Neutral Citation Number: [2013] EWHC 4554 (Ch)
Case No:   HC12A00429

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL

Date: Thursday, 19 December 2013

BEFORE:

THE HONOURABLE MR JUSTICE BARLING

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BETWEEN:

SAINSBURY’S SUPERMARKETS LIMITED
Claimant
- and -

(1)	MASTERCARD INCORPORATED
(2)	MASTERCARD INTERNATIONAL INCORPORATED
(3)	MASTERCARD EUROPE S.P.R.L.
Defendants
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MARK BREALEY QC and DEREK SPITZ (instructed by Mishcon de Reya) for the Claimant
THOMAS SHARPE QC and MATTHEW COOK (instructed by Jones Day LLP) for the Defendants.
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Judgment
MR JUSTICE BARLING:  
Introduction
1.	At this CMC there are two main applications before me.  The first is an application by the defendants for the trial of a preliminary issue, supported by the third witness statement of Nicholas Paul Cotter, a partner in Jones Day, the defendants’ solicitors.  The second application is by the claimant for specific disclosure and other related directions. That application is supported by the witness statement of Robert Paul Murray, a partner in Mishcon de Reya, the claimant’s solicitors.  I shall refer to the defendants collectively as “MasterCard” unless the context requires me to distinguish between them.  

Background to both applications

2.	The present claim is one of several sets of proceedings based on an allegation that MasterCard’s interchange fee arrangements in relation to its credit and debit card schemes were and are unlawful because they infringe EU and domestic competition rules.  The defendants are the principal legal entities which own and/or operate the worldwide MasterCard credit and debit and Maestro debit card schemes.  The arrangements pursuant to which these schemes work are helpfully described in an agreed summary of issues prepared by the parties on 6 September this year, for an earlier application in this matter.  

3.	Briefly, in any transaction carried out under the arrangement there are four parties: the bank (known as the “issuer” bank) who issues the card to a cardholder; second, the cardholder who uses the card to buy an item at a merchant’s premises; third the merchant who accepts the card in payment for the item; and fourth the merchant’s bank (known as the “acquirer” bank) which pays the merchant.  Thus, if a cardholder purchases an item in a shop, the issuer bank is responsible for making payment to the acquirer bank for the latter to pay the merchant.  At the time the issuer makes this payment, the issuer deducts and retains a percentage of the transaction value.  This deduction is called the interchange fee.  The acquirer charges a separate fee to the merchant for the provision of payment card services.  This fee is called the merchant service charge.  

4.	The scheme’s rules impose an obligation upon acquirers, and through them, upon merchants that wish to accept the MasterCard cards, to accept all MasterCard branded cards, regardless of the identity of the issuing bank.  This is called the “honour all cards” rule.  The scheme also includes a number of default rules which apply in the absence of a bilateral agreement between an issuer / acquirer pair.  One of these default rules is the default level of interchange fee.  In practice, nearly all transactions are conducted under the default terms of dealing.  When the interchange fee is set as a default under the scheme it is referred to as the “fall back” or “multilateral” or “default” interchange fee, also commonly known as the “MIF”. I will use the latter expression in this judgment.  

5.	Different MIFs apply, depending on the nature of the transaction.  These include, first of all, what I will call an “EEA MIF”, which applies to transactions where a card issued in one EEA state is used at a merchant in a different EEA state, where the relevant issuer and acquirer have not negotiated a bilateral interchange fee.  Secondly, there are domestic MIFs, which are the fees that apply only to intra-country transactions, for example where a card issued in the UK is used at a merchant based in the UK, and the relevant issuer and acquirer have not negotiated a bilateral interchange fee.  I will refer to that fee, in the context of this case, as the “UK MIF.”  

