Posts Tagged Private enforcement
Stand alone cartel damages suits: The High Court in Media Saturn Holding v Toshiba on anchoring jurisdiction.
In  EWHC 1095 (Ch) Media Saturn Holding v Toshiba et al, Barling J is concerned with stand-alone damages suits following the European Commission decision in COMP/39437 – TV and Monitor Tubes. None of the Defendants was an addressee of the Decision (some of their parent companies were). The claims are, therefore, “standalone” rather than “follow-on” actions, and the Decision is not binding on the court so far as the claims against the Defendants are concerned, as it would have been had the Defendants been addressees. Nevertheless, Claimants place considerable reliance upon the evidential effect of the Decision.
Claims are strike out and summary judgment application, intertwined with challenges to jurisdiction. These essentially relate to there being no arguable claim against the “anchor” defendants, particularly Toshiba Information Systems UK ltd – TIS.
At 114: Claimants refute the suggestion that the claim has been brought against TIS on a speculative basis in the hope that something may turn up on disclosure and/or simply to provide an anchor defendant for jurisdictional purposes. They point to the Commission’s finding, at Recital 595, that the cartel was implemented in the EEA through sales of cartelised CPTs that had been integrated into the finished products.
The substantive law issue of implementation of the cartel therefore is brought in not just to argue (or refute) summary dismissal, but also to shore (or reject) the jurisdictional claim under Article 8(1) Brussels 1a.
Barling J establishes as common ground (at 90) that ‘as a matter of law an entity can infringe Article 101(1) TFEU and Article 53 EEA if it participates in relevant cartel activity, in the sense of being a party to an agreement or concerted practice which falls within that Article, or if it knowingly implements a cartel to which it may not have been a party in that sense. [counsel for defendants] submitted that there is no arguable case that TIS had the requisite knowledge. However, what is sufficient knowledge for this purpose is not common ground’.
At 300 ff the most recent CJEU authority is discussed: C-724/17 Vantaan kaupunki v Skanska of March 2019.
This leads to a relevant discussion on ‘implementation’ of the cartel, which mutatis mutandis is also relevant to Article 7(2) (locus delicti commissi). At 117-118:
‘TIS [similar arguments are discussed viz other defendants, GAVC] was involved in activities which were important to the operation of the cartel from the Toshiba perspective. These included the manufacture of CTVs using the cartelised product acquired from an associated company which itself was one of the established cartelists, and the onward sale of the transformed product. TIS also had direct commercial dealings with the Claimants relating to bonuses on sales of, inter alia, the transformed products. In my judgment there is an arguable case that those activities amounted to the actus reus of participation in and/or implementation of the cartel. The available material is sufficient to preclude the summary disposal of that issue.’
At 139 ff much CJEU and national authority is discussed, viz a variety of the defendants, on the issue of ‘implementation’ for summary dismissal on substantive grounds, a discussion which then at 259 ff is applied to the jurisdiction issue. Reference is made to Brownlie v Four Seasons, to C-103/05 Reisch Montage and of course to C-352/13 CDC. At 273 Barling J distinguishes excellently in my view between predictability as part of the DNA of CJEU Brussels Ia case-law on the one hand, and its treatment (and rejection) as a stand-alone criterion on the other hand:
‘[argument of counsel] is in danger of treating the statement of the CJEU in Reisch Montage as adding a free-standing and distinct criterion of foreseeability to the preconditions of application expressly set out in Article 8(1). If that criterion were to be applied generally, and without reference to those express pre-conditions, there would be a risk of the EU law principle of legal certainty being compromised, instead of respected as Reisch Montage expressly requires. That case states that the special rule in Article 8(1) must be interpreted so as to ensure legal certainty. The special rule’s express precondition is that “the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments…” Therefore, by virtue of Reisch Montage, it is those words that must be interpreted strictly so as to respect legal certainty and thereby ensure foreseeability. In other words, foreseeability is inextricably linked to the closeness of the connection between the two sets of claims, and the criterion will be satisfied if a sufficiently close connection of the kind described in Article 8(1) exists.’
