’s accounts by carrying out specified past payment instructions. Burton J ordered that RBS make the specified payments and also declared that in doing so the bank “will not commit any criminal offence under the Proceeds of Crime Act 2002 or otherwise” and that it is “not obliged to make any disclosure as would or may be required by the Criminal Law or any other law”. Further similar orders followed.

Whilst not going so far as to say that POCA ousts the jurisdiction of the court to grant interim relief, the Court of Appeal accepted the NCA’s submission that the statutory procedure is highly relevant to the exercise of the court’s discretion to grant such relief. Parliament’s statutory scheme, which represents a “workable” and “reasonable” balance of conflicting interests in the fights against money laundering, cannot be displaced merely on consideration of the balance of convenience as between the interests of the private parties. Cases justifying such intervention are likely to be exceptional, including such extreme scenarios as demonstrable bad faith by the bank. The instant case was not sufficiently exceptional to justify the grant of an interim declaration.

Philip Moser QC and Imogen Proud (who did not act below) represented the National Crime Agency in the Court of Appeal. A copy of the judgment is here.

The Competition Appeal Tribunal (CAT) has today given its judgment on the first ever application for a Collective Proceedings Order (CPO) under the new competition damages collective actions procedures introduced by the Consumer Rights Act 2015. The CAT has refused to grant a CPO on the basis of the Claimant’s proposed case on consumer losses as set out at the application hearing, but has left the door open for the Claimant to return to the CAT with fresh economic evidence estimating alleged consumer losses on an alternative basis.

Background

Under the procedures introduced by the Consumer Rights Act 2015, any person can apply to the CAT for permission to bring claims for damages for competition law infringements acting as representative of a class of persons (such as consumers who bought a particular product) who are alleged to have suffered losses as a result of the infringement. Such actions can be brought on an ‘opt-out’ basis, so that, for example, every person in the UK who purchased a particular product during a particular time period will be within the scope of the proceedings unless he or she actively chooses to ‘opt out’.  If the action results in an award of damages, such class members will be able to submit claims for a share of those damages, and the amount that is left over in the damages fund after those claims have been processed may be given to charity.

The application for a CPO was issued in June last year by Ms Dorothy Gibson (the General Secretary of an unincorporated association calling itself the National Pensioners’ Convention) against Pride Mobility Products Ltd, an Oxfordshire-based distributor of mobility scooters.

The proposed action is a ‘follow-on’ action brought to recover damages for losses alleged to have been suffered by consumers in consequence of infringements found by a decision of the Office of Fair Trading (OFT). The OFT’s decision was issued in May 2014 and found that Pride and eight of its retailer customers had infringed the Chapter I prohibition in the Competition Act 1998.   By each of those eight agreements, Pride and a retailer (a “Relevant Retailer”) agreed that the retailer would not advertise below-RRP prices on the internet for particular models of scooter (“Relevant Models”).  Pride advised the retailers that they should instead state on their websites, “Call for best price”.  Pride had been concerned about the promotion of heavily discounted prices on the internet undermining the viability of ‘bricks and mortar’ stores and their ability to offer buyers of mobility scooters pre-sales physical assessments and after-sales support; but the OFT found that the way Pride had gone about trying to address that concern was unlawful.  No penalty was imposed on Pride, and Pride did not seek to appeal the OFT’s decision.

The claimant Ms Gibson (who did not herself purchase any mobility scooter) is claiming damages on behalf of everyone who purchased a Pride scooter in the UK during the 2-year period from February 2010 to February 2012 within which the eight infringements were operating.

A hearing of her CPO application took place over three days in December last year. At that hearing she relied on evidence from an economic expert who estimated the losses suffered by consumers at between £2.7m and £3.2m (not including interest).  The basis for that estimate was that the eight agreements identified in the OFT’s decision were pursuant to a “policy” of Pride to restrict retailers from advertising below-RRP prices on the internet.  The economic expert, who was cross-examined at the hearing, explained that he intended to quantify the consumer losses by comparing sold prices for the Relevant Models during the 2-year period during which the infringement place, with sold prices for those models in subsequent years.

