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

After an introductory sub-section addressing the extent of judicial review exercised by the General Court (paras 1372-1379) and the particularities of the pharmaceutical sector (paras 1380-1405), the Court examines the enumerated complaints. The Court first considers and rejects the first limb of the first complaint (paras 1406-1417). The Court then turned to the second complaint, concerning the therapeutic substitutability of ACE inhibitors. The Judgment helpfully summarises Servier’s arguments under this second complaint as follows:

“1418 By their second complaint, the applicants maintain, in essence, that the Commission disregarded the therapeutic substitutability between the ACE inhibitors. They argue, firstly, that the Commission wrongly considered that perindopril was differentiated from other ACE inhibitors by particular qualities, secondly that competition between the ACE inhibitors was keen with regard to new patients, thirdly that the Commission underestimated the propensity to change drugs of patients treated with perindopril and, finally, that promotional actions are one of the essential dimensions of competition in the relevant market.”⁵

The Judgment proceeds to discuss and evaluate, in a very structured fashion, each of these four arguments in turn (paras 1419-1565).

Servier’s argument that all ACE inhibitors are in this regard part of a homogeneous class is examined under eight heads, which can be summarised as follows:

Following that analysis, the Court concludes:

“1481 In the light of all the documents in the file, it must be concluded that there is no significant difference between perindopril and other ACE inhibitors in therapeutic terms, including in terms of efficacy and side effects. There is no evidence in the record of objective scientific evidence of the therapeutic superiority of perindopril over other ACE inhibitors. ACE inhibitors are widely perceived as substitutable by prescribers and there are many medications considered by physicians as therapeutic equivalents to perindopril. Therefore, the Commission erred in considering that the class of ACE inhibitors was heterogeneous and that perindopril exhibited particular therapeutic characteristics within this class of drugs.” (Footnote: ⁴)

The Court discusses the question of the extent of this ‘inertia’ of doctors in their prescribing for new patients under six heads, as follows:

Following that analysis, the Court concludes as regards this factor:

“1513 In the light of the foregoing, it must be concluded that the Commission has not established that a phenomenon of

“inertia” of doctors and the existence of a growing group of prescribers “faithful” to perindopril had significantly restricted the competitive pressure on perindopril by other ACE inhibitors for new patients.” (Footnote: ⁵)

Servier’s criticism of the Commission’s conclusion in this respect is also discussed under six heads:

The Court concludes:

“1540 It follows from the foregoing that the Commission underestimated the propensity to change patients treated with perindopril, further relying on the erroneous assumption of the heterogeneity of drugs in the class of ACE inhibitors. The evidence in the file shows that the changes in treatment of patients starting treatment with perindopril are significant over a period of five years, which calls into question the average duration of treatment assessed by the Commission and the significance of the effect of foreclosure of the patient base.” (Footnote: ⁶)

The Court analyses under four heads Servier’s argument that the Commission failed to take due account of the important promotional efforts made by laboratories as a major dimension of competition, concluding:

“1565 Therefore, it follows from the foregoing that the Commission did not give due consideration to the promotion efforts of the laboratories and their importance in the analysis of the competitive relationship between perindopril and the other ACE inhibitors.” (Footnote: ⁷)

Based on its detailed examination and discussion of each of Servier’s four arguments, the Court finds that the second complaint is well-founded: para 1566.

The Court proceeds (at paras 1567-1585) to uphold the second limb of the first complaint, concerning the excessive weight given by the Commission to changes in the relative prices of medicinal products based on a so-called ‘natural events’ analysis. The Court accordingly expressly decides that it is unnecessary to consider also Servier’s third complaint: para 1586.

There follows a concluding sub-section (paras 1587-1592). This effectively summarises the Court’s findings and it is relevant to set out the final four paragraphs:

“1589 In the present case, at the end of the overall assessment of the factors on which the Commission based its assessment and the examination of the applicants’ complaints, it must be concluded that the Commission committed a series of errors in the analysis of the definition of the relevant market. Indeed, the Commission:

-

wrongly considered, with regard to therapeutic use, that ACE inhibitors were a class of heterogeneous drugs and that perindopril had particular characteristics within this class of drugs;

-

wrongly concluded that a mechanism of “inertia” of physicians had significantly restricted the competitive pressure exerted on perindopril by other ACE inhibitors for new patients;

-

underestimated the propensity of patients treated with perindopril to change treatment;

-

did not give due consideration to laboratory promotion efforts and their importance in the analysis of competitive relationships;

-

disregarded the particular characteristics of competition in the pharmaceutical sector, erroneously inferring from an analysis of natural events based primarily on price changes that perindopril was not subject to significant competitive pressures from other ACE inhibitors.

1590

On the basis of an analysis tainted by the abovementioned errors, the Commission restricted the relevant market to the single molecule of perindopril, while the evidence shows that perindopril could be exposed to significant non-tariff competitive pressures from the other ACE inhibitors. In those circumstances, it must be held that the errors committed by the Commission are such as to vitiate the result of its analysis.

1591

It must therefore be concluded, following an assessment made by the Court, in compliance with the limits of the judicial review referred to in paragraphs 1587 and 1588 above, that it has not been established that the relevant product market relevant is limited to only branded and generic perindopril.

