European Competition Law Annual 2001: Effective Private Enforcement of EC Antitrust Law 9781472559456, 9781841131986

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LIST OF SPONSORS

Akin, Gump, Strauss, Hauer & Feld L.L.P. Contact: Prof. Jacques H. H. Bourgeois Brussels Office Avenue Louise 65 P.B. No. 7 B-1050 Brussels Tel: (32 2) 535 29 11 Fax: (32 2) 535 29 00 E-mail: [email protected] Cleary, Gottlieb, Steen & Hamilton Contact: Prof. Mario Siragusa Rome Office Piazza di Spagna 15 I-00187 Rome Tel: (06) 695 221 Fax: (06) 692 00 665 E-mail: [email protected] Howrey Simon Arnold & White Contact: James Rill Esq. 1299 Pennsylvania Ave., NW Washington, DC 20004 Tel: (001 202) 383 65 62 E-mail: [email protected] Fax: (001 202) 383 66 10

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Martinez Lage & Asociados Contact: Santiago Martínez Lage Claudro Coello 37 28001 Madrid Tel: (34 91) 426 44 70 Fax: (34 91) 577 37 74 E-mail: [email protected] Skadden, Arps, Slate, Meagher & Flom L.L.P. Contact: Prof. Barry Hawk Brussels Office 523 Avenue Louise B-1050 Brussels Tel: (32 2) 639 03 00 Fax: (32 2) 639 03 39 E-mail: [email protected] White & Case/Forrester Norall & Sutton Contact: Prof. Ian Forrester Brussels Office Place Madou Box 34 B-1210 Brussels Tel: (32 2) 219 16 20 Fax: (32 2) 219 16 26 E-mail: [email protected]

List of Sponsors

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TABLE OF CASES

EC Cases A. Leur-Bloem v. Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2, Case C–28/95 [1997] ECR I–4161. ACF Chemiefarma, Case 41/69 [1970] ECR 661. Ahlström Osakeyhtiö v. Commission (Woodpulp), Joined Cases C–89/85, C–104/85, C–114/85, C–116/85, C–117/85 and C–125/85 to C–129/85 [1993] ECR I–1307. Alcan, Case C–24/95 [1997] ECR I–1591. Amministrazione delle Finanze dello Stato v. Simmenthal, Case 106/77 [1978] ECR 629. Atlanta, Case C–465/93 [1995] ECR I–3761. Austria v. Commission, Case 99/98, [2001] ECR I–1197. Automec v. Commisssion (Automec II), Joined Cases T–24/90 and 28/90 [1992] ECR II–2223. Bagnasco e altri v. Banca Popolare di Novara e Cassa di Genova e Imperia, Joined Cases C–215/96 and C–216/96 [1999] ECR I–135. Baustahlgewebe v. Commission, Case C–185/95 P [1998] ECR I–8422. Béguelin, Case 22/71 [1971] ECR 949. BEMIM v. Commission, Case T–114/92 [1995] ECR II–147. Bergaderm, Case C–352/98 P [2000] ECR I–5291. Bernd Giloy v. Haupftzollamt Frankfurt am Main-Ost, Case C–130/95 [1997] ECR I–4291. Bloos II, Case 59/77 [1977] ECR 2359. Bosch, Case 13/61 [1962] ECR 97. Brasserie de Haecht v. Wilkin (de Haecht II), Case 48/72 [1973] ECR 77. Brasserie du Pêcheur and Factortame, Joined Cases C–46/93 and C–48/93 [1996] ECR I–1029. BRT v. SABAM, Case 127/73 [1974] ECR 51. C. Broekmeulen v. Huisarts Registratie Commissie, Case 246/80 [1981] ECR 2311. Camera Care, Case 792/79 R [1980] ECR 119. Casati, Case 203/80 [1981] ECR 2595. Cascades v. Commission, Case C–279/98 P, [2000] ECR I–9757. Cementhandelaren, Case 8/72 [1972] ECR 977. Cimenteries CBR a.o. v. Commission, Joined Cases T–25/95 a.o. [2000] ECR II–508.

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Commission Decision 1999/60/EC of 28 October 1998, Heating Pipes, OJ L 24/1 [1999]. Commission Decision 2000/400/EC of 10 May 2000, Eurovision, OJ L 151/18 [2000]. Commission Decision 85/206/EEC of 19 December 1984 Relating to a Proceeding under Article 85 of the EEC Treaty (Aluminium Imports from Eastern Europe), OJ L 92/1 [1985]. Commission Decision of 30 November 1994, Cement, OJ L 343/1 [1994]. Commission Decision of 13 July 1994, Cartonboard cartel, OJ L 243/1 [1994]. Commission Decision of 21 October 1998, Pre-Insulated Pipe Cartel, OJ L 24/1 [1999]. Commission Decision of 7 June 2000, Amino acids, OJ L 152/24 [2000]. Commission Decision of 8 December 1999, Seamless Steel Tube – IP/99/957 of 8.12.1999. Commission Decision of 9 December 1998, Greek ferries, OJ L109/24 [1999]. Courage Ltd v. Crehan, Case C–453/99, [2001] ECR I–6293. Cowan v. Trésor public, Case 186/87 [1989] ECR 195. Criminal Proceedings against J.J. Zwartveld et al., Case C–2/88 [1990] ECR I–3365. De Geus v. Bosch, Case 13/61 [1962] ECR 45. Dekker, Case C–177/88 [1990] ECR I–3941. Delimitis v. Henninger Bräu AG, Case C–234/89 [1991] ECR I–935. Dillenkofer, Joined Cases C–178–90 and 188–90 [1996] ECR I–4845. Dirección General de Defensa de la Competencia v. Asociación Espanola de Banca Privada (AEB) and Others, Case C–67/91 [1992] ECR I–4785. Dorsch Consult Ingenieurgesellschaft v. Bundesbaugesellschaft Berlin, Case C–54/96 [1997] ECR I–4961. Draehmpaehl v. Urania, Case C–180/95 [1997] ECR I–2195. DSR-Senator Lines v. Commission, Case C–364/99 P(R) [1999] ECR I–8733. DSR-Senator Lines v. Commission, Case T–191/98 R [1999] ECR II–2533. Dzodzi, Joined Cases C–297/88 and C–197/89 [1990] ECR I–3763. Eco Swiss China Time Ltd. v. Benetton International NV, Case C–126/97 [1999] ECR I–3055. Enichem Anic v. Commission, Case T–6/89 [1991] ECR II–1695. Estée Lauder, Case 37/79 [1980] ECR 2481. Factortame II, Case C–213/89 [1990] ECR I–2433. Factortime I, Case C–128/92 [1994] ECR I–1209. Familiapress, Case C–368/95 [1997] ECR I–3689. Fantask, Case C–188/95, [1997] ECR I–6783. Ford, Joined Cases 228–229/82 [1984] ECR 1129. Foto-Frost v. Hauptzollamt Lübeck Ost, Case 314/85 [1987] ECR 4199. France v. Commission, Case C–325/91 [1993] ECR I–3283. Francovich v. Italian Republic, Joined Cases C–6/90 and 9/90 [1991] ECR I–5357.

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G. Vaassen-Göbbels v. Management of the Beambtenfonds voor het Mijnbedrijf, ECJ [1966] ECR 258. Geigy v. Commission, Case 52/69 [1972] ECR 787. Germany v. Commission, Case C–240/90 [1992] ECR I–5367. Greenpeace, Case C–321/95 P [1998] ECR I–1651. Greenpeace, Case T–585/93 [1995] ECR II–2205. Grifoni, Case C–308/87 [1994] ECR I–341. Guérin Automobiles v. Commission, Case C–282/95 [1997] ECR I–1503. H.J. Banks & Co. Ltd v. British Coal Corp., Case C–128/92 [1994] ECR I–1212. Handels-og Kontorfunktionærernes Forbund I Danmark v. Dansk Arbejdsgiverforening [1989] ECR 3199. Hauptzollamt Bremen-Freihafen v. Waren-Import-Gesellschaft Krohn & Co., Case 74/69 [1970] ECR 451. Hoffmann La Roche, Case 85/76 [1979] ECR-461. Hoffmann-La Roche v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH, Case 107/76 [1977] ECR 957. Höfner and Elser v. Macrotron, Case C–41/90 [1991] ECR I–1979. Hüls v. Commission, Case C–199/92 P [1999] ECR I–4287. Hydrotherm v. Compact, Case 170/83 [1985] ECR 3016. J.J.Wouters (a.o.) v. Nederlandse Orde van Advocaten, Case C–309/99, judgment of 19 February 2002. Kerpen & Kerpen, Case 319/82 [1983] ECR 4173. Kingdom of the Netherlands and Gerard van der Wal v. Commission, Joined Cases C–174/98 P and C–189/98 P, [2002] ECR I–1577. La Cinq, Case T–44/90 [1992] ECR II–1. Lemmerz-Werke GmbH v. High Authority, Joined Cases 53 and 54/63 [1963] ECR 239. Limburgse Vinyl Maatschappij a.o. v. Commission, Joined Cases T–305/94, T–306/94, T–307/94, T–313/94, T–314/94, T–315/94, T–316/94, T–318/94, T–325/94, T–328/94, T–329/94 and T–335/94 [1999] ECR II–945. LTM v. Maschinenbau Ulm, Case 56/65 [1966] ECR 235. Marshall v. Southhampton and South-West Area Health Authority (Marshall II), Case C–271/91 [1993] ECR I–4367. Masterfoods v. HB Ice Cream, Case C–344/98 [2000] ECR I–1214. Mulder and Others v. Council and Commission, Joined Cases C–104/89 and C–37/90 [1992] ECR I–3061. Municipality of Almelo et al. v. Energiebedrijf Ijsselmij NV (Almelo), Case C–393/92 [1994] ECR 1477. Musique Diffusion Française v. Commission, Joined Cases 100 to103/80 [1983] ECR 1908. Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG, Case 102/81 [1982] ECR 1095. Nungesser v. Commission, Case 258/78 [1982] ECR 2015. NV Algemene Transport- en Expeditie Onderneming Van Gend en Loos v. Nederlandse Administratie der Belastigungen, Case 26/62 [1963] ECR 1.