The Tribunal’s judgment

The Tribunal’s judgment first dealt with Pride’s case that the CPO application should be refused because the provisions of the Consumer Rights Act 2015 allowing the bringing of collective actions on an ‘opt-out’ basis should not be permitted to have retroactive effect. Both at the times when the infringements occurred, and at the time of the OFT decision, it was not possible for actions to be brought on an ‘opt-out’ basis so as to claim damages for consumers who had not indicated any wish to bring a claim and who might never receive those damages personally.  The Tribunal rejected Pride’s argument that to allow an ‘opt-out’ action in these circumstances would contravene the principle against retroactivity which under the Human Rights Act and/or EU law.  The Tribunal found that there was no such contravention because the introduction of the ‘opt-out’ regime, although a radical procedural change in the UK, was not a change in substantive law.  The Tribunal also considered that Pride could have anticipated the change at the time when it was deciding whether or not to appeal the OFT’s decision in May 2014.

By its judgment, the Tribunal has declined to grant Ms Gibson a CPO at this time because her proposed basis for quantifying losses did not stand up to scrutiny in the context of a ‘follow on’ claim. Given that the proposed action was a ‘follow-on’ action, any estimate of consumer losses would have to be in relation to the alleged losses suffered by consumers specifically as a result of the eight infringements found by the OFT.  Ms Gibson’s economic expert should therefore not have sought to quantify damages by reference to Pride’s “policy”, since such an approach would effectively allege that Pride committed infringements in addition to the eight found in the OFT’s decision.

The Tribunal also expressed doubts the approach that the economic expert proposed to use for quantifying the losses, namely to compare sold prices for the Relevant Models during the 2-year period during which the infringement place, with sold prices for those models in subsequent years. Such an approach risked confusing ‘cause’ and ‘effect’.  If such a comparison were to be useful, it would be necessary to show that any reduction over time in the average sold prices of the Relevant Models was attributable to the cessation of the eight infringements, since this could not be assumed.

The Tribunal has, however, left the door open for Ms Gibson to return to the Tribunal with fresh economic evidence seeking to quantify the alleged consumer losses on an alternative basis. In that regard, the Tribunal considered that, given the effects on the interests of any consumers who may have suffered losses, it would not be proportionate to now exclude the possibility for Ms Gibson’s economic expert to reformulate his proposed approach for quantifying damages on the basis of a legally correct approach.  Any such quantification would need to be in relation to consumer losses attributable specifically to the eight infringements found in the OFT decision, and would therefore need to exclude any losses attributable to the conduct of any other retailers who chose to abide by Pride’s “policy”.  The economic expert would also need to explain how he proposed to show that any changes in sold prices for Relevant Models over time were attributable to the cessation of the infringements.

The Tribunal has formally adjourned the CPO application and invited submissions from the parties as to the form of order it should make.

Comment

The judgment will be of great interest to competition law practitioners as a first example of the approach that the Tribunal will take to examining the merits of proposed ‘opt-out’ collective actions before allowing such actions to proceed.

At the present time, it remains to be seen whether or not Ms Gibson will take up the opportunity to submit a new economic case for quantifying consumer losses. The judgment notes that there were some 250-300 retailers who regularly sold Pride scooters during the 2-year infringements period, and the number of Relevant Models sold by the Relevant Retailers during that period was 944 (many of which were sold in‑store rather than online or by telephone) .

A copy of the judgment is here.

Monckton barristers Alan Bates, Michael Armitage and Jack Williams are instructed on behalf of Pride.

Case C-72/15 OJSC Rosneft Oil Company v. HM Treasury; the Secretary of State for Business, Innovation, and Skills; the Financial Conduct Authority

The Grand Chamber of the EU Court of Justice has handed down an important judgment concerning the validity of the EU’s sanctions on Russia in response to Russia’s actions in Ukraine, and the scope of the CJEU’s jurisdiction to review the validity of decisions adopted under the EU’s Common Foreign and Security Policy.

The case was referred by the High Court in February 2015 (see [2015] EWHC 248 (Admin)) following a challenge by Rosneft to UK statutory instruments giving effect to the sanctions, and the legality of the underlying sanctions against the Russian oil sector.

