Secretary of State for Health & Ors v Servier Laboratories Ltd & Ors [2020] UKSC 44

Servier sought to rely on findings from a General Court judgment annulling a Commission decision on market definition as binding in UK national damages proceedings. The Supreme Court dismissed the appeal, holding the EU principle of absolute res judicata did not apply outside the annulment context.

Facts

Servier developed and manufactured the medicinal product Perindopril, used to treat cardiovascular conditions. The respondents, being the national health authorities of England, Wales, Scotland and Northern Ireland, commenced proceedings between 2011 and 2012 alleging breaches by Servier of articles 101 and 102 TFEU (and equivalent domestic provisions under the Competition Act 1998). They claimed that anti-competitive agreements with generic manufacturers, coupled with abuse of a dominant position, had delayed generic entry and caused the NHS to pay inflated prices.

In July 2014 the European Commission found that Servier had infringed articles 101 and 102 TFEU, defining the relevant market as Perindopril alone. On 12 December 2018, the General Court annulled the article 102 finding in its entirety, holding that the relevant market extended beyond Perindopril to all ACE inhibitors. Both the Commission and Servier appealed to the CJEU; those appeals remain pending.

Servier had raised a “prescribing argument” in the national proceedings, contending that the claimants failed to mitigate losses by not encouraging prescribers to switch to cheaper alternative ACE inhibitors. Following the General Court Judgment, Servier contended that eight specific factual findings in that judgment were binding on the national court in the trial of preliminary issues relating to the prescribing argument, by virtue of the EU principle of absolute res judicata (res judicata erga omnes).

Roth J held that none of the disputed findings constituted res judicata for the preliminary issues trial. The Court of Appeal dismissed Servier’s appeal. The Supreme Court granted permission on the res judicata point alone.

Issues

The principal issue was whether specified findings of fact made by the General Court in annulling the Commission’s article 102 finding were binding on the national courts in the trial of preliminary issues concerning mitigation of loss, causation and remoteness, pursuant to the EU principle of absolute res judicata. A subsidiary question was whether the point should be referred to the CJEU under article 267 TFEU as not being acte clair.

Arguments

Servier’s submissions

Servier, represented by Ms Kelyn Bacon QC, contended that the four findings of the General Court (including that there was no significant therapeutic difference between Perindopril and other ACE inhibitors, and that ACE inhibitors were widely perceived as substitutable) formed part of the ratio decidendi of the annulling judgment and accordingly carried authority erga omnes with absolute effect in any proceedings within the scope of EU law. Servier argued the limits imposed by the Court of Appeal had no basis in EU jurisprudence and requested a reference to the CJEU.

The claimants’ submissions

The claimants argued that the principle of absolute res judicata is limited to preventing an annulling judgment from being called into question in subsequent proceedings. The findings relied on by Servier were not essential to the operative part of the annulling judgment and, in any event, could not bind parties in a distinct legal context concerning alleged breaches of article 101 and issues of mitigation. They submitted the point was acte clair.

Judgment

Lord Lloyd-Jones (with whom Lord Reed, Lord Briggs, Lord Sales and Lord Hamblen agreed) dismissed the appeal.

No preliminary reference

The court declined to refer questions to the CJEU. The principle of absolute res judicata applies only to judicial decisions that have become definitive after all rights of appeal have been exhausted (citing P&O European Ferries and Artegodan). Since the Commission’s appeal against the General Court Judgment remained pending, any findings might yet be reversed, rendering a reference premature and unnecessary under article 267 TFEU.

The principle of absolute res judicata

Drawing on P&O European Ferries, the court confirmed that an annulling judgment has retroactive effect erga omnes. This authority attaches not only to the operative part but also to the ratio decidendi that is inseparable from it. As explained in Asteris and AssiDomän, the purpose of considering the grounds of an annulling judgment is to determine the exact meaning of the ruling in the operative part.

Purpose-based approach

The court emphasised that the scope of the principle must be determined by reference to its purpose: preventing an annulling judgment from being called into question in subsequent proceedings and ensuring effective judicial control of EU institutions. Only those aspects of the reasoning that are essential to preserving the authority of the annulling judgment fall within the ratio decidendi for this purpose.

Application

The General Court annulled the article 102 finding because the Commission had wrongly defined the relevant product market as Perindopril alone. However, in the national proceedings, the claimants now pursue only claims based on article 101 TFEU; no question arises concerning the relevant product market under article 102. Servier sought to detach factual findings from the annulling judgment and deploy them in an entirely different legal context concerning mitigation of loss. The ratio decidendi of the annulling judgment was simply not engaged.

The court distinguished Shoe Branding, Tomkins and Pérez-Díaz, holding that none supported transposing factual findings as binding into an unrelated legal context. AssiDomän in fact supported the claimants’ position: the authority of grounds of an annulling judgment cannot apply to situations or persons in materially different legal contexts. The analogy with the binding status of Commission decisions under Regulation 1/2003 was rejected as those decisions are governed by distinct legislative arrangements.

Lord Lloyd-Jones endorsed Rose LJ’s concerns regarding the practical difficulties of Servier’s approach, including identifying which findings were essential, the risk of unbalanced factual analysis, and the potential to bind strangers to the original dispute unfairly. The court held the matter was acte clair: the principle of absolute res judicata had no application.

Implications

The judgment clarifies the limited scope of the EU principle of absolute res judicata (res judicata erga omnes) as applied by domestic courts in matters falling within the scope of EU law. The principle operates solely to preserve the integrity of annulling judgments of the EU courts and the consequences flowing from them; it does not convert factual findings made in such judgments into universally binding determinations across unrelated legal contexts.

The decision is significant for competition litigation, particularly follow-on damages claims, where parties may seek to leverage findings in EU court judgments. It establishes that findings made by the General Court in one regulatory context (here, article 102 market definition) cannot be imported as binding into distinct issues (here, mitigation of loss in article 101 proceedings) absent engagement with the annulling judgment itself.

The judgment also confirms that a preliminary reference under article 267 TFEU will not be made where the underlying EU judgment is subject to a pending appeal that may render the questions redundant. Practitioners advising on competition follow-on damages should note the court’s cautious delineation between the binding effect of Commission decisions under Regulation 1/2003 and the narrower principle governing EU court judgments. The decision remains tied to its EU law context and does not disturb common law concepts of res judicata, issue estoppel or abuse of process.

Verdict: The appeal was dismissed. The Supreme Court held that the EU principle of absolute res judicata (res judicata erga omnes) had no application to the findings of fact made by the General Court that Servier sought to treat as binding in the national proceedings, and declined to make a preliminary reference to the CJEU.

Source: Secretary of State for Health & Ors v Servier Laboratories Ltd & Ors [2020] UKSC 44