Before : MR. JUSTICE TEARE Between :

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1 Neutral Citation Number: [2009] EWHC 2609 (Comm) Case No: 2007 Folio 1676 and 2008 Folio 703 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT Before : MR. JUSTICE TEARE Between : Royal Courts of Justice Strand, London, WC2A 2LL Date: 27/10/2009 COOPER TIRE & RUBBER COMPANY AND OTHERS - and - SHELL CHEMICALS UK LIMITED AND OTHERS Claimants Defendants Laurence Rabinowitz QC and Daniel Jowell (instructed by Linklaters LLP) for the Dow Defendants Mark Hoskins QC (instructed by Freshfields Bruckhaus Deringer) for the Bayer and Lanxess Defendants David Foxton QC and Philippa Hopkins (instructed by S.J.Berwin LLP) for the Claimants Mr. Justice Teare : Hearing dates: 5-8 October Judgment 1. Some but not all of the Defendants to these actions contend that this Court lacks jurisdiction against them and, in the event that the Court has jurisdiction, contend that the proceedings commenced in this court should be stayed. Both the jurisdiction and the stay applications depend upon the application of the Judgments Regulation in the context of European competition law and multiple parties. 2. The claims in these actions arise out of and follow on a decision by the Commission of the European Communities dated 29 November 2006 in Case COMP/F/ Butadiene Rubber and Emulsion Styrene Butadiene Rubber (the Commission Decision ). The Commission Decision found 13 companies (the Addressees ) guilty of an infringement of Article 81 of the EC Treaty in relation to the market for the supply of Butadiene Rubber ( BR ) and Emulsion Styrene Butadiene Rubber ( ESBR ). 3. The Addressees were: Bayer AG ( Bayer ), The Dow Chemical Company, Dow Deutschland Inc, Dow Deutschland Anlagengesellschaft mbh, Dow Europe GmbH,

2 (collectively Dow ) Eni SpA, Polimeri Europa SpA (collectively Enichem ), Shell Petroleum NV, Shell Nederland BV, Shell Nederland Chemie BV (collectively Shell ), Kaucuk a.s. and Unipetrol a.s. (collectively Kaucuk ) and Trade-Stomil Ltd ( Stomil ). 4. The Addressees were variously domiciled in Germany, the Netherlands, Italy, the Czech Republic, Switzerland and Poland. None was domiciled in England. 5. The Commission Decision held that the Addressees committed a complex single and continuous infringement of Article 81 of the Treaty by agreeing price targets for their products, sharing customers by non-aggression agreements and exchanging sensitive commercial information relating to prices, competitors and customers. In particular it was said that: i) The cartel took effect at least between 20 May 1996 and 28 November ii) iii) The agreement was operated by a series of meetings, usually taking place on the fringes of the committee meetings of the European Synthetic Rubber Association ( ESRA ), in an informal setting before or after the official committee meetings. ESRA meetings took place four times each year at various locations across Europe and the cartel meetings took place at the same locations. These locations included Milan, Vienna, Amsterdam, Brussels, Richmond-on- Thames, Frankfurt, Grosse Leder, and Prague. The cartel was ended at a meeting in London. 6. In considering the liability of particular companies the Commission said: Concerning the principle of personal liability, Article 81 of the Treaty is addressed to undertakings which may comprise several legal entities. In this context the principle of personal liability is not breached so long as different legal entities are held liable on the basis of circumstances which pertain to their own role and their conduct within the same undertaking. In the case of parent companies, liability is established on the basis of their exercise of effective control on the commercial policy of the subsidiaries which are materially implicated by the facts. Under these circumstances, the principle of personal liability is not breached. References to different areas of law where the principle of autonomy of a subsidiary plays a different role (such as under corporate law) is not appropriate. 7. So far as concerns the impact of the cartel on the market the Commission said: In this proceeding, it is not possible to measure the actual impact on the EEA market of the complex of arrangements of which the infringement consists and therefore the Commission does not rely specifically on a particular impact, in line with the Guidelines according to which the actual impact should be taken into account when it can be measured. The Court of First

