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Cousins battle with the Swatch Group is now heading to the High Court in Londo


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At Long Last the Fight for Parts Supply is Going to the High Court

 

Cousins battle with the Swatch Group is now heading to the High Court in London. However, after the ruling in Switzerland, the case in London commences with arguments that you might not be expecting. Anthony Cousins explains the details below:-

 

 

It has been more than a year since I last updated you on our legal battle with the Swatch Group to overcome their refusal to openly supply spare parts. Doubtless some of you will think that we have gone quiet because we have given up, but nothing could be further from the truth. When we started this process, I made a commitment to keep fighting until we won the day, or had exhausted every available means. That fight has continued and has now reached a significant milestone.

 

In December of 2021, the Commercial Court of Bern gave a verdict that ran contrary to the most fundamental principle of British and European Competition Law, which is that no matter can be decided without consideration of the impact upon UK consumers and competition in the UK. We supplied the court with overwhelming evidence to show that watch owners are suffering substantially higher prices for servicing and repair, are waiting significantly longer for their watches to be returned, have an extremely limited selection of locations where they can obtain service, and are frequently obliged to have work done to their watches that is not necessary and that they do not want. We also asked the court to engage independent expert witnesses to advise them on how British Competition Law is applied and decided. The Bern Court refused to consider any of that evidence, declined to employ any expert witnesses, and determined that Swatch was “objectively justified in changing its supply chain. In so doing, the Bern Court did not consider at all any of the evidence we provided on the impact of Swatch’s cessations of supplies on UK consumers and competition in the UK.

 

As we reported in August of 2022, we appealed against this ruling to the Swiss Federal Supreme Court (FSC), pointing out in detail why the interests of consumers and competition are always paramount. Our experience of the FSC has not been good. Twice before the Bern court ruled in our favour, and on both occasions the FSC changed the Swiss Civil Code and found in favour of Swatch. Although our arguments were entirely correct, it came as little surprise when in September of last year, the FSC refused our appeal and found again for Swatch.

 

It is outrageous that a foreign jurisdiction thinks it can alter the basis of a UK law, without even asking for any opinion on this from this country, and at the same time ignore a wealth of factual evidence that has been placed before it. I have no doubt that the Swiss judicial system is not a suitable forum to give rulings on British and European law, but explaining in detail why is an issue for another day. However, for you as the reader to understand what actions we have taken subsequently, it is necessary that you understand some basic points about why the Swiss had the right to rule on British and European law in the first place.

 

Brexit had not happened when the case started back in early 2016, and an agreement existed between the EU, Switzerland, Iceland, Norway, and Denmark, called the Lugano Convention. This treaty deals with how cross border disputes between parties in the different countries should be managed in the courts, and in simple terms stated that all the signatories to the convention recognised each other’s judicial systems as being equal, and gave each other the right to rule using whichever country’s law was applicable. In our case this meant that a dispute between a British company and a Swiss company about a matter of British (and EU) law could be dealt with by either country’s courts.

 

When we first wrote to Swatch about taking legal action, we told them that we would be taking them to the High Court in London if they did not resupply us within three weeks. To avoid that, they brought a claim against us in the Bern court without, however, telling us that they were doing this. But this did mean that the proceedings were supposed to be dealt with using British and EU law, not Swiss law. I am not going to detail the whole case again here, but for what follows to make sense, there are four significant points I must explain about how this relates to the Lugano Convention in our case.

 

Firstly, the UK was (when the case began) bound by the Lugano Convention because it was a member of the EU, but when Brexit happened half way through our case, the UK was no longer part of the convention. The UK government applied to join the convention, and whilst waiting for a decision from the other members, held that any case started under Lugano rules would continue to be bound by them. Over a year later, the EU was still refusing to agree that the UK could join the convention, so the rules applicable in our case became somewhat less clear, and indeed before the final appeal was heard at the FSC, the Swiss courts declared that the convention was no longer applicable, and the final appeal was conducted under different rules.

 

Secondly, all EU members use the same wording in their competition laws that appears in the EU Treaty, the only minor and required difference is that where the EU Treaty says ‘in the EU’, the UK Competition Act says ‘in the UK’. As part of the Brexit process, although the basics of UK Competition Law stayed the same, Section 60a was added to the Competition Act which allows UK law to deviate from EU law, so the two cannot be considered to be the same.

