Cooper Tire & Rubber Co & Ors v Shell Chemicals UK Ltd & Ors

Some but not all of the Defendants to these actions contend that this Court lacks jurisdiction against them and, in the event that the Court has jurisdiction, contend that the proceedings commenced in this court should be stayed. Both the jurisdiction and the stay applications depend upon the application of the Judgments Regulation in the context of European competition law and multiple parties.

The claims in these actions arise out of and follow on a decision by the Commission of the European Communities dated 29 November 2006 in Case COMP/F/38.638 – Butadiene Rubber and Emulsion Styrene Butadiene Rubber (the “Commission Decision”). The Commission Decision found 13 companies (the “Addressees”) guilty of an infringement of Article 81 of the EC Treaty in relation to the market for the supply of Butadiene Rubber (“BR”) and Emulsion Styrene Butadiene Rubber (“ESBR”).

The Addressees were: Bayer AG (“Bayer”), The Dow Chemical Company, Dow Deutschland Inc, Dow Deutschland Anlagengesellschaft mbH, Dow Europe GmbH, (collectively “Dow”) Eni SpA, Polimeri Europa SpA (collectively “Enichem”), Shell Petroleum NV, Shell Nederland BV, Shell Nederland Chemie BV (collectively “Shell”), Kaucuk a.s. and Unipetrol a.s. (collectively “Kaucuk”) and Trade-Stomil Ltd (“Stomil”).

The Addressees were variously domiciled in Germany, the Netherlands, Italy, the Czech Republic, Switzerland and Poland. None was domiciled in England.

The Commission Decision held that the Addressees committed a “complex single and continuous infringement” of Article 81 of the Treaty by agreeing price targets for their products, sharing customers by non-aggression agreements and exchanging sensitive commercial information relating to prices, competitors and customers. In particular it was said that:

In considering the liability of particular companies the Commission said:

“Concerning the principle of personal liability, Article 81 of the Treaty is addressed to “undertakings” which may comprise several legal entities. In this context the principle of personal liability is not breached so long as different legal entities are held liable on the basis of circumstances which pertain to their own role and their conduct within the same undertaking. In the case of parent companies, liability is established on the basis of their exercise of effective control on the commercial policy of the subsidiaries which are materially implicated by the facts. Under these circumstances, the principle of personal liability is not breached. References to different areas of law where the principle of autonomy of a subsidiary plays a different role (such as under corporate law) is not appropriate.”

So far as concerns the impact of the cartel on the market the Commission said:

“In this proceeding, it is not possible to measure the actual impact on the EEA market of the complex of arrangements of which the infringement consists and therefore the Commission does not rely specifically on a particular impact, in line with the Guidelines according to which the actual impact should be taken into account when it can be measured. The Court of First Instance has held that the Commission is not required precisely to demonstrate the actual impact of the cartel on the market and to quantify it, but may confine itself to estimates of the probability of such an effect. What can be said, in this case, is that with regard to the EEA, the cartel arrangements were implemented by the European producers and that such implementation did have an impact on the market, even if its actual effect is difficult to measure. Therefore, the Commission will not take into account the impact on the market in determining the applicable fines in this case.”

The Commission Decision imposed fines on the Addressees. The fines were assessed by reference to the effective economic capacity of the offenders to cause damage to competition. For this purpose regard was had to the sales of BR and ESBR by each undertaking in the last full calendar year of the infringement. Enichem and Bayer were placed in the first category, Dow in the second category, Shell in the third, Kaucuk in the fourth and Stomil in the fifth. Regard was then had to the size of each undertaking (to ensure that the fine had a deterrent effect) by applying a multiplier to the basic fine. Shell had the largest multiplier applied. The fines were then adjusted to reflect the period of time each undertaking was party to the cartel. Aggravating factors (such as involvement in previous cartels) and mitigating factors (such as co-operation with the Commission) were considered. In the result Enichem received the largest fine of EUR 272.25 million, followed by Shell with a fine of EUR 160.875 million. Dow’s fine was reduced by 40% to reflect the value of the evidence it supplied to the Commission of the cartel. In the result it was fined EUR 64.575 million. Bayer was granted immunity because it was the “whistle-blower”.

In February 2007, the Addressees, with the exception of Bayer, lodged appeals against the Commission’s Decision with the Court of First Instance of the European Communities (“CFI”). It is necessary to note the grounds of appeal submitted by Dow and Enichem.

The appeals to the CFI were listed for hearing in October 2009. I was informed that decisions of the CFI can be expected some 6-9 months after the hearing of the appeal. Thereafter there may be a further appeal to the European Court of Justice which I was told might take 18-24 months.

On or around 29 July 2007, after receiving letters before action from the Milan office of S.J.Berwin LLP, Enichem commenced proceedings in Milan against 28 defendants, all of whom were companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups. The relief claimed was as follows:

“(i)

to rule and declare the inexistence in the period between 20.5.1996 and 28.11.2002, of any agreement whatsoever and/or any other forbidden anti-competition practices (the so-called “cartel”) between the producers of [BR] and [ESBR] addressed by the [Commission Decision];

(ii)

in any case, to rule and declare that Eni SpA, Polimeri Europa SpA and Syndial SpA have never adopted forbidden anti-competition behaviour within the sphere of the alleged “cartel” referred to under (i);

(iii)

in any case, to rule and declare that the alleged “cartel” referred to under (i) had had no effect on the BR and ESBR prices and that, in any case, the subjects hereby summoned cannot complain of any damage consequent to the aforesaid “cartel”.”

It is necessary to note two matters concerning the Italian proceedings:

None of the defendants to the Italian proceedings issued a counterclaim seeking damages from Enichem for its breach of Article 81 though it is common ground that they could have done so. However, on 21 December 2007 26 Claimants drawn from the same groups of tyre manufacturers who were named as defendants to the Italian proceedings issued proceedings in England against 23 Defendants who were alleged to be part of the cartel. However, the disputes between the Claimants and the Shell Defendants (D1-6) have since been settled and so the remaining Defendants are the Bayer and Lanxess Defendants (D7-13), the Dow Defendants (D14-20), Trade-Stomil (D21) and Kaucuk (D22-23).

In relation to the Claimants in the English proceedings, it is to be noted that:

In relation to the Defendants in the English proceedings, it is to be noted that:

The claims brought in England are for damages for breach of statutory duty, in particular, Article 81 of the EC Treaty which prohibits agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market.

Although Article 81 prohibits agreements its scope has been interpreted as extending to the implementation of agreements which infringe Article 81. In Ahlstrom Osakeyhtio and others v The Commission Case 129/85 ECR [1988] 5193 the ECJ held, at paragraph 16, that “an infringement of Article 85 [the predecessor of Article 81], such as the conclusion of an agreement which has had the effect of restricting competition within the Common Market, consists of conduct made up of two elements, the formation of the agreement, decision or concerted practice and the implementation thereof.”

In May 2008 the Dow Defendants (and other Dow companies) intervened in the Italian proceedings and adopted the claims made by Enichem. In June 2008, the Bayer Defendants (and other companies) intervened in the Italian proceedings, just as Dow had done.

Also in June 2008 further proceedings were instituted in Italy by Enichem against fellow producers of rubber. The aim of these proceedings, in which similar negative declaratory relief to that sought in the original proceedings was claimed, appears to have been to protect the claimants from being exposed to possible recourse suits by fellow producers of rubber. At the same time Enichem joined as parties to the Italian proceedings those of the Claimants in England who had not been party to the first Milan proceedings.

Further developments took place in England. In June 2008 the Bayer and Lanxess Defendants in the English proceedings brought a Part 20 claim against Enichem, seeking a contribution. However, Enichem issued a challenge to the jurisdiction of those proceedings under Articles 27 and 28 of the Judgments Regulation and, following this, those proceedings were discontinued.

On 12 June 2008 the Dow Defendants issued their application challenging the jurisdiction of this Court and, in the alternative, seeking a stay.

On 14 July 2008 the Claimants commenced further proceedings against Dow Chemical Company Limited (“DCCL”), which were served on 1 August 2008. DCCL is a company domiciled in England.

On 7 August 2008 the Bayer Defendants issued their application seeking a stay of this Court’s jurisdiction. This application was out of time.

On 10 September 2008, DCCL intervened in the Italian proceedings.

On 19 September 2008 the Lanxess Defendants issued their application for a stay of this Court’s jurisdiction.

