This paper is available here.
Damages claims which follow on from European Commission (“Commission”) cartel decisions are, by their very nature, multinational in scope, with addressees of a Commission decision often domiciled across various EU Member States and even further afield. As multiple national markets are often affected by the anticompetitive conduct, potential claimants are also often domiciled across the EU and beyond. This can present potential claimants with a choice as to the jurisdiction in which they wish to pursue their damages claims, with the United Kingdom, Germany and the Netherlands emerging as the most popular jurisdictions.
However, seising jurisdiction in the national court of a desired Member State can require the claim to be pursued against an anchor defendant that is not an addressee of a Commission decision. The ECJ’s Skanska judgment relieves claimants from the burden of having to establish that the non-addressee defendant participated in, or implemented, the cartel in order to sustain a claim against it, by holding that it is entire undertakings that are liable for compensation in private damages actions. This judgment harmonises the scope of liability under the public and private spheres of EU competition law enforcement and has potentially significant ramifications for competition litigation.
A first section reviews the Skanska judgment.
The case concerns a follow on claim against a cartel in the asphalt market in Finland between 1994 and 2002 – with the infringement decision becoming final in 2009. Several companies that had been involved in the cartel were dissolved in voluntary liquidation procedures, with their parent companies acquiring the dissolved companies’ assets and continuing their economic activity. In this case, the assets of cartelist Sata-Asfaltti were acquired by, and its activities were transferred to, Skanska Asfaltti (Skanska) in 2002. The liquidation of the companies involved in the cartel did not prevent the Finnish Supreme Administrative Court from imposing fines on the cartelists’ parent companies. In doing so, the Supreme Administrative Court applied the ‘principle of economic continuity’, which is well established in the public enforcement of fines for EU competition law infringements.
However, damages claims are traditional governed by national rules concerning tort liability, not by EU competition law. In 2009, the City of Vantaa, which had purchased asphalt during the cartel period (although not from either Skanska or Sata-Asfaltti), brought a private damages claim against the cartelists, including Skanska, which was ordered to pay damages on the basis of its own conduct and, by applying the economic continuity test, that of Sata-Alsfatti. Skanska disputed that the ‘economic continuity principle’ should also apply in determining liability in the context of private damages actions, and that it could not be held liable for Sata-Alsfatti, a legally independent company. The Court of Appeal upheld Skanska’s appeal on the ground that that the economic continuity test could not be applied to tortious actions for damages under Finish law. On appeal, the Supreme Court agreed with the Court of Appeal on this point but made a reference to the ECJ on whether this state of affairs contradicted EU law.
In its judgment, the CJEU emphasised that national courts must protect and give full effectiveness to individuals’ rights under EU competition law, including the right to claim damages. It held that whilst national law lays down the rules for compensation claims concerning harm caused by a breach of EU competition law, the identification of the entity liable to pay such compensation is governed by EU law, as opposed to national law; and must be based on the same interpretation of the concept of an ‘undertaking’ as for the imposition of fines. The Court also emphasised that liability to pay compensation is personal in nature, and that this liability is imposed on an ‘undertaking’ that has participated in a cartel or other anti-competitive practice. The term ‘undertaking’ has been defined by the CJEU in previous case law as “any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed”, i.e. an economic unit that may consist of several persons, natural or legal. The same undertaking that is responsible for the infringement of Article 101(1) TFEU is liable for damages in a private damages action. Therefore, restructuring of an undertaking in which the legal entity that committed the infringement of EU competition law ceases to exist does not create a new undertaking that is free of liability for the anti-competitive behaviour of its predecessor, if – from an economic perspective – the two entities are identical. Thus, liability can be imputed from the predecessor company (which has been liquidated) to its successor, which is carrying on its economic activity and has taken over its liability for breaching EU law.
A second section looks at the various ways in which jurisdiction can be seised in the English courts.
Two main avenues exist – and will persist until 31 December – for an English court to seise jurisdiction over a damages claim. Under EU law, the Recast Brussels Regulation governs jurisdiction. The most straightforward ground for securing jurisdiction in the English courts is where, in a follow-on private damages action, one of the Commission decision addressees is domiciled in England, as per Article 4. That English-domiciled defendant can be used as an ‘anchor defendant’, with any and all other defendants, regardless of where they are domiciled, brought in to the claim on the basis that the claims against those other defendants are so closely connected to the claim against the English-domiciled defendant that it is expedient to hear the claims together in the English court. A stand-alone allegation that an English-domiciled defendant participated in the cartel can also secure jurisdiction, provided there is a reasonable basis for such an allegation. The claimant’s belief that the English-domiciled defendant participated in the cartel must be genuine, as the claim form and particulars of claim must be verified by a statement of truth.