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Océano Grupo, Joined Cases C–240/98 to C–244/98 [2000] ECR I–4941. Orkem v. Commission, Case 374/87 [1989] ECR 3283. Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs und Zeitschriften Verlag GmbH & Co. KG et al., Case C–7/97 [1998] ECR I–7791. Otto v. Postbank, Case C–60/92 [1993] ECR I–5683. Pasquale Foglia v. Mariella Novello, Magliano Alfieri (II), Case 244/80 [1981] ECR 3045. Peterbroeck, Van Campenhout & Cie SCS v. Belgian State, Case C–312/93 [1995] ECR I–4599. PreussenElektra AG, Case C–379/98, [2001] ECR I–2099. Rechberger, Case C–140/97 [1999] ECR I–3499. Remia v. Commission, Case 42/84 [1985] ECR 2545. Rewe v. Hauptzollamt, Case C–158/80 [1981] ECR 1805. Rhône – Poulenc v. Commission, Case T–1/89 [1991] ECR II–867. Sacchi, Case 155/73 [1974] ECR 409. Sandoz v. Commission, Case C–277/87 (Summary publication) [1990] ECR I–45. SCA Holding v. Commission, Case T–327/94 [1998] ECR II–1373. SFI v. Belgium, Case C–85/97 [1998] ECR I–7447. Srl CILFIT & Lanificio di Gavardo SpA v. Ministry of Health (I), Case 283/81 [1982] ECR 3415. Stergios Delimitis v. Henninger Bräu AG, Case C–234/89 [1991] ECR I–935. The Netherlands v. Commission and Gerard van der Wal Joined Cases C–174/98 P and C–189/98 P Joined Cases C–174/98 P and C–189/98 P [2000] ECR I–1. Tournier, Case 395/87 [1989] ECR 2521. Tréfileurope v. Commission, Case T–141/89 [1995] ECR II–856. VAG France, Case 10/86 [1986] ECR 4071. Van Schijndel and Van Veen v. SPF, Joined Cases C–430/93 and C–431/93 [1995] ECR I–4705. Van Uden, Case C–391/95 [1998] ECR I–7122. Walt Wilhelm et al., Case 14/68 [1969] ECR 1. Zuckerfabrik Süderdithmarschen, Joined Cases C–143/88 and C–92/89 [1991] ECR I–413. Zwartveld, Case C–2/88 [1990] ECR I–4405.

Cases from EC Member States: France:

CA de Versailles, 5 Mai 1988, Gazette du Palais 1986, 876. CA de Lyon, 13 June 1960, Dalloz 1961, 148 (note by Goré). CA de Lyon, 2 June 1988, Gazette du Palais 1988, 1, juridique, 669, Quotidien juridique, 2 March 1989, no. 26, 15.

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CA de Lyon, 2 June 1988, Petites affiches 27 June 1988, 6. CA de Paris, 1st October 1980, Dalloz 1983 IR, 222 (observations by Gavalda and de Leyssac), Revue trimestrielle de droit commercial 1983, 791 (observations by Alfandari et Jeantin). CA de Paris, 20 December 1971, Gazette du Palais 1972, 702. CA de Paris, 23 March 1989, Gazette du Palais 1989, 551, Revue trimestrielle de droit civil 1989, 537 (observations by J. Mestre). CA de Paris, 29 May 1986, Dalloz 1986, informations rapides, 308. CA de Paris, 4 May 1961, Jurisclasseur édition générale 1962, II, n12517 (note by Gendrel and Lafarge). CA de Paris, 5ème chambre, 12 December 1996, Bulletin rapide de droit des affaires 1997/3, 12, Revue juridique de droit des affaires 1997/5, no. 665. CA de Paris, 5ème chambre, 3 November 1982, Gazette du Palais 1984/1 juridique, 58 (note by Laurent), Dalloz 1985, Informations rapides, 219 (note by Ch. Gavalda an Cl. Lucas de Leyssac). CA Lyon, 19 October 2000, Juris-data no. 138 087. CA Nancy, 27 November 1987, Gazette du Palais 1988.1.251. CA Paris, 13 May 1993, Europe, July 1993, comm. no. 300, Journal du droit international, 1993, 957 (note by L. Idot). CA Paris, 13 October 2000, Juris-data no. 126287. CA Paris, 15 February 2001, Dalloz 2001, 1465. CA Paris, 18 February 2000, Volkswagen – Dalloz affaires 2000, AJ, 195. CA Paris, 2 December 1999, Dalloz affaires, 2000, AJ, 92. CA Paris, 20 June 2000, Dalloz affaires, 2000, 382. CA Paris, 23 September 1999, SA Fleury Michon v/Sté Aoste Holding – Jurisdata no. 024258. CA Paris, 29 September 1999, SARL Bourgogne Funéraire – Juris-data no.118625. CA Paris, 30 September 1998, Europe, December 1998, comm. no. 410. CA Pau, 11 May 1999, SARL Anais – Juris-data no. 041680. CA Toulouse, 1 March 1999, Cejibe – Juris-data no. 040 352. Cass. Civ., 16 April 1985, n8315.527, Jurisclasseur édition générale 1985, IV, Cass. Civ., 1ère chambre, 16 July 1959, Bull. civ. I, no. 358, 298. Cass. Civ., 1ère chambre, 26 January 1983, Bull. civ. I, no. 39, 34, Dalloz 1983, 317 (note by A. Breton), Revue trimestrielle de droit civil 1983, 749 (observations by F. Chabas), 773 (observations by J. Patarin). Cass. Civ., 1ère, 24 May 1989, Bull. civ., I, no. 212. Cass. Civ.1ère, 28 May 1984, Bull. I, no. 172 . Cass. Civ.1ère, 30 January 1985, Bull. I, no. 45. Cass. Civ.1ère, 30 June 1998, Juris-data no. 003069. Cass. Com., 1 December 1998, Sté Sodifa – Europe February 1999, comm. no.81. Cass. Com., 1 March 1982, no.8015.834, Bull. civ. IV, 69. Cass. Com., 10 July 1989, Bodson – Bull. civ. IV, 145. Cass. Com., 10 July 1989, Bull. IV, no. 216.

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Cass. Com., 10 October 2000, SA Cachia Holding – Juris-data n° 006177, Les Petites Affiches, 20 April 2001, no. 79. Cass. Com., 10 October 2000, Sté Catamini v/Sté Cofotex – Les Petites Affiches, 20 April 2001, no. 79, 5. Cass. Com., 12 July 1993, Bonet – Europe, November 1993, no. 446. Cass. Com., 13 January 1998, Sté Gift Shop – Europe, December 1998, comm. no. 410. Cass. Com., 13 January 1998, Sté L’Oceane Automobiles – Europe, December 1998, comm. no. 410. Cass. Com., 14 December 1999, Mme Sterczinski – Bull. IV, no. 227. Cass. Com., 14 December 1999, Zilliotto – Dalloz affaires, 2000, 79. Cass. Com., 14 February 1995, Bull. IV, no. 48, Europe, April 1995, comm. no. 146. Cass. Com., 14 February 1995, Bull. IV, no. 48. Cass. Com., 14 January 1992 (2 decisions), Bull. IV, nos.12 and 13. Cass. Com., 14 January 1992, (2 decisions), Bull. IV, nos. 12, 13. Cass. Com., 15 July 1992, Bull. IV, no. 275. Cass. Com., 15 July 1992, Bull. IV, no. 92. Cass. Com., 15 October 1996, Europe, December 1996, comm. no. 471. Cass. Com., 16 April 1991, no. 915.340, Jurisclasseur édition G. 1991, IV, 233. Cass. Com., 17 July 1990, Dalloz 1991 Jur. 471 (note by Reynés), Jurisclasseur éd. G, 1990.II.20436 (note by Virassamy). Cass. Com., 17 November 1998, Pluri-Publi – Bull. IV, no. 271, Europe, January 1999, comm. no. 32. Cass. Com., 18 February 1992, Bull. IV, no. 78. Cass. Com., 18 February 1992, no. 8712.844, Jurisclasseur édition générale 1992, IV, 127, no. 1161, Revue trimestrielle de droit civil 1992 (note by J. Mestre). Cass. Com., 2 December 1986, no.8510.547, Bull. Civ. IV, 197, Revue du droit de la propriété industrielle 1987, 11, Jurisclasseur édition générale 1987, IV, 50. Cass. Com., 20 January 1987, Bull. IV, no. 21. Cass. Com., 20 March 1990 (2 decisions), Bull. IV, no. 85 et 86. Cass. Com., 20 March 1990, Bull. IV, no. 85 et 86, Dalloz 1991, somm. 253. Cass. Com., 21 June 1994, Bull. IV, no. 235. Cass. Com., 22 January 1991, no.8816.188, Revue juridique de droit des affaires 1991/3, 202. Cass. Com., 23 February 1994, Bull. IV, no. 74. Cass. Com., 23 March 1999, Volkswagen – Revue trimestrielle de droit commercial, 2000, 255. Cass. Com., 24 March 1991, Quantel, Jurisclasseur éd. G, II. 21887 (note by Virassamy). Cass. Com., 24 October 2000, C.S.M. v. Caulet – Dalloz affaires 2000, 429 (observations by A. Marmontel), Les Petites Affiches, 20 April 2001, n° 79, p. 10–11. Cass. Com., 25 March 1991, no. 89–10.800, Dalloz 1991, 124. Cass. Com., 25 March 1991, nos. 8910.800 and 8911.124.