In its judgment, available here, the CJEU finds that:

1. the Court has jurisdiction to give preliminary rulings on the validity of CFSP acts, provided that it relates either to the monitoring of the act’s compliance with Article 40 TEU, or to reviewing the legality of restrictive measures against natural or legal persons. The exclusion of the Court’s jurisdiction in the field of the CFSP should be interpreted strictly;
2. the adoption by the Council of restrictive measures against Russia in CFSP Decision 2014/512 did not breach Article 40 TEU by impinging on the Union’s competences under the TFEU;
3. in so far as it prohibits / requires prior authorisation for the sale, supply, transfer or export of technologies or services suited to specific categories of oil exploration and production, the CFSP measure does not prescribe restrictive measures against natural or legal persons, because the scope is determined by objective criteria;
4. on the other hand, measures applicable to specific entities including Rosneft were targeted at he named entities and the Court has jurisdiction to review their validity under Article 275 TFEU;
5. it was within the Council’s broad discretion to determine that the measures adopted against Russia were necessary for the protection of essential European Union security interests and the maintenance of peace and international security, within the meaning of Article 99 of the EU‑Russia Partnership Agreement;
6. the measures did not involve any breach of the Council’s obligation to state reasons, nor of Rosneft’s right of access to the file, rights of defence or right to effective judicial protection, nor any misuse of power, or breach of the principle of proportionality;
7. the fact that the measures were targeted at the oil industry did not infringe the principle of equal treatment. The Court agreed with the United Kingdom that it was open to the Council to target specific sectors of the Russian economy particularly reliant on products, technologies or services imported from the EU;
8. the fact that certain of the terms used in Regulation No 833/2014 are general in nature and may be subject to clarification by the Court does not breach the principle of legal certainty and does not prevent a Member State from establishing criminal penalties for breach of the Regulation.

The Court also clarified the use of the term ‘financial assistance’ in Article 4(3)(b) of Regulation No 833/2014, to exclude processing of payments by a bank or other financial institution, and the application of the prohibition on the issuance of global depositary receipts representing shares issued by one of the sanctioned entities before 12 September 2014.

The significance of the judgment lies, in particular, in the clarification of the scope of the CJEU’s jurisdiction to review CFSP acts under the preliminary reference procedure, and the degree of deference to be accorded to the Council in respect of the content of such acts.

Gerry Facenna QC acted for the United Kingdom in the Court of Justice. Gerry, Tim Ward QC and Julianne Kerr Morrison also acted for HM Treasury and the Secretary of State for Business in associated domestic proceedings leading to the reference.

The Court of Appeal has rejected a challenge under the Human Rights Act 1998 to the legislation governing the right to succeed to a secure tenancy.

The Appellant was the long-term partner of the sole tenant to a four-bedroom house owned by the London Borough of Wandsworth. In 2010 there was a breakdown in their relationship and the tenant moved out, leaving the Appellant in the house with their children. Following a reconciliation, he moved back in in January 2012 but he was by then seriously ill and he died in March of that year.

Under the Housing Act 1985 as it stood at the time, a spouse had an automatic right to take over a secure tenancy when the tenant died. However, an unmarried partner such as the Appellant had to have been living with the tenant for the 12 months preceding the tenant’s death in order to qualify. On the fact of this case, therefore, the Appellant was not entitled to take over the tenancy and the Council required her to vacate the house.

The Appellant challenged the legislation, arguing that it discriminated between spouses and unmarried partners and was therefore contrary to Article 14 and Article 8 of the European Convention on Human Rights (the prohibition on discrimination and the right to a family and private life). In a judgment handed down on 24 March 2017, the Court of Appeal dismissed the challenge, holding that:

• The legislation pursued a legitimate aim, namely limiting rights of succession to family members whose relationship with the tenant was of a permanent character. Whilst that requirement was inherently satisfied in the case of spouses, it was legitimate to impose the 12 month condition on unmarried partners as a means of demonstrating the same element of permanence and constancy.

• Since social housing could be equated with welfare benefits, the relevant standard of review in assessing whether the 12 month condition was proportionate was whether it was “manifestly without reasonable foundation”.

• It was impossible to say that the condition was manifestly without reasonable foundation as a criterion for demonstrating the necessary degree of permanence and constancy.

• The fact that the condition had since been removed from the legislation did not render the old regime unjustifiable. Nor had Parliament been required to make the change in the legislation retrospective.

At a time of significant pressure on the nation’s social housing stock, the Court’s judgment will come as a relief to local authorities. It is, moreover, of interest in that it clarifies the standard of review that applies when a court is considering a challenge to a socio-economic measure based on Article 14 of the ECHR. Whilst the “manifestly without reasonable foundation” test is not a “get out of jail free” card for respondents, it is plainly a stringent test.