And at 276
‘It is correct that the anchor defendants were not addressees of the Decision and that there were no UK addressees. However, there is no reason why this should be significant. Article 8(1) is capable of applying in a competition claim regardless of whether a Commission infringement decision exists. What matters is that there is a claim that the anchor defendant is guilty of an infringement, and that the case against the non-anchor defendant is sufficiently “closely connected” to that claim within the meaning and for the purposes of Article 8(1). The fact that neither entity is an addressee of a Commission decision (if there is one) and that neither is the subject of any other regulatory process or civil claim relating to the cartel, is, if not immaterial, then of marginal relevance.’
For all anchor defendants the conclusion is that there is an arguable claim that they participated in and/or knowingly implemented the cartel. That strongly militates against the sole purpose of the (two sets of) proceedings being to oust the jurisdiction of the other EU courts. No abuse has occurred.
At 316 a final postscript is added suggesting summarily that the Supreme Court’s Vedanta might have an impact on the ‘abuse’ issue. The judgment concerned inter alia an alleged abuse of EU law in the context of the predecessor provision to Article 8(1). The Court gave consideration to the test for the “sole purpose” issue. At 317: Barling J: ‘I can see no basis on which my conclusions in that regard are affected by this decision.’
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168.
Towards the end of July, the Court at Amsterdam applied the recent CJEU judgment in CDC, on the application of (now) Article 8’s rule on anchor defendants. The case also involved CDC – busy bees on the competition enforcement front, this time pursuing inter alia Kemira, a Finnish company, using Akzo Nobel NV, domiciled in The Netherlands, as anchor defendants.
The court referred in extenso to the CJEU’s CDC case, noting inter alia that it is not up to CDC to show that the suit was not just introduced to remove Kemira from the Finnish judge: that Kemira suggests that introduction of the suit in The Netherlands is not very logical given the absence of factual links to that Member State, does not suffice. The court also adopted the CJEU’s finding on choice of court and liability in tort. In the absence of specific proviso in a standard contractual choice of court, the application of such choice of court to extracontactual liability [such as here, for infringement of competition law] cannot be assumed.
Finally, at 2.18, the Court also referred to argument made by Kemira that Finish and Swedish law ought to apply to the interpretation (not: the validity) of the choice of court agreement. That would have been an interesting discussion. However in light of the court’s earlier judgment on the irrelevance of the court of choice, the court did not entertain that issue.
(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.12, Heading 22.214.171.124.
Anchor defendants in follow-up competition law cases. The ECJ in CDC confirms AG’s view on joinders. Sticks to Article 5(3 /7(1). Locus damni for purely economic loss = registered office.
Update 29 May 2018 on economic loss: Bobek AG would seem to take a similar view (that the CJEU’s finding on registered office is at odds with its case-law on Article 7(2) in his Opinions in Barclays and flyLAL.
Update November 2017. For a contrary ruling on the scope of arbitration agreement, see Dortmund 13 September 2017, reviewed here.
In Case C-352/13 CDC, in which the ECJ held last week, at issue is among others the use of Article 6(1) of the Brussels I-Regulation (8(1) in the recast) when the claim against the anchor defendant has been settled before the trial is well and truly underway.
I reviewed JÄÄSKINEN AG’s opinion here. The ECJ’s overall approach to Article 6 is not to take into account the subjective intentions of plaintiff, who often identify a suitable anchor defendant even if is not the intended target of their action. Like its AG, the Court does make exception for one particular occasion, namely if it is found that, at the time the proceedings were instituted, the applicant and that defendant had colluded to artificially fulfil, or prolong the fulfilment of, Article 6’s applicability. I had expressed reservation vis-a-vis this suggestion, obviously in vain. In cases such as these, where tort is already clearly established (via the European Commission’s cartel finding), the intention of ECJ and AG seem noble. Collusion to defraud is disciplined by the non-applicability of Article 6. However this arguably serves the interests of the parties guilty of the other type of collusion involved: that of defrauding not procedural predictability, but rather consumers’ interest.
Next, the referring court enquired about the application of Article 5(3)’s special jurisdictional rule in the event of infringement of competition law, where that infringement concerns a complex horizontal agreement, spread over a long period of time, and with varying impact in various markets. The AG had suggested dropping application of Article 5(3) (now 7(1)) altogether, both with respect to locus delicti commissi and locus damni. Here the Court disagreed. Difficult as it may be, it is not to be excluded that locus delicti commissi can be established. At 50: one cannot rule out ‘the identification, in the jurisdiction of the court seised of the matter, of a specific event during which either that cartel was definitively concluded or one agreement in particular was made which was the sole causal event giving rise to the loss allegedly inflicted on a buyer.’
