Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2013] CSOH 48
A278/07	OPINION OF LORD WOOLMAN in the cause THE SCOTTISH PREMIER LEAGUE LIMITED Pursuers; against LISINI PUB MANAGEMENT COMPANY LIMITED Defenders: ________________

Pursuers: Lake, QC; Harper Macleod LLP

Defenders: McIlvride; TLT Scotland Limited

25 March 2013

Introduction

[1] Lisini Pub Management Co Ltd ("Lisini") owns three public houses in the West of Scotland. They include 'the Angels' in Uddingston. It has several television screens. On three Saturday afternoons in 2006, Lisini showed live matches from the Scottish Premier League at the Angels. The broadcast signal came from Poland.

[2] The Scottish Premier League Ltd ("SPL") learned of the screenings at the Angels. It claimed that the broadcasts were unlawful. In late 2006 it raised proceedings against Lisini. On 9 January 2007 Lisini granted an undertaking not to broadcast any future live matches. On 4 May 2007, SPL obtained an interim interdict to similar effect. That order was sought and obtained after a further match was screened at the Angels.

[3] This court recalled the interim interdict on 12 July 2012. Lisini alleges that the interim interdict was wrongful and seeks damages of over £1.7 million. SPL takes the opposite position. It maintains that the interim order was lawful on the basis of the undertaking and that it is now entitled to permanent interdict.

The Facts

[4] SPL holds the broadcasting rights to Scottish Premier League matches. It grants licences to enable the matches to be broadcast both here and abroad. Those licences are granted with a view to maximising the financial return to its member clubs. Within the United Kingdom, however, SPL prohibits live matches being screened on Saturday afternoons. The closed period for transmission is between 14.45 and 17.15 hours. That restriction implements a rule of the Union of European Football Associations ('UEFA'), of which SPL is a member. The rule aims to encourage attendance at matches and to promote interest in sport in young people.

[5] In 2006 and 2007 SPL granted the rights to broadcast its matches in Poland to Telewizja Polsat SA ("Polsat"). At that time, Celtic FC had a well-known Polish player in its first-team squad. His appearances generated significant interest in his home country. Polsat acquired the signal by means of a broadcasting chain. SPL provided the signal to TWI (UK) Ltd. In turn TWI relayed the signal to Trans World International Inc, who passed it to Polsat. A contract was in place for each link in the chain.

[6] Polsat broadcasts by way of satellite transmission. Its customers access the signal by purchasing a decoder device and a smart card from its associated company, Cyfrowy Polsat ("CP"). Lisini purchased a card and decoder on CP's standard terms and conditions. Clause 4.2 restricts the geographical area of the contract. It stipulates that "making use of the offer is possible solely in the territory of the Republic of Poland".

[7] On 18 November 2006, Celtic FC played Inverness Caledonian Thistle FC. Lisini broadcast the match live at the Angels. On 24 November 2006 SPL's agents wrote to Lisini referring to the Copyright, Designs and Patents Act 1988 ('the 1988 Act'). They stated (a) that possession of a decoder and card was unlawful in terms of section 298; and (b) that use of the apparatus might be a criminal offence under section 297, which could lead to a maximum fine of £5,000.

[8] The letter continued

"To avoid action being taken, you must immediately cease showing the broadcasts and provide an undertaking that you will hand over the decoding apparatus and not show the broadcasts in the future. You may not sell the decoding apparatus or let it to another person. We attach a draft undertaking. To provide a suitable undertaking, please complete and return the undertaking to us by return."

[9] Lisini maintains that it did not receive the letter. Accordingly, it did not provide a response, oral or written. During the course of December it broadcast two further Celtic FC matches at the Angels.

Proceedings in Hamilton Sheriff Court

[10] Because it had not received a reply to the letter before action, SPL commenced proceedings. The action was raised in December 2006 in Hamilton sheriff court. SPL sought orders against Lisini for (a) delivery of the decoder and card; (b) interdict and interim interdict; and (c) count and reckoning, with an alternative claim of £25,000. The initial writ refers to various sections of the 1988 Act, but it is not clear upon which precise provision SPL founded. The pleas-in-law are silent on the matter.