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Cass. Com., 26 January 1999, Soc. Automobile J.Y. Berthier – Les Petites affiches, 1999, no. 58. Cass. Com., 26 January 1999, Sté Automobiles J.Y. Berthier – Bull. IV, no. 29, Europe, June 1999, comm. no. 116. Cass. Com., 26 March 1979, no. 7711.290, Bull. civ. IV, no. 113, 88, Jurisclasseur édition G. 1979, II, n19249 (note by Jeantet). Cass. Com., 26 May 1992, no. 9013.499. Cass. Com., 27 April 1981 – Dalloz 1982, p. 51. Cass. Com., 27 February 1996, Bull. IV, no. 63, Europe, May 1996, comm. no. 209. Cass. Com., 27 February 1996, Europe, April 1996, comm. no.158. Cass. Com., 27 June 1989, Jurisclasseur éd. G, 1990.II.21530. Cass. Com., 3 January 1996, no. 9413.169. Cass. Com., 4 January 1994, Bull. IV, no. 2. Cass. Com., 4 June 1991, Bull. IV, no. 202. Cass. Com., 4 June 1996, Europe, June 1996, comm. no. 256. Cass. Com., 6 April 1993, Bull. IV, no. 137. Cass. Com., 6 April 1999, Daubresse – Europe, January 2000, comm. no. 25. Cass. Com., 6 April 1999, Phildar – Revue trimestrielle de droit commercial, 2000, 257. Cass. Com., 6 May 1996, France Telecom – Europe, July 1996, comm. no. 287. Cass. Com., 7 April 1998 (2 decisions), Bull. IV, nos. 125 et 126. Cass. Com., 7 December 1993, Bull. IV, no. 450. Cass. Com., 7 February 1995, Bull. IV, no. 35. Cass. Com., 7 February 1995, no.9311.378, Revue juridique de droit des affaires 1995/6, nos. 733 et 797. Cass. Com., 7 October 1997, Bull. IV, no. 245. Cass. Com., 9 April 1996, Europe, June 1996, comm. no. 256. Cass. Com., 9 July 1996, Bull. IV, no. 204. Cass. Com., 9 Mai 1990, no. 8815.625, Dalloz 1990, 509 (note by P. Jourdain). Cass. Com., 9 May 1990, Bull. IV, no.136. Cass. Com., 9 November 1993, Bull. IV, no. 386. Cass. Com., 9 October 1999, Le Brasseur v/Sté Automobile des garages Sorin – Revue trimestrielle de droit europeén, 2000.256, obs. by S.P.P. Cass. Crim., 14 December 1995, R. Lebourgeois – Bull. crim., no. 384, 1126. Cass. Crim., 16 February 1991, Bull. crim., no. 210. Cass. Crim., 16 May 1991, Bull. crim., no. 210. Cass. Crim., 16 May 1991, Bull. crim., no. 211. Cass. Crim., 16 November 1999, Bull. crim., no. 263. Cass. Crim., 17 March 1992, Bull. crim., no. 114. Cass. Crim., 2 February 1994, Bull. crim., no. 48. Cass. Crim., 25 November 1992, Bull. crim., no. 389. Cass. Crim., 29 January 1997, Bull. crim., no. 40. Cass. Crim., 31 March 1992, Bull. crim., no.138. Cass. Soc., 22 June 2000, Les Petites affiches, 20 April 2001, no. 79.

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Cass. Soc., 25 January 1996, Europe, April 1996, no. 158. Cass., Crim., 16 November 1999, Bull. crim., no. 263. CE, 12 February 1997, FFSA, Europe, May 1997, comm. no. 161. CE, 8 November 1996, FFSA, Europe, December 1996, comm. no. 468. Cour de cassation, 1ère chambre civile, 3 December 1985, n8412.295, Jurisclasseur édition G. 1986, IV, 63. T. com. de Nanterre, 29 May 1998, Les Petites Affiches, 1999, no.159 (note by Fl. Le Cohennec). T. Com. Paris, 30 May 2000, Dalloz affaires, 2000, 349. T. Com., Paris, 10 October 2000, Sté OCP Repartition v/ Sté Laboratoires Merck – Juris-data no.134562. T. com., Paris, 22 October 1996, Europe, December 1996, comm. no. 471. TGI, Paris, 31 January 1986, Magne v. VAG – Gazette du Palais 1986/2, somm. 445. Germany BGH 10.11.1987, Neue Juristische Wochenschrift 1988, 2175. BGH 19.6.1986 VersR 1986, 1019, 1020 f.; OLG Nürnberg 10.12.1992 TranspR 1993, 138, 139. BGH 23.10.1979, Neue Juristische Wochenschrift 1980, 1224. BGH 6.3.1980, Neue Juristiche Wochenschrift 1980, 2522. BGH Case KZR 23/96 Depotkosmetik, Wirtschaft und Wettbewerb/Entscheidungssammlung DE-R 206 (BGH 1998). BGH Case KZR 3/68 Fruchtsäfte, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 1000 = 1969 Neue Juristische Wochenschrieft 978. BGH Case KZR 43/71 Eiskonfekt I, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 1226, 1231 sq. (BGH 1972); case KZR 18/84 Schaumstoffplatten, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 2565, 2567 (BGH 1989). BGH Case KZR 43/71 Eiskonfekt, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 1226, 1227 = 1972 Neue Juristische Wochenschrieft 2180, 2181. BGH Case NZR 15/86 Cartier-Uhren, Wirtschaft und Wettbewerb/ Entscheidungssammlung BGH 2451, 2457 (BGH 1987). BGH Case NZR 21/78 BMW-Importe, Wirtschaft und Wettbewerb/ Entscheidungssammlung BGH 1643, 1645 (BGH 1979). BVerG Case 1 BvR 1036/99, 2001 Zeitschrift für Wirtschaftsrecht 350. BVerG Case 89/1993, 155. RG 31.12.1898, RGZ 43, 56. RG 8.6.1895, RGZ 35, 63.

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Italy Corte d’appello di Milano 12/07/1995, Ceit/Novamont-Ciuffo Gatto. Corte d’appello di Milano 15/05/1996, Auchan v. Faid. Corte d’appello di Milano 20/09/1995, Sanguinetti/Ania. Corte d’appello di Milano 21/3/1993, BB Center Parabella. Corte d’appello di Milano 29/09/1999, Inaz Paghe v. Consiglio Nazionale Ordine Consulenti del Lavoro. Corte d’appello di Milano 31/01/1996, Comis/Ente Fiera Milano. Corte d’appello di Milano, 18/06/1995, Telsystem v. Sip. Corte d’appello di Milano, of 30 May/3 June 1995, Ceit/Novamont-Ciuffo Gatto (final judgment of 5 June/12 July 1996). Corte d’appello di Milano, Order 10/16 January 1996, SCAMM S.r.l./FAI Komatsu Industries S.p.a. Corte d’appello di Milano, Order 7/15 July 1992, A.V.I.R. S.p.a./ENEL. Corte d’appello di Napoli, Order 13/14 July 1993, V.E.A.R./R.S. Components Ltd. Corte d’appello di Roma, Omnitel/Telecom. Corte d’appello di Roma, Order 20/1/1993, Gruppo Sicurezza v. Aeroporti di Roma. Corte d’appello di Roma, Order 20/28 December 1994, S.r.l. Giovanni Grassano/Consorzio obbligatorio degli olii usati. Corte d’appello di Trieste, Order 12/16 May 1995, Duratorre-Del Rivo/Litoranea Editoriale s.r.l. Corte di Cassazione, 14 May 2001, Istituto Biochimico Italiano Lorenzini/ Bayer AG.. Corte di Cassazione, Avir/ENEL, Telsystem/Sip and Comis/Ente Fiera di Milano, Decisions of 15 July 1992, and 5 February 1996. Pretura di Firenze, 16 September 1980, in G.A.D.I., 1980, 1334. Pretura di Milano 19 July 1991, in Foro pad., 1992, 166. Pretura di Milano, 15 February 1973, in G.A.D.I., 1973, 295. Pretura di Monza, 20 December 1989, in G.A.D.I., 1990, 283. Pretura di Monza, 26 July 1984, in G.A.D.I., 1985, 215. Pretura di S. Donà del Piave 9 November 1981, ivi , 1981, 1443. Pretura di Venezia 29 October 1992, Foro italiano, 1994, I, 933. Tribunale Benevento, 8 April 1999, in Giur. mer., 1999, 703. Tribunale di Firenze, 15 May 1993, 1994, 3215, e 22 marzo 1995, 1995, 3302. Tribunale di Firenze, Order 5 March 1998 in G.A.D.I., 1998, n. 3798 e 7 maggio 1998, n. 3809. Tribunale di Milano, 4 July 1985, in G.A.D.I., 1985, 1940 e 6 July 1989, 1989, 50. Tribunale di Monza 11 December 1993, 1994, 491; Trib Torino, Lego System A.S. e Lego S.p.a./Lima S.r.l., Orders 20 November 1998 e 22 December 1998, Rivista di diritto industriale, 1999, II, 3. Tribunale di Roma, 16 March 1994, in G.A.D.I., 1994, 749.

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Tribunale di Roma, 16 March 1995, 1995, 3302 e 8 June 1995, 1995, 3322. in G.A.D.I. United Kingdom Apple Corps Ltd v. Apple Computer Inc. [1992] 1 Common Market Law Review 969 (High Court). Askin v. Borchard [2000] UK CLR 495 (High Court). British Steel v. Customs and Excise Commissioners [1997] 2 All ER 366. De Cubber v. Belgium A/86 (1984). Findley v. United Kingdom A/110 (1997). Iberian UK v. BPB Industries Ltd [1996] 2 Common Market Law Reports 601 (High Court). Morgan Stanley Dean Witter v. Visa, judgment of 2 May 2001 (High Court). MTV Europe v. BMG Record (UK) Ltd. [1997] European Law Reports 100 (CA). Society of Lloyd’s v. Clementson [1995] Common Market Law Reports 693 (CA). Synstar Computer Service (UK) Ltd. v. ICL (Sorbus) Ltd., judgment of 30 March 2001 (High Court) reported in The Times, May 1 2001. Tinsley v. Milligan [1992] Ch. 310 (CA) [1993] 3 Weekly Law Reports 126.

Arbitration Cases & Cases from Non-EU Jurisdictions 1994/95 Rep. EFTA Ct., 113, Mattel/Lego E-Gr. 14, 1996 Common Market Law Review, 313. 1994/95 Rep. EFTA Ct., 15, Restamark E-Gr. 7-31, 1995 Common Market Law Review, 161. 1994/95 Rep. EFTA Ct., 59 ff. Scottish Salmon Growers, 1995 Common Market Law Review 851 et seq.. 1998 Rep. EFTA Ct., 38 ff. Husbanken I, 1998 Comon Market Law Review, 281 et seq. 1998 Rep. EFTA Ct., 4, Opel Norge, 36 Common Market Law Review 1, 1999, 147 ff. ATF 118 II 193. BGE 104 II 175 Adams. Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946). Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation Ltd., [1979] 3 WLR 471, 479. CA Paris, 14 October 1993, Revue de l’Arbitrage, 1994, 164 (note by Ch. Jarrosson), Europe, April 1994 (comm. by L. Idot) no.155. CA Paris, 19 May 1993, Journal de droit international, 1993.957, note by L. Idot; Revue de l’Arbitrage, 1993.645 (note by Ch. Jarrosson).