1592

In the light of the foregoing, the fourteenth plea in law, directed against the definition of the finished product market market as being that of branded and generic perindopril, is accepted.”¹⁰

The substantive statement in para 1591 is effectively echoed in the Court’s overall conclusions, where it addresses market definition and dominance at para 1963: see at para 30 above.

a conclu à tort qu’un mécanisme d’« inertie » des médecins avait restreint de façon significative la pression concurrentielle exercée sur le périndopril par les autres IEC pour les nouveaux patients;

a sous-estimé la propension des patients traités au périndopril à changer de traitement;

n’a pas dûment pris en considération les efforts de promotion des laboratoires et leur importance dans l’analyse des rapports de concurrence;

a méconnu les caractéristiques particulières de la concurrence dans le secteur pharmaceutique, en déduisant à tort d’une analyse des événements naturels fondée essentiellement sur les variations de prix que le périndopril n’était pas soumis à des pressions concurrentielles significatives de la part des autres IEC. 1590 En se fondant sur une analyse entachée des erreurs qui viennent d’être rappelées, la Commission a restreint le marché pertinent à la seule molécule du périndopril, alors que les pièces du dossier montrent que le périndopril pouvait être exposé, de la part des autres IEC, à des pressions concurrentielles significatives d’ordre non tarifaire. Dans ces conditions, il y a lieu de considérer que les erreurs commises par la Commission sont de nature à vicier le résultat de son analyse.

Il convient ainsi de conclure, à l’issue d’une appréciation opérée par le Tribunal dans le respect des limites du contrôle juridictionnel rappelées aux points 1587 et 1588 ci-dessus, qu’il n’est pas établi que le marché de produits pertinent est limité au seul périndopril princeps et générique.

Compte tenu de ce qui précède, il convient d’accueillir le quatorzième moyen, dirigé contre la définition du marché des produits finis comme étant celui du périndopril princeps et générique.”

All parties have recognised that the actions before this court cannot proceed to final trial before the European proceedings are finally concluded. In the light of the Judgment, the claimants have stated that they will not pursue their case under Art 101 (or the Chapter 1 prohibition) as regards the Krka agreement or under Art 102 (or the Chapter 2 prohibition) for abuse of dominance, unless the Judgment is reversed in those respects by the CJEU. This is subject to a reservation of their position in the event of a change in the governing legal regime following Brexit. However, they are pursuing their claim under Art 101 (and the Chapter 1 prohibition) in all other respects, subject to Servier’s appeal to the CJEU, and if the Court of Appeal should reverse my decision striking out the unlawful means claim, the English claimants will doubtless pursue that also. The prescribing argument therefore remains very relevant to Servier’s defence even if the abuse of dominance case may fall away.

As explained above, critical to the prescribing argument is the degree of therapeutic equivalence between perindopril and other ACE inhibitors, whether at the material time (i.e., 2003-2009) prescribing doctors viewed them as substitutable, and whether the various health authorities should reasonably have sought to encourage doctors to prescribe another ACE inhibitor instead of perindopril, whether for new patients or by switching existing patients. On that basis, the following have been ordered to be tried as preliminary issues in these actions:

Some of the findings and statements in the Judgment are obviously relevant to those issues. As directed by this court, Servier served a statement of the eight propositions (“Servier’s propositions”) which it contends are binding on the court in the trial of the preliminary issues as findings of fact made by the General Court. As slightly amended in the course of argument, and as cross-referenced to the paragraphs in the Judgment, Servier’s propositions are as follows:

“(a)

There was no significant difference between perindopril and other ACE inhibitors in therapeutic terms, including in terms of efficacy and side effects, mode of action, main indications and contraindications (Judgment §§1425, 1429, 1481, 1519, 1589).

(b)

ACE inhibitors were widely perceived as substitutable by prescribers and there were many medications considered by physicians as therapeutic equivalents to perindopril (Judgment §§1481, 1489).

(c)

There was no element that limited the discretion available to physicians to prescribe ACE inhibitors other than perindopril for new patients (Judgment §1489).

(d)

Switching between ACE inhibitors for existing patients did not raise particular fears on the part of physicians (Judgment §1519).

(e)

The prescribing behaviour of physicians was not characterised by a high degree of “inertia” and treatment changes in patients undergoing continuous treatment were significant (Judgment §1544).

(f)

At least some PCTs considered, as from 2005, that perindopril was no more effective than any other ACE inhibitor and recommended, for cost reasons, the use of other ACE inhibitors than perindopril, or even the substitution of another ACE inhibitor for perindopril, in particular lisinopril or ramipril (Judgment §1464).

(g)

At least some PCT policies had a real negative effect on perindopril sales at local level (Judgment §1534).

(h)

Servier’s promotional activities did not sufficiently differentiate perindopril from other ACE inhibitors for it to be recognised for particular therapeutic qualities by physicians (Judgment §§ 1472, 1473).

The claimants dispute that any of these propositions are binding in the present proceedings by reason of the Judgment, but they have stated that they do not as a matter of fact dispute propositions (f) and (g). Accordingly, in practical terms the issue between the parties concerns the other six propositions.

The claimants wish to advance arguments to the contrary and they have prepared and served evidence that addresses these matters. For example, Dr Hurding, an experienced Scottish GP who has also worked on medicines management for two Scottish health boards, states that among the factors that led prescribers to prefer perindopril over other ACE inhibitors were the practical considerations that it was easier to titrate and that its easier dosing requirements enhanced patient compliance; and further that there was a strong evidence base supporting the benefit of perindopril treatment for stroke patients. Dr Smithard, a stroke consultant, explains in his witness statement that over the relevant period he almost exclusively prescribed perindopril

As stated at the outset, Servier puts its case on two grounds: res judicata and abuse of process. But Ms Bacon submitted that it could rely on a combination of these principles: if res judicata applies in respect of only some of Servier’s propositions, it might nonetheless be an abuse of process for the claimants to contest the others. Before examining the substantive arguments on those two grounds, it is appropriate to consider briefly whether the six propositions at issue properly reflect findings in the Judgment:

I would therefore, in any event, reject Servier’s case that its fourth and eighth propositions can be derived from the Judgment, even if the principles of res judicata or abuse of process should apply. Whether either of those principles does apply is the question to which I now turn.

The application of res judicata to Servier’s propositions for the purpose of determining the preliminary issues was argued entirely on the basis of EU law. Servier does not rely on the English principles of res judicata or issue estoppel.