Ben Lask represented the Secretary of State for Communities and Local Government. A copy of the judgment is here.

To read the case note, please click here.

In a short and significant judgment handed down on 24 March 2017, Mr. Justice Coulson has given general guidance on the treatment of confidential information in procurement cases and has signalled a change in the treatment of procurement case files in the Technology & Construction Court.

The judgment was given in Bombardier v Merseytravel, a case in which the claimant has made various allegations against the defendant arising out of a tender process for the award of a number of contracts which form the Merseytravel Rolling Stock Programme. The contract has been awarded to the successful bidder so the claim is for damages only.

The claim file had been marked “private” and a third party (an unsuccessful bidder) applied to the court for access to the pleadings. When considering the application, Mr. Justice Coulson learned that all public procurement claims were being marked on the court file as “private”, so that access to the court file in such cases was being routinely denied. Mr. Justice Coulson has made it clear that such a practice is wrong in principle and will not continue.

The judgment sets out various general principles relating to the balance to be achieved between open justice and confidentiality in public procurement disputes.

Please click here to read the judgment.

Valentina Sloane appeared for the Defendant, Merseytravel. She and Philip Moser QC are instructed by DLA Piper to act for Merseytravel in the ongoing proceedings.

 

The Court of Appeal today clarified the circumstances in which a failure by the First Tier Tribunal (FTT) to take account of a relevant ‘Country Guidance’ case when determining an asylum appeal will constitute an error of law: NA (Libya) v Secretary of State for the Home Department.

A Country Guidance case is one in which the Upper Tribunal (UT) issues authoritative guidance on the situation in a particular country, based on a detailed assessment of expert and factual evidence.  The general rule is that, in any subsequent appeal relating to the same country, the FTT is obliged to take account of an applicable Country Guidance case in deciding whether an appellant’s fear of persecution in that country is well-founded.  A failure to do so is an error of law because it constitutes a failure to take a material matter into account.

The Appellant, a national of Libya, had appealed to the FTT against the Secretary of State’s refusal to grant him asylum.  The FTT accepted that, having previously lived in a Gaddafi stronghold, he would be perceived as a supporter of the former leader on return to Libya and would therefore be at risk of persecution by members or supporters of the new regime.

After the FTT prepared and signed its decision, but two days before that decision was promulgated (formally issued), an Country Guidance case was issued by the UT in relation to Libya: AT (Libya) [2014] UKUT 318.  AT (Libya) cast doubt on the FTT’s decision in the present case but, since it was issued after the FTT’s decision was prepared and only two days before its promulgation, the FTT did not take AT (Libya) into account.  The Appellant argued that the FTT’s failure could not, in those circumstances, amount to an error of law and that its decision to uphold his asylum claim should therefore stand.

The Court of Appeal disagreed.  It held that, if a Country Guidance case was issued before promulgation of an FTT decision, the FTT was required to take it into account.  Any failure to do so would amount to an error of law, whether or not the Country Guidance case had been drawn to the FTT’s attention.  The rationale behind the requirement to follow a relevant Country Guidance case is the principle that like cases should be treated alike.  Thus the Court explained that, whilst the FTT Judge could not be criticised for the error: “It is important that the applicable principles about following and applying Country Guidance cases do not become obscured by the happenstance of the timing in the present case and it should make no difference when, precisely, before promulgation of the case before the Tribunal, the Country Guidance case is published and promulgated”.

The Court’s decision clarifies the scope of the FTT’s duties in the asylum context and confirms that an error of law is essentially an objective concept that does not depend on the decision-maker being at fault.

Ben Lask acted for the Secretary of State.

Click here to read the judgment.

The EU Court of Justice today handed down two judgments in cases concerning employers’ restrictions on the wearing by employees of Islamic headscarves and religious symbols.  In giving its judgments, the Court has clarified the law on the distinction between the concepts of “direct discrimination” and “indirect discrimination”.  The judgments will be welcomed by the UK Government, which intervened in the two cases to urge the Court to maintain a clear principled distinction between the two concepts.

