German Supreme Court provides guidance on applicable law and standards of proof for causality and damage quantification in follow-on damage actions in light of recent CJEU case law
On 29 May 2020 the German Supreme Court (‘Bundesgerichtshof’) published two judgments (KZR 23/17 and KZR 25/17) in which it provides detailed guidance on the legal principles and the standard of proof to be applied for the substantiation of damages in follow-on damage actions in the light of EU law principles. These judgments are of wide interest for courts across the EU as Germany’s highest civil court sets out the practical implications of the recent case law of the CJEU in cases Skanska (C-724/17) and Otis (C-435/18) for the establishment of causality and damages. Factual Background The judgments concern two damage actions brought by public transport companies against members of the German rail-tracks cartel. According to the findings of the German Competition Authority (‘Bundeskartellamt’) producers of rail-tracks had infringed the EU (Art. 101 TFEU) and the German (Art. 33 ARC) cartel prohibition between 2001 and 2011 by agreeing on prices, quotas and allocating customers. The two public transport companies had purchased rail-tracks during the relevant period from the cartel members. Based on the fining decision by the Bundeskartellamt the companies brought separate damage actions against one of the cartel members in which they requested that the defendant should be held liable in principle for any damage caused by the cartel. The first and the second instance court decided in favour of the claimants, mainly on the basis of the then established case law, confirming a prima facie evidence that cartels in general result in a damage. The Bundesgerichtshof in line with its earlier judgment in the rail-track cartel case (judgment of 11 December 2018 – KZR 26/17) held that claimants cannot rely on such prima facie evidence and therefore sent the cases back to the appeal court which now has to consider again the question of liability of the cartel member for any damage caused, without relying on the prima facie evidence. However, the Bundesgerichtshof used the reasoning in the judgments to provide the lower courts with clear guidance on the principles and standards to apply in their decision on the substance of the damage actions. EU law determines entitlement to damages, liability for damages and the causal link between infringement and damage At the outset of its general conclusions the Bundesgerichtshof stipulates under reference to the recent CJEU judgments Skansa and Otis that in case of an infringement of Art. 101 TFEU EU law determines (i) the persons entitled to bring a damage action, (ii) the persons and/or legal entities liable for the damage, and (iii) the concept of causal link between the conduct prohibited under Article 101 TFEU and the alleged damage. The Bundesgerichtshof confirms the wide scope of the right to obtain damages under EU law as well as its aim to prevent future infringements: “In order to enhance the enforceability of the Union’s competition rules and to deter undertakings from entering into agreements or practices which – often secretly – restrict competition, any person may claim compensation for the damage suffered as long as there is a causal link between the conduct prohibited under Art. 101 TFEU and the harm suffered”. Therefore, not only market participants active on the directly affected market or on neighboring markets (typically direct or indirect purchasers or suppliers of the cartel members or of cartel outsiders) are entitled to claim for damages. Rather, the group of persons entitled to claim damages also extends to other third parties whose assets have been adversely affected by the cartel agreement. Standard for the establishment of liability and causality – no need to show cartel effect on individual transactions The Bundesgerichtshof then sets out the standard for the establishment of liability in principle (i.e. prior to the quantification of the damage). According to the Bundesgerichtshof the courts “merely have to examine whether the defendant is guilty of an anti-competitive conduct which – through the conclusion of sales transactions or otherwise – is capable of directly or indirectly justifying that the claimant suffered a damage.” In the case at hand this standard was met “without further ado” as the claimant had purchased goods that were subject of the cartel agreements from the defendant. The Bundesgerichtshof further clarified that for the establishment of the causal link, it was not required to determine whether the cartel agreement actually had an effect on the individual procurement transaction in question. The Bundesgerichtshof specifically held that it was not necessary to show such ‘cartel affectedness’ of each individual transaction in order to establish liability and that this was a question of the quantification of the damage. According to the Bundesgerichtshof, “If it turns out that the claimant has suffered a loss attributable to the cartel agreement, it is also clear that the prohibited agreement had a detrimental effect on the transaction, in particular on the price paid.” Pursuant to the Bundesgerichtshof this is in line with the requirements of EU law as established in Otis according to which not only participants on directly affected or neighbouring markets, but also only indirectly affected third parties which did not enter into direct or indirect transactions with the infringers, can claim compensation for the damage caused by a cartel. Standard for the quantification of the damage The Bundesgerichtshof also provides detailed guidance on the standards to be applied in relation to the quantification of the damage caused by a cartel. a) National procedural law (lex fori) to be applied in light of EU law principles of effectiveness and equivalence Under reference to the case law of the CJEU (C‑557/12 Kone) the Bundesgerichtshof held that while the right to compensation for damages in case of an infringement of Art. 101 TFEU, including the concept of causality, is governed by Union law, the modalities, including the civil procedural law requirements regarding the judicial determination of the relevant facts, are governed by national civil procedural law (lex fori). However, in the application of the national procedural rules the national courts are bound by the principles of equivalence and effectiveness to ensure the effective application of the EU competition rules and the resulting right for compensation. b) Standard of proof in view
Towards civil liability of subsidiaries non-addressees of cartel decisions (C-882/19, Sumal)
