Peters & Peters

Supreme Court judgment dated 6 November 2020 – clarity given on the principle of res judicata

Secretary of State for Health & Social Care and the NHS Business Services Authority v Servier Laboratories Ltd and Others

On 6 November 2020 the Supreme Court confirmed that context is everything when applying findings of the European Courts in separate proceedings.

The Secretary of State for Health & Social Care and the NHS Business Services Authority (together, the “Secretary of State”) are engaged in long-running proceedings against the international pharmaceutical group, Servier (“Servier”). The Secretary of State alleges that it paid too much for Servier’s blood pressure medication, perindopril, as a result of Servier’s anti-competitive conduct, which breached Article 101 of the Treaty on the Functioning of the European Union (TFEU). Servier, along with a number of generic pharmaceutical companies, have already been fined by the European Commission in relation to this conduct. At present, the matter is before the Court of Justice of the European Union (CJEU), the General Court having handed down its judgment, upholding the Commission’s findings in relating to Article 101 TFEU, but dismissing those in relation to Article 102 TFEU, in December 2018.

In October 2019, the Secretary of State and Servier were to participate in a preliminary issues trial to determine the merits of one aspect of the proceedings, known as the “Prescribing Argument”. By way of the Prescribing Argument, Servier says that, even if it is found liable to the Secretary of State, the amount of the Secretary of State’s loss should be diminished or extinguished because it should have required doctors to prescribe the lowest priced drug in the category of drugs within which perindopril sits (known as ACE inhibitors).

However, in June 2019, the preliminary issues trial was postponed to accommodate an appeal by Servier. Servier sought to argue, amongst other things, that findings made by the General Court were determinative of facets of the Prescribing Argument (applying the principle of res judicata erga omnes or “absolute res judicata”, which translates as “a matter decided”).

On 6 November 2020, the Supreme Court agreed with the lower courts, dismissing Servier’s appeal. In particular, Lord Lloyd-Jones, with whom the rest of the panel agreed, found:

  • The principle of absolute res judicata applies only to judicial decisions which have become definitive after all rights of appeal have been exhausted. On this basis, the appeal was premature because the findings arrived at by the General Court are not definitive and they may never become definitive because they may be overturned by the CJEU on appeal.
  • Notwithstanding that it was premature, the appeal presented issues of law that were of considerable importance and it was therefore appropriate for the Supreme Court to set out its view.
  • The purpose of absolute res judicata was to ensure stability of legal relations, in particular by securing that legal matters which have been definitively settled by judicial decision cannot be referred once again to the EU courts for reconsideration. The principle also serves to define with certainty what is required in order to comply with an annulling decision and, thereby, to assist the institution concerned to achieve compliance. If, however, subsequent proceedings do not call into question an issue that has already been settled by the EU courts, the principle of absolute res judicata can have no application.
  • On this basis, the issue of the scope and extent of the General Court’s ratio decidendi only arises in a context where the General Court’s assessment of Servier’s conduct under Article 102 is sought to be re-examined. The claim currently advanced by the Secretary of State is founded on alleged infringements of Article 101 TFEU. As a result, the ratio decidendi of the annulling judgment is not engaged. The findings on which Servier relies have no significance independent of the annulling judgment. It is not necessary to treat those findings as binding in any other legal context in order to preserve the authority of the annulling judgment.

Jonathan Tickner, Head of Commercial Litigation at Peters & Peters Solicitors LLP, the firm instructed by the Secretary of State, commented “We welcome the Supreme Court’s decision and look forward to the resumption of the preliminary issues trial next year as well as the conclusion of these proceedings, which we are confident will lead to the recovery of significant sums for our client and ultimately the tax payer.