Enron Coal Services Ltd v English Welsh & Scottish Railway Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Jacob,Lord Justice Carnwath,Lord Justice Lloyd |
| Judgment Date | 19 January 2011 |
| Neutral Citation | [2009] EWCA Civ 647,[2011] EWCA Civ 2 |
| Docket Number | Case No: C3/2010/0404,Case No: C3/2009/0815/PTA |
| Court | Court of Appeal (Civil Division) |
| Date | 19 January 2011 |
[2009] EWCA Civ 647
Before : Lord Justice Carnwath
Lord Justice Jacob
Lord Justice Patten
Case No: C3/2009/0815/PTA
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL
(Lord Carlile of Berriew QC; Mr Graham Mather and Mr Richard Prosser OBE)[2009] CAT 7
Mr Mark Brealey QC and Miss Maya Lester (instructed by Freshfields Bruckhaus Deringer LLP) for the Appellant
Mr Daniel Beard (instructed by Orrick, Herrington & Sutcliffe) for the Respondent
Hearing date : 16 th June 2009
Lord Justice Patten :
Introduction
Enron Coal Services Limited (“ECSL”) was established in 1999. Until it ceased trading in late 2001 it carried on the business of coal supply and haulage in the UK. This involved acting as what is described as a third party intermediary for coal purchase. Its customers included electricity generators operating coal-fired power stations. One of the services which it provided to these customers was the management of the entire coal supply chain. This included purchasing the coal at the loading port, shipping, rail haulage and delivery of the coal to the power station. Services of this kind are known as “end-to-end” (“E2E”) services.
ECSL owned no rolling stock of its own and, in order to provide E2E services, it had to contract with a rail freight operator which could provide the necessary coal haulage. Until January 2001 (when Freightliner Heavy Haul (“FHH”) began to operate in this market) the Appellant, English Welsh and Scottish Railway Limited (“EWS”), was the only company providing such services in Great Britain. It therefore enjoyed an effective monopoly in the relevant market.
In July 1999 ECSL entered into an E2E contract with the UK subsidiary of Edison Mission Energy (“EME”), a US company which had recently acquired two power stations at Fiddler's Ferry and Ferrybridge from E.ON (Powergen). ECSL used EWS to haul the coal under the latter's standard conditions of carriage at rates which were agreed in August 1999 and later embodied in a seven month formal contract on 1 st December 1999. The contract therefore continued until 1 st July 2000.
From January 2000 discussions took place between ECSL and EWS about a possible performance-based contract which would, if implemented, have superseded the existing contractual arrangements for the haulage of coal to the two EME power stations. As part of this exercise EWS in May 2000 offered rates for a wide variety of routes from the ports of Hunterston, Hull and Immingham to Fiddler's Ferry and to the Aire Valley. This was the site of the Ferrybridge Power Station and also a power station at Eggborough owned and operated by British Energy (“BE”) which I will come to shortly. These quoted rates were in every case higher than the existing contractual rates under the 1999 contract. In the case of flows from Hunterston, the May quoted rate was £6.90 per tonne compared to the 1999 contract rate of £5.90. For flows from Hull and Immingham to Ferrybridge the May quotes were £3.40 per tonne compared to the existing contractual rate of £2.80.
Neither the new rates nor the performance-based contract were agreed between ECSL and EWS and no coal was hauled under them. ECSL continued to pay the 1999 contract price until July 2000. But on 26 th June 2000 EME issued an invitation to tender for the rail haulage of coal to Fiddler's Ferry and Ferrybridge for a 4-year period commencing on 1 st January 2001. EWS was a competitor with ECSL for this contract. It provided EME with quotes for coal haulage to its two power stations, first in August 2000 and then on 3 rd and 5 th October of that year. All these quotes were directed to a contract with effect from 1 st January 2001.
In relation to each of the routes, the August quotes were either the same or higher than the contractual rate paid by ECSL under the 1999 contract but were lower than the May quotes provided to ECSL. The quotes supplied in October were in every case lower than the August quotes and in some but not all cases were also lower than the 1999 contract rates. So, for example, in relation to the Hull to Ferrybridge flows EWS quoted a price per tonne of £2.80 in August but £2.50 on 5 th October (compared to the contract rate of £2.80 and the May quote to ECSL of £3.40). For the Immingham to Ferrybridge route, the October quotes were £2.60 (3 rd October) and £2.55 (5 th October) compared again to the contract price with ECSL of £2.80 and the May quote of £3.40. By contrast, for the Hunterston to Ferrybridge route, the October quote to EME was £6.20-£6.50 per tonne compared to the May quote to ECSL of £6.90; an August quote to EME of £6.25; but an ECSL contract price of £5.90.
EME awarded the 2001 contract to EWS. By then ECSL had no contract of its own with EWS which would cover the period of the tender and the only rates on offer to it were those which had been provided in May. These could not compete with the rates offered by EWS directly to EME.
The other E2E contract relevant to this appeal is the one which ECSL entered into with BE in relation to the Eggborough Power Station. This resulted from a tender process initiated in autumn 1999 for a 1-year contract. The tender process continued until spring 2000 and led to BE awarding a 1-year E2E contract to ECSL effective from 1 st April 2000.
ECSL's bid for the tender was based on rates quoted by EWS in March 2000 but, in the case of a number of routes, EWS subsequently agreed in April, once the contract had been awarded, to charge the same rates as they had agreed in 1999 for flows on the same route to EME's Ferrybridge Power Station. So, on the Hunterston route, the March quote was £6.45 per tonne which was reduced to £5.90 on 7 th April. Similarly, the rate for the Immingham to Eggborough flows was quoted at £3.03 in March but then reduced to £2.80. In the case however of the Hull to Eggborough route, there was no reduction in the March quote of £3.03 and on the Redcar to Eggborough route, the original March quote of £3.35 was raised on 28 th March to £3.40 compared to the 1999 contractual rate on the same route to Ferrybridge of £3.30.
In May 2000 the contract rates for flows to Eggborough were included in the negotiations for the new overall performance-based contract with EWS and, as in the case of the EME flows, EWS provided new quotes for the various routes. In every case these exceeded the contractual rate. In the case of flows from Hull and Immingham the price quoted was £3.40. For Hunterston it was £6.90; and for Redcar £3.60. As already mentioned, the new contract was not agreed and no coal was hauled on any of the routes at the May prices.
In June 2000 ECSL entered into a contract with FHH which, from January 2001, began to operate coal haulage services in competition with EWS. When in October 2000 BE issued a new invitation to tender for coal supplies to Eggborough from 1 st April 2001 (the termination date of the existing ECSL contract) EWS (in October and November 2000) quoted rates to BE which, with one exception, were considerably lower than the contractual rates for ECSL agreed in April 2000 and the prices quoted in May in connection with the negotiations for the performance-based contract.
For the Hull route the rates quoted were £2.55 (26 th October) and £2.30 (27 th November); for Immingham they were £2.55 and £2.35; and for Redcar the rates quoted were £3.20 and £2.75. The exception was the Hunterston route where the price quoted on 27 th November was £6.20 which was less than the May rate quoted to ECSL but more than the April contract price of £5.90. Notwithstanding this, ECSL was in fact awarded the 2001 contract for Eggborough on an E2E basis which it has carried out using FHH as its rail haulier.
On 1 st February 2001 ECSL submitted a complaint to the Director of Fair Trading which (so far as material) stated that:
“English, Welsh and Scottish Railways Limited ('EWS'), the dominant supplier of rail freight services in England, Wales and Scotland, has systematically and persistently acted to foreclose, deter or limit Enron Coal Services Limited's ('ECSL') participation in the market for the supply of coal to UK industrial users, particularly in the power sector, to the serious detriment of competition in that market. The complaint concerns abusive conduct on the part of EWS as follows.
• Discriminatory pricing as between purchasers of coal rail freight services so as to disadvantage ECSL.
• Operation of exclusive long-term supply contracts with power stations so as to foreclose ECSL's competitive prospects.
• Effective refusal to deal with ECSL in particular, in effect, refusing to agree a performance-based contract and effectively refusing to supply long-haul freight for coal.
• Attempt unfairly to influence the pricing policy of a key trading partner of Freightliner Limited ('Freightliner') and GB Railways Group Plc ('GB Railways'), namely General Motors.”
On 14 th February 2001, in accordance with his powers under the Competition Act 1998 (Concurrency) Regulations 2000 (SI 2000 No. 260), the Office of the Rail Regulator informed the Director of Fair Trading that it wished to exercise concurrent jurisdiction in relation to the investigation of the complaint and the complaint was then transferred to the Regulator with the consent of the Office of Fair Trading. On 5 th July 2004 the Office of Rail Regulation (“ORR”) replaced the Office of the Rail...
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