Breaking news in cartel damages litigation

Hans Bousie / 05 Feb 2020

Yesterday[1] the court of appeal in Amsterdam, the Netherlands, overturned an earlier decision[2] of the lower Amsterdam court in the so-called Sodium chlorate case. The lower court ruled earlier that the limitation period has run out according to several national regulations a.o. Spanish and Swedish law. Until now it was widely accepted in the European Union that limitation periods start running at the moment the European Commission renders its decision. In its ground breaking decision, the appellate court though ruled, referring to the so called Cocego case (see below) that the limitation period connected to follow-on proceedings only starts running after the complete appellate term has run, so ultimately at the moment of the final ruling of the Court of Justice of the European Union (CJEU). Thus extending possible limitation periods with years. The appellate court explicitly refers to the principle of effectiveness of private litigation in cartel damages cases.

In Europe, cartel damages litigation is picking up speed. Other than in the US where this kind of litigation has been practised for decades, in Europe it all started 16 years ago with the introduction of Regulation 1/2003[3] by the European Commission and three years later with the landmark judgment in the Manfredi case[4]. In Manfredi, the CJEU summarized its preceding case law and held that, once an infringement of Article 81 EC[5] has been committed, any individual should be able to rely on the invalidity of an agreement or practice prohibited under that article. In the Manfredi case, Vincenzo Manfredi, an Italian national, started national private damages litigation against a number of insurers who agreed to a concerted practice of raising their premiums, which was held to be an infringement of national competition law. The Manfredi case has proven to be a cornerstone under the theory and practice of private damages litigation by introducing the principle of effectiveness (Effet Util) into cartel damages litigation[6]. The direct effect principle ensures the application and effectiveness of European law in EU countries and this principle has been extended recently.

In 2019 the CJEU held in the so called Skanska case[7] that companies, interpreted as an economic unit, are liable for the damage caused by the cartel. This is also the case when it changes its identity through restructurings, sales or other legal or organisational changes.

The ECJ ruled:

“As stated in paragraph 25 of this judgment, the right to claim compensation for damage caused by an agreement or conduct prohibited by Article 101 TFEU ensures the full effectiveness of that article and, in particular, the effectiveness of the prohibition laid down in paragraph 1 thereof.”[8]

Therefore, if the undertakings responsible for damage caused by an infringement of the EU competition rules could escape penalties by simply changing their identity through restructurings, sales or other legal or organisational changes, the objective of suppressing conduct that infringes the competition rules and preventing its reoccurrence by means of deterrent penalties would be jeopardised.”[9]

The Dutch courts were eager to accept this principle of effectiveness. The Dutch Supreme Court[10] first held that according to EU law, anyone must be able to claim compensation for the damage caused to them by an agreement or conduct which is capable of restricting or distorting competition, and that would not preclude national courts from ensuring that the protection of rights guaranteed under the legal order does not result in an unjustified enrichment of the beneficiaries (referring to the Courage and Crehan cases).[11]

The determination of damages by the Dutch court takes place in the absence of EU law under Dutch law, with due regard for the principle of equivalence and the principle of full effectiveness. The Supreme Court then considered whether the private damages directive (‘Directive’) was applicable in this case, which clearly it was not, since the infringement referred to the Supreme Court took place long before the introduction of the Directive and the preamble of the Directive even states explicitly that the Directive has no retroactive effect. Nevertheless the Supreme Court (quite remarkably) held that, despite the non-applicability of the Directive, Dutch law has to be interpreted in such a way that the outcome of a case should not be contrary to the Directive.

So the Amsterdam appellate court, follows suit, referring to the Cogeco case[12] in which the CJEU held that the principle of effectiveness can set aside national limitation periods.

The CJEU ruled:

Accordingly, the rules applicable to actions for safeguarding rights which individuals derive from the direct effect of EU law must not be less favourable than those governing similar domestic actions (principle of equivalence) and must not make it in practice impossible or excessively difficult to exercise rights conferred by EU law (principle of effectiveness).”[13]

This Dutch judgment is surely welcomed by plaintiffs litigating in the Netherlands, and of course can have a great impact on the position of defendants. Not only will it possibly influence current cartel damages litigation in the Netherlands, but if the Dutch Supreme Court will uphold this ruling, this could have an immense impact on the strategy of defendants. In the near future defendants might be forced to decide to decline appealing a European Commission decision because together with the appeal they might prolong the limitation period to the benefit of anyone claiming damages connected to this specific cartel.

Hans Bousie

On behalf of the cartel damages team of bureau Brandeis, 5 February 2020

 

 

[1] Amsterdam court of Appeal CDC-Kemira, 4 February 2020.

[2] Amsterdam court, CDC-Kemira 10 May 2017.

[3] Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty.

[4] CJEU, Vincenzo Manfredo vs Lloyd Adriatico Assicurazion1 (C—295/04) 13 July 2006.

[5] 101 TFEU.

[6] The direct effect of European law has been enshrined by the CJEU in the judgement of Van Gend en Loos of 5 February 1963. In this judgement, the Court held that European law not only engenders obligations for EU countries, but also rights for individuals. Individuals may therefore take advantage of these rights and directly invoke European acts before national and European courts.

[7] Court of Justice, 14 March 2019, C-724/17.

[8] Court of Justice, 14 March 2019, C-724/17, p. 43.

[9] See, by analogy, judgment of 11 December 2007, ETI and Others, C‑280/06, EU:C:2007:775, paragraph 41 and the case-law cited).

[10] Tennet ABB, Dutch Supreme Court, 8 July 2016, ECLI:NL:HR:2016:1483, p. 4.3.1.

[11] (CJEU 20 September 2001, C-453/99, ECLI:EU:C:2001:465, NJ 2002/43, p. 26 and 30 (Courage and Crehan))

[12] Court of Justice, 28 March 2019, C-637/17

[13] judgment of 5 June 2014, Kone and Others, C‑557/12, EU:C:2014:1317, paragraph 25

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