[11] SPL enrolled a motion for interim interdict. Before the motion was heard, there were communications between the parties. On 9 January 2007 Lisa Wishart, one of Lisini's directors, signed an undertaking on its behalf. It states:

"I am now aware that the apparatus which has been used by [Lisini] to access the programmes is licensed only for use in Poland and not in the United Kingdom. I am now aware that access to these broadcasts is limited to people outside the United Kingdom and that I am not entitled to access programmes included within them. I am now aware that possession of such apparatus for commercial purposes is unlawful in terms of section 298 of the Copyrights, Designs and Patents Act 1988 and that use of that apparatus may be a criminal offence under section 297 of that Act.

On behalf of [Lisini] I undertake that in future [Lisini] will not purchase, hire, or otherwise obtain either on its own account or for any other person, any apparatus designed or adapted to permit access to programmes featuring live Scottish Premier League football matches included in a broadcasting service in a situation where there is no agreement with the broadcaster permitting [Lisini] or such other person to have such access.

On behalf of [Lisini] I undertake that in future [Lisini} will not, either on its own behalf or on behalf of any other person, use, cause to be used or permit to be used in any premises any apparatus designed or adapted to permit access to programmes featuring live Scottish Premier League football matches included in a broadcasting service in a situation where there is no agreement with the broadcaster permitting the company or such other person to have such access".

[12] The terms of that document are modelled on the draft undertaking attached to the letter dated 24 November 2006.

The present action

[13] On 7 April 2007 Lisini screened another live match involving Celtic FC at the Angels. SPL responded by raising the present action on 3 May 2007. The next day it obtained the following order ex parte:

"The Lord Ordinary, having heard counsel on the pursuers' motion, no caveat having been lodged, and before calling, ad interim, interdicts the defenders either on their own account or by any other legal or natural person on their behalf, from using apparatus in their possession designed or adapted to enable or assist them to access programmes included in a broadcasting service provided from a member State of the European Union and which the defenders are not entitled to access in Scotland ("infringing apparatus") to access in Scotland programmes featuring live Scottish Premier League football matches other than programmes in respect of which they have an agreement permitting them to receive broadcasts in Scotland, including without prejudice to the generality hereof from using such infringing apparatus to access such programmes in broadcasts from ... Polsat."

[14] The summons mirrored many features of the sheriff court initial writ. In both cases, SPL sought orders for delivery, interdict, and count and reckoning. In addition to the letter of 24 November 2006, the summons also referred to Lisini's undertaking of 9 January 2007. More importantly, SPL continued to found on the 1988 Act:

"in the circumstances, the pursuers are entitled to interdict of the defenders against use by them of that apparatus to access broadcasts of SPL matches. Reference is made to the Copyright, Designs and Patents Act 1988, sections 6, 6A, 96, 99, 297, 298 and 299."

[15] The court fixed a debate to take place on 31 January 2008. On that date, however, Lisini moved to discharge the hearing. The court granted that motion and fixed a proof before answer. Subsequently, the parties became aware of a significant development. A similar case awaited a decision from the European Court of Justice ("ECJ"). It had been referred by the English courts and involved public houses in England broadcasting live matches from the English Premier league. The parties in the present action decided to hold matters over until after the ECJ issued its decision. They applied to discharge the proof and sist the case, which the court granted on 27 February 2009. The sist remained in place for over three years.

[16] The ECJ decision is reported as Football Association Premier League v QC Leisure [2012] FSR 5 ("the English Premier league case"). I shall discuss it in more detail below. Put short, the ECJ found that clauses prohibiting the use of foreign decoders and smart cards were void. They constituted a restriction on competition and the anti-competitive provisions of European law prevailed over the 1988 Act.

[17] The parties took time to consider matters in the light of the ECJ decision. Lisini applied to recall the interim interdict. SPL did not oppose that application and I granted the motion on 12 July 2012. At the same time, I allowed parties a period of adjustment, which they both used to revise their pleadings to a significant degree.

a.    SPL deleted its conclusions for delivery and count and reckoning. It also deleted all references to the 1988 Act. By doing so, it therefore restricted its claim solely to interdict based upon the undertaking.

b.    Lisini lodged a counterclaim seeking declarator (i) that the interim interdict granted on 4 May 2007 was wrongful; and (ii) that SPL had acted in breach of Articles 101 and 102 of the Treaty on the Functioning of the European Union ('TFEU'). Lisini also sought damages of £1,761,749.