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ECHR Case no. 56672/2000, commented in (2000) 21 Human Rights Law Journal 112. ECHR, 8 June 1976, Engel, Ser. A, vol. 22. ECHR, 21 February 1984 Öztürk, Ser. A, vol 73. ECHR, 25 August 1987, Lutz, Ser. A, vol. 123. ECHR, 7 October 1988 Salabiaku, Yearbook of the European Convention of Human Rights, 1988. ICC Award n°1512, Yearbook Commercial Arbitration, 1976. Kelly v. Kosuga, (1959) 358 US 516, 520–21. Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir. 1964). Metrix Warehouse, Inc. v. Mercedes-Benz, 828 F.2d 1033 (4th Cir. 1987), cert.den. 108 S.Ct. 1753 (1988). Mitsubishi Motor Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). Mozart Co. v. Mercedes Benz, 833 F.2d 1342 ( 9th. 1987). Spectrum Sports, Inc. v. McQuillan .506 U.S. 447 (1993). Swiss Trib. Fed., 28 April 1992, Revue de l’Arbitrage 1993, 124 – (note by L. Idot). U.S. v. Watchmakers of Switzerland Info. Center, Inc., 1963 Trade Cases (CCH) § 70,600 (S.D.N.Y. 1962). United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (findings of fact); 87 F. Supp. 2d 30 (D.D.C. 2000) (conclusions of law).

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On 1–2 June 2001 the European University Institute (EUI) hosted the sixth Annual EC Competition Law and Policy Workshop. This programme started in 1996 by professors Giuliano Amato and Claus-Dieter Ehlermann at the Robert Schuman Centre of the EUI and it brings together every year top-level policy-makers, academics and legal specialists to discuss critical issues of EC competition policy. The first Workshop (1996) focused on the problems of implementing competition policy in a federal context.1 The second (1997) debated the objectives of competition law and policy.2 The third (1998) analysed how to ensure effective competition in the rapidly evolving market of telecommunications.3 The fourth (1999) examined selected problems of state aid control.4 The fifth (2000) was devoted to the debate about the modernisation of EU antitrust law.5 The sixth edition of the Workshop dealt with the issue of effective private enforcement of EC antitrust law. This publication includes a transcript of the discussions and a collection of the written contributions presented by the participants at the Workshop. The timing of the event was significative. It took place two years after the European Commission published its groundbreaking White Paper containing its suggestions for the reform of EC competition law enforcement6 and eight months after the Commission’s official proposal for a regulation amending the monumental Regulation 17.7 1

Ehlermann C.-D. and Laudati L.I., eds. (1997), The Robert Schuman Centre Annual on European Competition Law 1996, The Hague, Kluwer Law International. 2 Ehlermann C.-D. and Laudati L.I., eds. (1998), European Competition Law Annual 1997 — Objectives of Competition Policy, Oxford, Hart Publishing. 3 Ehlermann C.-D. and Gosling L., eds. (2000), European Competition Law Annual 1998 — Regulating Communications, Oxford, Hart Publishing. 4 Ehlermann C.-D. and Everson M., eds. (2001), European Competition Law Annual 1999: State Aid Control in the European Union—Selected Problems, Oxford, Hart Publishing. 5 Ehlermann C.-D. and Atanasiu I., eds. (2001), European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, Oxford, Hart Publishing. 6 European Commission, White Paper of 28 April 1999 on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, COM(1999) 101 final, OJ [1999] C 132/1. 7 Commission Proposal for a Council Regulation on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty and Amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 (“Regulation Implementing Articles 81 and 82 of the Treaty”), COM(2000) 582 final, OJ [2000] C 365E/284.

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The 2001 Workshop comes as a sequence to the 2000 one and it focuses on a very important parameter of the whole modernisation debate, private enforcement of EC competition law. It should be stressed that an effective private enforcement was stated to be one of the main objectives of the reform. Indeed, many pertinent points were raised throughout the 2000 Workshop proceedings and it was felt that a more detailed analysis of this fundamental issue was wanting. The proceedings of the 2001 Workshop were structured in four sessions. Panel 1 was devoted on the substantive remedies available for an effective private enforcement of EC antitrust, whereas Panel 2 examined the procedural issues involved. Panel 3 dealt with a very specific albeit extremely important aspect, that of private arbitration. Finally, Panel 4 debated a different issue of fundamental interest, the possibility to introduce also a system of criminal enforcement of EC competition law. The Workshop revealed first of all a general consciousness that the reforms envisaged by the Commission would very soon come to reality and that an entirely new system of enforcement would exist, where the Commission would still enjoy its central policy role, but other players would also be present at a decentralised level: national competition authorities and national courts.8 Secondly, there was a broad consensus that an effective private enforcement of EC competition rules at national courts would be a welcome development, bearing in mind the current reduced role of private actions in national courts. However, the best model for Europe would be a mixed system, where public and private enforcement will be complementary to each other. Thirdly, it was thought that although the proposed reform and the measures envisaged by the Commission as to the application of EC competition law by national courts were in the right direction, at the same time they were not sufficient to lead to an enhanced private enforcement. The whole issue of private enforcement had to be seen in an autonomous way, by introducing powerful incentives at the Community and national levels. Fourthly, the debate on criminal enforcement showed that, at least with reference to imprisonment, this was still a sensitive issue, notwithstanding that public enforcement could be made more effective by adding individual fines to existing corporate ones. Background. The decentralised system of competition enforcement that the Commission advocates in its White Paper and in its Draft Regulation will have profound consequences in the way EC competition law is enforced. Most commentators agree that certainly an impact will be felt in private antitrust enforcement, which is expected to grow from a rather meagre to a more complete and mature system. In the White Paper the Commission has in a very powerful way referred to this perspective by admitting that the current system is hardly encouraging for 8 This holds true for Article 81 EC, since in the new system the Commission’s exemption monopoly will be abolished and this provision will be enforced as a whole by the same authority or in the same forum. A parallel competence system, at least as far as national courts are concerned, has obviously existed for Article 82 EC.

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such a development. In its words, ‘since national competition authorities and courts have no power to apply Article 81 (3), companies have used this centralised authorisation system . . . to block private action before national courts and national competition authorities. This has undermined efforts to promote decentralised application of EC competition rules. As a result, the rigorous enforcement of competition law has suffered and efforts to decentralise the implementation of Community law have been thwarted’.9 Indeed, private enforcement of EC antitrust law as part of its effective decentralisation is considered by the Commission as one of the main objectives of the proposed reforms, those objectives being firstly the refocusing of the Commission’s activity towards combating the most serious restrictions of competition through the ending of the system of notification and authorisation while ensuring an intensified ex post control, secondly the decentralised application of the competition rules while maintaining consistency throughout the Community, and thirdly the easing of the administrative constraints on undertakings while providing them with sufficient legal certainty.10 The advantages of private antitrust enforcement have long been stressed in the United States, where studies estimate its ratio to public antitrust suits between 10 to 1 and 20 to 1. Invariably, two basic functions are attributed to private enforcement of public laws, and particularly of antitrust laws. One appertains to corrective justice. Private actions ensure that those who are harmed by anticompetitive conduct are compensated. The other, maybe more important, function of private enforcement is the deterrent effect of such action, particularly of civil actions for punitive damages. A further advantage is that in this way the weaknesses of public enforcement, most notably the ‘enforcement gap’ generated by the perceived inability of public enforcement to deal with all attention-worthy cases, are counter-balanced. Private enforcement, thus, acquires an instrumental role, which explains the private litigant’s status in the US as ‘private attorney-general’. However, the US system avails itself of a whole array of weapons that make private suits very efficient: treble damages, pre-trial discovery, class actions, contingency fees, not to mention a far more unitary legal and judicial system than the European one. The question, therefore, that dominated the Workshop proceedings was not whether to have (more) private enforcement of antitrust law in Europe but rather how. A preliminary question is to define private enforcement. If private enforcement were to be given a rather broad meaning, i.e., if it meant enforcement of EC antitrust rules through the initiative or intervention of private parties, then one could argue that such a definition seems to cover cases of private parties acting also as complainants to competition enforcement agencies. In the Workshop proceedings this was defined as ‘privately triggered public enforcement’. Indeed, if the criterion is so general, the conclusion is that already there is a sort of private enforcement at the central level, i.e. at the EC Commission 9 10

Para 6 of the White Paper. Paras 41, 42, 74 and 75 of the White Paper.

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level. Complainants in EC competition cases, more as a result of jurisprudence than of EC legislation, enjoy a rather elaborately defined legal status, and are also accepted as players in the antitrust enforcement. However, this is not how we conceive private antitrust enforcement. Therefore, we can delimit further that concept, by noting that any private parties involved in the enforcement of antitrust rules must do so as litigants in a litigation procedure as against the perceived offenders of those rules. However, even so, such delimitation would not avoid including cases, where private parties participate in an already existing litigation, which is primarily between an administrative authority and a defendant. In such cases private parties may join such litigation as interveners, if they can prove a direct and legitimate interest. This could be the case at the Community level, e.g. a third party intervention at the Court of First Instance (CFI) level, or at the national level depending on national procedural rules, e.g. a third party intervention in a litigation where the competition law offender appeals against a decision of a national antitrust authority. However, such intervention cannot qualify this litigation as private antitrust enforcement. The characteristic element of the latter is that it leads to some sort of civil sanction as against the offender: damages, restitution, injunctions, voidness of a contractual relationship, non-invocability of certain claims based for example on contract or on unfair competition law. Therefore, the mere intervention of a private party in a public enforcement litigation, does not turn the latter into a private enforcement one, although such intervention may be beneficial to the effectiveness of public enforcement (for example because of pooling of public and private resources in the detection of a cartel).11 As a consequence, a more appropriate definition of private enforcement would refer to a litigation, in which private parties advance independent civil claims or counter-claims based on the EC competition provisions. Such a definition would basically cover civil litigation, but it would be broad enough to encompass third party civil claims attached to civil/administrative proceedings, when courts exercise a judicial review of national competition authorities’ decisions, if this is permissible under national procedural law. Finally, another version of private enforcement is when a national antitrust authority, or, indeed, the EC Commission intervene as amici curiae in civil proceedings between private parties. The litigation in such cases will retain basically the characteristics of private enforcement, but with some additional elements of administrative enforcement. These categorisations prove that a clear-cut definition of private enforcement is not always easy. At the same time it becomes clear that an effective system of private enforcement should by no means be thought of as antagonistic to the 11 Even such intervention in public enforcement cases may be relevant for private enforcement, when the latter follows in time and relies on the former, if for example facts established in a public enforcement litigation become binding on the parties of a subsequent civil litigation, as is the case in English law.