3 Instance has held that the Commission is not required precisely to demonstrate the actual impact of the cartel on the market and to quantify it, but may confine itself to estimates of the probability of such an effect. What can be said, in this case, is that with regard to the EEA, the cartel arrangements were implemented by the European producers and that such implementation did have an impact on the market, even if its actual effect is difficult to measure. Therefore, the Commission will not take into account the impact on the market in determining the applicable fines in this case. 8. The Commission Decision imposed fines on the Addressees. The fines were assessed by reference to the effective economic capacity of the offenders to cause damage to competition. For this purpose regard was had to the sales of BR and ESBR by each undertaking in the last full calendar year of the infringement. Enichem and Bayer were placed in the first category, Dow in the second category, Shell in the third, Kaucuk in the fourth and Stomil in the fifth. Regard was then had to the size of each undertaking (to ensure that the fine had a deterrent effect) by applying a multiplier to the basic fine. Shell had the largest multiplier applied. The fines were then adjusted to reflect the period of time each undertaking was party to the cartel. Aggravating factors (such as involvement in previous cartels) and mitigating factors (such as co-operation with the Commission) were considered. In the result Enichem received the largest fine of EUR million, followed by Shell with a fine of EUR million. Dow s fine was reduced by 40% to reflect the value of the evidence it supplied to the Commission of the cartel. In the result it was fined EUR million. Bayer was granted immunity because it was the whistle-blower. 9. In February 2007, the Addressees, with the exception of Bayer, lodged appeals against the Commission s Decision with the Court of First Instance of the European Communities ( CFI ). It is necessary to note the grounds of appeal submitted by Dow and Enichem. i) The Dow Chemical Company contends that it should not be held liable for the acts of its subsidiaries. The other Dow companies contend that the Commission identified too early a start date for the cartel and that the fine imposed on them was too high. Thus the Dow Defendants do not challenge the cartel s existence on their appeal. Nor do they challenge the participation of subsidiary companies in the Dow Group in that cartel. ii) Eni SpA contends that it should not be held liable for the acts of its subsidiaries. It also contends that the fine is too high. Polimeri Europa SA, a company in the Eni group, contends that the Commission made procedural errors in coming to its Decision, that the Commission s assessment of the market was unfair, that another company, and not it, was managing BR and ESBR, and that the fine imposed was too high. Thus Enichem does not challenge the existence of the cartel. 10. The appeals to the CFI were listed for hearing in October I was informed that decisions of the CFI can be expected some 6-9 months after the hearing of the appeal. Thereafter there may be a further appeal to the European Court of Justice which I was told might take months.

4 11. On or around 29 July 2007, after receiving letters before action from the Milan office of S.J.Berwin LLP, Enichem commenced proceedings in Milan against 28 defendants, all of whom were companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups. The relief claimed was as follows: (i) to rule and declare the inexistence in the period between and , of any agreement whatsoever and/or any other forbidden anticompetition practices (the so-called cartel ) between the producers of [BR] and [ESBR] addressed by the [Commission Decision]; (ii) in any case, to rule and declare that Eni SpA, Polimeri Europa SpA and Syndial SpA have never adopted forbidden anti-competition behaviour within the sphere of the alleged cartel referred to under (i); (iii) in any case, to rule and declare that the alleged cartel referred to under (i) had had no effect on the BR and ESBR prices and that, in any case, the subjects hereby summoned cannot complain of any damage consequent to the aforesaid cartel. 12. It is necessary to note two matters concerning the Italian proceedings: i) Although Enichem had not sought to appeal to the CFI on the basis that the cartel did not exist, Enichem sought a declaration from the Italian court that the cartel did not exist. ii) Enichem contends that those who bought BR or ESBR not only from it but also from other companies in the cartel suffered no loss. Thus Enichem invited the Italian court to consider whether the cartel as a whole, not just Enichem, had caused any damage to the tyre manufacturers who were made defendants to the Italian proceedings. 13. None of the defendants to the Italian proceedings issued a counterclaim seeking damages from Enichem for its breach of Article 81 though it is common ground that they could have done so. However, on 21 December Claimants drawn from the same groups of tyre manufacturers who were named as defendants to the Italian proceedings issued proceedings in England against 23 Defendants who were alleged to be part of the cartel. However, the disputes between the Claimants and the Shell Defendants (D1-6) have since been settled and so the remaining Defendants are the Bayer and Lanxess Defendants (D7-13), the Dow Defendants (D14-20), Trade-Stomil (D21) and Kaucuk (D22-23). 14. In relation to the Claimants in the English proceedings, it is to be noted that: i) Of the 26 companies included as Claimants in the English proceedings, 14 had been named as defendants in the Italian proceedings. The remaining 12 were subsidiaries or affiliates of the defendant companies in Italy.

