Under English law, the courts refuse to endorse a claim for damages when the claimant was a party to a contract borne from illegal principles, while this is echoed in equity under the maxim ‘he who comes to equity must come with clean hands’; and so, reminds those considering such arrangements that they do so without the aid of the judiciary.
However, in this matter the claimant was a party to a publican agreement drawn up through the merger of a large brewery and owners of a number of public houses across the United Kingdom, while as part of this agreement, the claimant brewery contracted to supply beer to existing tenants (publicans) under a non-negotiable tariff purportedly designed to protect the interests and profits of those purchasing; and yet, after the tenant had somehow amassed a debt of around £15,000, the brewery sought recovery through the courts.
Having previously discovered that the brewery was supplying the same beers for lower prices to non-contracted third parties, it was then counter-claimed that the agreement demonstrated a breach of article 85 EC (formerly article 81 EC), therefore damages were owed and no payment for previously provided beer was due.
After the case reached the Court of Appeal, it was decided that due to the conflict between national and Community law, a preliminary ruling to the European Court of Justice under article 234 EC needed to confirm:
1. Whether art.85 EC allowed a party to a prohibited agreement to claim damages?
2. Whether a party can claim when relying upon their own adherence to the agreement?
3. Whether a national law preventing recovery under prohibited agreements remained consistent with Community law?
4. Where deemed incompatible which situations allowed national law to apply?
Having evaluated the aims of national law and the claim’s validity, it was agreed that while those contracting in the distortion of fair competition are themselves contributors to their own demise, there are certain scenarios demonstrating an inequality of bargaining power, and thus grounds for reconsideration.
Here, the Court noted how in this instance the tenant was subjected to the terms of the agreement with little to no room for bargain; and so, while it was agreed that the terms of article 85 EC precluded claims of that nature, it did so on the proviso that the claimant was proportionately liable for any market distortion, while it was also clear that where no such arrangement existed, the effects of article 85 EC (which provided for direct effect and application between individuals) were sufficient enough to allow for a claim, despite any objections raised under English law, while reminding the parties that:
“[C]ommunity law precludes a rule of national law which prevents a party subject to a clause in a contract which infringes Article 81 EC from recovering damages for the loss suffered by it on the sole ground that it is a party to that contract.”