6.	Between 1992 and 2007 the European Commission carried out an investigation into the lawfulness of the EEA MIF.  In December 2007 it reached a decision (“the Decision”) addressed to the defendants, concluding that the EEA MIF restricted competition between acquirer banks in that period by setting a floor for, and thereby inflating, the merchant service charge made by acquirer banks.  The relevant MIF therefore infringed what was then article 81(1) of what was then the EC Treaty, and the defendants had, according to the Commission, failed to produce satisfactory evidence that the MIF in question was exempt under what was then article 81(3) of that Treaty.  The Decision was appealed to the General Court, which upheld it in a judgment in May 2012.  The defendants appealed again to the European Court of Justice.  The oral hearing was in July this year, and the Advocate General’s Opinion is expected at the end of January 2014, with judgment to follow, probably before the summer break 2014.  None of these times, of course, is written in stone, but represent the current expectation.

7.	The present proceedings are concerned exclusively with the lawfulness of the UK MIF, in force from December 2006 onwards.  This, of course, was not the subject of the Decision.  Nevertheless, it is clear from the Particulars of Claim that the claimant relies to some extent on the Commission’s findings in the Decision.  The Particulars of Claim set out those findings and state at paragraph 36 that the Decision has what is called: 

“a direct read-across as regards the legality of domestic MIF arrangements across the EU.”

8.	Mr Thomas Sharpe QC, who appears for the defendants, told me that the Court of Justice is expected to make findings on, first, whether MasterCard was an association of undertakings on the 25 May 2006 onwards, and so within the scope of article 81(1) of the EC Treaty, and article 53 of the EEA Agreement; second, whether the EEA MIF was a restriction of competition infringing article 81(1) and article 53(3), between 1992 and 19 December 2007; and third, assuming that is the case, whether that MIF was objectively necessary for the operation of the MasterCard payment card scheme, and so fell outside those provisions.  Mr Sharpe submitted that findings on those issues would be of fundamental importance to the present claim, and that if any were to be made in favour of the defendants, it would make the case advanced by the claimant unsustainable.  

9.	Mr Mark Brealey QC, who appears for the claimant agreed that success in the Court of Justice by the defendants on the issues in question would cause problems for the claimant.  He did not go so far as to agree that the claim would be unsustainable.  

10.	I should note that, in addition to the European Commission’s investigation, there was one by the UK Office of Fair Trading, being an inquiry into the UK MIF.  That resulted in a decision adverse to MasterCard in 2005. However, that determination was quashed by the Competition Appeal Tribunal in 2006.  I am told that the Office of Fair Trading continues to investigate the UK MIF in respect of the period after 2004, but that the investigation is awaiting the judgment of the Court of Justice.  I also understand that national competition authorities in some other EEA member states have reached adverse decisions in respect of their domestic interchange fees, but this does not concern me in the present context.  

11.	It is common ground in these proceedings that, as things stand, the Decision and its ultimate fate are in the hands of the Court of Justice, and that the issues involved are sufficiently central to the issues in this case that the substantive trial of the action should not precede the outcome of that appeal - even if that were logistically practicable, which seems unlikely on the present ETA of the judgment of the Court of Justice.

The present claim

12.	The claim form was issued on 19 December 2012, with an amended claim form on 15 April 2013, and Particulars of Claim on 18 April 2013.  The defence was served on 19 June 2013, and the reply on 13 November 2013.  As I have said the claim concerns only UK transactions based on the UK MIF. 
 
13.	The claimant contends: that MasterCard is an association of undertakings; that by reference to the relevant findings in the Decision or in any event, the UK MIF restricted competition by acquirer banks; and that consequently the defendants were in breach of what is now Article 101(1) of the TFEU and/or the Chapter I prohibition in the Competition Act 1998.  The claimant also contends that, while the burden of proving exemption under Article 101(3) and the corresponding national provision, is upon the defendants, the exemptable level of the UK MIF is either 0.2% for debit cards / 0.3% for credit cards, as agreed by MasterCard in the undertakings that it gave to the European Commission in 2009 in relation to the temporary EEA MIF, or alternatively is 0.04%, based on the claimant’s own data. It is contended that the UK MIF was and continues to be higher than it should have been, and that this has resulted in the claimant paying higher merchant service charges to its acquirer bank than it would otherwise have done.  The claimant seeks compensatory damages in relation to that overcharge.  It also seeks exemplary damages, interest, and declaratory relief, namely that the UK MIF paid by the claimant was unlawful.