5 ii) Furthermore, of the 26 Claimants in the English proceedings, only 4 are English companies. 15. In relation to the Defendants in the English proceedings, it is to be noted that: i) All are members of the undertakings which are the subject of the Commission Decision, namely, Shell, Dow, Bayer, Stomil and Kaucuk, with one notable omission, namely EniChem. That was obviously because Enichem had already issued proceedings in Italy and the Claimants in England foresaw that proceeding against Enichem in England would lead to an application by Enichem that the proceedings be stayed pursuant to Article 27 of the Judgments Regulation. ii) Only 2 of the 23 Defendants are domiciled in England, neither of whom was an Addressee of the Commission Decision. They were Shell Chemicals UK Ltd. and Bayer plc. 16. The claims brought in England are for damages for breach of statutory duty, in particular, Article 81 of the EC Treaty which prohibits agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market. 17. Although Article 81 prohibits agreements its scope has been interpreted as extending to the implementation of agreements which infringe Article 81. In Ahlstrom Osakeyhtio and others v The Commission Case 129/85 ECR [1988] 5193 the ECJ held, at paragraph 16, that an infringement of Article 85 [the predecessor of Article 81], such as the conclusion of an agreement which has had the effect of restricting competition within the Common Market, consists of conduct made up of two elements, the formation of the agreement, decision or concerted practice and the implementation thereof. 18. In May 2008 the Dow Defendants (and other Dow companies) intervened in the Italian proceedings and adopted the claims made by Enichem. In June 2008, the Bayer Defendants (and other companies) intervened in the Italian proceedings, just as Dow had done. 19. Also in June 2008 further proceedings were instituted in Italy by Enichem against fellow producers of rubber. The aim of these proceedings, in which similar negative declaratory relief to that sought in the original proceedings was claimed, appears to have been to protect the claimants from being exposed to possible recourse suits by fellow producers of rubber. At the same time Enichem joined as parties to the Italian proceedings those of the Claimants in England who had not been party to the first Milan proceedings. 20. Further developments took place in England. In June 2008 the Bayer and Lanxess Defendants in the English proceedings brought a Part 20 claim against Enichem, seeking a contribution. However, Enichem issued a challenge to the jurisdiction of those proceedings under Articles 27 and 28 of the Judgments Regulation and, following this, those proceedings were discontinued.

6 21. On 12 June 2008 the Dow Defendants issued their application challenging the jurisdiction of this Court and, in the alternative, seeking a stay. 22. On 14 July 2008 the Claimants commenced further proceedings against Dow Chemical Company Limited ( DCCL ), which were served on 1 August DCCL is a company domiciled in England. 23. On 7 August 2008 the Bayer Defendants issued their application seeking a stay of this Court s jurisdiction. This application was out of time. 24. On 10 September 2008, DCCL intervened in the Italian proceedings. 25. On 19 September 2008 the Lanxess Defendants issued their application for a stay of this Court s jurisdiction. 26. On 10 October 2008 directions were given by this Court (Andrew Smith J.) for the determination of the applications which had been issued concerning jurisdiction. A hearing date was fixed for 29 March On 28 January 2009 Judge Paola Gandolfi of the Tribunal of Milan directed a determination of preliminary matters in the Italian proceedings and a hearing took place on 9 February The defendants to the Italian proceedings sought an order that the proceedings were inadmissible pursuant to Article 16 of Regulation 1/2003 EC (the Modernisation Regulation ) which provides that national courts cannot take decisions running counter to the decisions adopted by the Commission. 28. On 16 February 2009 this Court (Blair J.) adjourned the hearing of the jurisdiction applications pending a decision in Italy. The hearing was fixed for 5 October On 29 April 2009 Judge Paola Gandolfi gave her decision. She found as follows: i) The Italian court had jurisdiction over the first two claims and the first part of the third claim under Article 6(1) of the Judgments Regulation. (The claims are set out in paragraph 12 above.) ii) iii) iv) The court did not determine whether it had jurisdiction over the second part of the third claim. The first and second claims and the first part of the third claim were, however, inadmissible by reason of Article 16(1) of the Modernisation Regulation as they ran counter to a Commission decision. The second part of the third claim was admissible, but was characterized by defects in the writ of summons that cannot be amended, and, in particular, as an application for a negative declaration, it was insufficiently detailed and, as a result, declared void. 30. The effect of Judge Gandolfi s decision, therefore, was to dismiss the Italian proceedings in toto. The claimants and interveners in Italy have lodged notices of appeal against the decision. Not all the notices of appeal were in evidence but the Dow defendants in Italy have not sought to appeal the dismissal of the first and second pleas but only the dismissal of the third plea. If that appeal succeeds the Italian