On 10 October 2008 directions were given by this Court (Andrew Smith J.) for the determination of the applications which had been issued concerning jurisdiction. A hearing date was fixed for 29 March 2009.

On 28 January 2009 Judge Paola Gandolfi of the Tribunal of Milan directed a determination of preliminary matters in the Italian proceedings and a hearing took place on 9 February 2009. The defendants to the Italian proceedings sought an order that the proceedings were inadmissible pursuant to Article 16 of Regulation 1/2003 EC (the “Modernisation Regulation”) which provides that national courts “cannot take decisions running counter to the decisions adopted by the Commission.”

On 16 February 2009 this Court (Blair J.) adjourned the hearing of the jurisdiction applications pending a decision in Italy. The hearing was fixed for 5 October 2009.

On 29 April 2009 Judge Paola Gandolfi gave her decision. She found as follows:

The effect of Judge Gandolfi’s decision, therefore, was to dismiss the Italian proceedings in toto. The claimants and interveners in Italy have lodged notices of appeal against the decision. Not all the notices of appeal were in evidence but the Dow defendants in Italy have not sought to appeal the dismissal of the first and second pleas but only the dismissal of the third plea. If that appeal succeeds the Italian court of appeal will also consider the merits of the case. However, before proceeding to do so, the court of appeal will be likely to issue a preliminary appeal judgment in which it will either reverse Judge Gandolfi or uphold her judgment.

A preliminary hearing before the Italian court of appeal is scheduled for 1 December 2009. The experts on Italian law are agreed that it is “likely” that the appeal on the second limb of the third plea will succeed, though one expert stresses that the likelihood is “not so high.” They are also agreed that it is likely that a decision on the appeal will be made within two to two and a half years from 10 September 2009, that is between September 2011 and February 2012, and that if the appellate court determines the merits a decision is likely within four to five years, that is between September 2013 and September 2014.

On 1 July 2009 I dismissed an application by the Defendants in England (or most of them) for a further adjournment of the jurisdiction applications. Those applications were heard on 5, 6, 7 and 8 October 2009.

As at the date of issue of the first English proceedings only two Defendants were domiciled in England. In addition, DCCL, the only Defendant to the second English proceedings, is domiciled in England. Thus, of the 24 original Defendants only three were domiciled in England. Those three companies were in the Shell, Bayer and Dow groups of companies. Jurisdiction was established against those three Defendants pursuant to Article 2 of the Judgments Regulation.

Although other Defendants have submitted to the jurisdiction the Dow Defendants (apart from DCCL) dispute that this Court has jurisdiction to hear and determine the claims brought against them. The primary ground on which jurisdiction is asserted against them is that the claims against the Defendants domiciled in England and the claims against the Dow Defendants are “so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings”; see Article 6(1) of the Judgments Regulation.

Counsel for the Dow Defendants said that it was plain that the three Defendants domiciled in England, none of which was an addressee of the Commission Decision, had been selected as a tactical device (“Anchor Defendants”) to establish jurisdiction against the other Defendants pursuant to Article 6(1) of the Judgments Regulation. This does appear to be likely. No other explanation was suggested by counsel for the Claimants. However, the question for the Court is whether it is a tactic which has succeeded in establishing jurisdiction over the Dow Defendants.

It is common ground that the Claimants must establish a good arguable case that this Court has jurisdiction. However, it is clear from Kolden Holdings Limited v Rodette Commerce Limited [2008] EWCA Civ 10 at paragraphs 47-53 but in particular paragraphs 50-52 that the test is flexible and that what is required depends upon the nature of the issue in question. Thus where a fact must be alleged and proved it will usually be sufficient that there is evidence to support it. But where there is a disputed issue of law which the trial judge will be in no better position to resolve than the judge dealing with the jurisdictional challenge, the latter may have to determine that issue of law in order to have the required degree of assurance that the Court has jurisdiction.

It is also common ground that for the purposes of Article 6(1) there must be a real issue between the Claimants and one of the Anchor Defendants, that is, an issue which cannot be struck out; see FKI Engineering Ltd. v Dewind Holdings [2007] EWHC 72 (Comm) at paragraph 32. In circumstances where the Anchor Defendants are not addressees of the Commission Decision but are subsidiaries of certain of the addressees the debate in this Court has been whether the Claimants have a claim against those Defendants which cannot be struck out.

The Particulars of Claim make the following allegations against all of the Defendants, including those domiciled in England. It is alleged that they coordinated their competitive behaviour through an agreement with respect to the fixing of prices, an agreement not to compete aggressively to win one another’s customers and the exchange of confidential commercial information; see paragraph 44. It is further alleged that each of the Defendants implemented those arrangements in relation to their sales of BR and ESBR; see paragraph 46. It is specifically pleaded that those Defendants who are subsidiaries of addressees of the Commission Decision, including the Anchor Defendants, implemented the arrangements by selling BR and ESBR to the Claimants. There is no dispute that the Claimants have a good arguable case that the Anchor Defendants sold BR or ESBR to at least some of the Claimants. It is common ground that the amount of sales by the Anchor Defendants was relatively small.

It is not clear from these allegations whether it is alleged that the Anchor Defendants were party to the alleged agreements or that they knew of those agreements when they implemented the arrangements. However, in that part of the Particulars which pleads a claim for exemplary damages it is alleged that the Defendants’ wrongful actions were carried out “in the knowledge of and in wilful disregard of the Claimants’ rights”; see paragraph 90.

The manner in which it is alleged that the Anchor Defendants “coordinated their competitive behaviour” or “implemented the arrangements” was not particularised (save for the plea that those Defendants who are subsidiaries of addressees of the Commission Decision, including those domiciled in England, implemented the arrangements by selling BR and ESBR to the Claimants). Counsel for the Claimants suggested in argument that the Defendants might have done so in more than one way eg by participating in the agreements or by handing over control of their activities to another company within the group. This was an unsatisfactory basis on which to consider the Claimants’ claim against the Anchor Defendants because the factual basis of the claims being advanced against the Defendants was not clear. It was observed by counsel for the Dow Defendants that the Particulars of Claim distinguished between those Defendants “directly involved in the cartel” and those who were no more than “direct or indirect subsidiaries of the addressees of the Decision”; see paragraphs 38 and 39 of the Particulars of Claim. Counsel submitted that the thrust of the claim was apparent from the supporting evidence and was based upon (i) the Anchor Defendants having sold ESBR or BR to the Claimants and (ii) the concept of an undertaking in European competition law. Indeed, the primary focus in argument was on the question whether, where a corporate entity forms part of the “undertaking” which has been found in breach of Article 81, personal liability for damages can be attached to that corporate entity because it forms part of the undertaking and implemented the offending agreements or arrangements by selling BR and ESBR whether or not the corporate entity had knowledge of the offending agreements or arrangements. It is appropriate therefore to consider this question of law.

The Claimants submitted that the answer to that question was in the affirmative and relied upon the decision of Aikens J. in Provimi Limited v Roche Products Ltd. [2003] EWHC 961 (Comm) in which he said at paragraphs 30 and 31:

“ [30] Therefore the point comes down to this: what knowledge of the infringing agreement by the legal entity being sued, if any, does a claimant have to plead and prove in order to succeed in a claim for damages for infringement of art 81(1)? There are no cases or even textbook opinions to provide me with a ready answer. Moreover there is a tension between English law and EU competition law concepts. In English law the separate identity of corporations is respected and knowledge of one corporation will not be readily imputed to another. But EU competition law maintains the concept of an ‘undertaking’, which is more flexible than a legal entity. It can embrace a number of legal entities, so long as they act as a single economic unit and no legal entity acts independently for any relevant purpose.

[31] It seems to me to be arguable that where two corporate entities are part of an ‘undertaking’ (call it ‘Undertaking A’) and one of those entities has entered into an infringing agreement with other, independent, ‘undertakings’, then if another corporate entity which is part of Undertaking A then implements that infringing agreement, it is also infringing art 81. In my view it is arguable that it is not necessary to plead or prove any particular ‘concurrence of wills’ between the two legal entities within Undertaking A. The EU competition law concept of an ‘undertaking’ is that it is one economic unit. The legal entities that are a part of the one undertaking, by definition of the concept, have no independence of mind or action or will. They are to be regarded as all one. Therefore, so it seems to me, the mind and will of one legal entity is, for the purposes of art 81, to be treated as the mind and will of the other entity. There is no question of having to ‘impute’ the knowledge or will of one entity to another, because they are one and the same. ”

Shortly before the hearing of the Dow Defendants’ applications the European Court of Justice gave judgment in P. Akzo Nobel and Others v Commission on 10 September 2009. That case concerned the circumstances in which a parent company could be personally liable for a fine imposed by the Commission for breach of Article 81 where the conduct which gave rise to the breach was that of a subsidiary and not of the parent. The Claimants submitted that that decision supported their case and showed that the argument described as arguable by Aikens J. was indeed correct. The Dow Defendants submitted that the decision supported their case. They submitted that a subsidiary which was not an addressee of the Commission Decision could only be liable in damages for breach of Article if it exercised a “decisive influence” over the addressee. It is therefore necessary to consider what the European Court of Justice decided in Akzo Nobel and why.