The proposed preliminary issue 

14.	One of the matters pleaded by the defendants in the defence is that any claim by the claimant in relation to the UK MIF is barred by the principle ex turpi causa; alternatively, any such claim for the period after 8 May 2013 is barred by that principle.  The defendants ask the court to order this question to be tried as a preliminary issue.  The proposed issue is formulated in Appendix A to the defendants’ application notice, in terms which Mr Brealey submits do not fully reflect what the court would have to decide.  I leave this debate as to the formulation of the issue on one side for the moment.  The basis for this plea of ex turpi causa  is set out in paragraphs 30 to 37 of the defence, and has been elaborated upon in this hearing.

15.	In summary, the allegation is as follows: throughout the relevant period Sainsbury’s Bank plc (“the Bank”) has been an affiliate licensee of the defendants, and has issued MasterCard branded cards to customers.  All UK transactions with MasterCard acquirer banks on such MasterCard branded cards, have been carried out pursuant to the UK MIF (including those transactions which relate to sales by the claimant itself in its supermarkets).  Thus the Bank has charged acquirer banks the UK MIF, in common with the other MasterCard issuers.  In this regard - and this seems to be common ground - its position is indistinguishable from the other banks, which are part of the MasterCard scheme.  

16.	The defendants’ contention then proceeds as follows: (1) throughout the relevant period the claimant was a wholly-owned subsidiary of J Sainsbury plc (which I shall call “the Holding Company”).  This, it is contended, gave the Holding Company sufficient control over the claimant to remove the latter’s autonomy of action in the market.  (2) As far as the Bank is concerned, the Holding Company owned 55% of the Bank until 8 February 2007, with the balance owned by the Bank of Scotland.  After that date, the Holding Company owned 50% of the Bank, again with the balance owned by the Bank of Scotland, now Lloyds Banking Group.  (3) Further to a public announcement on 8 May 2013, the Holding Company will very soon, possibly in January 2014 if not before, acquire the remaining shares in the Bank so that it will thenceforth own 100%.  

17.	The defendants’ argument then continues: throughout, or for a large part of, the period in question there was a degree of management overlap, as well as commercial links, between the claimant, the Holding Company and the Bank.  In particular, there were common directors; a director of the Holding Company was either chairman or deputy chairman of the Bank; an employee of the Holding Company was chief executive officer of the Bank; and the claimant is an appointed representative of the Bank, under financial services legislation, thereby enabling the claimant to sell financial products, including credit cards, on behalf of the Bank at its supermarkets.  

18.	On the basis of this the defendants contend that the Holding Company had sufficient control over the Bank to remove any real autonomy in determining its action on the market.  In those circumstances, it is submitted, the claimant, the Holding Company and the Bank form a single economic entity, and are consequently an “undertaking” for the purposes of the Chapter 1 prohibition in the domestic legislation and Article 101 of the TFEU.  

19.	The defendants then refer to the Particulars of Claim at paragraph 37, where the claimant alleges that throughout the material period, the UK MIF constituted part of the MasterCard scheme rules in which the defendants and the relevant acquirer and issuer banks, including the Bank, acquiesced.  Accordingly, the decision to set the UK MIF “on behalf of the participants in the MasterCard scheme” constituted a decision of an association of undertakings.

20.	The defendants contend that if that is right, the claimant has been throughout, and remains, part of one of the undertakings of which MasterCard was an association, and on whose behalf it was setting the UK MIF.  Mr Sharpe also referred to the undertaking as “implementing” the scheme which included the UK MIF. Thus, so the argument runs, if the setting of the UK MIF represented a breach of UK and EU competition rules, then the claimant is part of one of the undertakings which is a party to and benefitted from that infringement; on this basis, if the claimant has a course of action, it is barred by the principle ex turpi causa, and if this contention is upheld, the claim must fail.

21.	Mr Sharpe submits that in order to determine this issue the court will need to decide the following questions, and in this regard I quote from Appendix A to the application notice: 
“1) Is the claimant part of the same undertaking as Sainsbury’s Bank plc?  2) If so, is the claimant’s claim against the defendants barred by the principle ex turpi causa  as a result of Sainsbury’s Bank plc’s participation in the MasterCard scheme?”