Servier relied in particular on the P&O Ferries case which Ms Bacon described as the seminal authority establishing the position under EU law: Cases C-442 &471/03P P&O Ferries v Commission, EU:C:2006:356. The background to that case is somewhat complex but pertinent, so it is necessary to summarise the details.

In July 1992, an agreement (“the original agreement”) was concluded between the Provincial Council of Biscay (“the Diputación”) and the Ministry of Trade and Tourism of the Basque Government on the one hand and the ferry company subsequently called P&O Ferries on the other hand concerning the establishment of a ferry service between Bilbao and Portsmouth. The two Spanish authorities thereby agreed to acquire over the period 1993-1996 a number of travel vouchers for

P&O Ferries thereupon informed the Commission that it had suspended the original agreement and notified to the Commission a further agreement with the Diputación concluded in March 1995 (“the new agreement”) for the period 1995-1998 which included an undertaking to purchase a total of 46,500 tickets, at a lower price than in the original agreement, and various other terms. By decision of 7 June 1995 the Commission terminated the procedure commenced regarding the original agreement and determined that the new agreement did not constitute State aid. BAI challenged that decision before what was then the Court of First Instance (“CFI”) (now the General Court).

In Case T-14/96 BAI v Commission, the CFI annulled the decision of 7 June 1995 and held that the new agreement did not constitute a normal commercial transaction and that the Commission’s conclusion that the new agreement did not constitute State aid was incorrect. In particular, the CFI noted that although the ticket price was lower than under the original agreement, the total number of tickets which the Spanish authority agreed to purchase was substantially higher, so that the total sum that would be paid to P&O Ferries was higher than under the original agreement; and further the number of tickets to be purchased did not reflect any real needs of the purchaser. Moreover, those tickets could only be used in low season. The CFI held that the effects of the new agreement were in substance the same as those of the original agreement. P&O Ferries and Spain as a Member State intervened in the proceedings before the CFI in support of the Commission.

Following the CFI judgment in BAI, the Commission proceeded to adopt a further decision on 29 November 2000 declaring that the new agreement constituted State aid incompatible with the common market, and Spain was ordered to recover the sums already paid.

P&O Ferries and the Disputación then commenced proceedings before the CFI challenging the Commission’s decision of 29 November 2000. They argued, inter alia, that the Commission had been wrong to categorise the new agreement as State aid. The Commission submitted that the plea concerning the classification of the agreement as State aid was inadmissible as res judicata by reason of the BAI judgment. In Cases T-116 & 118/01, P&O Ferries and Diputación v Commission EU:T:2003:217, the CFI held that res judicata applied only “if the action which gave rise to the judgment was between the same parties, had the same subject-matter and was founded on the same grounds”: para 77. The Court proceeded to reject the plea of res judicata on the grounds that, first, the actions did not have the same subjectmatter since BAI’s action had been brought against the Commission’s decision of 7 June 1995 whereas the action before the Court brought by the Diputación was against the Commission’s decision of 29 November 2000; and secondly, the action before the Court was not between the same parties as in the BAI case: paras 78-80.

On appeal, the European Court of Justice (“ECJ”, now the CJEU) reversed the judgment of the CFI. It is appropriate to set out the relevant parts of the Court’s judgment:

“41 Contrary to the view taken by the Court of First Instance, the BAI v Commission judgment did not only have relative authority preventing merely new actions from being brought with the same subject-matter, between the same parties and based on the same grounds. That judgment was invested with the force of res judicata with absolute effect and prevented legal questions which it had already settled from being referred to the Court of First Instance for re-examination.

42

In the BAI v Commission judgment the Court of First Instance annulled the decision of 7 June 1995 in which the Commission held that the new agreement did not constitute State aid and consequently decided to terminate the review procedure which had been initiated in respect of the aid granted to [P&O Ferries].

43

That annulment led retroactively to the disappearance of the decision of 7 June 1995 with regard to all persons. An annulling judgment of that nature thus has authority erga omnes, which gives it the force of res judicata with absolute effect (see, in particular, Case 1/54 France v High Authority [1954] ECR 1, or p. 17, 34; Case 2/54 Italy v High Authority [1954] ECR 37, at p. 55; Case 3/54 Assider v High Authority [1955] ECR 63; and Case C-310/97 P Commission v AssiDomän Kraft Products and Others [1999] ECR I-5363, paragraph 54).

44

That authority is not attached only to the operative part of the BAI v Commission judgment. It is also attached to the ratio decidendi of that judgment which is inseparable from it (see, to that effect, Joined Cases 97/86, 193/86, 99/86 and 215/86 Asterisand Others v Commission [1988] ECR 2181, paragraph 27, and Commission v AssiDomän Kraft Products and Others, paragraph 54).

45

In addition, the question of the force of res judicata with absolute effect is a matter of public policy, which must, consequently, be raised by the Court of its own motion.

46

In the present case, in order to annul the decision of 7 June 1995 the Court of First Instance based itself, in particular, in paragraph 80 of the BAI v Commission judgment, on the conclusion that the new agreement ‘is not a normal commercial transaction’ and, in paragraph 81, on the fact that ‘the cultural and social aims pursued by the Spanish authorities play no part in the characterisation [of the new agreement] in the light of Article 92(1) of the Treaty [now, after amendment, Article 87(1)

EC]’. Finally, the Court of First Instance found, in paragraph 82

of the judgment, that ‘the Commission’s conclusion that [the new agreement] does not constitute State aid is based on a misinterpretation of Article 92(1) of the Treaty’ and that ‘[c]onsequently, the decision terminating the review procedure initiated in relation to aid granted to [P&O Ferries] is vitiated by an infringement of that provision and must be annulled’.

47

No appeal was lodged against the BAI v Commission judgment, and its operative part and ratio decidendi therefore became final.

48

It is clear from the grounds of that judgment that the Commission should have classified the aid at issue as State aid for the purposes of Article 87(1) EC and that, following the annulment, it would have to reopen the review procedure in respect of that aid.