In a request for a preliminary ruling, the Barcelona Provincial Court asks the EU Court of Justice which legal entities within the undertaking are liable for the damages caused by an infringement of Art. 101 TFEU. Is this liability limited to the addressees of the fining decision or could in principle every legal entity that forms part of the single economic unit be sued for damages? The response will have significant procedural and material law implications for claimants and defendants in antitrust damages litigation throughout the European Union. Factual context On 3 December 2019, Barcelona Provincial Court (‘Barcelona Court’) lodged a request for a preliminary ruling (‘Request’) to the Court of Justice of the European Union (‘CJEU’). The Request concerns the issue of civil liability of the legal entities within the undertaking that has been sanctioned for the infringement of EU and national competition law. The main characteristics of the national case are as follows: National proceedings The Barcelona Court is hearing the case on appeal. The court of first instance had previously dismissed the action against MBTE because the company lacked capacity to be sued. It had been considered that only legal entities to which the Decision was addressed can be held liable for the Infringement. In front of the Barcelona Court, MBTE asserts that (i) the Decision is not addressed to it and no reference is made to it in the Decision, (ii) it did not participate in the Infringement, (iii) the trucks were acquired from a dealer who negotiated prices independently, (iv) it has separate legal personality from Daimler AG and the dealer. The Claimant asserts that as part of the single economic unit with Daimler AG, MBTE should be held liable for the damages caused by the Infringement. The Barcelona Court considers that in line with Art. 71(2)(b) of the Ley de Defensa de la Competencia, companies to whom a fining decision is addressed could be held liable for the harm caused by the infringement. This would apply to direct participants in the illegal practices and to companies that exercised decisive influence on these participants. The Barcelona Court then points to conflicting court rulings in Spain regarding the civil liability of subsidiaries that are non-addressees of the fining decision. The Barcelona Court deems that by analogy with existing EU courts case law, a subsidiary which is not an addressee of the Decision, could in principle be held civilly liable for the Infringement in which the ‘undertaking’ participated. EU law discussion In the public enforcement procedure, the infringement of Art. 101 TFEU is imputable personally to each participating undertaking. However, the undertaking as an economic unit is usually lacking legal personality. The fining decision is therefore addressed to specific legal entities. In practice, the decision is often addressed to subsidiaries involved in the anticompetitive behavior and to their parent companies as the ultimate legal entities exercising decisive control. In its recent judgment in Skanska, the CJEU stated that the determination of the entity required to provide compensation for the damage caused by an infringement of Art. 101 TFEU is governed by EU law (para. 28). The CJEU further specified that the liable entity is the undertaking, within the meaning of Art. 101 TFEU (para. 32). In that regard, it is relevant to recall the landmark judgment in CDC HP where the CJEU had specified that the joint conduct of the undertakings infringing Art. 101 TFEU leads to joint civil liability. However, the CJEU did not so far explicitly discuss the civil liability of specific natural or legal persons that are part of the infringing undertaking. In Otis Belgium (para. 50), the CJEU had stated that in antitrust damages cases, national courts cannot take decisions running counter to the decision adopted by the Commission. In light of this statement, the question remains whether the binding effect relates only to the legal entities to whom the fining decision is addressed or if all legal entities that are part of the undertaking can be held liable on the basis of the decision. One potential outcome could be that only subsidiaries active in the affected market should be held liable in damages actions. From a strategic viewpoint, it might seem doubtful that large damages actions will be initiated solely against a subsidiary. So far, many such actions have been lodged against several entities, including parent companies. Such approach facilitates access to justice and effective compensation of harmed companies which dealt mainly with local subsidiaries of the infringing undertakings. Another question of general interest, not subject to the Request, is whether subsidiaries not-addressees of fining decisions could serve as anchor defendants under Art. 8(1) Brussels I bis? Would the competence of the court be dependent on the civil liability of the anchor defendant or should the joint and several liability of the undertaking to which it belongs be sufficient to fulfill the requirements set up by the CJEU in CDC HP, i.e. the existence of an identical legal and factual situation that should be assessed by the same court in order to avoid irreconcilable judgments? Conclusion If the CJEU takes a broad view and holds that in principle every legal entity of one undertaking is liable for the damage caused, this will open many litigation alternatives for persons damaged by the anticompetitive conduct of an undertaking. By Jeanne Cousin, Juraj Siska & Vasil Savov
Choice of forum delicti in EU-wide cartel damages cases (C-30/20, RH vs Volvo)
Does Art. 7(2) Brussels I bis determine territorial jurisdiction within the EU Member States, Madrid Commercial Court asks EU Court of Justice. The request for a preliminary ruling from the Madrid Commercial Court might seem trivial or easy to answer given the recent case law by the Court of Justice of the European Union (‘CJEU’). However, it touches upon the fundamental question of jurisdiction. The response from the CJEU will provide further guidance on the spectrum of courts competent to hear EU-wide damages cases. It could also enhance competition between Member States to attract competition damages litigation. Factual context On 22 January 2020, Madrid Commercial Court (‘Madrid Court’) lodged a request for a preliminary ruling to the CJEU. The request concerns the interpretation of Art. 7(2) Regulation 1215/2012 (Brussels I bis). The main characteristics of the national case are as follows: claims based on the European Commission (‘Commission’) decision of 19 July 2016 (‘Decision’), which sanctioned the participants in the European Trucks Cartel (Trucks Cartel); action initiated by a Spanish claimant located in Cordoba (‘Claimant’), where acquisition of trucks at inflated prices took place; three of the defendants, none of which are seated in Spain, are addressees of the Decision; the fourth defendant, non-addressee of the Decision, is seated in Madrid. According to the request, the international competence of the Madrid Court was contested by the defendants. In essence, they argue that (i) the Trucks Cartel was formed outside of Spain and the harmful event giving rise to the damage occurred outside Spanish territory and (ii) in line with CJEU’s case law, the place of the Claimant’s domicile would be irrelevant for the purpose of determining international jurisdiction under Art. 7(2) Brussels I bis. The same strategy is adopted by defendants in (many other) parallel follow-on proceedings against the Trucks Cartel before Spanish Courts. In the present case, the fact that one of the defendants (a subsidiary of one of the addressees of the Decision) was domiciled in Madrid was not discussed. Also, it is not clear whether the trucks were sold to the Claimant by the Spanish subsidiary. Against this background, the Madrid Court decided to suspend the