Assignment of claims in cartel damages actions

Businesses that have suffered harm because of a cartel are increasingly aware of their right, and often fiduciary duty, to claim compensation.

The European Union’s Antitrust Damages Directive, implemented in the UK in March 2017, has created a better sense of understanding that cartel damages can indeed be claimed. It also made recovery of damages easier, though not “easy.”

Challenges

The key obstacles for plaintiffs to enforce cartel claims include:

• The need to prove damages. Quantification of harm usually requires professional analysis of detailed data and case-specific market information.
• Dispersed losses, as cartel members are often active in multiple jurisdictions and victims have therefore suffered damages across different countries.
• Potential strains on ongoing commercial relationships associated with individual exposure to multiple defendants.
• The traditional high costs of litigation, including legal team, forensic accountant, and economic expert fees.
• The appetite of the legal team to pursue claims at risk.

Solutions

Many of these difficulties can be lessened by collective approaches. Such approaches have considerable advantages and improve the prospects for an effective enforcement of cartel damages claims. Collective approaches:

• enable the collection and forensic review of data from all companies that have suffered losses, thus enhancing the chances to prove harm caused by the infringement.
• establish synergies for the enforcement of claims both in court and through settlements.
• improve the plaintiffs’ cost-risk ratio due to economies of scale and, therefore, the risk appetite of the legal team; and
• result in a significant concentration and stream-lining of court procedures, which is advantageous for claimants, defendants, and the courts from both a time and cost perspective.

Claims Aggregation

Bundling of claims by a special legal entity, often referred to as a claims vehicle, is a particularly effective solution. The model typically has the following features:

• a number of companies (typically 15-150) damaged by a common infringement assign their claims via a claims purchase or assignment agreement to a specialised company (special purpose vehicle, or SPV).
• the SPV enforces the claim in its own name and at its own risk. It acts as a single plaintiff, litigating on behalf of all victims that assigned their claims to the SPV.
• the SPV arranges for the overall financing of the case, typically through third party litigation funding, and insurance.
• the SPV collects and analyses the relevant data, which substantially increases the chances of proving and recovering individual damages.
• the SPV will take appropriate steps to collect the damages from the defendant and distribute the proceeds to the victims in accordance with the claims purchase or assignment agreement.

This approach effectively results in an outsourcing of the arduous task of proving damages and enforcing claims. Since under the bundling method the entity acquiring the claims is acting in its own name, commercial relationships do not suffer as much and can often be preserved.

Funding

Any representative entity seeking damages must be able to cope with the high costs and adverse cost risks of complex litigation. For that reason, collective actions and bundled claims are usually funded by third-party litigation funders.

Gateley has its own funding facility which provides a complete costs solution for our clients. In partnership with Bench Walk Advisors, our team can help you claim your antitrust damages on a true no win, no fee basis.