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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

CMA not immune from costs orders says Supreme Court

On 25 May 2022, the Supreme Court handed down an important judgment relating to appeals against decisions by public authorities (Pfizer and Flynn v CMA [2022] UKSC 14). It found that there is no generally applicable principle that all public bodies should enjoy protected status as parties to litigation where they lose a case they have brought or defended in the exercise of their public functions in the public interest. Instead, it is important that a court or tribunal considers the risk that there will be a ‘chilling effect’ on the conduct of a public authority, if costs orders are made routinely against it in those kinds of proceedings. The Competition Appeal Tribunal (“CAT”) was right to distinguish Competition Act 1998 (“CA98”) appeals from appeals against public authorities where there might be a risk of a chilling effect. The starting point in CA98 appeals is that costs follow the event, but the question of success is generally considered on an issue-by-issue basis.

The judgment is significant for appellants against CA98 decisions by the Competition and Markets Authority ("CMA") and other competition authorities. Undertakings that have been found to have infringed competition law have already been subject to lengthy investigations, often lasting many years, and leading to significant costs none of which are recoverable. Had the Court of Appeal’s judgment been upheld, even undertakings who had successfully appealed a CA98 decision before the CAT could not have recovered any of their costs, absent exceptional circumstances. Such a regime may have significantly deterred companies from appealing CA98 decisions even where they regarded the decisions as wrong. It must be hoped that the maintenance of costs risk for the CMA should it fail to defend its decisions will result in robust, fair and proportionate decision making. This judgment from the Supreme Court strikes the right balance in ensuring that, if an appellant succeeds in its appeal before the CAT, then it will be able to recover its reasonable costs from the CMA.

Clifford Chance acted for Pfizer in its appeal before the Supreme Court, during the CMA’s investigation and Pfizer’s subsequent successful appeals in phenytoin.

Read more in our client briefing.