proceedings and addressed the request for a preliminary ruling to the CJEU. In substance, the Madrid Court asks whether Art. 7(2) Brussels I bis determines (also) the territorial competence of the courts within the Member States. Brussels I bis discussion The Madrid Court considers that in line with Art. 7(2) Brussels I bis and the recent judgment by the CJEU in Tibor-Trans, Spanish courts have international competence to hear the claim. The Madrid Court highlights the fact that the Trucks Cartel affected the Spanish market and harm was suffered therein. The Court seeks to determine, however, whether Art. 7(2) Brussels I bis also determines jurisdiction within the territory of the EU Member States. In passing, the Madrid Court seems to accept that the national court seized would be entitled to hear the claim regarding all and any jointly liable tortfeasors. In that regard, the scope of liability of the Spanish defendant, a non-addressee of the Decision, is not discussed before the Madrid Court so far. According to Brussels I bis, persons domiciled in a Member State, whatever their nationality, (i) shall be sued in the courts of that Member State and (ii) may be sued in the courts of another Member State by virtue inter alia of the rules on special jurisdiction under Section 2 Brussels I bis. In line with Art. 8(1) and the CJEU’s judgment in CDC HP, fellow cartelists can be sued together for the entire damage in the court of domicile of any one of them. Moreover, based on Art. 7(2) and the CJEU’s judgment in Tibor-Trans, fellow cartelists can also be sued for the specific damage in the court of the affected market, where the harm was suffered. Art. 5(2) Brussel I bis provides that the rules on special jurisdiction of the Members States shall be notified to the Commission. The internal competence of the courts seems determined by national procedural law, provided that EU law and principles are complied with. Story behind the scenes The request does not specify whether the Madrid Court was seized by the Claimant as the court of domicile of the Spanish defendant. Also, it is unclear from the request what alternative special jurisdiction, other than the defendant’s domicile, would have been available to the Claimant under Spanish law. The Madrid Court merely points to a recent decision by the Spanish Supreme Court in another damages case against the Trucks Cartel. It is stated therein that even if no defendant has a domicile in Spain, the territorial jurisdiction of Spanish courts can be established under Spanish law at the place where the infringement took place or where it had effects. Furthermore, the Supreme Court stated in February 2019 that if the specific claim is related to more than one location, the claimant can choose among several courts. In the case dealt with by the Supreme Court, the claimant filed the action in Valladolid, where the defendant (non-addressee of the Decision) was domiciled. The claimant then moved the claim to the court of the place where the sale was invoiced, which was Madrid. In the present case before the Madrid Court, the Claimant is seated in Cordoba where, according to the Madrid Court, purchases of the cartelized product took place. The Madrid Court considers however, insofar as no party had contested it, that its competence to hear the action would be established under Spanish procedural law by way of tacit agreement. The Spanish rules (art. 52 of the Spanish Civil Procedural Law), as interpreted by the Supreme Court, seem to provide for alternative special jurisdiction, complementing Art. 7(2) Brussels I bis (i.e. the request does not deal with the interplay between Brussels I bis and the Spanish rules on international jurisdiction). In that regard, the Supreme Court dissociated the seat of the defendant(s) from the place where harm was suffered, each place being a distinct ground for establishing jurisdiction. Thus, in order to maintain its competence to hear the case, it might have been more useful for the
Amsterdam Court of Appeal applies Cogeco principles on limitation periods and confirms validity of assignments in Sodium Chlorate cartel case
Introduction On 4 February 2020 the Amsterdam Court of Appeal in a landmark judgment ruled that the claims brought by CDC against Kemira Chemicals Oy (‘Kemira Chemicals’) under Finnish, Swedish and Spanish law are not time-barred. The Court of Appeal is the first national appeals court to apply the Cogeco principles on limitation periods as formulated in 2019 by the European Court of Justice (‘CJEU’) to applicable objective and subjective limitation periods. In addition, the judgment confirms the model of bundling damage claims on a Europe-wide level. Facts and Background By decision of 11 June 2008 the European Commission imposed fines totalling over EUR 79 million on four groups of companies (among Akzo Nobel/EKA Chemicals, Kemira Chemicals and Arkema France) for allocating sales volumes and fixing prices for sodium chlorate, a bleaching agent mainly used in the pulp and paper industry, between 1992 and 2000. Several addressees filed an appeal against the decision. Kemira Chemicals was not among them. On 17 May 2011 the EU General Court dismissed the first appeals. Its judgments made public details of the scope of the single and continuous infringement of all cartel members, including Kemira Chemicals. On 31 May 2011, CDC filed an action for damages against four cartel members before the District Court of Amsterdam. Ten pulp and paper companies with a total of 27 production sites located in nine European countries had previously sold and assigned their claims for damages resulting from the European Sodium Chlorate cartel to CDC. After several settlements, CDC still pursues damage claims governed by different national regimes against the last remaining defendant Kemira Chemicals. By judgment of 10 May 2017 the District Court of Amsterdam held that the assignment of the claims by the affected companies to CDC were valid, but that certain claims were time-barred under certain national laws. Both CDC and Kemira appealed the judgment. Judgment of the Court of Appeal Finnish, Swedish and Spanish claims not time-barred The Amsterdam Court of Appeal overruled the first-instance judgment and considered the claims governed by Swedish and Spanish law as well as Finnish law (prior to 1 October 1998) not time-barred. According to the Court of Appeal, CDC filed its damage action within the limits of the applicable limitation periods. It stressed that national laws must be applied in line with EU law, notably the principles on the interpretation of limitation rules as formulated by the CJEU in Cogeco (C-637/17, 28 March 2019, ECLI:EU:C:2019:263). The starting point of subjective limitation periods Based on an assessment of the Spanish (subjective) limitation period of one year and the EU law principle of effectiveness, the Court of Appeal found that the ‘limitation period cannot start before the single and continuous infringement of competition law has been finally determined and the injured parties are aware of the facts relating to the way the cartel worked, and the damage that they suffered’. In the present case that moment was after the EU General Court had rejected the appeals, even if Kemira Chemicals had not appealed the decision. The Court of Appeal stressed that to determine the damage caused by cartels ‘it is important to know which legal entities have infringed competition law during which period of time.’ It considered that in the present case the decision of the General Court on appeal by cartel members other than Kemira Chemicals was ‘relevant for determining the extent of the infringement and, as a consequence, the damage (…) and the parties which were liable’, on a joint and several liability basis for the total damage. Because the damage largely depends on the duration, nature and extent of the infringement, the Spanish subjective limitation period of one-year did not start to run before May 2011. Equally, the Court emphasised that also a (previous) interruption would ‘require specific economic analyses, as the cartel was a secret operation and it may have affected a vast amount of transactions over the many years before the Commission published the press release and the summary’. Hence, the Court found that the short Spanish limitation period in this case is insufficiently attuned to the secret nature and economic complexity of cartel infringements. The starting point of objective limitation periods Based on similar grounds the Amsterdam Court of Appeal found that the Finnish (objective) limitation period of ten years which starts to run when the event giving rise to the damage occurs, has to be interpreted in line with the Cogeco principles. Thus, a damaged party under Finnish law can in general wait until a final decision has been taken, including any appeal. Any reliance on the moment of the event giving rise to the damage would lead to the finding that claims would already have expired by the time of the non-confidential decision of the Commission published in October 2009 and even more so by the time of the decision of the General Court in May 2011. In any event, ‘given the specific characteristics of this type of damage claim, as mentioned in Cogeco’ a remaining limitation period must not be ‘so short that even the limited investigation needed for an interruption could not reasonably be carried out’. The Court of Appeal followed the same line of argumentation with regard to the Swedish (objective) limitation periods of five and ten years applicable in time, which started on the day the damage occurred. The Court considered that under a literate interpretation the claims governed by Swedish law had long been expired at the time of the publication of the Commission decision in October 2009 and even the General Court judgment in May 2011. This was ‘in principle contrary to the principle of effectiveness and so must be disregarded.’ Neither the assignors nor CDC could be expected to take measures earlier, since they could wait for the final decision of the EU General Court on the appeals against the Commission fining decision. CDC’s filing of the action two weeks after the publication of the judgment was ‘sufficiently diligent’ given this kind of damage claim. Validity of assignments Further, the Court of Appeal confirmed the validity of the assignments of claims to CDC under Dutch law. It rejected the cross-appeal by
What makes a jurisdiction attractive for follow-on damage actions? The case of the Netherlands
This article is the first in a series on private enforcement in the Netherlands. Introduction Over the past 10 years the Netherlands has established itself as one of the key jurisdictions for private damage actions in the field of competition law in the EU. Claimants have brought multiple follow-on actions, mainly relating to pan-European cartel cases, such as Gas-Insulated Switchgear, Bitumen, Air Cargo, Sodium Chlorate, Paraffin Wax, Elevators and Escalators, Prestressing Steel and recently Trucks. The courts have issued several important judgments which provide increased legal certainty. Together with the timely implementation of the EU Damages Directive by the Dutch legislator the efficient and proactive judiciary is a key factor in fostering the Netherlands as an attractive forum for private enforcement actions. Key features of the Dutch judicial system What are the main reasons for the establishment of the Netherlands as one of the main jurisdictions for high profile competition damage actions in the EU? Firstly, the Netherlands has an efficient and reliable judiciary system. This is evidenced by a recent survey of the World Justice Forum which has ranked the civil justice system of the Netherlands highest among 113 countries. Secondly, the judges dealing with competition damage cases typically have practical experience with such cases. While there are no specialized courts, there are specialized judges dealing with competition damage actions across different courts. The judges often have a background in the field of private international and/or competition law. Also, the organization of the Dutch courts ensures that judges have sufficient resources and time to deal with such complex damage actions. Dutch courts and judges are also generally accustomed to pan-European and international cases and regularly apply foreign law. Thirdly, the Dutch civil procedure is efficient and provides tools for the courts to streamline and proactively manage complex cases. Courts can for example issue interim judgments on important issues such as the international competence of the court, limitation periods and applicable law. Another element is the so called two stage procedure: Claimants can ask the court to first rule on the merits of a claim before entering the second stage on quantification. Fourthly, the Dutch courts accept documents in electronic form. This is a significant advantage in proceedings such as competition damage actions where the volume of data and documents is often considerable. Parties may also submit documents in English, French and German. Fifthly, the Netherlands has clear and predictable rules regarding court fees and adverse costs. The court fees in the Netherlands are very low, typically in the range of several hundred to several thousand Euros per instance. The amounts that must be reimbursed by the losing party would normally amount to approx. 10,000-20,000 EUR per party and instance, depending however on the number of procedural steps taken (both written and oral) throughout the proceedings. These rules ensure an effective access to justice. The Netherlands Commercial Court The attractiveness of the Netherlands as a forum for competition damage actions is further strengthened by the establishment of the Netherlands Commercial Court. This newly established court is competent for commercial disputes, including competition damage actions, under the condition that all parties to a dispute consent to its jurisdiction. The main feature of this court is that the proceedings will in principle be conducted entirely in English. In addition, the court also aims to have more effective and shorter proceedings. In this respect the Netherlands Commercial Court has for example established a novel paperless electronic filing system. The appointed judges all have long-standing experience in complex commercial disputes with an international angle. The court fees are compared to the ordinary Dutch courts higher, but still very accessible, in particular compared to courts in the UK or Germany. The fees amount to 15,000-20,000 EUR per party. By Till Schreiber
