Settling the seas: Tribunal approves further collective settlements in RoRo shipping class action
21 January 2025On 15 January 2025, the Competition Appeal Tribunal (the Tribunal) handed down its judgment approving the second and third settlement agreements in the RoRo collective proceedings brought by Mark McLaren in relation to roll-on, roll-off car shipping. These agreements mark the third and fourth settlements approved under the UK’s collective actions regime.
Background
Class representative Mark McLaren began the RoRo proceedings in February 2020. These proceedings followed a European Commission decision imposing fines on seven international shipping firms for operating a maritime car shipping cartel which, according to the class representative, impacted the price of approximately 17 million vehicles purchased and leased in the UK between October 2006 and September 2015.
As reported in our previous article, the Tribunal approved the first ever collective settlement under the UK’s opt-out regime in this case in December 2023, in a £1.5m settlement with Compañía Sudamericana de Vapores S.A. (CSAV).
In its latest judgment, the Tribunal has approved McLaren’s settlements with WWL/EUKOR and K-Line for sums of £24.5m and £12.75m respectively. WWL/EUKOR and K-Line account for a significant proportion of the overall claim, unlike CSAV – the smallest defendant in the proceedings with an estimated market share of only 1.7%, compared to WWL/EUKOR and K-Line’s combined estimated market share of 50.6%.
This settlement is therefore more significant, both in the context of these proceedings and also as an indication of how the Tribunal may deal with future collective settlements.
The Tribunal’s approach
By way of reminder, a settlement must be approved by the Tribunal for it to bind a defined class of persons in opt-out collective proceedings. To grant such approval, the Tribunal must be satisfied that the terms are both “just and reasonable” (considering the factors set out in Rule 94 of the Competition Appeal Tribunal Rules 2015 and the Competition Appeal Tribunal Guide 2015). The Tribunal specifically remarked in this judgment that the assessment of whether settlement terms are “just and reasonable” includes consideration of (i) both monetary and non-monetary benefits offered by a settling defendant, as well as the provisions related to payment of costs, fees and disbursements, and (ii) the likely “success” of the claim.
These settlements build on the approaches taken in the two previous settlements approved by the Tribunal (one, referred to above, in the RoRo case; the other in the Boundary Fares claim brought by Justin Gutmann). In each of the settlements, significant volumes of evidence were submitted to the Tribunal in support of the applications and, similar to the approach taken in Boundary Fares, these settlements divide the damages and costs into four “pots” (albeit the “pots” in Boundary Fares related to the level of evidence required for class members to prove their respective claims):
1. Two pots for damages, which together total £15.25m in respect of WWL/EUKOR and £7m in respect of K-Line:
a) Immediate/Guaranteed Damages, which are to be held in escrow awaiting distribution to class members. To the extent damages remain in this pot, distribution will be made to a charity approved by the Tribunal rather than allowing for any reverter mechanism to WWL/EUKOR or K-Line; and
b ) Deferred/Additional Damages, which are available on application by the class representative where there is a shortfall between the Immediate/Guaranteed Damages and the amount required to compensate all class members. This pot can also be used to cover any shortfall in the Distribution Costs pots (see below).
Both settling defendants must pay the Immediate/Guaranteed Damages within 28 days of the Tribunal’s order, to be held in escrow by the class representative’s solicitors until the Tribunal makes a further order on distribution. However, there is a difference between the settling defendants in relation to the mechanism for payment of the Deferred/Additional Damages based on how this pot can be used by McLaren. For WWL/EUKOR, the Deferred Damages become payable upon 28 days’ notice from McLaren that there is a shortfall in damages due to the class members (up to £6.5m). For K-Line, the Additional Damages are due at the same time as the Guaranteed Damages, with a reverter mechanism requiring McLaren to return any surplus from the Additional Damages pot to K-Line promptly.