49

In order to comply with that judgment the Commission, as it was required to do, reopened the review procedure on the compatibility of the aid in dispute with the Treaty. In the contested decision it, first, confirmed the classification as State aid acknowledged by the Court of First Instance in the BAI v Commission judgment and, second, considered that the aid in dispute was incompatible with the Treaty. The Commission therefore gave its decision on the same measures as those which were classified as State aid in the BAI v Commission judgment.

50

In those circumstances, when the Diputación brought its application against the contested decision before the Court of First Instance that court could not re-examine the pleas alleging that the aid at issue did not amount to State aid without disregarding the scope of the BAI v Commission judgment. Consequently, in finding as it did, the Court of First Instance failed to have regard to the force of res judicata with absolute effect of its previous judgment.”

Ms Bacon pointed out that the ECJ set out a distinction in para 41 between the concept of “relative authority”, which applied only as between the same parties as regards the same measure and on the same grounds, and the “absolute authority” of a judgment which created a broader res judicata which applied erga omnes. She emphasised that the relevant finding in BAI that gave rise to res judicata was essentially factual, i.e. that the new agreement was “not a normal commercial transaction”; it was not an issue of law. And she noted that the formulation set out in P&O Ferries had been repeated in subsequent cases. For example, in Case C-221/10P Artegodan v Commission, EU:C:2012:216, the CJEU stated, at para 87:

“… the Court has held, firstly, that res judicata extends only to the matters of fact and law actually or necessarily settled by the judicial decision in question (Commission v Luxembourg paragraph 27; and Thyssenkrupp Nirosta v Commission paragraph 123) and, secondly, that the force of res judicata attaches not only to the operative part of that decision, but also to the ratio decidendi of that decision which is inseparable from it (Joined Cases C-442/03 P and C-471/03 P P & O European Ferries (Vizcaya) and Diputación Foral de Vizcaya v Commission [2006] ECR I-4845, paragraph 44).”

In her reply, Ms Bacon further relied on the judgment of the General Court in a trade mark case, Case T-629/16 Shoe Branding Europe BVBA v EUIPO EU:T:2018:108. There, adidas AG (“adidas”) which was the registered owner of its well-known “three-stripes” mark as applied to footwear, had filed opposition before the EU Intellectual Property Office (“EUIPO”) to the application for registration by Shoe Branding Europe BVBA (“Shoe Branding”) of a “two stripes” mark for footwear. That opposition was rejected by EUIPO and its Board of Appeal, but on appeal by adidas, in Case T-145/14 adidas v OHIM – Shoe Branding Europe EU:T:2015:303 (“the annulling judgment”), the General Court annulled the decision of 28 November 2013 of the EUIPO Board of Appeal. The Court found that EUIPO had been wrong to conclude that there was no similarity between the two marks and that the public would not make a connection between them, and thus that the grounds for opposition under Art 8 of the Community Trade Mark Regulation (then Reg 207/2009) had not been made out. An appeal against that judgment was summarily dismissed by the CJEU: Case C-396/15P.

The matter then went back to the EUIPO Board of Appeal, which re-examined the case and by decision of 8 June 2016 held that there was likelihood that the relevant public would establish a link between the two marks. When Shoe Branding brought an action challenging that second decision, the General Court held that this was definitively settled by the earlier annulling judgment of the General Court and the CJEU. The Court stated:

“100.

In that regard, it should be noted that, in finding that the Board of Appeal had erred in its assessment of the similarity of the signs at issue and in annulling the decision of 28 November 2013, the General Court inter alia relied, in paragraphs 33 and 40 of the annulling judgment, on the dual fact, first, that ‘sports shoes’ were everyday consumer goods and, second, that the relevant public, made up of the average consumer, who is reasonably well informed and reasonably observant and circumspect, had an average degree of attention when purchasing those ‘sports shoes’. The applicant attempted to dispute those factual assessments before the Court of Justice, but that Court rejected its argument as being, in part, inadmissible and, in part, manifestly unfounded (order on the appeal, paragraphs 11 to 18). It follows that the judgment annulling the decision of 28 November 2013 is final.

After referring to P&O Ferries, the Court continued:

“103.

In the present case, it must be stated that the grounds of the annulling judgment, recalled in paragraph 100 above, relating to the degree of attention of the relevant public, constitute the necessary support for the operative part of that judgment. Therefore, those grounds themselves have the authority of res judicata with absolute effect and the Board of Appeal was required to comply with them.”

Servier stated that in the present case, the relevant operative part of the Judgment is paragraph 2, setting aside the article in the Decision which found that Servier had abused a dominant position in violation of Art 102. However, the reasoning which led to that determination was the Court’s conclusion that Servier did not occupy a dominant position in the relevant market, which the Court found was a market for all ACE inhibitors. Servier further submitted, as stated in Ms Bacon and Mr Piccinin’s skeleton argument:

“That finding, in turn, depended on the Court’s conclusions on the key factual issues set out above about the extent to which ACE inhibitors were, and were perceived to be, substitutable, and indeed the extent to which they were substituted in practice through PCT switching programmes. None of the eight findings above can be characterised as obiter dicta which fall outside the scope of the res judicata. All eight formed part of the core of the Court’s analysis of the market definition issue.”

On that basis, Servier argued that the findings encapsulated in its propositions were binding erga omnes, and thus also in the national courts of the Member States.