A related, but alternative, ground for securing jurisdiction in the English courts which falls short of alleging full participation by the English-domiciled defendant in the cartel, is that the English-domiciled defendant implemented the cartel in England. This is perhaps the most commonly used means of securing jurisdiction in the English courts in competition damages actions in circumstances where there is no English-domiciled addressee of the Commission’s infringement decision. There is some debate as to whether the requirement for a claim to be brought against the English-domiciled defendant should be on the basis of the English-domiciled defendant having ‘knowingly implemented’ the cartel or whether mere ‘implementation’ suffices; and as to what constitutes implementation of a cartel. In any event, a consistent message in the case law is that determining the participation in, or knowing implementation of, a cartel by a subsidiary is a fact-sensitive question which is not suitable for summary determination. Given that matters of jurisdiction are dealt with at a preliminary stage, this means that the issue of jurisdiction becomes much less significant as the claim proceeds through the litigation process towards trial. Whilst it would technically remain open to defendants to challenge jurisdiction at a later stage in the proceedings following disclosure or even at trial, the claimant may be able to settle the claim with the defendant prior to any such later challenge taking place, and the court is unlikely to allow a jurisdictional challenge to be made concurrently with the main trial.
A further means by which jurisdiction can arguably be established in the English court is through the English-domiciled defendant being part of the same undertaking as the decision addressee, for the purposes of EU competition law. This would require the addressee of the Commission’s infringement decision to exert decisive influence over the English-domiciled defendant (through holding, for example, decisive voting rights in the English domiciled defendant) such that it formed a single economic unit with the English-domiciled defendant and therefore a single undertaking. However, in Cooper Tyres it was held obiter that attribution of liability works only ‘up’ the corporate chain from a subsidiary to its parent company, as opposed to ‘down’ the corporate chain from a parent company to its subsidiary.
The third section considers the implications of the Skanska judgement.
This judgment can be subject to a fairly narrow reading, and be taken to mean solely that any successor company to an entity that infringed competition law and ceased to exist through corporate restructuring may be liable for damages. However, the judgment has potentially much wider reaching implications. The CJEU’s finding that entire undertakings are liable for compensation in private damages actions may enable claimants to secure jurisdiction in the national courts of a Member State against a defendant which is domiciled in that Member State purely on the basis that it is part of the same undertaking as the legal entity that has infringed EU competition law. This would remove the requirement for the anchor defendant to have engaged in any conduct concerning the cartel, as set out in the Provimi case law.
If this latter interpretation of Skanska finds favour with the courts, the consequence would be that, provided a claimant can locate in a country an organisation that forms part of the undertaking that has infringed competition law, it can be used as an anchor defendant to a damages claim without having to allege separate conduct on the part of that organisation, through participation in, or implementation of, the cartel. A further potential benefit for claimants arising out of the Skanska judgment is the CJEU’s clarification that the same principles for establishing liability apply to both the imposition of fines by the Commission and the award of damages in private damages actions and that the legal entities that comprise an undertaking are jointly and severally liable for the payment of any fines in a public enforcement context and damages. Therefore, claimants may seek to include other well-financed companies from within the undertaking as defendants in damages actions, regardless of whether those other companies are themselves addressees of the Commission’s decision, or even participated in, or implemented, the cartel.
In conclusion, the Skanska judgment harmonises the rules of liability within an undertaking in the public and private enforcement spheres of EU competition law. Whilst, from a black letter reading of the terms of Article 101 TFEU, that should not be a surprising conclusion, distinctions between liability for public enforcement fines and liability in private damages actions in various respects has been a contested issue in previous competition litigation cases.
This is both a thoughtful comment on the ECJ’s Skanska decision, and an introduction to the complexities of establishing jurisdiction for competition infringements in English courts. I do not have much to say on the content, other than that I am not sure that the distinction between two of the grounds for seising jurisdiction in England (implementing the cartel, and being part of the same undertaking) is as solid as it sounds, even if I can see how it makes sense conceptually. As far as I know, most (all?) instances of relying on cartel implementation to seise jurisdiction related to conduct by a subsidiary (i.e. the anchor defendant belonged to the same undertaking as the addressee of the infringement decision); and, in order for a member of an undertaking to be liable for damages, English law requires this legal entity to have implemented the cartel. However, I may be wrong in this, and I know many of my readers are much better placed to know whether that is the case – if I need to correct this, please let me know.
On reading this paper, I was expecting to see two aspects discussed – how will this matter for English cases after the Brexit extension period is over; and how this decision interacts with the intricate architecture set out for the allocation of jurisdiction in the Brussels Recast Regulation. As to the former, I can understand one’s reticence to go into the matter, given the ongoing uncertainty about how EU and UK competition regimes will interact in the future. As to the latter, it is useful to bear in mind that a number of jurisdictions already allow claimants to rely on anchor defendants to seise jurisdiction on the basis of the liability of parent companies based outside the jurisdiction. Further, following the Skanska decision, courts in both the Netherlands and Germany – which traditionally did not find the economic undertaking liable, but instead restricted liability to the infringing legal entity – adopted this broader approach. As such, I think this is an area of great sensitivity going forward, particularly as courts compete for jurisdiction over competition damages claims, and disputes regarding priority, exclusive jurisdiction and allocation of competences become likelier.