Boosting the Enforcement of EU Competition Law at the Domestic Level [1 ed.] 9781443891493, 9781443852012

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Boosting the Enforcement of EU Competition Law at the Domestic Level

Boosting the Enforcement of EU Competition Law at the Domestic Level Edited by

Anne Looijestijn-Clearie, Catalin S. Rusu and Marc Veenbrink

Boosting the Enforcement of EU Competition Law at the Domestic Level Edited by Anne Looijestijn-Clearie, Catalin S. Rusu and Marc Veenbrink This book first published 2017 Cambridge Scholars Publishing Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2017 by Anne Looijestijn-Clearie, Catalin S. Rusu, Marc Veenbrink and contributors All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-4438-5201-5 ISBN (13): 978-1-4438-5201-2

CONTENTS

Acknowledgments ..................................................................................... vii List of Abbreviations ................................................................................ viii Foreword .................................................................................................... ix Monique van Oers Part 1 – Introduction Chapter One ................................................................................................. 2 Domestic Enforcement of EU Antitrust and State Aid Rules: Status Quo and Foreseen Developments CATALIN S. RUSU AND ANNE LOOIJESTIJN-CLEARIE Part 2 – Antitrust Enforcement Chapter Two .............................................................................................. 26 Effective Public Enforcement of the Cartel Prohibition in the Netherlands: A Comparison of ACM Fining Decisions, District Court Judgments, and TIAT Judgments ANNALIES OUTHUIJSE Chapter Three ............................................................................................ 52 On-Site Inspections Performed by Competition Authorities and the Protection of Fundamental Rights MICHAL PETR Chapter Four .............................................................................................. 71 Incentives to Apply for Leniency: Criminalising Cartel Offences in Spain MANUEL CONTRERAS

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Part 3 – State Aid Enforcement Chapter Five .............................................................................................. 90 Latest State Aid Enforcement Developments in the Domestic Ambit JULES STUCYK AND PIERRE SABBADINI Chapter Six .............................................................................................. 109 The Enforcement of the EU State Aid Rules by the Dutch Courts ALKE METSELAAR Chapter Seven.......................................................................................... 128 Ancillary Activities and Environmental Protection Organisations LUKAS AMENT Chapter Eight ........................................................................................... 143 The Enforcement of the State Aid Rules by National (Judicial) Authorities JOHAN VAN DE GRONDEN Part 4 – Conclusion Chapter Nine............................................................................................ 162 Boosting the Enforcement of EU Competition Law at the National Level: Some Unresolved Issues MARC VEENBRINK Bibliography ............................................................................................ 173 Contributors ............................................................................................. 194

ACKNOWLEDGEMENTS

This volume is the fruit of the first Radboud Economic Law Conference held at the Radboud University, Nijmegen, the Netherlands on 3 June 2016. The title of this first conference is “Boosting the Enforcement of EU Competition Law at the Domestic Level”. The speakers dealt with the central problem of how to accomplish the goal of further boosting the enforcement of the EU antitrust and State aid law rules at the domestic level and the challenges which this presents to the national authorities and courts. The editors of this volume would like to express their gratitude to a number of persons without whose help both the conference and this volume would not have been possible. Firstly, we are indebted to the Faculty of Law of the Radboud University Nijmegen for giving us the opportunity to host this conference in the new Grotius Building. We are also grateful to all the speakers who held presentations during the conference and to all those who contributed to this volume. A special word of thanks goes to Professor Pieter Kuypers and Professor Johan van de Gronden who chaired the discussion sessions in a stimulating and thought-provoking manner. We would also like to express our gratitude to Mrs Charley Berndsen and Mrs Fiorina Argante of the Law Faculty without whose organisational skills the conference would not have been possible. We are also indebted to Mr Thomas Arnold, student assistant at the Department of International and European Law, for his valuable help in polishing the various contributions to this volume. Anne Looijestijn-Clearie, Catalin S. Rusu and Marc Veenbrink Nijmegen, December 2016

LIST OF ABBREVIATIONS

Authority for Consumers and Markets Act on the Protection of Competition College van Beroep voor het bedrijfsleven Court of Justice of the European Union Czech Competition Authority Compagnie méridionale de navigation SA De Nederlandsche Bank (Netherlands Central Bank) Dutch General Administrative Law Act European Competition Network European Convention on Human Rights European Court of Human Rights European Union General Block Exemption Regulation Legal Professional Privilege National Competition Authority Netherlands Authority for the Financial Markets Netherlands Competition Authority Netherlands Independent Post and Telecommunications Authority Services of General Economic Interest Small and Medium-Size Enterprise Société Nationale Corse-Méditerranée and the Compagnie Méridionale de Navigation Trade and Industry Appeal Tribunal Treaty on the Functioning of the European Union

ACM APC CBb CJEU CCA CMN DNB GALA ECN ECHR ECtHR EU GBER LPP NCA AFM NMa OPTA SGEI SME SNCM TIAT TFEU

FOREWORD EFFECTIVE ENFORCEMENT AT THE DOMESTIC LEVEL: A CLOSER LOOK AT THE ENFORCEMENT OF COMPETITION LAW IN THE NETHERLANDS MONIQUE VAN OERS

“The world is changing rapidly”. This cliché, so often heard, also applies to competition law enforcement. Enforcement of the competition rules in the Netherlands is still relatively new: less than 20 years old. However, the enforcement practice has evolved amazingly rapidly in this period. In the early years, working for the competition authority meant dealing with applications for exemptions. A job often carried out by lawyers; something they were good at. There was little time for ex officio investigations and enforcement actions were rare. This changed dramatically, when Regulation 1/20031 entered into force in 2004 and applications for exemption were replaced by self-assessment. Competition Authorities within the European Union, such as the Netherlands Competition Authority (NMa), could dedicate more of their time to enforcement. The composition of the NMa’s staff became more diverse, with more economists and other professionals joining the authority. In those days, public support for free markets and competition was widespread and fines were regarded as the appropriate response to cartel infringements. This was also the case when the NMa developed its fining policy and leniency policy. Enforcement peaked with the issuing by the NMa of 1,300 fining decisions from 2005 to 2007, totaling fines of more

Director Legal Department, Authority for Consumers and Markets in the Netherlands. 1 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, OJ L1/1, 04.01.2003.

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than 250 million Euro, for bid-rigging in the Dutch construction industry. Fines are for punishment and deterrence; a warning and stimulation for undertakings not to engage in similar behaviour. That fines are an important enforcement tool was stressed again recently by the Dutch Parliament when it passed a bill increasing the maximum fines for undertakings and individuals substantially. Nowadays, high fines, up to 40 percent of the annual turnover of undertakings involved and 900,000 Euro for individuals, may be imposed for sufficiently serious competition infringements. Not only the rules on fines but also the approach to market problems in the Netherlands have evolved over the years. This development was stimulated by the merger of the NMa with the Consumer Authority and the Netherlands Independent Post and Telecommunications Authority (OPTA) in 2013. The new Authority for Consumers and Markets (ACM) is a multifunctional authority that is charged with competition oversight, sector-specific regulation and the enforcement of consumer protection laws. The goal of ACM is to promote wellfunctioning markets and orderly and transparent market processes that serve consumers well. Faced with market failures, ACM aims at tackling the underlying causes of the market problem at hand. Depending on its analysis of such market problems, ACM may choose to approach a case on the basis of competition law, consumer law, or regulation. For example, low levels of competition in a regulated market may be an indication of collusion which may justify a fining decision for cartel behaviour by the undertakings involved. It may also be the result of restrictions, which consumers either perceive or actually encounter when wanting to switch from one provider to another. In such a case, empowering the consumers by informing them of their rights, and stimulating providers to be transparent about their offer may result in a boost to competition. Not only has the sphere of ACM’s activities been enlarged over the years, also its toolbox has been enriched. Apart from fines, ACM may impose orders subject to periodic penalty payments, an instrument ACM often uses in the field of consumer law. Commitment decisions are also an important element in ACM’s toolbox. In addition, ACM has powers to impose binding instructions and structural remedies. Hence, ACM has various angles from which it can approach a case and it also has a wide range of instruments. In today’s world, the authority’s task is as simple as it is complex: how to use all these options in practice to boost competition and contribute to consumer welfare? To give an example: in 2013, ACM fined the airline company Ryanair for using online ticket prices that did not include all the foreseen surcharges. The impact of this illegal behaviour goes beyond

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consumers’ missing out on necessary information. It also affects market dynamics. As a result of ACM’s intervention, competition in the market is sharpened and all players are playing by the same rules. Another example: in 2015 ACM issued fining decisions for market sharing agreements in the Cold Storage cartel cases. ACM reduced the fines by 10 percent for parties not disputing the facts of the case. In other cases, ACM reduced the fines even further because the company involved had compensated their consumers for the damage suffered. In 2016, ACM accepted commitments from undertakings active in the market for construction materials, more specifically ready-mix concrete. In ACM’s view, harm to competition could arise due to the structure of the sector combined with the close ties between the various firms and/or their employees (resulting, for example, in jointly-used plants, managed by competitors). Seven undertakings made extensive commitments stating that where they have a combined market share of 40 percent or more in a particular region, they will cease their collaboration within three years, so that the joint operation of plants will no longer take place. ACM believes that, due to this intervention, possible harm to competition is avoided. These examples show that the optimal use of its instruments gives the authority the means to contribute to restoring the position of undertakings and consumers in the market, and thus to contribute to the wellfunctioning of markets. While developing and using their instruments, authorities must be alert to the importance of maintaining their credibility. Transparency, respect for the rights of defence of the parties involved and the for the interests of third parties are important elements for consideration. ACM finds it, therefore, important that all its decisions may be challenged before the court. In fact, most enforcement decisions are reviewed by the court. The court’s review extends to the selection of the instrument (could ACM reasonably choose a certain instrument?) and in the case of fines, their proportionality. Notwithstanding ACM’s large working scope and large toolbox, one may pose the question whether the authority is sufficiently armed to tackle the market problems not only of today but also of tomorrow? The world is transforming rapidly as a result of digitalization. Platformisation, the sharing economy and big data stimulate new business models which are very different from those we know from the past. New business models create new opportunities but also new uncertainties. In the sharing economy and with the use of big data, it is not always clear anymore who is the producer and who is the consumer. Consumers are paying for products and services with their data rather than with their pockets. Are our laws and tools fit to detect possible harmful developments and are our

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tools flexible enough to accommodate new business models? And even if we do have an adequate toolbox, there is another question. Are we capable of delivering timely solutions to today’s market problems? Are our traditional procedures not too slow in view of the dynamics of this new digitalized world? How can we offer legal certainty in this rapidly changing world? Looking at the evolution of competition law enforcement and the dynamics created by the integration of oversight over the years, I am optimistic that we are fit to face this challenge as well. However, if we are to facilitate evolution, we need to be open to discussion. We need to be willing to innovate. Here, an important role is also played by universities and academic debate. The evolution of competition law enforcement, and market oversight in general, are hugely dependent upon academic analysis of new developments and innovative thinking. I am therefore very grateful to the authors who have contributed to this book, and who in their contributions show that they have the discernment and determination needed to facilitate this analysis in our dynamic world.

PART 1 – INTRODUCTION

CHAPTER ONE DOMESTIC ENFORCEMENT OF EU ANTITRUST AND STATE AID RULES: STATUS QUO AND FORESEEN DEVELOPMENTS CATALIN S. RUSU AND ANNE LOOIJESTIJN-CLEARIE

1. Introduction The role of the EU competition law rules in shaping the EU Internal Market can hardly be overstated. Furthermore, competition law has served over time the achievement of various goals: economic efficiency, proper allocation of resources, consumer welfare, and more recently, fostering innovation for the purpose of boosting growth, according to the Europe 2020 agenda.1 Yet, much of the success of EU competition law in achieving these goals is owed to the practical enforcement of the substantive rules on cartels, abuse of dominance, and State aid. EU competition law has come of age. For quite some time now, it has no longer been regarded as a ‘stand-alone only’ legal area. Particularly when talking about the enforcement of the EU antitrust rules (Articles 101 and 102 TFEU) and of the EU State aid rules (Articles 107-109 TFEU), a great deal of reliance has been placed on domestic law. In this respect, competition law is nowadays part of domestic administrative law, while

Catalin S. Rusu is Associate Professor of European Law at Radboud University Nijmegen. (www.ru.nl/english/people/rusu-c). Anne Looijestijn-Clearie is Senior Lecturer of European Law at Radboud University Nijmegen (www.ru.nl/english/people/looijestijn-clearie-a). 1 See Jones and Sufrin, EU Competition Law (2016); Patel and Schweitzer, The Historical Foundations of EU Competition Law; Petersen, “Antitrust Law and the Promotion of Democracy and Economic Growth”; Sauter, Coherence in EU Competition Law; Mooij and Rusu, “Innovation and EU Competition Law”.

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also simultaneously impacting greatly domestic private law.2 Furthermore, especially in the recent past, certain competition law mechanisms seem to be developing quite an interesting relationship with criminal law,3 and tax law.4 Last but not least, the network of enforcement entities, that has been put together for the purpose of ensuring that the EU competition law rules are properly enforced in practice, pertains greatly to the EU multi-level governance dynamic.5 Within this mix of legal disciplines, that touch upon competition law in a more or less evident manner, it is safe to say that EU antitrust and State aid law have fought their biggest battles on the enforcement front. The substantive rules on cartels, abuse of dominance, and State aid have not changed much since their inception in the late 1950s. It is true though, that when talking about substance, the role of the EU Courts has been instrumental over the years: think, for example, of the recent discussions about object and effect, and appreciability in the context of Article 101 TFEU,6 or of the development of various types of exclusionary abuses in the context of Article 102 TFEU.7 In the field of State aid, illustrations can be found in seminal rulings of the CJEU on the topic of services of general 2

See, for example: Van Bael, Due Process in EU Competition Proceedings; Hüschelrath and Schweitzer, Public and Private Enforcement of Competition law in Europe; Komninos, “Public and Private Antitrust Enforcement in Europe”; Korah, EC Private Enforcement; Wils, “The Relationship between Public Antitrust Enforcement and Private Actions for Damages”. 3 See Whelan, The Criminalization of European Cartel Enforcement; Wardhaugh, Cartels, Markets and Crime. 4 Nicolaides, “State aid Rules and Tax Rulings”, p. 428; Moreno González, “State aid and Tax Competition”, p. 556; Gunn and Luts, “Tax Rulings, APAs and State aid”, p. 119; Luja, “Do State Aid Rules Still Allow European Union Member States to Claim Fiscal Sovereignty?”, p. 312. 5 See also Caranta, Andenas and Fairgrieve, Independent Administrative Authorities; Cengiz, “Multi-level Governance in Competition Policy”; Cseres, Questions of Legitimacy; Fox and Trebilcock, The Design of Competition Law Institutions; Wilks, “Agencies, Networks, Discourses”. 6 See for example CJEU 14 March 2013, C-32/11, ECLI:EU:C:2013:160 (Allianz Hungária Biztosító Zrt. and Others v. Gazdasági Versenyhivatal); CJEU 11 September 2014, C-67/13P, ECLI:EU:C:2014:2204 (Groupement des cartes bancaires v. European Commission); CJEU 13 December 2012, C-226/11, ECLI:EU:C:2012:795 (Expedia Inc. v. Autorité de la concurrence and Others); CJEU 20 January 2016, C-373/14P, ECLI:EU:C:2016:26 (Toshiba Corporation). 7 See, for example CJEU 16 July 2015, C-170/13, ECLI:EU:C:2015:477 (Huawei Technologies Co. Ltd v. ZTE Corp., ZTE Deutschland GmbH); CJEU 17 February 2011, C-52/09, ECLI:EU:C:2011:83 (Konkurrensverket v. TeliaSonera Sverige AB).

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economic interest8 and on that of the market economy investor principle.9 Yet, the enforcement of the EU antitrust and State aid substantive rules is the legal realm that has faced the most interesting challenges, to say the least in the recent past. This is so, especially when taking into account the diversity of the domestic legal mechanisms used by the national bodies in the context of their enforcement activities. While, as stated above, a big part of the enforcement of the EU competition law rules takes place in the domestic ambits, a valid question that may be posed is whether the national authorities performing the enforcement work have the adequate tools to get the job done. In other words, is the enforcement of the EU antitrust and State aid rules, performed by the national competition authorities and the domestic courts, prone to be boosted? Or better yet, to what extent would boosting the domestic enforcement of the EU competition law rules aid the ambition of more forceful, better targeted, and more resource-efficient EU competition law enforcement in the Internal Market? Answering these questions is important, since efficiency, coherency, and uniformity in the enforcement activities are key attributes of the development of the EU competition law area, especially in this day and age, when the scarcity of (enforcement) resources calls for a pragmatic approach on behalf of all entities concerned, be them EU institutions, or domestic entities. To this end, the volume at hand raises certain key points in connection with the areas where the boosting of the domestic enforcement of the EU antitrust and State aid rules seems more challenging than ever. Thus, the contributions included in this volume critically discuss important elements relating to the domestic enforcement of the said rules, in order to place the discussion of further boosting this enforcement exercise in the correct context. In the eyes of the editors of and the contributors to this volume, such discussions are necessary in order to ensure that the domestic enforcement of the EU competition law rules develops in a consistent and uniform manner. If the endeavour is to ensure more forceful and effective enforcement, while making an even greater use of the domestic enforcement capabilities, a coherent and transparent approach must be adopted, so that added value is created, for the benefit of all stakeholders involved. With this in mind, the volume at hand contains diverse contributions touching upon topical practical aspects: the sufficiency of the enforcement 8

CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark). See for example, CJEU 3 April 2014, C-224/12 P, ECLI:EU:C:2014:213 (Commission v. Netherlands and ING Groep NV) and CJEU 4 September 2014, Joined Cases C-533/12 P and C-536/12 P, ECLI:EU:C:2014:2142 (SNCM and France v. Corsica Ferries France).

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toolbox of national competition authorities, the interaction between fundamental rights and competition law, the link between the Private Damages Directive10 and public enforcement tools in domestic ambits, the interplay between EU State aid law and domestic enforcement activities, and the duties of domestic bodies in this context. Generally speaking, these contributions may be categorized as relating to either EU antitrust law (enforcement), or EU State aid law (enforcement). Consequently, this volume is structured in two main parts, dealing with enforcement aspects relating to these two areas of EU competition law. In the same respect, the following two sections of this introductory chapter briefly touch upon the status quo and the foreseen legal developments, in the field of EU antitrust and State aid law enforcement, respectively.

2. The domestic (public) enforcement of the EU antitrust rules 2.1 Status quo Regulation 1/200311 brought about significant changes with its entry into force on 1 May 2004 to the enforcement of the EU antitrust rules.12 A socalled ‘decentralized’ enforcement system was put into place, in which not only the European Commission, but also the national competition authorities and the domestic courts, were charged with the task of enforcing Articles 101 and 102 TFEU, when the trade between Member States is impacted.13 In this respect, a network of enforcement entities was created (the so-called European Competition Network), in the context of which exchanges of relevant enforcement information take place, thus ensuring also a valuable forum for discussion between the competition enforcement agencies in the EU.14 10

Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1, 05.12.2014. 11 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, OJ L1/1, 04.01.2003. 12 See also Cseres, “The Impact of Regulation 1/2003 in the New Member States”; Parret, Side Effects of the Modernisation of EU Competition Law. 13 See Article 3 of Regulation 1/2003. For further details, see also Lenaerts and Gerard, “Decentralisation of EC Competition Law Enforcement”. 14 See also the Notice on cooperation within the network of competition authorities, OJ C 101/43, 27.04.2004.

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The consequences that the entry into force of Regulation 1/2003 brought about have been debated extensively.15 To summarize the contribution of Regulation 1/2003 to a stronger enforcement of the EU competition rules, one may mention the following:16 first, a larger number of infringements has been tackled by the national competition authorities after 2004, than the Commission could have handled by itself; second, this gave the Commission more room to prioritize its enforcement activities by devoting more resources to the more important inquires. As a by-product of this joint enforcement of the EU antitrust rules, a process of ‘soft harmonisation’ has occurred between the domestic and the EU substantive rules on anticompetitive agreements and abuses of dominant positions.17 Consequently, Articles 101 and 102 TFEU have become the law of the land throughout the EU.18 Furthermore, the joint enforcement of the EU antitrust rules by the Commission and the domestic bodies, has rendered the latter as solid enforcement pillars of the EU antitrust rules. All in all, Regulation 1/2003 has created the premises for a proliferation of the antitrust law enforcement in the EU. Still, has this enforcement expansion reached its outer limits? In other words, is there more that can be done with the system put in place by Regulation 1/2003? In particular, when talking about the enforcement performed by the national competition authorities, the above-mentioned proliferation has its roots in the decision-making powers that Article 5 of Regulation 1/2003 grants to these domestic bodies: requiring that an infringement of the EU antitrust rules be brought to an end, ordering interim measures, accepting commitments, and sanctioning the infringers. Yet, these administrative powers are not as far reaching as originally thought, since according to the provisions of Article 10 of the same Regulation, and as further explained in the Tele2Polska CJEU ruling,19 it is only the Commission that can adopt a decision stating that the EU antitrust rules have not been infringed. Thus, 15

See also Wils, “Ten Years of Regulation 1/2003”; Rusu, “The Commission Communication on Ten Years of Antitrust Enforcement under Regulation 1/2003”. 16 For a more thorough analysis on this matter, see Cseres, “Multi-Jurisdictional Competition Law Enforcement”. See also Italianer, “Completing Convergence”; Italianer, “The Independence of National Competition Authorities”; Almunia, “Looking Back at Five Years of Competition Enforcement in the EU”. 17 Vedder, “Spontaneous Harmonisation of National (Competition) Laws in the Wake of the Modernisation of EC Competition Law”. 18 Communication from the Commission – Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM(2014) 453, 09.07.2014. 19 CJEU 3 May 2011, C-375/09, ECLI:EU:C:2011:270 (Tele2Polska).

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negative enforcement decisions are off-limits for the domestic entities, for the simple reason of avoiding the risk of undermining the uniform application of Articles 101 TFEU and 102 TFEU. Moving on, when it comes to the investigative powers of the national competition authorities, the prerogatives for performing antitrust investigations are not grounded in EU law (as is the case for the Commission, whose investigative powers are embedded in Chapter V of Regulation 1/2003), but rather are exercised by making use of domestic procedures. It is true that the use of these domestic procedures has to be in accordance with the EU law principles of effectiveness and equivalence, yet this control is rather light.20 Similarly, the control that EU law exerts on the Member States’ institutional autonomy is again limited, since there is a large degree of flexibility that EU law leaves to the Member States in the design of their competition regime. When designing the features of their national enforcement agencies, the Member States must comply only with the rather permissive obligation contained in Article 35 of Regulation 1/2003, to observe that the provisions of the Regulation are effectively complied with. Last but not least, recent research21 put forward by the European Commission shows that the institutional positioning of the national competition authorities, their staffing and funding policies, and the powers allotted the them in relation to day-to-day enforcement activities lack the desired strength for these entities to be labelled as truly effective EU antitrust law enforcers. All in all, these issues demonstrate the rather fragmented nature of the EU antitrust domestic public enforcement activities performed by the national competition authorities.

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See CJEU 7 December 2010, C-439/08, ECLI:EU:C:2010:739 (VEBIC) and CJEU 18 June 2013, C̻681/11, ECLI:EU:C:2013:404 (Schenker). 21 See Communication from the Commission – Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM(2014) 453, 09.07.2014; Commission Staff Working Document SWD (2014) 230 – Ten Years of Antitrust Enforcement under Regulation 1/2003, SWD(2014) 230/2, 09.07.2014; Commission Staff Working Document SWD (2014) 231 – Enhancing competition enforcement by the Member States' competition authorities: institutional and procedural issues, SWD(2014) 231/2, 09.07.2014.

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2.2 Foreseen developments Remedying (at least some of) these enforcement inconsistencies seems to require an imminent revision of the system put in place by Regulation 1/2003. In this respect, the Commission initiated a public consultation in late 2015,22 for the purpose of identifying the mechanisms to ensure that the national competition authorities are further empowered to be more effective EU antitrust enforcers. In the words of the Commission, the national competition authorities indeed have the potential to do much more. While Regulation 1/2003 gave these domestic agencies the competence to apply the EU antitrust rules, it did not tackle the means and instruments by which they apply those rules. As a result, the national competition authorities encounter various institutional, investigative, and decision-making difficulties in carrying out their work and in tapping their full potential, such as: the ability to act independently when enforcing EU antitrust rules and having the resources and staff needed to do their work; an adequate competition toolbox to detect and tackle infringements; imposing effective fines on companies which break the rules; applying leniency programmes that work effectively across Europe. Amending Regulation 1/2003 in order to ensure that such limitations on the enforcement work performed by the national competition authorities are removed, seems to be a good starting point in fulfilling the endeavour of more forceful and effective EU antitrust enforcement throughout the EU. Yet, this exercise tackles only one of the facets of enhancing the domestic enforcement activities in the national ambits, namely what the EU law instruments can do to further boost the domestic enforcement of Articles 101 and 102 TFEU. A stronger and more coherent approach to boosting the domestic enforcement activities relates to much more than this. In this respect, the following three chapters of this volume critically assess specific enforcement points which are prone to improvement, from various standpoints: the contribution of domestic legal processes to boosting the EU antitrust enforcement, the consistency between investigation tools and fundamental rights, and the balance between various public and private enforcement mechanisms. While this list of improvement points is by no means exhaustive, it provides a colourful depiction of the diversity of actions which may be undertaken in connection with various legal fields, 22

ECN Plus: Empowering the national competition authorities to be more effective enforcers, available at: http://ec.europa.eu/competition/consultations/2015_effective_enforcers/index_en.h tml, accessed on 05.12.2016.

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for the purpose of boosting enforcement. On top of this, the selection of the domestic jurisdictions covered in these contributions constitutes a representative sample as far as enforcement experience and traditions, priorities, and breadth and availability of domestic investigative tools are concerned. First, one has to ask the question what other avenues are available in the domestic settings to boost EU antitrust enforcement. In other words, is there something that can be done in the domestic proceedings to this end, after a national competition authority has established an infringement of the EU antitrust rules and imposed a fine? The contribution of Annalies Outhuijse in Chapter 2 deals with important aspects relating to the effectiveness of the public enforcement of the EU cartel prohibition in the Netherlands, by focusing on the success rate in appeal proceedings in front of the Dutch administrative courts, with regard to the fining decisions issued by the Netherlands Competition Authority. Her research shows that a large percentage of such decisions are overturned on appeal, thus calling into question the consistency of the approaches undertaken by the administrative enforcement agency, on one hand, and the judiciary, on the other hand, with respect to, for example the standard of due process and the proportionality of fines. What is more, according to Outhuijse, the fact that many decisions are challenged and annulled affects the effective enforcement of EU antitrust law, while also entailing other negative externalities of a quantitative and qualitative nature (e.g. high costs, legal uncertainty). Consequently, boosting the enforcement of the EU antitrust provisions pertains to a great extent also to how the domestic processes may be upgraded. Second, boosting the enforcement of the EU antitrust rules relates also to the strength of the connection established between the national competition authorities making use of their investigative powers (provided by domestic law), on one hand, and the protection of the fundamental rights of the undertakings under investigation, on the other hand. Indeed, while ‘dawn raids’ are indispensable investigative tools of competition authorities, they may also entail profound fundamental rights intrusions. Michal Petr discusses in Chapter 3 the differences between the regime applied to the inspections performed by the Commission (which is governed by EU law – Regulation 1/2003), and those performed by the national competition authorities, under the – not yet harmonised – national rules. This two-sided setup yields different judicial review avenues, too: the former inspections are ultimately reviewed by the CJEU, while making use of the Charter of Fundamental Rights, while the latter are reviewed by the by the European Court of Human Rights, under the provisions of the

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European Convention on Human Rights. While focusing on two recent infringement decisions issued by the Commission and the Czech Competition Authority, respectively, Petr aims to ascertain whether legislative changes are necessary in both the EU and the national legal regimes, for the purpose of bringing uniformity in the manner in which inspections unfold in various jurisdictions, and also in order to ensure stronger consistency with fundamental rights guarantees. With regard to the main question of this volume, establishing a solid rapport between investigative prerogatives of enforcement agencies and due process with respect to the parties investigated is prone to boost the quality of the EU antitrust enforcement process. Third, a more encompassing enforcement of the EU antitrust rules necessarily pertains also to the manner in which the relationship between various public and private enforcement mechanisms is conceived. While this relationship was for decades unbalanced, the recent case law23 and legislative developments24 seem to have brought about a degree of equilibrium. Yet, this relationship is still rather fragile, since it is built on delicate institutional dynamics, which often seem to be pulling in opposite directions: while the Commission is highly protective of its leniency policy, the CJEU seems to be placing a great deal of importance on private enforcement. On top of all this, the incentives of market players to apply for leniency seem to have shifted in the recent past. Further, boosting the enforcement of the EU antitrust rules entails correctly setting the balance between all these interests. In Chapter 4, Manuel Contreras focuses on the obstacles which may continue to hamper the development of antitrust damage claims after the 2014 Private Damages Directive is fully implemented in Spain. In this respect, he tests the provisions of the Spanish draft proposal for the implementation of the Directive against (amongst others) the EU principle of effectiveness. Furthermore, the contribution of Contreras debates whether the prohibition to disclose leniency and settlement documents in court will remain a major obstacle to Spanish antitrust damage claims, and proposes a more daring alternative for incentivizing leniency applications: individual criminal responsibility of the directors of cartel offenders, who fail to cooperate with the Spanish 23 See for example CJEU 14 June 2011, C-360/09, ECLI:EU:C:2011:389 (Pfleiderer); CJEU 6 June 2013, C-536/11, ECLI:EU:C:2013:366 (Bundeswettbewerbsbehörde v. Donau Chemie AG and Others); CJEU 5 June 2014, C-557/12, ECLI:EU:C:2014:1317 (Kone). 24 Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1, 05.12.2014.

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Antitrust Authority under the leniency program. All in all, such discussion points may very well be valuable avenues for boosting EU antitrust enforcement in the domestic ambits, or in any case, at least food for thought for the Commission, when reviewing the Private Damages Directive. According to Article 20 of the said Directive, this should happen no later than December 2020.

3. The domestic enforcement of the EU State aid rules 3.1 Status quo The EU State aid rules, laid down in Articles 107-109 TFEU, are unique to the European Union and are specific to the Internal Market project. These rules are as old as the EU itself, but for a long time they stood in the shadow of the EU antitrust rules, which apply directly to undertakings. A number of recent developments, some of which are discussed in this volume, have, however, taken the State aid rules out of the shadow and put them into the spotlight. In this introductory chapter, we will focus on three such developments. The first important development is that in May 2012 the Commission began adopting a major reform package, referred to as the State Aid Modernisation Programme (hereinafter the SAM programme).25 As part of the SAM package, the Commission adopted new guidelines in a large number of areas (on, for example, research and development and innovation; broadband connections; energy and environment; risk financing of SMEs and midcaps; regional aid, etc.). The Commission also adopted five important regulations in order to make State aid control instruments and procedures more efficient.26 Last but not least, in order to provide practical guidance to public authorities (and national courts) and undertakings in identifying when public support measures fall within, and outside, the 25

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on EU State Aid Modernisation, COM(2012) 209 final. In par. 8 of this document, the Commission states that the SAM programme has a threefold objective: (i) to foster sustainable, smart and inclusive growth in a competitive internal market; (ii) to focus Commission ex ante scrutiny on cases with the biggest impact on the internal market whilst strengthening the Member States’ cooperation in State aid enforcement; (iii) to streamline the rules and provide for faster decisions. 26 For a comprehensive overview of the SAM programme, see: http://ec.europa.eu/competition/state_aid/modenisation/index_en.html, accessed on 15.12.2016.

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scope of the EU State aid rules, in May 2016, the Commission adopted the long-awaited Notice on the Notion of State Aid.27 Apart from providing clarifications on a number of points, this Notice gives general guidance on all the constitutive elements of the notion of State aid: the existence of an undertaking, the imputability of the measure to the State, its financing through State resources, the granting of an advantage, the selectivity of the measure and its effect on competition and trade between Member States. This guidance is based on existing case law of the EU Courts and, in some instances, on the views of the Commission itself. Secondly, in 2015 and 2016, the Commission handed down a number of decisions concerning one of the elements for the application of Article 107 (1) TFEU, namely that the measure in question must have an effect on trade between Member States. The approach followed by the Commission is also reflected in its Notice on the notion of State aid.28 As will be demonstrated below, it is debatable whether the approach of the Commission is itself consistent and whether it is in line with that of the CJEU. A third significant recent development concerns the State aid investigations conducted by the Commission into a number of tax rulings granted to large multinational companies in the Member States. These decisions have attracted a great deal of media attention and, in some cases, fierce criticism.29 All of these developments have important ramifications for the enforcement of the State aid rules at national level which we will deal with in turn below. It should, however, first be noted that, in contrast with the important role conferred on the national competition authorities of the Member States in the enforcement of the EU antitrust rules, for obvious reasons, no such role has been conferred on these authorities with regard to the enforcement of the EU State aid rules. At national level, only the courts of the Member States are entrusted (to a certain extent) with the enforcement of the State aid rules. The Commission observes that litigation on State aid matters before domestic courts in the EU has significantly increased in recent years which means that private litigation now plays an important 27 Commission Notice on the notion of State aid as referred to in Article 107 (1) of the Treaty on the Functioning of the European Union, OJ C262/1, 19.07.2016. 28 See Commission Notice on the notion of State aid, par. 190-198. 29 See for example, Kavanagh and Robins, “Corporate Tax Arrangements Under EU State Aid Scrutiny. The application of the Market Economy Operator Principle”; Gunn and Luts, “Tax Rulings, APAs and State Aid: Legal Issues”, p. 119.

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role in the overall enforcement of the State aid rules.30 This raises the question of whether the tools which domestic courts have at their disposal contribute to an effective enforcement of the EU State aid rules at national level. In the application and enforcement of the State aid rules, the Commission and national courts have complementary and separate roles to play. Although decisions on the compatibility of State aid measures with the Internal Market are reserved solely to the Commission, national courts do have a number of key roles to play. It may therefore be useful, in the context of this volume, to briefly recall the powers of domestic courts with regard to the enforcement of the State aid rules.31 Domestic courts are responsible for enforcing the so-called standstill obligation set out in Article 108 (3) TFEU,32 for enforcing decisions taken by the Commission under Article 108 (2) TFEU33 and for applying the provisions of block exemptions adopted under Article 109 TFEU.34 In order to enforce the standstill obligation and to apply any relevant block exemption, national courts will in most cases need to apply and interpret Article 107 (1) TFEU to determine whether and to what extent a national measure indeed forms State aid.35 In Chapter 6 of this volume, Metselaar discusses in detail the wide variety of cases which come before the domestic courts in the Netherlands. Her contribution makes clear that the role of the domestic courts is not limited to settling cases where an interested party (often a competitor) argues that aid has been granted in contravention of the standstill obligation set out in Article 108 (3) TFEU. Metselaar reviews seven other categories of cases which have come before the Dutch courts on the basis 30

See, Enforcement of EU State aid law by national courts. The Enforcement Notice and other relevant materials, European Commission, Brussels, 2010, Foreword; 2009 National Enforcement Study Update, available at: http://ec.europa.eu/competition/court/state_aid/studies_reports/html, accessed on 15.12.2016. 31 See Bacon, European Union Law of State Aid. 32 See for example, CJEU 11 December 1973, 120/73, ECLI:EU:C:1973:152 (Lorenz v. Germany), par. 8; CJEU, C-354/90, ECLI:EU:C:1991:440 (FNCEPA v. Commission), par. 11-12. 33 See for example, CJEU 19 June 1973, 77/72, ECLI:EU:C:1973:65 (Capolongo), par. 6. 34 See, Commission Notice on the enforcement of State aid law by national courts, OJ C85/1, 09.04.2009, par. 16. 35 See for example, CJEU 22 March 1977, 78/76, ECLI:EU:C:1977:52 (Steinike & Weinlig v. Germany), par. 14; CJEU 11 November 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI), par. 49.

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of the EU State aid rules. It is interesting to note that one such category is the situation where the state itself, increasingly so in the Netherlands, invokes the State aid rules in order to prevent granting aid, or to undo aid already granted, without having been ordered to do so by the Commission. Another type of case which frequently reaches the Dutch administrative courts is that in which a spatial planning decision is challenged on the grounds that the project to which the spatial planning decision pertains involves the granting of State aid. The chapter by Metselaar also makes clear that not only the civil courts have a role to play in deciding cases based on the EU State aid rules, a comparable role is also played by the administrative and tax courts in the Netherlands.

3.2 Foreseen Developments We will now discuss what ramifications the above-mentioned three developments may have for the application and enforcement of the State aid rules by domestic courts. 3.2.1 Enforcement of the standstill obligation by domestic courts As mentioned above, one of the most important tasks of the domestic courts of the Member States is the enforcement of the so-called standstill obligation contained in Article 108 (3) TFEU. If a dispute with regard to an alleged infringement of the standstill obligation comes before a domestic court, in order to settle this dispute, this court will first have to answer the question of whether the measure in question does indeed constitute aid within the meaning or Article 107 (1) TFEU. In order to do so, the domestic court will have to examine whether all the constitutive elements of the notion of State aid contained in this provision exist. Answering this question is not as simple as appears at first glance. As mentioned above, the Commission has, in its Notice on the notion of State aid, attempted to provide guidance on this matter. Be that as it may, we would like to point out that difficulties may arise with regard to the interpretation of a number of the constitutive elements of State aid. In Chapter 7 of this volume, Ament deals with the element ‘undertaking’. The State aid rules apply only if the beneficiary of the aid qualifies as an ‘undertaking’ within the meaning of the EU competition law rules. On the basis of settled case law of the CJEU, at first glance this would not appear to be a difficult issue to determine: an undertaking is

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every entity engaged in an economic activity.36 However, Ament’s discussion of ancillary activities raises interesting questions on the concept of an economic activity. Ament provides a detailed overview of the practice of the Commission and the case law of the General Court regarding aid to environmental production organisations. The main thrust of Ament’s argument, which is shared by Van de Gronden in his chapter (Chapter 8), is that some economic activities form such a small part of the activities of a non-economically active entity, such as an environmental organisation, that they should be excluded from the EU competition law rules altogether. This would greatly reduce the administrative burden imposed on public authorities planning to grant aid to environmental organisations and the like. In their contributions, both Ament and Van de Gronden deal extensively with this matter. In this introductory chapter, we would like to focus on two other constitutive elements of the notion of State aid: the trade between Member States criterion and the criterion of selectivity. In order to constitute aid within the meaning of Article 107 (1) TFEU, the measure at issue must have an effect on trade between Member States. As Van de Gronden states in Chapter 8, “[…] it is of utmost importance for the national authorities to have a clear and transparent test for establishing an impact on intra-Union trade.” It is obvious that the same applies to the domestic courts. In a press release dated 29 April 2015,37 the Commission discusses seven decisions in which it found that measures granting public support to purely local operations in the Czech Republic, Germany, the Netherlands and the UK did not involve EU State aid because these measures were unlikely to have a significant effect on trade between Member States. The Commission states that the reason for the finding of no impact on interstate trade is that in these cases support was granted to an activity which has a purely local impact. In a further five decisions handed down on 21 September 2016, the same approach of the Commission can be found. In a press release from the same date,38 the Commission states “[…] where the beneficiary of state support supplies goods or services to a limited area within a Member State, and is unlikely to attract customers from other Member States, there may be no effect on intra-EU trade and therefore no State aid within the meaning of the EU rules. To be free of aid, the measure should also have no – or at most marginal – foreseeable 36

See for example, CJEU 23 April 1991, C-41/90, ECLI:EU:C:1991:161 (Höfner). See Press Release IP/15/4889 of the Commission of 29.04.2015. 38 See Press Release IP/16/3141 of the Commission of 21.09.2016. 37

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effects on cross-border investment in the sector or on the establishment of companies within the EU’s Single Market.” These decisions would seem to indicate that the Commission is adopting a ‘softer’ approach to measures with a purely local impact, as far as the criterion of an effect on interstate trade is concerned. In previous decisions, the Commission was not eager to accept that the criterion of an effect on trade between Member States could be excluded.39 An actual effect on interstate trade was not required. A potential effect sufficed. The ‘new’ approach is also reflected in the Commission Notice on the notion of State aid where the Commission repeats the statement made in the press release of 21 September 2016.40 Furthermore in this Notice, the Commission attempts to provide guidance on the interstate trade criterion by giving numerous examples of past decisions where it found that there was no impact on trade between Member States.41 The Commission does not, however, lay down a clear test for determining what amounts to an effect on trade between Member States. We would, however, observe that the approach of the Commission is not always consistent. The Commission seems to be oscillating between its former approach and its ‘new’ approach. An illustration can be found in a recent Commission decision.42 At issue was aid granted to a port authority which operates the Lauterbach port. This port is a small harbour located in the city of Putbus, Germany, which is used predominately by excursion vessels and river cruise ships. The aid was granted to facilitate the expansion and adaption of the port in order to meet the growing demand for river cruise ships. In deciding whether the granting of the aid would distort competition, the Commission stated: “It can therefore not be excluded that the project will, at least potentially, distort competition between river cruise ship ports in Germany.” In deciding on the impact on interstate trade, the Commission reverted to its former approach. It states: “[…] the Commission is of the view the measure is at least potentially capable of affecting trade between Member States by potentially diverting

39

An example can be found in Commission Decision N 1/2010, C(2010) 22540, State aid to Basque museums. Here, although the Commission found that the aid granted was unlikely to significantly affect intra-Union trade, it did not rule out the presence of State aid completely. The Commission therefore reviewed the compatibility of the aid under the cultural derogation of Article 107 (3) (d) TFEU. 40 See Commission Notice on the notion of State aid, par. 196. 41 See Commission Notice on the notion of State aid, par. 197. 42 Commission Decision SA.45848 (2016/N) Extension of cruise ship terminal Putbus-Lauterbach, Brussels, 19.08.2016, C(2016) 5456 final.

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traffic away from other Member States […].”43 In this volume, Van de Gronden points out that the ‘new’ approach of the Commission may be contrary to established case law of the CJEU. We agree with this observation. The CJEU applies a very lenient test with regard to the trade between Member States criterion which means that this criterion is easily satisfied. It is settled case law that a potential effect on interstate trade suffices for the application of the State aid rules.44 Furthermore, the CJEU has never applied a de minimis rule in determining whether a measure is liable to affect trade between Member States. In other words, the relatively small amount of the aid concerned or the relatively small size of the undertaking receiving the aid does not exclude the possibility that trade between Member States might be affected.45 The fact that the final version of the Commission Notice on the notion of State aid, unlike the draft version of this Notice, does not contain a general test for determining when interstate trade is affected, is also mentioned in the contribution of Van de Gronden. He, however, finds that the Commission may have good reasons for not including a general test, namely the fact that it is ultimately for the CJEU to decide on the interpretation of the criterion of the effect on trade between Member States, not the Commission. Van de Gronden puts forward the interesting suggestion that, in order to aid national authorities in the application of the trade between Member States criterion, the Commission should consider exploring the avenue of raising the threshold set out in the De Minimis Regulation.46 Although this exercise may have a number of pitfalls, we feel that it should be given serious consideration as this may provide clearer guidance to all stakeholders involved than the examples given by the Commission in its Notice on the notion of State aid.

43

All emphasis by the authors of this chapter. See for example, CJEU 8 May 2013, Joined Cases C-197/11 and C-203/11, ECLI:EU:C:2013:288 (Libert), par. 76; CJEU 14 January 2015, C-518/13, ECLI:EU:C:2015:9 (Eventech v. The Parking Adjudicator), par. 65. 45 See for example, CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark), par. 81. 46 Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, OJ L352/1, 24.12.2013. 44

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3.2.2 Tax rulings and the role of domestic courts (the selectivity criterion) Another, highly publicised, development concerns the State aid investigations conducted by the Commission into a number of tax rulings granted to large multinational companies in the Member States. This development may also lead to problems for domestic courts when deciding on whether a tax ruling amounts to State aid within the meaning of Article 107 (1) TFEU. This relates in particular to the criterion of selectivity. To date the Commission has adopted final decisions in the following cases: Fiat Finance & Trade,47 Starbucks,48 Belgian Excess Profit Ruling System49 and Apple.50 The Commission concluded in all four cases that the tax rulings in question constituted unlawful State aid which must be recovered (with interest) from the beneficiary by the national authorities concerned. A number of other investigations are still pending. Moreover, in a working paper published on 3 June 2016,51 the Commission announced its intention to pursue further investigations. The decisions concerning tax rulings have been subjected to fierce criticism from both within52 and outside the EU.53 One of the main points

47 Commission Decision on State aid SA.38375 (2014/C ex 2014 NN) which Luxembourg granted to Fiat, Brussels, 21.10.2015, C(2015) 7152 final. 48 Commission Decision on State aid SA.38374 (2014/C ex 2014/NN) implemented by the Netherlands to Starbucks, Brussels, 21.10.2015, C(2015) 7143 final. 49 Commission Decision on the excess profit exemption state aid scheme SA.37667 (2015/C) (ex 2015/NN) implemented by Belgium, Brussels, 11.01.2016, C(2015) 9837 final. 50 On 30 August 2016, the Commission adopted a final negative decision with recovery in this case. The public version of this decision is not yet available. 51 DG Competition Working Paper on State Aid and Tax Rulings, 03.06.2016, available at: http://ec.europa.eu/competition/state_aid/legislation/working_paper_tax_rulings.pd f, accessed on 16.12.2016. 52 See footnote 29, above. 53 In particular the alleged bias of the Commission against US-based multinational companies has led to criticism in the USA. In August the U.S. Treasury Department issued a White Paper criticising the Commission’s approach. See, The European Commission’s Recent State Aid Investigations of Transfer Pricing Rulings. U.S. Department of the Treasury White Paper of 24 August 2016, available at: https://www.treasury.gov/resource-center/tax-policy/treaties/ Documents/White-Paper-State-Aid.pdf, accessed on 16.12.2016.

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of criticism is aimed at the selectivity of the measure concerned.54 This is not the place to discuss these decisions in detail, we will, therefore, limit ourselves to examining the significance of these decisions for the enforcement of the EU State aid rules by domestic courts. Actions for annulment under Article 263 TFEU have been filed with the General Court against all four final decisions mentioned above.55 That the General Court, and possibly the CJEU, will decide these cases can be described as a foreseen development. But how these cases will be decided cannot be foreseen. The rulings of the EU Courts on the issue of tax rulings will be of paramount importance for domestic courts which may, in the future, have to answer the question whether a particular tax ruling amounts to State aid. It is not inconceivable that, in the future, a competitor of an undertaking which has benefited from a ruling granted by the national tax authorities may bring an action before a domestic court challenging the compatibility of this measure with the EU State aid rules. Without a ruling of the EU Courts (in particular of the CJEU) on this issue, it would take a very brave domestic court to decide that a tax ruling in a particular case meets the selectivity criterion of Article 107 (1) TFEU and thus amounts to State aid. If a domestic court decides that the standstill obligation has been breached in a particular case, it must take the necessary measures (for instance, order the recovery of the aid in question56 or the placing of the aid in a blocked account). The powers which the domestic courts may exercise with regard to the recovery of unlawful aid are governed by 54

Another point of criticism raised includes the fact that the Commission investigations into tax rulings form an incursion into the fiscal sovereignty of the Member States. Furthermore, the question is raised whether the State aid rules are the proper tool for dealing with corporate tax avoidance. See Luja, “Do the State Aid Rules Still Allow European Union Member States to Claim Fiscal Sovereignty?”, p. 312. 55 See case T-759/15 Fiat Chrysler Finance Europe v. Commission, OJ C59/49, 15.02.2016; case T-755/15 Luxembourg v. Commission (Fiat), OJ C59/48, 15.02.2016 and case T-760/15 Netherlands v. Commission (Starbucks), OJ C59/50, 15.02.2016. In the Belgian excess profit ruling case, appeals have been filed by the Belgian state (case T-131/16 Belgium v. Commission) and 27 individual taxpayers (the case numbers can be found on: http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_37 667). In the Apple case, both the Irish government and Apple have launched an appeal. The arguments of the Irish Government are published on http://www.finance.gov.ie/sites/default/files/161219%20Summary%20of%20Appe al%20Grounds%20Publised%20under%20Embargo.pdf, accessed on 20.12.2016. 56 See for example, CJEU 11 July 1996 C-39/94, ECLI:EU:C:1996:285 (SFEI).

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national, not EU, law. Accordingly, it may seem that applying the standstill provision is a rather simple task for a domestic court. But a number of developments in EU State aid law make clear that applying this provision can nevertheless give rise to various unresolved issues. A number of these issues are dealt with in detail in the contributions of Metselaar (Chapter 6), Stuyck and Sabbadini (Chapter 5) and Van de Gronden (Chapter 8). For instance, Stuyck and Sabbadini deal with the consequences for State aid law of the principle of procedural autonomy on the basis of an analysis of the case law of the CJEU on this principle. An interesting issue which they also discuss is the supplementary role of national law in the calculation of interest. Van de Gronden discusses the issue of parallel proceedings before a domestic court and before the Commission with regard to one and the same State aid measure. He also deals with the thorny issue of the impact of the standstill obligation on national private law. Further questions arise with regard to the role of domestic courts once the Commission has taken a decision of incompatibility. Such questions are discussed extensively in the abovementioned contributions. The unresolved issues discussed in these contributions raise the question as to whether particular rules need to be enacted at EU level (possibly harmonisation) in the field of State aid law. 3.2.3 The application of the General Block Exemption Regulation (GBER) by domestic courts One of the main aims of the SAM programme is to stimulate the decentralised application of the State aid rules and to permit the Commission to focus on cases having a potentially significant impact on the Internal Market. As pointed out by Van de Gronden in his contribution, a similar development took place within the framework of the enforcement of the EU antitrust rules a number of years earlier with the adoption of Regulation 1/2003.57 One of the cornerstones of the SAM programme is the new General Block Exemption Regulation (hereinafter the GBER)58 which simplifies aid granting procedures for Member States by authorising, without prior 57 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, OJ L1/1, 04.01.2003. 58 Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L187/1, 26.06.2014. This regulation came into force on 1 July 2014 and will apply until 31 December 2020.

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notification to and approval by the Commission, a wide array of national measures. Compared with its predecessor,59 the new GBER includes new categories of aid which are block exempted (for example, aid schemes to make good damage caused by natural disasters, aid for broadband infrastructures, aid for cultural and heritage conservation and aid for local infrastructures) and also broadens the categories of aid previously exempted (for instance a wider scope for risk finance aid is permitted). Moreover, higher notification thresholds and higher permitted aid intensities have been introduced. For example, the notification threshold for Research and Development projects has been doubled.60 The Commission estimates that in the future, 75 percent of state aid measures and 66 percent of aid amounts could fall under the new GBER. That proportion could increase to 90 percent of all aid measures if the Member States use the GBER to the full extent. This means that only measures with the largest potential to distort competition in the Internal Market will require prior notification to the Commission.61 The GBER has by its very nature direct effect in the legal orders of the Member States and can thus be applied by the domestic courts of the Member States. The new GBER may have a profound effect on the enforcement of the State aid rules by such courts due to the expanded scope of this new instrument. As Van de Gronden points out in his contribution, the public authorities of the Member States must carry out a self-assessment in order to determine whether a particular measure fulfils all the conditions of the GBER. Consequently, it is likely that disputes and litigation will arise with regard to the findings of these public authorities. It is then the task of the domestic courts to deal with such disputes. Accordingly, a domestic court will have to examine whether the measure in question meets the substantive criteria for application of the new GBER. This may prove to be no easy task since the GBER is a technically complex instrument. In her contribution, Metselaar mentions the relative inexperience of domestic (Dutch) courts in State aid matters. In order to give guidance to all stakeholders, in July 2015 the Commission published a list of Frequently Asked Questions (FAQ) concerning the application of Articles 1 to 35 of the GBER and the answers thereto. This was updated 59 Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty, OJ L214/3, 09.08.2008. 60 Derenne, Block, Doudountsaki and Rodriguez-Toquero, “Key Developments in State Aid Law”, p. 210. 61 See, State aid modernisation – a major revamp of EU State aid control, European Commission Competition policy brief, Issue 11, November 2014.

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by a second document concerning Articles 36 to 58 of the GBER in March 2016.62 It is also evident that if problems arise concerning the interpretation and application of the GBER, a domestic court can ask the Commission for assistance63 or put preliminary questions to the CJEU under Article 267 TFEU. In addition, a national court will have to examine whether all procedural or formal requirements for the application of the GBER have been met. An illustration can be found in the recent case Dilly’s Wellnesshotel GmbH.64 This case concerned an Austrian aid measure that was based on the former Block Exemption Regulation No 800/2008. In the dispute before the Austrian court, the question arose whether the aid measure at issue complied with certain procedural conditions of this regulation. The CJEU had no difficulty in finding that since the Austrian aid measure did not contain an express reference to Regulation No 800/2008 by citing its title and publication reference in the Official Journal of the EU, as required under Article 3 the regulation, it did not fulfil all the procedural conditions for application of the regulation. This meant that the aid measure in question could not benefit from exemption from notification under Regulation No 800/2008. Accordingly, the aid granted by the Austrian authorities was unlawful since it had not been notified to the Commission and could be challenged before the Austrian courts. There is, in our opinion, no reason to suppose that the CJEU would decide otherwise if one of the procedural conditions of the new GBER is not met. In the Austrian case discussed, the CJEU made quite clear that the procedural conditions of the (former) GBER must be applied very strictly and cannot be regarded as a mere formality. The aim of the procedural conditions in regulations like the GBER is to increase transparency and legal certainty. Although, in our view, it will be much easier for a domestic court to establish compliance with the procedural conditions set out in the GBER, than compliance with its substantive provisions, a domestic court should 62

Both documents have been incorporated into one document: General Block Exemption Regulation (GBER). Frequently Asked Questions, http://ec.europa.eu/competition/state_aid/legislation/practical_guide_gber_en.pdf, accessed on 17.12.2016. It is important to note that, as the Commission itself points out, this document is a working paper prepared by the Commission services. It is not binding on the European Commission as an institution. 63 See, Commission Notice on the enforcement of State aid law by national courts, OJ C85/1, 09.04.2009, par. 89-96. 64 CJEU 21 July 2016, C-493/14, ECLI:EU:C:2016:577 (Dilly’s Wellnesshotel GmbH v. Finanzamt Linz).

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not ignore the procedural conditions as non-compliance with these conditions will have dire consequences.

4. Conclusion The enforcement of the EU antitrust and State aid rules has come a long way. The role that national authorities, be they competition enforcement agencies or domestic courts, play in this exercise has steadily increased over time. Nowadays, these domestic entities are able to apply the EU antitrust rules, in many respects, just like the Commission does. Furthermore, in State aid cases, the fact that the domestic courts are able to enforce the standstill obligation, apply block exemptions, and enforce Commission decisions (to name but a few), highlights the important (complementary) function that such domestic entities play in the enforcement activity. Yet, in the words of the Commission,65 there is room for the domestic bodies to do much more to this end. It is in this context that the endeavour of further boosting the domestic enforcement of the EU antitrust and State aid rules may be placed. The contributions included in this volume present various facets of how this further boosting of domestic enforcement of the EU competition law rules may materialize. At the same time, this volume presents insights into the status quo of the domestic enforcement of EU antitrust and State aid rules, and also into the foreseen developments which are bound to occur in the future, when it comes to achieving the ambition of more forceful, better targeted, and more resource-efficient EU competition law enforcement in the Internal Market.

65

See footnote 22 above.

PART 2 – ANTITRUST ENFORCEMENT

CHAPTER TWO EFFECTIVE PUBLIC ENFORCEMENT OF THE CARTEL PROHIBITION IN THE NETHERLANDS: A COMPARISON OF ACM FINING DECISIONS, DISTRICT COURT JUDGMENTS, AND TIAT JUDGMENTS ANNALIES OUTHUIJSE

1. Introduction1 One of the central rules in competition law is the prohibition of anticompetitive agreements.2 In the Netherlands, the public-law enforcement of this prohibition has been entrusted to the Authority for Consumers and Markets (hereinafter ACM), which is, inter alia, empowered to impose administrative fines.3 Undertakings can file an appeal against these fining decisions at two specialised courts, namely the District Court Rotterdam and the Trade and Industry Appeal Tribunal (hereinafter TIAT). This contribution poses the question whether the public enforcement of the

Annalies Outhuijse is a PhD researcher at the University of Groningen. The PhD research focuses on the public enforcement of the prohibition of anti-competitive agreements in the Netherlands. Questions and comments are welcome at [email protected]. 1 This text builds upon previous publications and contains overlap with: Outhuijse and Jans, “Judicial Review of Decisions of the Dutch Competition Authority”; Jans and Outhuijse, “Advisory Objection Procedures in the Netherlands. A Case Study on its Usefulness in Dutch Competition Law”. 2 Article 101 TFEU and Article 6 Dutch Competition Act. Cartel prohibition is in this Article used as synonym for the prohibition of anti-competitive agreements. 3 In the majority of the Member States, the national competition authority adopts the fining decisions. However, in Austria, Ireland, Denmark, Finland and Sweden, fining decisions are adopted by a court upon the request of the national competition authority.

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cartel prohibition in the Netherlands is conducted effectively or whether this enforcement would benefit from a boost. There are a number of indications that the latter is the case. Firstly, the percentage of appeals against the ACM fining decisions in cartel cases is over 70 percent, which is considerably higher than is normal in administrative disputes.4 Secondly, previous research showed that between 2003 and 2013, almost 60 percent of the ACM decisions imposing cartel fines were annulled by the District Court Rotterdam.5 A quantitative and qualitative assessment of these judgments revealed that the ACM and the District Court applied a different approach with regard to, for example, the standard of due process and the proportionality of fines.6 This previous research will be explained in further detail in section 2. These conclusions and the fact that the District Court is not the highest court regarding these disputes led to further questions: did one of the parties appeal? What did the TIAT decide? Did the TIAT endorse the District Court judgment, and what were the consequences for the ACM fining decision? As this contribution will describe in sections 3 and 4, the percentage of further appeals and annulment of District Court judgments are also high; the TIAT, for example, annulled the judgment of the District Court in more than 60 percent of the cases. The high percentages of challenged and annulled decisions both affect the effective enforcement of anti-competitive agreements and entail other negative externalities of a quantitative and qualitative nature, as the contribution will describe in section 5. Finally, some developments in Dutch competition law which will influence the judicial review in cartel cases will be described in section 6. Section 7 concludes.

2. Analysis of District Court judgments The ACM can impose a fine for any infringement of the prohibition of anti-competitive agreements.7 Undertakings can apply for judicial review at two specialised courts: the District Court as the first instance court and the TIAT as the second and last instance court. However, under Dutch administrative law, an interested party can only challenge an administrative 4 See amongst others about this: Jans and Outhuijse, “Advisory Objection Procedures”. 5 Outhuijse and Jans, “Judicial Review of Decisions of the Dutch Competition Authority”. The percentage of annulments definitely did not decrease in the years 2013 and beyond. 6 Ibid. 7 Article 56 Dutch Competition Act.

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decision before a court if it has previously lodged an objection with the decision-making authority; in cartel cases, this is the ACM.8 The ACM completely reviews its decision in the objection procedure: it reconsiders the lawfulness and the expediency of the contested decision.9 After the ACM’s objection decision, the undertaking can file an appeal with the Rotterdam District Court, which has exclusive jurisdiction in public competition law enforcement as the court of first instance. The comprehensive review conducted by the District Court includes the establishment of the facts, the qualification of the facts, the evidence for the infringement, the compliance with the relevant procedures, the amount of the fine and the interpretation of the law.10 The period for filing an appeal is six weeks after the ACM’s objection decision. In public enforcement procedures, undertakings file an appeal in more than 70 percent of cases. This percentage is considerably higher than is usual in administrative disputes: on average, only ten percent of cases reach the judicial review stage.11 Moreover, in the field of other economic fining decisions, such as banking supervision and the supervision of financial markets by the DNB and AFM, only a limited number of undertakings submit their cases for judicial review.12 As mentioned, previous research analysed the judgments of the District Court Rotterdam.13 This research focused on a total of 74 judgments from the period 2003–2013 and found the following. Judgment Decision wholly or partly annulled Decision upheld Case withdrawn

8

Number of cases 44 of the 74 25 of the 74 5 of the 74

Percentage 59 percent 34 percent 7 percent

Article 7:1 of the Netherlands General Administrative Law Act (GALA). See for further explanation of the objection procedure: Jans and Outhuijse, “Advisory Objection Procedures”. 10 See inter alia Lavrijssen and de Visser, “Independent administrative authorities and the standard of judicial review”; Lavrijssen, “More intensive judicial review in competition law and economic regulation in the Netherlands: vice or virtue?”. 11 See inter alia Marseille, “Burgers in bezwaar en beroep; over de toegankelijkheid van het bestuursrecht”; Van Erp en Klein Haarhuis, De filterwerking van buitengerechtelijke procedures; Boekema, De stap naar hoger beroep. 12 Mein, De boete uit balans, p. 308-309. 13 Outhuijse and Jans, “Judicial Review of Decisions of the Dutch Competition Authority”. 9

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The 44 overturned decisions were divided into three broad categories.14 1. Can a fine be imposed justifiably and properly? The District Court ruled in these cases that no fine could be imposed because of substantive or procedural defects in the fining decision. Pertinent questions include: can the ACM prove the alleged facts? Do the facts constitute an infringement of the cartel prohibition? Has there been procedural impropriety? Have adequate reasons been given for the decision? A defect was found in 25 of the 44 cases (57 percent). 2. Is the fine too high? The District Court ruled in those cases that a fine could be imposed but the amount of the fine was excessive. Important questions include: have the policy rules regarding the calculation of the fine been applied properly? Has the relevant turnover been calculated correctly? Is the fine disproportionate? A defect was found in 14 of the 44 cases (32 percent). 3. Has the case been brought within a reasonable time? This category includes those cases in which the fine was justifiably and properly imposed and correctly calculated at the first instance, but was nevertheless reduced for exceeding the reasonable time for an administrative procedure provided for by Article 6 European Convention on Human Rights (hereinafter ECHR).15 This occurred in 5 of the 44 cases (11 percent). Decisions in the first category are often overturned because the standards of due process have not been met: insufficient evidence (5 cases),16 insufficient regard for the economic context (5 cases),17 and insufficient reasoning (13 cases).18 Insufficiently reasoned decisions included decisions in which the reasons or responses to counter-arguments 14

Ibid. See Wils, “EU Antitrust Enforcement Powers and Procedural Rights and Guarantees”. 16 E.g. District Court Rotterdam 28 April 2009, ECLI:NL:RBROT:2009:BI3337 (ETB Vos); District Court Rotterdam 1 October 2009, ECLI:NL:RBROT:2009:BJ9175 (Clabbers). 17 E.g. District Court Rotterdam 4 March 2008, ECLI:NL:RBROT:2008:BC8958 (Soletanche Bachy); District Court Rotterdam 28 February 2006, ECLI:NL:RBROT:2006:AX1341 (Bovag/NCBRM); District Court Rotterdam 12 April 2012, ECLI:NL:RBROT:2012:BW1335 (Home care organisations). 18 E.g. District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6819 (Vialis). 15

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or counter-evidence appeared too late in the proceedings (e.g. during the court hearing rather than in the decision on the objection) or did not appear at all. Examples of insufficient regard for economic context included cases in which the District Court questioned the ACM’s market definition, questioned whether the undertakings were in fact competitors or questioned whether the conduct restricted competition. The District Court sets higher standards than the ACM regarding the quantity and kind of economic research required from the ACM. Insufficient evidence concerned the factual evidence for the alleged facts, such as evidence for the cartel agreement or exchange of information between the undertakings. Finally, it is worth noting that there were no cases in which a decision was annulled or the fine was reduced for the infringement of substantive principles of sound administration, such as legitimate expectations, legal certainty or equality. The amount of the fine is the second largest category of annulments. This category can be further divided: wrong basis for the fine (incorrectly calculated turnover) (5 cases), wrong classification of the offence (2 cases), disproportionately high fine (5 cases) and defects in the grounds for the amount of the fine (2 cases). The proportionality principle presents a notable difference in emphasis between the ACM and the District Court. On the one hand, the deterrent effect of the fine seems to be the ACM’s paramount.19 On the other hand, the District Court seems to place greater emphasis on the proportionality of the fine. This difference in approach partially explains the number of decisions successfully challenged in this category (5 cases). Exceeding the reasonable time is the third and smallest category. In 5 cases, the fine was reduced for exceeding the reasonable time requirement of Article 6 ECHR. In 1 of the 5 cases, the District Court concluded that the ACM had remained largely inactive during various parts of the enforcement procedure without being able to point to any cause on the part of the undertakings.20 The delay occurred in the judicial proceedings once21 and three times both in the objection procedure and in the judicial

19 See inter alia Smuda, “Cartel overcharges and the deterrent effect of EU competition law”; Veljanovski, “Deterrence, recidivism, and European cartel fines”. 20 District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6828 (Oomen). 21 District Court Rotterdam 26 October 2009, ECLI:NL:RBROT:2009:BK1215 (Bongaertz Holding).

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proceedings.22

3. To appeal or not to appeal 3.1 The percentage of further appeals and the appellant Judicial review proceedings followed the objection procedure in more than 70 percent of the cases. The appeal was also often followed by a further appeal, which occurred in almost 70 percent of the cases brought before the District Court: of the 69 cases adjudicated in the District Court, at least one of the parties appealed to the TIAT in 48 cases. Litigation category Imposition of the fine Amount of the fine Reasonable time Grounds unfounded Litigation category Imposition of the fine Amount of the fine Reasonable time Grounds unfounded Total

Number of cases in the District Court 25 14 5 25

Number of further appeals 15 14 4 15

Undertaking appeals 8

ACM appeals 6

Both appeal 1

No appeal 10

4 2 15

3 0 0

7 2 0

0 1 10

29

9

10

21

Undertakings appeal more often than the ACM. This finding is unsurprising and corresponds to literature describing appeal behaviour in Dutch general administrative law.23 The largest number of appeals brought by undertakings relate to cases in which the District Court ruled that the appeal was unfounded. The ACM mostly appealed annulments based on 22 District Court Rotterdam 10 February 2011, ECLI:NL:RBROT:2011:BP3913 (Gerritsen); District Court Rotterdam 22 May 2006, ECLI:NL:RBROT:2006:AX8428 (Aesculaap); District Court Rotterdam 22 May 2006, ECLI:NL:RBROT:2006:AX8425 (AUV). 23 Boekema, De stap naar hoger beroep.

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the amount of the fine. Furthermore, the table shows that appeals are least common in the imposition of the fine category and if the District Court ruled that the appeal is completely unfounded. The undertaking and/or the ACM appealed all fourteen annulments based on the amount of the fine. Before going into further detail on the disputes in which one of the parties filed a further appeal, it is interesting to analyse which kind of disputes and which outcomes saw neither party file an appeal. Neither party appealed further in 21 of the 69 cases (30 percent). In 11 of these 21 cases, the District Court annulled the fining decision of the ACM. In the other ten cases, the District Court confirmed the ACM fining decision and ruled that all the grounds for appeal by the undertaking were unfounded.

3.2 No appeal after annulment by the District Court The consequences of the annulment depend on the exact ruling in the District Court’s judgment. Before 1 July 2009, the general rule was that the District Court ordered the ACM to amend its decision in the case of an annulment. For example, in a case of insufficient evidence or insufficient regard for the economic context, the District Court could order the ACM to conduct more research and amend its decision accordingly. The rule since 1 July 2009 is that the District Court has to replace the decision with its judgment in case of an annulment of the administrative fine.24 To serve both the principle of effective judicial protection and final dispute resolution, the District Court has to decide in those cases whether a fine can be imposed and if so, what the amount of the fine should be. Another remedy, which also serves the principles of effective judicial protection and final dispute resolution, is the administrative loop which was introduced into Dutch administrative law in 2010.25 The administrative loop is an interlocutory judgment which grants the ACM the opportunity to remedy the defects found in the contested decision pending the appeal procedure. The District Court renders its final judgment after this remedy. Another way to finalise the dispute involves the District Court’s annulment of the decision and its upholding of the legal consequences of the decision.26 The ACM does not have to adopt a new decision in that case. Upholding the legal consequences is most often applied in cases in which the objection decision lacks timely, adequate reasoning which was 24

Article 8:72a GALA. Examples in the case law: CBb 14 March 2012, ECLI:NL:CBB:2012:BV9426 (Ooms Avenhoorn); CBb 14 March 2012, ECLI:NL:CBB:2012:BV9430 (NH8); CBb 20 March 2012, ECLI:NL:CBB:2012:BW3671 (BTL). 26 Article 8:72 (3) GALA. 25

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33

the ground for the annulment, but the ACM provided adequate reasoning for the fining decision during the court procedure. As mentioned, neither the ACM nor the undertaking appealed the annulment by the District Court in eleven cases. This concerned the following subcategories. Grounds for annulment Insufficient evidence27 Insufficient regard for economic context28 Lack of timely, adequate grounds29 Reasonable time30

Number of annulments in the District Court 5 5

Number of no appeal 1 4

13

5

5

1

In four out of five cases, neither party appealed against the annulment of the ACM’s decision on grounds of insufficient regard for the economic context.31 The ACM probably did not consider it worthwhile to investigate these cases further and withdrew its decision. In the Home care organisations case, the District Court ruled that the ACM’s research had not demonstrated that the agreement between the home care organisations

27 District Court Rotterdam 24 June 2005, ECLI:NL:RBROT:2005:AT8817 (Texaco); District Court Rotterdam 13 July 2006, ECLI:NL:RBROT:2006:AY4035 (Mobile Operators). 28 District Court Rotterdam 28 February 2006, ECLI:NL:RBROT:2006:AX1341(Bovag/NCBRM); District Court Rotterdam 4 March 2008, ECLI:NL:RBROT:2008:BC8958 (Soletanche Bachy); District Court Rotterdam 12 April 2012, ECLI:NL:RBROT:2012:BW1335 and ECLI:NL:RBROT:2012:BW1327 (Home care organisations). 29 E.g. District Court Rotterdam 23 July 2008, ECLI:NL:RBROT:2008:BD8517 (Borginfra); ECLI:NL:RBROT:2008:BD8550 (Bouwmij); ECLI:NL:RBROT:2008:BD8227 (Beentjes); District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6819 (Vialis). 30 District Court 26 October 2009, ECLI:NL:RBROT:2009:BK1215 (Bongaertz Holding). 31 District Court Rotterdam 28 February 2006, ECLI:NL:RBROT:2006:AX1341(Bovag/NCBRM); District Court Rotterdam 4 March 2008, ECLI:NL:RBROT:2008:BC8958 (Soletanche Bachy); District Court Rotterdam 12 April 2012, ECLI:NL:RBROT:2012:BW1335 and ECLI:NL:RBROT:2012:BW1327 (Home care organisations).

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was suitable to restrict competition.32 The District Court ordered the ACM to examine the impact of several factors on the undertakings’ competitive opportunities and to amend its decision accordingly. The ACM, however, waived the fines imposed on all seven home care organisations.33 According to the ACM, a further investigation was not worthwhile because, among other issues, too much time had elapsed since the infringement. This was a highly favourable outcome for the undertakings, since the fines ranged from 600,000 Euro to 4 million Euro. The ACM also withdrew its decision and waived the fines in Texaco.34 This was one of the cases in which the District Court annulled the decision on the ground of insufficient evidence. None of the parties appealed further. Neither party appealed further in five cases in which the decision was annulled for lack of adequate, timely reasoning.35 In two cases, Vialis and Van Oord Holding, the ACM had to adopt a new fining decision. The ground for annulment in these two cases was the fact that the ACM had not provided adequate reasons for the distinction it had drawn between this undertaking and other undertakings in a similar situation.36 In Vialis, the District Court ruled that the ACM substantiated insufficiently why it reduced the leniency discount following an information meeting organised by the leniency seeker for the other cartel participants, whereas the ACM took no issue with meetings and leniency reductions in other sectors.37 According to the District Court, “[…] the ACM was unable to explain why meetings in other sectors should not also (1) constitute a genuine risk that evidence would be destroyed and (2) offer a forum in which to decide

32 District Court Rotterdam 12 April 2012, ECLI:NL:RBROT:2012:BW1335 (Home care organisations). 33 NMa Annual Report 2012, 36. 34 Press release of the ACM, https://www.acm.nl/nl/publicaties/publicatie/5375/NMa-ziet-af-van-boetesTexaco-en-Texaco-tankstations/, accessed on 20.04.2016 35 District Court Rotterdam 23 July 2008, ECLI:NL:RBROT:2008:BD8517 (Borginfra); ECLI:NL:RBROT:2008:BD8550 (Bouwmij); ECLI:NL:RBROT:2008:BD8227 (Beentjes); District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6819 (Vialis); District Court Rotterdam 17 October 2008, ECLI:NL:RBROT:2008:BG0948 (Van Oord Holding). 36 District Court Rotterdam 17 October 2008, ECLI:NL:RBROT:2008:BG0948 (Martens and Van Oord/Van Oord Holding) and District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6819 (Vialis). Essentially these cases concerned a veiled application of the equality principle. 37 District Court Rotterdam 5 March 2010, ECLI:NL:RBROT:2010:BL6819 (Vialis).

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whether to lodge a leniency request in a concerted way”.38 The undertaking received an 80 percent leniency discount in the original decision. In the new decision, the ACM granted a 100 percent discount. In Van Oord Holding, the District Court also ruled that the ACM had not substantiated sufficiently why the fine was much higher than the fines imposed on other undertakings in similar cases.39 Because the ACM could not substantiate this difference, the decision was not adequately reasoned. In its new decision, the ACM decreased the fine from 552,626 Euro to 129,165 Euro instead of improving its reasoning. In the other three cases, the ACM’s decision was annulled because it failed to respond to the arguments of the undertakings in its objection decision. The District Court upheld the legal consequences of the decisions, since the ACM explained its decisions during the District Court hearing.40 The undertakings did not apply for judicial review in these three cases. Interestingly, the parties did appeal in four similar cases. This raises the question of why certain parties do appeal in similar cases and others do not.41

3.3 No appeal after unfounded appeal In 10 cases in which the District Court ruled that the appeal was unfounded, neither the undertaking nor the ACM appealed at the TIAT. The undertakings participated in the ‘accelerated-fine procedure’ in 7 cases.42 These cases concerned the construction fraud cases. 38

Ibid. District Court Rotterdam 17 October 2008, ECLI:NL:RBROT:2008:BG0948 (Martens and Van Oord/Van Oord Holding). 40 District Court 23 July 2008, ECLI:NL:RBROT:2008:BD8517 (Borginfra); ECLI:NL:RBROT:2008:BD8550 (Bouwmij); ECLI:NL:RBROT:2008:BD8227 (Beentjes). 41 CBb 1 September 2010, ECLI:NL:CBB:2010:BO0866 (Schelvis); ECLI:NL:CBB:2010:BN9357 (Verzijl); ECLI:NL:CBB:2010:BN9349 (Timmer); CBb 31 August 2010, ECLI:NL:CBB:2010:BN6711 (Reimert). 42 District Court Rotterdam 23 July 2008, ECLI:NL:RBROT:2008:BD8275 (Nooijen); ECLI:NL:RBROT:2008:BD8268 (Eggengoor); ECLI:NL:RBROT:2008:BD8261 (De Groot); ECLI:NL:RBROT:2008:BD8245 (Joost Visser); District Court Rotterdam 15 May 2009, ECLI:NL:RBROT:2009:BI4893 (Kindeg); District Court Rotterdam 26 June 2009, ECLI:NL:RBROT:2009:BJ1431 (Ten Tije); District Court Rotterdam 10 July 2007, ECLI:NL:RBROT:2009:BJ3041 (Aalberts). In the three remaining cases which were unfounded and no appeal was filed, one case did not concern the construction fraud cases and the other two did concern the construction fraud cases, but not the accelerated procedure. 39

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The construction fraud cases concerned a national price-fixing system involving 1,300 undertakings.43 To simplify and accelerate the prosecution of these undertakings, the ACM offered them an accelerated-fine procedure. In exchange for a fine discount of 15 percent, the undertakings could renounce their right to individual access to the file, the right to be heard individually and the right to object and appeal the facts and their qualifications. This procedure has some similarities to a settlement, but unlike a settlement, the undertaking does not have to recognise its infringement of the cartel prohibition.44 Of the 1,300 undertakings involved, 1,240 undertakings chose the accelerated procedure.45 The cases concerning the other 60 undertakings were dealt with under the normal procedure.46 When opting for the accelerated-fine procedure, the undertaking may still apply for judicial review of the fining decision, but the grounds for judicial review are substantially limited because the facts and qualification of the facts cannot be disputed. The conditions of the accelerated-fine procedure and the amount of the fine can still be grounds for judicial review. However, the requirements of the accelerated procedure (e.g. limited access to the fining report) make litigation difficult in practice as the undertaking might not have a complete picture of the ACM’s case. The circumstances of the accelerated procedure combined with the fact that the District Court rejected all grounds of appeal probably influenced the decision not to file a further appeal in these seven cases. In contrast with these undertakings, other undertakings did file further appeals in similar cases; they also participated in the accelerated-fine procedure, and their cases were also ruled unfounded by the District Court. As noted above, this begs the question what is the difference for the parties and what is the reason that some undertakings file a further appeal and other undertakings in a similar situation do not. 43

Knoop-Rutten and Strijker-Reintjes, “Schoon schip in de bouw. NMa blikt terug”. 44 Recognition of the infringement is one of the requirements for the settlement procedure in most Member States. This is for example a requirement in the United Kingdom and Germany, but not in France. See Outhuijse, “Schikken met ACM”. 45 These numbers are taken from: Knoop-Rutten and Strijker-Reintjes, “Schoon schip in de bouw: NMa blikt terug”. However, when adding up the summaries of the fining decisions for each subsector as published by the ACM, I found the following numbers: 1,082 companies involved in the accelerated procedure, of which 1,026 undertakings received a fine and 56 undertakings did not, and 131 undertakings involved in the regular procedure, of which 53 undertakings received a fine, and 78 companies did not. 46 Ibid.

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4. Analysis of TIAT judgments The TIAT is the highest administrative court specialising in the field of economic administrative law. Undertakings and the ACM can file a further appeal at the TIAT within six weeks of the District Court’s judgment. The TIAT not only reviews the judgments on legal grounds, unlike some second instance courts in other Member States, but also completely reviews the factual grounds of the case.47 This comprises the establishment and qualification of the facts, evidence, compliance with the relevant procedures, the amount of the fine, the interpretation of the law and the method and intensity of the judicial review of the District Court. The intensity of the review by the TIAT could in general be described as a comprehensive review.48 Like the District Court, the TIAT can substitute its findings for that of the ACM and does not limit itself to the question whether the ACM could reasonably have reached a particular conclusion.49 The Lymbouw case illustrates that the TIAT carries out a thorough review of the facts. In this case, the TIAT analysed the infringing projects and the available evidence in order to determine the number of projects in which the involvement of the undertaking could be proven.50 Moreover, as the Bicycle cartel case shows, the TIAT rules itself on the gravity of the infringement for the purpose of calculating the amount of the fine.51 The high percentage of further appeals (70 percent of the cases) could partly be explained by the scope and intensity of the review in further appeal. The question is whether these further appeals are likely to be successful or whether the TIAT simply confirms the judgment of the District Court. The latter question must be answered in the negative. The TIAT annulled the judgment of the District Court in 30 of 48 cases (62.5 percent). The TIAT judgments show substantial differences between appeals. In some cases, there is one specific ground for appeal: the undertakings, for example, do not deny the offence and only dispute the amount of the

47

In the majority of the Member States, the second instance court only reviews questions of law. 48 See inter alia Lavrijssen and De Visser, “Independent administrative authorities and the standard of judicial review”; Lavrijssen, “More intensive judicial review in competition law and economic regulation in the Netherlands: vice or virtue?”. 49 The intensity of the review differs per Member State. 50 Other example: CBb 3 July 2008, ECLI:NL:CBB:2008:BD6629 (AUV). 51 CBb 4 October 2011, ECLI:NL:CBB:2011:BT6521 (Bicycle cartel).

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fine.52 In other cases, no fewer than 38 grounds were presented, and the undertakings seek to dispute all aspects of the fining decision.53 A description of all the grounds in all cases lies beyond the scope of this contribution. Accordingly, the following discussions are limited to a summary of the main cases.

4.1 Annulments by the TIAT The TIAT annulled the District Court’s judgment in more than 60 percent of the further appeals. In contrast to the Court’s annulments, reasonable time forms the largest category for annulment by the TIAT: 46.6 percent (14 of 30 cases) were annulled because of infringement of the right to trial within a reasonable time. The District Court and the TIAT have different views on determining a violation of the reasonable period. The amount of the fine is the second largest category of annulment by the TIAT. The District Court’s judgment was annulled on this ground in 9 out of 30 cases (30 percent). The imposition of the fine is the cause of the annulment in 7 of 30 cases (23.33 percent). In conclusion, the TIAT does not agree with the District Court on the imposition of the fine or on the amount of the fine in 33.3 percent of all appeals (16 out of 48 cases). The vast majority of annulments were in favour of the undertaking. The critical reader will wonder how it is possible that the TIAT annulled the judgment on the basis of reasonable time in 14 cases, while it is stated above that one of the parties lodged a further appeal under the reasonable period category in only 4 cases. The TIAT held that the reasonable time limit had been exceeded in 8 cases, while the District Court had found no violation in this regard. The same case will then fall into the ‘unfounded grounds’ category during the District Court phase and ‘reasonable time’ category during the TIAT phase. Other shifts between the categories have also been reported, such as from the category of unfounded grounds to that of the amount of the fine and from the amount of the fine to the imposition of the fine. Some shifts between the categories will be explained in greater detail during the description of the cases. The annulments are further divided into subcategories.

52

For example: CBb 8 April 2010, ECLI:NL:CBB:2010:BM1588 (Erdo); CBb 12 July 2012, ECLI:NL:CBB:2012:BX6386 (Lymbouw). 53 E.g. CBb 3 July 2008, ECLI:NL:CBB:2008:BD6629 (AUV).

Effective Public Enforcement of the Cartel Prohibition in the Netherlands

Grounds for overturning District Court’s judgment Imposition of the fine Insufficient evidence54 Insufficient regard for economic context Lack of timely, adequate grounds55 Limitation period56 Infringement of the right to defence 57 Amount of the fine Principle of equality58 Wrong basis for fine59 Wrong classification of offence60 Disproportionately high fine61 Defects in grounds given Reasonable time

39

Number of times 7 2 2 1 2 9 2 1 1 5 15

The numbers of annulments show that there are some differences in approach between the TIAT and the District Court Rotterdam, although the relationship between the judgments of the District Court and the TIAT is not unambiguous: it cannot be inferred that the TIAT is generally more flexible or more stringent than the District Court in its review of the ACM’s decisions. Nevertheless, some general trends can be distinguished.

54

CBb 28 August 2012, ECLI:NL:CBB:2012:BX7256 (Aan de Stegge); ECLI:NL:CBB:2012:BX7257 (Land industry Sneek). 55 CBb 7 December 2005, ECLI:NL:CBB:2005:AU8309 (Secon); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3818 (Abbink). 56 CBb 10 April 2014, ECLI:NL:CBB:2014:119 (Darthuizer tree nurseries). 57 CBb 12 February 2010, ECLI:NL:CBB:2010:BM1689 and ECLI:NL:CBB:2009:BH0436 (Shrimps). 58 CBb 14 March 2012, ECLI:NL:CBB:2012:BV9426 (Ooms Avenhoorn); ECLI:NL:CBB:2012:BV9430 (NH8). 59 CBb 20 March 2012, ECLI:NL:CBB:2012:BW3671 (BTL). 60 CBb 4 October 2011, ECLI:NL:CBB:2011:BT6521 (Bicycle cartel). 61 CBb 12 March 2004, ECLI:NL:CBB:2004:AO6479 (Notaries Breda); CBb 1 September 2010, ECLI:NL:CBB:2010:BN6925 (Jagro); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3816 (Wallaard Noordeloos); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3817 (Van Hemert); CBb 12 July 2012, ECLI:NL:CBB:2012:BX6386 (Lymbouw).

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4.1.1 Imposition of the fine The ACM may only impose a fine if it has sufficient evidence to prove the infringement and bears the burden of proof during the court procedures.62 The decision will be annulled if the ACM provides insufficient evidence. The TIAT endorses the conclusion of the District Court regarding the standard of proof in most cases. However, in the Aan de Stegge and Land industry Sneek cases, the TIAT appears to have been more stringent regarding the demands of evidence since it annulled the decision on the grounds of insufficient evidence rather than on the amount of the fine as the District Court had done. The District Court ruled that the ACM had used a wrong basis for the fine.63 After the further appeal by the undertakings, the TIAT held that the fining decision should indeed have been annulled, albeit on different grounds. According to the TIAT, the ACM was not entitled to fine the undertakings because the fining report contained insufficient evidence to prove the alleged facts.64 The TIAT did not give the ACM another chance to adopt a new decision; it substituted the decision with its judgment. These cases are examples of a shift from the amount of the fine category to the imposition of the fine category. With regard to the evidence, the District Court and the TIAT both seem to wield an unequivocal standard of proof.65 Sometimes the offence must be plausible,66 sometimes the infringement must be sufficiently proven67 and

62

In this sense, the Netherlands belongs to the minority of the Member States. See European Commission, Pilot field study on the functioning of the national judicial systems for the application of competition law rules, 2014, p. 21. 63 District Court Rotterdam 8 June 2009, ECLI:NL:RBROT:2009:BI7165 (Aan de Stegge); ECLI:NL:RBROT:2009:BI7388 (Land industry Sneek). 64 CBb 28 August 2012, ECLI:NL:CBB:2012:BX7257 (Land industry Sneek); ECLI:NL:CBB:2012:BX7256 (Aan de Stegge). 65 See also Gerbrandy, Convergentie in het mededingingsrecht. 66 CBb 3 July 2008, ECLI:NL:CBB:2008:BD6629 (AUV); CBb 31 December 2007, ECLI:NL:CBB:2007:BC1396 (Mobile Operators), par. 9.5.5.1; CBb 3 July 2008, ECLI:NL:CBB:2008:BD6635 (Aesculaap); CBb 22 May 2006, ECLI:NL:CBB:2006:AX8428; CBb 13 December 2012, ECLI:NL:CBB:2012:BZ2034; CBb 6 October 2008, ECLI:NL:CBB:2008:BF8820 (NIP), par. 5.2.; CBb 4 October 2011, ECLI:NL:CBB:2011:BT6521 (Bicycle cartel). 67 CBb 7 December 2005, ECLI:NL:CBB:2005:AU8309 (Secon); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3818 (Abbink); ECLI:NL:CBB:2011:BP3816 (Wallaard Noordeloos); ECLI:NL:CBB:2011:BP3817 (Van Hemert); CBb 30 August 2011, ECLI:NL:CBB:2011:BR6737 (ETB Vos).

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sometimes the offence must be proved convincingly.68 There is no discernible factor to justify the differences. Whether this is just a difference in the words used, or whether there is actually a difference in the required standard of proof is questionable. A follow-up study including interviews with judges, might answer this question. Another interesting point in this category concerns the right to defence. In Dutch competition law cases, the court does not lightly assume there has been an infringement of the right to defence, even though this is argued frequently. In the Shrimps cases, however, the TIAT ruled that there was an infringement of the right to defence.69 The TIAT ruled that the ACM’s decision-making procedure had been in breach of the right to a fair trial, because the undertakings neither had the opportunity to see an inventory of all the available documents in a language they could understand nor had the opportunity to determine what documents they needed for their defence. 4.1.2 Amount of the fine The case law of the national administrative courts, the European Court of Justice and the European Court of Human Rights require the national court to review the amount of the fine fully.70 The court must consider whether all the relevant facts and circumstances have been taken into account and whether the fine is proportionate to the offence. The Dutch courts may reduce the fine using their power to substitute their judgment for the decision if they consider that this standard has not been met.71 There is considerable difference in assessment regarding the amount of the fine 68

E.g. CBb 10 April 2014, ECLI:NL:CBB:2014:119 (Tree nurseries). CBb 12 February 2010, ECLI:NL:CBB:2010:BM1689; CBb 19 January 2010, ECLI:NL:CBB:2009:BH0436. 70 Generally, see judgments: ECtHR 10 February 1983, No. 7299/75, 7496/76 (Albert and Le Compte v. Belgium), par. 29; ECtHR 20 May 1998, No. 21257/93 (Gautrin and others v. France), par. 57; ECtHR 16 December 2008, No. 53025/99 (Frankowicz v. Poland), par. 60; ECtHR 24 February 2004, No. 12547/86 (Bendenoun v. France), par. 46; ECtHR 23 October 1995, No. 15527/89 (Umlauft v. Austria), par. 37–39; ECtHR 23 October 1995, No. 15523/89 (Schmautzer v. Austria), par. 34; ECtHR 21 May 2003, No. 34619/97 (Janosevic v. Sweden), par. 81. Cf. on EU law: de Moor-van Vugt, “Administrative Sanctions in EU Law.” National judgments: e.g. District Court Rotterdam 26 November 2015, ECLI:NL:RBROT:2015:8610; District Court Rotterdam 14 April 2009, ECLI:NL:RBROT:2009:BI1203 (Wallaard Noordeloos); Council of State 27 January 2010, AB 2010/48. 71 Parliamentary Papers II 2003/04, 29702, nr. 3, p. 141. 69

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both between the ACM and the District Court, and between the District Court and the TIAT. This applies particularly to the proportionality of the fine. The District Court annulled the fining decisions several times because the fine was disproportionate.72 The ACM, however, filed further appeals against these 5 judgments and did so successfully: the TIAT annulled these judgments. The TIAT increased the fine again in cases in which the court had reduced it. This was the result of a clear difference in interpretation between the TIAT and the District Court as to concept ‘limited participation’ and the proportionality of the fine. Unlike the District Court, the TIAT does not easily mitigate the amount of the fine because of limited participation. In Wallaard Noordeloos, the District Court found that the ACM had proved the undertaking’s involvement in the national construction fraud for twenty projects.73 Considering that the construction fraud cases comprised in total 530 projects, the District Court concluded that the undertaking’s involvement was only limited and reduced the fine from 540,306 Euro to 270,153 Euro. After further appeal by the ACM, the TIAT reversed the court’s judgment. According to the TIAT, involvement in 20 projects does not constitute limited participation, and therefore the original fine was not disproportionate. Similar cases are Van Hemert and Jagro.74 In these cases which involved 7 projects, the TIAT also ruled that participation was not limited and the fines imposed were not disproportionate. The District Court had reached the opposite conclusion.75 Another case in which the TIAT increased the fine was the Bicycle cartel.76 The court annulled the decision of the ACM on multiple grounds. Firstly, there was insufficient evidence for part of the infringement. The ACM was therefore not entitled to impose a fine for that part. In addition, the court annulled the decision because the offence was incorrectly classified. Contrary to the ACM, the District Court considered that the offence should be qualified as serious instead of very serious, which 72

E.g. CBb 12 March 2004, ECLI:NL:CBB:2004:AO6479 (Notaries Breda); CBb 1 September 2010, ECLI:NL:CBB:2010:BN6925 (Jagro); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3816 (Wallaard Noordeloos). 73 District Court Rotterdam 14 April 2009, ECLI:NL:RBROT:2009:BI1203 (Wallaard Noordeloos). 74 CBb 1 September 2010, ECLI:NL:CBB:2010:BN6925 (Jagro); CBb 8 February 2011, ECLI:NL:CBB:2011:BP3817 (Van Hemert). 75 District Court Rotterdam 23 July 2008, ECLI:NL:RBROT:2008:BD8259 (Jagro) and District Court Rotterdam 17 April 2009, ECLI:NL:RBROT:2009:BI2195 (Van Hemert). 76 CBb 4 October 2011, ECLI:NL:CBB:2011:BT6521 (Bicycle cartel).

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affected the amount of the fine. The District Court substituted the decision for its judgment and reduced the fines. In response to more than 20 grounds of further appeal, the TIAT declared only one ground well founded, namely that the District Court had erred by qualifying the offence as merely ‘serious’. The TIAT agreed with the ACM and increased the fines. As noted, there have been no District Court judgments in which a decision was annulled for infringement of substantive principles of sound administration, such as legitimate expectations, legal certainty or equality. This is different for the TIAT. In the Ooms Avenhoorn and NH8 cases,77 the TIAT ruled that the ACM had breached the principle of equality trough using a different fine calculation methodology compared to a similar case, which resulted in an excessive fine. The District Court had ruled that the undertakings’ objection to the fine system applied was inadmissible.78 4.1.3 Reasonable time Another clear difference in approach between the District Court and the TIAT pertains to the reasonable duration of the enforcement procedure.79 The TIAT annulled the judgment on this ground in 14 cases.80 This number of annulments is almost three times higher than that of the District Court. It is largely explained by a disagreement about the starting point and the duration of the reasonable time period for handling the construction fraud cases. 77 CBb 14 March 2012, ECLI:NL:CBB:2012:BV9426 (Ooms Avenhoorn); ECLI:NL:CBB:2012:BV9430 (NH8). 78 District Court 8 June 2009, ECLI:NL:RBROT:2009:BI8190; District Court 14 December 2009, ECLI:NL:RBROT:2009:BK6812. 79 See for more information about how the right to trial within a reasonable time is applied in the Netherlands: Outhuijse and Jans, “Judicial Review of Decisions of the Dutch Competition Authority”. 80 CBb 8 April 2010, ECLI:NL:CBB:2010:BM1588 (Erdo); CBb 18 November 2010, ECLI:NL:CBB:2010:BO5197; CBb 13 September 2010, ECLI:NL:CBB:2010:BO0952 (Van den Biggelaar); CBb 7 July 2010, ECLI:NL:CBB:2010:BN0540 (Bruil Ede); CBb 13 September 2010, ECLI:NL:CBB:2010:BO0990 (Oetelaar); ECLI:NL:CBB:2010:BO0961 (Lareco); ECLI:NL:CBB:2010:BO0973 (Schagen); CBb 18 November 2010, ECLI:NL:CBB:2010:BO4962 (Ooms Avenhorn); CBb 1 December 2011, ECLI:NL:CBB:2011:BU9159; CBb 25 March 2011, ECLI:NL:CBB:2011:BQ5977 (Geelen Beton); CBb 18 March 2011, ECLI:NL:CBB:2011:BU5581 (Lavaredo); CBb 6 June 2012, ECLI:NL:CBB:2012:BW4991 (Oomen); CBb 13 December 2012, ECLI:NL:CBB:2012:BZ2037 (Gerritsen); CBb 3 July 2008, ECLI:NL:CBB:2008:BD6629 (AUV).

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4.2 Confirmation judgments It is interesting to observe in which cases the TIAT confirmed the District Court’s judgment. This happened in 18 out of 48 cases. Of these 18 cases, 12 cases concerned an annulment of the ACM’s decision by the District Court. In 6 cases, the District Court ruled that the grounds of appeal were unfounded. The TIAT improved the grounds of annulment in 2 cases. The confirmations are also divided into different subcategories. 81

Grounds of dispute Imposition of the fine Insufficient evidence Insufficient regard for economic context Lack of timely, adequate grounds Limitation period Infringement of Chinese walls Amount of the fine Wrong basis for fine Wrong classification of offence Disproportionately high fine Defects in grounds given Reasonable time Manifestly unfounded

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Number 10 2 1 5 1 1 3 2 1 1 1 4

Insufficient evidence: CBb 14 June 2012, ECLI:NL:CBB:2012:BW1393 (Clabbers); CBb 13 December 2012, ECLI:NL:CBB:2012:BZ2034 (Kolthof); Insufficient regard for economic context: CBb 6 October 2008, ECLI:NL:CBB:2008:BF8820 (NIP); Lack of timely, adequate grounds: CBb 12 August 2010, ECLI:NL:CBB:2010:BN3895 (Mobile operators); CBb 1 September 2010, ECLI:NL:CBB:2010:BN9357 (Verzijl); CBb 1 September 2010, ECLI:NL:CBB:2010:BN9349 (Timmer); CBb 31 August 2010, ECLI:NL:CBB:2010:BN6711 (Reimert); CBb 1 September 2010, ECLI:NL:CBB:2010:BO0866 (Schelvis); Limitation period: CBb 26 November 2014, ECLI:NL:CBB:2014:447 (Van der Linden); Infringement of Chinese walls: CBb 30 August 2011, ECLI:NL:CBB:2011:BR6737 (ETB Vos); Wrong basis for fine: CBb 22 December 2011, ECLI:NL:CBB:2011:BV1411 (Tasta Bouw); CBb 30 June 2011, ECLI:NL:CBB:2011:BR3068 (Anonymous); Disproportionately high fine: CBb 18 March 2010, ECLI:NL:CBB:2010:BM2423 (Merckx); Defects in grounds given: CBb 9 June 2011, ECLI:NL:CBB:2011:BQ7886 (De Combi Brabocon).

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4.2.1 Imposition of the fine .

The TIAT confirmed the District Court’s annulment based on insufficient evidence in 3 cases.82 All three cases were part of the construction fraud investigation. The undertakings were able to question the available evidence, since they had opted for the regular procedure. Despite the further appeal brought by the ACM, the TIAT confirmed the District Court’s judgment in the Clabbers and Kolthof Beheer cases. In Clabbers, the District Court ruled that the 2 leniency statements on which the fine was based were insufficient to prove Clabber’s involvement.83 The District Court considered it unlikely that further investigation ten years after the facts would produce reliable information which could prove the infringement and therefore replaced the fining decision by its judgment. The ACM appealed this judgment and argued that the District Court had wrongly concluded that there was insufficient evidence to prove undertaking’s participation. The TIAT, however, confirmed the Court’s judgment, ruling that evidence of the alleged offence was insufficient and that the ACM therefore was not entitled to impose a fine.84 The TIAT also confirmed the judgment in the third case, albeit on different grounds.85 In ETB Vos, the District Court ruled that a part of the ACM’s evidence was unlawful, since the ACM had infringed Article 54a Dutch Competition Act which states that the persons involved in investigating an infringement should not also be involved in imposing the fine.86 According to the District Court, the remaining evidence of ETB Vos’ involvement in the infringement of the cartel prohibition in the installation sector was insufficient and the ACM was not entitled to fine the undertaking. The ACM appealed the judgment, stating that the District Court erroneously concluded that there was an infringement of Article 54a of the Dutch Competition Act and that there was sufficient evidence to prove the participation. As mentioned, however, the TIAT confirmed the judgment with an improvement of the grounds.87 The TIAT ruled that the 82

CBb 14 June 2012, ECLI:NL:CBB:2012:BW1393 (Clabbers); CBb 13 December 2012, ECLI:NL:CBB:2012:BZ2034 (Kolthof); CBb 30 August 2011, ECLI:NL:CBB:2011:BR6737 (ETB Vos). 83 District Court Rotterdam 1 October 2009, ECLI:NL:RBROT:2009:BJ9175 (Clabbers). 84 CBb 14 June 2012, ECLI:NL:CBB:2012:BW1393 (Clabbers). 85 CBb 30 August 2011, ECLI:NL:CBB:2011:BR6737 (ETB Vos). 86 Now: Article 12q Establishment Act of the Authority for Consumers and Markets. 87 CBb 30 August 2011, ECLI:NL:CBB:2011:BR6737 (ETB Vos).

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infringement of the division of functions is an independent ground for annulment. The ACM further appealed only one annulment by the District Court on the ground of insufficient regard for the economic context.88 The District Court ruled that the ACM had insufficiently reasoned how the undertakings’ behaviour restricted competition and ordered the ACM to decide again.89 To implement the disputed judgment, the ACM provided additional reasons in its new decision regarding the undertakings’ objections. The ACM appealed the District Court’s judgment, but the TIAT decided that the ACM had done insufficient research into the question of whether the behaviour restricted competition and its additional reasoning did not remedy this deficiency.90

5. Negative externalities of the Dutch public enforcement regime The research which covered the District Court judgments in the period 2003-2013 and the subsequent TIAT judgments showed that the percentages of litigation and annulments are high. These percentages remained high in the years 2013 and beyond.91 The high percentage of challenged and annulled decisions can be regarded as a systemic deficiency, since it affects the effectiveness of competition law enforcement and entails other quantitative and qualitative externalities. The objective of competition law is to solve and prevent market failure.92 The proper functioning of markets results in efficiencies to the benefit of consumers and total welfare. While the exact goal of EU competition law and competition law enforcement is widely contested,93 the perceived deficiencies prevent optimal enforcement,94 so that the plurality of goals that EU competition law serves - e.g. consumer welfare, 88

CBb 6 October 2008, ECLI:NL:CBB:2008:BF8820 (NIP). District Court Rotterdam 17 July 2006, ECLI:NL:RBROT:2006:AY4928 (NIP). 90 CBb 6 October 2008, ECLI:NL:CBB:2008:BF8820 (NIP). 91 Later publications will address developments after 1 January 2013. 92 Bork, The Antitrust Paradox, p. 405; Van den Bergh and Camesasca, European Competition law and economics, p. 64; Jones and Sufrin, EU Competition Law, p. 13; Whish and Bailey, Competition Law, p. 13. 93 Lianos, “Some Reflections on the Question of the Goals of EU Competition Law”. 94 On optimal competition law enforcement, see generally Lianos et al., “An Optimal and Just Financial Penalties System for Infringements of Competition Law”. 89

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market integration, and the competitive process as such - are not fully realized.95 Fine imposition is an important instrument to achieve these objectives. The imposition of fines is intended to have, amongst others, a specific and general deterrent effect.96 Potential offenders should, as a result of the deterrent effect, refrain from entering into a cartel agreement out of fear of prosecution and receiving a fine.97 According to the economic theory of crime, the deterrent effect depends on the probability of successful prosecution and the amount of the fine.98 The high percentages of challenged and annulled decisions have a negative effect on these elements of deterrence. The high percentage of challenged decisions reduces the probability of prosecution, since a part of the ACM’s time and workforce must be allocated to litigation, preventing these resources from being deployed to new decision-making. In addition, the high percentage of annulments decreases (1) the chance of a successful prosecution and/or (2) the amount of the fine. This occurs particularly, but not exclusively, in situations where a court annuls the fine on the merits of the case, e.g. for insufficient evidence, and concludes that the competition authority could not have imposed a fine in this manner. In conclusion, the high percentages of challenged and annulled decisions lower the deterrent effect of potential ACM enforcement. Market failure is therefore not optimally prevented and solved, and the cartel prohibition is not enforced effectively. Apart from the substantive objectives of competition law enforcement, the objection and appeal procedures have their own, additional aims. The procedures of objection, appeal and further appeal are dispute-resolution procedures and should have a filtering effect, meaning that objection proceedings should infrequently be followed by an appeal, and if they are, this appeal should rarely be followed by a further appeal.99 The objection procedure, for example, allows the administrative authority to review its 95

Lianos, “Some Reflections on the Question of the Goals of EU Competition Law”. 96 Veljanovski, “A statistical analysis of UK antitrust enforcement”. 97 E.g. Veljanovski, “A statistical analysis of UK antitrust enforcement”; Becker, “Crime and Punishment: An Economic Approach”, p. 167-217; Landes, “Optimal Sanctions for Antitrust”, p. 652-678; Hylton, Antitrust Law, Chapter 2; Veljanovski, Economics Principles of Law, Chapter 6; Veljanovski, “Deterrence, Recidivism and European Cartel Fines”; Combe and Monnier, “Fines Against Hard Core Cartels in Europe”. 98 Ibid. 99 The legislative history of the GALA (Dutch General Administrative Law Act) demonstrates that one of the purposes of the objection procedure was to prevent large numbers of appeals. PG Awb I, 279; available at: www.pgawb.nl.

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decisions before court proceedings are initiated and to repair defects by either making an entirely new decision, or support the original decision with improved argumentation. This should reduce the number of appeals by resolving disputes more efficiently.100 This contribution shows, however, that the objection procedure and the District Court phase only have a limited filtering effect and are ineffective in this respect. In addition, the high percentages of challenged and annulled decisions entail quantitative externalities, such as significant procedural costs. The competition law enforcement procedures are generally expensive, and these costs are increased by the perceived deficiencies. The increase in costs is firstly caused by the litigation costs, especially if the State Attorney assists the ACM’s lawyers. In addition, the high proportion of annulments increase the costs for the ACM, since the substantive annulment of the fining decision creates an obligation for the ACM to motivate its decision further, to gather more evidence or to adopt a new decision, which also increases the costs. Finally, the high proportion of annulments can detrimentally affect trust in the competition authority among consumers, fined undertakings and society as a whole. Ideally, society at large must be able to rely on the ACM’s effective supervision and protection against market failures. In addition, undertakings confronted with the cartel prohibition must be able to rely on the ACM’s application and enforcement of the legal rules in a lawful manner, particularly in cases of (potentially) substantial administrative fines. Secondly, disagreement between the two courts on the application of competition law in the Netherlands leads to legal uncertainty and encourages undertakings to file a succession of appeals, since there is a chance that the ruling will go in their favour eventually.

6. Developments influencing judicial review in the Netherlands Several recent developments in Dutch competition law enforcement will influence judicial review in competition law cases. On the one hand, some of these new developments will likely lead to an increase in litigation in the future. The maximum amount of a cartel fine was raised from 450,000 Euro to 900,000 Euro or 10 percent of the annual turnover of the undertaking if the latter is higher on the 1 July 2016.101 If the infringement 100

See for more details: Jans and Outhuijse, “Advisory Objection Procedures”. Act of 23 December 2015, Stb. 2016, 22. See Article 57 Dutch Competition Act. 101

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lasted longer than two, three or four years, the maximum fine can be raised to 1.8, 2.7 or 3.6 million Euro, respectively, or to 20, 30 or 40 percent of annual turnover. This amount can even be doubled for recidivists to the maximum of either 7.2 million Euro or 80 percent of annual turnover – whichever is higher. The objective of the legislation is to increase deterrence. As the amount of the fine is regularly a ground of appeal, an increase in litigation is to be expected if higher fines are imposed. On the other hand, other developments will likely decrease the number of appeals and further appeals and thus lower the number of court rulings. The ACM settled a case for the first time in the Summer of 2015 and another settlement followed on 23 March 2016.102 It is expected that this instrument will be used more frequently.103 The use of settlements at the European level and in some other European Member States led to a decrease in the number of court rulings.104 The enforcement practice at the European Union level shows that the percentage of decisions challenged is much lower in settlement procedures than in normal fining decision procedures.105 The proportion of decisions challenged is approximately 60 percent for normal cartel cases, while the undertakings in the 19 settlement cases filed an appeal in only two cases.106 The examples at the European Union level and in other Member States suggest that the use of settlements in the Netherlands might also lead to a decrease in court rulings. The decrease of court rulings can probably be explained by the fact that the undertaking recognises the infringement and its involvement and accepts the amount of the fine in the settlement procedure.107 A detailed explanation for the decrease in challenged decisions goes however beyond the scope of this contribution. Finally, an interesting development in terms of judicial review is the 102

Decision of the ACM of 11 August 2015, case 14.0705.27 (Natuurazijn); Decision of the ACM of 22 December 2015, case 13.0698.31; 15.0710.31; 15.0327.31; 15.0328.31 (Koel- en vrieshuizen). 103 Speech by Chris Fonteijn, 8 October 2015 at Conference developments competition law, Apollohotel Amsterdam. 104 Outhuijse, “Schikken met ACM: gewenste koers of rechtsomgekeert”. 105 See Hellwig, Hüschelrath and Laitenberger, “Settlements and Appeals in the European Commission's Cartel Cases”. 106 Société Générale, case COMP/39.914, T-98/14; Envelopes case, case COMP/39.780, T-95/15. Hellwig, Hüschelrath and Laitenberger, “Settlements and Appeals in the European Commission's Cartel Cases: An Empirical Assessment”, p. 10-11. 107 Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases 2008/C 167/01.

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legislative proposal to merge the two of the highest Dutch courts in administrative law (TIAT and the Council of State), although the current status of this legislative proposal is unclear. The consequence of merging the highly specialised TIAT with the Council of State, which focuses on general administrative law, will be that the specialised judges of the TIAT are replaced by non-specialised judges. One of criticisms to this bill was that the valuable expertise of the judges would get lost. While the bill was already submitted to the Dutch Parliament,108 the responsible ministers asked Parliament to postpone the vote of the bill since they want to discuss the withdrawal of the bill in Cabinet.109 It is expected that the legislative proposal will be withdrawn.

7. Concluding remarks This contribution has discussed some indications that the public enforcement of the cartel prohibition in the Netherlands is not carried out effectively. These indications include the number of appeals and further appeals, the number of ACM decisions annulled by the District Court and the number of District Court judgments annulled by the TIAT. The main points of disagreement between the ACM, the District Court and the TIAT are often related to evidence, both factual and economic, and the proportionality of the fine. The Dutch enforcement regime can be criticised because the deficiencies perceived limit effective enforcement, lead to high costs and legal uncertainty and negatively affect the trust of its stakeholders and society as a whole. It can be concluded that the Dutch enforcement of the cartel prohibition through the imposition of administrative fines does not function properly and would benefit from a boost. It is, however, difficult to formulate the possible improvements and to determine which entity (the ACM, the District Court or the TIAT) should implement them on basis of this research. Future legitimate recommendations first require thorough research into the decisions and decision-making procedures of the ACM. Although some annulments of fining decisions by the District Court or the TIAT appear to be easily resolvable – such as late response to an 108

Website administration of justice, https://www.rechtspraak.nl/Organisatie-encontact/Organisatie/Raad-voor-de-rechtspraak/Nieuws/Paginas/Kamer-praat-overwetsvoorstel-bestuursrecht-in-hoger-beroep.aspx, accessed on 15.11.2016. 109 Website administration of justice, https://www.rechtspraak.nl/Organisatie-encontact/Organisatie/Raad-voor-de-rechtspraak/Nieuws/Paginas/Wetsvoorstelbestuursrecht-in-hoger-beroep-waarschijnlijk-ingetrokken.aspx, accessed on 15.11.2016.

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undertaking’s arguments or evidence – there might be particular justifications or strategic choices which are currently unknown. Further research is also needed to clarify the deficiencies perceived. The developments described in section 6 (the increase in the fines, the use of settlements and the quality of the judicial review) are factors which influence the percentage challenged and annulled decisions and should therefore certainly be taken into consideration in future research.

CHAPTER THREE ON-SITE INSPECTIONS PERFORMED BY COMPETITION AUTHORITIES AND THE PROTECTION OF FUNDAMENTAL RIGHTS MICHAL PETR

1. Introduction The European Convention on Human Rights (hereinafter referred to as Convention) guarantees in Article 8 that everyone has the right to respect for his private and family life, his home and his correspondence and that there shall be no interference by a public authority with the exercise of this right, except for further specified exemptions. This right is typically associated with natural persons and the place where they live; it however extends also to other places used by natural persons and even to the business premises of companies. A similar provision is contained in Article 7 of the Charter of Fundamental Rights of the European Union (hereinafter referred to as Charter). Ever since the European Court of Human Rights (hereinafter referred to as ECtHR) declared in 2002 that the rights guaranteed by Article 8 may also be relied on by companies,1 the precise level of these guarantees has been discussed, in particular the conditions that must be met in order to perform inspections on companies’ premises and specifically the requirements of judicial supervision over the inspection. A significant proportion of jurisprudence on this topic is dedicated to

Michal Petr is Senior Lecturer at the Faculty of Law of the Palacky University in Olomouc, Czech Republic. He specializes in competition law and policy; next to his academic career, he has been working for the Czech Competition Authority since 2003, in the years 2010 – 2015 as its Vice-President. 1 ECtHR 16 July 2002, No. 37971/97 (Société Colas Est and Others v. France), par. 41.

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enforcement of competition law. Crucial evidence in antitrust cases is obtained thanks to unannounced on-site inspections (poetically called ‘dawn raids’), that are routinely performed by both the European Commission and the national competition authorities (hereinafter referred to as NCAs); as fines in case of finding an infringement may be extremely high (up to 10 percent of annual turnover of undertakings concerned), these cases are frequently appealed to courts where all the aspects of the proceedings are challenged, including the dawn raids. Even though in principle, the rules on dawn raids in EU law and in national regulations follow the same principles, the system of review differs. Whereas the actions of NCAs, after having been reviewed by national courts, may ultimately be brought before the ECtHR, the Commission’s actions are only reviewed by the EU Courts, not (yet) the ECtHR.2 This might reflect in differences in jurisprudence. In the last months, the courts have declared that the competition authorities overstepped their competences in two important cases; the first concerns the Commission (Deutsche Bahn)3 and the second a NCA – the competition authority of the Czech Republic (DELTA PEKÁRNY).4 The question therefore ought to be asked whether there is a systemic problem with the regulation of on-site inspections, requiring a change of legislation. This chapter will concentrate on inspections of business premises of companies performed by competition authorities, focusing on the Commission and the Czech Competition Authority (hereinafter referred to as CCA). Firstly, it will recall the ECtHR’s jurisprudence on the protection of the ‘home’ of companies and its reflection in the EU case law (section 2). Subsequently, the regulation of inspections in the Czech Republic will be described, and after analysing the ECtHR’s DELTA PEKÁRNY judgment, it will be assessed whether it is in line with the Convention or whether some legislative amendments are necessary (section 3). Similarly, the EU legislation will be described and assessed in the light of jurisprudence of both the Court of Justice (hereinafter referred to as CJEU), in particular the Deutsche Bahn case, and the ECtHR (section 4); as more detailed information on the DELTA PEKÁRNY case is practically unavailable outside the Czech Republic, its description will be more concise in order to provide sufficient legal and factual background. Finally, the approach of the CJEU and the ECtHR will be compared and it will be assessed whether any legislative changes are necessary in order to 2

Taking into account Opinion 2/13 of the Court of Justice, ECLI:EU:C:2014:2454, it is not probable that the EU would accede to the Convention in the near future. 3 CJEU 18 June 2015, C-583/13 P, ECLI:EU:C:2015:404 (Deutsche Bahn). 4 ECtHR 2 October 2014, No. 97/11 (DELTA PEKÁRNY v. Czech Republic).

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bring the regulation in line with the requirements of these courts (section 5).

2. Protection of companies’ ‘home’ Traditionally, the position was taken that the inviolability of ‘home’ could be relied on only by natural persons. In 1989, the Court of Justice addressed this in the Hoechst case, concerned specifically the legality of the Commission’s dawn raids: “Since the applicant has also relied on the requirements stemming from the fundamental right to the inviolability of the home, it should be observed that, although the existence of such a right must be recognized […] in regard to the private dwellings of natural persons, the same is not true in regard to undertakings […]. No other inference is to be drawn from Article 8 (1) of the European Convention on Human Rights […]. The protective scope of that Article is concerned with the development of man's personal freedom and may not therefore be extended to business premises. Furthermore, it should be noted that there is no case law of the European Court of Human Rights on that subject”.5

In principle, the ECtHR understands the term ‘home’ as a place where a natural person may enjoy her private and family life; the ECtHR defined home for example in the Giacomelli case as a “place, the physically defined area, where private and family life develops. The individual has a right to respect for his home, meaning not just the right to the actual physical area, but also to the quiet enjoyment of that area”.6

Since the nineties, the ECtHR’s case law has been shifting from this narrow understanding of ‘home’ and ‘private life’. In 1992 in the Niemitz case, it proclaimed that also professional and business activities of natural persons should be covered by the term ‘private life’, because “it would be too restrictive to limit the notion [of private life] to an "inner circle" in which the individual may live his own personal life as he 5

CJEU 21 September 1989 Joined Cases 46/87 and 227/88, ECLI:EU:C:1989:337 (Hoechst), par. 17 and 18. 6 ECtHR 2 November 2006, No. 59909/00 (Giacomelli v. Italy), par. 76.

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chooses and to exclude therefrom entirely the outside world not encompassed within that circle. […] [T]o interpret the words "private life" and "home" as including certain professional or business activities or premises would be consonant with the essential object and purpose of Article 8, namely to protect the individual against arbitrary interference by the public authorities […].7

The ultimate step was finally taken in 2002, when the ECtHR concluded in Société Colas Est that “the time has come to hold that in certain circumstances the rights guaranteed by Article 8 of the Convention may be construed as including the right to respect for a company's registered office, branches or other business premises”.8

The ECtHR arrived at this conclusion while assessing a dawn raid carried out by the French competition authority. From then on, this assumption has not been disputed; it was almost immediately adopted by the CJEU, which decided only 6 months later in the Roquette Frères case, coincidently as well concerning dawn raids in France, that “regard must be had to the case law of the European Court of Human Rights subsequent to the judgment in Hoechst. According to that case law […], the protection of the home provided for in Article 8 of the ECHR may in certain circumstances be extended to cover such [business] premises”.9

The ECtHR thus decided that the business premises of companies are to be protected from interference of public authorities under Article 8 of the Convention, even though “[…] the entitlement to interfere may be more far-reaching where the business premises of a juristic person are concerned”;10 it did not, however, specify what the precise threshold for interference was. In the Société Colas Est case, the ECtHR decided that the guarantees stemming from Article 8 of the Convention were not fulfilled vis-à-vis this 7

ECtHR 16 December 1992, No. 13710/88 (Niemietz v. Germany), par. 29 and 30. ECtHR 16 July 2002, No. 37971/97 (Société Colas Est and Others v. France), par. 41. 9 CJEU 22 October 2002, C-94/00, ECLI:EU:C:2002:603 (Roquette Frères), par. 29. 10 ECtHR 16 July 2002, No. 37971/97 (Société Colas Est and Others v. France), par. 49. 8

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company. The first and second requirements of Article 8 (2) of the Convention were met, i.e. the inspection was performed in accordance with the law and it pursued a legitimate aim,11 it was however not found to be proportionate to these aims, because adequate and effective safeguards against abuse were not guaranteed.12 Concerning these safeguards, the crucial question was whether the inspections needed to be authorised ex ante by a court, or whether subsequent judicial review would suffice. The ECtHR did not address this directly, it only observed that “the relevant authorities had very wide powers which […] gave them exclusive competence to determine the expediency, number, length and scale of inspections. Moreover, the inspections in issue took place without any prior warrant being issued by a judge and without a senior police officer being present […]. That being so […], the Court considers […] that the impugned operations in the competition field cannot be regarded as strictly proportionate to the legitimate aims pursued […]”.13

In subsequent cases, the question of ex ante judicial authorization has been repeatedly raised, without a conclusive answer in relation to companies in the area of competition law.14 The problem was also exacerbated by divergent legislation in different EU countries; according to the Commission’s report published in 2012, ex ante court authorization was required in 16 out of 30 cases (53 percent).15 To finally settle this dispute, the Deutsche Bahn and DELTA PEKÁRNY cases needed to be decided.

3. Dawn raids in the Czech Republic Czech competition law, both substantive and procedural, is in most aspects identical to EU competition law, and according to the settled case law, it 11

Ibid, par. 43 and 44. Ibid, par. 48. 13 Ibid, par. 49. 14 See e.g. ECtHR 12 November 2007, No. 71362/01 (Smirnov v. Russia); ECtHR 16 January 2008, No. 74336/01 (Wieser and Bicos v. Austria). Later case law nonetheless allowed to conclude that ex ante review is not strictly necessary, see e.g ECtHR 15 February 2011, No. 5672/09 (Heino v. Finland), par. 45, and ECtHR 14 March 2013, No. 24117/08 (Bernh Larsen Holding and others v. Norway). 15 “ECN Investigative Powers Report” of 31 October 2012, http://ec.europa.eu/competition/ecn/investigative_powers_report_en.pdf, accessed on 27.10.2016. 12

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needs to be interpreted in a way corresponding with EU legislation, including the provisions on on-site inspections.16 Most of the Czech competition rules are contained in the Act on the Protection of Competition (hereinafter referred to as APC).17 It was adopted in 2001 in order to fully approximate the Czech competition law to EU law, but it has been amended eleven times since, and another amendment is pending; event though the rules on inspections have been amended in order to fully correspond to EU legislation (see below), they have remained in principle the same. It also needs to be mentioned that the inspections have been subject to material court review only twice in the Czech Republic, once in the DELTA PEKÁRNY case and once in another cartel case, in which the issue of legal profession privilege was mostly addressed;18 I will therefore not discuss this second case any further.

3.1 Authorizing an inspection In theory, it is possible for the CCA to inspect not only the business premises, but also the homes of natural persons associated with the undertakings concerned.19 This power has not yet been exercised in practice and I will not discuss it further. The conditions for authorising a dawn raid are very flexible in the Czech Republic. The law only states that the undertakings shall be obliged to undergo the investigation of the CCA on the land and on all premises, rooms and means of transport which they use in their business activities.20 The undertakings shall be informed of the legal reasons and the purpose of investigation, as well as of their rights and duties under the APC.21 The law thus does not provide for any requirements that must be met in order to perform a dawn raid, and the Czech courts have never decided that the CCA has overstepped its powers; the principles preventing ‘fishing expeditions’ thus need to be derived from EU law and jurisprudence, as 16 Czech Supreme Administrative Court 29 May 2009, Ref. No. 5Afs 95/2007 (BILLA – JULIUS MEINL I). 17 Act No. 143/2001 Coll., on the Protection of Competition and on Amendment of other Acts (Act on the Protection of Competition), as amended. APC is available in English at: http://www.uohs.cz/en/legislation.html, accessed on 27.10.2016. 18 Czech Supreme Administrative Court 29 May 2009, Ref. No. 5Afs 95/2007 (BILLA – JULIUS MEINL I) 19 Section 21h of the APC. 20 Section 21f (1) of the APC. 21 Section 21f (6) of the APC.

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will be discussed below. In Czech law, there is no formal decision authorizing an inspection. According to the law, the conduct of inspection shall be authorized in written form by the Chairman of the CCA or any other person authorized according to internal regulations of the CCA; the law further specifies the content of that authorization.22 Because there is no decision, the authorization is not subject to court review. As a matter of practice, dawn raids are carried out only after the initiation of formal administrative proceedings, not during the preliminary stage of the investigation. This is relevant for judicial review, as will be discussed below.

3.2 The DELTA PEKÁRNY proceedings and court review In 2003, the CCA carried out a series of dawn raids in several bakery companies which were allegedly engaged in a price-fixing cartel. During the searches on the premises of DELTA PEKÁRNY (meaning bakeries DELTA), one of the involved companies, the CCA’s officials printed out several documents from the computer of one of its managers. The company thereafter obstructed the inspection by refusing to hand these documents over and by not allowing further search in the computer. The CCA subsequently imposed a fine upon the company;23 even though the amount of the fine was negligible compared to fines imposed by the Commission (300,000 Czech Koruna, approx. 10,000 Euro), it was the highest fine possible under the APC then in force.24 DELTA PEKÁRNY appealed the CCA’s decision imposing the fine to the Regional Court in Brno, which is competent to review all the decisions of the CCA in full jurisdiction. Relying on the ECtHR’s Société Colas Est judgment, the principle claim of the appeal was founded on a presumption that searches on business premises of undertakings carried out by competition authorities need to be ex ante authorised by courts. As it was not so in the present case, DELTA regarded the inspection as per se illegal. The Regional Court dismissed DELTA’s claims.25 The judgment was 22

Section 21f (5) of the APC. Decision of the CCA of 27 June 2006, Ref. No. S 233C/03; decision of the CCA Chairman of 8 November 2011, Ref. No. R 79/2006. 24 Currently, the fine can amount up to 1 percent of annual turnover of the undertaking concerned; see Section 22c of the APC. 25 Regional Court in Brno 27 September 2007, Ref. No. 62 Ca 1/2007 (DELTA PEKÁRNY I). 23

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surprisingly founded on the jurisprudence of the CJEU, specifically the pre-Colas Hoechst judgment, under which companies cannot rely on Article 8 of the Convention; according to the Regional Court, this judgement was “[…] more suitable to the situation under review” than the Société Colas Est judgment. The court thus concluded that an inspection on business premises without a prior court authorisation corresponds with the EU law and does not infringe DELTA’s rights. DELTA PEKÁRNY further appealed to the Supreme Administrative Court, which reviews the decisions of Regional Courts, but deals only with questions of law. It dismissed the claims of the appellant as well.26 The Court thoroughly analysed the ECtHR’s jurisprudence, pointing out the differences between the Société Colas Est and the present case, and concluded, that even though companies may indeed rely on Article 8 of the Convention, an ex ante court authorization is not necessary if a sufficient and immediate ex post court review is available. The court therefore suggested that the undertaking could have taken a specific legal action against public authorities, affording court protection against unlawful interference with individuals’ rights. The aim of this action is to enable courts to scrutinize whether specific activities of public authorities, which do not have the form of an administrative decision and are thus not subject to ‘standard’ court review, are in accordance with the law (hereinafter referred to as ‘unlawful interference claims’;27 unlawful interference claims are typically used against enforcement actions of the police). DELTA PEKÁRNY had not filed an unlawful interference claim. Furthermore, before the Supreme Administrative Court, it had not claimed any specific infringement of its rights allegedly breached by the CCA during the inspection. The Court thus concluded that since there was an adequate instrument of ex post facto judicial review of the dawn raid, ex ante judicial authorization was not necessary, and ultimately, that the searches carried out in accordance with the APC were in line with the Convention. DELTA finally addressed the Constitutional Court, which dismissed its claim as inadmissible.28

26

Czech Supreme Administrative Court 29 May 2009, Ref. No. 5 Afs 18/2008 (DELTA PEKÁRNY I). 27 Act No. 150/2002 Coll., Code of the Administrative Justice, as amended, Sec. 82 et seq. 28 Constitutional Court 26 April 2010, Ref. No. III. ÚS 2309/09 (DELTA PEKÁRNY I).

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3.3 The decision on the merits The decision discussed above was only concerned with the fine for not submitting to the inspection. On the merits, the CCA found out that there was a cartel, and imposed a fine on DELTA PEKÁRNY and two other companies.29 The final decision was appealed to the Regional Court in Brno, which upheld the decision (hereinafter referred to as First Judgment of the Regional Court),30 but this judgment was overturned by the Supreme Administrative Court (hereinafter referred to as First Judgment of the Supreme Administrative Court).31 The Regional Court then upheld the CCAs decision in so far as that there was a cartel, but cancelled the fine due to procedural irregularities, not connected with the topic of this Article (hereinafter referred to as Second Judgment of the Regional Court);32 the Supreme Administrative Court concurred (hereinafter referred to as Second Judgment of the Supreme Administrative Court).33 The parties to the proceedings then filed a number of complaints to the Constitutional Court, which will be discussed below.

3.4 Inadmissibility of the unlawful interference claims In the meantime, there was an important shift in the jurisprudence on the unlawful interference claims. In 2012, the CCA conducted another series of unannounced inspections, among others on the premises of a company Schneider Electric CZ; the company, represented coincidentally by the same lawyer as DELTA PEKÁRNY, claimed that a dawn raid without ex ante court authorization was in itself in breach of Article 8 of the Convention. The company also immediately filed an unlawful interference claim with the Regional Court in Brno, as suggested by the Supreme Administrative Court in the DELTA PEKÁRNY judgment.

29 Decision of the CCA of 19 March 2004, Ref. No. S 223/03; decision of the CCA Chairman of 2 February 2009, Ref. No. R 20, 21 and 22/2004. 30 Regional Court in Brno 21 October 2010, Ref. No. 62 Ca 16/2009 (Bakeries Cartel I). 31 Supreme Administrative Court 29 March 2012, Ref. No. 5 Afs 7/2011 (Bakeries Cartel I). 32 Regional Court in Brno 20 September 2012, Ref. No. 62 Af 71/2012 (Bakeries Cartel II). 33 Supreme Administrative Court 16 December 2013, Ref. No. 5 Afs 69/2012 (Bakeries Cartel II).

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The Regional Court however dismissed the claim as inadmissible.34 In the Court’s opinion, these claims are only admissible where no other form of judicial review is possible, in particular outside formal proceedings. The searches in question were however performed in course of proceedings, which must be concluded by a decision on the merits, and such a decision might ultimately be challenged before the courts. Other forms of judicial protection are thus available. The Supreme Administrative Court upheld these findings.35 In the Schneider Electric case, neither the Regional Court, nor the Supreme Administrative Court explained why they had differed from the opinion stated in the DELTA PEKÁRNY judgment, in which the Supreme Administrative Court proclaimed that the unlawful interference claims against dawn raids were admissible. In fact, this judgment was not mentioned at all.

3.5 Judgment of the ECtHR The ECtHR issued its judgment in October 2013. Crucially, it finally settles the question whether ex ante court authorization is necessary in order to perform dawn raids legally; according to the ECtHR: “an absence of a court warrant may be compensated by effective ex post facto judicial control”.36

As DELTA’s claims were founded on a presumption that the absence of ex ante review constitutes in itself an infringement of the Convention, it seemed logical that the court would dismiss them. The judgment was nonetheless issued after the Schneider Electric case had been resolved in the Czech Republic, which influenced the reasoning of the ECtHR, which ultimately found an infringement. Relying on the Schneider Electric judgment, the ECtHR observed that an unlawful interference claim was inadmissible;37 the Strasbourg Court did not take into account that DELTA PEKÁRNY had not filed such a 34

Regional Court in Brno 18 April 2013, Ref. No. 62 A 9/2013 (Schneider Electric). 35 Supreme Administrative Court 13 February 2014, Ref. No. 7 Aps 2/2013 (Schneider Electric). 36 ECtHR 2 October 2014, No. 97/11 (DELTA PEKÁRNY v. Czech Republic). In this chapter, author’s own translation is used as there is no official translation of this judgment into English. 37 Ibid, par. 89.

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claim and only challenged the CCA’s decision, because – according to its understanding of the Czech law – such a claim would have been dismissed, regardless of what the Supreme Administrative Court held in its judgment. Even the absence of such an immediate court review did not make the inspection per se illegal. Nonetheless, the ECtHR concluded that the Czech courts had not reviewed the reasons why the CCA decided to carry out the dawn raid nor the execution of the dawn raid itself.38 The ECtHR therefore ruled that “in the absence of ex ante court warrant, an effective ex post factum judicial review of the necessity of the inspection and legal rules on eventual destruction of copies of the documents collected […], these procedural guarantees are not sufficient to prevent the risk of abuse of the CCA’s powers […]. [C]ourt review ex post factum, as performed in the present case, did not provide the complainant with sufficient guarantees against arbitrariness, and the interference with its rights therefore cannot be regarded strictly proportionate to the legitimate aim pursued”.39

In general, the requirements of the ECtHR are clear and well supported by its previous jurisprudence. With regard to this particular case, it however ought to be added that the judgment was adopted by a 4-3 majority, the dissenting judges pointing out that the Czech courts did not have anything to review, as DELTA had not claimed any specific infringements of its rights. It had only put forward an assertion that an inspection without ex ante judicial authorization is per se illegal.40

3.6 Reaction in the Czech Republic Immediately after the DELTA PEKÁRNY judgment of the ECtHR was announced in October 2014, the CCA decided not to conduct any new dawn raids until it had thoroughly analysed the judgment. At its annual conference in November 2014, the CCA announced that it is considering an amendment to the APC, introducing either an ex ante judicial authorization (similar to that required for searches on non-business premises)41 or specific provisions allowing for the decision on the dawn 38

Ibid, par. 85 and 88. Ibid, par. 92 and 93. 40 Joined dissenting opinion of the Judges Villigera, Yudkivska and Pejchal, par. 5. 41 Section 21h of the APC. 39

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raid to be reviewed by courts.42 In March 2015, the CCA however announced that no legislative changes were necessary.43 The CCA underlined that all Czech legislation needs to be interpreted in a way that would guarantee fulfilment of obligations assumed by the Czech Republic under international law, in particular obligations stemming from the Convention. Thus, in order to reach an interpretation consistent with the Convention, the courts are obliged, if necessary, to revisit its previous jurisprudence. According to the CCA, such a reassessment of case law needs to take place vis-à-vis unlawful interference claims against dawn raids, which ought to be found admissible by courts. Currently, the CCA performs dawn raids under the same rules as before. It only strives to substantiate the authorization more precisely, stating clearly on what grounds it bases its suspicion that there was an infringement, why it is necessary to perform an inspection on the premises of that particular undertaking and what kind of evidence it intends to discover. So far, none of these ‘new’ searches have been reviewed by Czech courts. Despite this approach, the CCA decided to include in the latest amendment to the APC a specific provision pronouncing unequivocally that inspections may be challenged using an unlawful interference claim.

3.7 Latest developments in the DELTA PEKÁRNY saga After the ECtHR had passed its judgment, the Constitutional Court finally decided on the complaints concerning the cartel proceedings (the decision on the merits).44 Unsurprisingly, it held that as there had not been sufficient court review, the case needs to be returned to the Supreme Administrative Court.45. It thus annulled the Second Judgment of the

42

“Presentation of the CCA’s Vice Chairman at the Annual Conference” of 11 November 2015, http://www.uohs.cz/en/information-centre/conferences-andworkshops/past-events/st-martins-conference-2014/introduction-of-speakers-andtheir-presentations.html, accessed on 27.10.2016. 43 CCA’s Press Release of 18 March 2015, http://www.uohs.cz/cs/hospodarskasoutez/aktuality-z-hospodarske-souteze/1945-mistni-setreni-u-soutezitelupokracuji-nasledna-soudni-ochrana-je-dostatecna.html, accessed on 27.10.2016. 44 Ruling of the Constitutional Court of 9 February 2016, Ref. No. IV. ÚS 4397/12 (Bakeries Cartel). 45 The Constitutional Court annulled the First and Second Judgments of the Supreme Administrative Court and the Second Judgment of the Regional Court

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Regional Court and the First and Second Judgments of the Supreme Administrative Court. The Constitutional Court fully relied on the ECtHR’s judgment and did not add anything substantial to the discussion. Subsequently, the Supreme Administrative Court returned the case to the Regional Court.46 According to the Supreme Administrative Court, the Regional Court needs to allow DELTA to raise concrete objections against the dawn raid; the Regional Court would then review these claims, ascertain whether there were any irregularities, whether such eventual irregularities had caused inadmissibility of the evidence collected and ultimately, whether a cartel might be established without such eventually inadmissible evidence; this ‘new’ judgment may then be reviewed by the Supreme Administrative Court, thus providing the complainant with full judicial review. Apart from this rather foreseeable conclusion, the Supreme Administrative Court also held that unlawful interference claims against dawn raids were (and always had been) admissible.47

4. The Commission’s dawn raids Before drawing any general conclusions from the ECtHR’s DELTA PEKÁRNY judgment, the practice of the Commission, EU law and the jurisprudence of the Court of Justice needs to be analysed.

4.1 Authorizing the Commission’s decisions The Commission’s investigative powers, including on-site inspections, are provided for by Regulation 1/2003.48 Regulation 1/2003 does not provide for conditions, under which an inspection may be performed. It only states that the Commission may start an inspection in order to carry out the

(see above), thus returning the proceedings to the stage where it was to be first reviewed by the Supreme Administrative Court. 46 Supreme Administrative Court Judgment 25 February 2016, Ref. No. 5 Afs 7/2011 (Bakeries Cartel III); the Supreme Administrative Court annulled the First Judgment of the Regional Court, thus returning the proceedings to a stage where the CCA’s decision was to be reviewed by the courts for the first time. 47 While interpreting the law in this way, the Supreme Administrative Court did not even refer to its Schneider Electric ruling. 48 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, OJ L 1, 04.01.2003, p. 1-25.

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duties assigned to it.49 If undertakings are to be obliged to submit to the inspection, this needs to be ordered by a decision, specifying among others its subject matter and purpose.50 As will be discussed below, the subject matter of the investigation needs to be precisely identified, because it “constitutes […] a fundamental requirement, designed not merely to show that the proposed entry onto the premises of the undertakings concerned is justified but also to enable those undertakings to assess the scope of their duty to cooperate whilst at the same time safeguarding their rights of defence […]”.51

Thus, information obtained during an investigation must not be used for purposes other than those indicated in the inspection decision;52 as the Court of Justice proclaimed, “[…] a search may be made only for those documents coming within the scope of the subject-matter of the inspection”.53 If however the Commission happens to obtain information that there might have been other unlawful conduct, such evidence may be used to initiate a separate investigation thereof.54 As the Advocate General Wahl explains in his Deutsche Bahn Opinion, “the Commission cannot be required to turn a blind eye in the event that it should find, purely by coincidence, documentary evidence which appears to point to another possible infringement […]”.55

The inspection decision may be reviewed by the EU Courts. There is however no ex ante court review. Unlike national competition authorities, the Commission does not have any enforcement powers in the event that the undertakings under inspection do not cooperate. The only possibility is to impose a fine.56 As the Court of Justice held in Hoechst: “the Commission's officials […] may not obtain access to premises or 49

Article 20 (1) of Regulation 1/2003. Article 20 (4) of Regulation 1/2003. 51 CJEU 25 June 2014, C-37/13 P ECLI:EU:C:2014:2030 (Nexans), par. 34. 52 CJEU 17 October 1989, 85/87, ECLI:EU:C:1989:379 (Dow Benelux), par. 17. 53 CJEU 18 June 2015, C-583/13 P, ECLI:EU:C:2015:404 (Deutsche Bahn), par. 60. 54 CJEU 17 October 1989, 85/87, ECLI:EU:C:1989:379 (Dow Benelux), par. 15. 55 Opinion of Advocate General of 12 February 2015 in case C-583/13 P, par. 65. 56 Article 23 (1) (c) of the Regulation 1/2003. 50

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The Commission may nonetheless ask a NCA for assistance in order to overcome the opposition of the undertaking concerned.58

4.2 The Deutsche Bahn case In 2011, the Commission adopted three subsequent decisions authorizing inspections on the premises of the Deutsche Bahn company and several of its subsidiaries. These decisions were challenged before the General Court like in DELTA PEKÁRNY, the complainant relied among others on the Société Colas Est judgment, claiming that an inspection without ex ante court authorization in itself infringed its rights under Article 8 of the Convention and Article 7 of the Charter of the Fundamental Rights of the European Union. The General Court dismissed these claims in September 2013,59 i.e. before the DELTA PEKÁRNY judgment was handed down. Nonetheless, it argued correctly that “the inevitable conclusion to be drawn from the recent case law of the ECtHR is that the lack of a prior judicial warrant is not capable, in itself, of rendering an interference within the meaning of Article 8 ECHR illegal”.60

The CJEU then went on to examine whether there were appropriate safeguards as to sufficiently restrict the powers of the Commission to prevent their abuse, finding five categories.61 The first set of safeguards is concerned with the substantiation of reasons on which the inspection decision is based.62 As has already been discussed, the decision needs to show why the inspection is justified and what the Commission plans to investigate, in particular the decision needs to precisely identify the subject matter of the investigation, as well as satisfy the other requirements of Article 20 (4) of Regulation 1/2003. The 57

CJEU 21 September 1989, Joined Cases C-46/87 and 227/88, ECLI:EU:C:1989:337 (Hoechst), par. 31. 58 Article 20 (6) of the Regulation 1/2003. 59 CJEU 6 September 2013, Joined Cases T-289/11 and T-521/11, ECLI:EU:T:2013:404 (Deutsche Bahn). 60 Ibid, par. 67. 61 Ibid, par. 73 and 74. 62 Ibid, par. 75.

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investigation cannot go beyond the subject matter thus identified. The second set of safeguards imposes limits on the Commission during the inspection. In particular, the undertakings are entitled to receive legal assistance. Further, the confidentiality of lawyer-client correspondence (legal professional privilege – LPP) is to be guaranteed, as well as of nonbusiness documents. The Commission may not compel the undertakings concerned to provide it with answers that might involve an admission of guilt. It must also explain to the undertakings how the inspection will be performed.63 Thirdly, the Commission does not possess any coercive powers64 and it must enable the undertakings to effectively exercise their right to oppose the inspection. In particular, they must be allowed a brief but reasonable period of time to examine the inspection decision and to consult their lawyers before the Commission actually applies its powers.65 In the fourth place, should the undertakings oppose the inspection and should the Commission seek the assistance of the national authorities, these authorities would be subject to review according to national rules, specific to the member state concerned. During the review process, national courts may refer a question for preliminary ruling to the Court of Justice.66 And finally, the inspection is subject to ex post facto review by the EU Courts.67 As all these categories of safeguards were met in the Deutsche Bahn case, the General Court concluded that the system of inspections established under Regulation 1/2003 in general and the inspections in question in particular were in line with requirements of the Convention as well as the Charter.68 In June 2015, this judgment of the General Court was nonetheless set aside by the Court of Justice, which ultimately annulled two of the inspection decisions. The reasons were however not concerned with the General Court’s arguments summarised above. On the contrary, the Court of Justice proclaimed that “the General Court did not err in law in holding […] that, in the light of the ECtHR’s case law, the lack of prior judicial authorisation was not capable, 63

Ibid, par. 80-83. Ibid, par. 85. 65 Ibid, par. 89. 66 Ibid, par. 91 and 94. 67 Ibid, par. 95. 68 Ibid, par. 73, 74, 100 and 102. 64

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The Court also upheld the analysis of the five categories of safeguards: “the detailed examination conducted by the General Court satisfies both the requirements of the ECtHR, […] the letter of Regulation No 1/2003 and the Court of Justice’s case law”.70

The reason why the Court of Justice set aside the General Court’s judgment were specific irregularities during the inspections. The first inspection was conducted in order to investigate a possible abuse of dominance by the DB Energie company. The Commission however briefed its staff that it had received complaints concerning other conduct of the Deutsche Bahn group. When such evidence was indeed discovered, the Commission opened a separate investigation and performed two additional dawn raids. As I have described above, the Commission may use in this way only evidence that it happens to obtain purely by coincidence. According to the Court of Justice, this was not the case here: “the first inspection was vitiated by irregularity since the Commissions agents, being previously in possession of information unrelated to subject matter of that inspection, proceeded to seize documents falling outside the scope of the inspection as circumscribed by the [inspection decision]”.71

Thus, the legality of the system of dawn raids was not put into question and the CJEU concluded that in general, the rules on inspections are in line with the requirements of Article 8 of the Convention and Article 7 of the Charter. The CJEU also acknowledged the five categories of guarantees, identified by the General Court.

5. Further legislative changes Taking into account the results of the two cases analysed above, it may be concluded that the EU Courts consider the EU rules on inspections to be in line with the inviolability of the home, as guaranteed by the Convention, as well as the Charter. The five categories of guarantees, identified by the 69

CJEU 18 June 2015, C-583/13 P, ECLI:EU:C:2015:404 (Deutsche Bahn), par. 25. 70 Ibid, par. 29. 71 Ibid, par. 66.

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General Court, are exhaustive and there is no reason to believe that should the EU ever become a party to the Convention and should the ECtHR acquire powers to review the Commission’s conduct, it would find it incompatible with its case law. No changes of the Commission’s investigative powers, as set out in Regulation 1/2003, are therefore necessary. In the Deutsche Bahn case, the Court of Justice did not uncover a systemic deficiency of the system, but only a case-specific irregularity, brought about by the particularities of that investigation. The situation in the Czech Republic is more difficult. Despite the proclamations of the Supreme Administrative Court in its latest judgment that the unlawful interference claims against dawn raids are admissible, it was not so in the past, as the Schneider Electric case suggests. More importantly, the level of substantiation of the dawn raid authorisations, as they had been formulated in the past, did not necessarily correspond to the requirements set forth by the Court of Justice. After the ECtHR’s decision, the practice of both the courts and the CCA has changed and even though there have not been any judgments issued thereafter, it may be expected that the objections raised by the ECtHR in DELTA PEKÁRNY will be overcome. An amendment of the APC was also adopted in order to make sure that these changes will indeed be implemented. Apart from the lack of sufficient judicial control, the ECtHR also criticised the fact that there are no rules on eventual destruction of unlawfully seized information. Such evidence would clearly be inadmissible, both before the Commission and the NCAs, and it is therefore questionable whether such rules are strictly necessary. Indeed, the ECtHR referred to this deficiency only in connection with the fact that in the DELTA PEKÁRNY case, effective court review, both ex ante and ex post, was missing. As the Court did not single out this issue in its previous judgments on inspections, we might presume that it is not necessary to immediately amend the legislation. Finally, we should consider the fact that the Commission is considering the possibility of introducing specific legislation concerning investigatory powers of NCAs,72 thus harmonising their competences. As we have seen already, even though the NCAs are empowered to carry out dawn raids, the conditions for their execution differ, including the crucial question of whether an ex ante court review is necessary. Should the Commission propose new legislation in this area, minimal investigatory powers of NCAs will probably be harmonised. Conversely, 72

Press Release of the Commission Ref. No. IP/15/5998, published on 04.11.2015.

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there is no need to harmonise the system of court review, as both the ex ante and ex post systems are in line with the Convention and the Charter. Still, harmonization concerning the conditions under which a dawn raid may be ordered and the level of substantiation the order must contain in order to be reviewable by courts might be very useful, because incompatible conditions for authorising inspections in different jurisdictions may jeopardise the effectivity of cooperation among NCAs.

6. Conclusions Even though in two recent judgments the CJEU and the ECtHR identified irregularities concerning inspections on both EU and national level, it does not seem that these decisions point to systemic problems, requiring legislative changes in order to bring the rules on inspections in two jurisdictions under scrutiny in line with the Convention and the Charter. It may therefore be presumed that dawn raids will be carried out in the same way as before. The competition authorities will only need to pay more attention to substantiation of their decisions to initiate an inspection, as well as to the precise description of their subject-matter.

CHAPTER FOUR INCENTIVES TO APPLY FOR LENIENCY: CRIMINALISING CARTEL OFFENCES IN SPAIN MANUEL CONTRERAS

"Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like". Edward Thurlow, 1st Baron Thurlow

1. Introduction Private antitrust enforcement is perhaps the only undeveloped area of Spanish competition law. This is evident simply by comparing the number of private antitrust cases resolved in Spain and in the major ‘hub’ jurisdictions for private enforcement in the EU. For instance, in only two years the German courts handled more private antitrust cases than the Spanish courts have in two decades: indeed, from 2005 to 2007 the German courts handled 368 cases, 25 cases more than those heard by Spanish courts in the 20 years from 1992 to 2012. In this same vein, a report prepared by the European Commission in 20131 recognised that the ‘vast majority’ of large antitrust damages claims were being brought in the Netherlands, Germany and the UK where national rules facilitate damage claims. All in all, this report found that the development of private antitrust enforcement throughout Europe was unbalanced and that remedial action was needed in the form of EU legislation. In this context, on 10 November 2014 the EU Directive on antitrust damages actions was adopted to implement the Commission's programme

Lawyer at Herbert Smith Freehills Spain LLP. All opinions expressed are personal. 1 Commission Staff Working Document, Impact Assessment Report, Damages actions for breach of the EU antitrust rules, par. 52.

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aimed at facilitating competition damages claims throughout Europe (the Directive).2 Article 27 of the Directive provides that EU Member States must implement the Directive by 27 December 2016. Accordingly, in January 2016 the Spanish Ministry of Justice published a first draft of the proposal to implement the Directive in Spain (the Proposal).3 This Proposal is still subject to public consultation before it is finally passed by Spanish parliament and enters into force. Section 2 of this Article explores certain aspects of the Proposal from an EU law perspective and suggests a number of changes that could be made to the definitive text that is ultimately implemented in Spain. This relates particularly to (i) the deadline set for claimants to file claims, (ii) the system designed to recover contributions for non-settling co-infringers, and (iii) the procedural rules provided to assess if a document can be categorised as a leniency or settlement document and, thus, exempted from court disclosure. Separately, it is doubtful whether the Proposal could boost Spanish private antitrust enforcement, partly because of the protection provided to leniency documents that could not be disclosed in court. Therefore, section 3 addresses the major obstacle that will continue to hamper the development of antitrust damage claims after the Proposal is fully implemented in Spain and a policy change that could potentially overcome that obstacle. This potential policy change disregards, for the sake of the argument, the wording of the Directive which prohibits the disclosure of leniency documents under the national procedural rules of Member States. However, this potential policy change, which will require the criminalisation of cartel offences in Spain, could eventually improve private antitrust enforcement without undermining public investigations in Spain.

2

Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349, 05.12.2014, p. 1–19. 3 Legislative Proposal by the Special Section for the implementation of Directive 2014/104/EU, of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.

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2. The Proposal from an EU law perspective 2.1 Deadline for the claimant to file a claim in court The Proposal4 provides that, if the claimant requests the court to order a discovery procedure before the actual court proceedings start, then the claimant should file the claim within 20 days from the date the discovery procedure effectively concludes. Indeed, under the discovery procedure the claimant may ask the court to request the defendant to disclose in court certain documents proving the anticompetitive practice. This will allow the claimant to have access to key evidence held by the defendant. However, the claimant will need to review such evidence and prepare the claim within 20 days from the date the evidence is finally disclosed in court in the context of the discovery procedure. Failure to file on time may lead the court to rule in favour of the defendant and to order the claimant to pay costs. According to Spanish civil law,5 Saturdays and Sundays are not business days and hence should not be taken into account when calculating limitation periods. This means that the period of 20 days provided in the Proposal will amount approximately to one month in practical terms. In short, the defendant has one month to file the claim from the date the evidence is ultimately disclosed in court. At EU level, the principle of good administration requires that parties replying to a statement of objections issued by the European Commission must be given a reasonable period of time to respond, bearing in mind both the time required to prepare the reply and the urgency of the case; for example, where the undertaking could suffer immediate loss as a result of an infringement of Articles 101 or 102 TFEU. In this context, the EU Courts have explained that, in cases involving a high volume of documentation, a two-month period is required to reply to the statement of objections.6 In my opinion, the same two-month limitation period should be granted in the Proposal for the claimant to file the claim. This is because the same circumstances considered at EU level to reply to a statement of objection would also seem to apply to damages cases. First, damages claims may also require the claimant to review a high volume of documentation. In particular, the claimant may need to review a 4

Proposal, p. 13. Article 130 of the Spanish Civil Procedural Act. 6 Inter alia, CJEU 20 March 2002, T-9/99, ECLI:EU:T:2002:70 (HFB v. Commission), par. 344. 5

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substantial number of (i) documents relating to the administrative procedure before the antitrust authority; (ii) documents relating to primary facts; and (iii) documents related to market and other economic issues. In addition, the claimant would need to provide evidence of the casual link between the conduct itself and damage caused. This will imply ‘connecting’ the documents of the infringer disclosed in court and its own factual evidence and, most likely, preparing an expert's report supporting the claim. Second, as in EU competition investigations, the claimants may have also suffered a substantial harm as a result of the infringement of Articles 101 and 102 TFEU caused by the defendants' conduct. In the words of the European Commission: "[m]oreover, infringements of Article 101 or 102 TFEU cause great harm to consumers and undertakings".7 Such ‘great harm’, therefore, justifies that damage claimants are given the same reasonable time limit provided in EU procedural law, that is to say, a twomonth limitation period as from the date the evidence is disclosed by the court. In addition, this is not simply related to the principle of good administration. The principle of effectiveness provided in EU law may also be against the limitation period provided in the Proposal. In a nutshell, this principle of effectiveness provides that national rules governing damages actions for breaches of Article 101 or 102 TFEU must not render the exercise of rights conferred by EU law excessively difficult or practically impossible. Included among the rights guaranteed by EU law is the right to compensation for harm suffered as a result of an infringement of Article 101 or 102 TFEU.8 It follows that a national procedural rule like the one included in the Proposal may render damages actions excessively difficult or practically impossible. This is because, again, the claimant will only have one month to review the documents, connect the evidence and prepare the claim and the expert's report. In my opinion, therefore, a two-month limitation period is more than justified in line the principle of good administration and in order to respect the principle of effectiveness under EU law.

7

Communication from the Commission on quantifying harm in actions for damages based on breaches of Article 101 or 102 of the Treaty on the Functioning of the European Union, 2013/C 167/07, par. 2. 8 CJEU 14 June 2011, C-360/09, ECLI:EU:C:2011:389 (Pfleiderer), par. 28.

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2.2 Recovering contributions from non-settling co-infringers The Proposal9 provides that the compensation of a settling claimant will be reduced on the terms agreed in the settlement agreement. However, the Proposal seems also to provide that the claimant may claim the unsettled share of the damage from non-settling co-infringers.10 If this interpretation is accurate, then settling claimants are able to recover contributions for the unsettled share of the harm from non-settling co-infringers. For instance, if a claimant requests 2 million Euro in compensation as a result of the damage suffered from cartelists A and B (1 million Euro each) and cartelist A settles with the claimant for 0.8 million Euro, the defendant may still request from cartelist B its share of the total compensation (1 million Euro) plus the share that cartelist A has failed to settle (totalling 0.2 million Euro). However, the Directive explains in Article 19 (1) that, "[…] following a consensual settlement, the claim of the settling injured party is reduced by the settling co-infringer's share of the harm that the infringement of competition law inflicted upon the injured party".11 This means the settling claimant will not be able to recover the unsettled share of the harm from other cartelists as the consensual agreement will imply that its claim will be reduced by the settling co-infringer's share of the harm. Following on the example above, if the claimant settles with cartelist A for 0.8 million Euro, the unsettled share of the harm corresponding to cartelist A (0.2 million Euro) could not be recovered from cartelist B, which will be liable for its share of the harm only (up to 1 million Euro). In this context, the Proposal may be considered incompatible with the Directive. As such, in a case such as this, cartelist B may argue that the action brought by the claimant after the settlement agreement is incompatible with EU law insofar as the claimant has requested that cartelist B bears the unsettled share of the harm of cartelist A (0.2 million Euro). In line with the Directive, compensation for the unsettled share of the harm should no longer exist as the claim of the settling injured party should be reduced following a consensual agreement. Put differently, the unsettled share of the harm should not survive the consensual agreement that reduces the claim of the settling injured party accordingly. 9

Proposal, p. 7. In particular, the Proposal literally explains that claimants may claim the ‘remaining proportion’ from non-settling co-infringers, which may be referring to the unsettled share of the harm. 11 Emphasis added. 10

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On a separate note, the current wording of the Proposal in this regard will probably have clear procedural effects for private antitrust enforcement in Spain, as it will incentivise defendants to be the first to settle with the claimant. This is because the first settling defendant will pass the responsibility for the unsettled share of the harm to the other infringers that have not settled with the claimant. In this context, the nonsettling defendant will be left in the proceedings with its share of the harm plus all settling co-infringers' unsettled share of the harm. Again, following on the example above, if cartelist A is responsible for 1 million Euro, it will have an incentive to settle first to (i) pass the unsettled share of the harm (0.2 million Euro) to cartelist B; and (ii) avoid cartelist B settling first and, hence, to avoid cartelist A having to bear the unsettled share of the harm. With this solution, the Proposal creates a private enforcement system that encourages defendants to settle in the first place and to try to pass the unsettled share of the harm to other co-infringers and, perhaps more importantly, to avoid having to bear the share of the harm of other coinfringers. This mechanism is actually very similar to the spirit of the leniency program used in Spain and across Europe. Indeed, the leniency program in Spain compensates the first applicant with full immunity from fines, while the second to apply for leniency will enjoy a 40 percent fine reduction and so on. In other words, the first to apply for leniency gets immunity and the risk of being fined passes directly to other co-infringers. In the same vein, the Proposal provides that the first settling co-infringer will pass the unsettled share of the harm to the non-settling co-infringers. This will also avoid the remaining co-infringers from passing their respective unsettled share of the harm to him. This solution can be welcomed from a procedural and material viewpoint as it would create instability among co-infringers and will favour rapid consensual agreements and early compensation for the injured parties. However, it is unclear if this ‘settle first’ system is exactly the objective pursued in the Proposal as one of its key principles explains that it "[…] will not allow overcompensation by punitive or multiple damages or of any other kind". This is also provided in the Directive, which reads that full compensation "[…] shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages." As such, one may argue that the claimant could be overcompensated if, following a consensual agreement, it is allowed to recover the unsettled share of the harm from non-settling claimants. In my opinion, the Law ultimately approved may implement the terms of the Directive literally and

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provide that, following a consensual settlement, the claim of the settling injured party is reduced by the settling co-infringer's share of the harm with no possibility of recovering the un-settled share of the harm from non-settling co-infringers. The ‘settle first’ system will be removed to make way for a Spanish private antitrust system that avoids overcompensation in compliance with EU law.

2.3 Court assessment of documents exempted from disclosure The Proposal explains12 very clearly that "[…] the court cannot at any time order a party or a third party to disclose any of the following categories of evidence: a) statements made in the context of the leniency program, and b) settlement submissions". As such, leniency statements and settlement submissions are exempted from court disclosure, all in line with Article 6 (6) of the Directive.13 The Proposal also explains,14 however, that the claimant may file a request for the court to review the evidence and assess if the documents can in fact be included in those categories of evidence and thus exempted from court disclosure. The Proposal also provides that, to complete the assessment, the court may request assistance from the competent antitrust authority. In addition, the court will consult with the party that prepared the relevant evidence, that is to say, the party that has filed the leniency statement or the settlement submission. In other words, the defendant will also be heard by the court in this particular procedural step. However, the Proposal states in very robust terms that "[…] the court cannot allow other parties or third parties to access this evidence at any time". In essence, the claimant will not have access to the documents and would be unable to comment if a particular piece of evidence could rightly be categorised as a leniency statement or a settlement submission exempted from court disclosure. In other words, the claimant may very well file a request for the court to assess if a particular document is exempted from disclosure. However, the claimant will not participate in that assessment in any way, whereas the other parties involved (the antitrust authority and, especially, the 12

Proposal, p. 20 and 21. "Member States shall ensure that, for the purpose of actions for damages, national courts cannot at any time order a party or a third party to disclose any of the following categories of evidence: (a) leniency statements; and (b) settlement submissions." 14 Proposal, p. 21. 13

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defendant) will be heard by the court on the matter. It is evident that the claimant will have limited incentives to file this kind of petition if it cannot participate in the court assessment. And not only that, the incentives will be close to zero if we consider that the court will be ‘assisted’ in its assessment by the defendant – who will have a clear interest in non-disclosure – and, possibly, the antitrust authority – which will be aligned with the defendant in order to protect the secrecy of leniency statements and settlement submissions. This, in fact, will allow the defendant to adopt, unopposed, an expansive view of this exemption and effectively claim before the court that ‘everything’ could be considered a leniency statement or a settlement submission. The antitrust authority, if consulted by the court, could not be considered neutral in this regard as it would need to make sure that those materials remain undisclosed to protect its public policy prerogatives. This is all in line with the joint position argued by national antitrust authorities in a public statement: "[all ECN Competition Authorities] take the joint position that leniency materials should be protected against disclosure to the extent necessary to ensure the effectiveness of leniency programme".15 As such, the claimant will leave the assessment of its petition to a court that may be inexperienced in antitrust law and could easily rely on the views of the defendant or the antitrust authority, which, I repeat, will in all likelihood favour ‘non-disclosure’. Depriving the claimant of its right to be heard in this regard could be incompatible with the principle of equality of arms,16 especially considering that the defendant will be heard by the court during the same court assessment. However, this could also be incompatible with the principle of effectiveness provided in EU law and the assessment outlined by the Court of Justice in this regard particularly in the Donau Chemie judgment.17 In that judgment, the Court of Justice recalled that it is for the Member States to establish procedural rules concerning competition damages claims but that these rules should not make it practically impossible or excessively 15

Resolution of the Meeting of Heads of the European Competition Authorities of 23 May 2012 "Protection of leniency material in the context of civil damages actions". 16 The equality of arms is a jurisprudential principle established by the European Court of Human Rights and is a part of the right to a fair trial written in the (European) Convention for human rights and fundamental freedoms. 17 CJEU 6 June 2013, C-536/11, ECLI:EU:C:2013:366 (Bundeswettbewerbsbehörde v. Donau Chemie AG and Others).

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difficult to claim damages, thereby undermining the effectiveness of the right to compensation conferred by EU law (principle of effectiveness).18 It is evident that systematically depriving the claimant of its right to be heard during the court assessment may render the claim impossible to proceed if we consider that the claimant is at this stage essentially seeking the disclosure of evidence proving the damage it has suffered. A refusal per se of the claimant's right to be heard in this context will thus hamper access to evidence, which may be incompatible with the principle of effectiveness provided in EU law as it could make it difficult or practically impossible for individuals to exercise their right to be compensated in court for an antitrust infringement. This conclusion is reinforced by looking more closely at the legal test set in EU case law. The Court of Justice explains in Donau Chemie that "[…] any request for access to the documents in question must be assessed on a case-by-case basis".19 This assessment is twofold as the court will need to consider (i) the interest of the requesting party in obtaining access to those documents in order to prepare its action for damages, and (ii) the actual harmful consequences that may result from such access having regard to public interests or the legitimate interests of other parties. However, the Proposal does not meet clearly the first requirement outlined by the Court in relation to EU law. The Spanish court will not be able to assess the ‘interest’ of the requesting party in gaining access to the evidence if that party is not allowed to participate in the court assessment. In other words, depriving the claimant of its right to be heard before the court means exactly that its ‘interest’ will not be considered in the assessment of each of the documents requested. As a consequence, it seems clear that following the Court’s findings in Donau Chemie, the Proposal at issue does not comply with EU law as it precludes the conduct of a weighing exercise to be conducted by the Spanish national court on a case-by-case basis. In these circumstances, it would be advisable to modify the current draft form of the Proposal to allow the claimant to participate and be heard during the court assessment that decides if a particular piece of evidence can be categorised as a leniency or settlement document and, hence, excluded from disclosure. In my opinion, this amendment would be compliant with EU law.

18 19

Ibid, par. 27. Ibid, par. 43.

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3. A potential policy change for antitrust enforcement: criminalisation of cartel offences in Spain 3.1 Introduction Although the purpose of the Proposal is to provide the framework required to boost private antitrust enforcement in Spain, it is the author's contention that a major obstacle will still hamper the development of competition damages claims after its full implementation under Spanish law. This is because claimants will not be allowed to access leniency documents in Spain in support of their claims. As such, access to the main set of documents proving antitrust infringements will be out of the question for claimants in follow-on cases. Indeed, as explained above and in line with the Directive, the Proposal provides that Spanish courts cannot ‘at any time’ order the disclosure of leniency statements and settlement submissions. However, the statement of purpose in the Proposal, which explains the reasons for the reform, remains silent on this point. It seems therefore that the Proposal has assumed per se the position held by the European legislator in the Directive. In this regard, the Directive provides20 that the incentives for undertakings to apply for leniency or engage in settlement discussions will be reduced if the documents submitted to the authorities in that context were to be disclosed in court. That prohibition has therefore been imposed to preserve the incentives for undertakings to apply for leniency or to settle with the Spanish Antitrust Authority. However, this section discusses a potential policy change that would allow both the preservation of the incentives for undertakings to apply for leniency and the disclosure of leniency materials in Spanish courts. 20

Directive, par. 26: "Undertakings might be deterred from cooperating with competition authorities under leniency programmes and settlement procedures if selfincriminating statements such as leniency statements and settlement submissions, which are produced for the sole purpose of cooperating with the competition authorities, were to be disclosed. Such disclosure would pose a risk of exposing cooperating undertakings or their managing staff to civil or criminal liability under conditions worse than those of co-infringers not cooperating with the competition authorities. To ensure undertakings' continued willingness to approach competition authorities voluntarily with leniency statements or settlement submissions, such documents should be exempted from the disclosure of evidence."

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Finally, it should be noted from the outset that this potential policy change disregards, for the sake of the argument, the wording of the Directive which, as explained, prohibits the disclosure of leniency documents under the national procedural rules of Member States implementing the Directive. This policy change or recommendation is discussed in the sections below. A quick overview of the investigative tools available to the Spanish antitrust authority is also provided to explain how public and private antitrust enforcement interplay.

3.2 Investigations of the Spanish antitrust authority Cartel behaviour in Spain is sanctioned by the Spanish Antitrust Authority or regional antitrust authorities under administrative law. The Spanish commercial courts are also entitled to declare the existence of a cartel as they have jurisdiction to declare the infringement of Article 1 of the Spanish antitrust law21 and Article 101 TFEU. However, the Spanish courts cannot impose sanctions for cartel infringements which again fall to the Spanish antitrust authorities. Indeed, in principle cartel conduct can only be sanctioned in Spain by those authorities as an administrative infringement rather than as a criminal offence.22 According to Spanish antitrust law, an undertaking taking part in a cartel can receive a fine of up to 10 percent of its turnover. The law also provides for penalties of up to 60,000 Euro to be imposed on individuals taking part in a decision or agreement leading an undertaking to commit a competition law infringement including, of course, cartels. However, the Spanish Antitrust Authority has been very hesitant in applying this provision in the past.23

21

Law 15/2007 of 3 July 2007 on the Defence of Competition. However, in September 2015 the Spanish National Court (Audiencia Nacional) initiated criminal proceedings against the directors of certain petrol operators involved in price fixing practices in Spain. In this case, the claimants, supported by the Spanish Public Prosecutor's Office, argued that the evidence in the case shows that a crime was committed under Article 284 of the Spanish Criminal Code, which punishes the crime of price fixing or contrivance with up to 6 years imprisonment. It remains to be seen, however, if the court will follow the same path and consider that individual directors could be held criminally liable under that provision of the Spanish Criminal Code, which has been rarely used to prosecute individuals in this context. 23 Decision of the Spanish Antitrust Authority of 26 September 2012 in Case S/0335/11, CEOE, repealed by the Spanish National Court. 22

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On the other hand, as explained, Spain has operated a leniency program since 2008. This program provides that the first undertaking to provide the Authority with relevant evidence of the existence of a cartel and certain collusive practices, and that complies with the remaining statutory conditions, can expect an exemption from the payment of fines. Further, the second undertaking to provide the Authority with relevant evidence will not receive full immunity from the fine. However, it may qualify for a reduction in the amount of the fine. In particular, the first person to meet the requirements to qualify for a reduction will benefit from a reduction of between 30 percent and 50 percent. The second person will benefit from a reduction of between 30 percent and 20 percent and any subsequent persons will benefit from a reduction of up to 20 percent. The Spanish Antitrust Authority also operates a settlement program. However, this program differs from the one provided at the EU level and is more limited in scope. This is because the Spanish Antitrust Authority has decided to exclude cartel behaviour from its settlement policy. Indeed, the Guidance provided by the Authority in this regard24 explains that a settlement procedure cannot be initiated where the infringement of Article 1 of the Spanish Antitrust Law – similar to Article 101 TFEU – involves cartel behaviour. Therefore, as cartelists cannot currently engage in settlement discussions with the Authority under Spanish law, this point will not be addressed further in the potential policy reform discussed in this section. We will then focus on leniency materials only.

3.3 Why are leniency materials important for public and private antitrust enforcement? In this section I will explain briefly why leniency materials are important for both private and public antitrust enforcement in Spain. On the one hand, it is clear that the documents included in the case file of a Spanish antitrust investigation will be important for parties seeking compensation in private antitrust cases.25 This is particularly true if the case file includes a leniency application, which typically contains two kinds of documents to prove the existence of the cartel: (i) corporate statements, which describe the background of the cartel from the perspective of the leniency applicant; and (ii) evidence supporting that background. 24 25

Guidance on Settlement proceedings of investigative case files, par. 23. De Zárate Catón, "Disclosure of Leniency Materials.”

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These two categories of documents can be very helpful for claimants willing to file follow-on damage actions against cartelists in Spain. In particular, they are useful to prove the existence of the damage and the causality link between the damage and the cartel behaviour. It follows that leniency materials could be key evidence in follow-on actions. On the other hand, there is the public enforcement angle to consider. Indeed, commentators agree that cartels are difficult to detect.26 They are typically formed through secret agreements between competitors, where evidence is limited and accessible only to them. Therefore, illegal cooperation by cartel members is crucial to form and operate cartels in an effective manner. A common finding in antitrust literature is that leniency programs destabilise cartel cooperation.27 Cartelists face the risk that any cartel member may report the cartel to the antitrust authority in light of the incentives offered to leniency applicants: immunity from fines or a substantial reduction of the fines that the authority would have imposed otherwise. In addition, the experience of antitrust authorities shows28 that when deciding whether or not to cooperate under a leniency programme, an important factor considered by potential leniency applicants is the impact of that cooperation on their position in damage claims as compared with the situation where they to decide not to apply for leniency.29 In fact, the undertaking may decide not to apply for leniency if so doing would put it in a worse position than a company that has not done so in the context of civil damage claims. Indeed, as explained above, followon suits rely heavily on the evidence included in the administrative case file and, as such, companies voluntarily submitting evidence to the authority under the leniency program will in fact be providing evidence available in court to future claimants. In contrast, undertakings that have not applied for leniency will not provide evidence at all. Therefore, claimants are more likely to file their claims against leniency applicants, where evidence of their infringement is included in the administrative case file and then disclosed in court. Conversely, nonleniency applicants will have no evidence included in the case file and this could make them a less attractive target for damage claims as injured 26

Porter, “Detecting Collusion”. Miller, "Strategic leniency and Cartel Enforcement". 28 Resolution of the Meeting of Heads of the European Competition Authorities of 23 May 2012, "Protection of leniency material in the context of civil damages actions". 29 White Paper on Damages Actions for Breach of the EC antitrust rules, section 2.9. 27

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parties will have no evidence to rely on to claim compensation in court. In short, it is clear that undertakings consider their position in civil proceedings when deciding whether or not to apply for leniency. It is also clear that, if that position is worsened by the disclosure of leniency materials, then the potential applicants will have less incentive to apply for leniency. This is the reason why antitrust authorities, the Directive and the Proposal have made it clear that leniency materials should not be disclosed in court: to preserve the effectiveness of leniency programs as an antitrust tool to uncover cartels.

3.4 Cartel criminalisation as a policy change for public and private antitrust enforcement The criminal prosecution of individuals involved in cartel behaviour has recently come under the spotlight. For instance, as of May 2016 directors and managers could be held criminally liable in South Africa for causing a company to engage in, or ‘knowingly acquiescing’ to a company’s involvement in, price-fixing, market-sharing or bid-rigging.30 In addition, on September 9 2015 the Deputy Attorney General of the US Department of Justice addressed a Memo to all DOJ attorneys, intended to strengthen their efforts to hold corporate executives accountable for unlawful conduct including antitrust – the so-called ‘Yates Memo’. Moreover, the press has recently reported the cases of two European individuals imprisoned in the US31 and the UK32 for causing their companies to engage in cartel behaviour. All this has somehow increased the public perception of the harm cartels cause to the overall economy and the risks to the managers and directors responsible. There are several reasons for recommending the introduction of criminal sanctions for individuals responsible for cartel behaviour in Spain. First and foremost, a public policy reason: to crack down on the individuals involved. The need for criminal penalties derives from the fact that cartels can have drastic effects on the overall economy by imposing, for instance, price surcharges that are passed on to final users and end consumers.33 Second, the criminal prosecution of the individuals involved may deter future cartel activities. Managers or directors may think more carefully 30

"Criminal liability in South Africa for cartel conduct from 1 May 2016". "IL CAPITANO: a cautionary tale for white-collar criminals". 32 "Libor fraudster Tom Hayes describes prison life in series of letters". 33 Smuda, “Cartel overcharges and the deterrent effect of EU Competition Law”. 31

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regarding whether or not to participate in cartel conduct if they, rather than the company they manage, can be held criminally liable for such conduct. Indeed, the problem of the current antitrust system in Spain is that administrative fines, although incredibly high in some cases, are not truthfully directed towards the individuals that cause the company to engage in the anticompetitive conduct. Indeed, the fines target undertakings, which are suffer financial injury, to the detriment of their shareholders and employees. By contrast, the individuals responsible receive no punishment at all. However, there is also a purely instrumental reason for turning cartel infringements into criminal penalties in Spain: cartels could be criminalised as a solution to create a more developed private enforcement antitrust system in Spain. Indeed, private antitrust enforcement could benefit from the criminalisation of cartel activities in Spain if an in-depth policy change takes place. This policy change would involve, in the first place, criminalising cartel offences in Spain: the individuals responsible for cartel behaviour should be criminally prosecuted in Spain. In addition, the Spanish Public Prosecutor's Office could only file criminal charges against individuals who fail to cooperate with the Spanish Antitrust Authority under the leniency program. In this context, individual directors would still have incentives to apply for leniency to avoid criminal punishment. This is because individuals involved in cartel behaviour would be forced to choose between (i) cooperating with the Authority under the leniency programme, or (ii) being exposed to potential criminal prosecution in Spain by the Public Prosecutor's Office, which may eventually lead to imprisonment. At this point, the secrecy of leniency documents will no longer be an incentive for the undertakings to apply for leniency. Indeed, the incentives for individuals to apply for leniency will be to avoid jail time. As such, leniency materials could be disclosed in court to claimants without damaging public antitrust investigations. The system can then come full circle as private antitrust enforcement will be developed with complete access to leniency materials without hampering public investigations, which will be protected or even reinforced by criminalisation.

3.5 How could the Spanish antitrust system be refined? To put this into practice, two basic reforms of the current Spanish antitrust system should take place.

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First, Article 15 bis of the current Spanish Law of Civil Procedure34 needs to be amended. This piece of legislation, which governs the procedural rules of competition damage claims in Spain, provides that the disclosure of information by the Spanish Antitrust Authority to the national courts in the context of damage claims must not include data or documents submitted by leniency applicants to that Authority. If this wording is repealed, then damages claimants would be able to request the court to disclose leniency materials proving the damage suffered. At the same time, the Authority would no longer be able to refuse those requests from the court. This, in turn, will boost the Spanish private enforcement system as claimants will have full access to valuable evidence. Second, the Spanish Criminal Code should be amended by making cartel behaviour a criminal offence under Spanish law. The wording provided in the UK cartel offence35 could be considered as an example in this regard. UK legislation provides that an individual can receive a prison sentence of up to five years if he or she agrees with one or more persons to make or implement, or cause to be made or implemented, arrangements of the following kind: price fixing, market or client sharing, bid-rigging and output limitation. In addition, the reform of the Spanish Criminal Code should also provide that individuals cooperating with the Spanish Antitrust Authority under the leniency program will be exempted from criminal prosecution in Spain. As explained above, this is precisely the wording that will safeguard the incentives for individuals to apply for leniency. Again, individuals responsible for cartel behaviour will be forced to choose between cooperating with the Antitrust Authority or being exposed to criminal prosecution in Spain. It should be noted in this regard that the interplay of administrative bodies with the Public Prosecutor's Office is not new in the Spanish criminal system. In particular, the current Article 305 of the Spanish Criminal Code provides that individuals responsible for certain criminal offences against the Exchequer must be punished with a prison sentence of up to five years unless "[…] his tax situation has been brought into compliance" with the Spanish tax authorities. This means that an individual will not be criminally prosecuted if he or she has wholly acknowledged on time tax liability and paid taxes in full to the Spanish tax authorities. 34 35

Law 1/2000 of 7 of January 2000 on Civil Procedure. "Cartel Offence Prosecution Guidance".

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A similar approach could be adopted for antitrust purposes. The reform of the Spanish Criminal Code could specifically provide that individuals responsible for cartel behaviour will be criminally prosecuted unless they have been granted full or partial immunity under the leniency program operated by the Spanish antitrust authority. The wording should also consider timing issues. Specifically, the wording should provide that individuals exempted from criminal penalties must apply for leniency before the criminal proceedings have started. By doing so, the system will avoid situations where individuals only apply for leniency after a criminal investigation has started. Therefore, the opening of a criminal investigation for cartel behaviour against an individual will imply that such individual will no longer be eligible for leniency in Spain and will be subject to criminal investigation by the Public Prosecutor's Office. As such, the wording should explain that individuals will be exempted from criminal prosecution for cartel behaviour where the application for leniency has been filed before the Public Prosecutor's Office or any other body takes steps that allow the applicant to be formally aware of the opening of criminal proceedings regarding its liability for cartel behaviour under Spanish law.

4. Conclusions The Proposal to implement the EU Directive on antitrust damages in Spain could be modified as follows, to be compliant / consistent with EU law. First, the Proposal should provide that the limitation period for the claimant to file the claim should be of at least two months from the date the evidence is ultimately disclosed in court. Second, the Proposal should explain more clearly that, following a consensual settlement, the claim of the settling injured party should be reduced by the settling co-infringer's share of the harm with no possibility of recovering the un-settled share of the harm from non-settling coinfringers. Finally, the Proposal should allow the claimant to participate and be heard during the court assessment to decide if a particular piece of evidence can be categorised as a leniency or settlement document and, hence, excluded from disclosure in court. The Directive provides that EU Member States should not allow leniency materials to be disclosed in court to claimants. The Proposal prepared in Spain to implement the Directive follows this same approach. However, my contention is that this prohibition will still prove to be an

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obstacle for Spanish private antitrust enforcement, which is clearly underdeveloped compared to other EU countries. In this context, the criminalisation of cartel offences could help to boost both public and private antitrust enforcement in Spain. This is because the incentives to apply for leniency would still be preserved if the individual directors of cartel offenders were ultimately subject to criminal prosecution in Spain. I would argue that, if cartel offences were criminalised, individual directors would still have incentives to apply for leniency to the Spanish Antitrust Authority to avoid criminal punishment by the Public Prosecutor's Office. At this point, the disclosure of leniency materials in court will play a very limited role for individuals who need to decide between applying for leniency or facing criminal charges in Spain. To put this into practice, the Spanish legal system must be refined. Particularly, cartels should be criminally prosecuted in Spain and the Public Prosecutor's Office should not prosecute individuals who cooperate with the Spanish Antitrust Authority under the leniency program. In this scenario, leniency documents could ultimately be disclosed in court to claimants, which will foster antitrust damage claims without lessening public antitrust investigation of cartels in Spain.

PART 3 – STATE AID ENFORCEMENT

CHAPTER FIVE LATEST STATE AID ENFORCEMENT DEVELOPMENTS IN THE DOMESTIC AMBIT JULES STUYCK AND PIERRE SABBADINI

1. Introduction EU State aid law is characterised by the existence of an exclusive competence of the European Commission to declare aid measures of the Member States compatible or incompatible with the Internal Market (Article 107 of the Treaty on the Functioning of the European Union (hereinafter the TFEU).1 Hence, enforcement of the State aid rules is primarily a task for the European Commission (hereinafter the Commission). By contrast, with regard to the Treaty antitrust rules – Articles 101 and 102 TFEU (prohibition of restrictive agreements and of abuse of a dominant position), Regulation 1/20032 has decentralised the application of these provisions. Although the Commission has a right of first refusal to examine and decide on restrictive practices that adversely affect trade between Member States, national authorities and national courts can and shall fully enforce these Articles (unless the Commission has decided to start a procedure). There is now even an EU directive on claims for

J. Stuyck is Emeritus Professor at KU Leuven and RU Nijmegen and counsel at Liedekerke, Brussels. P. Sabbadini is Associate at Liedekerke, Brussels. 1 Article 107 of the Consolidated version of the Treaty on the Functioning of the European Union, OJ C 326, 26.10.2012, p. 47–390. CJEU 17 September 1980, C730/79, ECLI:EU:C:1980:209 (Philip Morris), par. 17. 2 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, OJ L 1, 04.01.2003, p. 1–25.

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damages for victims of EU or national competition law infringements.3 With regard to the role of national courts it can be said that Articles 101 and 102 TFEU (the substantive antitrust provisions) are directly effective (individuals can rely on these provisions in national courts as a plaintiff or a defendant), while Article 107 TFEU (incompatibility of State aid measures with the Internal Market) is not. That however is not the end of this story. On the basis of Article 108 (3) TFEU (a procedural provision), the Court of Justice of the European Union (hereinafter the CJEU) has defined a rather important role for national courts. Article 108 TFEU has been further implemented by successive procedural regulations, the current version of which is Regulation 2015/1589.4 As a matter of principle, it should be remembered that Articles 107108 TFEU relate to measures granted by the Member States (and not conduct by undertakings) in order to avoid a detrimental ‘subsidy race’ among Member States.5 It seems therefore logical that the appraisal of the compatibility of these measures with the Internal Market takes place exclusively at the EU level, i.e. by an authority that is not involved in the infringement of the Treaty rules at issue. This being said, the CJEU recognized quite early on that national courts have a role to play in the enforcement of the State aid rules. Article 108 (3) TFEU provides for a system of compulsory notification, by the 3

Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1, 05.12.2014. 4 Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, OJ L 248/9, 24.09.2015. 5 This objective is often recalled by the Commission. In the framework of an investigation into Italian state support for a steel producer, the Commission stated that: “Steelmakers across the EU are struggling with worldwide overcapacity and strong imports – the response to this challenge must be to improve the sector's long-term global competitiveness. Therefore, EU State aid rules enable Member States to for example support research activities or relieve energy costs of steel companies, and the Commission tackles international trade distortions using anti-dumping or anti-subsidy measures. It is also why EU countries and the Commission have put in place strict safeguards against State aid to rescue and restructure steel companies in difficulty. This avoids harmful subsidy races between EU countries and that uncontrolled State aid in one EU country can unfairly put at risk thousands of jobs across the EU”, IP/16/115, Brussels, 20 January 2016 (emphasis added).

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Member States, to the Commission, of new state measures (those not existing at the time when Articles 107-108 TFEU entered into force for the Member State concerned). As long as the Commission has not taken a decision on the compatibility of the aid with the Internal Market, the Member State concerned shall suspend the implementation of the aid under the so-called ‘stand-still obligation’. The same obligation to refrain from granting aid of course exists for aid that should have been notified and was not. At the request of an interested party, a national court can establish the existence of aid within the meaning of Article 107 TFEU,6 as well as the fact that it should have been notified, while it was not. To come to that conclusion the national court can obtain the help of the Commission in the form of an opinion,7 or of the CJEU, by making a preliminary reference, under Article 267 TFEU. The court can also verify whether the aid is exempted from application of Articles 107 and 108 TFEU, under one of the existing block exemption regulations, e.g. the ‘de minimis’ exemption for smaller aid amounts or one of the exemptions for aid that comply with EU policy objectives (such as aid for R&D), see now the General Bock Exemption Regulation (hereinafter the GBER).8 Finally, once the Commission has found a State aid measure to be incompatible with the Internal Market it shall order the Member State concerned to recover the aid from the beneficiary, if the aid has already been granted (in violation of the ‘stand-still’ obligation of Article 108 (3) TFEU). Recovery of aid often leads to an action in court by the beneficiary, raising (substantive) defences, against the Member State in question. The CJEU has also gradually clarified the obligations of national courts to render decisions within the limits of their powers as defined above. What the EU can expect national courts to do is also limited by the principle of procedural autonomy. In this chapter, we will first analyse recent case law of the Court of 6

CJEU 22 March 1977, C-78/76, ECLI:EU:C:1977:52 (Steinike & Weinlig), par. 14; CJEU 11 July 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI), par. 49; CJEU 21 November 1991, C-354/90, ECLI:EU:C:1991:440 (Fédération Nationale du Commerce Extérieur des Produits Alimentaires and Others v. France). 7 Commission Notice on the enforcement of State aid law by national courts, OJ C 85/1, 09.04.2009, par. 89. See also Article 29 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, OJ L 248/9, 24.09.2015, p. 9–29. 8 Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 26.06.2014.

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Justice on the consequences for State aid cases of the principle of procedural autonomy. In the following sections, we will discuss recent case law with respect to a couple of other important questions on the role of national courts in the enforcement of EU State aid law: substantive defences under national law against the implementation of recovery decisions, the supplementary role of national law in interest calculation and the role of national authorities in the enforcement of Commission decisions (practical problems and cooperation with the Commission).

2. Powers and duties of national courts with regard to the EU State aid rules, in light of the principle of procedural autonomy In settled case law, the Court of Justice has recognised the so-called ‘procedural autonomy’ of the Member States.9 The procedural autonomy of the Member States is however subject to the principles of equivalence and effectiveness. Recently, in Mono Car Styling,10 referring to older judgments, the CJEU said that “[…] according to settled case law, the principle of effective judicial protection is a general principle of [Union] law stemming from the constitutional traditions common to the Member States, which has been enshrined in Articles 6 and 13 of the ECHR and which has also been reaffirmed by Article 47 of the Charter of Fundamental Rights of the European Union [...]”. The Court added that: “it has consistently held that, in the absence of [Union] rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from [Union] law, but the Member States, however, are responsible for ensuring that those rights are effectively protected in each case.” Thus, the Court concludes, “whilst it is in principle, for national law to determine an individual’s standing and legal interest in bringing proceedings, [Union] law nevertheless requires, in addition to observance of the principles of equivalence and effectiveness, that the national legislation does not undermine the right to effective judicial protection”.

9

CJEU 19 September 2002, C-336/00, ECLI:EU:C:2002:509 (Republik Österreich and Martin Huber), par. 61. 10 CJEU 16 July 2009, C-12/08, ECLI:EU:C:2009:466 (Mono Car Styling), par. 47-49.

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The State aid procedural regulation, Regulation 2015/158911 does not contain any procedural rules for national courts. Hence the principle of procedural autonomy has full effect, subject to the limitations stemming from the principles of equivalence and effectiveness. Koen Lenaerts,12 now president of the CJEU, has put it this way. Although it is for the Member States to establish a system of legal remedies and procedures, EU law requires them to do so in a way that ensures respect for the right to effective judicial protection. This judgemade principle is now codified in the second paragraph of Article 19 (1) TEU pursuant to which Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law. He adds that, in accordance with the principle of sincere cooperation laid down in Article 4 (3) TEU, national courts are required, so far as possible, to interpret and apply national procedural rules governing the exercise of rights of action in a way that achieves that result. With respect to State aid cases this could, for example, mean that national law could not, as a matter of principle or in general, deny the competitor of the beneficiary the opportunity to act in court against the aid measure. That would deprive that competitor of effective legal protection and at the same time jeopardise the attainment of the objective pursued by the State aid rules. A specific question with regard to procedural autonomy is that of limitation periods. If the limitation period under national law, for example, for recovery of aid or for an action by a competitor against an unlawful aid measure is (very) short, this will render the exercise of such correcting measures aimed at giving full effect to the State aid rules problematic. However, in Palmisani13 the CJEU ruled that EU law, as it stood, did not preclude Member States from requiring any action for reparation of the loss or damage sustained as a result of the belated transposition of the Directive in issue to be brought within a limitation period of one year from the date of its transposition into national law, provided that that procedural requirement is no less favourable than procedural requirements in respect of similar actions of a domestic nature. With regard to limitation periods the standard therefore seems to be the principle of equivalence. Another issue of procedural autonomy, on which the Court had to rule rather recently is that of res judicata. In the Klausner Holz Niedersachsen 11 Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union, OJ L 248/9, 24.09.2015. 12 Lenaerts, Effective judicial protection in the EU. 13 CJEU 10 July 1997, C-261/95, ECLI:EU:C:1997:351 (Palmisani), par. 39.

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case, the Court rendered a judgment on that principle in the context of State aid law.14 The Court ruled that EU law precludes, in circumstances such as those at issue in the main proceedings, the application of a rule of national law enshrining the principle of res judicata from preventing a national court which has held that contracts forming the subject-matter of the dispute before it constitute State aid, within the meaning of Article 107 (1) TFEU, implemented in breach of the third sentence of Article 108 (3) TFEU, from drawing all the consequences from that breach because of a national judicial decision which has become definitive, which court, without examining whether those contracts constitute State aid, has held that the contracts remain in force.

3. Rules and case law of the Court of Justice on the duties of national courts with regard to State aid 3.1 General Rules It has already been mentioned in the introduction that the European Commission has exclusive competence to declare aid compatible or incompatible with the Internal Market, and that the standstill provision of Article 108 (3) TFEU is directly effective: national courts can establish that there is aid that was notifiable and that the granting of the aid without notifying it, or without awaiting the Commission’s decision on compatibility with the Internal Market, is unlawful. In order to facilitate the national courts’ power and duty (if they are called upon) to establish the existence of State aid, the Commission recently issued a Notice on the notion of State aid as referred to in Article 107 (1) of the Treaty on the Functioning of the European Union,15 essentially based on the case law of the European Courts. The role of national courts in State aid matters is also confirmed in Article 29 of Regulation 2015/1589, according to which, for the application of Article 107 (1) and Article 108 TFEU, the courts of the Member States may ask the Commission to transmit to them information in its possession or its opinion on questions concerning the application of 14

CJEU 11 November 2015, C-505/14, ECLI:EU:C:2015:742 (Klausner Holz Niedersachsen), par. 45-46. 15 Commission Notice on the notion of State aid as referred to in Article 107 (1) of the Treaty on the Functioning of the European Union, C/2016/294, OJ C 262, 19.07.2016, p. 1–50.

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the State aid rules. Furthermore, the Commission may act as amicus curiae. Pursuant to Article 29 (2) of the Regulation, where the coherent application of Article 107 (1) or Article 108 TFEU so requires, the Commission, acting on its own initiative, may submit written observations to the courts of the Member States that are responsible for applying the State aid rules. However, the Regulation does not impose any obligation on the national courts with regard to the type of measures they should take in order to guarantee the effectiveness of the State aid rules or the decisions taken by the Commission on the basis thereof. On this issue, there is case law of the Court and a Commission Notice of 2009.16 In its 2009 Notice, the Commission first reiterates that a national court can identify State aid. If there is State aid, the court can check whether the stand-still obligation has been respected and if not, take appropriate measures. Furthermore, where there is a block exemption, the court can go into a substantive appraisal. Where the standstill obligation has not been respected the national court can take one of the following measures: -

Preventing the payment of unlawful aid; Recovery of unlawful aid, regardless of incompatibility; Recovery of interests; Damages for competitors and other third parties Interim measures against unlawful aid.

As to preventing the payment of unlawful aid, the CJEU stated that “[…] the validity of measures giving effect to aid is affected if national authorities act in breach of the last sentence of Article 93 (3) of the Treaty (now Article 108 (3) TFEU). National courts must offer to individuals in a position to rely on such breach the certain prospect that all the necessary inferences will be drawn, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision, and possible interim measures”. As to the principle that national courts should order full recovery of unlawful aid that has not (yet) been declared incompatible with the Internal Market, the Commission relies on the case law of the CJEU in the

16

Commission Notice on the Enforcement of State aid law by national Courts, OJ C 85/1 (2009).

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SFEI case.17 In this ruling, the Court merely stated that a national court, seized of a request, should draw the appropriate conclusions from an infringement of the last sentence of Article 93 (3) of the Treaty (now Article 108 (3) TFEU), where the matter has also been referred to the Commission, which has not yet given a final decision as to whether the State measures constitute State aid, and that it is not required to declare that it lacks jurisdiction or to stay proceedings until such time as the Commission has adopted a position on how the measures in question are to be categorized. The Commission however concedes that the Court accepted that there can be exceptional circumstances in which the recovery of unlawful aid would not be appropriate. Be that as it may, according to the Commission, the national court’s obligation to protect individual rights under Article 108 (3) remains unaffected where the Commission has not yet taken a decision, regardless of whether a Commission procedure is pending or not.18 Again, with due respect, this can only be inferred a contrario from that judgment where the Court ruled that the last sentence of Article 88 (3) EC (now Article 108 (3) TFEU) is to be interpreted as meaning that the national court is not bound to order the recovery of aid implemented contrary to that provision, where the Commission has adopted a final decision declaring that aid to be compatible with the common market, within the meaning of Article 87 EC (now Article 108 TFEU). Applying Union law, the national court must order the aid recipient to pay interest in respect of the period of unlawfulness. A Commission Notice cannot of course derogate from the case law of the European Courts. In addition, the Notice dates already from 2009. It seems therefore useful to examine more recent case law. In Deutsche Lufthansa19 this airline brought an action in a German court against alleged State aid (in the form of ‘marketing support’ and reduction of airport fees) granted by Frankfurt Airport to Lufthansa’s competitor Ryanair. Lufthansa sought an order for the recovery of the payments made to Ryanair and those corresponding to the reduction in airport fees which had benefited Ryanair. In the meantime, the Commission had opened a procedure against these measures under Article 108 TFEU. The Court of Justice considered i.a.:

17

CJEU 11 July 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI), par. 53. CJEU 12 February 2008, C-199/06, ECLI:EU:C:2008:79 (CELF I). 19 CJEU 21 November 2013, C-284/12, ECLI:EU:C:2013:755 (Lufthansa), par. 40-44. 18

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40. [...] even if in its final decision, the Commission were to conclude that there were no aid elements, the preventive aim of the State aid control system established by the TFEU [...] requires that, following the doubt raised in the decision to initiate the formal examination procedure as to the aid character of that measure and its compatibility with the internal market, its implementation should be deferred until that doubt is resolved by the Commission’s final decision. 41. It is also important to note that the application of the European Union rules on State aid is based on an obligation of sincere cooperation between the national courts, on the one hand, and the Commission and the Courts of the European Union, on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that cooperation, national courts must take all the necessary measures, whether general or specific, to ensure fulfilment of the obligations under European Union law and refrain from those which may jeopardise the attainment of the objectives of the Treaty, as follows from Article 4 (3) TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission, even if it is provisional. 42. Consequently, where the Commission has initiated the formal examination procedure with regard to a measure which is being implemented, national courts are required to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure. 43. To that end, national courts may decide to suspend the implementation of the measure in question and order the recovery of payments already made. They may also decide to order provisional measures in order to safeguard both the interests of the parties concerned and the effectiveness of the Commission’s decision to initiate the formal examination procedure. 44. Where they entertain doubts as to whether the measure at issue constitutes State aid within the meaning of Article 107 (1) TFEU or as to the validity or interpretation of the decision to initiate the formal examination procedure, national courts may seek clarification from the Commission and, in accordance with the second and third paragraphs of Article 267 TFEU, as interpreted by the Court, they may or must refer a question to the Court for a preliminary ruling (see, to that effect, as regards requests for preliminary rulings on the validity of State aid, Case C-222/04 Cassa di Risparmio di Firenze and Others [2006] ECR I-289, paragraphs 72 to 74).20

20

The authors’ emphasis is added.

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From this judgment, it appears clearly that even where the Commission has initiated the procedure, but has not yet taken a decision on whether there is incompatible aid, the national court can and shall take measures to safeguard the rights of the parties. It is in particular clear from the language of the judgment that such appropriate measures can entail provisional measures, obviously including, an order to suspend the aid. Whether the national court is also under an obligation to order recovery of aid granted pending the procedure before the Commission (and before a decision by the Commission declaring the aid incompatible with the internal market) is still not totally clear. It can thus be deduced from this judgment that national courts are under an obligation to take measures to defer the implementation of an unlawful State aid measure pending an examination by the Commission, when this is requested by an interested party. Whether these measures include, already at that stage, as a matter of principle, the full recovery of the aid, as contended by the Commission, remains debatable. Furthermore, it is also uncertain whether a national court is under an obligation to take measures at the request of a competitor, or another interested party that acts against the beneficiary of the aid. Obviously, the court cannot order the recovery by the State if it is not a party in the procedure. But can it, at the request of a competitor, order the cessation of the granting of aid or its use? We will come back to this question. The Lufthansa judgment has been confirmed by Flughafen Lübeck v. Air Berlin.21 The Court added that national courts cannot, in a situation such as that at issue in the main proceedings, (i.e. a competitor claims against the State) stay the proceedings until the closure of the formal investigation procedure. State aid is not always straightforward in the sense that a company receives a direct advantage from the state or is exempted from paying taxes or other charges. It is well established that state guarantees can also constitute aid. With regard to other type of measures which will be requested from national courts, an example is Residex.22 The Court ruled that the last sentence of Article 108 (3) TFEU must be interpreted as meaning that the national courts have jurisdiction to cancel a guarantee in a situation such as that in the main proceedings, in which unlawful aid was implemented by means of a guarantee provided by a public authority in order to cover a loan granted by a finance company to an undertaking which would not have been able to secure such financing under normal 21

CJEU 4 April 2014, C-27/13, ECLI:EU:C:2014:240 (Flughafen Lübeck v. Air Berlin). 22 CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex).

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market conditions. When exercising that jurisdiction, those courts are required to ensure that the aid is recovered and, to that end, they can cancel the guarantee, in particular where, in the absence of less onerous procedural measures, that cancellation is such as to lead to or facilitate the restoration of the competitive situation which existed before that guarantee was provided. Again, the CJEU does not rule that the national court is under an obligation to cancel the guarantee, but that it has the power to do so. All these recent judgments show that while being firm on effectiveness and loyal cooperation, and stressing the powers and obligations of national courts under the State aid rules, as far as these rules allow them to act (i.e. taking into account the exclusive competence of the Commission to decide on the compatibility of State aid with the Internal Market), it nevertheless remains cautious in impinging too much on procedural autonomy (leaving it to the national courts to determine under their national law what measures are appropriate) and in obliging these courts to take irrevocable measures (such as recovery) that could, later on conflict with a Commission decision (of compatibility).

3.2 Disputes between competitors A recent case brought before a Belgian court illustrates the limits of what a competitor can claim in court in a case where unlawful aid has been granted. In early 2014, the Belgian State decided to adopt a Royal decree providing Brussels National Airport with an annual allowance for 3 years to pass it further on to airlines using the infrastructure of its airport by carrying more than 400,000 passengers per year. One of the low-cost airlines (the ‘Airline’) which did not meet the 400,000 passengers’ threshold argued that this constituted illegal State aid and (i) filed a complaint with the European Commission, (ii) sought the annulment of the Royal decree before the Belgian Council of State and (iii) lodged a ceaseand-desist action before the Brussels Commercial Court.23 The Airline argued that the fact that the other airlines receive and, a fortiori use, unlawful State aid constitutes unfair market practices within the meaning of the Belgian Code of Economic Law.24 According to settled case law of the Belgian Cour de Cassation, prohibited market practices include the 23 Judgment of the Brussels Commercial Court (Dutch speaking section), AR 2014/52 655, 29 April 2015, unpublished. 24 Article VI.104 of the Code on Economic Law provides that: “Any act contrary to honest market practices whereby an enterprise affects or may affect the professional interests of one or more other undertakings, is prohibited.”

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breach of a legal or regulatory obligation. This would apply to Article 108 (3) TFEU which prohibits granting State aid without the approval of the Commission. However, the Commercial Court emphasised that the Airline is actually not the addressee of this prohibition but that this applies to Member States. In addition, the Court indicates that an action for a ceaseand-desist order against a conduct that is completed (and where there is no danger of reiteration) is inadmissible. Finally, the Court noted that the Belgian State had undertaken vis-à-vis the Commission to suspend the implementation or the Royal Decree, therefore it ruled that there was no necessity to take a measure. This case raises several interesting questions. As a general comment, one could question the fact that the court uses national rules regarding cease-and-desist actions to reach the conclusion that this was not the adequate way for the claimant to seek redress. The court could maybe have reached the opposite conclusion based on the above-mentioned case law of the CJEU, notably in Deutsche Lufthansa, allowing national courts to take appropriate measures to prevent the implementation of unlawful State aid and safeguarding the rights of the parties. However, at the same time, the Brussels commercial court also underlined that what the Airline was seeking was actually not possible for that court to award – at least by means of a cease-and-desist order – and that, in any event, the Belgian State had already committed itself to suspend the implementation of the measure. The national court also considered the fact that the Commission was currently investigating the measure and this ruling could be interpreted as a way to lean towards interim measures, which the court did not have to grant, because the Belgian State had committed itself to suspend further aid. This case also raises at least two specific further issues. First, it triggers the question of the standing of competitors of the recipients of an aid measure and the fact that, based on this judgment, they could decide only to lodge an action against the State. At the same time, in the absence of effective remedies at the national level to guarantee an effective protection of their rights, competitors may be discouraged from bringing the existence of potential unlawful aid to the attention of the Commission. Second, one could wonder what value commitments made by the State to the Commission during an investigation have for a national court ruling on the appropriate action to take in the case of unlawful aid. The commitment made by the State not to further implement a measure may not be sufficient to compensate competitors which could suffer damage linked to the mere fact that the State had committed to grant its support

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during a certain period before withdrawing this commitment upon Commission investigation. It remains to be seen whether this judgment is isolated or if this is a trend that is going to develop in Belgium.

3.3 Disputes regarding recovery and substantive defences under national law Developments regarding the interaction between the application of the State aid rules and national law heavily relate to the consequences of a recovery decision adopted by the Commission. Indeed, the Member State which granted the aid in the first place (and/or beneficiaries) may be tempted to find exceptions or arguments based on national law to avoid proceeding with the recovery. It would certainly jeopardize the rationale of the control of State aid, if the ultimate objective of recovery of incompatible aid could not be achieved because of conflicting rules or principles under national law. It is settled case law of the Court of Justice that, with the exception of cases in which a recovery decision has been annulled pursuant Article 263 TFEU, the only defence available to a Member State in opposing an infringement action by the Commission is to argue that it was absolutely impossible for it to implement the decision of which it was an addressee.25 Such impossibility may be of legal nature, for example, where the recovery of the aid would run contrary to a principle of European law. Issues related to recovery are also dealt with by the Court of Justice where the Commission lodges actions against Member States for failure to fulfil their obligations under Article 108 (2) TFEU. In the European Commission v. France case,26 the Court of Justice had to deal with the failure of the French Republic to take the measures necessary to recover the illegal aid awarded to Société Nationale Corse-Méditerranée and the Compagnie Méridionale de Navigation (SNCM), and to Compagnie méridionale de navigation SA (CMN) in the form of an annual contribution notably for the performance of a public service contract for the operation of ferry services between the port of Marseille and the Corsican ports. Corsica Ferries, a competitor, lodged a complaint with the European Commission which declared the aid incompatible with the Internal Market and ordered its recovery. 25

CJEU 11 September 2014, C-527/12, ECLI:EU:C:2014:2193 (Commission v. Germany), par. 48 and the case law cited. 26 CJEU 9 July 2015, C-63/14, ECLI:EU:2015:209 (Commission v. France).

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In order to avoid recovery, the French Republic raised first the fact that the recovery of such a sum would inevitably lead to the compulsory liquidation of SNCM, a process which would itself give rise to serious social unrest (strikes), which may block the port of Marseille for a long period and jeopardise the territorial continuity with Corsica and, ultimately, seriously affect the economic equilibrium of a whole region. As it had consistently held in the past, the European Court of Justice concluded that regarding the possible outbreak of social unrest which might jeopardise public order, where such unrest is threatened, it is for the Member State to adopt all appropriate measures to guarantee the full scope and effect of EU law so as to ensure its proper implementation in the interests of all economic operators, concerned unless it can show that action on its part would have consequences for public order with which it could not cope by using the means at its disposal.27 The Court noted that the French Republic had failed to show such consequences and that, in fact, the information regarding the recovery order did not give rise to any particular unrest. The second argument put forward by the French Republic related to the practical difficulties which, if SNCM ceased to operate, would require the conclusion of a new public service delegation contract with an economic operator other than SNCM, which would not necessarily have the material resources or manpower to satisfy the demands of public service delegation. The need to use such a procedure would thus be likely, at least for a certain period, to interrupt the territorial continuity in question. Regarding the alleged risk of a break in territorial continuity which might occur between the cessation of activities of SNCM and the conclusion of a new public service delegation contract, the Court agreed with the fact that any cessation of activities of SNCM might certainly be likely in the short term to result in a certain reduction in ferry services between Marseille and the Corsican ports. However, the Court did not consider that the facts put forward by the French Republic would justify the conclusion that such a reduction would have consequences on a scale which could be regarded as making it absolutely impossible to implement the decision at issue. At the risk of stating the obvious, this case underlines again that, while the Court is open to consider the impact of a recovery decision at national level, it applies a very high threshold which Member States must meet under an absolute impossibility defence to escape their recovery obligation. 27 CJEU 9 December 1997, C-265/95, ECLI:EU:C:1997:595 (Commission v. France), par. 56 and 57.

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3.4 The supplementary role of national law: interest calculation As mentioned above, the enforcement of State aid rules sometimes creates pressure or an opportunity for national law to take into account the effective enforcement of State aid rules, to set aside national rules. However, as it is true for other non-harmonised areas or European law, where there is no intention of the European Union to intervene on a specific aspect of the law, national rules apply. This is the case, even if, as is discussed below, it leads, by means of a reference under national law to Regulation 794/200428, to an early application of the compound interest standard set to the recovery of State aid, even though the decision declaring that aid incompatible with the common market and ordering its recovery was adopted and notified to the Member State concerned before that regulation entered into force. In A2A SpA v. Agenzia delle Entrate29, the Court of Justice dealt with a request for a preliminary ruling from the Italian Corte suprema di cassazione regarding the issue of the calculation of interest relating to the recovery of incompatible aid. A2A benefitted from a three-year exemption from corporation tax granted by the Italian Republic to joint stock companies with majority public shareholdings. The Commission considered that such an exemption constituted State aid incompatible with the Internal Market. In Commission v. Italy,30 the Court held that, by failing to adopt, within the prescribed period, the necessary measures to recover from the recipients the aid declared by the decision of the Commission to be unlawful and incompatible with the common market, the Italian Republic had failed to fulfil its obligations under that decision. Following that judgment, the Italian Republic adopted a regulatory framework regarding actions for recovery of the aid at issue. On that basis, the Agenzia delle Entrate sent to A2A tax assessments so as to recover sums owed by way of corporation tax that it had not paid in accordance with the exemption granted by the Italian Republic. In addition, those tax assessments required payment, of the sum of 120 million Euro in the form 28

Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty the former procedural implementing Regulation, OJ L 2004, L 140/1, 30.04.2004. 29 CJEU 3 September 2015, C-89/14, ECLI:EU:C:2015:211 (A2A SpA v. Agenzia delle Entrate). 30 CJEU 1 June 2006, C-207/05, ECLI:EU:C:2006:366 (Commission v. Italy), par. 54.

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of interest calculated on a compound basis. A2A brought an action before the Corte suprema di cassazione against those tax assessments. It raised the fact that those were contrary to EU law because the calculation of interest on a compound basis was made under a reference to provisions of Regulation 794/2004 that was not applicable ratione temporis to the decision of the European Commission applicable to A2A, since that decision was notified to the Italian Republic before Regulation 794/2004 entered into force. The referring court asked the CJEU whether EU law precluded such a national provision or whether it allowed the application of compound interest to the recovery of State aid, even though the recovery decision was notified before the entry into force of Regulation 794/2004. The referring court added that the Commission’s practice consisted at the time in referring to provisions of national law, which applied simple interest and allowed the application of compound interest to financial obligations only in accordance with the conditions laid down in the Italian Civil Code, conditions which were not satisfied as regards the recovery of the aid at issue in the main proceedings. The Court of Justice confirmed that Regulation 794/2004 was not, as such, applicable ratione temporis; it held that at the time the decision at issue in the case giving rise to that judgment was adopted, neither Union law, nor the case law of the Court or of the General Court specified whether the necessary interest on aid to be recovered was to be calculated on a simple or on a compound basis and it indicated that the Commission’s practice, set out inter alia in its 1991 letter to the Member States, linked the question of charging interest to the procedural rules for recovery and referred, in that regard, to national law.31 Therefore the Court concluded that it was for national law to determine whether, in this case, the interest rate must be applied on a simple or on a compound basis. In addition, reacting to the objection of A2A based on the grounds of legal certainty, the Court reminded A2A of its settled case law according to which, whilst the principle of legal certainty precludes a regulation from being applied retroactively, namely to a situation which arose prior to the entry into force of that regulation, and irrespective of whether such applications might produce favourable or unfavourable effects for the person concerned, the same principle requires that any factual situation should normally, in the absence of any express contrary provision, be examined in the light of the legal rules existing at the time when the situation occurred. However, where for that reason the new law is valid 31 See also CJEU 11 December 2008, C-295/07, ECLI:EU:C:2008:707 (Commission v. Département du Loiret), par. 82-84.

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only for the future, it also applies, save for derogation, to the future effects of situations which came about during the period of validity of the old law (see, to that effect the Bavaria case).32

3.5 Recovery from the ‘beneficiary’ Given that State aid is sometimes granted to help undertakings in difficulty and that a rather long period may run between the opening of an investigation by the Commission and the effective recovery of aid, issues have arisen regarding the quality of the beneficiary from whom the aid is to be recovered. In addition, the European Commission may not be in a position to identify, in its decision, all the undertakings which have received unlawful and incompatible aid. In its 2007 Recovery Notice,33 the Commission summarized the case law of the European courts and provided some guidance as to the conditions under which the recovery obligation must be extended to companies other than the original beneficiary of the unlawful and incompatible aid. The Commission makes a distinction between asset deals and share deals. Regarding asset deals, the Commission considers that there is a transfer of the advantage linked to the aid when the sale is concluded at a price lower than market value, e.g. with a successor company set up in order to circumvent the recovery order.34 As to the transfer of shares, the Commission takes the view that it does not affect the obligation of the beneficiary to reimburse such aid. At the same time, it considers that when it can be established that the buyer of the shares paid the prevailing market price for the shares of that company, it cannot be regarded as having benefited from an advantage that could constitute a State aid. In Magefesa,35 the Court of Justice dealt with a form of successor liability. The Court recalled that the recovery of incompatible aid aims at putting an end to the distortion of competition brought about by the competitive advantage which an undertaking enjoyed in the market as compared with its competitors. Therefore, it ruled that where the undertaking which received the unlawful aid is insolvent and a new 32

CJEU 22 December 2010, C-120/08, ECLI:EU:C:2010:798 (Bavaria), par. 40, 41 and the case law cited. 33 Notice from the Commission — Towards an effective implementation of Commission decisions ordering Member States to recover unlawful and incompatible State aid, OJ C 272, 15.11.2007, p. 4–17. 34 Ibid, par. 33. 35 CJEU 24 January 2013, C-529/09, ECLI:EU:C:2013:31 (Magefesa II).

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company has been created to continue the activities of the insolvent undertaking, such a newly created company may, if it retains that advantage, be required to repay the aid in question. The Court indicated that this may be the case where it is established that that company continues genuinely to derive a competitive advantage because of the receipt of that aid, especially where it acquires the assets of the undertaking in liquidation without paying the market price in return or where it is established that the effect of that company’s creation is circumvention of the obligation to repay the aid. The Court further explained that the obligation to repay applies where the payment of a market price is not sufficient to cancel out the competitive advantage linked to receipt of the unlawful aid. This case constitutes a reminder that the enforcement of State aid rules, as is also the case for the antitrust rules, sometimes requires the corporate veil to be pierced in order to offset the grant of an undue advantage to an undertaking.

4. Conclusion In this chapter, it has been shown that notwithstanding the Commission’s exclusive power to declare State aid compatible or incompatible with the Internal Market, national courts play an increasingly important role in enforcing the EU State aid rules. The procedural regulation on State aid does not deal with the role of national courts. This remains a question of case law. When defining the powers and duties of national courts in this field the Court of Justice has reiterated the procedural autonomy of the Member States, subject however to the principles of effectiveness and equivalence. Many questions remain on the exact duties of national courts. The Court of Justice has stressed that national courts shall take all measures in their power to avoid that unlawful aid (i.e. new aid that has not yet been reviewed by the Commission, while it is not exempted from notification) be implemented. This means that courts should take provisional measures to stop further implementation of unlawful aid pending proceedings by the Commission. But to what extent shall a national court order recovery before the Commission has found the aid to be incompatible with the Internal Market? A question that has arisen in recent case law is what measures the national court can take at the request of a competitor who claims to be put at a competitive disadvantage by the unlawful aid. The answer is not

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obvious. By contrast, another question that has indeed been settled quite clearly is that of successor liability in cases of recovery. Finally, it seems that at a more substantive level the Court of Justice remains strict on the possibility of defences under national law (such as social unrest that may be expected in the case of recovery or practical difficulties with the recovery process). It can be predicted that in coming years the Court of Justice will have to deal with new questions on the role of national courts in the enforcement of the State aid rules. State aid law came to full development many years after antitrust law. In antitrust law there is now a directive on private enforcement. Will there be one for State aid in the future?

CHAPTER SIX THE ENFORCEMENT OF THE EU STATE AID RULES BY THE DUTCH COURTS ALKE METSELAAR

1. Introduction When one considers the widespread media coverage concerning the EU Commission’s recent State aid investigations – the controversial Apple case being the most prominent example – it is easy to forget that the enforcement of EU State aid law is not ‘solely’ a matter for the Commission. National courts, too, have a significant role in ensuring the enforcement of the EU State aid rules, in theory at the very least. Only rarely does the enforcement of these rules by the national courts generate the kind of media attention that enforcement by the Commission does. This should not come as a surprise, given for instance that several studies have shown that the private enforcement of State aid law in the EU Member States leaves rather a lot to be desired.1 At the same time, the Commission has expressed an interest in scaling back, in focusing on the ‘big cases’ that have significant effects on competition and interstate trade, and the requirements for submitting a State aid complaint to the Commission, which could compel it to investigate an alleged aid measure, have been tightened.2 It may thus again become interesting to look at the

Alke Metselaar is currently Assistant Professor at the Department of Constitutional and Administrative Law at Leiden University. She welcomes comments on this chapter via [email protected]. 1 Derenne, Müller-Rappard and Kaczmarek, Enforcement of EU State aid Law at National Level 2010. Reports from the 27 Members States. 2 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, EU State aid Modernisation (SAM), COM/2012/0209 final, par. 8; Article 24 (2) Council Regulation (EU) No 2015/1589 of 13 July 2015 laying down detailed rules

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role of the national courts in the enforcement of EU State aid law, as those who fail to pique the interest of the Commission might turn instead to the national courts to provide them with the necessary redress when they are negatively affected by an alleged breach of the State aid rules. Now, for this reason, is as good a time as any to recapitulate. What has been the experience of the national courts so far? How often have the State aid rules been invoked, by whom, and to what effect? These are important questions for two reasons. First, their answer can help us to understand and possibly predict to what extent national courts can ‘fill the gap’ that may be left with the Commission’s intention to focus on the big distortions of competition. Second, a good look at the national case law can tell us what interested parties really seek to gain from invoking EU State aid law, which is not necessarily the same as what might be expected on the basis of the CJEU case law and the Commission’s soft law. This chapter considers ten years of Dutch ‘State aid’ case law with a view to exposing with which types of questions Dutch courts are generally faced when asked to apply the EU State aid rules.3 While the discussion zooms in on the experiences in the Netherlands, it is expected that these experiences can be interesting for other EU Member States as well, not only because some of the same types of cases do arise in other EU jurisdictions,4 but also because the question of which types of cases arise in national courts depends only to some extent on the specific legal context of the Member State concerned. First, it is influenced also by the varying outcomes desired by, and interests underlying the actions of, the different actors involved in private State aid enforcement. Second, the questions with which national courts are faced in this context are to a fair extent a product of the EU legal context that applies in all Member States. In addition, an analysis of case law such as presented in this chapter can help to contribute to a comparison between the legal issues concerning the private enforcement of EU State aid rules in the Member States.

for the application of Article 108 of the Treaty on the Functioning of the European Union (codification), OJ 2015, L 248/9. 3 This analysis is based on the PhD-research carried out by the author at the University of Leiden: Metselaar, Drie rechters en één norm. 4 The European State aid Law Quarterly provides in its country reports a good overview of the issues regarding EU State aid enforcement at the national level.

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2. General overview: what is expected from the national courts? It was suggested in the introduction that a good look at national State aid case law can provide insight into the question of what interested parties really seek to gain from invoking the EU State aid rules. This, it was added, is not necessarily the same as what might be expected on the basis of the CJEU case law and Commission’s soft law. Thus, it becomes important to tackle the question of what, from an EU law perspective, interested parties can hope to achieve in the national courts on the basis of EU State aid law. This paragraph will therefore provide a general overview of the State aid rules and the role of the national courts as envisaged by the European Courts and the European Commission. In short, State aid law prohibits the Member States of the EU from selectively conferring on undertakings financial advantages by which competition and interstate trade can be negatively affected, unless these advantages are compatible with the Internal Market, as to be determined by the European Commission or the Council. State aid that has been granted in contravention of this prohibition, must in principle be repaid to the authority that has granted the aid.5 The European Treaties do not explicitly define State aid. However, it follows from the first paragraph of Article 107 TFEU that it comprises “[…] any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods […], in so far as it affects trade between Member States”. From this definition, it is possible to distinguish five separate elements. First, there must be some advantage. Secondly, that advantage must be selective.6 This means that the advantage is granted only to certain companies or for the production of certain goods. Third, the advantage must be granted by the State or through State resources. Next, for a measure to constitute State aid, it must distort or threaten to distort competition and, finally, it must affect trade between Member States. Once a measure qualifies as aid, it must be notified to, and authorized by the European Commission (or the Council), unless it is exempted from 5

CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex), par. 32-34 and references. 6 It is not uncommon for these two criteria to be treated as a single criterion. See for instance CJEU 21 March 1990, C-142/87, ECLI:EU:C:1990:125 (Tubemeuse), par. 25; CJEU 1 July 2008, Joined Cases C-341/06 P and C-342/06 P, ECLI:EU:C:2008:375 (Chronopost and La Poste), par. 125.

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notification under a regulation based on Article 109 TFEU. The third paragraph of Article 108 TFEU provides that the Commission shall be informed of any plans to grant or alter aid and that the Member State concerned shall not put its proposed measures into effect until the Commission has reached a final decision. Aid granted in breach of this last requirement, the standstill obligation, is deemed unlawful. When an aid measure has been implemented unlawfully, the European Commission is competent to order a Member State to recover the amount granted. Before it can do so, however, it must determine that the measure is also incompatible with the Internal Market. If that is indeed the case, Article 9 (5) of the so-called Procedural Regulation7 provides that the Commission takes a negative decision, which will generally lead to a decision within the meaning of Article 16 of the Procedural Regulation that the aid is to be recovered along with the interest accrued. According to the EU Courts, recovery of aid is not a penalty but rather a logical consequence of the finding that it is unlawful and recovery of the aid serves to restore the previously existing situation.8 Similarly, the recovery of interest is considered necessary because without it, the recipient of the aid would have benefited from an interest-free loan.9 National courts are under a duty to enforce these decisions in national proceedings.10 The standstill obligation has direct effect, meaning, importantly, that it can be invoked in proceedings before the national courts.11 For this reason, national courts must, in the words of the CJEU, “offer to individuals the certain prospect that all the appropriate conclusions will be drawn from an infringement of the last sentence of Article 108 (3) TFEU, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision and possible interim

7

Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (codification), OJ 2015, L 248/9, 24.09.2015. 8 Respectively: CJEU 21 March 1990, C-142/87, ECLI:EU:C:1990:125 (Tubemeuse), par. 66 and CJEU 2 October 2014, Joined Cases T-227/01 to T-229/01, T-265/01, T-266/01 and T-270/01, ECLI:EU:T:2014:880 (Territorio Histórico de Álava), par. 375. 9 CJEU 12 October 2000, C-480/98, ECLI:EU:C:2000:559 (Spain v. Commission), par. 35; CJEU 12 February 2008, C-199/06, ECLI:EU:C:2008:79 (CELF I), par. 51. 10 Article 288 (4) TFEU. 11 CJEU 11 December 1973, C-120/73, ECLI:EU:C:1973:152 (Lorenz), par. 8.

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measures.”12

The purpose of such conclusions, again in the words of the Court, is “[…] essentially, to restore the competitive situation existing prior to the payment of the aid in question”, which can be achieved through the recovery of the aid if it has already been granted.13 In order for a national court to draw all the appropriate conclusions from a violation of the standstill obligation, it is not necessary to establish that the aid is also incompatible with the Internal Market.14 In fact, the national courts are not competent to carry out such an assessment.15 Where unlawful aid has been declared by the Commission as compatible with the internal market, the national courts must order the recovery of at least the compound interest of the (unlawful but retrospectively compatible) aid.16 National courts are also encouraged to take steps in order to prevent the Member States from granting illegal aid, taking interim measures if necessary. Also, courts may award compensation for damages caused by the illegal advantage given, to be paid by the Member State or, if national law should provide for it, the aid recipient.17 Finally, the Court has determined that national courts should, where necessary, attach consequences to the validity of the aid measure18 and order the repayment of levies charged to undertakings in order to finance the aid, in so far as they are indissociable from the aid.19 The European Commission has made clear how it views the role of the national courts in relation to that of its own, in its notice on the enforcement

12

CJEU 21 November 2013, C-284/12, ECLI:EU:C:2013:755 (Lufthansa), par. 30-31; CJEU 11 March 2010, C-1/09, ECLI:EU:2010:136 (CELF II), par. 30. Cf. CJEU 21 July 2005, C-71/04, ECLI:EU:2005:493 (Xunta de Galicia), par. 47. 13 CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex), par. 45. 14 It is partly for this reason that the Commission considers the role of the national courts to be so important. Commission Notice on the Enforcement of State aid Law by National Courts, OJ 2009, C 85/1, par. 25. 15 CJEU 11 July 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI), par. 40; CJEU 21 November 1991, C-354/90, ECLI:EU:C:1991:440 (FNCE), par. 12. 16 CJEU 12 February 2008, C-199/06, ECLI:EU:C:2008:79 (CELF I), dictum. 17 Commission Notice on the enforcement of State aid law by national courts, OJ 2009, C 85/1, par. 26 ff. 18 See recently: CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex), par. 49. 19 CJEU 21 October 2003, Joined Cases C-261/01 and 262/01, ECLI:EU:C:2003:571 (Van Calster and Cleeren), par. 53-54; CJEU 18 December 2008, C-384/07, ECLI:EU:C:2008:747 (Wienstrom), par. 38.

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of State aid law by national courts (hereinafter 2009 Notice).20 The Commission considers foremost, as is often stressed in the case law of the CJEU, that the national courts and the Commission itself play ‘essential, but distinct roles’ in the context of State aid enforcement. The Commission stresses in particular two roles of the national court, namely to intervene in cases where a Member State authority has granted aid without respecting the standstill obligation, in order to protect the rights of individuals affected by the unlawful implementation of the aid, and to rule in conformity with EU law, when beneficiaries challenge a recovery request issued by the national authorities. Where this is the case, the Commission stresses that national courts, bound as they are by the principle of sincere cooperation and the principle of primacy, must at the very least leave national provisions unapplied where they prevent immediate and/or effective recovery.21 Summing up: national courts are called upon to fulfil two important tasks. First, they are under an obligation to secure the application of binding decisions of the European Commission, and second, they must provide legal protection in cases of a violation of the directly effective standstill obligation. In order to assess whether such a violation has taken place, national courts must determine whether a measure falls within the scope of Article 107 (1) TFEU, and if so, whether it has been authorized by the Commission or, alternatively, exempted from notification. Should a court establish that a violation has taken place, it is obliged to ensure that the granting of the aid is prevented or that the aid, in so far as it has been granted, is recovered along with the interest accrued. Where necessary, the court may have to order the payment of damages or the refund of taxes or levies imposed in breach of the standstill obligation. These are not easy tasks. It is fair to say that, in enforcing the State aid rules within the – somewhat vague – scope of national procedural autonomy, the national court may frequently lack the necessary clarity and support. In such cases, the possibility to refer a preliminary question to the Court of Justice or to approach the European Commission with questions may sometimes be helpful.

3. Ten years of Dutch State aid case law: an overview Having considered the role of national courts in the enforcement of EU State aid law in theory, it is time to turn to their role in practice. While the 20

Commission Notice on the Enforcement of State aid Law by National Courts, OJ 2009, C 85/1, par. 19-21. 21 Ibid, par. 64.

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EU institutions may have a clear view of the tasks of national courts when called upon to enforce EU State aid law, it is by no means a given that this view should be reflected in the actual case law of those courts. An analysis of ten years of Dutch case law shows that while some types of cases are indeed what might be expected on the basis of the 2009 Commission Notice, the courts in the Netherlands are also confronted with other types of cases in which the EU State aid rules may be relevant, but which were likely not foreseen when the applicable Treaty articles were drafted. First, some general numbers. This is by no means an abundant yield, amounting to about 45 cases per year, but still it is more than what previous studies might have suggested.22 Of these cases, 275 are the result of proceedings before the administrative courts, 143 have been ruled on by the civil courts and 36 reflect the case law of the Dutch tax courts. The case law published after 1 November 2015 has so far confirmed the conclusions that can be drawn from the analysed period, on which this chapter is based. From ten years of Dutch State aid case law, it emerges that claims on the basis of the State aid rules in the Netherlands are brought within different fields of law, by different parties, against the background of varying factual contexts and legal relationships. Broadly speaking, these cases can be divided into eight categories. First: cases in which an interested party argues that the State (in any form) has granted illegal aid to one or more of its competitors. Second: cases in which the implementation of a recovery decision of the EU Commission is at stake. Both of these types of cases correspond quite seamlessly to the image presented in the 2009 Commission Notice. Third, and increasingly so: cases in which the State itself (again in any form) invokes the State aid rules in order to prevent alleged aid from being granted, or to undo aid already granted, without having been ordered to do so by the European Commission. Fourth: challenges against the obligation to pay a levy or tax that is allegedly used to fund an illegal aid measure. These two types of cases can also be said to follow quite logically from the CJEU State aid case law. However, four further types of State aid cases do also arise before the Dutch courts. Quantitatively very prominent are the situations in which a spatial planning decision is challenged before the administrative courts, on the grounds that the project to which the spatial planning decision pertains involves illegal State aid. Similar in their reasoning, if not in their prominence, are the cases in which a civil court 22

Derenne, Müller-Rappard and Kaczmarek, Enforcement of EU State aid Law at National Level 2010. Reports from the 27 Members States.

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has to rule on the expropriation of a litigant, who argues that the expropriation forms part of a project in which illegal State aid has been granted. Also of interest are the cases in which an alleged violation of the standstill obligation by the State leads to litigation between one or more undertakings on the one hand and the alleged aid recipient(s) on the other. Finally, it is logical that an analysis of published case law in which the words ‘State aid’ appear should reveal a number of cases in which EU State aid law is only indirectly or hypothetically relevant to the case at hand. The next sections will address each of these types of cases, with particular attention to the types of questions they raise for the Dutch courts, and, where relevant, the extent to which the proceedings can lead to the results prescribed by EU law and, if different, the results desired by the litigants. Of course, the role of the Dutch courts in the private enforcement of State aid law cannot be reduced to an analysis of their published case law. This point must be made separately and is discussed in section 10.

4. ‘Traditional’ private enforcement cases initiated by (mainly) competitors A significant amount of cases in the Netherlands reflect, as might be expected, the ‘traditional’ approach in which an interested party argues that the State (in any form) has unlawfully benefitted another undertaking or other undertakings, often being the interested party’s competitors, by granting State aid that should have been notified to the Commission. Of this type, 42 cases have led to published judgments of the administrative courts and 61 cases have led to published judgments of the civil courts. It is important to note, first, that these cases only rarely lead to a ruling that unlawful State aid has been or is about to be granted and that a remedy is called for. In fact, I am aware of only one case in which a court has found it necessary to restore the competitive situation existing prior to the payment of the aid in question.23 There are any number of reasons why successful State aid cases initiated by third parties are so rare, including, but not limited to, the difficulty of accessing the information necessary to prove the existence of aid, the relative inexperience of Dutch judges in State aid matters, the possibility that litigants invoke State aid law lightly or as a last resort, and the possibility that many measures thought to 23 District Court Rotterdam 28 March 2013, ECLI:NL:RBROT:2013:BZ5824 (Veerverbinding Boven Hardinxveld).

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constitute illegal State aid are in fact in conformity with EU law.24 For the purpose of this chapter, suffice it to say that expectations of national courts in protecting interested parties against violations of the standstill obligation should not be exaggerated – a finding that confirms the previous studies mentioned above. Apart from the difficulty in establishing a breach of the standstill obligation, some other issues with which Dutch courts are faced deserve attention. First, it must be noted that there are some doubts as to whether the ‘traditional’ cases brought against State bodies which have allegedly granted illegal aid to an undertaking are always and necessarily initiated by competitors seeking to undo a distortion of competition. This is relevant because it has been established in EU case law that “[…] an individual may have an interest in relying before the national court on the direct effect of the prohibition on implementation referred to in the [standstill obligation] not only in order to erase the negative effects of the distortion of competition created by the grant of unlawful aid, but also in order to obtain a refund of a tax levied in breach of that provision”.25 It is not uncommon, for instance, for undertakings to challenge an administrative decision of which they are the addressee on the basis that comparable undertakings have received more favourable treatment, leading to a violation of the standstill obligation.26 Regardless of the question whether the other undertakings are the litigant’s competitors, it is logical to assume that in such cases, more often than not the applicant hopes not so much to bring about the recovery of the alleged aid, but rather to receive the same advantageous treatment as the other undertakings. Such arguments are rightfully rejected by the Dutch courts.27 In other cases, the question whether the litigant is the alleged aid recipient’s competitor becomes more important. In some administrative law cases, claims based on the EU State aid rules have been declared 24

For a more detailed analysis, which exceeds the scope of this chapter, see Metselaar, Drie rechters en één norm, p. 302-306. 25 CJEU 13 January 2005, C-174/02, ECLI:EU:C:2005:10 (Streekgewest Westelijk Noord-Brabant), par. 19. 26 See for example: Netherlands Council of State 27 December 2012, ECLI:NL:RVS:2012:BY7375 (Stichting Thuiszorg West-Brabant); Netherlands Council of State 21 February 2011, ECLI:NL:RVS:2011:BP5454 (Agis Zorgverzekeringen); CBb 29 January 2009, ECLI:NL:CBB:2009:BH3017 (Slotervaart Ziekenhuis); Netherlands Council of State 20 October 2009, ECLI:NL:RVS:2009:BK1335 (Enecal). 27 CJEU 5 October 2006, C-368/04, ECLI:EU:C:2006:644 (Transalpine Ölleitung), par. 49; CJEU 15 June 2006, Joined Cases C-393/04 and C-41/05, ECLI:EU:C2006:403 (Air Liquide Industries), par. 45.

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inadmissible because the applicant did not qualify as a competitor and thus did not meet the interest requirement laid down in Article 1:2 of the General Administrative Law Act.28 Interestingly, at least in one case the qualification of an applicant as a competitor took place on the basis of the definition of competitor under Dutch law.29 This is significant because that definition may well be more narrowly construed than is required by the protective scope of the standstill obligation. The civil courts, too, appear in some cases to be tempted to refrain from addressing a State aid claim where its author fails to substantiate how it is or may be affected by the alleged distortion of competition, although they have not done so yet.30 In some of these cases, while the contested aid has already been notified to, and authorized by the Commission, it is argued that the aid as has actually been granted falls outside the ambit of the Commission’s authorization decision.31 This can be a tricky issue for the national courts, because to rule on such a claim may require an interpretation of (the ambit of) the Commission decision. The difficulty here is that the Commission decision will concern the Commission’s assessment of the compatibility of the aid measure with the internal market, a matter that clearly falls outside the competence of the national courts. While the courts must avoid indirectly assessing the compatibility of the aid measure through an interpretation of the Commission decision, neither is it realistic that they could limit their analysis to a mere literal interpretation of that decision. After all, it is not unheard of that the legal and factual context surrounding an aid measure (or the understanding thereof) shifts somewhat after that aid measure has been approved. On top of that, the authorization decision might for various reasons lack clarity on points that may later become very important in court proceedings. Of course, the national courts can in such

28

Netherlands Council of State 6 February 2013, ECLI:NL:RVS:2013:BZ0794 (Vogelaar II); Somewhat comparable: CBb 13 September 2012, ECLI:NL:CBB:2012:BX6991 (Thuiszorgservice). 29 Netherlands Council of State 6 February 2013, ECLI:NL:RVS:2013:BZ0794 (Vogelaar II). 30 District Court Maastricht 3 May 2010, ECLI:NL:RBMAA:2010:BM3162 (AZM). 31 Consider for instance District Court ‘s-Gravenhage 1 August 2007, ECLI:NL:RBSGR:2007:BB1424 (NEA); Netherlands Council of State 23 February 2011, ECLI:NL:RVS:2011:BP5454 (Agis Zorgverzekeringen NV); Netherlands Council of State 14 October 2015, ECLI:NL:RVS:2015:3175 (Herbestemming Kasteel Klimmen); Netherlands Council of State 2 November 2011, ECLI:NL:RVS:2011:BU3143 (Vogelaar I).

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cases refer a question to the EU Commission,32 but so far they have been reluctant to do so.33 Still, it would make little sense to expect the courts to deal with these kinds of problems by systematically referring questions to the Commission, which would not only lead to significant delays in the proceedings, but would also unduly burden the EU institutions.

5. Recovery of illegal State aid after a Commission recovery decision Only rarely does a case concern the enforcement of a Commission decision ordering the recovery of aid. This is not so surprising, given that only a handful of such decisions were taken in the period studied. Of the two cases, one stands out in particular (the other has not yet been resolved, at least to my knowledge).34 It concerns a subsidy scheme for manureprocessing plants. While the scheme had been authorized by the European Commission for a certain period of time, some of the subsidies were given out after the time period during which the scheme had approved. The Commission, after an investigation, found that the subsidies had been granted unlawfully and were incompatible with the Internal Market, and ordered the recovery of the aid granted and the interest accrued. Having to effectuate that decision, the Ministry of Agriculture, Nature and Food Quality addressed a recovery decision to the unfortunate aid recipients, who promptly challenged it before the administrative courts. They argued, first, that the principle of legitimate expectations as laid down in Dutch law precluded the possibility of ordering the recovery and second, that there was no legal basis for that recovery in Dutch law. The administrative court in the appeal case rejected the plea based on legitimate expectations, reasoning on the basis of the CJEU case law that a plea based on legitimate expectations is available only where the State aid has been granted in conformity with the relevant procedures laid down in Article 108 (3) TFEU.35 Regarding the argument based on the legality principle, it ruled that neither Dutch written administrative law, nor EU law could 32

Article 29 of Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (codification), OJ 2015, L 248/9. 33 An exception is Netherlands Council of State 15 April 2015, ECLI:NL:RVS:2015:1152 (Zorg en Zekerheid). 34 District Court Rotterdam 24 August 2011, ECLI:NL:RBROT:2011:BR6507 (Kliq Reïntegratie). 35 Netherlands Council of State 11 January 2006, ECLI:NL:RVS:2006:AU9416 (BPM).

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provide the necessary legal basis for the recovery of the subsidies. However, the Minister Agriculture, Nature and Food Quality could rightfully find the recovery decision on the unwritten principle that an advantage that has been granted, may also be revoked. Having said that, the highest administrative court considered that the law as it stood did not provide an unwritten legal basis for the recovery of the interest in administrative proceedings. In order to recover that interest, civil proceedings would have to be initiated. This judgment has had a profound impact on the discussion surrounding the enforcement of State aid law in the Netherlands. Firstly, the EU Commission wasted no time in initiating an infringement procedure against the Netherlands for failing to secure the immediate and effective execution of the recovery decision.36 This led to the introduction of a Dutch bill on the recovery of State aid that would provide legal bases for State aid recovery in the Dutch tax, administrative, and civil law,37 following which the President of the Court ordered that the case be removed from the register.38 The bill, introduced in 2008, has never made it into law and is now to be replaced by another bill on the recovery of State aid, which is, however, at the time of writing still in the earliest stages of the legislative process.39 In the meantime, the Dutch State, on behalf of the Minister of Agriculture, Nature and Food Quality, did initiate civil proceedings for the recovery of the interest, to a limited effect. The civil court in first instance ruled that, while it was bound by the principle of loyal cooperation under Article 4 (3) TEU, it could only find a basis in Dutch law for the recovery of part of the interest and that full recovery would require a contra legem interpretation of Dutch civil law.40 An appeal case, if one was lodged, has never been published.

36 Action brought on 29 August 2007 – CJEU 5 June 2008, C-401/07, ECLI:EU:C:2008:326 (Commission v. Netherlands). 37 Parliamentary Papers II 2007-2008, 31 418, nr. 2. 38 Order of the President of the Court of 5 June 2008 – CJEU 5 June 2008, C401/07, ECLI:EU:C:2008:326 (Commission v. Netherlands). 39 A consultation version of the bill has been published, after which the bill must be approved in the House of Representatives and the Senate. The text of the bill is available as a consultation version at: https://www.internetconsultatie.nl/wetterugvorderingstaatssteun. 40 Netherlands Council of State 11 January 2006, ECLI:NL:RVS:2006:AU9416 (BPM), par. 2.7.1, referring to CJEU 20 March 1997, C-24/95, ECLI:EU:C:1997:163 (Alcan).

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6. Recovery and prevention of illegal State aid without a Commission recovery decision The case law studied also shows that with some regularity, the State itself invokes State aid law in order to prevent the granting of illegal aid or to undo an aid measure that has already been put into effect. Of the 454 published judgments studied, 27 judgments of the administrative court and 24 judgments of the civil court concern this situation. A distinction must be made between cases where a State aid law violation is to be prevented and where it has allegedly already occurred and must be remedied. The most important cases in which a dispute arises concerning an attempt by the State to prevent the granting of aid arise before the administrative courts. Most prevalent is the situation in which an application for a subsidy is rejected altogether or approved for a lower amount than requested. From a State aid law perspective, there is a potential problem if a court were to be too easily persuaded by the applicant’s argument that the subsidy would not constitute an illegal State aid, and order the administrative body to grant the subsidy, thereby itself violating the standstill obligation.41 The alternative, that a court upholds a decision refusing a subsidy even when granting it would not have violated the standstill obligation, is not problematic as such from an EU law perspective, but it can be problematic from the point of view of national law. For example, an administrative decision refusing a financial contribution was quashed for violating the administrative law principles of equivalence and proportionality.42 In another, much discussed judgment, the Administrative Jurisdiction Division of the Council of State was asked to rule that an administrative body had unjustly considered that the granting of a requested subsidy would amount to unlawful State aid and that the administrative body should not have rejected the subsidy requested.43 It subsequently ruled that, where an applicant has argued with some substantiation that a subsidy does not qualify as a State aid, the principle of due diligence prohibited the rejection of that subsidy on State aid grounds if the administrative body has failed to contact the European Commission to request its informal advice.44 This judgment has been criticized, not in the last place because 41

Cf. CJEU 26 October 2016, C-590/14 P, ECLI:EU:C:2016:797 (DEI), par. 107. CBb 29 January 2014, ECLI:NL:CBB:2014:29 (Aalvissers). 43 Netherlands Council of State 13 February 2013, ECLI:NL:RVS:2013:BZ1245 (Ridderstee Holiday). 44 Ibid, par. 5.5. This reasoning was followed by a court in first instance, case SLG Zuid-Holland, ECLI:NL:RBDHA:2014,6726, par. 4.3. 42

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the competent court would have been able to refer a question to the Commission in its own right.45 It is important to note, however, that the judgment concerned not the enforcement of EU law as such, but the protection granted on the basis of Dutch law against an all too zealous application, and possibly unnecessarily so, of the EU State aid rules by State bodies. Having said that, legislation has been proposed to turn back this line of case law.46 It is also possible that the State (in any form) has come to the conclusion that its previous conduct amounts to unlawful State aid and that it is under an obligation to undo the consequent distortion of competition. This is possibly the most contentious type of case, as it involves the State relying against a private party (the alleged beneficiary) on its own violation of EU law. The most prominent case is one that has led to the referral of preliminary questions by the Dutch (Civil) Supreme Court.47 In this case, the former head of the municipal port authority of Rotterdam48 offered the undertaking Residex a guarantee from the port authority for a loan to be granted to another undertaking, Aerospace. When Residex invoked the guarantee after Aerospace failed to repay the loan, the municipality of Rotterdam submitted that the guarantee agreement must be considered null and void because it had been concluded in violation of the EU State aid rules. Therefore, it argued, it was under no obligation to pay Residex the amounts promised. From an EU law perspective, the most important legal issue in the Residex case was whether a violation in a contract of the standstill obligation should automatically lead to the nullity of that contract – a matter that was largely resolved in the subsequent judgment of the CJEU in the preliminary ruling procedure.49 However, it is worth noting that another argument was made, and rejected, in the proceedings before the civil court in first instance. Residex contended before that court that the 45

Saanen, “De uitspraak Ridderstee Holiday”, p. 245; Huurnink and Van den Tweel, “Modernisering van het staatssteunbeleid”, p. 96. 46 The new Bill on the Recovery of State aid proposes adding a third paragraph to Article 4:35 of the General Administrative Law Act allowing the refusal of a subsidy if granting that subsidy would, in the view of the administrative body, be incompatible with the State aid rules. 47 HR 28 May 2010, ECLI:NL:HR:2010:BL4082 (Residex). See, however, also the important administrative law Netherlands Council of State 15 April 2015, ECLI:NL:RVS:2015:1152 (Zorg en Zekerheid), which will not be discussed in this chapter but merits attention. 48 For a similar case, in which the link to the State was less clear, see HR 27 May 2016, ECLI:NL:HR:2016:994 (Commerz). 49 CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex).

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municipality of Rotterdam should be prevented from invoking to its own advantage a rule that the municipality had itself violated.50 This argument was rejected for reasons to do with the interpretation in Dutch law of Article 3:40 (2) of the Dutch Civil Code, the legal basis for the nullity of the contract. Still, the court in appeal allowed for the possibility, although not in the case at hand, that a State body would, for reasons of fairness and reasonability, be prevented from citing the nullity of a contract in such a situation.51

7. Repayment of taxes and levies Somewhat less frequent are cases in which parties claim the repayment of certain taxes or levies with which, it is argued, illegal State aid has been financed. Of this type, there have been four judgments of the civil courts, 16 administrative court judgments and 14 tax court judgments. These cases do not present overly remarkable issues in the Dutch courts, being generally quite straight-forward. An interesting question that may arise is whether the parties involved should challenge both the decision by which the tax or levy has been imposed as well as the decision (or legal act) by which the alleged aid has been granted. There are some examples where both types of decisions have in fact been challenged before the administrative courts.52 An important side note here is that an undertaking having to pay a tax or levy will not necessarily be admissible in proceedings concerning the validity of the decision by which the alleged aid has actually been granted. The highest Dutch administrative court has ruled that such an undertaking will have to show an interest as a competitor in order to initiate proceedings against the aid decision itself.53 In this category of cases, there have been fewer published judgments of the tax courts than one might expect, namely 14. This can be chalked down almost entirely to the requirement that the tax forms an integral part of the aid measure. To be more specific, the tax, according to the CJEU case law, must be hypothecated to the aid measure under the relevant 50

District Court Rotterdam 24 January 2007, ECLI:NL:RBROT:2007:AZ6904 (Residex). 51 Court of Appeal ‘s-Gravenhage 10 July 2008, ECLI:NLGHSGR:2008:BD6981 (Residex). 52 Netherlands Council of State 2 November 2011, ECLI:NL:RVS:2011:BU3143 (Vogelaar I) and Netherlands Council of State 6 February 2013, ECLI:NL:RVS:2013:BZ0794 (Vogelaar II). 53 Netherlands Council of State 6 February 2013, ECLI:NL:RVS:2013:BZ0794 (Vogelaar II), par. 6.2.

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national rules, meaning that the revenue from the tax is necessarily allocated for the financing of the aid and the revenue from the tax has a direct impact on the amount of the aid.54 This is very rarely the case under Dutch tax law.55

8. State aid arguments in the context of expropriation zoning decisions The Dutch case law studied reveals a surprisingly large volume of cases within the field of spatial planning law. In such cases, (the approval of) a zoning plan is challenged before the administrative courts because the execution of that plan would allegedly involve illegal State aid. Of such cases, there have been no less than 143 published judgments over the course of ten years. It is also theoretically possible for interested parties to challenge their expropriation on the grounds that it forms part of a project which breaches the standstill obligation. Of these cases, contrastingly, there have been three published judgments of the civil courts and one of the administrative court. The civil courts have been swift in rejecting State aid claims made in expropriation cases, ruling that the EU State aid rules are not intended to protect private property, but serve to secure fair competition on the Internal Market.56 The highest administrative court came to a similar conclusion in a case concerning the expropriation of the shareholders of SNS bank.57 In the case of spatial planning law, the conformity of a zoning decision with EU State aid law is not considered directly, but rather through the lens of a requirement laid down in Dutch spatial planning law, namely: the financial feasibility of the spatial plan. It is argued in such cases that the plan’s financial feasibility is put at risk if it appears that the project to which the zoning decision pertains has been backed with, and cannot be

54

CJEU 13 January 2005, C-174/02, ECLI:EU:C:2005:10 (Streekgewest Westelijk Noord-Brabant), par. 26. 55 Luja, “De rol van nationale rechters bij de handhaving van de standstill-bepaling in fiscale zaken”. Cf. in France: Coutrelis, “News from the Member States. France,” p. 584. 56 HR 30 June 2006, ECLI:NL:HR:2006:AV9441 (Onteigening), par. 3.2.5; HR 27 April 2007, ECLI:NL:HR:2007:AZ6641 (EWF). 57 Netherlands Council of State 25 February 2013, ECLI:NL:RVS:2013:BZ2265 (SNS Reaal).

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fully realized without, unlawful State aid.58 It is important to realize that within such an argument, the legal issue before the Dutch courts is thus not whether the zoning decision itself violates EU State aid law. This makes sense in that the alleged State aid will not have been granted through the zoning decision itself, but generally through another legal act, such as a subsidy decision or a contract (which can be challenged in the Dutch courts in its own right).The burden of proof in these cases is high: the applicants must show that the competent administrative authority should have reasonably foreseen that the spatial plan could not have been realized within the given time frame in a way that would not involve the granting of unlawful State aid.59 Chances of clearing this hurdle are extremely slim. Still, applicants continue to make arguments of this type with some gusto. A likely reason for this is that arguments based on EU State aid law in spatial planning law cases are never stand-alone arguments, but are generally the last in a long line of arguments concerning other issues, and can thus easily be ‘attached’ to a case that will probably hinge on another matter entirely. If a State aid argument does succeed in these types of cases and the zoning decision is subsequently annulled, it is important to realize that the annulment of the decision does not automatically affect the alleged aid measure, such as a subsidy decision or civil law contract. These must be contested separately.

9. State aid arguments in proceedings between private parties Finally, several cases have been published in which the State aid rules appear to be indirectly relevant in one way or another, but which do not explicitly concern the application of the standstill obligation. There are two types of cases that are interesting here, both of which have arisen before the civil courts. The first concerns the situation in which a competitor seeks damages from an aid recipient. EU law does not provide for these types of actions, although the CJEU has ruled that if national law could lead to the liability of an economic operator on the grounds that it has accepted unlawful assistance of a nature such as to occasion damage, the principle of non-discrimination may lead the national court to find the 58 This line of case law was initiated by the case before the Netherlands Council of State of 6 May 2004, ECLI:NL:RVS:2004:AO8853 (Bestemmingsplan Haaksbergen). 59 See Netherlands Council of State 13 April 2011, ECLI:NL:RVS:2011:BQ1077 (Bestemmingsplan Centrum Haaren).

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recipient of illegal State aid liable.60 So far, there has only been one case in which a claim of this type has led to a published judgment. Given the lack of subsequent cases, it will be unsurprising that the claim in this case was rejected. The civil court in appeal ruled that it is relevant whether the aid recipient should have understood that it had received prohibited State aid, and that for this purpose it is not sufficient to demonstrate that the aid measure was unlawful, as it is not inconceivable that the Commission might have deemed the aid to be compatible with the Internal Market, had it been properly notified.61 It is clear that this is a very difficult hurdle to clear, although it may be interesting to see whether competitors would be inclined to bring damages claims against aid beneficiaries in cases where the Commission has already considered aid to be unlawful and incompatible with the Internal Market, for instance when a recovery decision has been taken. Such cases have not yet arisen. The second type of cases is most likely a consequence of the temporarily prevalent understanding that a violation of the standstill obligation must necessarily lead to the annulment of a contract.62 Given this understanding, a litigant in one case has argued that it should not be bound to a (upon closer examination rather unattractive) contract regarding the sale of a plot of land. It argued that the sale could not have taken place because the seller, another undertaking, had bought the land from a municipality at a price below market conditions. Since the contract between the municipality and the undertaking had thus been made in breach of the standstill obligation, so it was argued, that contract was null and void, meaning that the undertaking actually never owned the land and could not have sold it to the litigant in the case at hand, who now should be considered to be released from its obligations under the sales contract. The case in appeal is still pending,63 but the court in first instance was not at all inclined to follow this line of reasoning. It ruled that, if the contract concluded between the municipality and the undertaking indeed constituted unlawful State aid, this would only lead to the nullity of the contract as regards the price of the land, whereas the transfer of the ownership of the land would remain intact. Thus, even a successful State aid argument could not lead to the result envisaged by the applicant, namely that it would itself be 60

CJEU 11 July 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI). Court of Appeal Amsterdam 26 June 2006, ECLI:NL:GHAMS:2006:AZ1425 (Baby Dan), par. 5.12-5.13. 62 Verse and Wurmnest, “Zur Nichtigkeit von Verträgen bei Verstößen gegen das EG-Beihilferecht”; Koenig, “Nichtigkeit beihilfegewährender Verträge!”, p. 417. 63 An interlocutory decision has been published: Court of Appeal ArnhemLeeuwarden 28 September 2016, ECLI:NL:GHARL:2016:7801. 61

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released from its obligations.64 Although it is worth noting that the concept of a contract being void only with regard to the established price does not at all fit easily into Dutch law, it may be inferred from this case that Dutch courts will not be easily inclined to honour arguments based on State aid law that clearly serve a purpose other than the elimination of a competition distortion.

10. Conclusion: an invisible role for the Dutch courts? In the above sections, an image has emerged of the Dutch State aid case law, in which many different actors invoke the State aid rules for any number of reasons – usually with only limited success. While this image is valuable and informative, it should be acknowledged explicitly that the (effectiveness of) private enforcement of EU State aid law in a Member State such as the Netherlands cannot be satisfactorily assessed based solely on the published case law of the domestic courts. Firstly, it not to be excluded that the existence of a possibility to invoke EU State aid law before the national courts can serve to prevent the granting of unlawful State aids. In other words: it is possible that relatively few State aid cases exist – and that even fewer are successful – simply because State bodies are careful to avoid granting illegal State aid. Similarly, successful cases will not necessarily lead to a published judgment, as the litigants may have already settled their dispute, or the matter may have already been solved before the administrative authority so that litigation has since become unnecessary. Although this ‘invisible’ role of the Dutch courts is not reflected in the discussion in this chapter, it must certainly not be forgotten when addressing their role in the enforcement of the EU State aid rules at the domestic level.

64

District Court Noord-Nederland 4 June 2014, ECLI:NL:RBNNE:2014:2790 (Accolade v. Ludinga), par. 4.7-4.8.

CHAPTER SEVEN ANCILLARY ACTIVITIES AND ENVIRONMENTAL PROTECTION ORGANISATIONS LUKAS AMENT

1. Introduction In several decisions, the European Commission has held that certain activities undertaken by environmental protection organisations are economic in nature. As a consequence, public financing granted to environmental protection organisations can fall within the scope of the EU State aid rules. Even though this does not necessarily mean that such financing is prohibited, it does increase the administrative burden for public entities wishing to grant aid to environmental protection organisations. After all, public entities will have to ensure that such financing is in line with the EU State aid rules. After introducing the EU State aid rules, in particular the concept of ‘economic activity’, this paper will provide an overview of the practice of the European Commission and the General Court in respect of aid to environmental protection organisations. The second half of the paper will focus on the so-called concept of ‘ancillary activities’. Application of this concept may lessen the administrative burden for public entities intending to grant aid to environmental protection organisations.

2. EU State aid prohibition The notion of State aid is provided for in Article 107 (1) of the Treaty on the Functioning of the European Union (hereinafter TFEU):

Lukas Ament currently works as State aid advisor at the Dutch Ministry of Internal Affairs ([email protected]). Formerly he worked as legal advisor at “Europa Decentraal”. All opinions expressed are personal.

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“Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”

From Article 107 (1) TFEU it follows that in order for a measure to be qualified as State aid, the following conditions have to be met: i. ii. iii. iv.

the measure has to be granted out of State resources, it has to confer a selective economic advantage on undertakings, the advantage has to distort or threaten to distort competition, and the measure has to affect trade between Member States.

In respect of aid granted to environmental protection organisations, the main question is whether such aid is granted to ‘undertakings’. The other conditions laid down in Article 107 (1) TFEU will often be met when a public entity grants aid to an environmental protection organisation.1 Hence, it should be assessed whether environmental protection organisations can be considered as undertakings for the purposes of EU State aid law.

3. Notion of undertaking As the conditions laid down in Article 107 (1) TFEU are cumulative, the prohibition of State aid laid down in this Article only applies insofar as the beneficiaries of a measure are undertakings. According to settled case law, an undertaking is every entity engaged in an economic activity, regardless of its legal status and the way in which it is financed.2 The decisive element in this respect is whether an entity carries out economic activities, which is defined in case law as offering goods and services on a given market.3 An important indication that this is the case, is when a certain degree of competition exists, i.e. whether there are other entities offering the same or substitutable goods and services.4 The above means, amongst 1

Decision of the European Commission of 2 September 2015, Case SA.27301, Alleged illegal State aid in connection with the subsidized acquisition or free granting of nature land, recitals 53-63. 2 CJEU 12 September 2000, Joined Cases C-180/98 to C-184/98, ECLI:EU:C:2000:428 (Pavlov and Others), par. 74. 3 Ibid. 4 CJEU 11 July 2006, C-205/03 P, ECLI:EU:C:2006:453 (FENIN), Opinion of AG Maduro, par. 31.

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others, that also entities operating on a non-profit basis, can qualify as undertakings. This is the case as soon as they offer goods and services on a market.

4. Environmental protection organisations as undertakings? In order to determine whether aid granted by public entities to environmental protection organisations qualifies as State aid, it has to be established whether these organisations qualify as undertakings, i.e. whether they offer goods and services on a market. Both the European Commission and the General Court have in the past held that this can be the case.

4.1 Case NN 8/2009 – Nature conservation areas Back in 2009, the European Commission dealt with a German case concerning the gratuitous transfer of federally owned natural heritage sites to environmental protection organisations and the funding of large-scale nature conservation projects.5 In respect of the question whether environmental protection organisations qualify as undertakings within the meaning of Article 107 (1) TFEU, the European Commission held that: “While it cannot be excluded that some of the conservation tasks globally defined by Germany as Services of General Interest will be purely noneconomic in nature, in other cases the conservation objective will be achieved through the imposition of environmental constraints on activities such as forest and pasture management, leases of land and tourism. Even though these activities may be limited in scope and not particularly profitable due to the environmental constraints, profitability is not a relevant criterion for the classification of an activity as economic in nature. According to settled case-law, any activity consisting in supplying goods or services on a given market is an economic activity. The Commission considers that, in the case at hand, activities like sales of wood, leases of land and tourism must be classified as economic in nature. The German nature conservation entities concerned by the notified measures should therefore be considered as undertakings within the meaning of Article 87 (1) of the EC Treaty insofar as they exercise these activities (and as such,

5 Decision of the European Commission of 2 July 2009, Case NN 8/2009, Nature conservation areas.

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they should be subject to State aid control).”6

Hence, insofar as environmental protection organisations carry out activities such as the abovementioned, they should, according to the European Commission, be considered as undertakings within the meaning of Article 107 (1) TFEU. The European Commission moreover held that the environmental objective of environmental protection organisations will always coexist with an economic objective as these organisations have an interest in generating revenue to cover the costs of their activities.7

4.2 Case N 376/2010 – Subsidies for nature management In this case, from 2010, the European Commission assessed whether subsidies granted by Dutch provincial authorities to environmental protection organisations were in conformity with the EU State aid rules.8 Again the question arose whether the beneficiaries of the subsidies were undertakings. In its decision in this case, the European Commission came to a similar conclusion as in the case discussed above: “While it cannot be excluded that some of the conservation tasks will be purely noneconomic in nature, in other cases the conservation objective will be, at least partially, achieved through tasks involving economic activities, such as e.g. the sale of crops, leases of land and activities attracting tourism. […] According to settled case-law, any activity consisting in supplying goods or services on a given market is an economic activity. The Commission considers that, in the case at hand, activities like the sale of wood chips and reed, leases of land and attracting tourism must be classified as economic in nature.”9

Like in the German case discussed above, the European Commission concluded that the Dutch environmental protection organisations should be considered as undertakings within the meaning of Article 107 (1) TFEU insofar as they carry out economic activities such as the abovementioned.

6

Ibid, recitals 39 and 41. Ibid, recital 40. 8 Decision of the European Commission of 20 April 2011, Case N 376/2010, Subsidies for nature management. 9 Ibid, recital 27. 7

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4.3 Case T-347/09 – Germany v. Commission As set out above, the European Commission concluded in Case NN 8/2009 (Nature conservation areas) that environmental protection organisations, insofar as they carry out activities as for example the sale of wood, should be considered as undertakings within the meaning of Article 107 (1) TFEU. Even though the European Commission in this case decided that the German aid measures were compatible with the Internal Market on the basis of the SGEI (Services of General Economic Interest) Framework,10 the German authorities did not agree with the European Commission’s finding that certain activities carried out by the environmental protection organisations are economic in nature. Therefore, the German authorities brought an action before the General Court for annulment of the European Commission’s decision. The German authorities argued that the activities of the environmental protection organisations concerned were of an exclusively social nature and therefore did not constitute an economic activity. The General Court did however not agree completely: “Even if activity for the protection of the environment, the object of the measures at issue, is exclusively social in nature and does not constitute an economic activity, the Commission was fully entitled to find that the environmental protection organisations are involved in other activities that are economic in nature […]”.11

The General Court subsequently assessed whether the economic activities carried out are linked to the primary, exclusively social, activities of the environmental protection organisations and could therefore escape the classification as economic. According to the General Court, this was not the case: “Through the activities authorised under the measures at issue – such as the sale of wood, leases for hunting and fishing and tourism – the 10

European Union Framework for State aid in the form of public service compensation, OJ C 8 (2011), 11.01.2012, p. 1522. State aid under the SGEI Framework is subject to the prior notification requirement of Article 108 (3) TFEU. The SGEI Framework spells out the conditions under which such State aid can be found compatible with the internal (see paragraph 7 SGEI Framework). 11 General Court of the European Union Press Release No 104/13 and CJEU 12 September 2013, T-347/09, ECLI:EU:T:2103:418 (Federal Republic of Germany v. European Commission), par. 31-32.

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environmental protection organisations directly offer goods and services in competitive markets. Through those activities, they pursue a separate interest, severable from the exclusively social objective of the protection of the environment.”12

Thus, contrary to what the German authorities claimed, the services provided by environmental protection organisations do not constitute an indivisible whole (‘ne constituent pas un tout indissociable’). The General Court dismissed the action brought by the German authorities and found, like the European Commission had done before, that the environmental protection organisations concerned also carry out activities that are economic in nature and, in respect of which, those organisations must be regarded as undertakings.

4.4 Case SA.27301 – Alleged illegal State aid in connection with the subsidized acquisition or free granting of nature land The most recent European Commission decision with regard to alleged State aid to environmental protection organisations is Case SA.27301.13 In this case the European Commission assessed whether Dutch subsidies for the acquisition of nature land or for the redemption of leases on such land concerned State aid. In its decision, the European Commission firstly repeated the General Court’s finding in case T-347/09 that: “nature protection and conservation activities have an exclusively social character, being based on solidarity, and therefore are of a non-economic nature.”14

The European Commission then held that the beneficiaries of the measure: “apart from their primary activities of nature conservation, also [perform] certain secondary activities like the sale of wood and meat, hunting and fishing leases, or tourism activities.”15

12

Ibid, par. 41. Decision of the European Commission of 2 September 2015, Case SA.27301, Alleged illegal State aid in connection with the subsidized acquisition or free granting of nature land. 14 Ibid, recital 47. 15 Ibid, recital 49. 13

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The European Commission therefore concluded that that at least some of the secondary activities carried out by the beneficiaries qualify as economic activities.16

5. Practical consequences Given the General Court’s confirmation of the European Commission’s finding that certain activities carried out by environmental protection organisations can be of an economic nature and the most recent European Commission decision with regard to environmental protection organisations, public entities will have to take into account the EU State aid rules when providing funding for these activities. In the Cases NN 8/2009 and N 376/2010 the European Commission approved the aid measures on the basis of the SGEI Framework. However, aid measures granted on the basis of the SGEI Framework are subject to the prior notification requirement of Article 108 (3) TFEU. This is often a lengthy procedure which places a heavy administrative burden on the authority granting aid. As Article 108 (3) TFEU provides that Member States may not implement new State aid measures before the European Commission has approved them, application of the SGEI Framework is not feasible if immediate action is required. With no notification requirement, the SGEI Decision17 could provide a useful alternative to the SGEI Framework. In the SGEI Decision, the conditions are laid down under which State aid in the form of compensation for an SGEI is not subject to the prior notification requirement of Article 108 (3) of the Treaty, as it can be deemed compatible with Article 106 (2) TFEU. However, also when applying the SGEI Decision, public authorities are subject to certain administrative requirements, as the compatibility criteria of the SGEI Decision are that the public service must be properly entrusted to an undertaking and that the service provider must not be overcompensated for the discharge of the public service. In addition, Member States have to periodically (once every two years) provide the 16

Ibid, recital 52. Decision of the European Commission of 20 December 2011 on the application of Article 106 (2) of the Treaty on the Functioning of the European Union to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, OJ L 7, 11.01.2012, p. 3-10. The SGEI Decision lays down the conditions under which State aid in the form of compensation for a SGEI is not subject to the prior notification requirement of Article 108 (3) TFEU as it can be deemed compatible with Article 106 (2) TFEU (see paragraph 7 SGEI Framework). 17

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European Commission with detailed information concerning the application of the SGEI Decision. Furthermore, with regard to environmental protection organisations, the SGEI Decision only applies to public service compensation not exceeding 15 million Euro on an annual basis. This ceiling may, in certain cases, not be sufficient for environmental protection organisations. Moreover, this ceiling applies per SGEI. This means that if the same SGEI is carried out by several undertakings, the threshold applies to that that specific SGEI task as a whole (and not per undertaking).18 Alternatively, aid-granting authorities could oblige environmental protection organisations to maintain separate accounts for their economic activities and for their non-economic activities. As mentioned above, the General Court held that the services provided by environmental protection organisations do not constitute an indivisible whole.19 Therefore, by maintaining separate accounts and ensuring that aid is only used for their exclusively social, non-economic, activities, environmental protection organisations can avoid being subject to the State aid rules. However, environmental protection organisations are not necessarily obliged to maintain separate accounts and might not always be capable of doing so. The above shows that, due to that classification as economic of certain activities undertaken by environmental protection organisations, the granting of aid to these organisations can be subject to the – often burdensome – State aid rules.

6. The concept of ancillary activities A reduction of the administrative burden placed on both aid-granting authorities and environmental protection organisations could potentially be achieved by expanding the so-called concept of ancillary economic activities, applied by the European Commission in the field of (research) infrastructure, to other categories of aid such as nature conservation.

6.1 Ancillary activities in the field of (research) infrastructure As stated above, in the field of (research) infrastructure, the European Commission has already recognised the concept of ancillary activities. 18

Commission Staff Working Document, Guide to the application of the European Union rules on State aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest, par. 91. 19 CJEU 12 September 2013, T-347/09, ECLI:EU:T:2103:418 (Federal Republic of Germany v. European Commission), par. 41.

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Research infrastructures may be used for both economic and noneconomic activities. In the General Block Exemption Regulation (hereinafter GBER), under which certain categories of aid are compatible with the Internal Market and exempt from the prior notification requirement laid down in Article 108 (3) TFEU, the European Commission has laid down the following definition of ancillary economic activities: “If the infrastructure is used almost exclusively for a non-economic activity, its funding may fall outside State aid rules in its entirety, provided that the economic use remains purely ancillary, that is to say, an activity which is directly related to and necessary for the operation of the infrastructure or intrinsically linked to its main non-economic use, and is limited in scope. This should be considered to be the case when the economic activities consume the same inputs (such as material, equipment, labour and fixed capital) as the non-economic activities and the capacity allocated each year to such economic activity does not exceed 20% of the research infrastructure's overall annual capacity.”20

With regard to infrastructure (in general), the European Commission has specified in its Notice on the notion of State aid as referred to in Article 107 (1) of the Treaty on the Functioning of the European Union (Notice on the notion of State aid) that: “If, in cases of mixed use, the infrastructure is used almost exclusively for a non-economic activity, the Commission considers that its funding may fall outside the State aid rules in its entirety, provided the economic use remains purely ancillary, that is to say an activity which is directly related to and necessary for the operation of the infrastructure, or intrinsically linked to its main non-economic use. This should be considered to be the case when the economic activities consume the same inputs as the primary non-economic activities, for example material, equipment, labour or fixed capital. Ancillary economic activities must remain limited in scope, as regards the capacity of the infrastructure. Examples of such ancillary economic activities may include a research organisation occasionally renting out its equipment and laboratories to industrial partners. The Commission also considers that public financing provided to customary amenities (such as restaurants, shops or paid parking) of infrastructures that are almost exclusively used for a non-economic activity normally has no effect on trade between Member States since those customary amenities are unlikely to attract customers from other Member States and their 20

Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 26.06.2014, recital 49.

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financing is unlikely to have a more than marginal effect on cross-border investment or establishment.”21

In summary, ancillary activities are economic activities that are limited in scope and directly related to and necessary for the operation of the infrastructure, or intrinsically linked to its main non-economic use. Funding for such ancillary economic activities does not fall within the scope of the State aid prohibition.

6.2 Applied to other sectors (culture) Whilst the European Commission has recognised that funding in the field of (research) infrastructure may fall outside the State aid rules in its entirety, provided the economic use of the infrastructure remains purely ancillary, the question arises whether the concept of ancillary economic activities can also be applied in other sectors. In this respect, it is interesting to have a look at the European Commission’s approach to State aid in the field of culture and heritage conservation. Before this category was added to the new GBER in 2014, the European Commission was regularly asked to assess aid measures in the field of culture and heritage conservation. In these decisions, the classification as economic of the supported activities was not so much at stake, as the European Commission consistently held that this was the case. More interesting is the way the European Commission dealt with the question as to whether the supported activities were of a cultural nature and the aid could thus be approved under Article 107 (3) (d) TFEU. Many cultural institutions not only provide ‘purely cultural’ services but also operate a café, restaurant or shop. Although investments such as cafés and restaurants in cultural centres, playing rooms for little children, and proper offices for management are not directly related to culture, the Commission considered these to be an integral part of any modern cultural institution.22 According to the European Commission, these investments also served cultural purposes and could therefore be approved under Article 107 (3) (d) TFEU.23 For this reason, it could be concluded that the 21 Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union, OJ C 262, 19.07.2016, par. 207. 22 Decision of the European Commission of 26 November 2008, Case N 293/2008, Aid for multifunctional community cultural centres, museums, public libraries, recital 30. 23 Ibid.

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European Commission, without explicitly stating so, qualified these investments, which are not directly related to culture, as ancillary to the cultural activities.

6.3 Applied to environmental protection The next question to be addressed, is whether the concept of ancillary activities can also be applied to aid granted to environmental protection organisations. Put differently, can funding of environmental protection organisations fall outside the State aid rules in its entirety, because the economic use of the aid is directly related to and necessary for the protection of the environment or intrinsically linked to its main noneconomic use, and is limited in scope? In its earlier decisions, the European Commission was not willing to accept that the economic activities undertaken by environmental protection organisations remained purely ancillary. In Case NN 8/2009, the German authorities had, for example, argued that the revenue-generating activities are the inevitable result of the conservation tasks. According to the German authorities: “trees may need to be felled for environmental reasons (e.g. in order to remove foreign tree species), and certain animal populations may need to be reduced by hunting in order to protect forest ecosystems.”24

In its decision, the European Commission only assessed whether these activities should be classified as economic, which, according to the European Commission, was the case.25 The European Commission did not assess whether these economic activities remained purely ancillary to the protection of the environment and, if so, whether for this reason the funding may fall outside the State aid rules in its entirety. The European Commission took a similar approach in the Dutch Case N 376/2010. According to the European Commission: “activities like the sale of wood chips and reed, leases of land and attracting tourism must be classified as economic in nature.”26

24 Decision of the European Commission of 2 July 2009, Case NN 8/2009, Nature conservation areas, recital 38. 25 Ibid, recital 41. 26 Decision of the European Commission of 20 April 2011, Case N 376/2010, Subsidies for nature management, recital 27.

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Therefore, the beneficiaries of the measure should be considered as undertakings within the meaning of Article 107 (1) TFEU. Even though the European Commission itself admitted that these secondary activities (e.g. the sale of wood) might be limited in scope,27 an assessment as to whether these activities are purely ancillary to the overall, purely noneconomic, objective of environmental protection was not carried out. In its most recent decision, Case SA.27301, the European Commission appears to have taken a slightly different approach. The European Commission firstly stressed that the beneficiaries of the measure, apart from their primary activities of nature conservation, may also perform certain secondary activities like the sale of wood and meat, hunting and fishing leases, or tourism activities.28 Unlike the European Commission did in the Decisions NN8/2009 and N376/2010, in which all of these secondary activities were classified as economic, in Case SA.27301 the European Commission did accept that some of these activities were purely ancillary to the main task of nature conservation and would therefore not qualify as economic activities.29 Secondary activities like tourism did however involve economic activities, according to the European Commission.30 In this respect the European Commission made reference to the judgement of the General Court in Case T-347/09 where it was concluded that activities of nature conservation organisations can be deemed to be economic activities, not necessarily linked to nature conservation.31 The conclusion the European Commission came to in this case was that at least some, thus not necessarily all, of the secondary activities carried out qualified as economic activities. The wording chosen by the European Commission in Case SA.27301 could perhaps leave room to argue that certain activities carried out by environmental protection organisations remain ancillary to their main noneconomic task of nature conservation. In the older cases, the European Commission simply classified all secondary activities, like the sale of wood and meat, hunting and fishing leases and tourism activities, as economic in nature. The General Court too held that environmental protection organisations are involved in activities that are economic in 27

Ibid, recital 29. Decision of the European Commission of 2 September 2015, Case SA.27301, Alleged illegal State aid in connection with the subsidized acquisition or free granting of nature land, recital 49. 29 Ibid, recital 50. 30 Ibid. 31 Ibid. 28

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nature and that the services provided by environmental protection organisations do not constitute an inseparable whole.32 Whilst the Commission in its most recent decision, Case SA.27301, did not explicitly disagree with the General Court’s finding in Case T-347/09, the Commission did state that it could not be excluded that some secondary activities undertaken by environmental protection organisations were purely ancillary to their main task of nature conservation. As mentioned, ancillary activities must be directly related to and necessary for the protection of the environment, or intrinsically linked to the non-economic main task of nature conservation. By saying that certain activities of environmental protection organisations could be ancillary in nature, the Commission, without expressly stating so, in a way indicated that it might be possible that the services provided by environmental protection organisations do constitute an inseparable whole. Could this mean that, in certain cases, aid granted to environmental protection organisations may fall outside the State aid rules in its entirety, because the economic activities in which the environmental protection organisations are involved are purely ancillary to their main task of nature conservation?

7. Remaining questions Even if some activities carried out by environmental protection organisations can, in certain cases, be considered as ancillary to the main task of nature conservation, some unanswered questions do remain. The first question concerns the scope of the ancillary activities. In both the GBER and the Notice on the notion of State aid, the European Commission stressed that ancillary economic activities must remain limited in scope. However, when can an ancillary economic activity be deemed limited in scope? In respect of infrastructure, the European Commission specified in its draft Notice on the notion of State aid that: “the economic use of the infrastructure may be considered ancillary when the capacity allocated each year to such activity does not exceed 15 per cent of the infrastructure's overall annual capacity.”33

This threshold was later adjusted to 20 percent in the final Notice on the notion of State as published in the Official Journal of the European 32

CJEU 12 September 2013, T-347/09, ECLI:EU:T:2103:418 (Federal Republic of Germany v. European Commission), par. 31-32 and 41. 33 Communication from the Commission, Draft Commission Notice on the notion of State aid pursuant to Article 107 (1) TFEU, par. 49.

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Union on 19 July 2016.34 Another reference to the concept of ancillary economic activities is made by the European Commission in the GBER. In this Regulation the European Commission decided that, in respect of research infrastructure, funding may fall outside the State aid rules in its entirety, provided that the economic use remains purely ancillary. According to the European Commission, this should be considered to be the case when the economic activities consume the same inputs (such as material, equipment, labour and fixed capital) as the non-economic activities and the capacity allocated each year to such economic activity does not exceed 20 percent of the research infrastructure's overall annual capacity.35 In respect of (research) infrastructure, it seems that the European Commission considers 20 percent an appropriate threshold below which the economic use of the infrastructure remains purely ancillary. However, if the concept of ancillary economic activities is to be extended to environmental protection, the question arises what would constitute an appropriate threshold below which the economic activities carried out by environmental protection organisations remain ancillary to their main, non-economic, task of nature conservation. Is this the case when the capacity allocated each year to these activities does not exceed 20 percent of the environmental protection organisation’s overall annual capacity, as is the case with (research) infrastructure? Or should a different threshold apply? And if so, what would constitute an appropriate threshold? The second issue concerns the question which economic activities are ancillary and which are not. With regard to (research) infrastructure, the European Commission clarified that ancillary activities are activities which are directly related to and necessary for the operation of the infrastructure or intrinsically linked to its main non-economic use.36 In respect of environmental protection organisations, the question arises which economic activities are directly related to and necessary for the protection of the environment or intrinsically linked to the main task of nature conservation? Whereas tourism, as can be concluded from Case SA.27301, cannot be considered directly related to and necessary for the protection of the environment or intrinsically linked to the main task of 34 Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the Functioning of the European Union, OJ C 262, 19.07.2016, p. 1, footnote 505. 35 Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 26.06.2014, recital 49. 36 Ibid.

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nature conservation, from this case it follows that the same does not necessarily apply to activities like the sale of wood and meat or hunting and fishing leases. However, it is not clear where the line between economic activities that may be considered ancillary and activities that cannot be considered ancillary needs to be drawn. How to classify for example tourist hunting or fishing trips? Ancillary or not?

8. Conclusion Environmental protection organisations carry out a wide range of activities. The European Commission and the General Court have made it clear that certain activities undertaken by environmental protection organisations should be classified as economic in nature for the purposes of the EU State aid rules. This conclusion increases the administrative burden placed on public entities that intend to grant aid to environmental protection organisations, as they have to ensure that such aid is in line with the EU State aid rules. Expanding the concept of ancillary activities to aid granted in the field of environmental protection could potentially reduce this administrative burden. In the field of (research) infrastructure, the European Commission has already accepted that when the infrastructure is used almost exclusively for a non-economic activity, its funding may fall outside the EU State aid rules in its entirety, provided that the economic use remains purely ancillary. This is the case when an activity is directly related to and necessary for the operation of the infrastructure or intrinsically linked to its main non-economic use, and is limited in scope. However, even if the concept of ancillary activities is expanded to aid granted in the field of environmental protection, a number of questions remain. Firstly, when can an ancillary economic activity in the field of environmental protection be deemed limited in scope? And, secondly, which economic activities are directly related to and necessary for the protection of the environment or intrinsically linked to the main task of nature conservation?

CHAPTER EIGHT THE ENFORCEMENT OF THE STATE AID RULES BY NATIONAL (JUDICIAL) AUTHORITIES JOHAN VAN DE GRONDEN

1. Introduction Since the adoption of the General Block Exemption Regulation1 (hereinafter GBER) in 2014 and the State Aid Modernisation Communication2 the decentralized application of the State aid rules is high on the agenda. This is a striking parallel with the policy actions the Commission initiated with regard to Article 101 and 102 TFEU in 1999: at that time the aim was also stimulating the decentralized application of the EU antitrust rules, in order to focus on particular enforcement priorities.3 The same is true for the policy actions taken in EU State aid law: the Commission has recently taken up cases of great importance, such as the national tax rulings granted by some Member States large enterprises like Starbucks, Apple, and Fiat.4 As a result, the enforcement of the State aid rules by national (judicial) authorities is a key issue nowadays. Its success is to a great extent

Professor of European Law, Radboud University Nijmegen (http://www.ru.nl/english/people/gronden-j-van-de). 1 Commission Regulation 651/2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ 2014 L187/1, 26.06.2014. 2 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on EU State aid Modernisation, COM (2012) 209 final. 3 See the White Paper on Modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ 1999 C132/1, 28.04.1999. 4 See Press Release IP/15/5880 of the Commission of 21.10.2015 and Press Release IP/16/2923 of the Commission of 30.08.2016.

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dependent on the question of whether important issues regarding the scope of the EU State aid rules are clarified. In this volume, interesting papers as regards these issues are discussed. From these contributions, it is clear that the concept of undertaking plays an important role, whereas the condition of the impact on trade between Member States is also crucial. Another very important matter is the standstill provision, as this provision obliges the domestic courts to order recovery of illegal State aid. It goes without saying that this matter is decisive for the success of the enforcement of the State aid rules, as is apparent from the chapter of Stuyck and Sabbadini on the role of the domestic courts. This chapter will discuss the subjects of the concept of undertaking, trade between Member States, and the standstill provision in the light of the decentralisation policy actions of the Commission: does the ‘configuration’ of these concepts enable the domestic courts to enforce the EU State aid rules at the national level?

2. The concept of undertaking: clarifying the concept? A huge body of case law is available on the concept of undertaking.5 In this respect it should be stressed that the State aid rules apply, in so far as the beneficiary qualifies as an undertaking. Furthermore, the competition and State aid rules share the same definition of the term undertaking: there is full convergence on what an undertaking is for the purposes of Articles 101 and 102 TFEU as well as of Article 107 TFEU. It is settled case law of the CJEU that every entity engaged in an economic activity is an undertaking.6 An economic activity constitutes the offering of goods or services on the market.7 This functional approach, which prevents Member States and enterprises from circumventing EU competition and State aid law, encompasses a wide array of activities, ranging from ‘regular’ commercial activities to activities closely related to the tasks of public authorities. As a result, the performance of the latter tasks may be put under pressure, as their financing could amount to State aid. In order to strike a balance between the need to enforce the EU competition and State aid rules and the legitimate tasks of the Member States to pursue objectives of public interest, the CJEU has developed the following

5

See for a discussion of this case law e.g. Wehlander, Services of General Economic Interest as a Constitutional Concept of EU law, p. 35 et seq. 6 CJEU 23 April 1991, C-41/90, ECLI:EU:C:1991:161 (Höfner). 7 CJEU 16 June 1987, C-118/85, ECLI:EU:C:1987:283 (Commission v. Italy).

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approach.8 It is settled case law of the CJEU that the exercise of State prerogatives9 and particular social security activities10 do not qualify as economic activities. A state prerogative concerns the exercise of public powers, such as verifying the compliance with public laws. Social security activities are not caught by the Treaty provisions on competition and State aid, provided that the scheme concerned is predominately based on solidarity and the bodies managing this scheme are subject to substantial state control.11 In other words, if the performance of a particular task has to be labelled as ‘state prerogative’ or ‘social security’ (fulfilling the conditions set out in the case law) the financing of this task is immune from the EU State aid rules. As regards these two categories, national competences are not impacted by EU State aid law. To my mind, this is not surprising, since these categories are closely related to the classic tasks of the state: the exercise of official authority and the social welfare state. However, the contribution of Ament reveals an important development in relation to the concept of undertaking. From the cases discussed in this contribution the emergence of a new category of activities, somehow connected with the public tasks of the Member States, and therefore not qualifying as economic, appears. The point is that on the one hand these activities do not fit in well in the two categories identified in the settled case law of the CJEU, but on the other hand they are without any doubt of a ‘public dimension nature’. A significant example, in this regard, is nature conservation. In case T347/0912 the General Court suggested that the task of nature conservation does not have an economic dimension. Activities such as the sale of wood are, however, of an economic nature. Also, the Commission has held – for example in case SA. 2730113 - that nature protection and conservation activities fall outside the scope of the concept of undertaking. This view taken by the Commission seems to be in perfect tune with the outcome of

8

See also Van de Gronden, “Services of General (Economic) Interest in EU Competition law”, p. 245-250. 9 See e.g. CJEU 18 March 1997, C-343/95, ECLI:EU:C:1997:160 (Diego Calì). 10 See e.g. CJEU 16 March 2004, Joined Cases C-264/01, C-306/01, C-351/01 and C-355/01, ECLI:EU:C:2004:150 (AOK). 11 See e.g. CJEU 3 March 2011, C-437/09, ECLI:EU:C:2011:112 (AG2R). 12 See CJEU 12 September 2013, T-347/09, ECLI:EU:T:2103:418 (Federal Republic of Germany v. European Commission). 13 Decision of the European Commission of 2 September 2015, Case SA.27301 The Netherlands, Alleged illegal State aid in connection with the subsidized acquisition or free granting of nature land.

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case T-347/09. Also in its recent Notice on the notion of State aid,14 the Commission has taken a similar position, as is apparent from paragraphs 33 and 34 of this Notice. Furthermore, the Commission points out that also activities related to education, research, and culture may not constitute economic activities.15 However, the question arises how this position sits with the settled case law of the CJEU; nature conservation and other environmental activities do not involve the exercise of State prerogatives and the management of social security schemes. The same is true for educational, research, and cultural activities. This is not surprising, as these activities are not connected with the state tasks of official authority and the social welfare state. Therefore, it could be argued that a new category of non-economic activities is emerging. For this ‘third’ category the General Court and the Commission have used the term of social activities. In my view, this term may give rise to confusion, as it suggests that they fall within the same category as the social security schemes do. This is not correct, as those schemes are concerned with granting benefits to people in need, while nature conservation and other environmental activities, as well as culture, education, and research are aimed at realising a particular policy goal set by the state (e.g. the legislator). In other words, it is time that in the case law a new, third, category of activities that fall outside the scope of the concept of undertaking is explicitly acknowledged. It should be stressed that the involvement of the state in realising some goals is of such intensity that the activities connected with these goals are (virtually) completely financed by the state. Therefore, it could be argued that the financing of activities that are inherent in the achievement of these public policy goals does not amount to State aid. Accordingly, entities engaged in public policy goal activities are not undertakings. Traces of this new doctrine can be found in the Notice of the Commission on the notion of State aid and in the old case law of the CJEU concerning free movement and education, such as Humble,16 Gravier,17 and Wirth.18 From this Notice and the case law of the CJEU the applicable test can also be deduced. It should be examined whether the achievement of the public policy goal is entirely or 14

Commission Notice on the notion of State aid as referred to in Article 107 (1) of the Treaty on the functioning of the EU, OJ 2016 C262/1. 15 See par. 28-37 of the Commission Notice on the notion of State aid. 16 CJEU 27 September 1988, C-263/86, ECLI:EU:1988:451 (Humbel). 17 CJEU 13 February 1985, C-293/83, ECLI:EU:1985:69 (Gravier). 18 CJEU 7 December 1993, C-109/92, ECLI:EU:C:1993:916 (Wirth).

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predominately financed by the state in order to achieve a specific goal of public interest. If so, the activities carried out in order to achieve these goals are not of an economic nature. If not, the competition and State aid rules kick in. This means that a three-prong test must be carried out: 1) is a public interest goal outlined by the State in, e.g., a piece of legislation 2) are the activities under review closely related with this goal and 3) are these activities (virtually) entirely financed by the State? It is clear from the outset that a couple of questions must be clarified. To start with, an issue is whether and in which way public interest goals have to be set out by a Member State. Another matter that needs clarification is how close the relationship between the activities to be financed and the public interest goal to be realised must be. Furthermore, the level of financing by the state may give rise to problems of interpretation. Will only activities that are entirely financed by the state fall within the ambit of the ‘third category’, or do also activities that are financed by non-state actors for a minor part belong to this category? New case law is needed in order to shed more light on these questions. However, in my view the point of departure will be that the public policy goals activities cannot be regarded as the offering of goods or services on the market. The activities concerned are not part of the marketplace, as their raison d’etre is state intervention. In the light of this characteristic of the public policy goal activities the Commission and the EU Courts could elaborate on the conditions of the three-prong test set out above. It goes without saying that we have to wait and see what the CJEU will do in this respect. It is far from certain that this new approach is accepted in EU law, but it seems that this approach is supported by the General Court and the Commission. When it comes to working out the conditions of the three-prong test, the contribution of Ament is of great importance. In fact, he focuses on the second condition: are the activities under review closely related with a particular public interest goal? He suggests applying the concept of ancillary activities in order to carve out some economic activities that are closely related to activities that are not of an economic nature. It seems to be perfectly in tune with the second condition of the three-prong test, to explore what ancillary activities are. What he proposes, comes down to examining whether a particular activity is closely related to a particular goal, such as nature conservation. Consequently, the proposal made by Ament to accept that ancillary activities are not caught by the State aid rules, even if they constitute economic activities, deserves further serious consideration. Now, it is only used in cases dealing with State aid and

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infrastructure, but it seems to be in line with the recent case law of the General Court and the decisional practice of the Commission discussed above to extend this concept to other areas, as well. Ament identifies some remaining questions in his chapter. In fact, these questions come down to how to distinguish between economic activities that are ancillary, and economic activities that are not. He points to thresholds, which is a technique also used by the Commission in the GBER. The question arises whether the criterion of thresholds does justice to the concept of ancillary restraints. I would like to argue that such a criterion should be based on the close relationship between the groups of activities at issue (the main and ancillary activities). Consequently, it seems to make sense to regard activities that cannot be disconnected from the public policy goals activities as ancillary activities. The technique I am proposing is taken from the Corbeau judgment of the CJEU.19 In this case it is explained how to make a distinction between activities that are part of the task to provide Services of General Economic Interest and activities that are not part of this task. The reason for this distinction is that Services of General Interest fall within the ambit of the exception of Article 106 (2) TFEU and competition distortions resulting from the task to provide these services may be justifiable. To conclude, Ament’s chapter has opened up interesting avenues in EU State aid law. It is very important to clarify the issues he has raised. It is clear from the outset that domestic authorities and courts will frequently be confronted with the question whether it is permitted for the authorities of the Member States to finance nature conservation and other public policies. In order to improve the decentralised enforcement of the State aid rules, it is important to clarify the issues raised.

3. Trade between the Member States: sufficient guidance given by the Commission? Another issue of great importance for the decentralised enforcement of the EU State aid rules is the condition that trade between the Member States be impacted. If this is not influenced, the EU State aid rules do not apply. Consequently, it is of utmost importance for the national authorities to have a clear and transparent test for establishing an impact on intra-Union trade. It is settled case law of the CJEU that a potential effect suffices for

19

CJEU 19 May 1993, C-320/91, ECLIEU:C:1993:198 (Corbeau).

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the State aid rules to be applicable.20 A link has to be established between the national measure concerned, on the one hand, and the likely or potential effect on trade, on the other hand, which may be the case, for example, if the beneficiary competes with firms based in other Member States.21 The point is that the small amount of the aid in itself does not exclude the possibility that the trade between the Member States is influenced.22 In such circumstances, it is still possible that undertakings established in other Member State will encounter difficulties to penetrate the market concerned. Nevertheless, in some cases the Commission found that several measures had merely a local effect and did not fall within the scope of the Treaty provisions on State aid. An interesting case concerns the financing of some Dutch small harbours out of the public purse.23 The annual turnovers of the harbours concerned were so small in relation to the entire EU turnovers that no effect on trade between the Member States occurred. The Commission was, accordingly, of the opinion that the national measures under review did not constitute State aid within the meaning of Article 107 (1) TFEU. In this regard, it has to be put forward that in the final version of the Notice on the notion of State aid the Commission did not come up with a general test for finding an effect on the trade between Member States. Nevertheless, the Commission does give a wide range of examples, where it found that the trade between Member States was not impacted.24 It appears from the cases listed by the Commission that the main reason for not finding an effect on the trade between the Member States was that undertakings in other regions were not interested in supplying the product or service financed in the region, where the beneficiary operated. The absence of a general test stands in sharp contrast with the draft Notice, where the Commission had made a proposal for such a test.25 In this draft Notice some common features for not finding an impact on trade between the Member States were highlighted: the funding did not lead to demand 20

See e.g. CJEU 8 May 2013, Joined Cases C-197/11 and C-203/11, ECLI:EU:C: 2013:288 (Libert), par. 76. 21 See Hancher, “The General Framework”, p. 100. 22 See CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark), par. 81. 23 See Decision of the European Commission of 29 October 2003 on measures in favour of non-profit harbours for recreational crafts, OJ 2004 L34/63. 24 See par. 197 of the Commission Notice on the notion of State aid. 25 See the Draft Commission Notice on the notion of State aid pursuant Article 107 (1) TFEU, available at: http://ec.europa.eu/competition/consultations/2014_state_aid_notion/draft_guidanc e_en.pdf, accessed on 11.11.2016.

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or investment being attracted in the region concerned, the goods or services financed are mainly local; and there is only a marginal effect on markets and consumers in other Member States.26 Although, this list seems to be comprehensive and based on good arguments, the Commission shied away from inserting these common features in the definitive Notice. Although the Commission offers some help by, as already said, giving some examples of national measures deemed not to affect trade between Member States, under the current Notice the national authorities will be looking for guidance when confronted with examples not listed in the Notice. Then again, a good explanation can be given for not incorporating a general test in the final version of the Notice: it is eventually for the CJEU to decide on the interpretation of the condition of the impact on trade between the Member States. What is the use of the Commission Notice, if the CJEU were to hand down a judgment that calls into question what the Commission has said? It should be pointed out that in cases, such as Altmark,27 the CJEU held that a relatively small amount of State aid does not justify the finding that trade between Member States is not affected. From this point of view, it seems to make sense not to lay down a test in the Notice. Is it possible for the Commission to give a helping hand to the national authorities, as regards the trade between Member States criterion? It would be interesting for the Commission to explore the following avenue. The Commission has adopted the De Minimis Regulation, according to which aid not exceeding 200,000 Euro in three years is exempted from the obligation to notify.28 It is possible that the Commission will raise this threshold. On the one hand, it could be argued that this may give rise to serious issues, as the De Minimis Regulation is based on the presumption that trade between Member States is not influenced. Since the interpretation of this condition is in the hands of the CJEU, raising the threshold would increase the risk that the CJEU would find the Regulation incompatible with Article 107 TFEU in a case brought before it. On the other hand, it could also be argued that the reason for exempting De Minimis aid is not only related to the absence of impact on trade between the Member States, but also to considerations connected with the proper functioning of the Internal Market. The Commission could argue that a State aid measure not exceeding a particular threshold is compatible with the Internal Market. Given its limited effect on competition and trade as 26

See par. 196 of the Draft Commission Notice on the notion of State aid. See CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark), par. 81. 28 See Article 3 of Commission Regulation 1407/2013 on the application of Articles 107 and 108 of the Treaty to de minimis aid, OJ 2013 L352/1, 24.12.2013. 27

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well as taking into account the benefits of the reduction of administrative burdens resulting from lifting the notification obligation, the Commission could decide to raise the De Minimis threshold. In the present De Minimis Regulation it is contended that aid not in excess of 200,000 Euro is supposed not to influence trade between Member States and not to distort competition in the Internal Market.29 The first section of Article 3 of the Regulation provides that such aid is deemed not to meet all the criteria set out in Article 107 (1) TFEU. Accordingly, in the absence of the fulfilment of these criteria, the obligation to notify is lifted. The Commission could also put forward that in line with Article 107 (3) (c) TFEU certain economic activities in the Member States’ regions are stimulated, if the threshold to notify is raised, since red tape that may affect economic activity is cut. Of course, it is possible that a De Minimis Regulation containing a threshold higher than 200,000 Euro will be challenged in a case brought before the CJEU. But, it is settled case law that the Union legislature enjoys a wide margin of appreciation when enacting legislation.30 In sum, the Commission should consider exploring the avenue of raising the threshold laid down in the De Minimis Regulation. This could increase the guidance given to the national authorities and boost the decentralised application of the EU State aid rules.

4. The standstill provision and the role of the domestic courts In 2014 the Commission adopted a new General Block Exemption Regulation (GBER)31 and by doing this, it has extended the scope of the exemptions. The Member States are enabled to grant more State aid, as many State aid measures are not regarded as harmful for competition and trade between Member States.32 An important goal of the adoption of this regulation is to free-up staff of the Commission for ex post control. Since more State aid measures are exempted than in the past, the number of 29

See recital 3 of the De Minimis Regulation. See e.g. CJEU 25 June 1997, C-114/96, ECLI:EU:C:1997:316 (Kieffer) and CJEU 7 February 1985, C-173/83, ECLI:EU:C:1985:56 (Commission v. France). On this matter see Mortelmans, “The Relationship between the Treaty Rules and Community Measures for the Establishment and Functioning of the Internal Market-Towards a Concordance Rule”, p. 1315 et seq. 31 Commission Regulation 651/2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ 2014 L187/1, 26.06.2014. 32 See Press Release IP/14/587 of the Commission of 21.05.2014. 30

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notifications will go down, which means that the Commission has more time and resources to carry out investigations for detecting large illegal State aid schemes.33 As a result, the Member States have to review many of their State aid measures in the light of the 2014 GBER in order to verify whether the relevant conditions of this regulation are satisfied. For example, they have to examine what the exact amount of the aid to be granted is, as the block exemption only applies to transparent aid.34 Furthermore, the measure should have an incentive effect, which means that the beneficiaries are stimulated to be engaged in a specific project.35 The GBER specifies various types of national State aid measures that may benefit from the exemptions, such as regional aid, aid to SMEs (small and medium-size enterprises), aid for research and development and innovation and aid for environmental protection. It goes without saying that the GBER lays down for each type of State aid specific conditions that must be met. On top of that, notification ceilings are in place varying per State aid type. State aid in excess of these ceilings is subject to the obligation of prior notification. It is clear from the outset that the public authorities of the Member States have to carry out a self-assessment for establishing whether a particular measure satisfies all the conditions set out in the GBER. Accordingly, disputes and litigation are prone to arise, as the findings of these public authorities may be called into question. In these cases, it is up to the domestic courts to settle these disputes, since these judicial bodies are competent to review the decisions of the national public authorities that a State aid measure is justifiable under the GBER. The reason for this is that, if a domestic court finds that the GBER does not apply to a particular State aid measure, it has to order the recovery of the State aid concerned on the basis of the standstill provision. To my mind, the parallel with the modernisation of the EU antitrust provisions is striking. On 1 May 2004 Regulation 1/200336 entered into force and as from that date the cartel exemption laid down in Article 101

33

Ibid. See Article 5 of the GBER. Pursuant to this provision the gross grant equivalent of the aid must be calculated ex ante with great precision. Therefore, Member State have to make precise calculations, which may, apart from subsidies, lead to complex questions. 35 See Article 6 of the GBER. 36 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, OJ L1/1, 04.01.2003. 34

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(3) TFEU was directly applicable.37 As a result, undertakings must carry out a self-assessment in order to find out if the conditions laid down in this Treaty provision are met. Eventually, it is up to the scrutiny of the national courts whether the results of such a self-assessment are valid, if disputes arise. Also in the 2004 Modernisation project one of the drivers for the entire operation was the improvement of the enforcement: the underpinning rationale was to enable the Commission to focus on detecting serious hard-core cartels by shifting the workload related to Article 101 (3) TFEU assessment to the national level.38 In 2014, the Commission undertook a similar operation for EU State aid law, which entails that the role of the national courts in the enforcement process is reinforced. It is for them to review whether the self-assessment of the national authorities is in line with EU law. If not, they are under the obligation to apply the standstill provision, as laid down in Article 108 (3) TFEU, and order the recovery of the unlawful State aid. Consequently, the question arises as to what the state of art of the CJEU’s case law on this provision is. In the light of the foregoing it is of great importance that it is crystal clear for the national courts which consequences they have to draw from the standstill provision. What is the role of the national court? It should be clear for the national court what is expected from it. This is a very important prerequisite for the successful enforcement of the EU State aid rules. The contribution of Stuyck and Sabbadini reveals that important developments have taken place in relation to the standstill provision. It should be recalled that the role of the national court is confined to verifying whether the standstill provision is observed. According to settled case law this provision has direct effect, which means that national courts must order recovery of unlawful State aid.39 It should be noted that it is the sole power of the Commission to examine whether national State aid is compatible with the Internal Market. At first sight applying Article 108 (3), last paragraph, TFEU seems to be a rather limited task but it is clear from the developments in EU State aid law that this task gives rise to various complicated issues. The reason for this is that ‘the configuration’ of the task to apply the standstill provision has been extended by the CJEU over the years on the basis of the principle Union loyalty. Remarkably, the issues tackled by the CJEU predominately concerned 37

See Article 1 of Regulation 1/2003. See Maher, “Competition Law Modernization”, p. 729. 39 See e.g. CJEU 11 July 1996, C-39/94, ECLI:EU:C:1996:285 (SFEI). 38

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the relationship between the standstill provision and the remedies available at the national level. How should a domestic court ‘translate’ the direct effect of Article 108 (3) TFEU into national law? Which consequences must be drawn from the fact that unlawful aid must be recovered? From the analysis carried out by Stuyck and Sabbadini it is apparent that, although the standstill provision belongs to the classic concepts of EU law, a lot of issues are unsolved. In order to demonstrate this, I will discuss two matters: the procedures before the national court parallel to the procedure initiated by the Commission and the impact of the standstill provision on national private law.

4.1 Parallel procedures A case in point is the CELF judgment,40 where the CJEU stressed the independent role of the national courts. It said that a national court must do whatever is possible to prevent that unlawful aid is implemented. As a result, staying the procedure as long as the aid concerned is under scrutiny by the Commission would come down, in the CJEU’s view, to refusing to take safeguard measures on the basis of the standstill provision. So, the national court is called upon to take a decision, if a party raises a State aid issue. It should examine whether it is required to take safeguard measures. Safeguard measures are deemed necessary, if there is no doubt as regards the classification of the measure as State aid, the aid is given or about to be given and no exceptional circumstances are found which would make recovery inappropriate.41 If these conditions are fulfilled, the national courts should order by way of provisional measures repayment of the aid or the placing of the aid in a blocked account. In the latter case interest will be due for the period between the expected implementation of the aid and the placement in the blocked account. It is clear that taking no action is not an option in the view of the CJEU. If the Commission takes a decision to initiate the formal investigation procedure pursuant to Article 4 of Regulation 2015/1589,42 it is not certain that it will find State aid. This decision is of a preliminary nature. This stands in sharp contrast with the decision that will be taken at the end of the formal investigation procedure according to Article 9 of Regulation 2015/1589, which establish whether the measure concerned constitutes 40

CJEU 11 March 2010, C-1/09, ECLI:EU:2010:136 (CELF II). See par. 36 of the CELF II judgment. 42 Regulation 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the EU, OJ 2015 L248/9, 24.09.2015. 41

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State aid. It goes without saying that a national court should respect the final decisions. What consequences should a national court draw from a Commission decision to initiate a formal investigation procedure? In the Lufthansa case43 the CJEU addressed this question by taking the Union loyalty, and more in particular, the obligation of sincere cooperation as point of departure. The CJEU acknowledged that a decision to initiate the formal examination procedure is of a preliminary nature. However, it moved on by stating that a national court should do whatever is possible to refrain from handing down a judgment that eventually could contradict the final decision taken by the Commission. The CJEU’s concern was that the proper functioning of the standstill provision of Article 108 (3) TFEU would be jeopardised. As a result, as soon as the Commission has taken the decision to initiate the formal examination procedure, it is no longer permitted for a domestic court to assess independently whether the aid under consideration amounts to State aid within the meaning of Article 107 (1) TFEU.44 As a result, national courts must follow the preliminary findings of the Commission, although these findings may change during the formal examination procedure.45 The national court has to draw the appropriate conclusions from the Commission finding that the measure concerned could constitute State aid.46 That means that the national court should either order recovery or order a safeguard measure such as the placement of the aid in a blocked account. So, even if a Commission decision does not contain a final judgement on the status of the measure concerned, the room for manoeuvre for the national courts is limited in comparison with the situation in which, no Commission decision is taken. In this respect, it is noteworthy that the choice is left to the domestic courts which decisions they will take. They could either order recovery or take safeguard measures. This choice is given for obvious reasons, since the implementation of the standstill provision is not harmonised and, therefore, national procedural rules must be applied, as long as these rules are in line with the settled case law of Rewe47 and Comet.48 The requirements to be observed in relation to this case law are the well-known principles of equivalence and effectiveness: the national rules governing claims derived from EU law ought not to be treated less favourably than the national rules governing claims derived from national law respectively, 43

CJEU 21 November 2013, C-284/12, ECLI:EU:C:2013:755 (Lufthansa). See par. 41 of the Lufthansa case. 45 See Lübbig and Morgan, “State aid”, p. 259. 46 See par. 42 of the Lufthansa case. 47 CJEU 16 December 1976, C-33/76, ECLI:EU:C:1976:188 (Rewe), p. 1989. 48 CJEU 16 December 1976, C-45/76, ECLI:EU:C:1976:191 (Comet), p. 2043. 44

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and national rules must not render it virtually impossible to effectuate rights under EU law.49 More in particular, in cases related to the standstill provision due consideration has to be paid by the national courts to the principle of effectiveness: national courts must do whatever is possible to prevent that financial benefits are granted to undertakings, if it is not excluded that those benefits constitute unlawful State aid. Which orders are to be given, is, as already said, left to the national court dealing with a State aid dispute, but sometimes it is hard for such a court to assess whether a particular order is capable of preventing State aid issues from arising.

4.2 Impact of the standstill provision on national private law What should a civil law court do if it finds that the State aid rules are violated? The point of departure is that it should take a decision that eventually leads to the recovery of the unlawful State aid granted. For example, if a national court is of the opinion that a loan given by a public authority constitutes State aid,50 it should order the loan to be paid back including interest. However, public authorities could make use of various kinds of private law constructions and it is not clear from the outset which consequences must be drawn if such a construction amounts to State aid and triggers, as a result, the standstill provision. An important case in this respect is the Residex case.51 At issue was a guarantee given by a public authority to a lender in order to enable him to get a loan. It turned out that this guarantee constituted State aid, as a private investor would not have given a guarantee under the same circumstances. As the guarantee had not been notified to the Commission, the national court had to apply the standstill provision. The point was that it was not clear what this meant for the guarantee given by the public authority concerned and therefore a preliminary reference was made. The CJEU started by putting forward that the domestic court must draw consequences from the fact that Article 108 (3) TFEU applies. It must take a decision that restores the normal market conditions. This entails that a way had to be found for recovering the 49

See for example Jans, Europeanisation of Public Law, p. 46. Such a loan could be in violation of the private investor principle: the test to be carried out is whether a private investor would have given a loan under similar conditions as the public authority concerned did. See Sauter and Schepel, State and Market in European Union Law, p. 204-207. Public authorities should treat their debtors with the same vigour as that of a private creditor. See Hancher, “The General Framework”, p. 109. 51 CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex). 50

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economic advantages. Nevertheless, the CJEU stressed that it depends on national law which decision will be taken, as long as the economic advantage is taken away. Consequently, the competent national court was at liberty to reach various decisions, provided that effective application of the standstill provision was ensured. If the most effective remedy was the cancellation of the guarantee, this decision had to be taken. So, cancellation may be the solution but it is not required, if other equally effective remedies are available. Consequently, as with the case law on parallel procedures, some discretion was left to the domestic courts. The explanation for this discretion is again that the matters at hand are not harmonised. The main requirements to be taken into account are the principles developed in Rewe / Comet (equivalence and effectiveness). In my view, the cases analysed by Stuyck and Sabbadini and discussed above show that new issues will arise. For example, an interesting question is raised by Stuyck and Sabbadini: to what extent can receiving unlawful State aid be classified as an unlawful act for the purposes of national private law? If such claims for damages are successful, competitors may sue the recipients of State aid also in private law proceedings. At the current development stage of EU law, it is for national law to settle this issue. Then again, it should be recalled that in cases such as Courage52 and Manfredi53 the CJEU held that the right to claim damages is inherent to Article 101 TFEU. Is such a right also inherent in Article 107 or Article 108 (3) TFEU (standstill provision)? We will have to wait and see what the CJEU will decide, if such a question is referred to it. The uncertainties pointed out raise the question as to whether particular rules need to be enacted at the EU level. Particular matters could be harmonised as the EU did with regard to the private enforcement of Articles 101 and 102 TFEU. An alternative could be asking help from the Commission pursuant to Article 29 of Regulation 2015/1589; this provision has introduced the concept of the Commission as amicus curiae in EU State aid law. In some cases, the Commission could give guidance to domestic courts. The point is, however, what a domestic court should do if the guidance by the Commission does not suffice. Is the court in that case under the obligation to refer a preliminary question to the CJEU? These are intriguing questions but also worrying for domestic civil law courts handling State aid cases. It should be noted that those cases are capable of posing a special burden on the judges. Clear rules may help them to deal with this burden. 52

CJEU 20 September 2001, C-453/99, ECLI:EU:C:2001:465 (Courage). CJEU 13 July 2006, Joined Cases C-295/04, C-296/04, C-297/04 and C-298/04, ECLI:EU:C:2006:461 (Manfredi). 53

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5. Conclusion Although the EU and national authorities have longstanding experience with the State aid rules, a lot of issues are unclear. It would be great if the CJEU clarified how to deal with the financing of particular public policy goals activities. What is striking, is that the matters that are unclear concern elementary issues, such as trade between the Member States and the interpretation of the standstill provision. In many cases concerning State aid law, these issues must be settled and it is worrying that the debate is still open. Therefore, I would like to suggest that the stakeholders, such as the Commission, consider harmonising some important matters concerning State aid. Another approach may be that the national courts of the various Member State exchange best practices and a network be set up to that effect, possibly with the involvement of the CJEU and the Commission. Setting rules of private and administrative law belongs to the competences of the Member States and introducing some new EU provisions in this area limits these competences. Then again, it should be pointed out that the national judicial authorities have to deal with questions that are elementary to the State aid rules and essential for the effective enforcement of these rules. The decentralized application of the State aid rules was one of the objectives pursued by the Commission. Therefore, the question that needs to be addressed is the following: are EU rules and approaches enacted respectively adopted at the EU level necessary for facilitating the decentralized application of the Treaty provisions on State aid by the national authorities? At first sight it may seem odd that rules or approaches must be adopted at the EU level, if the enforcement of the EU State aid rules are decentralised. The task to apply these rules is (partly) shifted from the EU level to the national level and, therefore, it could be argued that it is now (to a great extent) in the hands of the national courts to decide on State aid matters. On second thought, the adoption of new rules and approaches seems to be inherent in a decentralisation process. The application of the decentralised rules of EU law by national (judicial) authorities must meet some prerequisites, such as the principle of equivalence and the principle of effectiveness. On top of that, EU State aid specific rules must be observed by these authorities. As a result, the influence of EU law on national (procedural) law will increase: some provisions of national law will be set aside, other provisions will be interpreted in line with EU law and new national rules will be introduced in order to bridge some ‘legal gaps’. Consequently, national law will increasingly be intertwined with

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EU law in areas, such as State aid law. National courts are called upon to apply a mixed set of national and European rules. It seems inevitable that judicial bodies both at the level of the various Member States and at the EU level exchange views in order to get a better understanding of how the wide variety of jurisdictions works and how specific concepts of EU law could be incorporated into the great diversity of the national law systems that belong to the common heritage of Europe.

PART 4 – CONCLUSION

CHAPTER NINE BOOSTING THE ENFORCEMENT OF EU COMPETITION LAW AT THE NATIONAL LEVEL: SOME UNRESOLVED ISSUES MARC VEENBRINK

1. Introduction Competition law is one of the main tools used by the EU to ensure the proper functioning Internal Market. The decentralized enforcement of competition law, in particular of Articles 101 and 102 TFEU and the State aid rules, tries to strengthen this goal. In general, one could say that the substantive rules are quite clear, although, as mentioned in the introduction by Rusu and Looijestijn-Clearie, there are still some issues which need to be resolved. The main problems for the decentralized enforcement lie with the procedural aspects. This is not so strange since the procedural rules are generally not harmonised in the competition law area. Even when there is harmonisation, e.g. the Private Damages Directive,1 it is still difficult to find an all-encompassing framework. A number of contributors to this book have therefore argued that harmonization might be necessary to overcome hurdles in the enforcement of EU competition law at national level. It also appears that the enforcement of the antitrust rules is more developed than the enforcement of the State aid rules. Therefore, it might prove useful to examine some of the links between the two areas. In the following, first some elements of the contributions are highlighted, after which some possible improvements for the enforcement of EU competition law at national level are discussed.

Lecturer and PhD fellow in EU Law at Radboud University Nijmegen (www.ru.nl/english/people/veenbrink-j). 1 Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1, 05.12.2014.

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2. Some elements of the contributions Most contributions in this book tackle a deficiency or inconsistencies in the enforcement of EU competition law at the national level. Outhuijse points to the high annulment percentages of ACM decisions and rulings of the court of first instance in Dutch competition law proceedings. She argues that these high percentages, and the difference of opinion between the first instance court and the appeal tribunal, are problematic for the enforcement of competition law: diminished deterrence, costs increase and legal uncertainty are some of the consequences of the perceived deficiency in competition law proceedings in the Netherlands. Where the increase in fining policy in the Netherlands might lead to more litigation, other developments, such as the increase of settlement decisions might diminish court disputes. An increase in settlement procedures can, in my opinion, never form a solution to the underlying reasons of the high litigation percentages. Another deficiency in antitrust enforcement might be found with regard to the dawn raid. Petr mentions in his contribution that the dawn raid regime in the Czech Republic did not conform to the right to privacy under Article 8 ECHR. Ex post judicial review of a dawn raid was nearly impossible under Czech law, although this has changed by the possibility for undertakings to start an unlawful interference claim. Nonetheless, it might be wise, according to Petr, to harmonize the conditions under which a dawn raid may be ordered. Furthermore, he argues that the motivation requirements for a dawn raid decision can be insufficient for a court to review the dawn raid itself. Therefore, harmonisation of the motivation requirements of a dawn raid decision might be a good option. Contreras, in contrast, does not exclusively focus on public enforcement of the antitrust rules. He discusses the implementation of the Private Damages Directive in Spain. Furthermore, he argues that a better balance could have been struck in the Private Damages Directive between public and private enforcement. Allowing disclosure of leniency documents in combination with criminal law penalties for directors of companies which did not apply for leniency might boost both public and private enforcement. Here as well, harmonization, or a revision of the Private Damages Directive,2 could prove to be necessary. The second part of this book focuses on State aid. Both the contributions of Metselaar and of Stuyck and Sabbadini focus on the role of the national courts in the enforcement of the State aid rules. National courts should try 2

The Commission should review the directive and submit its observations to the Council and European Parliament by latest on 27 December 2020 on the basis of Article 20 (1) of Directive 2014/104/EU.

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to restore the situation on the market when a Member States has given unlawful aid to an undertaking.3 This obligation is however not specifically defined by Union law. The CJEU gives room for manoeuvre to national courts in line with the principle of procedural autonomy. In her contribution, Metselaar, focuses on the specific implementation of this duty to act by Dutch courts. One might wonder whether there is need for harmonization to provide clarity to national courts in the enforcement of the State aid rules. Furthermore, as Van de Gronden mentions, it is still unclear whether a third party has an EU right to start an action for damages if an undertaking has unlawfully received aid by a Member State. The contribution of Ament focuses particularly on the concept of ancillary activities. Van de Gronden also tackles this aspect. There is a possibility that a third exception to the concept of an economic activity emerges. Not only state prerogatives and the management of social security schemes would form an exception to the concept of an economic activity; there are other activities, such as nature conservation, educational activities and cultural activities, which should probably not be classified as of an economic nature. Ament argues that some economic activities, which form such a small part of the activities of a non-economically active entity, should be excluded from the EU competition rules altogether. This might make it possible for Member States to stimulate services of a social nature without being constrained by the State aid rules. Unfortunately, it is not clear whether the Union Courts will accept this third exception. Overall, as stated by Van de Gronden, certain elementary issues in the enforcement of the State aid rules remain open.

3. Potential improvements of competition law enforcement at the national level It might appear, at a quick glance, that the manner of enforcement of the antitrust rules, Articles 101 and 102 TFEU, vis-à-vis the State aid rules is quite different. There are nevertheless many connections between both areas to be found. The antitrust rules can, in my opinion, form a template for the development of the State aid rules. In the discussion below four different aspects will be examined which can be relevant for both the enforcement of the EU antitrust rules and the State aid rules at the national level.

3

See e.g. CJEU 8 December 2011, C-275/10, ECLI:EU:C:2011:814 (Residex), par. 45.

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3.1 The concept of undertaking and services of general economic interest In the contribution of Ament and the contribution of Van de Gronden we can find a narrowing down of the concept of ‘undertaking’. As Van de Gronden puts it: “[…] it is time that in the case law a new, third category of activities that fall outside the scope of the concept of undertaking is explicitly acknowledged.” Ament argues that certain ancillary activities should fall outside the notion of an economic activity as well, since they are merely marginal activities compared to the non-economic activities. One might wonder though whether this is the proper method to deal with the ‘often burdensome State aid rules’, as Ament describes them. Accepting that these activities are not of an economic nature also has consequences for the antitrust rules. Suppose that a nature conservation entity, such as Staatsbosbeheer in the Netherlands, decides to sell wood on the market. It might be possible for such an entity to abuse its dominance from the nature conservation market to the wood market. This could thus lead to e.g. margin squeeze. Similarly, a cultural centre might operate a café or restaurant. A possible dominant position, e.g. because all cultural centres in a State are exploited by one single entity, might even lead to below cost pricing in the café or restaurant market. A complete exclusion of the competition rules by way of narrowing down the concept of undertaking might thus not be the best solution. A different solution may be found in the concept of services of general economic interest. The EU competition rules are excluded for these types of services by way of Article 106 (2) TFEU. Furthermore, the Court of Justice has ruled in the Altmark case that under certain conditions there will not be aid within the meaning of Article 107 (1) TFEU when an entity performs a service of general economic interest.4 Overcompensation is under Article 106 (2) and under the Altmark criteria not allowed.5 Preventing overcompensation of an undertaking by the State might ensure that an undertaking will not be able to lower its prices in a secondary market to the detriment of competition on that market. Nevertheless, the

4

CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark), par. 87-94. Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest, OJ C 8/4 (2012), par. 67-68. See for the Altmark criteria in particular CJEU 24 July 2003, C-280/00, ECLI:EU:C:2003:415 (Altmark), par. 9293. 5

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benefits obtained by economies of scale6 could still ensure that an undertaking engaged in a public service can compete more efficiently on a secondary market.7 The problem perceived by Ament does not completely disappear with this solution, since there are still administrative burdens involved. Whichever option is chosen, if any, both have, unfortunately, negative consequences.

3.2 Factors to refuse recovery of unlawful aid Stucyk and Sabbadini mention in their contribution that Member States only have one defence to prevent recovery of unlawfully given aid. They also refer to the reliance by France on the argument of ‘social unrest’ in order to prevent recovery for the unlawfully provided aid. This argument was not allowed by the Union Courts and this is also not so surprising in light of the case law of the Union Courts in antitrust proceedings. Undertakings have used many arguments to mitigate the sanction for their anticompetitive behaviour. The Union Courts appear to make a difference in those cases between factors specifically related to the undertaking concerned and more general factors. The Commission enjoys a wide margin of discretion when setting a fine,8 although it should fit the fine to the individual conduct and characteristics of an undertaking.9 The factors relating specifically to an undertaking are thus factors which the Commission can take into account. By contrast, more general factors, such as the poor financial health of a sector,10 do not have to be taken into account. It is thus not unsurprising that an argument based on ‘social unrest’ is not accepted in another area of competition law, namely State aid law. An example where we can find a similar approach in antitrust 6

E.g. conservation of all woods in the Netherlands, or exploiting all cultural centers in a State. 7 E.g. the selling of wood, or exploiting cafés or restaurants. 8 See e.g. CJEU 3 September 2009, Joined Cases C-322/07 P, C-327/07 P and C338/07 P, ECLI:EU:C:2009:500 (Papierfabrik August Koehler and others v. Commission), par. 112; CJEU 29 June 2006, C-308/04 P, ECLI:EU:C:2006:433 (SGL Carbon AG v. Commission), par. 71; CJEU 15 October 2002, Joined Cases C-238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C-250/99 P to C-252/99 P and C-254/99 P, ECLI:EU:C:2002:582 (Limburgse Vinyl Maatschappij and others v. Commission), par. 464; CJEU 9 September 2015, T-104/13, ECLI:EU:T:2015:610 (Toshiba v. Commission), par. 184. 9 CJEU 15 July 2015, T-398/10, ECLI:EU:T:2015:498 (Fapricela v. Commission), par. 256. 10 CJEU 9 September 2015, T-92/13, ECLI:EU:T:2015:605 (Philips v. Commission), par. 275.

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proceedings and State aid proceedings is the argument that the fining or recovery decision would lead to insolvency or bankruptcy of the undertaking concerned. As the General Court stated with regard to the fining decision “[…] even if a measure taken by a Community authority were to lead to the liquidation of an undertaking, such a liquidation of the undertaking in its existing legal form – although it may adversely affect the financial interests of the owners, investors or shareholders – does not mean that the personal, tangible and intangible elements represented by the undertaking would also lose their value”.11 In State aid proceedings, the European Court of Justice has made clear that the insolvency of a beneficiary of unlawful aid or the fact that the beneficiary is subject to bankruptcy procedures does not take away the obligation of a Member State to recover the unlawfully provided aid.12 Furthermore, the argument that a recovery decision does not have to be executed, because the undertaking would become insolvent or bankrupt due to the recovery of the unlawful aid, does not appear to be successful.13 An examination of the factors which the Commission can take into account when determining the fine in antitrust proceedings, or the factors which the Commission does not have to take into account when setting such a fine, might thus give an indication with regard to (non-)applicable factors in State aid proceedings. The purpose of both the fining decision and the recovery decision is to restore competition on the market, although a big difference can be found in the nature of the decision taken. Whereas the recovery decision is not a penalty,14 the fining decision in antitrust proceedings is meant to deter.15 It is thus necessary to treat a comparison between State aid and antitrust law with caution in light of the different goals of the fining decision and the recovery decision. 11

CJEU 28 April 2010, T-456/05 and T-457/05, ECLI:EU:T:2010:168 (Gütermann & Zwicky v. Commission), par. 261. 12 CJEU 14 September 1994, C-42/93, ECLI:EU:C:1994:326 (Spain v. Commission), par. 32-33. 13 CJEU 27 June 2000, C-404/97 ECLI:EU:C:2000:345 (Commission v. Portugal), par. 52-53. The Commission does, by contrast, have the power to declare rescue and restructuring aid compatible with the internal market, see the additional online chapter on State aid by Jones and Sufrin (2014), p. 169-176, available at: http://global.oup.com/uk/orc/law/competition/jones_sufrin6e/, accessed on 15.12.2016. 14 CJEU 29 September 2000, T-55/99, ECLI:EU:T:2000:223 (CETM v. Commission), par. 164. 15 See e.g. CJEU 19 December 2013, Joined Cases C-239/11 P, C-489/11 P and C-498/11 P, ECLI:EU:C:2013:866 (Siemens, Mitsubishi and Toshiba v. Commission), par. 298

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However, there are perhaps more lessons to be drawn from the factors which the Commission does not have to take into account when setting a fine in antitrust proceedings. One example here is the factor of the ‘poor financial health of a sector’. This factor is, as mentioned, a factor which the Commission does not necessarily have to take into account when determining the amount of a fine in antitrust proceedings.16 In my opinion, it would thus also be highly unlikely that this factor would allow a Member State not to recover the unlawfully provided aid. By contrast, it might be possible for the Commission to hold the aid to be compatible under Article 107 (3) (b) TFEU,17 but this is a different question from the implementation of the recovery decision.

3.3 Private damages As shown by the contribution of Contreras, private damages in EU antitrust proceedings remain a hot potato. Contreras argues, amongst others, that it should be possible to disclose leniency documents in civil proceedings. The EU legislator, however, explicitly excluded this option.18 In order to protect the leniency programme as such, criminal sanctions should be possible. This would require a revision of the Private Damages Directive which imposes an obligation on Member States to prosecute certain persons, e.g. directors, for anti-competitive behaviour. This, perhaps far-reaching, intrusion into the jurisdictions of the Member States could lead to more problems. Criminal law sanctions should be effective, proportionate and dissuasive when a Member State enforces Union law with criminal law sanctions.19 The Commission has explained the effectiveness, 16

CJEU 9 September 2015, T-92/13, ECLI:EU:T:2015:605 (Philips v. Commission), par. 275. The Union Courts allow the Commission a wide margin of discretion in deciding which factors to take into account when setting a fine. Therefore, it might be possible that the Commission can take this condition into account in extraordinary circumstances. As stated though, the Commission is not obliged to do so. 17 See the additional online chapter on State aid by Jones and Sufrin (2014), p. 112, available at: http://global.oup.com/uk/orc/law/competition/jones_sufrin6e/, accessed on 15.12.2016. Jones and Sufrin refer to the more lenient stance of the Commission in the application of this article during the financial crisis. 18 Article 6 (6) (a) of Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, OJ L 349/1, 05.12.2014 19 See e.g. CJEU 26 September 2013, C-418/11, ECLI:EU:C:2013:588 (Texdata Software GmbH), par. 50; CJEU 3 May 2005, C-387/02, C-391/02 and C-403/02,

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proportionality and dissuasiveness of a sanction in a Communication from 2011 as follows: “Effectiveness requires that the sanction is suitable to achieve the desired goal, i.e. observance of the rules; proportionality requires that the sanction must be commensurate with the gravity of the conduct and its effects and must not exceed what is necessary to achieve the aim; and dissuasiveness requires that the sanctions constitute an adequate deterrent for potential future perpetrators.”20

In general, the Court of Justice leaves it up to the national courts to apply the principle of proportionality.21 This would probably lead to much litigation on the amount of the effective, proportionate and dissuasive sanction. Although interesting, it is thus, in my opinion, not clear whether this particular solution proposed by Contreras would lead to a better enforcement regime in countries which do not already have experience with criminal law sanctions for antitrust infringements. Another aspect which can be raised in this subparagraph, is whether private damages should be possible for a breach of the State aid rules. The developments in antitrust proceedings might be mimicked in the State aid domain. Metselaar refers in her contribution to a Dutch case where a competitor of a beneficiary of unlawful aid decided, unsuccessfully, to claim damages from the beneficiary of that aid. Van de Gronden raises the question whether a right to claim damages is inherent in Article 107 or 108 (3) TFEU. Based on the Dutch example one could argue that it is nearly impossible to claim damages in civil court from a beneficiary of aid.22 Perhaps it is thus time for the EU legislator to come up with a proposal for new legislation in this area. After all, competitors of a beneficiary of unlawful aid might have incurred damages attributable the actions of a ECLI:EU:C:2005:270 (Criminal proceedings against Silvio Berlusconi, Sergio Adelchi, Marcello Dell’Utri and Others), par. 65; CJEU 21 September 1989, 68/88, ECLI:EU:C:1989:339 (Commission v. Greece), par. 24. 20 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Towards an EU Criminal Policy: Ensuring the effective implementation of EU policies through criminal law, COM(2011) 573, p. 9. 21 See e.g. CJEU 5 July 2007, C-430/05, ECLI:EU:C:2007:410 (Ntionik Anonymi Etaireia Emporias H/Y, Logismikou kai Paroxis Ypiresion Michanografisis and Ioannis Michail Pikoulas v. Epitropi Kefalaiagoras), par. 54. 22 See also the interesting and provocative blogpost of Metselaar available at: http://leidenlawblog.nl/articles/private-enforcement-of-state-aid-law-dont-bother, accessed on 15.12.2016.

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Member State and the beneficiary of that aid. It is therefore only fitting that they are able to claim those damages, either from the Member State or the beneficiary of the aid.23 It might be practical to await the review of the Private Damages Directive in order to benefit effectively from experiences with private enforcement in the antitrust domain.24

3.4 Harmonization of procedural rules Another area where antitrust enforcement might prove to be an example for the enforcement of the State aid rules is the ‘decentralized enforcement regime’ which was introduced with Regulation 1/2003.25 Decentralization, as Sauter provides, “[…] could be seen as posing a risk to coherence, that increases or decreases with the availability of effective overall coordination. At the same time, it can also improve the effectiveness (scope) and legitimacy (both input and output) of EU competition law.”26 The effectiveness of decentralized enforcement of EU competition law rests on the application of those rules by national courts and national competition authorities. National courts in particularly are, since 2004, able to apply Articles 101 and 102 TFEU in their entirety. This greatly increased the overall enforcement of the EU State aid rules. A complete decentralized enforcement of the State aid rules might not appear to be the best idea. It would be strange to allow Member States, in the form of national competition authorities, to decide on the question of whether the State is allowed to provide aid. Nevertheless, Stucyk and Sabbadini reveal quite some unclarity for national courts with regard to their obligations under the stand-still clause. By contrast, Metselaar showed in her contribution that there are not that many problems with the enforcement of the State aid rules by the Dutch courts. In the enforcement of the antitrust rules, the procedural and sanctioning autonomy remains with the Member States. Petr and Outhuijse both pointed to some deficiencies in the enforcement of the antitrust rules on 23 Obviously the beneficiary of aid cannot claim to be unaware of the rules, see e.g. CJEU 20 March 1997, C-24/95, ECLI:EU:C:1997:163 (Land Rheinland-Pfalz v. Alcan Deutschland GmbH), par. 25, where the Court refers to the concept of a diligent businessman. 24 As mentioned, the Commission should review the directive and submit its observations to the Council and European Parliament by latest on 27 December 2020 on the basis of Article 20(1) of Directive 2014/104/EU. 25 Council Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 04.01.2003. 26 Sauter, Coherence in EU Competition Law, p. 59.

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national level. In the literature, it is therefore questioned “[…] whether the hybridity of common and divergent rules is sufficient not just for the coherence of the law but for its standing as ‘good’ law.”27 In other words, do we need harmonization of procedural rules to aid the public enforcement of EU competition law at national level? Rusu and Looijestijn-Clearie already hint at this possibility in their introduction. The Court of Justice is not too reluctant to interfere with procedural rules in the name of the effectiveness of EU law.28 Some procedural rules are thus partially ‘harmonized’ by the Court of Justice, whereas the EU legislator might be better suited to decide on this. The Commission started a public consultation to identify problems in the antitrust domain.29 This might lead to harmonization measures by the EU legislator. Harmonization of the procedural rules30 in EU competition law is perhaps the last major frontier which we have to cross to ensure the truly effective enforcement of EU competition law at the national level.

4. Conclusion As mentioned above, there are quite some unresolved issues in the enforcement of the EU competition rules. With this book, we aim to stir academic debate and provide suggestions to practitioners. We hope to contribute to the strengthening of the enforcement of EU competition rules at the national level. It is in this way that we hope that our contribution can add to the ultimate goal of strengthening enforcement. Many contributors 27

Maher, “Competition Law Modernization: an evolutionary tale?”, p. 733. See e.g. CJEU 18 June 2013, C-681/11, ECLI:EU:C:2013:404 (Schenker), par. 49, where the Court of Justice held that an NCA can only in exceptional circumstances decide not to impose a fine on an undertaking even though the EU antitrust rules were infringed. In some cases the Court appears to mix up the existence of a right, which is a matter for EU law to decide on, with the exercise of an EU right, which falls under the procedural autonomy. See also CJEU 5 June 2014, C-557/12, ECLI:EU:C:2014:1317 (Kone), par. 33; Veenbrink and Rusu, “Case Comment - Case C-557/12”, p.109-112. 29 ECN Plus: Empowering the national competition authorities to be more effective enforcers, available at: http://ec.europa.eu/competition/consultations/2015_effective_enforcers/index_en.h tml, accessed on 15.12.2016. 30 For a discussion on procedural autonomy and harmonization of procedural rules, see e.g. Van Den Bossche, “Private Enforcement, procedural Autonomy and Article 19(1) TEU: Two’s Company, Three’s a Crowd”, p. 49-56. See also Veenbrink and Rusu, “Case Comment - Case C-557/12”, p. 109-112, and cited literature for a discussion on procedural autonomy. 28

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to this book pointed to strengths and weaknesses in the decentralized enforcement of the EU competition rules. In order to boost this decentralized enforcement, it is necessary to acknowledge these strengths and weaknesses. This is important to make EU competition law ‘future proof’. As Van Oers stated in her foreword, universities and academic debate have an important role to play in the evolution of competition law enforcement. With this book, we try to contribute to this goal.

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Decisions of National Competition Authorities Authority for Consumers and Markets (Netherlands) ƒ Decision of the ACM 11 August 2015, Case 14.0705.27 (Natuurazijn) ƒ Decision of the ACM 22 December 2015, Case 13.0698.31; 15.0710.31; 15.0327.31; 15.0328.31 (Koel- en vrieshuizen) Czech Competition Authority ƒ Decision of the CCA 19 March 2004, Ref. No. S 223/03 ƒ Decision of the CCA 27 June 2006, Ref. No. S 233C/03 ƒ Decision of the CCA Chairman 2 February 2009, Ref. No. R 20, 21 and 22/2004

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ECtHR Case Law ƒ ECtHR 10 February 1983, No. 7299/75, 7496/76 (Albert and Le Compte v. Belgium) ƒ ECtHR 16 December 1992, No. 13710/88 (Niemietz v. Germany) ƒ ECtHR 23 October 1995, No. 15523/89 (Schmautzer v. Austria) ƒ ECtHR 23 October 1995, No. 15527/89 (Umlauft v. Austria) ƒ ECtHR 20 May 1998, No. 21257/93 (Gautrin and others v. France) ƒ ECtHR 16 July 2002, No. 37971/97 (Société Colas Est and Others v. France) ƒ ECtHR 21 May 2003, No. 34619/97 (Janosevic v. Sweden)

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ƒ ƒ ƒ ƒ ƒ ƒ ƒ

ECtHR 24 February 2004, No. 12547/86 (Bendenoun v. France) ECtHR 2 November 2006, No. 59909/00 (Giacomelli v. Italy) ECtHR 12 November 2007, No. 71362/01 (Smirnov v. Russia) ECtHR 16 January 2008, No. 74336/01 (Wieser and Bicos v. Austria) ECtHR 16 December 2008, No. 53025/99 (Frankowicz v. Poland) ECtHR 15 February 2011, No. 5672/09 (Heino v. Finland) ECtHR 14 March 2013, No. 24117/08 (Bernh Larsen Holding and others v. Norway) ƒ ECtHR 2 October 2014, No. 97/11 (DELTA PEKÁRNY v. Czech Republic)

National Courts Case Law Belgium Brussels Commercial Court ƒ Judgment of the Brussels Commercial Court (Dutch speaking section) 29 April 2015, AR 2014/52 655, unpublished Czech Republic Constitutional Court (Czech Republic) ƒ Constitutional Court 26 April 2010, Ref. No. III. ÚS 2309/09 (DELTA PEKÁRNY I) ƒ Constitutional Court 9 February 2016, Ref. No. IV. ÚS 4397/12 (Bakeries Cartel) Regional Court ƒ Regional Court in Brno 27 September 2007, Ref. No. 62 Ca 1/2007 (DELTA PEKÁRNY I) ƒ Regional Court in Brno 21 October 2010, Ref. No. 62 Ca 16/2009 (Bakeries Cartel I) ƒ Regional Court in Brno 20 September 2012, Ref. No. 62 Af 71/2012 (Bakeries Cartel II.) ƒ Regional Court in Brno 18 April 2013, Ref. No. 62 A 9/2013 (Schneider Electric)

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CONTRIBUTORS

LUKAS AMENT MANUEL CONTRERAS JOHAN VAN DE GRONDEN ANNE LOOIJESTIJN-CLEARIE ALKE METSELAAR MONIQUE VAN OERS ANNALIES OUTHUIJSE MICHAL PETR CATALIN S. RUSU PIERRE SABBADINI JULES STUCYK MARC VEENBRINK