As reported here, BMW and VW challenged the extraterritorial reach of CMA information gathering powers under s26 of the Competition Act 1998 (s26) and the Competition Appeal Tribunal (CAT) has now issued its judgment, declaring that the CMA does not have powers to compel a foreign entity with no UK territorial connection to produce documents held abroad.

In this case, this therefore e.g. meant that:

• BMW (UK) Ltd (BMW UK) – a UK subsidiary of BMW AG – was obliged to comply with the CMA’s information request under s26 (the s26 notice), as it is a legal person sufficiently connected with the UK and so subject to UK laws but
• BMW AG was not obliged to comply with the s26 notice, as it had no UK territorial connection, being incorporated and domiciled in Germany with no branch or office in the UK

If, however, BMW UK had controlled documents responsive to the s26 notice beyond UK territory (e.g. in a physical warehouse of documents abroad), BMW UK would have been obliged to produce those documents.  This is different to the CMA’s attempt to oblige BMW AG and any legal or natural person within BMW AG, wherever situated, to comply with a s26 notice merely because one part of the BMW AG group (BMW UK) had a UK territorial connection – this interpretation of s26 was described by the CAT as rendering s26 “aggressively extraterritorial”. CAT stated that “the effect of the [s26 notice] is plainly extraterritorial and very likely to undermine comity between nations”, adding that a “foreign jurisdiction is unlikely to be impressed by the imposition of an obligation on a legal entity operating solely in its jurisdiction to provide an administrative authority in another jurisdiction (under threat of sanction) with documents and information”.

Whilst a "person" can extend to an "undertaking" for the purpose of competition law, this did not absolve the CMA from directing the s26 notice to a specific natural or legal person within the undertaking. The CAT thus concluded that a s26 notice can only be issued to an undertaking via a natural or legal person with sufficient connection to the jurisdiction of the UK. If the s26 notice is addressed to an undertaking, such as the ultimate group parent, it must inform all constituent elements of the undertaking of the s26 notice. Whether those elements are themselves obliged to respond to the notice depends on whether they have a UK territorial connection. If they do, then they must respond as if the notice were directed to them specifically. If they do not, then the presumption against extraterritoriality applies and there is no obligation to respond.

This case is the first time the extraterritorial reach of CMA’s information gathering power has been challenged and the judgment is a significant blow for the CMA, which has stated it will seek to appeal it. Unless the CAT’s judgment is overturned, it will make it more difficult for the CMA to carry out future cross-border cartel investigations effectively, as the CMA no longer forms part of the European Competition Network (ECN) of EU competition authorities. When the UK was still an EU member, the CMA could access the enforcement cooperation mechanisms of the ECN to obtain overseas documents and information more easily in an investigation.