For locus damni, the Court again has no sympathy for either mozaik effect of Article 5(3), or indeed the often great difficulties in establishing locus damni, flagged by the AG. At 52: ‘As for loss consisting in additional costs incurred because of artificially high prices, such as the price of the hydrogen peroxide supplied by the cartel at issue in the main proceedings, that place is identifiable only for each alleged victim taken individually and is located, in general, at that victim’s registered office.‘
Registered office as the locus damni for purely economic loss, lest my memory fails me, has not been as such confirmed by the ECJ before. It is also currently pending in Universal. The Court is in my view a bit radical when it comes to justifying registered office as the Erfolgfort: at 53: ‘That place fully guarantees the efficacious conduct of potential proceedings, given that the assessment of a claim for damages for loss allegedly inflicted upon a specific undertaking as a result of an unlawful cartel, as already found by the Commission in a binding decision, essentially depends on factors specifically relating to the situation of that undertaking. In those circumstances, the courts in whose jurisdiction that undertaking has its registered office are manifestly best suited to adjudicate such a claim.‘ Update 29 May 2018 Bobek AG would seem to take a similar view (that the CJEU’s finding on registered office is at odds with its case-law on Article 7(2) in his Opinions in Barclays and flyLAL.
Finally, on the issue of choice of court in the agreements between the victims of the cartel, and those guilty of the cartel, the Court follows the AG’s lead. Such clauses are not generally applicable to liability in tort (the clause would have to refer verbatim to tortious liability). Neither do they in principle bind third parties, lest of course there be subrogration (Refcomp). (The referring national court has given very little detail on the clauses at issue and hence the ECJ notes that it could not reply to all questions referred).
In the end, it is the finding with respect to economic loss for which the judgment may be most remembered.
(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.12, Heading 126.96.36.199.
The use of anchor defendants in follow-up competition law cases. JÄÄSKINEN AG in CDC questions i.a. arbitration clauses in competition cases.
A particularly sticky point in competition cases, are follow-up suits for damages. I have already reported on (private international law aspects of) the issue of the piercing of the corporate veil, and on the use of a related undertaking as an anchor. [I report more extensively on competition law and conflicts in Jacques Steenbergen’s liber amicorum here. I hope to translate it into English some time soon].
In Case C-352/13 CDC (Cartel Damage Claims, in effect private anti-trust enforcement), at issue is among others the use of Article 6(1) of the Brussels I-Regulation when the claim against the anchor defendant has been settled before the trial is well and truly underway.
JÄÄSKINEN AG [whose Opinion at the time of writing was not available in English; indeed the absence of English translation of quite a few important Opinions is becoming a bit of a pattern. (That’s an observation. not an accusation)] suggests in his Opinion that only the time of service of the suit is relevant to assess the criteria of Article 6(1). This suggestion in my view finds support in the ECJ’s overall approach to Article 6: the subjective intentions of plaintiff, who often identify a suitable anchor defendant even if is not the intended target of their action, does not feature in the application criteria of Article 6. While this may lead to abuse of procedural power, establishing malicious intent is all but impossible. All but impossible: but not totally excluded. For that reason the AG does suggest that if one can prove that plaintiff and anchor defendant (in the case at issue: Evonik Degussa) had secretly agreed to settle, prior to the introduction of the suit, such collusion should be punished by non-applicability of Article 6(1), for in that case the conditions of Article 6 arguably are no longer met.
I am not sure the ECJ should follow the latter suggestion, particularly not in cases such as the one at issue, where defendants have been found to have acted illegally under EU competition law. (Misdemeanor or indeed criminal act therefore has already been established). In a way it would be an application of nemo auditur propriam turpitudinem allegans not to reward those who infringe EU competition law in the way the AG suggests. (This may be different in the event of as yet unsubstantiated claims of tort, in which case one may argue the defendant should not routinely have to defend the claims in a court other than the one identified by Article 2).
