Claimant entering into contract with defendant for supply of jet fuel – Contract governed by English law – Italian authorities ruling defendant part of Italian cartel involved in price fixing
Ryanair Ltd v Esso Italiana Srl: Court of Appeal, Civil Division: 19 November 2013
The claimant, Ryanair, was a well-known Irish airline company. The defendant, Esso Italiana, was part of the world-wide ExxonMobil group. Ryanair entered into contract with Esso Italiana, through the agency of ExxonMobile Aviation International Limited (EMAIL), for the purchase of jet fuel in Italian airports. A jurisdiction clause was to be found in article 12.1 of Pt II of a master contract, made by EMAIL on behalf of group subsidiaries supplying fuel in various countries of the world.
The jurisdiction clause provided: ‘This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and there are no other promises, representations or warranties affecting it. This Agreement cannot be modified in any way except in writing signed by the parties. No claims shall be made hereunder for prospective profits or for indirect or consequential damages except as otherwise provided in the footnotes attached to the schedule.
‘This Agreement shall be governed by the laws of England excluding its conflict of law rules and the United Nations Convention on the International Sale of Goods Act shall not apply. For the purposes of the resolution of disputes under this Agreement, each party expressly submits itself to the non-exclusive jurisdiction of the Courts of England.’
The clause on prices fell under article IV within the General Provisions of Pt II to the contract, which provided: ‘4.1 If at any time a price or fee provided in this Agreement shall not conform to the applicable laws, regulations or orders of a government or other competent authority, appropriate price or fee adjustments will be made; provided, however, that in the event Seller is at any time prevented from collecting, or Buyer is required to pay more than, the full price or fee provided for in this Agreement, including changes in said price or fee pursuant to other provisions hereof, the party adversely affected shall have the option at any time thereafter while such condition exists to cancel this Agreement as to any affected delivery location upon fifteen (15) days prior written notice to the other (article IV).’
In June 2006, the Italian Competition Authority (ICA) found certain oil companies selling jet fuel at various airports in Italy, including Esso Italiana, to be in breach article 101 of the Treaty of the Functioning of the European Union (TFEU) (article 101). The ICA decision found that as a result of information sharing arrangements the supplied had been operating a cartel the effect of which had been to set up barriers to entry and distort and inflate the price of jet fuel supplied at various Italian airports. The distortion had not affected the international price of the fuel, which was premised on Platts market prices, but there was evidence that it tended to push up the ’differential’, an increment on market prices which was intended to cover additional expenses and services which a supplier of jet fuel to an airline would respectively incur or supply.
The critical finding of the ICA decision, for present purposes, had been that the Italian differentials tended to be higher than elsewhere in Europe. Ryanair issued proceedings against Esso Italiana. Ryanair sought to rely on the content of article IV and article 101 in respect of its claims. The first claim was described as a claim for ‘breach of contract’, and the second claim was described as one for loss arising from Esso Italiana’s ‘breach of statutory duty’.
The argument which was accepted by the judge proceeded as follows: (i) the claim under article IV was a claim under the contract for breach of contract in the absence of a price adjustment; (ii) that claim itself involved a consideration of a breach of law in Italy pursuant to article 101, which was necessary trigger for a claim under article IV; (iii) the ‘first limb’ of the statutory duty claim, namely a claim for breach of statutory duty by Esso Italiana in respect of the fuel supplied by it to Ryanair under the contract, covered the same ground as the contract claim under article IV; (iv) therefore the contract claim and the first limb of the statutory duty claim had been ‘so closely knitted together’; (v) the ‘second limb’ of the statutory duty claim, namely that part of it which concerned the much greater quantity of fuel supplied in Italy by suppliers other than Esso Italiana, was another matter, but on the whole it would be a ‘forensic nightmare’ if that had been adjudicated separately and therefore it was to be presumed that rational businessmen would have considered that the jurisdiction clause had been intended to cover such a claim (Esso Italiana’s joint and several liability for the breach of statutory duty committed by any cartel member who had supplied Ryanair) as well. Esso Italiani appealed.
It fell to be determined whether the jurisdiction clause embraced a claim against a member of an Italian cartel selling jet fuel in Italian airports, a claim advanced on the basis of a statutory tort under English law in vindication of rights arising out of article 101 of TFEU. Consideration was given to the case Fiona Trust & Holding Corp v Privalov  All ER (D) 292 (Jul) (Fiona Trust).
The appeal would be allowed.
(1) Article IV was designed to operate in circumstances where the parties were mutually aware of a law, regulation or order and its effect on contract prices, so that the contract prices were altered to confirm with the applicable law, regulation or order. That demonstrated to the court’s mind that the situation of cartel infringements of article 101 were simply not within the purview of article IV, for such infringements normally operated in secrecy and were only brought to light, if ever brought to light, subsequently. As to article IV’s provision for an adversely affected party being entitled to terminate the contract for any affected airport, there had been a failure to grapple with the language and sense of the clause, which demonstrated that article IV was simply not designed to perform the function which Ryanair sought to derive from it. The cartel inflated price was not unlawful, even though their effect on price might give rise to remedies.
It was the cartel which was unlawful. If an unlawful cartel arrangement led to a valid claim for damages for breach of statutory duty, there had been no ‘price or fee adjustments’ to conform with law, as distinct from proven damages for breach of statutory duty. If Ryanair was ignorant of the operation of a cartel in inflating prices, it was not the ignorant Ryanair who was not in a position to operate the termination option of the clause; that option applied to the ‘adversely affected party’. It followed that there was no prospect of Ryanair having a contractual claim under article IV or an implied term such as would give a remedy, albeit limited to goods supplied under the contract itself. which repudiated the effect of a statutory duty pursuant to article 101 (see , , , ,  of the judgment).
(2) With regard to the scope of the jurisdiction clause, even on the assumption of a contractual link such as a claim under article IV, there was no authority in the UK or other jurisdictions which had been brought to the attention of the court to support Ryanair’s claim. Further, there was nothing in the Fiona Trust doctrine of a presumption in favour of one-stop adjudication to justify a conclusion that the parties to the instant supply contract should reasonably be regarded as intending that a purely tortious claim which lay against a cartel of Italian suppliers of fuel oil at Italian airports for breach of EU and/or Italian law should fall within the jurisdiction provisions of an English law contract, just because the claimant buyer was willing to limit his claim to only one of the cartel members, namely his seller, albeit his claim extended to the total supply from all the cartel members (see , , ,  of the judgment). Fiona Trust & Holding Corp v Privalov  All ER (D) 292 (Jul) considered.
Stephen Auld QC and Eleanor Campbell (instructed by Enyo Law LLP) for Ryanair; Daniel Beard QC (instructed by Hogan Lovells International LLP) for Esso Italiana.