The case concerned a cartel in the vitamins industry. The Commission found Akzo Nobel NV and several of its wholly-owned subsidiaries liable, with others, for an infringement of Article 81. In fact, only four subsidiaries were found to have directly committed the infringement. However, the Commission also fined Akzo Nobel NV, the parent company, on the basis that, as parent, it exerted a decisive influence over the commercial policy of these wholly owned subsidiaries and that the subsidiaries therefore lacked commercial autonomy. This, reasoned the Commission, entitled it to address its decision to Akzo Nobel NV as well.

Akzo Nobel NV appealed the decision, inter alia, on the grounds that the Commission was wrong to have imputed the subsidiaries’ fault to it as parent merely on the basis of the finding that it was the 100% owner of the subsidiary. It argued that such an approach was tantamount to imposing ‘strict liability’ on the parent.

The Court of First Instance and the European Court of Justice upheld the decision of the Commission. The essential reasoning of the ECJ is set out in paragraphs 54-66 of its judgment. That reasoning may, for present purposes, be summarised as follows:

The ECJ concluded by saying:

“If the parent company is part of that economic unit, which………may consist of several legal persons, the parent company is regarded as jointly and severally liable with the other legal persons making up that unit for infringements of competition law. Even if the parent company does not participate directly in the infringement, it exercises, in such a case, a decisive influence over the subsidiaries which have participated in it. It follows that, in that context, the liability of the parent company cannot be regarded as strict liability.”

Counsel for the Dow Defendants submitted that if it was necessary to show that a parent company had decisive influence over a subsidiary which had participated in an infringement of Article 81 before holding the parent company jointly and severally liable with the subsidiary then it must be necessary to show the same in respect of a subsidiary if it is sought to make a subsidiary which has no knowledge of the infringement jointly and severally liable for the infringement. Counsel pointed out that in the present case the Commission had exercised great care in examining the role of parent companies in the infringement before finding them jointly and severally liable for the infringement of Article 81. It would be extraordinary, he said, if a similar enquiry was not required in respect of subsidiaries.

In my judgment that submission is not correct. The question before the Court is not whether mere subsidiaries of addressees of the Commission Decision are jointly and severally liable for the infringement but whether subsidiaries who, it is said, implemented the infringing agreements by selling BR and ESBR are jointly and severally liable for the infringement. This was not a question considered by the ECJ in Akzo Nobel. In that case the ECJ had to consider whether a parent company which had not been personally involved in the infringement could nevertheless be jointly and severally liable for the infringement with the subsidiary which had been personally involved in the infringement. The reasoning of the ECJ is not, I think, of direct assistance in answering the question before this Court. In the present case the problem is not to establish a basis upon which a parent company with no personal involvement in an infringement can be made liable for that infringement. Rather, it is to establish a basis upon which a subsidiary which has been involved in an infringement by selling goods which are the subject matter of the infringement but without any knowledge of the offending agreements or arrangements can be made liable for the infringement. That is the very question tackled by Aikens J. in Provimi. It was not addressed in Akzo Nobel.

The essential steps in the argument adumbrated by Aikens J. are these:

The first of the above steps is supported by the reasoning in Akzo Nobel. The second step is consistent with the reasoning in Akzo Nobel in that the ECJ held that the legal entities which make up an undertaking may be jointly and severally liable for a breach of Article 81 by the undertaking. It is also consistent with the reasoning in Ahlstrom Osakeyhtio and others v The Commission (see paragraph 17 above). The third and crucial step is not discussed in Akzo Nobel. However, in my judgment it is a conclusion which is supported by the concept of an undertaking. An undertaking in European competition law is an economic unit. That unit is engaged in an economic activity. The prohibition in Article 81 is on agreements by such undertakings or economic units but Article 81 is infringed not only by making an agreement contrary to Article 81 but also by the implementation of such agreements. An undertaking may act by or through those legal entities which constitute the undertaking. Whilst the infringement of Article 81 is that of the undertaking, liability for the resulting fine or damages must be attached to a legal person. Where a subsidiary is personally involved in the infringement by implementing the offending agreement there is no need to enquire into whether or not the subsidiary is involved by having decisive influence over another legal entity. Since the legal entity which makes the offending agreement plainly has knowledge of it, a rational consequence of the concept of an undertaking as a single economic entity, made up of its constituent legal entities, is that the undertaking has knowledge of the offending agreement. There is therefore no need, before attaching liability to a legal entity which is part of that undertaking and has implemented the offending agreement, to allege and prove that that legal entity had knowledge of the offending agreement. It is sufficient that the undertaking had such knowledge.

Counsel for the Dow Defendants challenged that conclusion. He submitted that reliance on implementation by the subsidiary was insufficient and that personal liability for an infringement of Article 81 by an undertaking can only be established where the defendant has itself entered into an agreement which infringes Article 81. In support of this submission reliance was placed on the wording of Article 81, the limited effect of the decision in Ahlstrom Osakeyhtio and others v The Commission and the extraordinary consequences which would flow from attaching liability to an entity which had implemented an offending agreement but without knowledge of it.

So far as the wording of Article 81 is concerned the ECJ has stated clearly in Ahlstrom Osakeyhtio and others v The Commission thatan infringement of Article 85 (now Article 81) consists of both the formation and the implementation of the agreement. This wide construction of Article 81 is supported by (i) the words in Article 81 which direct attention not only to the object of an agreement but also to its effect and (ii) the ease with which Article 81 could be evaded if a narrower construction were adopted. In any event, this Court ought to follow the guidance of the ECJ on this issue of construction.

So far as the actual decision in Ahlstrom Osakeyhtio and others v The Commission is concerned it is correct that it did not establish that implementation of an infringing agreement by a legal entity which was not party to or had no knowledge of the agreement was sufficient to constitute an infringement of Article 81. That case concerned the imposition of fines upon legal entities which were domiciled outside the Community and had entered into an offending agreement outside the Community on the basis that they had implemented the offending agreement within the Community. It did not involve the imposition of a fine upon a legal entity within the Community which was not party to the offending agreement but had implemented the agreement. Nonetheless the ECJ stated clearly that an infringement of Article 81 consists of both the formation and the implementation of the agreement.

So far as the suggested extraordinary consequences are concerned counsel posed two examples. The first example was a third party exclusive distributor. It was said that where a “cartelist” sells all of its product to a third party exclusive distributor who sells them on a cost-plus basis the third party would obviously not be liable for any infringement. Yet he would have implemented the infringing agreement and therefore, on the Claimants’ case, would be liable. I do not consider that this is an apt example because the present case concerns a subsidiary of a cartelist, rather than a third party exclusive distributor. There is a good arguable case that a subsidiary, by reason of its status as such, is under the decisive influence of the parent company and so part of the same undertaking. The same cannot be said of the third party exclusive distributor. Since it is not part of the same undertaking it is not liable for the breach of Article 81 committed by the undertaking.

Whether or not a subsidiary of a cartelist who implements an infringing agreement without being party to it or having knowledge of it can be made liable for the infringement of Article 81 depends upon the validity of the argument described by Aikens J. in Provimi. Counsel for the Dow Defendants submitted that the absurd consequence of the Claimants’ argument was that a parent company’s infringement of Article 81 would be attributed to any subsidiary in the group regardless of whether the subsidiary had any contact with the “cartelised” product at all and regardless of whether or not it was within the same industry. In argument the example was posed of a subsidiary which sold shoe polish rather than BR or ESBR.

However, I did not understand the Claimants’ argument to require the shoe polish subsidiary to be liable in the same way as the subsidiary which sold BR or ESBR. Indeed, counsel for the Claimants argued that the shoe polish subsidiary would not be so liable. In my judgment the shoe polish subsidiary would not be liable. In order to be liable a subsidiary must be part of the undertaking which has infringed Article 81. An undertaking “covers any entity engaged in an economic activity”; see Akzo Nobel at paragraph 54. There is a good arguable case that the Anchor Defendants are a part of the undertaking involved in the economic activity of producing and selling BR and ESBR because they sell those products. The same cannot be said of the sellers of shoe polish.