[18] Lisini then enrolled a motion for a commission and diligence to recover documents from SPL. The calls were directed toward written materials which showed any territorial restrictions in the arrangements between the various parties in the contractual chain: SPL, TWI (UK) Ltd, Trans World International Inc, Polsat and CP.

[19] SPL opposed that motion. Mr Lake, who appeared on its behalf, challenged the fundamental basis of Lisini's claim. He submitted that the defence and counterclaim were irrelevant. He invited me to grant decree de plano in the principal action and to dismiss the counterclaim. In light of that fundamental issue, I appointed the cause to the Procedure Roll. I continued the motion for a commission and diligence to the same hearing. It appeared that its grant or refusal would depend upon the decision I reached on the substantive matter.

The Issues

[20] Mr McIlvride appeared on behalf of Lisini at the debate. He helpfully narrowed the scope of the discussion by indicating that Lisini no longer insisted on two of its arguments. The first was the article 102 case - abuse of a dominant market position. The second was Lisini's plea-in-law that SPL had no title to sue. Mr McIlvride explained that the plea had been taken in relation to SPL's earlier pleadings. They founded on CP's standard terms and conditions. Lisini sought to meet that case by arguing that any action should be brought by CP. Once SPL had altered its case to rely solely on the undertaking, the plea was no longer relevant.

[21] On the main point, Mr Lake submitted that the undertaking is a free-standing one. The words being clear and unequivocal, Lisini is bound by its terms. Mr Lake also contended that an article 101 TFEU case had to make averments about the relevant market. Lisini having failed to do so, I should dismiss the counterclaim. Mr McIlvride invited me to reject both these arguments and to appoint the cause to a proof before answer.

Construction of the undertaking

[22] It is often a nice question whether to hear evidence before construing a document. Counsel had opposing views. Mr McIlvride invited me to defer my decision until I had heard testimony. He said that I required to hear about the circumstances surrounding the undertaking. Only then would I have a proper understanding of the context in which it was granted. In my view, that is unnecessary in this case. I agree with Mr Lake that I have all the relevant material to make a decision.

[23] Mr Lake submitted that no attempt had been made to reduce the undertaking. No question of error - common or unilateral - had been raised. It followed that the undertaking remains valid. Looking to the words used, Lisini bound itself not to obtain any apparatus to access unauthorised signals. That was a free standing contract which was not nullified by the English Premier League decision. It followed that SPL is entitled to enforce the undertaking.

[24] Despite its attractive simplicity, I reject that argument. I do so for the following reasons. In my opinion, Lisini granted the undertaking on the basis of an alleged breach of the 1988 Act. Its preamble makes that plain. Further, Ms Wishart signed the document on the basis of the representations made in the initial writ. Both likewise found on the 1988 Act. I make no criticism of SPL's solicitors in this connection. At that time, the law was in a state of flux. They were entitled to refer to the 1988 Act in seeking to protect their client's interests. But I can find no warrant for suggesting that Lisini intended to be bound "come what may".

[25] SPL's argument focuses on the operative words at the end of the undertaking. But in my opinion that involves throwing a cordon sanitaire around those words. On that approach, they require to be detached from the other words in the document and isolated from the surrounding circumstances. In my view such a construction is too narrow. It does not square with the trend of recent authority, which has been conveniently summarised by Lord Hodge in a number of cases, including Macintyre House Limited v Maritson Developments Limited [2011] CSOH 45 (at para.28).

[26] In my view, SPL's approach runs counter to the sagacious words of Learned Hand J in Giuseppe v Walling 144 F.2d 608, 624 (2d Cir. 1944):

"There is no surer way to misread any document than to read it literally. ... As nearly as we can, we must put ourselves in the place of those who uttered the words, and try to divine how they would have dealt with the unforeseen situation; and, although their words are by far the most decisive evidence of what they would have done, they are by no means final."

[27] In light of these considerations, I hold that the undertaking implicitly fell at the same time as the interdict was withdrawn. I shall therefore dismiss the principal action. That means that the motion for commission and diligence will be refused as unnecessary.