7 court of appeal will also consider the merits of the case. However, before proceeding to do so, the court of appeal will be likely to issue a preliminary appeal judgment in which it will either reverse Judge Gandolfi or uphold her judgment. 31. A preliminary hearing before the Italian court of appeal is scheduled for 1 December The experts on Italian law are agreed that it is likely that the appeal on the second limb of the third plea will succeed, though one expert stresses that the likelihood is not so high. They are also agreed that it is likely that a decision on the appeal will be made within two to two and a half years from 10 September 2009, that is between September 2011 and February 2012, and that if the appellate court determines the merits a decision is likely within four to five years, that is between September 2013 and September On 1 July 2009 I dismissed an application by the Defendants in England (or most of them) for a further adjournment of the jurisdiction applications. Those applications were heard on 5, 6, 7 and 8 October The Jurisdiction of the English Court 33. As at the date of issue of the first English proceedings only two Defendants were domiciled in England. In addition, DCCL, the only Defendant to the second English proceedings, is domiciled in England. Thus, of the 24 original Defendants only three were domiciled in England. Those three companies were in the Shell, Bayer and Dow groups of companies. Jurisdiction was established against those three Defendants pursuant to Article 2 of the Judgments Regulation. 34. Although other Defendants have submitted to the jurisdiction the Dow Defendants (apart from DCCL) dispute that this Court has jurisdiction to hear and determine the claims brought against them. The primary ground on which jurisdiction is asserted against them is that the claims against the Defendants domiciled in England and the claims against the Dow Defendants are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings ; see Article 6(1) of the Judgments Regulation. 35. Counsel for the Dow Defendants said that it was plain that the three Defendants domiciled in England, none of which was an addressee of the Commission Decision, had been selected as a tactical device ( Anchor Defendants ) to establish jurisdiction against the other Defendants pursuant to Article 6(1) of the Judgments Regulation. This does appear to be likely. No other explanation was suggested by counsel for the Claimants. However, the question for the Court is whether it is a tactic which has succeeded in establishing jurisdiction over the Dow Defendants. 36. It is common ground that the Claimants must establish a good arguable case that this Court has jurisdiction. However, it is clear from Kolden Holdings Limited v Rodette Commerce Limited [2008] EWCA Civ 10 at paragraphs but in particular paragraphs that the test is flexible and that what is required depends upon the nature of the issue in question. Thus where a fact must be alleged and proved it will usually be sufficient that there is evidence to support it. But where there is a disputed issue of law which the trial judge will be in no better position to resolve than the judge dealing with the jurisdictional challenge, the latter may have to determine that

8 issue of law in order to have the required degree of assurance that the Court has jurisdiction. 37. It is also common ground that for the purposes of Article 6(1) there must be a real issue between the Claimants and one of the Anchor Defendants, that is, an issue which cannot be struck out; see FKI Engineering Ltd. v Dewind Holdings [2007] EWHC 72 (Comm) at paragraph 32. In circumstances where the Anchor Defendants are not addressees of the Commission Decision but are subsidiaries of certain of the addressees the debate in this Court has been whether the Claimants have a claim against those Defendants which cannot be struck out. 38. The Particulars of Claim make the following allegations against all of the Defendants, including those domiciled in England. It is alleged that they coordinated their competitive behaviour through an agreement with respect to the fixing of prices, an agreement not to compete aggressively to win one another s customers and the exchange of confidential commercial information; see paragraph 44. It is further alleged that each of the Defendants implemented those arrangements in relation to their sales of BR and ESBR; see paragraph 46. It is specifically pleaded that those Defendants who are subsidiaries of addressees of the Commission Decision, including the Anchor Defendants, implemented the arrangements by selling BR and ESBR to the Claimants. There is no dispute that the Claimants have a good arguable case that the Anchor Defendants sold BR or ESBR to at least some of the Claimants. It is common ground that the amount of sales by the Anchor Defendants was relatively small. 39. It is not clear from these allegations whether it is alleged that the Anchor Defendants were party to the alleged agreements or that they knew of those agreements when they implemented the arrangements. However, in that part of the Particulars which pleads a claim for exemplary damages it is alleged that the Defendants wrongful actions were carried out in the knowledge of and in wilful disregard of the Claimants rights ; see paragraph The manner in which it is alleged that the Anchor Defendants coordinated their competitive behaviour or implemented the arrangements was not particularised (save for the plea that those Defendants who are subsidiaries of addressees of the Commission Decision, including those domiciled in England, implemented the arrangements by selling BR and ESBR to the Claimants). Counsel for the Claimants suggested in argument that the Defendants might have done so in more than one way eg by participating in the agreements or by handing over control of their activities to another company within the group. This was an unsatisfactory basis on which to consider the Claimants claim against the Anchor Defendants because the factual basis of the claims being advanced against the Defendants was not clear. It was observed by counsel for the Dow Defendants that the Particulars of Claim distinguished between those Defendants directly involved in the cartel and those who were no more than direct or indirect subsidiaries of the addressees of the Decision ; see paragraphs 38 and 39 of the Particulars of Claim. Counsel submitted that the thrust of the claim was apparent from the supporting evidence and was based upon (i) the Anchor Defendants having sold ESBR or BR to the Claimants and (ii) the concept of an undertaking in European competition law. Indeed, the primary focus in argument was on the question whether, where a corporate entity forms part of the undertaking which has been found in breach of Article 81, personal liability for