Counsel for the Claimants referred to the cases of Albany v Stichting Case C-67/96 [1999] ECR 1-5751 and Hydrotherm v Compact Case 170/83 1985 ECR 2999 in support of the above conclusion. In the latter case the question arose whether a natural person (Dr. Andreoli), a partnership (Compact, of which Dr. Andreoli was the personally liable partner) and a company (Officine Sant’Andrea, also run by Dr. Andreoli) could be a “single undertaking”. The question arose in the context of an agreement made between Hydrotherm, on the one hand, and Dr. Andreoli, Compact and Officine Sant’Andrea, on the other hand. The agreement concerned an exclusive distribution license granted to Hydrotherm in respect of a type of radiator. The ECJ held that Dr. Andreoli, Compact and Officine Sant’Andrea were a single undertaking. It said:

“In competition law, the term “undertaking” must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal. The requirement of Article 1(1) of Regulation No.67/67 [which declared Article 85 inapplicable to agreements “to which only two undertakings are party”] is therefore fulfilled if one of the parties to the agreement is made up of undertakings having identical interests and controlled by the same natural person who also participates in the agreement. For in those circumstances competition between the persons participating together, as a single party, in the agreement is impossible.”

Counsel for the Claimants relied upon the words “for the purpose of the subject-matter of the agreement in question” as supporting the conclusion that the seller of shoe polish would not be regarded as part of the undertaking which sold BR and ESBR.

Counsel for the Dow Defendants submitted that the reasoning in Hydrotherm v Compact could not be read across into the different context of a single corporate group. I do not understand why it cannot be read across to the case of a single corporate group which is made up of several different legal entities. If Hydrotherm had made an agreement with the different legal entities in such a group which produced the radiator in question, the reasoning in Hydrotherm v Compact would, in my judgment, equally apply. Indeed, in the passage in Bellamy & Child, European Community Law of Competition 6^th.ed. to which I was referred (paragraph 2-017) it is stated, relying on Hydrotherm v Compact, that “a parent company and its subsidiary or subsidiaries forming a single economic unit will be counted as a single undertaking.”

In Albany v Stichting Advocate-General Jacobs referred to the decision in Hydrotherm v Compact in these terms:

“….the Court has held that “in competition law, the term “undertaking” must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question”. Accordingly, the notion of “undertaking” is relative and has to be established in concreto with regard to the specific activity under scrutiny”.

The reference to “the specific activity under scrutiny” supports the argument that the shoe polish subsidiary would not be part of the undertaking concerned with the economic activity of producing and selling BR or ESBR.

Counsel for the Dow Defendants submitted that the Commission Decision in the present case did not support the suggestion that the relevant undertaking was restricted to those parts of the various groups that produced BR and ESBR. I am not persuaded that much is to be gained by referring to the Decision in this regard because it was not suggested that the particular point was raised for decision. Support can perhaps be found for both sides of the argument in the text of the decision. For example, it is to be noted that when assessing the basic fine, regard was had to the sales of BR and ESBR by the various groups; see paragraph 467. By contrast, when assessing “deterrence” it is possible that regard was had to the global turnover of each group; see paragraph 474.

Finally, Counsel for the Dow Defendants suggested that were the Claimants’ argument correct, dramatic and surprising results would ensue with regard to both liability and jurisdiction. Thus a small sale of the product in question by one subsidiary would expose that subsidiary to liability for all the damage caused by the cartel because each legal entity liable in respect of an infringement is liable on a joint and several basis with other cartelists. Similarly, a legal entity within an undertaking can be sued in a Member State in which it is not domiciled for all the damage caused by the cartel simply because an anchor defendant who is domiciled in that state has made a small sale of the product. These are logical consequences of the argument but I am not persuaded on their account that the argument set out by Aikens J. in Provimi is wrong in principle (though they may be relevant to the exercise of a discretion to stay under Article 28 of the Judgments Regulation). I was not referred to any textbook which suggested that it was not correct. On the contrary, Bellamy & Child, European Community Law of Competition 6^th.ed. expresses the opinion at paragraph 14.117 that “the attribution of liability ……..[by Aikens J.] seems inherent in the scheme of Article 81, whereby both an offending agreement and its implementation are prohibited but fines can be imposed and damages awarded only against a legal entity.”

I have therefore concluded that this Court has jurisdiction against the Dow Defendants by reason of Article 6(1) of the Judgments Regulation. There was no dispute that the Claimants had adduced evidence of sales by the Anchor Defendants within the jurisdiction. There was therefore, at the very least, a good arguable case that the Anchor Defendants had implemented the agreements which infringed Article 81. For the reasons which I have endeavoured to express I consider that the legal argument expressed by Aikens J. in Provimi much more succinctly than I have found possible is correct. It follows that I am satisfied that the Claimants have a good arguable case that this Court has jurisdiction over the Dow Defendants pursuant to Article 6(1) of the Judgments Regulation.

The Dow Defendants also relied upon Article 5(3) of the Judgments Regulation to establish jurisdiction. In view of my decision on Article 6(1) it is strictly unnecessary to lengthen this judgment yet further with a discussion of all the arguments. I will simply express my conclusions as shortly as possible. Article 5(3) provides for special jurisdiction “in the courts for the place where the harmful event occurred.” That expression means “both the place where the damage occurred and the place of the event giving rise to it, so that the defendant may be sued, at the option of the plaintiff, in the courts for either of those places”; see Reunion Europeenne SA v Spliethoff’s Bevrachtingskantoor BV Case C-51/97 [1998] ECR 1-6511 at paragraph 28. However, where the place where the event giving rise to the damage occurred is difficult or indeed impossible to determine the plaintiff must sue in the place where the damage occurred; see paragraph 33. In the present case the act complained of is a “complex single and continuous infringement” of Article 81 of the Treaty by agreeing price targets, sharing customers by non-aggression agreements and exchanging sensitive commercial information relating to prices, competitors and customers. The meetings which gave rise to it took place in a number of locations including Milan, Vienna, Amsterdam, Brussels, Richmond-on-Thames, Frankfurt, Grosse Leder, and Prague. The cartel was ended at a meeting in London. I consider that this is a case where it is, at the very least, difficult to say where the event which gave rise to the damage occurred. It was suggested that the cartel was set in motion in England over the period 28-30 August 1995 and that that is sufficient to show that the place where the harmful event occurred was in England; see Sandisk Corporation v Koninklijke Philips Electronics NV [2007] EWHC 322 (Ch) at paragraphs 25 and 41. I have, I confess, a sense of unease, in concluding, in the context of a Europe-wide cartel orchestrated at meetings in several countries, that the place where the harmful event occurred is England because that is where the first meeting took place. That seems to me to be unrealistic. In truth the harmful events occurred in several countries. In these circumstances I consider that the Claimants can only rely on the place where the damage occurred. It is common ground that some damage occurred in England because some BR and ESBR was sold here. However, it is also common ground that if jurisdiction is established on that basis it is only established in respect of the damage which occurred in England. That is, I understand, a very small part of the whole.

Article 27 of the Judgments Regulation provides as follows:

“1.

Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.” ……………”

The Dow and Bayer Defendants (including the Lanxess Defendants) submit that from the moment Enichem brought its claim in Italy the Italian Courts were first seised of the entire dispute, including the dispute between the Claimants and the Defendants in England. That is said to be so because on the Claimants’ own case Enichem and the Defendants in England are joint tortfeasors and therefore those parties have an identity of interest such that they are to be regarded as the same party for the purposes of Article 27(1). If so then the Court is obliged of its own motion to stay the action.

There is no dispute, it seems, that the proceedings in Italy involve the same cause of action as the proceedings in England or that the Italian courts were the first seised. The dispute between the parties is whether the proceedings in the two jurisdictions are between the “same parties”. The Italian proceedings were commenced by Enichem against 28 defendants, all of whom were companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups. The English proceedings were commenced by 26 companies drawn from the same groups of tyre manufacturers (save for Goodyear) against 23 Defendants, all of whom were producers and sellers of BR and ESBR.

The Claimants in the English proceedings are in essence the same as the defendants in the Italian proceedings. There was no dispute that they could be regarded as the same parties. The difficulty arose with the Claimants in the Italian proceedings, Enichem, and the Defendants in the English proceedings, all the producers of BR and ESBR save Enichem. Debate was joined on the issue whether they were the same parties.