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public enforcement model. Instead, the two models can ideally work in a complementary manner. Indeed, such complementary function was advocated by the majority of the participants and there are valid reasons to believe that such a mixed model may well be the system of tomorrow. The Workshop Proceedings. The Annual EC Competition Law and Policy Workshops hosted by the EUI in Florence provide an ideal forum for the informal debate of critical issues in EU competition policy among policy makers and actors involved in EU competition law implementation. The sixth edition of the Workshop brought together a group of 33 top-level participants, including: high-ranking Commission officials; very senior judges from the EU, EFTA and Member States courts; academics; and outstanding practitioners in the field of antitrust, Community, and arbitration law. The event was co-chaired by ClausDieter Ehlermann and Karel van Miert. The proceedings of the Workshop were opened by Commissioner Mario Monti. Professor Monti reiterated that a more effective private enforcement of EC competition rules constituted an important objective of the whole reform. He went on to advocate the complementary functions of public and private enforcement that would lead to a strengthening of the impact of EC competition rules. In this combined enforcement system the victims of anticompetitive practices, including consumers, must have the opportunity to avail themselves of effective remedies in the form of decentralised private enforcement, in order to protect their rights and to obtain compensatory damages for losses suffered.12 That would also bring the implementation of EC antitrust law closer to the citizen. The Commission under the proposed system would retain its central position and function, especially in the legislative development of EC competition policy and in the implementation of the latter in specific cases that can serve as precedents. Professor Monti was confident that the abolition of the Commission’s exemption monopoly would further private antitrust enforcement in Europe. He thought that the Draft Regulation of September 2000 contained some important elements intended to facilitate the application of EC competition rules by national courts. These were the rule on the burden of proof of Article 2, the co-operation mechanism of Article 15 and the possibility of the Commission or of national competition authorities to make amicus curiae submissions before national courts. Reference was also made to the Article 234 EC preliminary reference procedure. However, in his view, the eventual provision by means of Community legislation for further incentives would raise delicate questions that might endanger at the current stage the realisation of the already revolutionary proposals of modernisation. Finally Commissioner Monti welcomed academic discussions about the possibility of a criminal enforcement of EC competition law, but stressed that the 12 It is interesting to note that Professor Monti did not stay only at the compensatory qualities of such damage awards, but also stressed their contribution to the deterrent effect of the competition rules. This reference echoes some elements of the ‘private attorney-general’ function of the private litigant in US antitrust.

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introduction of criminal sanctions might risk creating some problems, presumably of institutional-political nature, and that in any case this was not the only way to attain efficiency of enforcement, at least at this stage. Panels 1 and 2 during the first day of the Workshop were entirely devoted to the various substantive and procedural law parameters of EC private antitrust enforcement. The contributions for each of these two panels are preceded by a synthesis report written from a Community law point of view. A preliminary point to be made is that it quickly emerged out of the written contributions and the discussion that the two issues were in effect inseparable. In addition, there is often not a clear-cut distinction between substance and procedure among the different legal systems in Europe. Indeed, most participants in their contributions and interventions felt free to address both the substantive and the procedural aspects of the application of EC competition rules by national courts. The majority of participants thought that the modernisation of EC competition law enforcement and the direct effect of Article 81(3) will have a certain impact on civil litigation before national courts at least in theory. In particular, as far as time is concerned, the abolition of Commission’s exemption monopoly would on the balance be positive for national litigation, since the courts would be able ‘to address the full range of competition law for the first time’ in the words of one participant. In addition, it is noteworthy that the ‘old’ question regarding the judges’ suitability to deal with the highly complex economic issues that the application of Article 81(3) entails was answered in the positive by the overwhelming majority of participants. However, a substantial number of participants thought that the modernisation project and the forthcoming direct effect of Article 81(3) EC, though in the right direction, would not nevertheless contribute significantly towards the development of a system of effective private enforcement. The argument was that Article 81(3) and the possibility of an exemption rarely come into play in cases, where there may be a substantial liability of a person that has committed a serious violation of the competition rules and has inflicted harm upon another. This is more likely to happen either with very serious anticompetitive practices that are not usually notified and would not in any case benefit from the third paragraph of Article 81 or with abuses of dominant position under Article 82, whose enforcement is not affected by the proposed reforms and which has long been recognised as directly effective. With the possible exception of some minor cases, where civil liability might have arisen, but the likelihood of a Commission exemption may have blocked the civil litigation, not much has really changed as to the possibilities of more private enforcement. Most participants thought that if a real objective of the reform was to increase private enforcement of EC antitrust, then many follow-up problems remained that had not been sufficiently addressed by the Commission neither in the White Paper nor in the Draft Regulation. These problems had to do with the fact that the framework of civil litigation in the EU (substantive and procedural) was up to a great extent governed by national and not Community law. Therefore, most would welcome more harmonisation measures.

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In order to proceed to the specifics of private antitrust enforcement one has first to examine the modalities of the application of EC competition law by national courts. The first instance is as a shield. This might be so in contractual liability cases, where the plaintiff claims specific performance of the contract or alleges its breach by the defendant and claims damages, while the latter raises the nullity of the contract or of parts thereof.13 Another instance is unfair competition actions against ‘free riders’, when EC competition law is pleaded in defence. Most participants thought that this kind of civil litigation (‘shieldlitigation’) can hardly account for private enforcement of competition law. Cases where competition law, in particular Article 81(2), has been raised as a shield by defendants have been numerous before national courts, but their contribution towards the development of a more effective system of private enforcement was considered minimal. The authors of the synthesis report on the procedural aspects stressed that in such cases the competition rules are often not invoked by the victim of a restraint but by participants therein, they are pleaded not because and whenever competition is endangered but only incidentally, they are often applied when competition has already been harmed, and their compensatory and deterrent effect is minimal. On the other hand, from a private enforcement perspective, more significant are the cases, where competition law is pleaded as a sword. Usually one party puts forward a claim for injunction, damages, restitution or interim measures that intends to compensate and/or to put an end to the harm caused by the infringement of the EC competition rules.14 While injunctions (usually of an interlocutory nature) are often granted by Member State courts, damages claims are very rare in Europe as opposed to the US. Damages in particular are thought of as the most important limb of private antitrust enforcement. Most of the participants deplored the scarcity of such cases and thought that it is precisely this kind of private enforcement that should be encouraged. A central issue that emerged in the synthesis report on substantive remedies was whether the legal basis for the remedies in private antitrust enforcement were to be found in national or in Community law. While nullity of anticompetitive agreements was prescribed in the Treaty itself (Article 81 (2) EC),15 the same was not true for damages and other remedies. The author of the Community report on substantive remedies, Former Advocate General Walter van Gerven, argued that these remedies were in principle prescribed by 13 In reality the situation will be a bit more complicated, since the plaintiff will most likely counter-plead the compensating qualities of the agreement that make it lawful under Article 81(3). It should be noted that according to Article 2 of the Draft Regulation in such a case the plaintiff will still bear the burden to prove these prevailing qualities. 14 Another possibility is to file an action for the declaration of the nullity of anticompetitive agreement (action en nullité). This type of actions is rare in practice. 15 Contractual relations that prepare, accompany or implement concerted practices or abuses of dominant position, notwithstanding the Treaty’s silence, will also be void. National laws contain specific rules that consider null contracts that are illicit or against public policy.

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Community law itself, while national laws defined the more detailed procedural rules that give effect to these remedies. In particular , the right to damages of the victim of an anticompetitive practice had its basis in Community law itself, exactly as was the case with the principle of state liability under the Francovich case law.16 This view was shared by other participants as well, though some thought that a Community right to damages would not add much, since it was clear that national laws provided for sufficiently clear legal bases upon which one could bring forward damages claims. Others, however, stressed the symbolic importance of the recognition of such a right, which would eliminate a state of ‘mass uncertainty’ of lawyers and clients. Indeed, the ECJ in its judgment in Courage that was rendered a few months after the Workshop did in fact answer this question of principle in the positive.17 In a ruling that indirectly gives support to the Commission’s modernisation plans and may prove a significant boost for private antitrust enforcement in Europe it stressed the Community law basis of the right to damages. In a Francovich-like language the Court underlined the task of national courts to ensure the full effect of Community rules and the protection of individuals’ rights conferred by those rules. The full effectiveness of the Treaty competition rules and, in particular the practical effect of the prohibition laid down in Article 81(1) would be put at risk, if individuals could not claim damages for losses caused by the infringement of those rules.18 Courage is now a reality and it seems that it goes further than certain national laws in encouraging in principle damages claims even between co-contracting parties.19 Leaving this discussion on the Community or national legal basis aside, the conclusion was that damages represented the strongest remedy in antitrust civil litigation, but unfortunately the cases where courts had rendered such awards were extremely rare. Civil suits for damages did not proliferate even in the most obvious cases, where the Commission had already unearthed and severely punished a repugnant cartel or other anticompetitive behaviour that had caused serious financial damages to competitors, customers and consumers.20 According to a participant the psychological factor was the most impor16

Cases C-6/90 and C-9/90, Andrea Francovich et al. v. Italy, [1991] ECR I–5357. Case C–453/99, Courage Ltd. v. Bernard Crehan, judgment of 20 September 2001, [2001] ECR I–6297. 18 Courage, para 26. According to the Court, ‘indeed, the existence of such a right strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community’ (para 34). 19 The situation until Courage was that at least German and English law did not allow damages claims of co-contractors based on Article 81 EC. Under the current law national legislation may pose an obstacle to such a Community law right only when the party advancing this claim bears a significant responsibility for the distortion of competition. 20 In France it seems that there are cases where a decision of the Conseil de la concurrence or of the Commission was followed by settlements on civil liabilities between the parties involved. 17