The first judgment was given in the case of Achbita (Case C 157/15), an employment dispute in Belgium concerning a Muslim woman who was dismissed from her employment as a receptionist.  The reason for her dismissal was her refusal to stop wearing a headscarf at work, which her employer considered to be contrary to its policy prohibiting employees from wearing “visible signs of their political, philosophical or religious beliefs and/or from engaging in any observance of such beliefs”.  The particular issue referred by the Belgium court to the EU Court of Justice was whether the employer’s actions should be classified as “direct discrimination” (since they targeted Ms Achbita’s clothing choices because of their link with her religious beliefs) or as a potential case of “indirect discrimination” (since a prohibition on wearing clothes associated with particular religious or other beliefs limits the clothing choices of all employees regardless of their religious beliefs, albeit that the prohibition would in practice have a particular impact on people whose religious beliefs require them to dress in a manner associated with those beliefs).

The second judgment was given in the case of Bougnaoui (Case C 188/15), an employment dispute in France concerning a Muslim woman who was dismissed from her employment as a design engineer working on projects for the employer’s customers.  The reason for her dismissal was her refusal to stop wearing a headscarf at work, following requests made by the employer in response to complaints they had received from their customer at whose premises Ms Bougnaoui was working.  The French court, which appears to have classified the case as one of “direct discrimination”, asked the EU Court of Justice whether the employer’s instruction to Ms Bougnaoui to stop wearing the headscarf could be justified by reason of a “genuine occupational requirement” constituted by the employer’s commercial need to comply with the demands of its customer.

In its two judgments, the Court of Justice explained that an employer’s restriction on an employee’s clothing choices is to be classified as “direct discrimination” only if that restriction is on the basis of the employee’s religion (which would be the case if, for example, an employer placed certain restrictions on the dress choices of Muslim employees but not on those of other employees).  Dress restrictions that apply to all employees without regard to their religious beliefs will, however, constitute “indirect discrimination”, and will therefore be unlawful, where they result, in fact, in employees with religious or other “protected characteristics” being put at a particular disadvantage and are not “objectively justified”.

The Court of Justice took pains to emphasise that its judgments should not be seen as allowing employers to restrict, without good reason, employees from dressing compatibly with their religious beliefs.  In particular, the Court stated that requests or complaints made by an employer’s customers could not, in themselves, constitute objective justification, since otherwise employers would be able to justify discrimination by relying on their customers’ prejudices.

The Court of Justice’s judgments essentially reflect the submissions of the UK Government, which urged the Court to: (a) promote legal certainty by limiting the concept of “direct discrimination” to situations where an employer has subjected an employee to particular treatment on the basis of his or her race, sex, religion, sexual orientation or other “protected characteristic”; (b) query the French court’s classification of the Bougnaoui case as one involving “direct discrimination”; and (c) emphasise that restrictions on employees’ manifestations of their religious beliefs cannot be justified by reference to the prejudices of an employer’s customers.

Monckton barrister Alan Bates represented the United Kingdom in both cases.

BT had agreed to “legally separate” Openreach.

For the last two years, Anneli Howard has been advising BT on the extent of OFCOM’s legal powers regarding its regulation of access to broadband infrastructure as part of its Strategic Review of Digital Communications.  In particular, Ofcom has been consulting on proposals to split Openreach –  the division of BT that owns and operates its broadband network – into a separate legal entity that is entirely independent of BT. That degree of separation would be far more extensive than the functional separation arrangements adopted back in 2005. Anneli drafted the detailed response by BT to Ofcom’s July consultation and has been advising BT on its regulatory strategy.

On 29 November 2016, Ofcom announced that it intended to proceed with mandating the legal separation of Openreach, the wholesale broadband services provider, from the rest of the BT Group.

On 10 March 2017, it was announced that BT and Ofcom have reached agreement on a long-term regulatory settlement that will see Openreach become a distinct company with its own Board as part of the BT Group. Around 32,000 employees will transfer to the new entity once pension arrangements are in place and Openreach Limited will have its own brand without the BT logo.

The agreement is based upon voluntary commitments submitted by BT that the regulator has confirmed address all its competition concerns.

Anneli Howard leading Daisy Mackersie was instructed by Freshfields Bruckhaus Deringer.

See BT news release.

The agreement has attracted wide media attention including: BBC; Telegraph; The Guardian; Sky News; FT; Daily Mail; CNBC; City A.M.; The Times.