He then goes on to argue that these questions are suitable to be determined as a preliminary issue, and that I should so order.  Mr Brealey resists the application.

The principles to be applied 

22.	It was common ground that the leading authority on the approach the court should take in considering whether to order a preliminary issue is the decision of Mr Justice Neuburger (as he then was) in Steele v Steele [2001] NPC 141.  There the learned judge listed a number of factors to which a court should have regard.  The list is very helpfully set out in the skeleton argument prepared by Mr Sharpe and Mr Matthew Cook.  These factors are as follows: 

“(a) whether the determination of the preliminary issue could dispose of the case or at least one aspect of the case; 

(b) whether the determination of the preliminary issue could significantly cut down the cost and time involved in pre-trial preparation or in connection with the trial itself;

(c) if the preliminary issue is an issue of law, the court should ask itself how much effort, if any, will be involved in identifying the relevant facts for the purpose of the preliminary issue; 

(d) if the preliminary issue is an issue of law, to what extent is it to be determined on agreed facts; 

(e) where the facts are not agreed, the court should ask itself to what extent that impinges on the value of a preliminary issue; 

(f) where the determination of the preliminary issue may unreasonably fetter either or both parties, or indeed the court, in achieving a just result at the trial; 

(g) is there a risk of the determination of the preliminary issue increasing costs, and / or delaying the trial; 

(h) the court should ask itself to what extent the determination of the preliminary issue may be irrelevant; 

(i) the court should ask itself to what extent the determination of the preliminary issue could lead to an application for the pleadings being amended so as to avoid the consequences of the determination; 

(j) finally, is it just to order a preliminary issue.”

I was also reminded by counsel of the well-known dictum of Lord Scarman in Tilling v Whiteman [1980] AC 1, at 25C: 

“Preliminary points of law are too often treacherous shortcuts.  Their price can be, as here, delay, anxiety and expense.”

The submissions

23.	Addressing the specific factors identified by Mr Justice Neuberger, Mr Sharpe made a number of submissions.

24.	First, if the preliminary issue was decided in the defendants’ favour, it would determine the entire claim.  Even if it was only decided in their favour in respect of the period after the holding company acquired 100% of the shares in the Bank, that would still have the effect of placing a cap on the extent of the claim, and therefore on the cost of trial preparation, as the period for which damages are claimed would be reduced by a period of about 18 months.  This was on the assumptions that 100% ownership of the Bank began at the beginning of 2014, and that the trial of the action would not be until about mid-2015.  
25.	Second, he submitted that in the absence of a preliminary issue there will be a long and expensive trial, with the risk of a massive waste of court time and costs in the event that the defendants are ultimately successful on the ex turpi causa  point.

26.	Third, although the question whether the claimant, the Holding Company and the Bank are part of the same undertaking is not purely a matter of law, it is unlikely that the issue will require substantial disclosure or evidence.  The second part of the issue is wholly or mainly a question of law.  The whole preliminary issue could therefore be determined in a short trial. Mr Sharpe estimated the length as about two days.  On any view this would cost a fraction of a full trial on liability, which would only be necessary if the claimant won on the preliminary issue.  

27.	Fourth, he submitted that as with any preliminary issue there would be a risk that it would increase costs in the event that the claimant succeeded on the issue, because there would then be two trials instead of one.  However, the increase in costs would, he argued, be likely to be limited, given that the issue would otherwise have to be determined at trial.  

28.	Fifth, it was unlikely that the preliminary issue would cause any significant delay.  In the similar claims proceeding against the defendants in the Commercial Court, Mr Justice Field had ordered the defendants to provide standard disclosure in relation to liability by 28 March 2014 with inspection by 14 April 2014, save to the extent that documents had been created for the Office of Fair Trading’s or the Commission’s investigations.  Those documents could also be disclosed in the present proceedings to the extent relevant to this claim.  There was therefore no reason why the parties could not prepare for and conduct the preliminary issue while that disclosure was being carried out.  

29.	Sixth, on the question whether the determination of the preliminary issue might prove irrelevant, Mr Sharpe submitted that this might well be the case if the defendants won on the appeal before the Court of Justice.