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tant. In his words ‘the single most useful event might be for some bold Community plaintiff to win a significant damages judgment which really “bangs the bell”.’ Most participants thought that the sole compensatory character of damages would not constitute a sufficient incentive for the victim of the breach to bring a private action and a sufficient deterrent for the tortfeasor not to engage in anticompetitive practices. For a considerable number of participants the US model of ‘private attorney-general’ and the possibility to recover treble damages was the only alternative for Europe. The problem with punitive damages is that they are viewed rather unfavourably by the European legal systems, particularly by those of continental countries. On the other hand an American participant thought that while treble damages are, indeed, a powerful incentive for private enforcement in US law, their non-availability in European law might have been overstated by European lawyers. According to him European legal systems provided for a very useful alternative that US law lacked: prejudgment interest. Prejudgment interest could in many cases reach the level of trebled damages. Another participant drew attention to the fact that there is already Community legislation21 that has introduced the element of punitive damages and that this was also feasible for the field of EC competition law. Indeed, the discussion draft of a Regulation drawn up by Former Advocate General van Gerven and annexed to his synthesis report on substantive remedies contains a rule on exemplary damages, according to which damages recoverable could exceed the payable compensation to the harmed person, though for not more than half of it. The reasons for the scarcity of civil antitrust suits in Europe were extensively debated throughout the Workshop proceedings. These were of legalinstitutional and psychological-sociological nature. As far as substantive remedies were concerned, all participants confirmed that in principle national laws did not pose any problem to the development of a stronger private enforcement system. National causes of action were more or less satisfactory.22 Procedural rules were more likely to cause some problems, which were not, however, insurmountable. Most of the participants contrasted the absence in the European legal systems of legal incentives for an effective private enforcement of the EC antitrust rules to the situation in the US, where a whole panoply of treble damages, contingency fees, class actions and pre-trial discovery procedures could be relied upon by prospective private litigants. Others thought that these specific incentives apart, the whole institutional system of antitrust enforcement in Europe was fundamentally different because of the overwhelmingly central role of public enforcement. In the words of one participant the existing 21 Reference was made to the late payments Directive (Dir. 2000/35/EC of 29 June 2000 on Combating Late Payment in Commercial Transactions, OJ [2000] L 200/35), which establishes a legal interest rate of a punitive character. 22 Notwithstanding occasional deficiencies like for example the pre-Courage restrictive rule on co-contractors, whether an obligation to contract (Kontrahierungszwang) can be a remedy in Article 81 cases, etc.

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administrative enforcement model in Europe ‘is proving to be very effective and to some extent alternative to judicial enforcement; and while the protection of private complainants is not the objective of the administrative intervention, the outcome of an antitrust case conducted by the [c]ompetition [a]uthority can be largely equivalent to a judge ruling’. To these one should add the fact that administrative authorities and certainly the Commission have extensive investigatory powers and the procedure before them entails no costs for a complainant. One of the most important problems that was many times mentioned is that civil litigation follows the adversarial system, unlike administrative authorities that follow the investigatory one. This means that civil courts rely on the information provided by the parties. Competition law presupposes an extensive degree of market information. This is particularly true of Article 81(3) but also of Article 82. In this respect the Workshop participants considered the problem of proof as the most serious obstacle towards an effective private enforcement.23 One solution would be to have the Commission fill this gap through the cooperation mechanism of Article 15 of the Draft Regulation, whereby national courts request from the former information in its possession or its opinion. However, many participants thought that such an option would in essence result in overburdening the Commission and, thus, in cancelling the basic stated aim of the reform, which is to enable the Commission to use its limited resources for the persecution of the most flagrant violations of the Treaty competition rules. In addition, it was clear by the interventions of Commission officials that the mechanism of co-operation could not transform the Commission into an investigator for the benefit of national litigation at the request of national courts. A radical solution to address the problem of proof before national courts would be simply to follow the US model and introduce a system of pre-trial discovery. Indeed, some participants adopted such a view at least with regard to pre-trial oral testimony. However, it was counter-argued that such an option was not realistic in view of the particular features of civil procedure, especially in continental countries, where proceedings do not terminate in one trial that has to be prepared in advance, and in any case such a novelty could not be sector-specific for practical reasons, but it would have to apply to the whole of civil procedure. Another solution that gained widespread support by the Workshop participants was to introduce by means of Community legislation under Article 83 EC a procedural duty on the defendant (in a case where EC competition law is pleaded as sword) to bear the burden of proof for certain facts that have occurred in his sphere of influence. Thus, if the plaintiff advanced prima facie evidence of an anticompetitive practice, it would be upon the defendant to prove the lawfulness of the practice in question by providing precise information. 23

In Article 81 cases this is particularly true when a third party attacks a concerted practice or even an agreement, about which he has no information, since he did not participate in it and possesses no pertinent documents or other evidence.

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A similar problem for the private litigant in EC competition cases is the proof of the loss sustained as a result of the breach of the antitrust rules. In this regard, one may distinguish between proving the extent of the damage itself and proving the causal link between the latter and the anticompetitive practice. An interesting proposal was to follow the example of industrial property or unfair competition law in some legal systems,24 where the loss is usually identified by reference to some criteria that have as one of their objectives to make it easier for the plaintiff to prove his loss while aiming at stripping the wrongdoer of any profit derived from the infringement. Restitutionary damages, which are known in some legal systems, also gained support as a useful remedy especially in cases where large groups of consumers claim damages from a producer. Proving the causal link appears more problematic. It is worth noting that in those few cases where damages actions were brought before national courts the plaintiff very rarely succeeded in proving the causality between damage and unlawful conduct. The most acute problem lies in determining profit losses, i.e. in whether such losses are due to the anticompetitive practise of a competitor or to external conjectural economic factors. An interesting proposal that again gained support was to ease this specific burden of proof. According to this proposal a drop in the plaintiff’s turnover in the relevant market and a simultaneous rise of the defendant’s turnover should be rebuttable evidence that the losses incurred were caused by the anticompetitive practice in question. Another interesting suggestion was for the Commission to provide some guidance to national courts by publishing guidelines on damages that would define for example the core violations of EC antitrust rules and the types of loss incurred by third parties and consumers, and that would also include model-cases dealing with the causality problem. Another consequence of the adversarial system governing civil litigation is that judges can only exceptionally take up issues that the parties have not pleaded themselves. As for the ex officio application of EC competition law by national courts, one may note a certain divergence between continental legal systems, where judges at least in theory are more likely to raise such issues even ex proprio motu, and English law, where such a possibility appears exceptional, notwithstanding the Court of Justice’s case law, which seems to lead to such a duty of national judges under certain conditions.25 Collective claims was another point of debate. The absence of class actions in Europe as opposed to the US was one of the reasons advanced by some participants as to the failure of private enforcement in EC competition law. Consumer claims and parens patriae actions to supplement administrative enforcement were among the choices. One proposal was to introduce a Directive that would grant such rights to certain collective interests, similar to the one 24

This is the case in French and German law. See cases C–312/93, Peterbroeck, Van Campenhout et Cie. SCS v. Belgium, [1995] ECR I–4599 and C–430/93 and C–431/93, Jeroen Van Schijndel and Johannes Nicolaas Cornelis Van Veen v. Stichting Pensioenfonds voor Fysiotherapeuten, [1995] ECR I–4705. 25

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adopted in the area of consumer protection.26 Interestingly enough, new national laws have in the meantime proved revolutionary in introducing such collective claims. Thus, the UK Enterprise Bill that has just been introduced to the House of Commons makes it possible for representative bodies to bring damages actions on behalf of groups of named and identified consumers. Finally, some participants drew attention to the fact that specific attitudes or characteristics of national legal systems might not be in concordance with the stated aim to encourage more private enforcement of EC antitrust rules. To give some examples, in a number of jurisdictions one could detect a certain degree of reticence to the idea of granting more rights to consumers and a certain adversity towards the litigiousness and ‘compensation culture’ of the US. In some judicial systems, especially in those that are seriously overloaded, prospective litigants are encouraged to pursue their case through other non-judicial channels or through administrative independent authorities, which in competition law would mean through national competition authorities and the Commission! This would be a sort of ‘renvoi’ that could in effect neutralise the whole decentralisation initiative (at least as far as national courts are concerned). The majority of the participants were of the opinion that the best choice to achieve these objectives was through secondary Community legislation rather than to leave to the European Courts to gradually construct the law. The Court’s case law has introduced two very important Community law limits to national remedial and procedural rules. These are the principle of equivalence and of effectiveness, meaning that national remedial and procedural rules must not discriminate against Community law rights and must not obstruct the effective exercise of those rights. It was thought, however, that this ‘negative integration’ process could not further substantially the effectiveness of private enforcement, since more ‘positive’ measures were due in order to provide for the suitable incentives. Therefore, a piece of legislation, most likely a Regulation, based on Article 83(2) EC would have to lay down specific rules on remedial relief, so that individuals can enforce their rights in the field of competition, thus promoting a system of undistorted competition in the internal market. Such legislative measures must be sufficiently precise to satisfy the principle of legal certainty and the requirement of uniform application of Community law in the Member States. Nevertheless, it was accepted by certain participants that legislative interference by the Community might be politically sensitive. This was particularly true more for procedural rules than for substantive ones. According to this view complete procedural harmonisation seemed outside the competencies of the Community. Any initiative in this respect would most likely aim at sector-specific measures, i.e. at rules applicable only to the enforcement of EC competition law. But doubts remained. Indeed, it was not obvious whether the sufficient legal basis for the adoption of secondary legislation (of a 26 Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on Injunctions for the Protection of Consumers’ Interests, OJ [1998] L 166/51.