The Dow and Bayer Defendants submitted that where there is an identity and indissociability of interest between parties they may be regarded as the same parties for the purposes of Article 27. Enichem and the Defendants to the English proceedings are joint tortfeasors. They are jointly and severally liable in respect of the same damage. It was therefore said that in substance there is an identity and indivisibility of interest between them.

The Claimants did not accept this analysis. They submitted that Enichem and the Defendants to the English proceedings do not have an identity and indissociability of interest.

It is first necessary to consider the meaning of “the same parties” in Article 27. Fortunately, this has recently been addressed by the Court of Appeal in Kolden Holdings Limited v Rodette Commerce Limited [2008] EWCA Civ 10. In that case Lawrence Collins LJ reviewed the European and English authorities and distilled from them the following principles:

“85.

The starting point is that these general propositions can be derived from The Tatry (Footnote: ¹) and Drouot (Footnote: ²). First, the object of Article 27 is to prevent parallel proceedings in different Member States and to avoid conflicts between decisions and irreconcilable judgments: The Tatry, para 32; Drouot , para 17. Second, the term between "the same parties" has an independent or autonomous meaning: The Tatry, para 47. Third, in considering whether two entities are the "same party" for the purposes of applying the regulation, the court looks to the substance, and not the form: The Tatry. Fourth, although the parties must be "identical" ( The Tatry, para 33; Drouot , para 18), this identity is not destroyed by the mere fact of there being separate legal entities involved: in The Tatry in the English proceedings the party was the sister-ship, and in the Dutch proceedings was the shipowner; in Drout the barge owner and the hull insurer were held to be capable of being the "same parties." Fifth, whether they are identical for this purpose may depend on whether there is such a degree of identity between the interests of the entities that a judgment given against one of them would have the force of res judicata as against the other (Drouot , para 19). Sixth, it will also depend on whether the interests of the entities are identical and indissociable, and it is for the national court to ascertain whether this is in fact the case: Drouot , para 23. In the context of a subrogated claim the Court also emphasised that the insured would not be in a position to influence the proceedings: Drouot, para 19.”

The fifth principle (“may depend”) does not suggest that res judicata is a necessary requirement but that it may determine whether the parties are the same parties for the purposes of Article 27. By contrast the sixth principle (“will also depend”) suggests that the requirement that the interest of the parties be identical and indissociable is a necessary requirement. However, when applying the principles to the facts of the case before the Court of Appeal Lawrence Collins LJ said that “a decision against one must be res judicata against the other” and that the parties’ interests must be identical and indissociable (see paragraphs 88 and 90) which suggests that both are necessary requirements.

My understanding of Drouot is that where the judgment of one court will have the force of res judicata in the other jurisdiction that may determine the question but that it is not a necessary requirement; see Drouot paragraph 19. I also understand from Drouot that parties will not be “the same parties” unless their interests are identical and indissociable; see Drouot paragraphs 23 and 25. I shall therefore follow and apply the summary of principles as stated by Lawrence Collins LJ in paragraph 85 of his judgment.

The independent and autonomous meaning of the phrase “the same parties” is derived from the object of Article 27 which is, in the interests of the proper administration of justice within the Community, to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions which might result therefrom; see The Tatry at paragraph 32. In each case the court must have that in mind when determining whether the proceedings in two jurisdictions are between “the same parties”. On the authorities as they presently stand the independent and autonomous meaning of that phrase is that parties are the same where their interests are identical and indissociable.

Two further points are to be noted from the judgment of Lawrence Collins LJ in Kolden. First, he understood indissociable in the sense of indivisible; see paragraph 91. Second, in determining whether interests are identical and indissociable the court has regard to the claims in both proceedings, not to the subsequent defences; see paragraphs 92 and 93.

Counsel for the Dow and Bayer Defendants submitted that it followed from the circumstance that Enichem and the Defendants in the English proceedings were alleged to be joint tortfeasors that a decision in one jurisdiction would be res judicata in the other and that their interests were identical and indivisible.

The case on res judicata was put in the following way. The only issue in the English proceedings, according to the Claimants, is whether they suffered damage and if so how much, each Defendant being jointly and severally liable for the whole. If that claim were to continue and the Claimants were to fail, the Claimants could not thereafter sue Enichem in respect of the same claim. Reliance was placed on House of Spring Gardens v Waite [1991] 1 QB 241 at pp.252-254, Philips v Ward (1863) 2 Hurstone and Colman 717, 159 ER 297 and Spencer, Bower, Turner and Handley, Res Judicata 3^rd.ed.1996 at paragraph 220.

The Claimants said that the Dow and Bayer Defendants were mistaken in their submissions with regard to joint tortfeasors and res judicata. They said that the relevant principles of English law concerning joint tortfeasors were not based upon res judicata but release by judgment and the merger of a claim in a judgment, which principles have now been amended by statute; see Bryanston Finance Ltd. v de Vries [1975] 1 QB 703 at pp.721-722 and 730-732, section 6 of the Law Reform (Married Women and Tortfeasors) Act 1935 and sections 3 and 4 of the Civil Liability (Contribution) Act 1978.

However, those principles do not exclude the possibility that res judicata might apply as between joint tortfeasors. Whether joint tortfeasors have a sufficient privity of interest that might lead to the application of res judicata is not the subject of clear authority. Philips v Ward concerned joint debts. Whilst House of Spring Gardens v Waite did concern joint tortfeasors, it also concerned a joint tortfeasor who “was content to sit back and leave others to fight his battle” (see p.254 A-B). It was accepted by the Dow and Bayer Defendants that whether or not res judicata applied to joint tortfeasors on the grounds of privity of interest depended upon the facts of each case; see also Spencer, Bower, Turner and Handley, Res Judicata 3^rd.ed.1996 at paragraph 232.

It is necessary therefore to consider the claims in the English proceedings and the claims by Enichem in Italy. The Claimants in England seek damages for breach of statutory duty (Article 81) against the producers and sellers of BR and ESBR. They say that each Defendant is jointly and severally liable for the whole loss caused by the cartel. The Defendants do not include Enichem. In Italy Enichem has claimed negative declarations, namely, (i) that the cartel did not exist, (ii) that Enichem was not part of an unlawful cartel and (iii) that the cartel had no effect on the price of BR and ESBR and that the tyre producers who bought BR and ESBR from members of the cartel did not suffer damage caused by the cartel. The first and second claims have been struck out and the Dow Defendants have not appealed against that decision. The third claim has also been struck out but is the subject of an appeal and it is agreed between the experts on Italian law that the appeal on the second limb of the third claim is “likely” to succeed. That limb covers the same ground as the claim in the English proceedings save that the Italian court is not asked to assess the quantum of damage suffered by each purchaser of BR and ESBR. There is also a difference between the period of time which it is alleged the cartel covered as between the English and Italian proceedings. However, looked at broadly, the interests of the Defendants in England and the interests of Enichem in Italy have much in common. They all wish to show that the purchasers of BR and ESBR have suffered no loss as a result of the cartel.

Enichem has also claimed the first two negative declarations against its fellow producers and sellers of BR and ESBR. The latter proceedings contain a section stating Enichem’s interest in seeking such relief as follows:

“The interest of the plaintiff companies in obtaining the pronouncements indicated above (in contradiction against the other members of the alleged cartel - and of the companies of the relative groups - which are hereby summoned) emerges clearly from the following circumstances:

(i)

it results from the above-mentioned decision of the EC Commission that certain of the present defendant companies have expressly stated that the plaintiff companies had participated in the adoption of specific anti-competitive types of behaviour and in particular that the companies of the ENI Group had apparently “acted in the role of leader of the cartel both for BR and for ESBR”…….

(ii)

these statements (on which the EC Commission was seen to rely in taking its decision) expose the plaintiff companies to the evident risk of:

(a)

becoming “the favourite target” of claims for compensation on the part of BR/ESBR buyers (who could sustain that they had paid prices which were too high as a consequence of the anti-competitive behaviour adopted by the members of the alleged cartel);

(b)

being exposed to possible recourse suits on the part of the other members of the alleged cartel.”

These additional proceedings appear designed to protect Enichem from contribution claims in which it may be said that companies in the Enichem Group were the leaders of the cartel. They indicate that in the context of contribution proceedings between Enichem and the other producers and sellers of BR and ESBR their interests diverge.