9 damages can be attached to that corporate entity because it forms part of the undertaking and implemented the offending agreements or arrangements by selling BR and ESBR whether or not the corporate entity had knowledge of the offending agreements or arrangements. It is appropriate therefore to consider this question of law. 41. The Claimants submitted that the answer to that question was in the affirmative and relied upon the decision of Aikens J. in Provimi Limited v Roche Products Ltd. [2003] EWHC 961 (Comm) in which he said at paragraphs 30 and 31: [30] Therefore the point comes down to this: what knowledge of the infringing agreement by the legal entity being sued, if any, does a claimant have to plead and prove in order to succeed in a claim for damages for infringement of art 81(1)? There are no cases or even textbook opinions to provide me with a ready answer. Moreover there is a tension between English law and EU competition law concepts. In English law the separate identity of corporations is respected and knowledge of one corporation will not be readily imputed to another. But EU competition law maintains the concept of an undertaking, which is more flexible than a legal entity. It can embrace a number of legal entities, so long as they act as a single economic unit and no legal entity acts independently for any relevant purpose. [31] It seems to me to be arguable that where two corporate entities are part of an undertaking (call it Undertaking A ) and one of those entities has entered into an infringing agreement with other, independent, undertakings, then if another corporate entity which is part of Undertaking A then implements that infringing agreement, it is also infringing art 81. In my view it is arguable that it is not necessary to plead or prove any particular concurrence of wills between the two legal entities within Undertaking A. The EU competition law concept of an undertaking is that it is one economic unit. The legal entities that are a part of the one undertaking, by definition of the concept, have no independence of mind or action or will. They are to be regarded as all one. Therefore, so it seems to me, the mind and will of one legal entity is, for the purposes of art 81, to be treated as the mind and will of the other entity. There is no question of having to impute the knowledge or will of one entity to another, because they are one and the same. 42. Shortly before the hearing of the Dow Defendants applications the European Court of Justice gave judgment in P. Akzo Nobel and Others v Commission on 10 September That case concerned the circumstances in which a parent company could be personally liable for a fine imposed by the Commission for breach of Article 81 where the conduct which gave rise to the breach was that of a subsidiary and not of the parent. The Claimants submitted that that decision supported their case and showed

10 that the argument described as arguable by Aikens J. was indeed correct. The Dow Defendants submitted that the decision supported their case. They submitted that a subsidiary which was not an addressee of the Commission Decision could only be liable in damages for breach of Article if it exercised a decisive influence over the addressee. It is therefore necessary to consider what the European Court of Justice decided in Akzo Nobel and why. 43. The case concerned a cartel in the vitamins industry. The Commission found Akzo Nobel NV and several of its wholly-owned subsidiaries liable, with others, for an infringement of Article 81. In fact, only four subsidiaries were found to have directly committed the infringement. However, the Commission also fined Akzo Nobel NV, the parent company, on the basis that, as parent, it exerted a decisive influence over the commercial policy of these wholly owned subsidiaries and that the subsidiaries therefore lacked commercial autonomy. This, reasoned the Commission, entitled it to address its decision to Akzo Nobel NV as well. 44. Akzo Nobel NV appealed the decision, inter alia, on the grounds that the Commission was wrong to have imputed the subsidiaries fault to it as parent merely on the basis of the finding that it was the 100% owner of the subsidiary. It argued that such an approach was tantamount to imposing strict liability on the parent. 45. The Court of First Instance and the European Court of Justice upheld the decision of the Commission. The essential reasoning of the ECJ is set out in paragraphs of its judgment. That reasoning may, for present purposes, be summarised as follows: i) An undertaking in European Community competition law covers any entity engaged in an economic activity. An economic unit may consist of several legal persons; see paragraphs ii) iii) iv) However, any infringement of Community competition law must be imputed to a legal person on whom fines may be imposed; see paragraphs Where a subsidiary does not decide on its conduct independently but carries out the instructions of its parent the conduct of the subsidiary may be imputed to its parent because the parent company and the subsidiary form a single economic unit and therefore a single undertaking. In such circumstances the parent may be fined notwithstanding that it has not been personally involved in the infringement; see paragraphs Where a parent company has 100% shareholding in a subsidiary there is a rebuttable presumption that the parent company exercises decisive influence over the conduct of the subsidiary. In such a case the parent and the subsidiary are jointly and severally liable for the fine unless the parent company can adduce sufficient evidence to show that the subsidiary acts independently on the market or that the parent and subsidiary do not act as a single economic entity; see paragraphs and The ECJ concluded by saying: If the parent company is part of that economic unit, which may consist of several legal persons, the parent