CJEU finds national limitation periods in conflict with the EU law principle of effectiveness
On 28 March 2019 in Case Cogeco C‑637/17 the CJEU provided guidance on the application ratione temporis of the EU Damages Directive 2014/104/EU (Directive) and stressed the importance of the principle of effectiveness for damages actions for breaches of EU competition law. The CJEU confirmed that a case-by-case analysis is required in order to assess whether the Directive is applicable. This will notably depend on its temporal application and the qualification of national rules as substantive or procedural in nature. Though, even if the Directive does not apply, national provisions must comply with the principle of effectiveness. The CJEU concludes that a three-year limitation period, that starts to run before the injured party is able to ascertain the identity of the infringer and that cannot be suspended or interrupted during proceedings before the competition authority, renders the exercise of the right to claim compensation practically impossible or excessively difficult. Factual background of the Cogeco case The facts took place in the Portuguese market of premium sports TV channels. The corporation Cogeco Communications Inc. (Cogeco) was a shareholder of the Portuguese company Cabovisão-Televisão Por Cabo SA (Cabovisão) between 2006 and 2012. On 30 July 2009, Cabovisão filed a complaint with the Portuguese Competition Authority against, amongst others, Sport TV Portugal SA (hereafter Sport TV). By decision of 14 June 2013, the Competition Authority imposed a fine on Sport TV as it held that it had abused its dominant position on the market at issue. On 27 February 2015, Cogeco brought an action for damages against, amongst others, Sport TV. The defendants argued that this claim for compensation was time-barred. Indeed, the applicable article 498 of the Portuguese Civil Code provides that such a right to compensation expires after a period of three years from the date on which the injured party became aware of his right. This remains true even if the injured party did not know the identity of the person liable or the full extent of the damage, and regardless of any proceedings before the national competition authority. The District Court of Lisbon decided to stay the proceedings and to request a preliminary ruling from the CJEU. The Court confirmed that the damages action at issue was brought before the expiry of the deadline to transpose the Directive. Furthermore, at the time of filing, the Directive had not yet been transposed into the Portuguese legal order. The District Court asked several preliminary questions that can be summarized, in essence, as follows: (1) is the Directive applicable in the case at hand? (2) Are the applicable Portuguese rules on limitation periods compatible with EU law and its principles? Applicability of the EU Damages Directive requires a case-by-case analysis The reason why the applicability of the Directive is relevant is to be found in article 10 thereof. This provision ensures that limitation periods for bringing damages actions are at least five years. Those periods can only begin to run when the infringement has ceased and when the claimant knows or can be reasonably expected to know (1) of the behaviour and the fact that it constitutes a competition law infringement, (2) of the fact that this infringement caused him harm, and (3) the identity of the infringer. Furthermore, the article introduces rules on the suspension or interruption of the limitation period when a competition authority takes investigative actions. The applicability in time of the Directive depends on its article 22. This article creates a distinction between the temporal application of the substantive and procedural provisions. Whilst the first may not apply retroactively, the latter may not apply to actions for damages that were brought before 26 December 2014. The CJEU does not address whether the provisions on the limitation periods are of a substantive or procedural nature. Instead, it concludes that the Directive does not apply in the case at hand, regardless of that distinction. Firstly, as the damages action was brought before the transposition of the Directive in the Portuguese legal order, the new provisions on limitation periods would definitely not apply if they were considered to be substantive (given the prohibition of retroactivity). Secondly, the same holds true if those provisions are considered procedural. The CJEU notes that the Member States enjoyed a measure of discretion when transposing the procedural provisions of the Directive. They could choose whether the corresponding national rules would apply to actions for damages brought after 26 December 2014 or only to such actions brought after the transposition of the Directive into the national legal order. If the national legislator would choose the second option, which Portugal did, then the expiry of the deadline of the transposition period, i.e. 27 December 2016, would serve as ultimatum. As the claim at hand was filed on 27 February 2015, this deadline was not exceeded. Thus, the Directive’s provisions on limitations periods do not apply to the case at hand. Unfortunately, the CJEU does not provide any clarification as to whether those rules are to be considered substantive or procedural. This seems to be a choice left open to the Member States. Consequently, one must carefully study the relevant national provisions in order to assess whether the new rules on limitation periods (or any other new rules) are applicable. This depends on their qualification by the national legislator as substantive or procedural and on the accompanying provisions on the entering into force of the national rules. Limitation period not compatible with the EU law principle of effectiveness In order to assess whether the relevant Portuguese provisions on limitation periods are compatible with EU law, the CJEU continues its reasoning from previous case law. In its judgment of 14 March 2019 (Skanska case, C-724/17), the CJEU followed the opinion of AG Wahl by stressing that actions for damages are an integral part of the enforcement system of the EU competition rules (see previous blog posts, here and here). Those rules are intended to sanction anticompetitive behaviour and to deter undertakings from engaging in such conduct. Therefore, damages actions strengthen the working of the EU competition rules, discourage anticompetitive
CJEU confirms the right of all cartel victims to obtain redress in Elevators and Escalators cartel case