The Counterclaim

[28] Since its inception, the European Union has promoted freedom of commerce. The main anti-competitive provision was originally found in article 85(1) of the Treaty of Rome. It was then housed in article 81(1) of the Treaty Establishing the European Community. It is now to be found in Article 101 of TFEU:

"(1) The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:

(a)  directly or indirectly fix purchase or selling prices or any other trading conditions;

(b)  limit or control production, markets, technical development, or investment ...

(2) Any agreements or decisions prohibited pursuant to this article shall be automatically void ..."

[29] Some agreements are clearly intended to be anti-competitive. In others, that fact will not be obvious. Article 101 (1) covers both "object" and "effect" cases. There is an extensive jurisprudence on its application, which begins with Societie Technique Miniere (LTM) v Maschinenbau Ulm GmbH [1966] CMLR 357. The ECJ stated (at p 375) that in each case, the first task is to "consider the very object of the agreement, in the light of the economic context in which it is to be applied." Where, however, that:

"does not reveal a sufficient degree of harmfulness with regard to competition, examination should then be made of the effects of the agreement and, if it is to be subjected to the prohibition, the presence of those elements which establish that competition has in fact been prevented, restricted or distorted to a noticeable extent should be required. The competition in question should be understood within the actual context in which it would occur in the absence of the agreement in question."

[30] The court has followed that approach in numerous cases, including, for example, Volk v Ets. Vervaecke SPRL [1969] CMLR 273. The matter is helpfully summarised in GlaxoSmithKline Services Unlimited v Commission of the European Communities [2010] 4 CMLR 50, where the Court of First Instance stated at para. 55:

"According to settled case-law since the judgment in Societie Technique Miniere ... the alternative nature of the condition, indicated by the conjunction 'or', leads first to the need to consider the precise purpose of the agreement, in the economic context in which it is to be applied. Where, however, the analysis of the content of the agreement does not reveal a sufficient degree of harm to competition, the consequences of the agreement should then be considered and for it to be caught by the prohibition it is necessary to find that those factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable extent. It is also apparent from the case-law that it is not necessary to examine the effects of an agreement once its anti-competitive object has been established ..."

[31] There is a tension between the final two sentences. In an "object" case, must the restriction operate to an "appreciable extent"? The Court of First Instance stated that "an agreement escapes the prohibition of article 85 when it only affects the market insignificantly" (ibid). Subsequent cases have revisited this question. For example in Beguilin Import Co v GL Import Export SA [1972] CMLR 81, at para 16 the court stated that: "to bring into play the prohibition set out in article 85, the agreement must affect noticeably the trade between member states and competition".

[32] In Yves Saint Laurent Parfums SA v Javico International AG [1999] QB 477, the court stated that "anti-competitive conduct may not be struck down ... unless it is capable of affecting trade between member states" (para. 15). That fell to be determined by reference to the position and the importance of the parties in the market for the products concerned (para. 17). Other cases also illustrate the need to define the market in question: Re Italian Flat Glass [1992] 5 CMLR 302; European Night Services [1998] 5 CMLR 718; and Competition Authority v Beef Industry development Society Ltd [2009] 4 CMLR 310.

[33] The European Commission has issued two guidance notices on the question: OJ 97/C 372/03 and 2001/C 149/05. The 1997 notice expressly covers both types of prohibited agreement, that is, those that either have the object or the effect of altering competition within the market. It stresses that market definition is important, because it often "has a decisive influence on the assessment of a competition case". It goes on to provide guidance on what constitutes an appreciable restriction of competition. For example, in the case of an agreement between actual or potential competitors, it means an aggregate market share of 10% or greater.

[34] The 2001 Notice is entitled: "Draft notice on agreements of minor importance which do not appreciably restrict competition ... (de minimus)." Its aim is "to give guidance to the courts and authorities of the member states in their application of article 81" (para 4). The process to be followed is clear:

"in order to calculate the market share, it is necessary to determine the relevant market. This consists of the relevant product market and the relevant geographic market. When defining the relevant market, reference should be had to the notice on the definition of the relevant market for the purposes of community competition law."