Mr Turner QC for the English claimants, in submissions adopted by the other claimants, accepted that para 44 of P&O Ferries set out the governing principle. Accordingly, the operative part of the Judgment gave rise to res judicata as regards the present proceedings, i.e. the conclusion that Servier had not abused a dominant position (subject only to his reservation as regards the possible consequences of Brexit: para 46 above). His primary case was that only the ultimate finding which constituted the ratio for this conclusion fell within the principle. Here, that was the finding that the Commission had not established that the relevant market was confined to perindopril: para 1963 of the Judgment. In the alternative, he submitted that, at most, the binding effect extended to the finding that perindopril could be exposed to significant non-price competition from other ACE inhibitors: para 1590 of the Judgment. Res judicata as set out in P&O Ferries and explained by other decisions of the EU courts did not extend further to what Mr Turner described as “findings of evidentiary facts”: such findings did not have effect erga omnes and could not bind the claimants in these proceedings. Mr Turner pointed to the distinction between findings of ‘evidentiary facts’ and findings of ‘ultimate facts’ in what he suggested was a helpful analogy in the judgment of Aldous LJ in Kirin-Amgen v Boehringer Mannheim GmbH [1997] FSR 289, citing at 301 from the judgment of Dixon J in the High Court of Australia in Blair v Curran (1939) 62 CLR 464, 532 (who was in turn referring to a judgment of Lord Shaw in the Privy Council on issue estoppel).

In that regard, Mr Turner drew attention to the two cases referred to by the ECJ in setting out the general position in P&O Ferries at para 44: Cases 97/86 etc Asteris v Commission, EU:C:1988:199, and Case-310/97P Commission v Assidöman Kraft Products, EU:C:1999:407.

Asteris concerned the question of what action the Commission had been required to take to give effect to a previous judgment of the ECJ. By a judgment of 19 September

Assidöman arose out of the Commission decision and then the ECJ judgment in Wood Pulp. By its decision, the Commission determined that a large number of producers of wood pulp had engaged in a cartel contrary to EU competition law. On an action for annulment of the Commission decision brought by 28 of those producers, the Court annulled the finding of a cartel on the basis that this was not established by the evidence relied on by the Commission. The Court considered expert evidence which showed that the conduct on the market was equally consistent with non-concerted parallel pricing, and annulled or substantially reduced the fines on those appellants. In Assidöman, representatives of 10 Swedish addressees of the Wood Pulp decision who had not brought applications for annulment (and were then out of time to do so), requested the Commission to reconsider the decision as it applied to them and for equivalent repayment of the fines which they had paid. The Commission’s refusal of their requests was upheld by the ECJ. Although drafted as a single decision, Wood Pulp was to be treated as a bundle of individual decisions by the Commission making findings of infringement against each of the undertakings to which it was addressed and imposing individual fines. On that basis, the Court stated, at paras 54-55 (omitting references):

“… although the authority erga omnes exerted by an annulling judgment of a court of the Community judicature attaches to both the operative part and the ratio decidendi of the judgment, it cannot entail annulment of an act not challenged before the Community judicature but alleged to be vitiated by the same illegality.

The only purpose of considering the grounds of the judgment which set out the precise reasons for the illegality found by the Community Court is to determine the exact meaning of the ruling made in the operative part of the judgment. The authority of a ground of a judgment annulling a measure cannot apply to the situation of persons who were not parties to the proceedings and with regard to whom the judgment cannot therefore have decided anything whatever.”

On that basis, Mr Turner submitted that legal force of an annulment ruling by the EU courts lies in the operative part. The binding authority of the operative part applies also, as stated in P&O Ferries, to the ratio decidendi of the judgment “which is inseparable from it”. The criterion of ‘inseparability’ is explained in the cases relied upon for this proposition in P&O Ferries: itapplies only to the grounds insofar as they are necessary “to determine the exact meaning” of that operative part. Beyond that, argued Mr Turner, the rest of the judgment does not give rise to res judicata of the kind invoked by Servier. It follows, submitted the claimants, that none of Servier’s propositions are binding in these proceedings. Discussion

The concept of “res judicata with absolute effect” referred to by the ECJ in P&O Ferries is by definition of very broad consequence: as the Court stated, it gives those matters to which it applies “authority erga omnes”. It therefore precludes a party to other proceedings, who had no involvement in the proceedings in which the matter was determined, from adducing its own evidence and arguing that the court should make a contrary finding. I think that underlines the need to keep this concept within proper bounds. It reflects the distinction, with which English law is familiar, between a decision in rem, which applies to persons generally, as compared to a decision in personam, which applies only to the parties (or their privies): see Spencer Bower and Handley on Res Judicata (4^th edn, 2009), para 10.01, where the editors suggest that the terms inter omnes and inter partes would be more appropriate.

As the Court made clear in P&O Ferries at para 41, such “res judicata with absolute effect” applies to “legal questions” which the court had settled. Of course, legal questions may engage related facts. To take an analogy from another area of law, once a patent has been declared invalid, that invalidity has effect erga omnes: the holder of a patent declared invalid cannot seek to enforce it against anyone, including someone who was not party to the proceedings which gave rise to the declaration of invalidity. But that invalidity is essentially a legal conclusion: it does not mean that all the many factual findings under the various heads relied on to establish invalidity have such absolute effect so as to apply in litigation concerning other patents or between different parties. Hence judgments that have effect inter omnes under English law generally concern questions of status: of a patent, or a marriage, or of property, or concern the disposition of property.

This distinction, it seems to me, assists the proper appreciation of the P&O Ferries caseitself. In BAI, the operative part of the judgment simply annulled the Commission’s decision of 7 June 1995, terminating the review under the State aid provisions of the new agreement. It was for that reason that the CFI in P&O Ferries held that there was no res judicata for the later case which challenged a different Commission decision. However, inseparable from the annulment of the Commission’s decision of 7 June 1995 was the conclusion that the Commission had misinterpreted the concept of State aid in the Treaty in finding that the new agreement was a normal commercial transaction. This was the essential basis on which BAI had challenged the Commission’s decision: see BAI at paras 39 and 82. And this was accordingly the ratio of BAI which the ECJ held was inseparable from the annulment of the Commission decision of 7 June 1995. As the ECJ stated in its judgment in P&O Ferries, in discussing BAI, at para 48:

“It is clear from the grounds of that judgment that the Commission should have classified the aid at issue as State aid for the purposes [of the relevant Treaty provision].”