Introduction The year 2019 was marked by a number of landmark judgements of the Court of Justice of the European Union (‘CJEU’) in the field of private enforcement such as Skanska, Cogeco and Tibor-Trans. On 12 December 2019 the CJEU rendered its judgement in Case-435/18, Otis Geselschaft m.b.H. e.a., (Austrian Elevators and Escalators). Following the Opinion of Advocate General (‘AG’) Kokott, it confirmed in essence that an entity, who does not operate on the market affected by the cartel, is nonetheless entitled to claim damages caused by that cartel. Factual context Back in 2007, the European Commission imposed an administrative fine of over EUR 990 million on various companies participating, at least since the 1980s, in the elevators and escalators cartel. In 2010, the Province of Upper Austria (‘Claimant’) brought a follow-on action for damages against the participants in the elevators and escalators cartel (‘Defendants’) before the Commercial Court of Vienna. The Claimant was neither a direct nor indirect customer of the Defendants for the products covered by the cartel. As a matter of fact, it acted as a public entity granting subsidised loans dedicated to promoting the building of homes. The companies which benefited from those subsidised loans were direct purchasers of the affected products (elevators). As the subsidised loans were calculated as a percentage of the total construction costs, these costs were higher as a result of the overcharge caused by the cartel. The case went up to the Supreme Court of Austria which referred a preliminary ruling question to the CJEU asking whether “compensation for losses may also be claimed from members of a cartel by persons who are not active as suppliers or consumers on the relevant product and geographic market affected by a cartel, but who grant loans to buyers” of cartelised products. The judgment of the CJEU In its judgment, the CJEU starts with a classical recall of its case-law stating that “any person is entitled to claim damages for the harm suffered where there is a causal relationship between that harm” and the cartel (para. 23). Interestingly, the CJEU confirms that private enforcement is a necessary complement of public enforcement of EU competition rules. According to the CJEU, the right of any individual to claim damages contributes to deterring cartel activities (para. 24). Furthermore, the CJEU confirmed that national law governs the exercise of the right to claim damages and therefore the establishment of the concrete conditions of application and procedural rules related to such right (para. 25). Thus, on the one hand, EU law governs the answers to the questions of who can claim damages, what damages can be claimed and why such damages can be claimed. However, on the other hand, it is national law that shall answer the question of how these damages shall be claimed. Moreover, while adopting the national rules, the Member States must “take into account the objective pursued by Article 101 TFEU, which strives to guarantee effective and undistorted competition in the internal market, and, accordingly, prices set on the basis of free competition” (para. 26). In addition, as opposed to some national tort laws (such as Austrian or German), the CJEU emphasises it is not necessary “that the loss suffered by the person concerned present, in addition, a specific connection with the ‘objective of protection’ pursued by Article 101 TFEU” (para. 31). Following the Skanska judgment concerning the tortfeasors’ liability, it seems that the CJEU continues in reshaping the Members states’ tort laws in order to harmonise and facilitate the introduction of damage actions in competition cases. Finally, as AG Kokott stated in her Opinion (point 78), the CJEU confirmed that the full effectiveness of Article 101 TFEU “would be seriously undermined if the possibility for requesting compensation for loss caused by a cartel were limited to suppliers and customers of the market affected by the cartel” (para. 27) given that “any loss which has a causal connection” with the cartel is entitled to be claimed (para. 30). Thus, even the entities not acting directly or indirectly on the market affected by the cartel must be able to claim compensation for loss caused by the cartel (para. 32). In this case, the Claimant’s loss resulted from the fact that the subsidised loans it granted were higher than if the cartel had not existed and therefore, these amounts could not have been used elsewhere in a more profitable way (para. 32). Conclusion By following the Opinion of AG Kokott (previously commented by CDC), the CJEU confirmed the right of all victims affected by a cartel to claim damages. Consequently, not only direct and indirect customers, as well as victims of umbrella pricing but also any person is entitled to claim compensation for a loss caused by a cartel including persons not active on the affected market or downstream market. This new judgement of the CJEU must therefore be welcomed as it contributes to strengthening access to justice for cartel victims. by Juraj Šiška, Vasil Savov, Till Schreiber, and Marc Barennes.
Collective or Class Actions and Claims Aggregation in the EU: the Claimant’s Perspective
An extract from GCR’s Private Litigation Guide – First Edition. The whole publication is available to purchase on GCR’s website. Private enforcement of competition law in Europe has in the past decade been driven in large part by the aggregation and enforcement of damages claims brought by multiple companies affected by the same competition law infringement in one single action. Follow-on damages actions based on forms of claims aggregation have been brought in various jurisdictions: for example, against the participants of Europe-wide cartels in Air Cargo, Hydrogen Peroxide, Lifts and Escalator, Sodium Chlorate, Paraffin Wax and Trucks. Aggregated or bundled claims have also been brought following decisions of national competition authorities, such as in Cement and Sugar in Germany. The cases led to landmark judgments by courts in several jurisdictions and to numerous out-of-court settlements resulting in significant compensation payments to corporate antitrust victims. In parallel, some EU Member States have introduced forms of group or class actions, partially as a reaction to the Commission Recommendation on common principles for collective redress mechanisms in Europe[1]. The collective mechanisms adopted across the EU vary significantly: while in France, Italy and Germany victims may opt into a collective or representative action, the United Kingdom and Portugal provide opt-out mechanisms, and countries like Belgium have an alternative opt-in or opt-out model, where the competent court decides on the applicable mechanism depending on the circumstances of the case. With the exception of the United Kingdom (e.g., in Mastercard, Trucks and Forex), these mechanisms have not yet played a role in the context of antitrust litigation. Nevertheless, they are practically indispensable in allowing the enforcement of mass claims at the end-consumer level. The present chapter reflects on current developments, the need for effective collective approaches in cartel cases, the impact of the EU Directive 2014/104/EU (the Directive)[2], the multi-jurisdictional framework for bringing such claims in Europe-wide cases and strategic considerations from a claimant perspective. Directive and beyond: need for collective approaches The Directive is a milestone for the private enforcement of competition law in the EU. lt codifies case law of the European Court of Justice (CJEU) on the right to full compensation for competition law infringements and provides for a (minimum) common legal framework in the Member States. However, the Directive does not tackle many practical obstacles that claimants face when assessing or pursuing antitrust claims and does not provide for