[35] Founding on these materials, Mr Lake submitted that Lisini's Art. 101 case was irrelevant. It had failed to define the market. Indeed the pleadings did not disclose whether Lisini regarded the market as embracing Scottish, United Kingdom or European football. It remained unclear whether the market included telephone networks as well as satellite broadcasting. Was the market limited solely to pubs? Mr Lake contended that a restriction which only related to three public houses would be a "drop in the ocean". It is self-evident that it could not affect competition to an appreciable extent. Accordingly, the counterclaim should be dismissed.

[36] Mr Lake also relied on the Outer House decision in PIK Facilities Limited v Watson's Ayr Park Ltd 2005 SLT 1041. In that case, the court held (at para. 42) that it was essential for a party claiming an infringement of the anti-competition provisions "to make a distinct averment in clear and precise terms of the relevant market. The importance of such an averment can hardly be over emphasised as the definition of the market is bound to affect the subsequent examination of the question whether there has been abuse of a dominant position." That matter was not one that could be left to inference.

[37] There is much force in that argument. But in my view the matter can only properly be considered in the light of the decision in the English Premier league case. It concerned two joined cases, one civil and one criminal. In the civil case, the Football Association Premier League ("FAPL") had brought proceedings against publicans who had used satellite decoder cards from foreign broadcasters to show football games on screens in their bars. Importers and suppliers of the cards were also convened as defendants. As in the present case, FAPL alleged infringement of copyright under sections 288 and 289 of the 1988 Act. In the criminal action, proceedings were brought against one licence holder under section 297(1) of the 1988 Act. She was convicted of wrongfully screening live matches at her public house using a decoder card and a satellite dish obtained from NOVA, which held a licence to broadcast the matches in Greece.

[38] The English courts referred a great many questions to the ECJ. For present purposes it is enough to focus on one discrete area. The ECJ was asked to consider the necessary requirements for an art. 101 case. Is it enough to show simply that the agreement has the object of preventing, restricting or distorting competition? Or must it also be shown that the restrictive effect is appreciable?

[39] The ECJ began by making the familiar observation that article 101 (1) contains two separate tests and crisply differentiated between them:

"The fact that the two criteria are alternatives means that it is appropriate, first and foremost, to determine whether just one of them is satisfied, here the criterion concerning the object of the agreement. It is only secondarily, when the analysis of the content of the agreement does not reveal a sufficient degree of impairment of competition, that the consequences of the agreement should be considered, and for it to be open to prohibition it is necessary to find that those factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable extent ..." (para. 135)

[40] The ECJ went on to discuss agreements which were designed either (i) to partition national markets, or (ii) to make the interpenetration of national markets more difficult. It said that in principle, they were object agreements caught by art.101(1) TFEU. Turning to the facts in front of it, the ECJ stated:

"where a licence agreement is designed to prohibit or limit the cross-border provision of broadcasting services, it is deemed to have as its object the restriction of competition, unless other circumstances falling within its economic and legal context justify the finding that such an agreement is not liable to impair competition" (para. 140).

[41] The Court held that the contracts under consideration did have an anti-competitive object and concluded (para. 146):

"the clauses of an exclusive licence agreement concluded between a holder of intellectual property rights and a broadcaster constitute a restriction on competition prohibited by art. 101 TFEU where they oblige the broadcaster not to supply decoding devices enabling access to that right holder's protected subject-matter with a view to their use outside the territory covered by that license agreement."

[42] In my view the English Premier league case has an important bearing on the present action. The material facts are virtually identical. The ECJ gave clear answers to the precise questions referred to it. Its decision means that subscribers in member states are entitled to access broadcast signals from other member states. An EC citizen living in (say) Germany should not be prevented from obtaining a signal from Sky, BBC, RAI, Nova or Polsat.

[43] Mr Lake accepted that the ECJ arrived at its conclusion without any detailed investigation of the market. He suggested that it did so because it was a reference and that it expected the national court to carry out the necessary investigation. I find that argument unconvincing. In my view the ECJ has held that the object of such agreements is to restrict competition. That is enough to provide Lisini with a prima facie art. 101 case. I therefore refuse to dismiss the counterclaim.

Conclusion

[44] I shall put the case out by order to discuss further procedure.