In considering whether there is sufficient privity of interest between parties to justify the application of res judicata it is necessary to have regard to the statement of principle by Sir Robert Megarry V-C in Gleeson v Whipple [1977] 1 WLR 510 at p.515 which was quoted by Lawrence Collins LJ in Kolden at paragraph 88:

Counsel for the Claimants relied upon a further passage at p.516:

“Any contention which leads to the conclusion that a person is liable to be condemned unheard is plainly open to the gravest of suspicions. A defendant ought to be able to put his own defence in his own way, and to call his own evidence. He ought not to be concluded by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance a decision against him. Even if one leaves on one side collusive proceedings and friendly defendants, it would be wrong to enable a plaintiff to select the frailest of a number of possible defendants, and then to use the victory against him not merely in terrorem of other and more stalwart possible defendants, but as a decisive weapon against them.”

With that guidance in mind I have reached the conclusion that that there is not a sufficient degree of identification between the Defendants in England and Enichem in Italy to make it just to hold that the decision in the English proceedings should be binding upon Enichem, for these reasons:

Counsel for the Dow and Bayer Defendants have submitted that this is an erroneous approach because what matters so far as the claim is concerned in both jurisdictions is the damage suffered by the purchasers of BR and ESBR. On that issue it is said that the interests of Enichem and the Defendants in England do not diverge. However, I consider that that is too narrow an approach when considering the question posed by Sir Robert Megarry, namely, whether, having due regard to the subject matter of the dispute, there is a sufficient degree of identification between the two to make it just [emphasis added] to hold that the decision to which one was party should be binding in proceedings to which the other is party. Where the parties are legally distinct and separate and the findings made as to damages may have a bearing on the subsequent contribution claims it is, in my judgment, only fair that Enichem, who considers itself to be especially at risk in such proceedings, should be able to conduct its own defence and adduce the evidence which it wishes to adduce rather than rely on the arguments and evidence of others who may not feel as exposed. The proceedings commenced by Enichem in Italy against their fellow “cartelists” are a manifestation of Enichem’s concern in that regard.

The second argument advanced by the Dow and Bayer Defendants is that the interests of Enichem and the Defendants in England are identical and indivisible. Subject to a minor point concerning the duration of the cartel, it can be said that their interests are identical and indivisible in that both Enichem and the Defendants in England are concerned to show that the cartel caused no damage. That is the issue raised by Enichem and that is the issue with which the Defendants in England are faced. However, I consider that this is too narrow and mechanistic an approach. As I have already observed in the context of the res judicata argument the interests of Enichem and the Defendants in England diverge on the question of contribution between the joint torfeasors. Although that question is not raised by the claim in Italy against the tyre manufacturers (as opposed to the claim in Italy against the other cartelists) or by the claim in England, Enichem is very likely to have that question in mind when advancing its claim in Italy just as it would were it resisting the claim in England. It will influence the evidence and arguments it would wish to advance. For this reason I consider that it can fairly be said that the interests of Enichem and the Defendants in England “diverge” (see Drouot paragraph 20). I accept, as I must, that in Kolden Lawrence Collins LJ held that the question of “the same parties” is to be determined by looking at the claims and not at the subsequent defences (see paragraph 92). Thus it is not possible to conclude that because defendants have different defences to a claim their interests diverge. However, upon the assumption that each Defendant in England will wish to resist the claim by denying that loss has been caused by the cartel as alleged by the Claimants, I am looking at the claim and the manner in which Enichem would wish to resist the claim in England were it party to it (and the manner it will wish to advance its claim in Italy). I am not looking at different defences which might be advanced against the claim in England but at the manner in which Enichem would wish to deny that claim by saying that no damage had been caused by the cartel, a defence which each cartelist would wish to advance.

There is a further point relied upon by the Claimants, though it may simply reflect the last point. That is that Enichem and the Defendants are entitled to conduct their own legal proceedings without interference from each other. That includes reaching a settlement independently of the others, as the Shell Defendants have done. That suggests they are not the same parties and that their interests are not identical.

I have kept in mind that the object of Article 27 is to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions which might result therefrom. However, by holding that Enichem and the Defendants in England are not the same parties I am not frustrating that object. It is common ground that the English and Italian proceedings are related and so there is undoubtedly a discretion to stay the English proceedings under Article 28. That was not regarded by Lawrence Collins LJ in Kolden as a sufficient answer. However, he was dealing with claims arising out of an assigned claim which is, I think, a clear case for the application of Article 27, unlike claims against joint tortfeasors.

For these reasons I have concluded that the English and Italian proceedings are not between the same parties and accordingly I refuse to stay the English proceedings pursuant to Article 27.

There are two Defendants who are domiciled in Switzerland and therefore subject to the Lugano Convention. They are Bayer International SA and Dow Europe GmbH.

In relation to Article 21 which (like Article 27 of the Judgments Regulation) provides for a mandatory stay where the parallel proceedings are between the same parties it is accepted by the Claimants and Dow Europe GmbH that the Italian court was first seised of the dispute between those parties (because the Italian court was seised on 13 May 2008 when Dow intervened in the Italian proceedings and the English court was seised of the dispute on 30 May 2008, the date of service being the requisite date under the Lugano Convention). Dow Europe therefore submits that this Court is required to stay the English claim against it.

In response the Claimants have noted that the English Court was first seised of the dispute between the Claimants and other Dow companies when proceedings were issued on 21 December 2007 (because under the Judgments Regulation the date of issue is the relevant date). The Claimants say that the effect of that seising is that this Court was seised of the dispute between the Claimants and all Dow Defendants, including Dow Europe, because entities within a single undertaking have, in respect of a liability imposed on that undertaking, an identity and indissociability of interest. I am inclined to agree that such entities within a single undertaking have, in respect of a liability imposed on that undertaking, an identity and indissociability of interest. However, I am not persuaded that that enables this Court to hold that it was seised of a claim against one such entity subject to the Lugano Convention at the moment when this Court became seised of claims against other such entities subject to the Judgments Regulation. If the argument were correct it would mean that this Court would be seised of a claim against the entity subject to the Lugano Convention even if no proceedings had been issued against it. I am not persuaded that that is right. No authorities or textbook authority was cited in support of it. In this case proceedings had been issued against Dow Europe but the argument was not dependent upon that but simply upon Dow Europe having an identity and indissociability of interest with the other Dow companies.

There must therefore be, in principle, a mandatory stay of the claim against Dow Europe. However, I have been informed that as at the date when the Italian court became seised of the claim, a number of Claimants in England were not party to the Italian proceedings, namely, Claimants nos. 6, 11, 12, 13, 14, 16, 17, 18, 19, 20, 21 and 26. They were only joined to the Italian proceedings at a later date. It was therefore said (and not disputed) that the English court was the first seised in respect of claims against Dow Europe by those Claimants and that there could not be a mandatory stay of those claims but only of the claims by those Claimants who were party to the Italian proceedings when the Italian court became seised. To that limited extent there must be a mandatory stay.

Pursuant to Article 28 any court other than the court first seised may stay the proceedings before it “where related actions are pending in the courts of different Member States”. It is common ground that the English and Italian proceedings are related and that the Italian court is the court first seised. The Dow and Bayer Defendants therefore seek a stay of the English proceedings.

The Bayer (and Lanxess) Defendants are faced with the problem that they made their application for a stay after the time limited for such an application had expired. I shall deal with this matter first.

The time limited for an application by the Bayer and Lanxess Defendants for a stay expired on 25 April 2008, 29 May 2008 or 11 June 2008 (depending upon the date on which each Defendant acknowledged service). The Bayer Defendants issued their application for a stay on 7 August 2008 and the Lanxess Defendants on 19 September 2008.

It was submitted on behalf of the Bayer and Lanxess Defendants that the provision in the rules requiring an application for a stay to be made within 28 days after filing an acknowledgment of service (see CPR 58.7(2)) was inconsistent with the Judgments Regulation and therefore could not be given effect. In the alternative it was submitted that there was good reason to extend time.

The submission of inconsistency was based upon the proposition that Article 28 provided on its true construction that an application for a stay could be made at any time “where related actions are pending in the courts of different Member States”. By contrast the CPR provided that such an application could only be made within 28 days after acknowledgment of service. It was said, correctly, that Article 28 should be given a broad interpretation in support of its objective to avoid the risk of conflicting decisions. It was said that, so construed, Article 28 empowered the national court to grant a stay at any stage of the proceedings. “It is inevitable that in certain cases (such as the present), circumstances will develop during the course of proceedings which lead to a risk of irreconcilable judgments. It would be artificial, and contrary to the wording and purpose of Article 28 to prevent a court from exercising its discretion to grant a stay in such circumstances.”