30.	Seventh, in relation to any possibility of avoidance of the outcome of the preliminary issue by amendment of the pleadings, it was difficult to see how the claimant could amend its pleadings to bring a claim which would not be barred by ex turpi causa  if their present claim was so barred.

31.	Finally, it would, he submitted, be just to order a trial of the proposed preliminary issue; it would allow some progress to be made with the litigation while the parties are awaiting the judgment of the Court of Justice; at the same time the parties, and the defendants in particular, would not be required to incur the enormous costs which would be involved in preparing for a trial which included liability, in circumstances where those costs may turn out to be wasted if the defendants won before the Court of Justice.

My conclusion on the preliminary issue application

32.	These points were cogently and attractively presented by Mr Sharpe.  Some of them have force.  However, an application of this kind ultimately comes down to a balance of competing factors, and in my view, the balance is against ordering the trial of this preliminary issue.  

33.	My reasons are briefly as follows: First, it is not at all clear that, if the preliminary issue were to be decided in the defendants’ favour, the entire claim would be disposed of as the defendants submit.  In addition to the claim for compensation, the claimant also seeks declaratory relief in relation to the alleged unlawfulness of the UK MIF, as I have mentioned.  The claimant alleges that the UK MIF continues to offend Article 101(1), and the corresponding UK domestic rules, and to be ineligible for exemption.  See, for example, paragraph 39 of the Particulars of Claim. Mr Brealey says that the future lawfulness of the UK MIF is extremely important to his client, and that the claim for declaratory relief would be likely to continue even if the damages claim were inadmissible as being ex turpi causa.  He submits that it is “trite law” that the counterparty to an allegedly unlawful agreement can seek a declaration to that effect.  

34.	The only authority to which I was taken on the latter point was the decision of the Court of Justice in case C-453/99 Courage v Crehan [2001] ECR 1-6297, which deals with the interaction between the right to claim damages under Article 101 TFEU, and the ex turpi causa principle.  For this purpose, Mr Brealey relied on paragraphs 22 and 24 of the judgment. Having referred to what is now Article 101(2), the Court of Justice said:
“That principal of automatic nullity can be relied on by anyone, and the courts are bound by it once the conditions for the application of Article 85(1) are met and so long as the agreement concerned does not justify the grant of an exemption under Article 85(3) of the Treaty.” (paragraph 22)

The Court then referred to the fact that Article 85 produces direct effects between individuals and rights which national courts must protect, and went on:

“It follows from the foregoing considerations that any individual can rely on a breach of Article 85(1) of the Treaty before a national court even where he is a party to a contract that is liable to restrict or distort competition within the meaning of that provision.”
		(paragraph 24)

35.	It is reasonably clear that at this point the Court of Justice is not dealing with compensatory relief, to which it then turns.

36.	Mr Sharpe responded that although it might well be an open question whether a party could get declaratory relief if the action arose ex turpi causa, on any view that relief would be focussed on the future lawfulness of the UK MIF, and so a swathe of evidence relating to damages going back to 2006 would become otiose. That is true, but the real possibility that there might well still have to be a trial on the question of infringement, whatever the outcome of the preliminary issue, reduces its attraction considerably.  

37.	As for the defendants’ alternative argument, namely that the ex turpi causa  principle only bites from the acquisition by the Holding Company of 100% of the Bank’s shares, this reduces the attraction of a preliminary issue still further; for there would admittedly need to be a full trial, including quantum of damages as well as liability, in respect of the period from 2006 to about 2014.

38.	Further, even if success on the preliminary issue would clearly have the effect of avoiding a substantive trial of the main action, which is by no means certain for the reasons just given, it is entirely possible that that result might emerge without the extra expense and effort of trying the preliminary issue.  As the defendants have pointed out, if they succeed on any one of a number of grounds in their appeal to the Court of Justice, the claimants claim will be very difficult if not unsustainable.  That definitive judgment is expected before the summer 2014, which is likely to be about the time when any preliminary issue ordered now would be determined.  

39.	In addition, the time, expense and evidence required in order to prepare the preliminary issue for a trial, and to conduct the hearing itself, may well be more substantial than the defendants optimistically suggest.