11 company is regarded as jointly and severally liable with the other legal persons making up that unit for infringements of competition law. Even if the parent company does not participate directly in the infringement, it exercises, in such a case, a decisive influence over the subsidiaries which have participated in it. It follows that, in that context, the liability of the parent company cannot be regarded as strict liability. 47. Counsel for the Dow Defendants submitted that if it was necessary to show that a parent company had decisive influence over a subsidiary which had participated in an infringement of Article 81 before holding the parent company jointly and severally liable with the subsidiary then it must be necessary to show the same in respect of a subsidiary if it is sought to make a subsidiary which has no knowledge of the infringement jointly and severally liable for the infringement. Counsel pointed out that in the present case the Commission had exercised great care in examining the role of parent companies in the infringement before finding them jointly and severally liable for the infringement of Article 81. It would be extraordinary, he said, if a similar enquiry was not required in respect of subsidiaries. 48. In my judgment that submission is not correct. The question before the Court is not whether mere subsidiaries of addressees of the Commission Decision are jointly and severally liable for the infringement but whether subsidiaries who, it is said, implemented the infringing agreements by selling BR and ESBR are jointly and severally liable for the infringement. This was not a question considered by the ECJ in Akzo Nobel. In that case the ECJ had to consider whether a parent company which had not been personally involved in the infringement could nevertheless be jointly and severally liable for the infringement with the subsidiary which had been personally involved in the infringement. The reasoning of the ECJ is not, I think, of direct assistance in answering the question before this Court. In the present case the problem is not to establish a basis upon which a parent company with no personal involvement in an infringement can be made liable for that infringement. Rather, it is to establish a basis upon which a subsidiary which has been involved in an infringement by selling goods which are the subject matter of the infringement but without any knowledge of the offending agreements or arrangements can be made liable for the infringement. That is the very question tackled by Aikens J. in Provimi. It was not addressed in Akzo Nobel. 49. The essential steps in the argument adumbrated by Aikens J. are these: i) An undertaking in European competition law is a different concept from a legal entity in domestic law. It can embrace a number of legal entities so long as they act as a single economic unit and no legal entity acts independently for any relevant purpose. ii) iii) Where a legal entity, A, which is part of such an undertaking, C, enters into an agreement with another undertaking which infringes Article 81 and another legal entity, B, which is part of undertaking C, implements that agreement legal entity B also infringes Article 81. It is unnecessary to prove that legal entity B had knowledge of the agreement which infringed Article 81 because, for the purposes of European competition

12 law, the legal entities which are part of undertaking C have no independence of mind or action or will. They are to be regarded as all one. It follows that the mind and will of legal entity A are to be treated as the mind and will of legal entity B. 50. The first of the above steps is supported by the reasoning in Akzo Nobel. The second step is consistent with the reasoning in Akzo Nobel in that the ECJ held that the legal entities which make up an undertaking may be jointly and severally liable for a breach of Article 81 by the undertaking. It is also consistent with the reasoning in Ahlstrom Osakeyhtio and others v The Commission (see paragraph 17 above). The third and crucial step is not discussed in Akzo Nobel. However, in my judgment it is a conclusion which is supported by the concept of an undertaking. An undertaking in European competition law is an economic unit. That unit is engaged in an economic activity. The prohibition in Article 81 is on agreements by such undertakings or economic units but Article 81 is infringed not only by making an agreement contrary to Article 81 but also by the implementation of such agreements. An undertaking may act by or through those legal entities which constitute the undertaking. Whilst the infringement of Article 81 is that of the undertaking, liability for the resulting fine or damages must be attached to a legal person. Where a subsidiary is personally involved in the infringement by implementing the offending agreement there is no need to enquire into whether or not the subsidiary is involved by having decisive influence over another legal entity. Since the legal entity which makes the offending agreement plainly has knowledge of it, a rational consequence of the concept of an undertaking as a single economic entity, made up of its constituent legal entities, is that the undertaking has knowledge of the offending agreement. There is therefore no need, before attaching liability to a legal entity which is part of that undertaking and has implemented the offending agreement, to allege and prove that that legal entity had knowledge of the offending agreement. It is sufficient that the undertaking had such knowledge. 51. Counsel for the Dow Defendants challenged that conclusion. He submitted that reliance on implementation by the subsidiary was insufficient and that personal liability for an infringement of Article 81 by an undertaking can only be established where the defendant has itself entered into an agreement which infringes Article 81. In support of this submission reliance was placed on the wording of Article 81, the limited effect of the decision in Ahlstrom Osakeyhtio and others v The Commission and the extraordinary consequences which would flow from attaching liability to an entity which had implemented an offending agreement but without knowledge of it. 52. So far as the wording of Article 81 is concerned the ECJ has stated clearly in Ahlstrom Osakeyhtio and others v The Commission that an infringement of Article 85 (now Article 81) consists of both the formation and the implementation of the agreement. This wide construction of Article 81 is supported by (i) the words in Article 81 which direct attention not only to the object of an agreement but also to its effect and (ii) the ease with which Article 81 could be evaded if a narrower construction were adopted. In any event, this Court ought to follow the guidance of the ECJ on this issue of construction. 53. So far as the actual decision in Ahlstrom Osakeyhtio and others v The Commission is concerned it is correct that it did not establish that implementation of an infringing agreement by a legal entity which was not party to or had no knowledge of the