Therefore, although in P&O Ferries the challenge was to the Commission decision of 29 November 2000, that decision also concerned the new agreement and the same question: whether the new agreement was not a State aid on the basis that it was a normal commercial transaction. The question was directed at the proper characterisation of an agreement for the purpose of the State aid rules. It followed that this question had been determined as the ratio that was inseparable from the annulment in the operative part of the BAI judgment and so had been settled with absolute effect. But there is nothing in P&O Ferries to suggest that all the various factual findings made by the CFI in the BAI judgment as part of its reasoning also had the special status of res judicata erga omnes: e.g. the finding that the total of 46,500 travel vouchers required to be purchased under the new agreement at the stipulated price gave rise to the same income as the 26,000 vouchers to be purchased at a higher price under the 1995 agreement; or the finding that because the vouchers could be used only in low season the agreement gave rise to no additional cost for P&O Ferries. Those factual findings were significant steps on the way to the CFI’s overall conclusion on the question of State aid, but it seems to me that there would be nothing to stop another party putting forward a different analysis of that income or cost in a different context (e.g. for the purpose of licensing the ferry service or as regards a tax assessment).

I consider that this analysis explains the approach in Assidöman, on which the ECJ expressly relied in formulating the principle set out in P&O Ferries. The ECJ judgment in Wood Pulp had annulled the decision finding an infringement by those addressees of the decision who had appealed. The Court found that the Commission had not established that the prices on the market being charged by the various addressees of the decision were the result of any concertation between them: on the expert evidence, the explanation could equally lie in mere conscious price parallelism. However, the operative part of the judgment in Wood Pulp was the annulment of the Commission’s decision in respect of those addressees who had appealed. That followed from the conclusion that the appellants had not infringed the competition rules. But it was only the latter conclusion on that legal question which was res judicata, not the subsidiary finding that the evidence did not support concertation between the various wood pulp producers. Accordingly, that subsidiary finding did not assist Assidöman as an addressee of the Wood Pulp decision who had not appealed.

The position under EU law was succinctly expressed by the UK Supreme Court in Deutsche Bahn v Morgan Advanced Materials [2014] UKSC 24, although that case concerned very different issues of limitation for the purpose of a domestic damages claim where the appellant, as the whistle-blower given immunity, had obviously not appealed against a Commission decision whereas the other participants in the cartel had appealed. After citing from Assidöman (along with another authority), Lord Mance stated, at [22]:

“… even if the appeals against infringement by alleged cartel members other than the appellant had succeeded, that would in European law have made no difference to the findings as to the existence and scope of the ‘complex of agreements and concerted practices’ in the relevant sector to which the Commission had found the appellant to have been party.”

I do not consider that Assidöman can be distinguished, as Ms Bacon suggested, on the basis that a Commission decision in a cartel case addressed to several parties constitutes in law a series of decisions addressed to each of them separately. That is true, but if that were the entire basis of this approach, it would have no relevance to the general principle articulated in P&O Ferries, where the ECJ significantly relied on Assidöman.

The Shoe Branding case is, in my view, consistent with this analysis. There, by the annulling judgment the General Court had annulled the decision of the EUIPO Board of Appeal dismissing the opposition to registration of the mark advanced by adidas on the basis of Art 8(1)(b) of the Trade Mark Regulation. That provision states:

“Upon opposition by the proprietor of an earlier trade mark, the trade mark applied for shall not be registered:

…

(b)

if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark.”

Accordingly, the ratio of the annulling judgment was the finding that there was a likelihood of association by the relevant public between the two marks because of the degree of attention given by the average consumer when buying sports shoes. This finding led directly, and was inseparable from, the operative part of that judgment annulling the decision of the Board of Appeal. It followed that this finding was res judicata with absolute effect when the Board of Appeal was required to reconsider adidas’ opposition following the annulment of its previous decision. I should add that since Shoe Branding had been an intervener in the first set of proceedings, the parties in the second proceedings were in fact the same, so that the only real distinction was that the action concerned the subsequent, and therefore different, decision of the EUIPO Board of Appeal.

I consider, therefore, that Mr Turner is correct in his submission that the only finding of fact in the Judgment that is res judicata with absolute effect is that in para 1963:

I should add that I regard it as significant that all the cases relied on by Servier in this part of the case concerned the question of the binding effect of an EU court judgment in subsequent proceedings before the EU courts. In contrast, the present case concerns the binding effect of an EU court judgment on a national court. The case therefore concerns the intersection of EU law and national law.

Ms Bacon briefly explained that the reason the Judgment is binding on the English court is because of the duty of sincere cooperation between the national courts and the EU, now set out in Art 4(3) of the Treaty on European Union. From that flows the principle of uniform application of EU competition law, given legislative force in Art 16 of Regulation 1/2003 as regards decisions of the Commission. However, this principle prevents a national court from making a decision that is incompatible with the law of the EU. Thus it prevents a national court giving a judgment on agreements, decisions or practices under Art 101 or Art 102 that would run counter to a decision adopted by the EU institutions. That is why, as the claimants accept (subject to their reservation regarding Brexit), this court could not now find that Servier abused a dominant position contrary to Art 102 (or to the Chapter 2 prohibition that has to be interpreted in the same way), unless the Judgment is overturned on appeal. But if this court were to reject Servier’s prescribing argument, on evidence about doctors’ prescribing practices and the degree of substitutability of perindopril with other ACE inhibitors, I do not see how that could be incompatible with the law of the EU. The legal context in which the facts covered by Servier’s propositions now arise is entirely different. The prescribing argument, as set out at paras 24 and 25 above, concerns issues of mitigation or breaking the chain of causation between the effects of any infringement and the claimants’ damage, or remoteness of damage. It is well established under EU law that although the question of infringement is a matter of EU law, matters concerning compensation, including such questions of causation, are governed by the domestic law of the Member States: see e.g. Cases 295-298/04 Manfredi EU:C:2006:461, para 64.