collective enforcement approaches. Practical difficulties to full compensation The enforcement of antitrust damage claims is complex, and time and cost-intensive requiring a combination of specific economic, legal and lT expertise. Despite the Directive, consumers, small and medium-sized enterprises and even large corporate victims continue to face many practical difficulties. The main obstacles for claimants to enforce antitrust claims can be summarised as follows: For these reasons, a majority of victims of anticompetitive practices still do not actively pursue their damage claims. Collective approaches as an effective solution Many of these difficulties can be remedied or at least alleviated by collective approaches. From a structural perspective, collective approaches have significant advantages and increase the chances for an effective enforcement of claims for damages resulting from the infringement of competition law. Depending on their concrete form, collective approaches have notably the following advantages: Collective enforcement mechanisms have, essentially for political reasons, been excluded from the Directive. Nevertheless, effective forms of collective approaches have developed in practice, predating the Directive. Trend of enforcing aggregated and collective claims Claims aggregation One effective solution that has evolved in the European Union is aggregation by bundling claims through a specialised company or entity, often referred to as a claims vehicle. The approach results in a de facto collective claims enforcement, without being a form of collective redress. The bundling model was developed more than 15 years ago by CDC Cartel Damage Claims to enforce corporate antitrust claims. Today, the model is widely used in different forms and by different parties across Europe. The model typically has the following features: In practice, a critical mass of claims is required to optimise the economic analysis and claims enforcement. Ideally, the claims aggregator combines economic, legal and technical know-how, including specific IT solutions facilitating the collection and analysis of market and transaction data on a large scale. Aggregated data collected from a larger number of cartel victims and covering longer time periods allow for a more adequate damage assessment. Experienced claims aggregators with specialised know-how can eliminate information asymmetries, present a sound theory of harm in court and hold stronger positions in settlement negotiations. The aggregation model is operated in different forms and not all parties offer the fully integrated approach as outlined above. For example, in the case of Deutsche Bahn, under a hybrid form, the bundling entity itself was damaged by the cartel and enforced its own claims together with damages claims of other companies. In the Netherlands, claims are often assigned to a foundation that enforces aggregated claims on a special statutory basis. Further, the bundling model is sometimes used to enforce claims assigned by consumers. However, cases brought by consumer associations (e.g., Which? in the United Kingdom, Que Choisir? in France, VKI in Austria) are rare and have not always been successful. Consumer associations often have difficulties in coping with the complexity of antitrust damages claims and time and cost-intensive litigation. Collective, group or class actions A second trend to be observed is the introduction of collective redress mechanisms by some EU Member States. It still has to be seen to what extent the different collective or group actions, representative or class actions are truly effective. Whereas most adopt an opt-in model, some provide an opt-out as operated under the US class action. The opt-out is often seen to be in conflict with the principle that claims can only be adjudicated where the putative claimant expressly wants to be part of an action. That is why the scope of opt-out mechanisms is usually limited to the jurisdiction in question (e.g., the United Kingdom). Though, with the exception of the United Kingdom, these mechanisms have not yet played a prominent role in the field of antitrust litigation. But they
The Spanish paper envelopes cartel: Compensation over 40 years later
In 1977, Spain celebrated its first democratic elections in the aftermath of the transition from dictatorship to full democracy. The leading five paper envelope producers used the occasion to create and establish one of the most harmful cartels in Spanish Public Procurement history. Before the elections took place, the transition government were required to buy envelopes in massive amounts for the polls. The envelope manufacturers took the opportunity to rig all bids not only for the first election but also for all other national and regional elections from 1977 until 2011. During that time, the cartel had a peaceful existence, and the price-fixing schemes and client allocations affected not only public procurement but also the main envelope types used by companies for more than three decades. In 2013, the Spanish Competition Authority, the CNMC, sanctioned all five producers. This decision was confirmed by the Courts. In the last three years, 11 companies represented by the same law firm filed eight claims in Barcelona and three claims in Madrid. The first instance resulted in full success in Barcelona and complete loss in Madrid. (see for all Barcelona, ECLI:ES:JMB:2018:2727 and Madrid ECLI:ES:JMM:2018:1232) The Regional Courts of Barcelona and Madrid will issue their second instance decisions in the coming months. The Commercial Court in Madrid recognised the right to compensation of the victims and the binding effect of the decision of the Spanish Competition Authority. Notwithstanding this, the Commercial Court rejected the claim concluding that the damage had not been proven by the claimants. According to the Court, the calculation made by the expert was inconsistent because the purchases used to determine the overcharge and the reference price were not equivalent to those made by the claimants. In contrast, the Court in Barcelona, being aware of the new regime after the Damages Directive and the mass litigation caused by the trucks cartel, has used this landmark case to produce rulings that confirm the well-known sugar cartel jurisprudence and clarify several questions about follow on claims derived from decisions of the Spanish Competition Authority. The rulings from the Commercial Court of Barcelona contain the following aspects that we would like to highlight: First, the Court refers to the Supreme Court decisions in the sugar cartel case of the 2012 and 2013. The Supreme Court had determined that the difficulties in calculating the sum should not preclude the victims from receiving damages and that in their expert report, defendants must not only question the claimant’s report but also must offer an alternative amount. Additionally, the Barcelona Court accepted the calculation of the claimant’s expert based on a comparison of purchases of pre-printed envelopes by small customers with the prices applied by the cartel on tenders organised by large clients for white envelopes and those used for elections. The rulings acknowledge the simulation of the overcharge through real comparable scenarios, based on the homogeneity of the market and the unique nature of the infringement. In fact, the Court recognises that the claimants can use the sources from the decision of the Spanish Competition Authority that concerned envelopes for elections and large customers after recognizing that there was no appropriate reference to compare the prices of the products purchased by a small NGO, which was a small client, with a non-cartel situation. Second, the rulings also recognise the liability of leniency applicants, excluding the liability limitation foreseen in the Damages Directive since its provisions do not apply to this case. As of today, four decades later, 8 NGOs, a retailer and a small regional bank are finally obtaining redress for the damage caused. Curiously the Spanish Administration, the initial victim of the cartel, has not asked for damages. By Julia Suderow