13 agreement was sufficient to constitute an infringement of Article 81. That case concerned the imposition of fines upon legal entities which were domiciled outside the Community and had entered into an offending agreement outside the Community on the basis that they had implemented the offending agreement within the Community. It did not involve the imposition of a fine upon a legal entity within the Community which was not party to the offending agreement but had implemented the agreement. Nonetheless the ECJ stated clearly that an infringement of Article 81 consists of both the formation and the implementation of the agreement. 54. So far as the suggested extraordinary consequences are concerned counsel posed two examples. The first example was a third party exclusive distributor. It was said that where a cartelist sells all of its product to a third party exclusive distributor who sells them on a cost-plus basis the third party would obviously not be liable for any infringement. Yet he would have implemented the infringing agreement and therefore, on the Claimants case, would be liable. I do not consider that this is an apt example because the present case concerns a subsidiary of a cartelist, rather than a third party exclusive distributor. There is a good arguable case that a subsidiary, by reason of its status as such, is under the decisive influence of the parent company and so part of the same undertaking. The same cannot be said of the third party exclusive distributor. Since it is not part of the same undertaking it is not liable for the breach of Article 81 committed by the undertaking. 55. Whether or not a subsidiary of a cartelist who implements an infringing agreement without being party to it or having knowledge of it can be made liable for the infringement of Article 81 depends upon the validity of the argument described by Aikens J. in Provimi. Counsel for the Dow Defendants submitted that the absurd consequence of the Claimants argument was that a parent company s infringement of Article 81 would be attributed to any subsidiary in the group regardless of whether the subsidiary had any contact with the cartelised product at all and regardless of whether or not it was within the same industry. In argument the example was posed of a subsidiary which sold shoe polish rather than BR or ESBR. 56. However, I did not understand the Claimants argument to require the shoe polish subsidiary to be liable in the same way as the subsidiary which sold BR or ESBR. Indeed, counsel for the Claimants argued that the shoe polish subsidiary would not be so liable. In my judgment the shoe polish subsidiary would not be liable. In order to be liable a subsidiary must be part of the undertaking which has infringed Article 81. An undertaking covers any entity engaged in an economic activity ; see Akzo Nobel at paragraph 54. There is a good arguable case that the Anchor Defendants are a part of the undertaking involved in the economic activity of producing and selling BR and ESBR because they sell those products. The same cannot be said of the sellers of shoe polish. 57. Counsel for the Claimants referred to the cases of Albany v Stichting Case C-67/96 [1999] ECR and Hydrotherm v Compact Case 170/ ECR 2999 in support of the above conclusion. In the latter case the question arose whether a natural person (Dr. Andreoli), a partnership (Compact, of which Dr. Andreoli was the personally liable partner) and a company (Officine Sant Andrea, also run by Dr. Andreoli) could be a single undertaking. The question arose in the context of an agreement made between Hydrotherm, on the one hand, and Dr. Andreoli, Compact and Officine Sant Andrea, on the other hand. The agreement concerned an exclusive

14 distribution license granted to Hydrotherm in respect of a type of radiator. The ECJ held that Dr. Andreoli, Compact and Officine Sant Andrea were a single undertaking. It said: In competition law, the term undertaking must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal. The requirement of Article 1(1) of Regulation No.67/67 [which declared Article 85 inapplicable to agreements to which only two undertakings are party ] is therefore fulfilled if one of the parties to the agreement is made up of undertakings having identical interests and controlled by the same natural person who also participates in the agreement. For in those circumstances competition between the persons participating together, as a single party, in the agreement is impossible. 58. Counsel for the Claimants relied upon the words for the purpose of the subjectmatter of the agreement in question as supporting the conclusion that the seller of shoe polish would not be regarded as part of the undertaking which sold BR and ESBR. 59. Counsel for the Dow Defendants submitted that the reasoning in Hydrotherm v Compact could not be read across into the different context of a single corporate group. I do not understand why it cannot be read across to the case of a single corporate group which is made up of several different legal entities. If Hydrotherm had made an agreement with the different legal entities in such a group which produced the radiator in question, the reasoning in Hydrotherm v Compact would, in my judgment, equally apply. Indeed, in the passage in Bellamy & Child, European Community Law of Competition 6 th.ed. to which I was referred (paragraph 2-017) it is stated, relying on Hydrotherm v Compact, that a parent company and its subsidiary or subsidiaries forming a single economic unit will be counted as a single undertaking. 60. In Albany v Stichting Advocate-General Jacobs referred to the decision in Hydrotherm v Compact in these terms:.the Court has held that in competition law, the term undertaking must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question. Accordingly, the notion of undertaking is relative and has to be established in concreto with regard to the specific activity under scrutiny. 61. The reference to the specific activity under scrutiny supports the argument that the shoe polish subsidiary would not be part of the undertaking concerned with the economic activity of producing and selling BR or ESBR. 62. Counsel for the Dow Defendants submitted that the Commission Decision in the present case did not support the suggestion that the relevant undertaking was restricted to those parts of the various groups that produced BR and ESBR. I am not