 

Thirdly, under the terms of the Lugano Convention, if a matter is decided in one country then all the others are bound by it, and the courts of those other countries cannot review or overrule the decision, or hear the matter again, even if they are certain that the foreign decision is wrong. This is part of a wider legal principle known by the Latin phrase “Res Judicata”, which loosely translates as “This has already been Judged”. The point of this is to prevent a matter being repeatedly litigated, and to avoid conflicting judgements in different countries.

 

Fourthly, under the terms of the Convention, the only action another member country can realistically  take, is to refuse to recognise the foreign decision if it is ‘contrary to public policy’, but this has to be something other than the law applicable to the decision concerned, for example if one of the parties right to a fair trial was breached. As highlighted in the point above, it is not possible to argue that the Swiss courts did not apply Competition Law correctly. That would be ‘reviewing’ the case, which is expressly forbidden.

 

Keeping these four points in mind, the actions that Cousins have now taken can be understood.

 

When Swatch wrote to us in 2016 to say that they had lodged their claim with the Bern Court, there was a delay whilst we were waiting for the papers to be served on us. In that time period, we lodged our claim at the High Court in London in the expectation that the proceedings in Switzerland would not be admissible. Normally, a claimant has only three months to serve the papers on the other party, but because of the extraordinary nature of how the Swiss proceedings played out, we applied to the High Court for extensions to that time period, and in the end were granted a very exceptional ten of them. This meant that when the final FSC verdict came in, we still had a live claim that we could use.

 

After lengthy consultation with our UK legal team, we identified two ways in which we believe the UK courts have valid reason not to recognise the Swiss decision, which in turn would allow us to bring the case again in the High Court, and have a British Judge decide a matter of British law concerning British markets and British consumers.

 

Firstly, both the UK and Switzerland are signatories to the European Convention on Human Rights (ECHR), and it is contrary to public policy for the terms of that convention to be ignored. A crucial part of the ECHR is that parties in a legal action ‘have the right to be heard’. For this requirement to be met, it is vital that any evidence offered is considered by the court hearing the case. This did not happen in Bern.

 

Secondly (as I explained above) after Brexit, UK Competition Law had the right to deviate from that of the EU. The Bern court did acknowledge the addition of Section 60a to UK law, but continued to regard UK law as being the same as that of the EU, and made its judgement on that basis. It is therefore true to say that UK Competition Law has not been applied at all, so it is not correct to claim that the matter has already been judged.

 

In July this year, we served our High Court claim on Swatch (UK), and had the High Court start the process of serving on Swatch Group and ETA in Switzerland. The process of serving on foreign companies takes a few months, but Swatch UK received the claim within two days, and were required by the rules to enter a defence within six weeks. As we expected, Swatch responded by stating that this matter was already decided, and they applied to the High Court to have the claim struck out.

 

We objected to the application on the grounds that I have explained above, and after some debate back and forth, it was agreed that there would be a one day hearing before a Judge in the High Court in order to decide whether or not the Bern verdict should be recognised in UK law. In simple terms, if the Bern decision is recognised, then there is little else that we can do. However, if the Bern decision is not recognised, then our current claim will continue and a longer hearing will be timetabled at which the evidence will be considered, and a ruling will be given under British Law. We are very confident as to what that ruling would be. On Monday of this week the administrative team at the High Court processed possible dates for the hearing, and it has been confirmed to us this will be the week commencing 26 February 2024.

 

Whilst I am sure that there will be much interest within the watch repair world, this case has far greater significance. The Bern decision is not confined to watch parts, but covers wholesaling and other forms of distribution of any product in any market. If that decision is recognised, then small businesses in every sector who can not compete with the buying power of their larger counterparts will find themselves either out of business, or under the direct control of the manufacturers, and the big loser in the end will be the consumer.

 

I never imagined when all this began that Cousins would end up fighting to uphold the basic principles of UK business law, but if that is what we need to do in order to preserve the right of our customers to continue to offer their services to UK consumers as they have done for Centuries, then that is what we will do.

 

I will keep you updated as matters progress.

 

Regards,

Anthony

 

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