40.	In relation to the first proposed sub-issue, it is quite likely that factual evidence will extend beyond a relatively straightforward analysis of the structural relationship and formal management links between the three Sainsbury’s companies, as apparently envisaged by the defendants.  It is quite possible that broader evidence may be required, going to the question of whether and to what extent each of the subsidiaries was or was not in a position independently to determine its own actions on the market.  In that regard, see, for example the judgment of the Court of Justice in case C-196/99 Aristrain v Commission [2003] ECR 1-11049, at paragraphs 96 to 99.  

41.	As to the second sub-issue, Mr Brealey submits that within it is concealed a further question, namely whether the Bank bears: “significant responsibility” for the breach of competition law in question. Mr Sharpe accepts that that is something which the defendants must prove.  This element, dealt with at paragraphs 12 and 13 of the claimant’s reply, is based on the Court of Justice’s judgment in Courage v Crehan, to which I have already referred.  There the court, having stated that an absolute bar in national law to a party to a contract bringing an action in damages on the ground that the contract infringed the EU competition rules, would itself be incompatible with those rules, and with the EU principle of effectiveness, stated at paragraphs 31 to 33:

“ ... provided that the principles of equivalence and effectiveness are respected ...  Community law does not preclude national law from denying a party who is found to bear significant responsibility for the distortion of competition the right to obtain damages from the other contracting party.

In that regard, the matters to be taken into account by the competent national court include the economic and legal context in which the parties find themselves and, as the United Kingdom government rightly points out, the respective bargaining power and conduct of the two parties to the contract.

In particular, it is for the national court to ascertain whether the party who claims to have suffered loss through concluding a contract that is liable to restrict or distort competition found himself in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract and his capacity to avoid the loss or reduce its extent, in particular by availing himself in good time of all the legal remedies available to him.”

 It is therefore very likely that this question, too, will generate more than a slight amount of factual, and possibly expert, evidence.  Even if, as Mr Sharpe states, the defendants would be happy to rest their case on the fact that the Bank charged the UK MIF to its acquirer banks, it cannot be assumed that the claimant would not want to rely upon considerably broader evidential material, going to responsibility for the breach.  

42.	Further, there may well be additional interesting legal questions, such as were mentioned at this hearing: for example, whether the effect of the Courage v Crehan judgment is to preclude the operation of a national law which, on its face, imposes an absolute bar to recovery of damages for a breach of the EU competition rules by a party to the unlawful contract; and if so, whether the English law principle of ex turpi causa  imposes such an absolute bar, or is capable of accommodating the element of “significant responsibility”.

43.	Leaving aside those questions, in my view the trial of the proposed preliminary issue is likely to be more substantial than the defendants have contemplated, and will not be disposed of in two days.  Depending on the amount of factual evidence and the extent to which it is controversial, the issue could engage a court for considerably longer than that, with corresponding expense.  

44.	The factors I have just mentioned are also likely to distract and deflect the parties from their preparation for the main trial, with the very real risk of significant delay in bringing that trial on.  

45.	In all the circumstances I have come to the conclusion that it would not be just, and the overriding objective would not be best served, by ordering the question of ex turpi causa to be tried as a preliminary issue, and I therefore refuse the application.

  The claimant’s disclosure application

46.	The scope of the issues which fall to me to decide in this application have been narrowed and refined in the course of this hearing.  At the end of the hearing I requested the parties, in the light of the argument before me, to prepare a draft order reflecting those developments, and indicating what is left for me to decide.  I duly received a draft order, which I will call “the Draft”, late yesterday afternoon, for which I am very grateful.  I also received some further information and submissions in a note from Mr Sharpe on behalf of the defendants.
  
47.	It emerges from the Draft that any remaining issues relating to (1) the supply by the defendants of an electronic document questionnaire and disclosure report, pursuant to CPR 31.5, and (2) the joint meeting between the parties’ representatives required by that rule, have now been resolved.  Paragraphs 1 and 2 of the Draft relate to these matters, and I say no more about them.