Article 28 states the condition which must be satisfied before a court other than the court first seised may stay its proceedings, namely, that related actions are pending in the courts of different Member States. It is silent as to the procedure to be applied when a party seeks such a stay and there is, in particular, no limitation as to the time within which an application for such a stay should be made if that condition is satisfied. Such matters are for the national courts to regulate. This Court has done so in the CPR by providing for a time limit of 28 days after acknowledgment of service which however may be extended in an appropriate case. In exercising that discretion to allow a “late” application for a stay this Court can take into account and give appropriate weight to the object of Article 28. I do not consider that such a procedural scheme is inconsistent with Article 28.

The grounds relied upon for an extension of time are:

The Bayer Defendants served a defence in the English proceedings on 11 June and the Lanxess Defendants did so on 25 June 2008. Notice of an intention to seek a stay was not given until 30 July 2008. This shows that both Defendants took and maintained for some time a decision to defend the claims brought against them in England rather than to seek a stay. It seems likely that they changed their stance once it was appreciated that others were seeking a stay. Jurisdiction applications were issued by other Defendants on 12, 20 and 24 June 2008. Normally, such a change of strategy would not be blessed with an extension of time. However, it was consistent with ensuring that all Defendants sought a stay so as to avoid fragmentation of the litigation and to reduce the risk of inconsistent decisions. Further, the delay in seeking a stay has not caused prejudice to the Claimants which cannot be remedied in costs (eg the costs of the Claimants serving Replies on 21 August 2009). In these circumstances it seems to me that it would be correct in principle to grant an extension of time. Such an extension would be consistent with the object of Article 28 in a multi-party case. I accept that the position is now different from the position when the applications were made by the Bayer and Lanxess Defendants in that some of those who sought a stay have not pursued that application so that there is no longer a common stance adopted by the Defendants. But I consider that I should deal with the application for an extension of time (as opposed to the application for the stay itself) by reference to the circumstances as they existed when the Bayer and Lanxess Defendants issued their applications.

The Court is not bound to stay the proceedings before it. It has a discretion whether or not to do so. Whilst the Court must obviously consider all the circumstances of the case before it, the Court must equally obviously have in mind the object of Article 28 which is to avoid the risk of conflicting judgments. That covers “all cases where there is a risk of conflicting decisions, even if the judgment can be separately enforced and their legal consequences are not mutually exclusive”; see The Tatry at paragraphs 52 and 53. It has been observed, and I respectfully agree, that this Court should be “ready to give generous support to the convention’s obvious concern about the undesirability of irreconcilable judgments”; see Centro Internationale Handelsbank AG v Morgan Grenfell Trade Finance Ltd. [1997] CLC 870 at p.892 D.

There was common ground that three matters in particular are relevant to the exercise of the discretion to stay, namely, (a) the extent of the relatedness and the risk of mutually irreconcilable decisions; (b) the stage reached in each set of proceedings; and (c) the proximity of the courts to the subject matter of the case; see Advocate General Lenz in Owens Bank v. Bracco (No 2) Case C-129/02 [1994] ECR I-117 at 144.

In the present case there is a clear risk of conflicting decisions between the English and Italian courts. The one may find on the evidence and arguments adduced before it that the cartel caused no damage. The other may find on the evidence and argument adduced before it that the cartel caused substantial damage. Each is considering in essence the same question and therefore the extent of the relatedness and the risk of inconsistent decisions is substantial.

There are however two features of this case which bear on the weight which it is appropriate to give to this factor. First, there is the circumstance that the proceedings in Italy have been dismissed. Whilst the Italian law experts are agreed that it is likely that the appeal will succeed (with regard to the issue of loss raised by the second part of the third claim) there is no certainty that the appeal will succeed. It may fail. It would be unfortunate if the proceedings before this Court were stayed and then, between September 2011 and February 2012, the Italian appeal were to decide that Judge Gandolfi’s decision was correct so that there would be no decision on the merits in Italy. Second, there is the circumstance that some Defendants have submitted to the jurisdiction of this Court and have chosen not to seek a stay of the proceedings before this Court; they are the Stomil and Kaucuk Defendants. There will therefore be proceedings before this Court in which the Claimants will be seeking damages for the loss, if any, caused by the cartel. (It is also the case that some Claimants, if they wish to pursue their claim against Dow Europe, must do so in Italy as a result of the stay which this Court is required to order pursuant to Article 21 of the Lugano Convention.) Thus the grant of a stay of the claim against the Dow and Bayer Defendants will not avoid the risk of inconsistent decisions arising out of the English and Italian proceedings.

In response to the first point the Dow and Bayer Defendants have submitted that in circumstances where there is still an action pending in Italy and where it is agreed that it is likely that the appeal against Judge Gandolfi’s decision will succeed, the decision of Judge Gandolfi at first instance does not alter the fact that, unless a stay is granted, there is a clear and present risk of irreconcilable judgments. In response to the second point it is said that pursuant to the Court’s case management powers the Court can stay the proceedings against those Defendants who have not sought a stay of the proceedings against them pursuant to Articles 27 and 28 of the Judgments Regulation.

My approach to these arguments is as follows. It must be relevant that the court first seised has determined to dismiss the claims brought before it so that unless the decision is overturned on appeal there is no risk of conflicting decisions. The significance of this factor is reduced by the fact that it is agreed that it is likely that an appeal will be successful. However, the dismissal of the claims and the possibility that such decision may be upheld on appeal means that although the extent of the relatedness between the two proceedings is substantial the risk of inconsistent decisions has been reduced.

The dismissal of the Italian proceedings at first instance has a further consequence. This court cannot decline jurisdiction pursuant to Article 28(2). That is only possible where the action before the court first seised is pending at first instance. Thus even if a stay were granted this Court will ultimately have to exercise its jurisdiction. If the Italian Court of Appeal allows the appeal from Judge Gandolfi and addresses the merits this Court, if it waits for the Italian decision, will have the benefit of that decision on the merits when it exercises its jurisdiction. But if, for example, the Italian Court of Appeal finds that the cartel did cause damage this Court will probably still have to quantify the damage caused to the Claimants because quantification is not in terms an issue in Italy.

It must also be relevant that some Defendants have not sought a stay pursuant to Articles 27 and 28 of the Judgments Regulation (and notwithstanding that there must be a mandatory stay in respect of some of the claims against Dow Europe). That is because the Court in those circumstances cannot avoid the risk of inconsistent decisions. I accept that this Court has power to stay the whole or part of a case on case management grounds. I am not persuaded that such power is excluded by section 49 of the Civil Jurisdiction and Judgments Act 1982 as submitted by counsel for the Claimants. If such a power were exercised to avoid the risk of inconsistent decisions that would not be inconsistent with the object of Articles 27 and 28 of the Judgments Regulation. It would promote that object. However, none of the Defendants who have submitted to the jurisdiction have applied for such a stay. Rather, the stay of the claims against those Defendants has been sought by the Dow and Bayer Defendants. It seems to me that a particularly good reason would be required to justify a stay in such circumstances and the Defendants in question would surely be entitled to be heard on the question. I do not consider that there is such a reason in circumstances where the Italian Court has dismissed the proceedings before it and accordingly (a) the prospect of a decision on the merits in Italy is contingent upon a successful appeal in Italy and (b) the English Court will ultimately have to exercise its own jurisdiction.

The stage reached in England is that the proceedings have been commenced and Particulars of Claim have been served. In Italy, the proceedings have been commenced but have been dismissed at first instance on jurisdictional and other grounds without consideration of the merits. The decision at first instance is now under appeal. If the appeal succeeds the Italian Court of Appeal will determine the merits.

It seems to me that at least one reason why the stage reached in the parallel proceedings is relevant is that it may indicate when a decision is likely to be reached. This is a relevant matter to bear in mind because in principle the sooner a decision is reached the better. (Where proceedings are well advanced the prospect of wasted costs may be another such reason.) Of course that is only one matter to be borne in mind. It must be weighed against other relevant factors. This approach is consistent with the observations of Advocate General Lenz in Owens Bank v Bracco at paragraph 78:

“78.

Contrary to the defendants' view, it is also legitimate for the court second seised to have regard, when reaching its decision regarding a possible stay, to the stage reached in the parallel proceedings. The proceedings before the court first seised should of course have reached a more advanced stage than the proceedings before the court subsequently seised of a related action. Where this is not the case, however, and where there is no prospect of a decision in the first set of proceedings, there is nothing to prevent the court subsequently seised from taking account of this when arriving at its discretionary decision.”

