Chart design Articles



9 APRIL 2021


The claim by Michael O’Higgins FX Class Representative Limited (the O’Higgins PCR) is against the banks who settled with the European Commission as part of its investigation into anticompetitive conduct in the FX market. It is a claim to recover damages for those who suffered losses (the Proposed Class) as a result of the banks’ anticompetitive behaviour (the O’Higgins FX Claim).

The O’Higgins FX Claim is what is referred to as a ‘follow-on’ damages claim in that it ‘follows on’ from the decisions of the European Commission dated 16 May 2019 (the Commission Decisions). In this article we explain what follow-on damages claims are and what this means for the Proposed Class of victims of the FX cartels.

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What is a ‘follow-on damages’ claim?

Anyone who has been harmed by a breach of competition law can seek damages from those who caused the loss. The damages are to put the victims in the same financial position as they would have been had the law not been broken.

There are three types of damages claims for breaches of competition law: (i) follow-on claims; (ii) standalone claims; and (iii) hybrid claims:

  • Follow-on claims are those that are based on – or ‘follow on’ from – an infringement decision of a competition regulator finding that there was a breach of competition law.
  • Standalone claims are where there is no such infringement decision and the claimant has to establish the breach of competition law itself, as no regulator has done so.
  • A hybrid claim combines both a follow-on claim and a standalone claim. For example, it might be follow-on in relation to the time period specified in the regulator’s infringement decision, but have a standalone element by alleging that the anticompetitive conduct was for a longer period than stated by the regulator.

CAs noted above, the O’Higgins FX Claim is a follow-on damages claim from the Commission Decisions regarding FX.

What is the benefit of a follow-on damages claim?

The benefit of follow-on damages claims is that they can rely on the investigative work conducted by the competition regulator which forms the basis of the relevant decision. This investigative work can include raiding suspected cartelists’ premises to seize relevant documents and making legally-enforceable demands for relevant material.

In addition, competition regulators have established ‘leniency’ and settlement programmes in which they provide a reduction in fines to cartelists who whistle-blow on the cartel (leniency programmes) or accept their role in the cartel (settlement programmes):

  • Leniency: Leniency programmes frequently provide for a 100% reduction in fines (i.e. immunity from fines) for the first cartelist to self-report on the cartel and substantial reductions in fines for subsequent cartelists who self-report.
  • Settlement: Settlement programmes frequently provide for a 10% reduction in fines to those who accept their involvement in the cartel. In addition to the reduction in the level of fines, settling cartelists also go through a streamlined regulatory process which should save time and costs.

In addition to obtaining reductions in fine, cartelists that settle with regulators have less detailed infringement decisions made against them as the regulators do not need to set out the detailed basis for the allegations, as those allegations are accepted by the settling parties.

The Commission Decisions in FX

While a large number of international financial services regulators and competition regulators (including amongst others the US Department of Justice, the UK Financial Conduct Authority, the New York Department of Financial Services) have fined the banks involved in the FX cartels, due to the UK rules on collective actions the relevant regulator for the purposes of the O’Higgins FX Claim is the European Commission.

The European Commission started investigating the FX cartel after UBS self-reported its involvement in September 2013 under the EC’s leniency programme.

On 16 May 2019, the European Commission handed down the two Commission Decisions: the first against UBS, Barclays, RBS, Citigroup and JPMorgan and the second against, UBS, Barclays, RBS and MUFG Bank (formerly Bank of Tokyo-Mitsubishi). The press summary relating to the Commission Decisions is available here.

In short, the European Commission found that in the period from 18 December 2007 to 31 January 2013:

“some individual traders in charge of Forex spot trading of these currencies on behalf of the relevant banks exchanged sensitive information and trading plans, and occasionally coordinated their trading strategies through various online professional chatrooms”.

Of the six banks subject to the Commission Decisions, five of the six made use of the leniency programme and all of them settled with the European Commission (MUFG did not make a leniency application and does not form part of the O’Higgins FX Claim). As a result, UBS obtained full immunity from fines as it was the whistle-blower on the FX cartels and the other banks received reductions in the fines imposed on them, for making leniency applications and settling (or just settling in MUFG’s case).

In making use of the settlement procedure, the banks made so-called ‘settlement submissions’ to the European Commission. The Commission Decisions describe each bank’s settlement submission as containing, amongst other things:

“an acknowledgement in clear and unequivocal terms of [the bank’s] liability for the infringement summarily described as regards its object, the main facts, their legal qualification, including the [bank’s] role and the duration of [the bank’s] participation in the infringement in accordance with the results of the settlement discussions”.

