See you in court

Preparations to launch a major civil lawsuit against airlines involved in cargo price fixing are gathering momentum among shippers in Europe, in what many believe will be the biggest cartel claim in European history.

Europe’s largest shipper association, Evo, in the Netherlands, last month began working with litigation specialist Claims Funding International (CFI) to help coordinate a class action case in Europe that aims to recover hundreds of millions - possibly billions - of euros on behalf of end users of air freight transport.

Shipper associations in Belgium, Sweden and Switzerland have also endorsed CFI, following the European Shippers’ Council decision to advise its member councils in France, the UK, the Netherlands, Romania, Portugal, Germany, Sweden, Switzerland and Belgium that CFI is its "preferred group" to conduct the recovery proceedings for European claimants.

The UK is said to be close, while France is understood to have given its verbal endorsement, because it is unable to do so in writing.

CFI MD Peter Koutsoukis says it has so far signed up around 300 shippers, including businesses in Australia, the Netherlands, France, Belgium and Switzerland. The majority are in Australia, where CFI’s parent company, Maurice Blackburn, has been conducting air freight litigation for almost three years, but around 100 are from Europe. Among them are some of the world’s biggest shippers, such as Johnson & Johnson, GlaxoSmithKline, Toshiba and Fuji Xerox.

Thousands of claims Observers believe there will eventually be thousands of claimants in Europe.

Joost van Doesburg, Evo’s head of European affairs and air cargo, says around 2,500 of his organisation’s 30,000 members are air shippers.

"All the big air shippers in the Netherlands will join, or have already joined, the CFI claim, " he says.

Unlike in the US, where the law requires that the direct customer of the airline - the freight forwarder - makes the claim, claims in Europe will come from shippers themselves.

Koutsoukis says there are no cases expected by shippers against freight forwarders, and he is hopeful that forwarders will help their shipper customers by providing information relevant to the case.

Van Doesburg says many shippers are waiting to sign-up until the European Commission delivers the result of its inquiry into price-fixing by airlines, which it launched in February 2006.

The result has been delayed several times, but Doesburg is confident it will come by the end of the year, which is when EU competition commissioner Neelie Kroes’s term in office comes to an end. He believes it is likely to come in early Competition commissioner Neelie Kroes is likely to reveal the result of the EC inquiry into price-fixing by airlines in Europe by the end of the year December.

Few doubt that the airlines that have already admitted taking part in the cartel in the US between 2000 and 2006 will also be found guilty by the EC, which is widely expected to fine the airlines hundreds of millions of euros.

The US Department of Justice has already fined carriers a total of more than US$1.6bn as a result of its inquiry, while Australia and Canada have so far imposed fines adding up to tens of millions.

So far, 15 airlines have pleaded guilty and agreed to pay criminal fines in the US:

British Airways, Korean Air Lines, Qantas Airways, Japan Airlines, Martinair, Cathay Pacific Airways, SAS Cargo, Air France, KLM, El Al, Lan Cargo, Aerolinhas Brasileiras, Cargolux, Nippon Cargo and Asiana Airlines.

Even greater fines Van Doesburg believes the fines from the EC may be even greater than those imposed by the US.

"The backbone of this cartel was made up of European carriers, " he said. "US carriers did not take part. So the fines, and claims by shippers, will probably be higher in Europe."

Koutsoukis says it is still unclear how much of the substantial body of evidence that has emerged from the criminal prosecutions in the US and Australia can be used in civil cases, although Cfiwould certainly attempt to use as much of it as possible. But the admissions by airlines during the investigations means that their involvement in the cartel will not be in dispute in the civil cases, which can focus solely on the commercial benefits achieved by the cartel and the level of compensation due to its victims.

Koutsoukis acknowledges that although the EU still lacks the necessary legislative framework to allow law firms to bring EUwide class action cases, the principle of "assignment" is well established in most EU member states.

Assignment means claimants sign over their rights of claim to a law firm, which makes a claim on behalf of multiple clients after agreeing to pass on a percentage of any award to the individual claimants.

Different arrangement A different arrangement would be needed for the UK cases, because cases of tort - civil wrong - are not "assignable" under English law.

In the European air cargo cases, CFI would itself take around 30% of any award, on a no-win, no-fee basis.

"It is risky, because it has never been done before in Europe, " says Koutsoukis.

A test case will take place in the Netherlands, involving claims by several major Dutch shippers against Dutch airlines KLM and Martinair. Koutsoukis says the Netherlands has been chosen because it the most experienced EU member state in terms of dealing with cartel cases, it is a nation sympathetic to these kinds of cases and because court costs are far lower than in other countries.

"But if we settle, we can settle Europewide, either before or after we get a court ruling, " says Koutsoukis. "In the Netherlands, most cases are settled before a trial."

Cfiestimates that agreements between airlines on fuel and other surcharges elevated the price of air freight by around 10%.

Evo’s van Doesburg says: "If you just take the 30 biggest shippers in the Netherlands, together they spend €400-500m on air freight each year. If you multiply that seven times, for the number of years this cartel was operating, it is a huge figure. Then you have all the shippers in other countries. We are really talking about a lot of money."

Koutsoukis says the 10% figure is based on a number of factors taken into account by economists used by CFI, but it roughly Peter Koutsoukis says shippers just want a fireasonable repaymentflfrom the airlines that colluded on surcharges corresponds with a civil claim already settled by Lufthansa Cargo in the US.

In 2007, it agreed to pay US$85m to settle civil claims in the US relating to its involvement in the cartel, and C$5m to cover claims in Canada. That corresponds with 8% of Lufthansa Cargo’s US revenue during the period in question, says Koutsoukis.