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Regulation or of a Directive) in those matters could surely be Article 83, or whether Articles 95 and 308 EC could also be useful in this regard. A proposal that at first look seemed not very supportive of private antitrust enforcement as such was made by one participant who was of the opinion that private actions could only operate as an adjunct, but no more than an adjunct to public enforcement. According to this view private law can be no substitute for public law in the field of antitrust enforcement. Its primary function is to compensate persons injured by infringements of competition law established by the administrative authorities. This view seems to contradict the US model of ‘private attorney-general’, but at second look such a verdict calls for a qualification. One has to admit that the current level of private enforcement in Europe is rather meagre. It has many times been noted with regret that no private actions have been brought in Europe not even in the most appropriate case when a practice has already been condemned by the Commission. To encourage the compensatory role of private action and to view private enforcement as a complement to public enforcement would be a good start. In addition, the distinction between the compensatory and the deterrent role of private action is not really meaningful. If damages awards that compensate the victims of anticompetitive practices were to grow, this undoubtedly would be seriously taken into account by future wrongdoers, who would have to consider the possibility of their exposure not only to administrative fines but also to civil damages. That is why this proposal gained considerable support by the other participants who thought that private and public enforcement should ideally be complementary to each other. In the words of a participant ‘an optimal combination of private and public enforcement would be when plaintiffs go to court for interim relief—which might be obtained faster in court than from an administrative authority, then go to the administrative authority with the actual complaint—so that the administrative authority investigates the facts of the case, and conclude the process with a damages lawsuit once the facts of the case were established by the public enforcer’. A similar proposal that was advanced in the Workshop proceedings was to consider giving injured private parties the opportunity to join public law proceedings preferably before a specialised court reviewing an administrative authority’s decision and attach thereto private law claims (a sort of partie civile). Again this novel suggestion found substantial support. This proposal relied on the view of some participants that specialised administrative tribunals exercising a judicial review of national competition authorities’ decisions should be preferred from generalist civil courts.27 It is interesting again to note that this system was proposed in a White Paper of the Department of Trade and 27 Alternatively, a different proposal was to introduce specialised competition tribunals or panels as parts of civil-commercial courts. There were, of course, some views expressed against any specialisation, because it was considered unworkable to separate the competition law issue from other legal issues.

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Industry (DTI) in the UK that was published shortly after the Workshop.28 In this document it was proposed to widen the remit of the Competition Commission Appeal Tribunals in order to enable them to hear civil claims for damages in competition cases. This would make better use of existing judicial resources reducing the costs for the parties. Another proposal was to make binding on the courts determinations of competition infringements by decisions of the competition authorities. The current Enterprise Bill has adopted these proposals and extends these possibilities to EC competition law infringements. Under the new system it will be possible to bring a damages claim in the future Competition Appeal Tribunal, where it has been established by either the Office of Fair Trading or the European Commission that an Infringement of competition law has occurred.29 On the institutional side of the future decentralised system of enforcement, one of the most significant issues was coherence. Some participants stressed that even in the new system the Commission would retain its primary role. An American participant noted that the existing and future powers of the Commission as to national courts and authorities are by far greater than those that the US federal authorities ever had as against the States. According to a Commission official the Masterfoods judgment30 by stressing the special role played by the Commission in the application of EC competition law based directly on the Treaty dissipated the fear that the Delimitis31 principles on the duty of national courts to avoid conflicting decisions might have been motivated by the Commission’s traditional exemption monopoly. A point of debate during the Workshop proceedings was whether Article 15(1) of the Draft Regulation introduced an obligation of the Commission to entertain national courts’ requests for information or for opinions. Some participants argued that the letter of the proposed provision was rather discretionary. Commission officials, however, stressed that the Commission was indeed under such an obligation as existing case law and Article 10 EC made clear. Some participants noted that the co-operation procedure of Article 15(1) had not been very successful in the past and that, particularly in some countries, there was a certain reluctance of courts to seize an administrative authority like the Commission. According to one Commission official the inclusion of the cooperation mechanism in the new Regulation would overcome such obstacles at the national level. Another reservation was that this procedure raised concerns of due process, since the Commission’s opinion might be followed in a copypaste manner by the judge, without the parties having the opportunity to effectively contradict it. Finally, there was some debate as to whether these opinions could go as far as interpreting Community law, which only the European Court 28 Department of Trade and Industry, Productivity and Enterprise, A World Class Competition Regime, July 2001. 29 The right to bring such a claim will be without prejudice to the existing right to bring damages claims in the courts. 30 Case C–344/98, Masterfoods Ltd. v. HB Ice Cream Ltd., [2000] ECR I–11369. 31 Case C–234/89, Stergios Delimitis v. Henninger Bräu AG, [1991] ECR I–935.

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of Justice had the competence to do. The prevailing view was that the Commission could act as legal or economic advisor and in effect could perform essentially the same work as the ECJ in preliminary ruling proceedings with one important limitation being that its views are not binding upon national courts. The duty of national courts under Article 15(2) of the Draft Regulation to transmit to the Commission copies of judgments that have applied EC competition rules was not considered problematic by the majority of participants, though some voices of concern were also heard based on the fear that some national judges might view this as an encroachment on their independence. According to a Commission official this specific provision had to be read in conjunction with paragraph 3 of Article 15 on the amicus curiae intervention of the Commission before national courts. This meant that in the majority of cases the Commission would intervene only at the stage of appeal, after it would have accordingly been alerted through the mechanism of paragraph 2.32 The possibility of the Commission’s intervention as amicus curiae in national litigation drew considerable attention. The Commission officials, responding to fears that the Commission might be overburdened with filing amicus briefs, stated clearly that this was to take place in exceptional circumstances and only in the Commission’s initiative, when important EC antitrust policy questions were at stake. Some participants, however, thought that it would be more appropriate if the court had the final word as to the admission of the Commission to the process. Due process concerns were heard in this specific case, too. Arbitration. Panel 3 dealt with an issue that some years ago would not have easily been addressed at a competition law conference. Arbitration had arisen as a concern for the first time already during the 2000 Workshop proceedings and many questions had remained outstanding. The relationship between EC competition law and arbitration had an interesting development. The latter in the past was seen rather suspiciously by the Commission. This suspicion, not to say hostility, was due to the fear that private parties may resort to arbitration in order to evade the application of EC competition law. Such a possibility was basically correlated with certain anecdotal evidence that international arbitrators sitting in non-EU jurisdictions, which were important arbitration centres, were not paying due deference to EC competition rules. However, this stance has certainly changed in the last decade or so. The Commission no longer obligates the parties to an exempted agreement to notify any future arbitral awards, and current block exemption regulations do not contain provisions on the withdrawal of the block exemption’s protection in the event of an offending arbitral award. Indeed, of late one may even 32

A pertinent question that arose in the Workshop proceedings was whether any information transmitted to the Commission through Article 15 could be used for purposes other than preparing its amicus intervention, for example for opening an investigation or for prosecuting another infringement. One participant thought that the Commission should not be constrained to act as if it had never come across such evidence, but that it would have to summon a new investigation and obtain the same evidence over again.

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speak of an embracement of arbitration by the Commission as an alternative dispute resolution method that can work in some cases as a complement to competition law enforcement. Thus, quite surprisingly, there has been a whole series of recent merger Decisions clearing concentrations subject to some conditions or obligations, one of which is recourse to arbitration for certain competition-related disputes. In those cases arbitration is used as a procedural remedy that ensures that parties comply by their behavioural commitments. The basic conclusion of Panel 3 was that arbitrators, in their capacity of private judges, are affected by the reform of EC competition law enforcement, just like ordinary judges are. Notwithstanding the absence of any mention of arbitration either in the White Paper or in the Commission’s Draft Regulation, something that was deplored by some participants, the arbitrators would also be called upon to apply Article 81(3) EC in the future. Some participants stressed that in this respect arbitration had in fact more advantages than litigation, since parties may select arbitrators. This means that if a party perceives the likelihood of a competition law issue arising during the arbitral proceedings, he could designate an expert as arbitrator. In addition, arbitration is devoid of the problems that judges may face with their limited discovery powers33 and arbitrators have more time to devote to a single case than most judges do. Arbitrators usually come across competition law issues in an incidental way. In most cases there will be a contractual dispute and the competition law question will be raised as a defence by the defendant. The contract—typically a distribution, licensing or cooperation agreement—will contain an arbitration clause and the plaintiff will advance claims based on breach of contract, while the defendant will raise the nullity of the contract or of certain parts of it.34 On the other hand, it is practically impossible to see a non-contractual liability case be decided by arbitrators, since it would be extremely rare for the involved persons to conclude a post litem arbitration agreement. This is undoubtedly a serious limitation of arbitration as a forum for private antitrust enforcement. Notwithstanding this limitation, all participants noted the dominant and almost exclusive role of arbitration in international business relations. The fact that most international commercial contracts of some significance contain arbitration clauses should not go unnoticed by the Commission in its modernisation initiative. While some participants thought that the Commission’s ignorance of arbitration in the White Paper and in the Draft Regulation was a missed opportunity, others argued that this was the correct manner to deal with 33

A certain weakness of arbitration exists as to third-party evidence. The latter can be usually obtained through the intervention of state courts. 34 Theoretically one cannot exclude the possibility that EC competition law could also be pleaded as sword before arbitrators in a contractual law dispute. This could happen in case of a co-contractor’s damages claim because of harm incurred through his counter-party’s violation of the competition rules. In all cases, even if the contract were to fail because of Article 81(2), still the arbitration clause, because of the doctrine of separability, would be valid and the arbitrators would have to decide the issue, subject to the arbitration clause being broad enough to cover the dispute.