AG Kokott: Confirming the Wide Scope of Antitrust Damage Claims
Introduction Advocate General (AG) Kokott is one of the most influential and experienced members of the European Union’s judiciary. Recently, she handed down a landmark opinion in relation to the Austrian Elevators and Escalators cartel damages case on the scope of damages claims that can be brought by claimants. The key issue in Austrian Elevators and Escalators revolved around the alleged losses resulting from the operation of the cartel by an entity who was not a commercial operator on the market affected by the cartel. AG Kokott after an extensive discussion of case law and legal principle took the view that the full effectiveness and efficiency of Art. 101 TFEU would be undermined if damages were just limited to operators active on the market affected by the cartel. It is clear, that if the European Union Court of Justice (CJEU) concurs with AG Kokott, the consequences, in terms of the incentives for public entities to pursue antitrust damages claims are likely to be significant. For instance, major public procurement contracts are continually plagued by price-fixing and bid rigging cases. If, however, not only the contracting public authority as the ‘operator’, but also a public finance agency, or the state treasury funding the project, are entitled to damages, then cartelists will face a formidable new group of potential claimants. Scope of the Opinion In her opinion of 29 July 2019 in Case C-435/18, Otis Gesellschaft m.b.H. e.a., (Austrian Elevators and Escalators) AG Kokott examined the scope of compensation and the persons eligible in cartel cases. She considered that the full effectiveness and efficiency of Art. 101 TFEU would be severely undermined if the right to claim for damages caused by a cartel was limited only to operators active on the affected market. In that regard, the AG highlighted that the existence of the right to compensation, encompassing (i) the categories of affected persons that have standing to claim for compensation, (ii) the types of damages, and (iii) the scope of the damages is a matter of EU law, not national law. AG Kokott reiterated that the substantive aspects of the right rooted in Art. 101 TFEU, including those related to causality, should be applied in uniform manner thus ensuring equal treatment throughout the EU. In passing, AG Kokott confirmed that (i) notwithstanding the temporal limits for the application of the Damages Directive, the EU acquis can be invoked immediately before the national courts, (ii) the principles of effectiveness and equivalence apply to the detailed procedural rules governing the exercise (modalités de mise en oeuvre procédurale) of the right to compensation, while the constitutive conditions (conditions matérielles) require an autonomous EU interpretation, (iii) the objective pursued by Art. 101 TFEU does not foresee any restriction of the right to compensation, and (iv) while the patrimonial damage (damnum emergens) has to be proven, interest is due from the date of harm until compensation is paid. Factual context AG Kokott issued her opinion following a request for a preliminary ruling from the Supreme Court of Austria ‘Oberster Gerichtshof’ (‘Referring Court’) to the CJEU in the context of an action for damages introduced by the Austrian Regional Authority ‘Land Oberösterreich’ (‘Claimant’) against the participants in the elevators and escalators cartel (‘Defendants’), as sanctioned by the Austrian and European authorities. During the infringement of Art. 101 TFEU by the elevator and escalator manufacturers (‘Cartel’), the Claimant was granting subsidized loans to companies for the construction of social housing. These companies were direct purchasers of elevators and the subsidized loans were calculated inter alia based on higher construction costs as a result of the overcharge imposed by the Cartel. The Claimant brought a follow-on action for damages against the Defendants before the Commercial Court of Vienna (Court). The action was dismissed by the Court because the Claimant was neither a customer nor a supplier active on the market affected by the Cartel. This judgment was subsequently quashed on appeal by the Vienna Higher Regional Court who considered that the EU cartel prohibition also protects the financial interest of players that are not active on the affected market but who nevertheless have suffered harm as a result of the Cartel. The Defendants brought the case before the Austrian Supreme Court who sent a request for a preliminary ruling to the CJEU asking in substance whether Art. 101 TFEU requires that a player, who is not active as supplier or customer on the relevant product and geographic market affected by the Cartel, can also claim compensation for losses that lie in the fact that the loan amount granted was higher than what it would have been without the Cartel, meaning the Claimant was unable to profitably invest those amounts elsewhere. Legal assessment AG Kokott started her substantive analysis by recalling that ‘the right of any person to claim damages caused by a cartel is rooted directly in Article 101 TFEU’ (para 40). Then, the AG added that Art. 101 TFEU ‘does not contain any restriction of the right to claim damages caused by a cartel’ (para 81). In that regard, AG Kokott specified that any categorical and systematic exclusion ‘for legal reasons, of the compensation for certain types of loss, regardless of the specific circumstances of this case’ is not compatible with Art. 101 TFEU’ (para 87). Further, AG Kokott concluded that players not active on the affected market cannot be precluded per se from seeking compensation for damages that are foreseeable for the tortfeasors and sufficiently linked to their behaviour (paras 63, 78 & 151). Then, the AG reiterated that while the concrete conditions of application and procedural rules governing the exercise of the right ‘ that is the question of knowing how compensation is to be granted), in particular, the rules on judicial competence, rules of procedure, limitation periods and administration of proof, are governed by national law’ (para 41), the normative elements of this right (including its nature and scope) ‘have to be subject to uniform and autonomous interpretation across the European Union’ (para 54). According to AG Kokott, the objective of Art. 101 TFEU ‘would be compromised if the legal requirements applied by