15 persuaded that much is to be gained by referring to the Decision in this regard because it was not suggested that the particular point was raised for decision. Support can perhaps be found for both sides of the argument in the text of the decision. For example, it is to be noted that when assessing the basic fine, regard was had to the sales of BR and ESBR by the various groups; see paragraph 467. By contrast, when assessing deterrence it is possible that regard was had to the global turnover of each group; see paragraph Finally, Counsel for the Dow Defendants suggested that were the Claimants argument correct, dramatic and surprising results would ensue with regard to both liability and jurisdiction. Thus a small sale of the product in question by one subsidiary would expose that subsidiary to liability for all the damage caused by the cartel because each legal entity liable in respect of an infringement is liable on a joint and several basis with other cartelists. Similarly, a legal entity within an undertaking can be sued in a Member State in which it is not domiciled for all the damage caused by the cartel simply because an anchor defendant who is domiciled in that state has made a small sale of the product. These are logical consequences of the argument but I am not persuaded on their account that the argument set out by Aikens J. in Provimi is wrong in principle (though they may be relevant to the exercise of a discretion to stay under Article 28 of the Judgments Regulation). I was not referred to any textbook which suggested that it was not correct. On the contrary, Bellamy & Child, European Community Law of Competition 6 th.ed. expresses the opinion at paragraph that the attribution of liability..[by Aikens J.] seems inherent in the scheme of Article 81, whereby both an offending agreement and its implementation are prohibited but fines can be imposed and damages awarded only against a legal entity. 64. I have therefore concluded that this Court has jurisdiction against the Dow Defendants by reason of Article 6(1) of the Judgments Regulation. There was no dispute that the Claimants had adduced evidence of sales by the Anchor Defendants within the jurisdiction. There was therefore, at the very least, a good arguable case that the Anchor Defendants had implemented the agreements which infringed Article 81. For the reasons which I have endeavoured to express I consider that the legal argument expressed by Aikens J. in Provimi much more succinctly than I have found possible is correct. It follows that I am satisfied that the Claimants have a good arguable case that this Court has jurisdiction over the Dow Defendants pursuant to Article 6(1) of the Judgments Regulation. 65. The Dow Defendants also relied upon Article 5(3) of the Judgments Regulation to establish jurisdiction. In view of my decision on Article 6(1) it is strictly unnecessary to lengthen this judgment yet further with a discussion of all the arguments. I will simply express my conclusions as shortly as possible. Article 5(3) provides for special jurisdiction in the courts for the place where the harmful event occurred. That expression means both the place where the damage occurred and the place of the event giving rise to it, so that the defendant may be sued, at the option of the plaintiff, in the courts for either of those places ; see Reunion Europeenne SA v Spliethoff s Bevrachtingskantoor BV Case C-51/97 [1998] ECR at paragraph 28. However, where the place where the event giving rise to the damage occurred is difficult or indeed impossible to determine the plaintiff must sue in the place where the damage occurred; see paragraph 33. In the present case the act complained of is a complex single and continuous infringement of Article 81 of the Treaty by agreeing

16 price targets, sharing customers by non-aggression agreements and exchanging sensitive commercial information relating to prices, competitors and customers. The meetings which gave rise to it took place in a number of locations including Milan, Vienna, Amsterdam, Brussels, Richmond-on-Thames, Frankfurt, Grosse Leder, and Prague. The cartel was ended at a meeting in London. I consider that this is a case where it is, at the very least, difficult to say where the event which gave rise to the damage occurred. It was suggested that the cartel was set in motion in England over the period August 1995 and that that is sufficient to show that the place where the harmful event occurred was in England; see Sandisk Corporation v Koninklijke Philips Electronics NV [2007] EWHC 322 (Ch) at paragraphs 25 and 41. I have, I confess, a sense of unease, in concluding, in the context of a Europe-wide cartel orchestrated at meetings in several countries, that the place where the harmful event occurred is England because that is where the first meeting took place. That seems to me to be unrealistic. In truth the harmful events occurred in several countries. In these circumstances I consider that the Claimants can only rely on the place where the damage occurred. It is common ground that some damage occurred in England because some BR and ESBR was sold here. However, it is also common ground that if jurisdiction is established on that basis it is only established in respect of the damage which occurred in England. That is, I understand, a very small part of the whole. The stay application: Article Article 27 of the Judgments Regulation provides as follows: 1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 67. The Dow and Bayer Defendants (including the Lanxess Defendants) submit that from the moment Enichem brought its claim in Italy the Italian Courts were first seised of the entire dispute, including the dispute between the Claimants and the Defendants in England. That is said to be so because on the Claimants own case Enichem and the Defendants in England are joint tortfeasors and therefore those parties have an identity of interest such that they are to be regarded as the same party for the purposes of Article 27(1). If so then the Court is obliged of its own motion to stay the action. 68. There is no dispute, it seems, that the proceedings in Italy involve the same cause of action as the proceedings in England or that the Italian courts were the first seised. The dispute between the parties is whether the proceedings in the two jurisdictions are between the same parties. The Italian proceedings were commenced by Enichem against 28 defendants, all of whom were companies in the Pirelli, Michelin, Continental, Goodyear, Bridgestone and Cooper groups. The English proceedings were commenced by 26 companies drawn from the same groups of tyre manufacturers (save for Goodyear) against 23 Defendants, all of whom were producers and sellers of BR and ESBR.