48.	The Draft also reflects the considerable extent to which a meeting of minds on the extent of disclosure emerged during the hearing and thereafter.  Paragraph 4 of the Draft indicates agreement between the parties that:

“By 4.00pm on 11 April 2014, the defendant shall provide standard disclosure by list on liability (including exemption), save for ...”

At that point the Draft identifies a class of documents in respect of which disclosure is to be dealt with in a different way, which is set out in paragraph 5 of the Draft. There is an issue as to which documents should be subject to the paragraph 5 procedure.  I shall refer to this as “the First Issue”.  

49.	Paragraph 4 of the Draft then states: “for the avoidance of doubt” the standard disclosure on liability will cover certain identified categories of document, which it describes in terms of three categories, all of which are documents said to evidence the setting of the UK MIF during the period 23 May 2006 to date.  I do not need to recite how all those categories are formulated.  However, there is an issue as to whether the following category should be included: “documents which pre-date 23 May 2006 but are nevertheless relevant to the setting of the UK MIF in this period”.  I shall refer to this as “the Second Issue”.

50.	Finally, there is an issue as to the nature of the disclosure arrangements in paragraph 5 of the Draft for the excepted documents included in that paragraph.  I refer to this as “the Third Issue”.  In relation to each issue, the parties have made some submissions by way of footnotes to the Draft.

The First Issue

51.	The First Issue is whether documents which were not created for the purpose of the European Commission or the Office of Fair Trading investigations to which I have referred, which happen to have been disclosed to the Commission or the Office of Fair Trading (ie pre-existing documents), should be subject to paragraph 4 of the Draft, and therefore subject to the standard disclosure on liability issues, or should be dealt with as an exceptional category under paragraph 5.  The explanatory footnotes to the Draft state that the claimant considers that these documents should be dealt with under paragraph 5 (presumably in the claimant’s preferred version of that paragraph).  In other words, they should be disclosed regardless of relevance to the claim.  By way of the same footnote, the defendants submit that these documents should be included in paragraph 4, that is, they should be part of the standard disclosure exercise, and consequently should only be disclosed, at least at this stage, if relevant to the issues of liability. 
 
52.	In my view this category of documents should be included in paragraph 4, and should be covered by the agreed standard disclosure obligation, at least for the time being.  In any event, there is not normally an obligation to disclose documents which are not relevant to the proceedings in any of the senses described in CPR 31.6.  However, it is obvious that caution would be needed before concluding that particular pre-existing documents, disclosed to the enforcement authorities in the course of the investigations in question, were not relevant in the sense I have described.  Paragraph 5 should be restricted to the category which the parties have agreed to treat exceptionally, namely documents created for the purpose of the Commission or Office of Fair Trading investigations.
 
The Second Issue

53.	The claimant wishes expressly to include in the standard disclosure exercise: 
“documents which pre-date 23 May 2006 but are nevertheless relevant to the setting of the UK MIF in this period”.  

The claimant considers that there are likely to be documents prior to 23 May 2006 which set out the impact on the setting of the UK MIF of the Initial Public Offering of MasterCard on 25 May 2006.  Therefore, the claimant cannot agree to a wholesale exclusion of documents prior to 23 May 2006.
54.	The defendants state that although the claim only relates to December 2006 onwards, in order to cover the possibility that there are earlier documents relevant to that period, they have offered to carry out a disclosure exercise going back to 23 May 2006.  This, they argue, tallies with the disclosure exercise which Mr Justice Field has ordered in the Commercial Court claims; the latter also include claims in respect of the UK MIF. The defendants contend that this is a proportionate approach, likely to capture all relevant documents.  In contrast, the claimant’s proposal would, they say, not provide any sensible limitation on the disclosure search to be undertaken.  

55.	I consider that it is not, in fact clear that the agreed terms of paragraph  4 of the Draft, even absent the controversial reference to documents pre-dating the 23 May 2006, would not already cover documents which were relevant to liability, albeit pre-existing that date.  Be that as it may, a disclosure exercise extending back to May 2006 would, in my view, be a proportionate one at this stage, and one which is likely to represent the best source of relevant material from the claimant’s perspective.  It would not preclude a further application for standard or specific disclosure as the agreed paragraph 3 of the Draft records.  I would therefore exclude the controversial words, but in view of the claimant’s submission in the footnote, I will hear counsel now or at a future convenient time as to whether there should be a fourth, express category in paragraph 4 of: 

“documents prior to 23 May 2006 referring to the impact of the Initial Public Offering of MasterCard on the setting of the UK MIF”

or words to that effect.
 	