In the present case the proceedings in Italy, although a judgment at first instance has been given, cannot, in the context of a decision on the merits, be said to have a reached a more advanced stage than the English proceedings. It is agreed that a decision on the merits in Italy is not likely until September 2013-2014. It is difficult to predict when a decision on the merits may be expected in this Court because there remains the prospect of a Masterfoods stay (that is, a stay pending the determination of the appeal to the CFI and thereafter to the ECJ; see National Grid Electricity Transmission PLC v ABB Limited and others [2009] EWHC 1326 (Ch) and Masterfoods Ltd. v HB Ice Cream Ltd. [2000] ECR 1-11369). But it is to be presumed in the absence of evidence to the contrary that a Masterfoods stay will also be required in Italy. I was not told that the agreed estimate of a decision in Italy makes allowance for a Masterfoods stay. I assume that it did not. I shall therefore leave such a stay out of account in order to compare like with like. It is likely that much of 2010 will be taken up in preparation for trial and that a trial will take place in 2011. Thus it seems likely that a decision on the merits will be reached significantly earlier in this jurisdiction than in Italy. That is one matter to be taken in favour of declining to stay but it must be weighed with all the other circumstances of the case.

As to the “proximity” of the English and Italian courts to the case it can be said that there is a significant connection with Italy because Enichem, an alleged key player in the cartel, is domiciled in Italy whilst the connections with England are slight. However, the connections with Italy are not such as to place the centre of gravity of the case in Italy. The cartelists were variously domiciled in Germany, the Netherlands, Italy, the Czech Republic, Switzerland and Poland. None was domiciled in England, though there were three subsidiaries in England and Enichem has two factories in England. The purchasers of BR and ESBR were companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups who are registered in several countries including England, Italy, Germany, France, Belgium, Slovakia, the Czech Republic, Sweden, Portugal, Spain, Greece, Hungary and Poland. The meetings at which the cartel was agreed took place in Milan, Vienna, Amsterdam, Brussels, Richmond-on-Thames, Frankfurt, Grosse Leder, and Prague. The cartel was ended at a meeting in London. The tort alleged by the Claimants and as found by the Commission was, as submitted by the Claimants, a Europe-wide tort which crossed borders and was linked to numerous jurisdictions. I do not consider that “proximity” with Italy is a significant factor in this case.

A related point is the submission by Counsel for the Dow and Bayer Defendants that the basis upon which jurisdiction has been established in England is “slender” or “tenuous”, namely, by finding three Anchor Defendants in England who had made modest sales of BR and ESBR. It was submitted that this was forum shopping, “a carefully constructed artifice specifically designed in light of - and to circumvent - the prior Italian proceedings.” I do not doubt that the Claimants have carefully sought out the Anchor Defendants as a means of establishing jurisdiction in England. This might well be a significant factor in a case whose centre of gravity is in the jurisdiction first seised of the dispute. But given the Europe-wide scope of the alleged cartel it cannot be said that the centre of gravity of the case is in Italy. In a Europe-wide tort there will inevitably be alternative places where jurisdiction can be established. If the court seized second has a discretion to stay pursuant to Article 28, “proximity” with the court first seised will be a relevant matter to consider. But in the present case it is not a matter which carries significant weight.

In the result I consider that it is appropriate and consistent with the objective of Article 28 to decline to order a stay of the Court’s jurisdiction over the claim against the Dow and Bayer Defendants. Such an order offers a good (though not a certain) prospect that the risk of inconsistent decisions between the English and Italian courts will be avoided and will enable all the claims in England (save some of those against Dow Europe) to proceed in the same jurisdiction. If, as is agreed to be likely, Enichem’s appeal succeeds it seems likely that the claims in England will be determined before the Italian Court of Appeal will be able to determine Enichem’s claim in Italy. In that event the Italian court will have the benefit of the decision of the English Court thereby reducing the risk of inconsistent decisions. If, however, Enichem’s appeal in Italy fails then Enichem can be joined to the English proceedings and the determination of the claims in England, or at any rate those against the Dow and Bayer Defendants, will not have been unnecessarily delayed by awaiting the outcome of the appeal in Italy.

By contrast a stay of the claims against the Dow and Bayer Defendants would leave claims against other Defendants in this jurisdiction. The English Court would be likely to reach a decision on the merits of those claims significantly before the Italian court of appeal and would only have the benefit of the Italian decision (assuming the appeal succeeded) if it delayed giving judgment until September 2013-2014. This Court would be unlikely to delay giving judgment for that length of time and so would be likely to reach a decision without the benefit of the Italian decision on the merits, thereby increasing the risk of inconsistent decisions.

There are two Defendants who are domiciled in Switzerland and therefore subject to the Lugano Convention. They are Bayer International SA and Dow Europe GmbH.

So far as concerns Article 22 of the Lugano Convention, which is the equivalent of Article 28 of the Judgments Regulation, there is a difference. The Court only has a discretion to stay so long as proceedings are pending at first instance. It is common ground that they are not pending at first instance in Italy and therefore this Court has no discretion pursuant to Article 22 to stay the claims against Bayer International SA and Dow Europe in any event.

In addition to seeking a stay based on Articles 27 and 28 of the Judgments Regulation the Dow Defendants have also applied for a stay pursuant to Article 23 of the Judgments Regulation and Article 17 of the Lugano Convention on the grounds that some of the contracts of sale contain an exclusive jurisdiction clause. The Application Notice does not mention Section 9 of the Arbitration Act 1996but the witness statement of Michael Sanders dated 12 June 2008 does. The application for a stay on the grounds of exclusive jurisdiction or arbitration clauses has been adjourned but, by his order dated 10 October 2008, Andrew Smith J. directed that at this hearing “the Claimants shall be at liberty to argue ………… that some or all of the Dow Defendants have waived reliance on” Article 23 of the Judgments Regulation, Article 17 of the Lugano Convention and/or Section 9 of the Arbitration Act 1996.”

The Claimants have therefore invited me to decide the question of waiver. The Dow Defendants have submitted that I cannot do so without evidence of the proper law of each contract in order that the law of waiver as understood by that proper law may be put before the Court. There is no such evidence before this Court.

The Dow Defendants have not particularised their stay applications based upon exclusive jurisdiction or arbitration clauses. There are, I understand, several such clauses. They do not, apparently, provide for jurisdiction in the same place which would appear to raise the possibility of disputes under the various contracts of sale being referred to several different jurisdictions.

The Claimants’ case on waiver has been put as follows:

“The Claimants submit that by their willingness to have disputes relating to the cartel determined in Italy, and in proceedings to which the Claimants and the Dow Defendants are all party (albeit that the Dow Defendants have adopted a “supporting” role) the Dow Defendants have elected not to exercise any rights to sue that they might otherwise have had, and/or should be precluded from now asserting such rights. The conduct of the Dow Defendants is fundamentally inconsistent with any enforcement of the exclusive jurisdiction or arbitration clauses in relation to the causes of action in issue; they must be taken to have elected not to pursue their rights under those clauses or to have abandoned them: see “The Comandate” [2008] 1 Lloyd’s Rep. 119.”

It is not clear what acts are relied upon as indicating the Dow Defendants’ “willingness” to have the claims determined in Italy. If the issue of the application notice dated 12 June 2008 is relied upon, the question would arise whether an application notice which raises both an application to stay on the grounds of Articles 27 and 28 and on the grounds of Article 23 would amount to a waiver of the right to rely on Article 23. That question would probably be determined by the law of this forum but I heard no argument on that. If however Dow’s intervention in Italy on 13 May 2008 prior to the issue of that application notice is relied upon, then it may be that evidence of Italian law is required to evaluate the nature of that act and whether it is inconsistent with an intention to rely upon the exclusive jurisdiction or arbitration clauses in the contracts of sale. I heard no argument on that. In these circumstances I do not consider that I can properly decide the issue which the Claimants have asked me to decide. It seems to me more sensible, if this issue is seriously to be pursued by the Dow Defendants, that they should particularise their application based upon Article 23 of the Judgments Regulation or Section 9 of the Arbitration Act and that the Claimants should particularise their response to that claim, stating in particular the acts relied upon as amounting to a waiver of the right to make such claim.

I therefore decline to decide the question of waiver at this time.

My conclusions can be summarised as follows: