The Secretary of State for Health and Another v Servier Laboratories Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Rose,Sir Stephen Richards,Lord Justice Longmore |
| Judgment Date | 27 June 2019 |
| Neutral Citation | [2019] EWCA Civ 1096 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2019/0985 A3/2019/0986 A3/2019/0987 |
| Date | 27 June 2019 |
[2019] EWCA Civ 1096
Lord Justice Longmore
Lady Justice Rose
and
Sir Stephen Richards
Case No: A3/2019/0985 A3/2019/0986 A3/2019/0987
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
MR JUSTICE ROTH
Royal Courts of Justice
Strand, London, WC2A 2LL
Kelyn Bacon QC and Daniel Piccinin (instructed by Sidley Austin LLP) for the Appellants
Robert Palmer QC and Julian Gregory (instructed by Reynolds Porter Chamberlain LLP) for the Scottish Ministers
Robert Palmer QC and Laura Elizabeth John (instructed by Geldards LLP) for the Welsh Ministers
Robert Palmer QC and David Drake (instructed by Peters & Peters Solicitors LLP) for the Secretary of State for Health)
Hearing date: 18 June 2019
Approved Judgment
These three appeals raise the important question of how far the EU law principle of res judicata can be relied on by the Appellants (‘Servier’) as establishing facts which they wish to prove in their defences to the damages claims brought by the Respondents (whom I shall call ‘the Claimants’). Servier submits that certain factual findings were made in its favour by the General Court when giving judgment in an action to annul a competition law infringement decision adopted by the EU Commission. Those findings are relevant to issues that are going to be considered at a hearing in October 2019 about whether the Claimants failed to mitigate the loss they claim to have suffered as a result of Servier's infringement of the competition rules. Roth J, who is charged with the case management of these complex proceedings, held in his judgment of 17 April 2019 reported at [2019] EWHC 1004 (Ch) that none of the factual findings of the General Court relied on by Servier was binding on him for the purposes of that forthcoming hearing. These appeals against his judgment have been expedited so that our decision is known in time for a pre-trial review of that preliminary issues hearing.
The background
Servier is a manufacturer of pharmaceuticals including the drug perindopril. Perindopril is a prescription-only product classed as an ACE-inhibitor used in the treatment of various conditions including hypertension and cardiovascular diseases. Servier's perindopril product is marketed under the brand name “Coversyl”. Coversyl was a blockbuster drug with global sales of more than €800 million in 2006 and 2007. The main compound patent for perindopril expired in 2003 to 2005 in most EU member states. The Claimants allege that Servier engaged in anti-competitive conduct designed to delay the date on which other manufacturers could bring generic versions of perindopril to the market in the UK. Market entry by generic products occurred in July 2007 after Pumfrey J held that a new patent for the crystalline form of perindopril was invalid for lack of novelty. The Claimants say that market entry would have occurred earlier if Servier had not committed infringements of Articles 101 and 102 of the Treaty on the Functioning of the European Union (‘TFEU’) and/or the Chapter 1 and Chapter 2 prohibitions imposed by the Competition Act 1998. These infringements and the delay in cheaper generic versions of perindopril becoming available caused them to spend more on perindopril prescriptions within the NHS than they would have spent if cheaper generic perindopril had become available earlier.
There was an investigation into Servier's alleged anti-competitive conduct by the EU Commission culminating in a decision adopted on 9 July 2014: Case COMP/39.612 Perindopril (Servier) (‘the Decision’). The Commission found that Servier had entered into amicable patent settlement agreements with six producers of generic pharmaceutical products. Under those agreements Servier made substantial financial payments referred to as “reverse payment patent settlements”. The Commission found that these constituted anti-competitive agreements contrary to Article 101 TFEU and that by entering into these agreements, among other conduct, Servier had abused its dominant position contrary to Article 102 TFEU. An important issue in the Commission investigation into the Article 102 infringement was the definition of the relevant market in which Coversyl competed; was the relevant market limited to perindopril or did it include other ACE-inhibitors or a wider range of products? The Commission defined the relevant market for finished products as comprising only perindopril and rejected Servier's argument that it comprised, at least, all ACE-inhibitors. The Commission imposed significant fines on Servier and the generic companies; Servier's fine was more than €330 million.
The Secretary of State for Health and the other English claimants commenced their action in the High Court on 3 May 2011, before the Decision was issued. The Scottish/Northern Irish and Welsh claims were commenced in mid-2012. The Particulars of Claim in all three actions were significantly amended following the publication of the Decision in 2014 so as to rely on the findings of infringement made by the Commission.
An important amendment to Servier's Defence was introduced in November 2015. Servier applied to amend its pleading to introduce a new defence based on the principles of mitigation, causation and contributory negligence. These raised what has been called “the prescribing argument”. The amendments were opposed by the English claimants but permission was granted by Henderson J on 4 October 2016. The amendment inserted a new section headed “Failure to mitigate, causation/remoteness and/or contributory negligence” asserting, without prejudice to the denials of liability, that the Claimants have failed to take all reasonable steps to mitigate their loss. In summary, the prescribing argument is that:
i) there was no material clinical difference between perindopril and other ACE-inhibitors which had been available in generic form from late 1999;
ii) the Claimants should therefore have taken all reasonable steps to encourage switching from the prescription of perindopril to the prescription of cheaper alternative ACE-inhibitors in generic form but failed to do so;
iii) accordingly the Claimants failed to mitigate their loss and/or those events broke the chain of causation and/or rendered any damage too remote.
As Roth J noted in his judgment, the prescribing argument brought into greater prominence the question of the substitutability of perindopril and other ACE-inhibitors. Following the introduction of the prescribing argument, that issue was relevant in the damages claims not only for the question of market definition and dominance but also to the Claimants' ability to recover under any heads of their claim.
Servier challenged the Decision in the General Court. The General Court handed down judgment on 12 December 2018, Case T-691/14 Servier SAS v EU Commission ECLI:EU:T:2018:922 (‘the Servier Judgment’). A provisional English language version of the judgment has recently been published. The UK Government did not intervene in that appeal. The Court upheld most of the Commission's findings including its analysis that four of the five settlement agreements challenged were restrictions of competition by object contrary to Article 101 TFEU. Before turning to consider the three complaints raised by Servier in relation to the definition of the relevant finished product market, the General Court recalled the scope of the judicial review it was bound to carry out:
“1374. In that regard, it must be borne in mind that, according to settled case-law, although the EU judicature undertakes a comprehensive review of the question as to whether or not the conditions for the application of the competition rules are met, the review of complex economic appraisals made by the Commission is necessarily limited to checking whether the relevant rules on procedure and on stating reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or a misuse of powers …
1375 The Court of Justice has held that whilst, in areas giving rise to complex economic assessments, the Commission has a margin of discretion with regard to economic matters, that does not mean that the Courts of the European Union must refrain from reviewing the Commission's interpretation of information of an economic nature. Those Courts must establish, among other things, not only whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it …
1376 Moreover, it should be pointed out that, according to settled case-law of the Court of Justice, in the field of competition law, where there is a dispute as to the existence of an infringement, it is for the Commission to prove the infringements found by it and to adduce evidence capable of demonstrating to the requisite legal standard the existence of the circumstances constituting an infringement. Where the Court still has a doubt,...
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