The Third Issue

56.	This issue reflects a debate which took place at the hearing, and the two viewpoints have now been reduced to alternative versions of what the disclosure arrangements should be for documents created for the purpose of the Commission investigation or the Office of Fair Trading investigation, together with the confidential version of the Decision.  

57.	I need not set out in any detail what has transpired in relation to such materials in the claims which have proceeded separately in the Commercial Court. Suffice to say that at a hearing on the question of disclosure and inspection before Mr Justice Popplewell in August 2013, the learned judge declined to order inspection at that stage of documents in these categories, including the confidential version of the Decision. (See Wm Morrison Supermarkets Plc and others v MasterCard Incorporated and others [2013] EWHC 3082 (Comm).) He refused on the following basis: that the balancing exercise laid down by the Court of Justice in Case C-360/09 Pfleiderer AG v Bundeskartellamt, a judgment of 14 June 2011 in respect of documents voluntarily disclosed to a competition authority in the course of a leniency application, was capable of applying to any documents voluntarily disclosed to the authorities.  The judge noted that at that stage the European Commission and the Office of Fair Trading had not yet had an opportunity to make submissions to the national court on the issue of inspection of the documents in question.  

58.	Following that decision, the matters came before Mr Justice Field at a CMC in October 2013.  In relation to these categories of documents, the learned judge stated in his judgment that he would write to the Commission and the Office of Fair Trading, informing them that in his view the documents should be disclosed, but inviting them to make representations. (See EWHC 3782 (Comm).) I have been shown copies of draft letters to both authorities, and I am told that these were sent in about mid-November 2013.  The letters request views within a month, ie by about now.

59.	I share Mr Justice Field’s provisional view that the documents in question are disclosable subject, as always, to any appropriate arrangements in relation to confidentiality or business secrets.

60.	I have been shown a copy of the Common Position of a draft directive dated 27 November 2013, relating to “a proposal for a directive of the European Parliament and of the Council on certain rules governing actions for damages under national law for infringements of the competition law provisions of the members states of the European Union”.  Proposed article 6.4 of the draft directive provides that documents created specifically for proceedings of a competition authority, or information drawn up by a competition authority and sent to parties in the course of proceedings, are only disclosable after the authority has closed its proceedings by decision or otherwise.  The same draft directive would, if enacted, modify the principles set out in the Pfleiderer case to which I have referred, by providing absolute protection from disclosure for leniency documents.  

61.	It is unnecessary for me to comment on whether, as things stand, the Pfeiderer principles apply by analogy to documents created for the purposes of a competition investigation.  In the circumstances, it would simply not be appropriate for me to order disclosure of the documents in question without first reviewing whatever submissions the Commission and the Office of Fair Trading may make in response to Mr Justice Field’s letters.  The two rival versions of paragraph 5 of the Draft both enable this to happen.  The difference is simply that on the claimant’s version the burden is on the defendants to apply to halt the disclosure which would otherwise have to be given, whereas on the defendants’ version, the claimant would have to apply for disclosure, either after receipt of the responses from the competition authorities, or in the absence of any response from either of them by 3 February 2014.  I understand the claimant’s desire to keep the momentum going, but I consider the defendants’ version is just as effective for this purpose, and on the whole, I prefer it.  

62.	That, I hope, deals with most of the issues on the Draft.
Miscellaneous

63.	I note that the Draft does not currently have any provision or a date in respect of inspection of the documents in paragraph 4. That is something the parties should agree.  In the absence of agreement I would order it to take place a month after disclosure.

64.	Also, there is no provision for a further CMC following the judgment of the Court of Justice.  That may not be necessary to stipulate at this stage but I mention it in case the parties wish to make provision for it.

65.	The parties are now requested to send me a further version of the Draft reflecting this judgment. I will then initial the final order.