Accordingly, all of the banks have accepted their participation in the FX cartels. While accepting the breach of competition law is not the same as accepting that damages should flow from that breach, it does mean that liability for the breach is established and the focus then shifts to the impact – in terms of damages – of that breach.

Legal implications of a settlement decision for follow-on damages claims

The legal implications of settlement decisions for follow-on damages claims was recently considered by the Court of Appeal of England & Wales (the second-highest court in the UK, after the Supreme Court) in a case concerning the Trucks cartel.

As with the FX cartels, the Trucks cartel involved a number of cartelists settling with the European Commission in exchange for reductions in their fines and having a less detailed infringement decision against them. Following the settlement submissions of the cartelists, the European Commission in 2016 issued a settlement decision finding that the truck manufacturer cartelists participated in a cartel involving coordination and information exchange on pricing and collusion on the timing and passing on of costs for emission technologies (the Trucks Settlement Decision).

The Trucks cartelists have subsequently been sued for damages by hundreds of claimants following on from the Trucks Settlement Decision. In the course of some of these follow-on damages claims, the relevant claimants sought to rely on statements included in the Trucks Settlement Decision. However, despite having settled with the EC, the Trucks cartelists sought to ‘not admit’ or deny (‘not admit’ and ‘deny’ both being legal terms of art) a number of the statements from that decision in their defences to several claims so that the claimants would have to prove these statements at trial.

Following the Trucks cartelists non-admissions or denials in their defences, the Competition Appeal Tribunal (CAT) (the same forum in which the O’Higgins FX Claim is being brought) held a hearing in December 2019 to determine which parts of the Trucks Settlement Decision were binding.

In a judgment dated 4 March 2020, the CAT found that a number of the facts set out in the Trucks Settlement Decision were binding because they were the ‘essential facts’ which formed the essential basis for the ‘operative part’ of the Trucks Settlement Decision. Further, the CAT found that it would be an abuse of process for the Trucks cartelists to not admit or deny the ‘non-essential facts’ (i.e. those parts of the Trucks Settlement Decision which did not form the essential basis) unless a number of limited exceptions apply (e.g. where the claimant does not object, where the defendant has new information which it did not have at the time of the decision).

This finding of the CAT was appealed to the Court of Appeal which heard the appeal in October 2020 and, in a judgment dated 11 November 2020, agreed with the findings of the CAT and dismissed the appeal.

The judgment is notable regarding the strength of the judges’ dismissal of the Truck cartelists’ approach. For example:

  • The judge who wrote the main judgment for the Court of Appeal, Lady Justice Rose, noted that: “it cannot be said that the addressees of a settlement decision accept that they have committed an infringement of the competition rules without admitting the facts set out in that decision. What they admit is that they engaged in the activities that are described in the decision; that as a matter of law that conduct amounts to an infringement and that it merits the fine imposed on them” (para. 48).
  • Lady Justice Rose also noted that allowing the settling parties to step back from their statements to the European Commission would be an “affront to most people’s ideas of justice” (para. 107).
  • Further, Sir Geoffrey Vos, the Chancellor of the High Court who wrote an opinion agreeing with Lady Justice Rose, stated that he was entitled to conclude that: “there would be manifest unfairness to the claimants and that the administration of justice would be brought into disrepute if the [cartelist addressees of the decision] were entitled, in the follow-on proceedings, to contest the admissions they had freely made in the settlement process” (para. 145).

Implication of the Court of Appeal judgment on the O’Higgins FX Claim

The Court of Appeal decision in Trucks makes clear that settling cartelists’ attempts to ‘have-their-cake-and-eat-it’ by back-tracking from their settlement submission are unlikely to be accepted. This means that the O’Higgins FX Claim can rely on the Commission Decisions (for which non-confidential versions can be found on this website here and here) and the cartelists will not be able to admit or deny the ‘essential’ facts contained in the Commission Decisions.

As a result, the significant benefit of follow-on damages claims – i.e. not having to establish liability – will be protected by the CAT and the focus of the O’Higgins FX Claim will rightly be on establishing the quantum of damages suffered by the Proposed Class. The O’Higgins PCR has, and continues to work on, assessing the damages suffered by the Proposed Class with its expert team consisting of Professor Francis Breedon of Queen Mary University (an FX microstructures expert), Professor Doug Bernheim, the Edward Ames Edmonds Professor of Economics and Chair of the Department of Economics of Stanford University and Bates White, and former trading experts.

The O’Higgins PCR would be happy to discuss any questions from Proposed Class members regarding the claim.

Belina Hollway

Author: Belinda Hollway + James Hain-Cole
Scott+Scott UK LLP

If you would like to receive updates on the FX claim you can register here and join the LinkedIn Group here.


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