This ensures that a minimum sum will be paid to class members or (if not fully claimed) to charity (less any excess Distribution Costs not met from other sources). This minimum sum was included in the Immediate/Guaranteed Damages pot, which totals £8.75m from WWL/EUKOR and £5.25m from K-Line. The Tribunal was clear that the collective settlement proposal would not have been approved were it not for this clear ring-fencing of a minimum class members’ entitlement.
2. Two pots for costs:
a) Proceedings Costs (also referred to in the agreements as the CFD Sum), whereby the settling defendants make contributions towards the class representative’s costs, fees, and disbursements (to be paid within 28 days of the Tribunal’s order and held in escrow in the same way as the damages pots). Any unclaimed Proceedings Costs must also be made available for distribution to the class, including to a charity approved by the Tribunal; and
b) Distribution Costs, which are contributions towards the costs of distributing the damages. These costs do not become payable by the settling defendants until 28 days after receiving notice from the class representative that the Tribunal has approved an application regarding distribution of the damages sum. Again, to the extent there are any sums left in this pot, distribution will be made to a charity approved by the Tribunal, although this is unlikely given that the Tribunal anticipates that this pot will need to be topped up by diverting funds from the Deferred/Additional Damages pot.
Similar to the CSAV settlement, the Deferred/Additional Damages and Proceedings Costs pots must be called upon/returned on a “second in, second-last out” and “third in, third-last out” basis respectively where these settling defendants have second and third priority over the sums not distributed to the class members (i.e. CSAV will have first entitlement to unclaimed sums, then WWL/EUKOR, and then K-Line).
Where do these agreements leave the funders and class members?
Woodsford Group Limited (Woodsford), McLaren’s litigation funder, voiced concerns about delay in receiving a percentage cut of its £8.07m contribution towards the proceedings, and requested immediate payout of the Proceedings Costs. At this stage in the proceedings, McLaren’s contractual entitlements towards stakeholders (primarily Woodsford and its insurers) exceed £45m – significantly more than the total sums of £38.37m payable under the current settlements (i.e. including the CSAV, WWL/EUKOR and K-Line settlements).
As noted above, the Tribunal made clear that it would not support any clawback mechanism allowing stakeholders to recover costs, fees and disbursements out of pots specifically ring-fenced for class members. The Tribunal instead required “Stakeholder Undertakings” from both the class representative’s and the funder’s lawyers that costs not covered at the end of the proceedings would not be reimbursed from the Immediate/Guaranteed Damages pot and that this pot would remain ring-fenced for class members. All stakeholders filed such undertakings confirming that they would not seek any proportion of their entitlement from the Immediate/Guaranteed Damages pot.
The Tribunal did, however, appreciate the potential delays that may arise in the flow of sums back to funders and other stakeholders. Although the Tribunal determined that it would not be prepared to direct payment to stakeholders prematurely, the judgment grants stakeholders liberty to apply for payment before the end of proceedings. The Tribunal indicated that the extent to which it will consider paying out on this basis will depend on the specific sums and purpose for the request, and the broader circumstances.
Although the Tribunal was satisfied that the proposed settlement terms met the “just and reasonable” test, it has yet to receive a detailed distribution plan. As such, there remain questions as to how the damages will be distributed in practice. The agreements provide that distribution can take place at either the conclusion of the collective proceedings or at such time as McLaren considers it “economical, proportionate and in the interests of the Class”. The Tribunal has confirmed in the judgment that it considers it sensible to defer the distribution plan until the outcome of the trial in the collective proceedings is known.
The bigger picture
The trial in respect of the remaining RoRo defendants, MOL and NYK, began on 13 January 2025 with a time estimate of 10 weeks.
In addition, in December it was announced that an agreement-in-principle had been reached to settle the long-running Merricks interchange fee collective proceedings, for a reported £200m (despite the original estimates of damages being up to £14bn). Details of the settlement have not been publicly disclosed and the agreement remains subject to the Tribunal’s approval, for determination at a hearing early this year. The outcome – particularly as to whether the settlement is deemed “just and reasonable” – will be closely watched, given that Innsworth, the funder of the claim, is understood to be contesting the settlement for being both “too low and premature”.
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