Indeed, if the appeal against the striking out of the economic tort claim should be allowed by the Court of Appeal, the prescribing argument will be just as relevant to that domestic law claim: Servier notably relies on the argument in that context under the additional head of contributory negligence. And if Servier should then succeed in its appeal to the CJEU against the finding of infringement of Art 101, the economic tort claim may be the only claim in these proceedings. It would appear very strange if facts arising under Servier’s prescribing argument in opposition to what then would be a purely domestic law claim should be res judicata by reason of the Judgment concerning an infringement of EU competition law that was no longer an issue before this court.

Ms Bacon sought to dismiss any distinction between the application of the findings in the Judgment for one purpose and their non-application for another by colourfully suggesting that this would make them like Schrödinger’s cat: present and binding as regards the abuse of dominance claim but disappearing for the purpose of the prescribing argument. She emphasised the fact that the claimants relied on the same assertions about the non-substitutability of perindopril with other ACE inhibitors and the prescribing practice of doctors in the part of the claimants’ pleadings addressing their claim for abuse of dominance. However, that only reinforces my conclusion set out above that all that is binding under EU law as regards the abuse of dominance claim is the Judgment’s finding that the Commission had not established that the relevant market is not restricted to perindopril, with the consequence that Servier was not dominant. It is that finding which precludes the claimants from pursuing their claims for abuse of dominance, preserving the consistency of EU law and domestic law as regards the application of the competition rules. On that basis, the suggested paradox disappears.

This head was advanced purely as a matter of English law. In their skeleton argument, Counsel for Servier stated:

“As Gloster LJ made clear in JSCBTA Bank v Ablayazov [2017] 1 WLR 603, §§54–6, the common law doctrine of abuse of process is not limited to a situation where the relevant litigant was party to the previous decision (or the privy of such a party). Rather, it will depend upon the particular circumstances of the case, and in particular the questions whether it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated, and whether to permit such relitigation would bring the administration of justice into disrepute.”

Servier invoked that general observation, along with the fifth and sixth principles set out by Lord Sumption JSC, under the heading “Res judicata: general principles” in his judgment (with which Lady Hale and Lords Clarke and Carnwath JJSC agreed) in Virgin Atlantic Airways v Zodiac Seats [2013] UKSC 46, at [17]:

“Fifth, there is the principle first formulated by Wigram V-C in Henderson v Henderson (1843) 3 Hare 100, 115, which precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones. Finally, there is the more general procedural rule against abusive proceedings, which may be regarded as the policy underlying all of the above principles with the possible exception of the doctrine of merger.”

In her oral submissions, Ms Bacon relied principally on Iberian UK Ltd v BPB Industries PLC [1996] 2 CMLR 601. That was also a competition damages action brought as a follow-on claim after a Commission decision that the defendants (“BPB”) had abused their dominant position in the supply of plasterboard. The plaintiff (“Iberian”) had complained about BPB’s practices to the Commission, which initiated proceedings leading to a decision finding that BPB had infringed what was then Art 86 EEC (now Art 102 TFEU). Iberian, as the complainant, played a full part in the proceedings before the Commission, making written submissions and taking part in the oral hearing. BPB’s appeal against that decision was dismissed by the CFI, as was a further appeal to the ECJ, and Iberian was an intervener in both those appeals. In the English damages claim, BPB sought to deny that it had abused a dominant position, and a trial of preliminary issues was ordered to determine whether the findings of the Commission, as upheld by the CFI and the ECJ, were binding in the domestic proceedings.

Laddie J rejected Iberian’s argument that the findings and decision of the Commission and EU courts gave rise to a strict res judicata in terms of issue estoppel. But he proceeded to hold on a broader basis that it would be contrary to public policy to permit BPB to seek to challenge those findings in the domestic proceedings, and that this would be an abuse of process. Laddie J described the question before him as follows, at [44]:

“In all the circumstances of this case should the complainant and investigatee be allowed to open up and dispute in these proceedings the final conclusions of fact or law reached in competition proceedings in Brussels and Luxembourg? If the answer to that is in the negative, it does not matter whether it is categorised as a part of the law of res judicata — i.e. that the complainant and investigatee are bound by those conclusions—or as part of the law of abuse of process— i.e. that any attempt by either of them to challenge the conclusions is improper. In either case the same public policy considerations are at work.”

The judge proceeded to note the role played by Iberian in the European proceedings that led to the finding of infringement. He said, at [47]:

“… in large part the European proceedings involved a head to head dispute between the plaintiff and the defendants as to whether or not the defendants had abused their dominant position and, if so, whether that was likely to, and did in fact, distort competition. In particular it was said that a compelling example of such distortion was the harm allegedly inflicted on the plaintiff's import trade. An informal indication of the reality of what was going on before the Commission is given by the title given by the Commission to the proceedings, namely “Case IV/31.900 Iberian Trading U.K. Ltd v. British

Plasterboard Plc ” . As far as I can tell, no quarter was given by either side. A layman who said that the plaintiff and the defendants were engaged in a major antitrust battle with each other in front of the Commission could not be accused of misunderstanding what was going on. He would be just as accurate if he said the same thing about the proceedings before the CFI and the ECJ.”

After considering various EU authorities, and observing that the English courts are obliged to stay proceedings before them to avoid inconsistency with a decision of the Commission, Laddie J concluded:

“71.

… If English and other national courts are encouraged to stay proceedings pending the resolution of European competition proceedings, but then are obliged by national rules of procedure to take no notice of the results in Europe, the only result will be to add years to the duration of the litigation here for no good reason. As I put it earlier in this judgment, in many cases the result will be to subject the litigant to a decade or more of litigation for no benefit. It seems to me that this course would be contrary to public policy. Indeed the whole rationale of staying national proceedings to await the outcome in Europe must be that the result of the proceedings there should have a major impact in the proceedings before the national court. Absent this, I can see no point in there being a stay.

