Litigating Competition Claims In SEA The New El Dorado?
Legal News & Analysis - Asia Pacific - Competition & Antitrust - Dispute Resolution
18 July, 2018
Whilst competition law is well- established in many jurisdictions - e.g. North America, the EU, Australia and Korea - this is not universally true. The SEA countries (members of ASEAN) are a case in point.
Since the 2015 creation of the ASEAN Economic Community, there is a plan to establish, amongst other things, “e ective competition regimes” in all ASEAN Member States, more speci cally via the ASEAN Competition Action Plan 2025.
This has led to a urry of new legislation in ASEAN countries and established regulators have been invigorated. Herbert Smith Freehills’ article summarises some of these developments earlier in this edition.
How to find a claims El Dorado
The crucial question for claimant litigators is whether any of the new regimes creates a promising new centre for competition law damages claims. The bottom line will dictate the answer.
Experience in Europe shows that many claims would not be brought were it not for funding and contingency (or similar) fee arrangements. Such arrangements can only operate e ectively if the eventual damages cake is big enough to share with the claimants. Competition damages claims are expensive; even follow-on actions require extensive disclosure and expert reports.
A hot new market for competition litigators is one where international cartels and abuses of dominance in high value industries can be pursued. To maximise recovery, claims should be brought in a jurisdiction which permits follow- on and stand-alone damages actions against a wide range of defendants (including those domiciled outside the jurisdiction).
Follow-on actions are most important and have had a major role in the European post-2004 boom in private enforcement. A regulator’s powers to gather evidence greatly exceed those of a private litigant. This means that a good jurisdiction is one where the regulator is vigorous and takes decisions which are both plentiful and, importantly, su ciently detailed to assist in proof of loss.
Leniency and settlement regimes can have a signi cant e ect on how useful infringement decisions are to claimants. Both regimes promote infringement ndings but may (as is the European experience) result in decisions which contain far less helpful detail in follow-on damages actions.
Provisions for punitive or multiple damages (as in the USA) are a bonus for claimants. Other features of the legal systems, such as costs rules and whether proceedings are adversarial or inquisitorial should also be considered.
Is El Dorado an ASEAN member state?
At present, no ASEAN regime has all the features required to be a claims El Dorado.
Singapore is generally regarded as the leading ASEAN enforcement regime. Indonesia may be catching up and the Malaysian regime also has attractions. All three regimes have been in place for some time.
Thailand and Vietnam are the other ASEAN nations with established competition laws from 1999 and 2004 respectively. To date, neither has produced much to interest the international claimant. Both, however, are being reformed. The changes are substantial and these two countries are among the ‘new kids’ on the block.
Four of the remaining ASEAN member states (Myanmar, Philippines, Brunei and Laos) have new laws following 2015, whilst Cambodia’s law is a 2016 draft. All have some promising features. For example,
Brunei’s law is of extra-territorial e ect (only an e ect on competition within Brunei is required) and includes leniency. On the other hand, only follow-on actions seem to be permitted and there are extensive exclusions, notably (like Singapore) of vertical agreements. We understand that in the Philippines the new regulator, the PCC, has got o to a good start.
Quite how these new regimes will work out in practice remains to be seen. They are certainly not designed to encourage free-standing private actions. That is unsurprising where, for policy reasons, a coherent development of the law is expected to follow from decisions by the regulator rather than in private litigation (the parallel with Europe is obvious; there liberalisation occurred only after many years). Given that lawyers are risk averse, it seems unlikely that any of these brand new regimes will see international claimants piling in until after the local authorities have made a number of decisions developing the principles applicable to competition damages claims (including issues like pass-on).
Singapore’s Competition Act 2004 was modelled on the UK’s 1998 Competition Act, itself modelled on EU law. This has the bene t of predictability.
Like the UK/EU law, Singapore law is extraterritorial – all that needs be shown is an e ect on competition within Singapore. This is useful for international claimants, widening the pool of possible infringements. On the other hand, Singapore law contains a large number of exemptions, including vertical agreements, thereby restricting the scope of possible infringements.
Singapore also has a leniency regime. This includes leniency plus (i.e. declaration of a completely separate cartel in a second market). Experience in Europe suggests that a leniency regime is an e ective way of exposing a large number of infringements that can form the basis for damages actions. On the other hand, only follow on actions are available. Whilst this is the easiest basis for private damages actions, the possibility to widen a claim by a stand-alone element can be advantageous.
Given the clarity of the regime, the enthusiasm of the regulator and Singapore’s recognised status as a popular and e ective centre for international litigation, it is not surprising that it is usually said to lead the pack in the region.
It is also worth noting that the other small island with a big economy in the region, Hong Kong, is vying for the crown relying on its 2015 Competition Ordinance which is similarly based on UK/EU law.
Although less well promoted, Malaysia’s Competition Act 2010 also has promise for claimant litigators. Again, its provisions resemble EU law.
Like Singapore, Malaysia’s competition law has extraterritorial e ect. Unlike Singapore law, there are fewer exclusions. Vertical agreements are covered. Moreover, in Malaysia, private damages actions are not restricted to follow- on actions and may be brought regardless of whether the claimant dealt directly or indirectly with the defendant.
Malaysia also has a leniency regime and an increasingly active regulator (although many decisions concern bid rigging which may have less appeal to the international claimant).
It follows that Malaysia is a forum worth considering for private competition law damages claims.
Indonesia has a rather different regime. The 1999 Indonesian law remains in use although we understand long awaited changes are at an advanced stage. The law applies only to business in Indonesia, although defendants need not be Indonesian. The prohibited actions are not modelled on EU law and are wide-ranging covering vertical and horizonal agreements, division of territory and a range of market power abuses.
Damages can be awarded for competition law infringements by the Indonesian regulator (KPPU) and potentially from the courts. This appears to give the claimant a wide remit. Another encouraging feature is that recently, the KPPU has been vigorous in its enforcement e orts and produced a signi cant number of decisions that could found follow on actions (bid rigging being a large part of this perhaps re ecting Indonesia’s economic focus). Indonesia does not have a leniency programme although this has been proposed.
Overall, Indonesia has promising features but there is room for improvement. One proposal which would have signi cant claimant bene ts would be introduction of extraterritoriality (i.e. an e ects based jurisdiction). If this was done, more and bigger claims could be litigated in Indonesia.
Bigger and more valuable competition damages claims spring from bigger and therefore more valuable markets. This makes those competition regimes which include extraterritorial jurisdiction particularly attractive. A single ASEAN market (part of ASEAN’s aspirations) would clearly also help and bring in many market partitioning claims.
Currently, Singapore and Malaysia are both reasonably attractive to competition damages claimants. If Indonesia reforms to introduce extraterritorial jurisdiction and leniency then it could well catch up quickly, given the size of its economy and scope for further growth. As for the other SEA countries, there competition regimes remain a work in progress but with promising signs of development.
Who knows, one or more of these countries may even strike gold.
By Sara Masters QC and Josephine Davies, Barristers, 20 Essex Street
For further information, please contact:
Ruth Stackpool-Moore, Director of Litigation Funding / Head of Harbour Hong Kong