Next, the referring court enquired about the application of Article 5(3)’s special jurisdictional rule in the event of infringement of competition law, where that infringement concerns a complex horizontal agreement, spread over a long period of time, and with varying impact in various markets. One can probably not at all establish a locus delicti commissi for the tort as a whole: for such behaviour often takes shape in a variety of meetings, electronic correspondence et al. For locus damni, too, the picture would be one of a complex patchwork. Predictability and manageability of the ensuing suits would be impossible to establish in some coherent way, thus endangering some of the very foundations of the Brussels regime. In conclusion therefore the AG suggests not to apply Article 5(3) at all to current scenario, and to stick with application of Article 2, often then in conjunction with Article 6.
Although the last word on Article 6 needs to be said by the national court who alone is the judge of the risk of irreconcilable judgments, clearly in the AG’s mind there is a strong likelihood of such risk in the event of follow-up damages in the case of a cartel which has been found to be illegal by the European Commission and where all members to it have acted within one and the same intent (again, as established by the EC). Article 6(3) b Rome II [not applicable in the case but the AG suggests it would not hurt looking ahead] hints at such scenario where many defendants are sued in one and the same court.
Finally, the Court is asked to give input on the issue of choice of court, and arbitration clauses, in the agreements between the victims of the cartel, and those guilty of the cartel: do such clauses have any impact on the legal position of CDC, who has acquired the rights to seek damages for the cartel infringement? The AG suggests, in line with most national case-law (see more on this in my Steenbergen chapter, linked above), that such clauses cannot include follow-up damages for cartel infringement: for the latter is arguably not within the legitimate contractual expectations. This would be different for such clauses concluded after the tort has been committed: for Article 23 of the Regulation allows parties to agree on a different forum than those identified in the special jurisdictional rules. The AG finds additional support for this argument in the overall objectives of the very recent Directive 2014/104, the damages Directive. He takes the opportunity to argue that in the case of arbitration clauses, these may hinder the effet utile of Article 101 TFEU, just as choice of court clauses might, unless parties are shown beyond doubt to have consented to the clause, and provided the tribunal or court at issue, is under an obligation to apply EU competition law as matter of public policy. (Whether that is the case is subject to national law).
(It is quite likely that the Court itself will not review the last question for as the AG indicates, the referring national court has given very little detail on the clauses at issue).
This case could turn out to have quite a wide relevance for a large part of commercial practice. Or not: that depends on how far the ECJ itself will decide to entertain it.
(Handbook of) European Private International Law. 2nd ed. 2016, Chapter 2, Heading 2.2.12, Heading 188.8.131.52.
The Foreign Trade Antitrust Improvements Act (“FTAIA”): How does one decide jurisdiction in competition cases.
Whether the US’ Foreign Trade Antitrust Improvements Act (“FTAIA”) is jurisdictional or rather establishes a substantial condition on the merits under the US Sherman Act (its main anti-trust law) has been extensively debated and arguments for or against now also rely on the seminal Morrison litigation (emphasising the need to draw a careful line between true jurisdictional limitations and other types of rules).
The FTAIA provides in short that the Sherman Act (the main source of US anti-trust or ‘competition’ law) shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless – (1) such conduct has a direct, substantial, and reasonably foreseeable effect – (A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or (B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and (2) such effect gives rise to a claim under the Sherman Act.
In Lotes v Foxconn, Scheindlin USDJ for the US District Court of New York rejected jurisdiction and found FTAIA to be of a jurisdictional nature. Plaintiff and defendant are Chinese corporations, competing in the USB connector market. Neither of them sell or manufacture the connector in the United States, however Lotes, plaintiff, argues that the management by defendant of its patents effectively forecloses Lotes from gaining a foothold in inter alia the US market. Judge Scheindlin found there to be a disconnect between the relevant foreign market (in competition terms) in which the defendant is alleged to create a monopoly (the Chinese market in USB 3.0 connectors), and the US market supposedly affected by the attempted monpolisation.
At the level of competition authorities, the issue of jurisdiction is sometimes managed using comity considerations in inter-State agreements [such as the US -EU agreements: see here and here]. These agreements employ some form of an effects and comity doctrine. Of course where enforcement of competition law is sought through private action, these agreements do not apply, leaving courts to having to apply their standard jurisdictional (or are they – see above) rules. This is no different in the EU, albeit that jurisdiction there is much easier determined, typically on the basis of corporate domicile. What (competition) law applies, is regulated through an EU equivalent, in the Rome II Regulation, of the US’ minimum contacts doctrine.