72.

These cases suggest that the courts should not interpret our rules of procedure in a way which will give rise to an appreciable and unnecessary risk that courts here and the Commission will come to inconsistent results in relation to competition issues. Of course due regard has to be paid to the interests of justice to the parties. But where, as here, the parties have disputed the same issues before the Commission and have had real and reasonable opportunities to appeal from an adverse decision, there is no injustice in obliging them to accept the result obtained in Europe. The position is a fortiori when, as here, the opportunities of appeal have been used to the full. Therefore, whether expressed in terms of res judicata or abuse of process, it would be contrary to public policy to allow persons who have been involved in competition proceedings in Europe to deny here the correctness of the conclusions reached there. The parties are bound.

…”

Laddie J further held, as an additional ground of his decision, that it would be an abuse of process in the classic sense for BPB to seek to dispute the Commission decision “in proceedings against any party before any national court”: para [83].

There is clearly a direct analogy between the position of BPB in the Iberian case and Servier in the present proceedings. The critical question is whether the principle there enunciated, which is not in dispute, applies here to the claimants. Ms Bacon accepted that they were not as closely involved in the European proceedings as Iberian. But she submitted that their involvement was sufficient for them to come within the scope of the Iberian principle.

Ms Bacon’s principal argument was that the English claimants had intervened in the proceedings before the Commission. They applied to the Commission for permission to intervene pursuant to Art 27(3) of Reg 1/2003, as a person with a “sufficient interest”, relying in their application on their position as claimants against Servier regarding the price of perindopril in the English proceedings, and the overlap between those proceedings and the proceedings before the Commission. That request was granted, and the English claimants were sent a confidential summary of the SO, although their request for a full copy was denied. On that basis they were able to submit to the Commission 7½ pages of comments on that summary and they also sent the Commission a copy of their Particulars of Claim in the present proceedings. They were permitted to attend the four-day oral hearing on 15-18 April 2013, although their Counsel was allowed to make only a 30 minute oral intervention at the end of the fourth day.

The English claimants did not play any part in the appeal before the General Court, but Ms Bacon stressed that the United Kingdom, as a Member State, had a right to be heard in those proceedings, and she submitted that it would therefore have been open

In my view, all this is a wholly insufficient basis on which to conclude that the English claimants were so bound up with the European proceedings so as to make it “improper” for them now to advance a contrary case on the factual matters covered by Servier’s propositions. In comparison with the plaintiff in Iberian, the degree of involvement of the English claimants in the proceedings before the Commission was not only much less, but it was of a fundamentally different character. The proceedings in the EU institutions could not remotely be described as “a major antitrust battle between” the English claimants and Servier. The contrast with Iberian is brought out by the following passage from Laddie J’s judgment (at [46]):

“…Although the Commission could have initiated and pursued the complaint against the defendants by itself, the fact is that in this case it did not. As [counsel for Iberian] put it, it was not possible for his client to be more fully involved. It initiated the procedure, it formulated the allegations of abuse (even if they were added to by the Commission), it presented written submissions, answered the plaintiff's responses and played a full part in the oral hearing before the Commission. Subsequently it played an equally full part before the CFI and the ECJ.”

Moreover, the prescribing argument was first raised by Servier’s application to amend its defence in November 2015, more than a year after the Decision. It is in response to that argument, not on the issue of abuse of dominance that was (and still is) at issue in the European proceedings, that the claimants wish to put forward their evidence and arguments in opposition to Servier’s propositions.

Once the Decision went on appeal, the English claimants were no longer involved at all. They accept that the effect of the Judgment presently precludes them from pursuing their claim under Art 102. I regard it as wholly unreasonable to say that the UK government should nonetheless have sought to intervene because any factual findings that might be made by the General Court could have collateral implications for the response of the English health authorities to a prescribing argument raised by Servier in defence to their claim under Art 101 (and in economic tort), a context in which these facts were irrelevant to the General Court. That is aside from the question of whether the UK government can properly be equated with the English claimants for the purpose of these proceedings. Altogether, there is in my view nothing in the conduct of the English claimants as regards the European proceedings that makes it remotely contrary to public policy to permit the English claimants to run arguments and adduce evidence to contest Servier’s propositions.

If that is the position as regards the English claimants, it is in my judgment a fortiori, the position as regards the Welsh and the Scottish/NI claimants. None of those parties played any part in the European proceedings at all. Ms Bacon could only submit that they could have sought to do so before the Commission, and that if they had asked the UK government to exercise its right to intervene in the appeal before the General Court, the government would surely have done so. But this is pure speculation. It is by no means clear that the Commission would have permitted three other groups of health authorities from the UK to intervene additionally in the proceedings before it.

Accordingly, I see nothing unfair, let alone “manifestly unfair”, in requiring Servier to litigate in these proceedings the various factual issues raised by its propositions. On the contrary, I would regard it as unfair if the claimants were not permitted to put forward the evidence on which they wish to rely in support of their response to Servier’s prescribing argument.

Finally, as regards the invocation of Lord Sumption’s fifth and sixth principles from the Virgin Atlantic case, in his judgment Lord Sumption quoted from the seminal speech of Lord Bingham in Johnson v Gore-Wood & Co [2002] 2 AC 1 at 31, where Lord Bingham stated that the Henderson v Henderson principle required:

“a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”

Lord Sumption went on to state, at [25]:

“Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the court’s procedural powers. In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation.”

Adopting a broad merits-based approach, having regard to the history and circumstances of the European proceedings and these three proceedings before this court, in my judgment there is nothing abusive or duplicative in the claimants seeking to advance evidence and arguments contesting Servier’s propositions in the trial of the preliminary issues raised by Servier’s mitigation defence.

For the reasons set out above, I determine that: