This country-specific Q&A provides an overview to competition litigation laws and regulations that may occur in Hong Kong.
This Q&A is part of the global guide to Competition Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/competition-litigation/
What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?
The Competition Ordinance (Cap.619) is the primary source of competition law in Hong Kong. The Competition Tribunal is a specialised court established by the Competition Ordinance to deal with legal proceedings concerning competition matters. Subsidiary legislation in the form of the Competition Tribunal Rules (CTR) provides further detail and the Competition Tribunal Practice Directions No.1 and No.2 govern the practice and procedure of the Competition Tribunal.
A private competition damages claim in Hong Kong can only be made by way of a follow-on action under the Competition Ordinance. The right to follow on is provided in section 110 of the Competition Ordinance in two circumstances:
- A competition authority in Hong Kong (i.e. the Competition Commission or the Communications Authority) must have previously established a contravention of a conduct rule in enforcement proceedings before the Competition Tribunal.
- A person has made an admission, in a commitment that has been accepted by the Competition Commission, that the person has contravened a conduct rule.
Persons who claim that they have suffered loss or damage as a result a contravention of a conduct rule have a right of action against (a) any person who has contravened or is contravening the rule; and (b) any person who is, or has been, involved in that contravention.
What is required (e.g. in terms of procedural formalities and standard of pleading) in order to commence a competition damages claim?
Procedural formalities and standard of pleading to commence a competition damages claim are similar to those for commencing civil damages claims in the High Court. CTR Rule 93 requires follow-on actions to be commenced by filing an Originating Notice of Claim, endorsed with a Statement of Claim, to the Competition Tribunal and serving such documents on the defendants named in the notice. Such documents must specify the decision of the specified court or admission in a commitment on which the claim for damages is based upon, as well as the nature of claim and relief sought. This should also include an estimated aggregate amount claimed. A filing fee will need to be paid to the Competition Tribunal to start the claim.
What remedies are available to claimants in competition damages claims?
Under section 142 of the Competition Ordinance, the Competition Tribunal has the same jurisdiction to grant remedies and reliefs, equitable or legal, as the Court of First Instance. This includes remedies for damages, specific performance, injunctions, declarations and orders for an account of profits.
In addition, the Competition Ordinance provides for a series of orders that may be made by the Competition Tribunal, such as orders declaring agreements in contravention of a conduct rule to be void or voidable, orders requiring a person who has contravened a competition rule to take steps for restoring the parties to a transaction to a position in which they were before the transaction was entered into, orders prohibiting the withholding of goods or services from any person, orders requiring that any person or class of person be given access to goods, facilities or services. The full list of such orders is available in Schedule 3 of the Competition Ordinance.
What is the measure of damages? To what extent is joint and several liability recognised in competition damages claims? Are there any exceptions (e.g. for leniency applicants)?
Damages are generally compensatory in nature. Damages in competition damages claims would generally be awarded to place the claimant in the position in which he or she would have been had the contravention of the conduct rule not taken place. It is unclear whether the Competition Tribunal would be prepared to award exemplary or punitive damages in competition damages claims, but such awards are rarely made in civil proceedings in Hong Kong and only made in very extreme circumstances.
Currently, no competition damages claims have been filed to the Competition Tribunal, such that the extent to which joint and several liability is recognised in competition damages claims remains to be seen. However, joint and several liability is generally recognised in Hong Kong civil proceedings. Under the Civil Liability (Contribution) Ordinance, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise). The Competition Tribunal would be expected to recognise joint and several liability in competition damages claims.
The Competition Ordinance does not provide for exceptions to liability in competition damages claims. Under the Competition Commission’s Leniency Policy for Undertakings Engaged in Cartel Conduct (November 2015), leniency applicants are required to agree to and sign a statement of agreed facts admitting to its participation in the cartel, and to make a joint application with the Competition Commission to the Competition Tribunal for an order declaring that the leniency applicant has contravened the prohibition against anti-competitive agreements under the Competition Ordinance. The Competition Tribunal’s order declaring such contravention would allow claimants to commence a follow-on action against the leniency applicant.
What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?
The limitation period for a follow-on action is 3 years is specified under section 111 of the Competition Ordinance. Time starts to run from the expiry of the appeal period applicable to the relevant decision of the Competition Tribunal, the Court of First Instance or the Court of Appeal. If the claim is based on the decision of the Court of Final Appeal, then time starts to run from the date of the decision. However, follow-on actions cannot be brought within the appeal period of a determination without prior permission from the court.
There is no provision in the Competition Ordinance to either suspend or interrupt the limitation period.
Which local courts and/or tribunals deal with competition damages claims?
The Competition Tribunal has exclusive jurisdiction to deal with pure competition damages claims under the Competition Ordinance. However, the Competition Ordinance does not prohibit claims being brought in the Court of First Instance where the cause of action is not limited to the defendant’s contravention or involvement in a contravention of a conduct rule under the Competition Ordinance. The Court of First Instance has the power to transfer proceedings to the Competition Tribunal where appropriate. There have been recent examples where a transfer was granted (see Taching Petroleum Company Limited v Meyer Aluminium Limited  HKCFI 515) – and also examples where a transfer was refused by the Court of First Instance (see Loyal Profit International Development Ltd v Travel Industry Council of Hong Kong  HCMP 256/2016.)
Appeals from decisions of the Competition Tribunal and the Court of First Instance can be made to the Court of Appeal. Further appeal lies to the Court of Final Appeal.
How does the court determine whether it has jurisdiction over a competition damages claim?
The Competition Tribunal has the same jurisdiction as the Court of First Instance under section 142 of the Competition Ordinance. The Competition Tribunal has sole jurisdiction to hear and determine follow-on actions in respect of contraventions, or involvements in contraventions, of the conduct rules, as well as allegations of contraventions, or involvements in contraventions, of the conduct rules raised as a defence.
In proceedings before the Court of First Instance where the cause of action is not limited to the defendant’s contravention or involvement in a contravention of a conduct rule, the Court of First Instance is required under section 113 of the Competition Ordinance to transfer so much of the proceedings before the Court that are within the jurisdiction of the Competition Tribunal.
How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?
Follow-on actions in Hong Kong can only be based on section 110 of the Competition Ordinance. As such, Hong Kong law will apply to the competition damages claim.
Although there has been no precedent of a competition damages claim in Hong Kong, it is expected that the ordinary civil standard of proof, i.e. a balance of probabilities, would apply to competition damages claim in Hong Kong.
To what extent are local courts bound by the infringement decisions of (domestic or foreign) competition authorities?
Competition authorities in Hong Kong, namely the Competition Commission and the Communications Authority, does not have the power to issue infringement decisions. Only the Competition Tribunal, the Court of First Instance, the Court of Appeal and the Court of Final Appeal may make a decision from which follow-on action may be based.
Infringement decisions of foreign competition authorities (including those of People’s Republic of China) may be considered in follow-on actions as a matter of comity. However, such decisions would not be binding on local courts and would only be relevant to the extent that the infringement decision concerns harm to competition in Hong Kong. Moreover, follow-on actions must be premised on the decision of a Hong Kong court determining a contravention of a conduct rule of the Competition Ordinance or an admission of such contravention in a commitment accepted by a Hong Kong competition authority. The relevance of a foreign infringement decision to a follow-on action in Hong Kong is limited.
To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?
Currently, there is no right to bring a standalone private action for competition damages claims in Hong Kong. This has been confirmed in a recent decision of the Court of First Instance (see Loyal Profit International Development Ltd v Travel Industry Council of Hong Kong  HCMP 256/2016).
Competition damages claims can only be brought about by way of follow-on action in Hong Kong. This means that a competition authority would have already succeeded in its public enforcement action before a Hong Kong court, in which a decision was made determining a contravention of a conduct rule of the Competition Ordinance. As such, there is no procedure for enforcers to stay a private action while the public enforcement action is pending.
Nonetheless, if a private action before the Competition Tribunal or the Court of First Instance involves an alleged contravention, or alleged involvement in a contravention, of a conduct rule of the Competition Ordinance, the Competition Commission or the Communications Authority may apply to the court to intervene in such proceedings under section 120 of the Competition Ordinance. Alternatively, the court may refer a case to a Hong Kong competition authority for investigation under section 118. In such event, the competition authority may apply to the court to stay the private action pending the completion of the authority’s investigation in to the alleged contravention or involvement that is in issue in the proceedings.
What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold criteria have to be met?
No mechanism is available under the Competition Ordinance to aggregate competition damages claims. As a general matter, class actions are not available in Hong Kong.
Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
No unique defences are provided for competition damages cases under the Competition Ordinance. As at the time of writing, there are no competition damages cases in Hong Kong. However, given that the Competition Tribunal has considered overseas cases (particularly EU case law) to be of considerable reference value to public competition law enforcement cases in Hong Kong, it is expected that the Competition Tribunal would also draw reference from analogous principles in overseas competition damages cases, including a “passing on” defence. However, the extent to which such defences will apply in Hong Kong competition damages cases remains to be seen.
As at the time of writing, there are no competition damages cases in Hong Kong. However, proceedings before the Competition Tribunal generally follow the same principles in civil proceedings in Hong Kong. As such, the party who commences a claim would bear a general burden of proof to establish its claim. The opposing party who raises a defence would in turn bear the burden of proof in establishing its defence.
As competition damages cases are considered as civil claims in Hong Kong, the standard of proof is expected to be the civil standard, i.e. balance of possibilities.
Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the court or the parties and what duties do they owe?
Expert evidence is permitted in both public and private competition litigation in Hong Kong. The manner in which expert evidence is adduced and used follows that in civil proceedings. Leave must be obtained from the court before expert evidence can be adduced. The Competition Tribunal may refuse leave for adducing or relying on unnecessary expert reports. After expert reports have been served, the parties’ respective experts will be directed to communicate with each other and produce a joint report specifying matters agreed and matters not agreed and the reasons for any non-agreement.
Experts will be called to give evidence and be cross-examined as expert witnesses at trial. The current President of the Competition Tribunal has not ruled out the possibility of “hot-tubbing” expert witnesses at trial – that is calling expert witnesses to give evidence at trial and be cross-examined concurrently. As at the time of writing, the Competition Tribunal has had a public competition law enforcement trial involving economic experts giving evidence in sequence, and not through “hot-tubbing”.
Experts are engaged by the party calling them and not appointed by the court. However, experts owe a general duty to the court, which overrides any obligation to the person from whom the expert has received instructions. As such, expert reports are addressed to the court.
In the expert report, the expert must declare that he/she (1) has read the code of conduct for expert witnesses and agrees to be bound by it, (2) understands the duty to the court, and (3) has complied with and will continue to comply with that duty. Such duties include the duty to help the Court impartially and independently on matters relevant to the expert’s area of expertise and to exercise his/her independent, professional judgment in relation to communicating with the other parties’ experts and producing a joint expert report.
Describe the trial process. Who is the decision-maker at trial? How is evidence dealt with? Is it written or oral, and what are the rules on cross-examination?
The trial process in the Competition Tribunal is similar to the trial process in High Court proceedings. The Competition Tribunal will try to avoid formality in the trial process and the legal representatives are not required to be robed. The hearing will take place in open court unless otherwise directed. There is no jury trial in competition damages cases in Hong Kong.
The trial process for competition damages cases in Hong Kong will generally follow the ordinary course of a civil trial. The trial will start with the claimant’s opening arguments, and the court will in turn hear the evidence of the claimant’s witnesses. Each witness will be examined in chief by the claimant, cross-examined by the defendant, and re-examined by the claimant. After all the claimant's witnesses have given evidence, the claimant will close his/her case. The defendant will then repeat the same process with opening arguments, defendant witnesses (if applicable) and closing arguments. The claimant will have an opportunity to give closing arguments in reply afterwards. The court may then either orally deliver judgment immediately or hand down judgment in written form at a later date.
The presiding judge of the Competition Tribunal is the decision-maker at trial. This is the case, even if specially qualified persons are appointed as assessors to assist the Competition Tribunal. There is no jury trial in competition damages cases in Hong Kong.
Evidence is generally treated more flexibly before the Competition Tribunal than in ordinary civil proceedings in Hong Kong. Section 147 of the Competition Ordinance expressly provides that the Competition Tribunal is not bound by the usual rules of evidence. For example, hearsay evidence that may not be admissible in civil proceedings may nevertheless be admissible in proceedings before the Competition Tribunal.
Witness evidence is given orally in the witness box on oath/affirmation. Alternatively, evidence may be given through live video conferencing in the courtroom. In practice, written witness statements are often exchanged by the parties before trial. At trial, the witness would be shown a copy of such statement in the witness box to confirm that it is his/her statement, and the judge would be asked to allow the statement to stand as the evidence of that witness in the case.
The rules on cross-examination in competition damages actions are the same as those in civil proceedings. For instance, leading questions can be put to the witness in cross-examination. The right to cross-examination is not limited by the examination-in-chief, but extends to all issues in the action. However, the question must be relevant to the issues in dispute and the trial judge may disallow vexatious questions irrelevant to the issue. A witness would not be compelled to answer questions that may tend to expose him to any criminal offence or penalty. The trial judge decides whether a question has such tendency or not.
How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?
As at the time of writing, there are no competition damages cases in Hong Kong. However, the Competition Tribunal takes an active and robust approach towards case management and is committed to ensuring that cases are as efficiently, inexpensively and expeditiously disposed of as is consistent with fairness. The first two public competition law enforcement cases before the Competition Tribunal took approximately two years from commencing proceedings to trial. Typical civil cases in Hong Kong generally take the same time. One can expect competition damages claim before the Competition Tribunal to take around the same time.
An appeal process exists. Appeals from decisions of the Competition Tribunal and the Court of First Instance lie to the Court of Appeal. Further appeal lies to the Court of Final Appeal.
Two levels of appeal are possible. Appeals from decisions of the Competition Tribunal and the Court of First Instance lie to the Court of Appeal. Further appeal lies to the Court of Final Appeal.
Do leniency recipients receive any benefit in the damages litigation context?
Leniency recipients do not receive any benefit in the damages litigation context. The Competition Ordinance does not provide exceptions for leniency recipients in relation to liability in competition damages claims.
Nevertheless, the Competition Commission has pledged not to release any confidential information provided to the Commission by a leniency applicant for the purpose of making a leniency application and/or pursuant to a leniency agreement and the Commission’s records of the leniency application process, including the leniency agreement. It has further pledged to firmly resist, on public interest or other applicable grounds, requests for such material in connection with private civil proceedings in Hong Kong or in other jurisdictions.
Under the Competition Commission’s Leniency Policy for Undertakings Engaged in Cartel Conduct (November 2015), the Competition Commission will only comply with requests for such material in limited circumstances, namely if: (a) it is compelled to make a disclosure by an order of the Competition Tribunal or any other court, by law or any requirement made by or under a law; (b) it has the consent of the leniency applicant to disclose the material; (c) the relevant information or document is already in the public domain; or (d) the leniency agreement has been terminated by the Competition Commission.
How does the court approach the assessment of loss in competition damages cases? Are “umbrella effects” recognised? Is any particular economic methodology favoured by the court? How is interest calculated?
As at the time of writing, the approach for assessing loss in competition damages cases have yet to be determined by the courts in Hong Kong. However, proceedings before the Competition Tribunal generally follow the same principles in civil proceedings in Hong Kong. Also, the Competition Tribunal has considered overseas cases (particularly EU case law) to be of considerable reference value to public competition law enforcement cases in Hong Kong. It can therefore be expected that the Competition Tribunal would also draw reference from analogous principles in overseas competition damages cases. However, the extent to which such principles will apply in Hong Kong competition damages cases remains to be seen.
Interest on debts and damages may be determined by the Competition Tribunal as it sees fit under section 153A of the Competition Ordinance. A judgment debt will carry simple interest at the rate specified by the Competition Tribunal under section 153B of the Competition Ordinance. Alternatively, the applicable interest rate can be determined by the Chief Justice from time to time. For instance, the applicable interest rate on judgment debts between the period 1 April 2019 to 30 September 2019 is 8.125% per annum.
Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?
A defendant is not prohibited from seeking contribution or indemnity from other defendants under the Competition Ordinance in respect of competition damages actions.
As at the time of writing, the approach for assessing loss in competition damages cases have yet to be determined in Hong Kong. If the same principles in civil proceedings in Hong Kong were to apply, it can be expected that the principles for allocating liability between defendants in Hong Kong civil proceedings would apply to competition damages cases. The Competition Tribunal may also draw reference from analogous principles in overseas competition damages cases in allocating liability between defendants.
In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?
Competition damages claims can be readily disposed of without a full trial and litigation is generally considered as a measure of last resort. Alternative dispute resolution methods in civil proceedings, such as mediation and without prejudice discussions, can be used by the parties in competition damages actions.
The Competition Tribunal particularly encourages parties to competition damages claims to settle their disputes through mediation in lieu of a full trial. By adopting Practice Direction 31 (Mediation) of the High Court, the Competition Tribunal requires that in cases where all the parties are legally represented, solicitors acting respectively for the parties are required by the Competition Tribunal to file a mediation certificate before trial. That certificate requires parties to indicate to the other party whether it is willing to attempt mediation with a view to settling the dispute, and if not why. Refusal to attempt mediation may entail cost consequences. Trial may proceed only if mediation fails or if a party refuses to attempt mediation.
What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?
No mechanism for the collective settlement of competition damages claims is available under the Competition Ordinance. There is, however, nothing to prohibit parties from voluntarily doing so.
What procedures, if any, are available to protect confidential or proprietary information disclosed during the court process? What are the rules for disclosure of documents (including documents from the competition authority file or from other third parties)? Are there any exceptions (e.g. on grounds of privilege or confidentiality, or in respect of leniency or settlement materials)?
Parties to legal proceedings in Hong Kong are subject to a general undertaking that information and documents disclosed during court proceedings are disclosed for purposes of that proceedings only, unless and until that document has been read to or by the court in open court.
In addition, the Competition Tribunal allows parties to apply for confidential treatment of certain information disclosed during court proceedings. A party may redact part or the whole of a document to the extent that is necessary and justified.
The Competition Tribunal has also adopted a practice of granting orders for a confidentiality ring for purposes of competition law proceedings. Broadly speaking, this allow parties to nominate members of the party’s legal team to use the documents in question only for the purpose of these proceedings (and of any appeals) and not to disclose them to anyone outside the ring. Members of such a “confidentiality ring” will have access to the documents produced in these proceedings without redaction (see: Taching Petroleum Co Ltd v Meyer Aluminium Ltd  2 HKLRD 205). If documents are to be provided to anyone else, only copies with confidential information redacted will be provided.
Proceedings before the Competition Tribunal generally follow the same principles in civil proceedings in Hong Kong, including the rules for disclosure of documents. However, a significant difference under Rule 24 CTR is that there is automatic mutual discovery in Competition Tribunal proceedings (see also paragraph 58 of Competition Tribunal Practice Direction No.1).
As a general rule, parties may apply to the Competition Tribunal for an order mandating discovery and disclosure of documents. This generally extends to third parties, including the Hong Kong competition authorities, i.e. the Competition Commission and the Communications Authority.
There are, however, exceptions to the disclosure of documents. Parties may resist requests for discover of documents on grounds of legal professional privilege (under section 58 Competition Ordinance), without prejudice privilege (e.g. settlement materials), privilege against self-incrimination and common interest privilege. In addition, public authorities such as the Competition Commission and the Communications Authority may resist requests for discovery on grounds of public interest immunity (e.g. leniency materials) (Competition Commission v Nutanix Hong Kong Ltd  HKCT 1).
Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how are costs calculated, and are there any circumstances in which costs recovery can be limited?
Proceedings before the Competition Tribunal generally follow the same principles in civil proceedings in Hong Kong.
In respect of litigation costs, the general rule is that costs follow the event, meaning that the successful party may recover its litigation costs against the losing party. However, when a variety of interlocutory applications were made by the parties in which different outcomes took place, the Court may award costs according to each outcome of each application. As such, the Court may not simply identify a “overall winner” in making the costs order (Competition Commission v Nutanix Hong Kong Ltd  HKCT 3). Litigation costs that can be recovered include court fees, solicitors’ fees, barristers’ fees, expert witness fees, live transcription fees, and out of pocket expenses incurred by the winning party’s solicitors.
The amount of costs that the winning party can recover depends on the basis on which the costs are awarded. The normal basis for assessment of costs is on a party-and-party basis, which means that the successful party may recover approximately 50-60% of its solicitors’ costs and 90-100% of disbursements incurred (including barristers’ fees). If there are special or unusual features in the case to justify a more generous award (e.g. the losing party committed perjury), then costs may be awarded on a common fund basis, in which 80-90% of solicitors’ fees and all disbursements could be recovered. In exceptional circumstances (e.g. the losing party had abused the court process), then costs may be awarded on an indemnity basis, which allows recovery of all costs except those of an unreasonable amount or have been unreasonably incurred.
Award of such costs, however, are at the discretion of the court. The winning party may not recover costs if, for example, it has failed to take a step which would have saved costs, or it took a step which caused unnecessary costs, or the winning party had been guilty of unnecessary delay.
Are third parties permitted to fund competition litigation? If so, are there any restrictions on this, and can third party funders be made liable for the other party’s costs? Are lawyers permitted to act on a contingency or conditional fee basis?
Third party funding is not available in civil litigation in Hong Kong.
Lawyers in Hong Kong are not permitted to act on a contingency or conditional fee basis. Such arrangements would amount to the common law offence of maintenance and champerty. Reform of this area is not currently envisaged.
What, in your opinion, are the main obstacles to litigating competition damages claims?
In our view, the main obstacle to the development of competition damages claims is that a party with a potential competition damages claim must wait until a contravention is established by one of the local competition authorities before the Competition Tribunal. Standalone private actions are currently not available in Hong Kong.
Another obstacle is the absence of class actions in Hong Kong. Parties with potential competition damages claims must litigate separately, which may result in an inequality of arms in terms of legal representation and expertise in competition law.
The third obstacle is the lack of legal aid for competition law litigants. Without legal aid, consumers that have been harmed by anti-competitive conduct may not have the means for lodging legal actions for claiming competition damages.
What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?
We expect the introduction of standalone private actions will be the most significant development affecting competition litigation in Hong Kong in the next five years. Support for such introduction has already been voiced by the Competition Commission and some legislators. As at the date of writing, the issue of introducing standalone private actions is still being considered by the Hong Kong Government – and we expect to have an indication of their position within 2019.