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the question, since the contact between arbitration and Community institutions and law would rather be indirect and the latter should only come forward at the enforcement stage. Consistently with this view, the proposed preventive measures of the Draft Regulation that aim at ensuring the consistency of enforcement of EC competition law by national courts were not applicable to arbitration. On the other hand, corrective measures were more appropriate to ensure the due respect of EC competition law by arbitrators. The answer to this problem was given by the Court’s Eco Swiss ruling,35 which considered that the violation of EC competition rules by arbitrators leads to a duty of national courts to set aside or to refuse to enforce the final arbitral award in question. The possibility of an arbitral award’s being set aside or being refused recognition and enforcement in case of a violation of ordre public was considered by far the most effective corrective mechanism. During the Workshop proceedings some participants questioned whether every violation or non-application of EC competition rules had to be considered an offence against public policy. The majority view was that a certain degree of seriousness of the infraction of EC competition law was necessary, in order for an arbitral award to be considered offensive to ordre public and to be set aside or refused enforcement. A complete disregard or unawareness of that law by the arbitrators would certainly be objectionable, even if non-deliberate. A fortiori so, when the agreement or practice in question is particularly repugnant, such as price-fixing, market-sharing or bid-rigging. On the other hand, a simple misapplication or incomplete application of EC competition law might not qualify as a violation of ordre public, at least if arbitrators have acted in an honest and diligent way, unless a gross mistake has been committed by them. There was some discussion about the real impact of the Eco Swiss judgment on arbitration. Most participants thought that this judgment did not introduce a legal obligation as such of arbitrators to apply EC competition law. This was so, because arbitrators do not fall under Article 10 EC, which can only bind national state courts. However, it was also noted that the ECJ had sent a powerful message to arbitrators that they should apply Community law provisions of a public policy character, such as the Treaty competition rules are, even ex officio, otherwise their awards would be liable to annulment or non-enforceability.36 Indeed, this result was the indirect consequence of a Community law duty imposed upon national courts to exercise an appropriate review over arbitral proceedings and awards. Another issue that—one could say—somewhat unexpectedly came to the fore was the inadmissibility of Article 234 EC preliminary references by arbitrators as 35 Case C–126/97, Eco Swiss China Time Ltd. v. Benetton International NV, [1999] ECR I–3055. 36 Annulment of an arbitral award takes place in the country where the award was rendered. Even if the award has been rendered by an arbitral tribunal sitting in a nonEU Member State, still Member States courts may be seized with a request of exequatur, when the award must be executed in an EU country.

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a result of the old Nordsee case law.37 A majority of participants objected to this jurisprudence of the Court of Justice and considered that arbitrators were deprived of a very important mechanism, thus being at a comparative disadvantage in comparison with courts. This was particularly regrettable under the future system of decentralised enforcement of EC competition law. Some participants thought that the ECJ jurisprudence was self-contradictory, because on the one hand it was imposing upon arbitrators to apply EC competition law, while on the other hand it was preventing them from addressing requests for preliminary rulings on the interpretation of this law. One participant thought in this regard that it was exactly the ordre public communautaire principle established in Eco Swiss that should be the criterion for determining which arbitration tribunals are entitled to seize the Court of Justice through Article 234. According to this proposal, where an arbitration tribunal must apply EC competition law as part of the Community public policy, the same arbitration tribunal should also avail itself of the preliminary reference procedure. Another proposal to address this problem was to make full use of the possibility provided for by the Nice Treaty (Article 225(3)) to transfer to the Court of First Instance the competence to hear preliminary references in specific areas. Competition law could be a first candidate and in such a case the CFI should also entertain requests coming from arbitrators. In contrast to these views, some other participants stressed the fact that arbitrators, not being judicial organs of the Member States, could not be bound either by Article 10 or by Article 234 EC. It was only national courts exercising a review over arbitral proceedings and awards that could be so bound. According to one participant there was a balance of indirectness between Articles 10 and 234 as far as arbitration was concerned: Arbitral tribunals are not directly bound by Article 10 EC to apply Community law and vice versa they cannot base rights on that provision that national courts may enjoy. It is only indirectly that Article 10 EC comes into play, through the intervention of state courts. By the same token arbitrators cannot directly seize the European Court of Justice by virtue of Article 234 EC and, again, a question of EC law arising in arbitration can reach the Court only indirectly through the state courts, while the latter exercise their functions of assistance and supervision. The inability of arbitrators to address preliminary questions of EC competition law to the ECJ does not mean that the former would be left entirely helpless. Most Workshop participants stressed the fact that the Commission could provide very useful support to arbitration in the context of the application of EC competition law. In that regard, arbitrators could seize the Commission with questions of fact or law, which should be in the interest of the latter to answer. While there was no Community law duty of the Commission to cooperate with arbitrators and while arbitrators themselves were not bound as against the former, since Article 10 EC and Articles 15 and 16 of the Draft 37

Case 102/81, Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co. KG, [1982] ECR 1095.

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Regulation do not apply to arbitration, nevertheless, on an informal basis, they should be able to seek the Commission’s assistance. Any disrespectful attitude of the Commission towards arbitration in this regard would run counter to the historically long-established recognition of arbitration in all Member States as an alternative judicial forum. At the same time, it would not serve its purpose to further the private enforcement of EC antitrust law and it might alienate arbitrators, with the possible repercussion that the latter would rather suppress a difficult competition law issue, instead of running the risk to decide it wrongly themselves and, thus, of exposing their award to an annulment action. Such assistance, according to some participants, should equally be given even to nonEU based arbitral tribunals. In addition, a certain proposal that gained some support was for the Commission to publish a soft law instrument in the future (a Communication or a Notice) that would deal with arbitration and with the modalities of a possible co-operation practice with arbitrators. Such an instrument’s usefulness would basically be to raise the EC competition law awareness of arbitrators and of the parties to arbitration proceedings. During the Panel 3 proceedings particular emphasis was given on international arbitration as opposed to the rather marginal role of domestic arbitration (as far as EC competition law disputes were concerned). The issue that arose and that was extensively treated was how EC competition law comes into the dispute in an international arbitration. In private international law EC competition rules are considered mandatory rules (lois de police). From the standpoint of EU national courts, they are integrated in the national legal order and are classified as mandatory rules of the forum. However, in international arbitration the arbitrator has no lex fori and for this reason the distinction between mandatory rules of the forum and foreign mandatory rules is no longer meaningful. The question of the application of such mandatory rules by international arbitrators has been thoroughly debated in theory. Some written contributions described in detail how arbitration theory and practice has dealt with it, but for the sake of simplicity we can omit this very interesting analysis. The general conclusion that was reached by the Workshop participants was that in practice international arbitrators would apply EC competition law even ex officio and even in cases where the applicable law of the contract is not one of an EU Member State. This is so, less as consequence of a clear obligation borne by them and more as the expression of the arbitrators’ will firstly to adhere to the perceived legitimate expectations of the parties that the arbitration tribunal does not ignore mandatory rules applicable to their contract, and secondly to produce an award that will be enforceable. Criminal Sanctions. Panel 4 dealt with an issue not falling under the private enforcement heading: criminal enforcement of EC competition law. As such, this theme had a priori a sort of ‘futuristic’ touch. However, the substantial and very interesting—even spirited at times—discussion during the Workshop proceedings proved that criminal sanctions were not such a temporally distant theme. The general rationale behind the proposals to introduce individual criminal sanctions in EC competition law is that undertakings or companies do not

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really ‘decide’ to violate the law. Rather, it is natural persons within the firm— entrepreneurs, managers and employees—that commit the acts that are legally attributed to undertakings under the Treaty competition rules. At present, public enforcement of EC competition law relies basically on corporate sanctions, i.e. fines applicable to undertakings.38 While nobody doubts the significance of such fines, there are, however, doubts as to their effectiveness. The basic arguments against sole corporate sanctions are that an effective deterrent effect of antitrust enforcement can only be achieved with very high fines and that usually the fines applicable to companies do not guarantee adequate incentives for their managers to respect the law. As to the level of fines a presentation made at the Workshop proceedings argued persuasively that these, in order to have an effective deterrent function, they would have to extremely high, even to exceed 150 per cent of a company’s annual turnover related to the products concerned. However, the imposition of so high fines was impossible, not only because of the limits set by current law, but also because companies would not simply have the ability to pay them. In addition, imposing high fines has undesirable side effects. Companies might reach the bankruptcy point and in any case there will be social costs for their creditors and workers, as well as for the taxpayers. Therefore, a proposal, welcomed by some participants but strongly opposed by others, was to introduce criminal sanctions including imprisonment for individuals responsible for the anticompetitive behaviour of companies. According to this view these sanctions should complement the already existing corporate fines. Imprisonment, in particular, should be introduced only for the most serious infringements of EC competition law, such as horizontal price-fixing, bid-rigging and market-sharing. These criminal sanctions would eliminate the problem of companies’ inability on the one hand to pay excessively high fines and on the other hand to fully control their managers. Finally, company managers would be able to resist pressure coming from their employers to break EC antitrust law and in the aggregate people’s moral commitment to the rule of law would be strengthened. The most important advantage of the introduction of individual criminal sanctions would certainly be their deterrent effect. Indeed, many practitioners during the Workshop proceedings referred to their experience of having to reply to their clients whether in Europe an antitrust violation would send individuals to prison. This surely meant that criminal sanctions—and imprisonment in particular—had an immense effect on the attitudes and behaviour of company executives. The same proposal, however, met considerable opposition during the Panel 4 proceedings. Some of the arguments against criminal sanctions that were put forward were of principle. A serious argument was that high standards for the pro38 Whether these could be categorised as administrative, criminal or administrativecriminal in nature was a question that was debated during the Panel 4 proceedings. However, the nature of the current fines was not the issue. The real question was whether to introduce individual fines and/or imprisonment in addition to such corporate fines.

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tection of defendants that will have to accompany criminal enforcement would hardly fit the dynamic interpretation usually given to competition rules and, as a result, progress in the interpretation of competition law would be slowed. However, the conclusion of most participants was that criminal sanctions, and imprisonment in particular, would, indeed, mark a significant departure from the current system of antitrust enforcement in Europe and would certainly make such enforcement very effective by providing for a powerful deterrent. Nevertheless, time was not ripe for such a revolutionary step. The postmodernisation system of public enforcement in combination with a more developed private enforcement of EC competition law had still to achieve its potential. Existing administrative fines could be made more effective, if the issue of their tax-deductibility could be tackled. It was also noted that in the US the real difference was not made by the sole availability of criminal sanctions, but also by the possibility of ‘follow-up’ civil litigation and civil sanctions, thus going back to the issue of effectiveness of private enforcement. A solution in the middle would be to complement existing corporate fines with individual fines for the most serious types of infringement of the EC competition rules, such as hard core cartels and price-fixing. Such a possibility coupled with an effective private enforcement could well prove sufficient. Then some participants drew attention to problems of institutional-legal nature having also to do with the legitimacy of any eventual Community action in the area of criminal law. In particular, Community measures introducing criminal sanctions in EC antitrust law would have to rely on a solid legal basis in the Treaty. While a majority of participants thought that Article 83(2) EC could provide for the appropriate legal basis—possibly also in conjunction with Article 95 EC, others thought that criminal law measures can only be introduced under the Third Pillar. More problematic were in the view of some participants the institutional aspects and the repercussions of the European Convention of Human Rights. According to one view the application of criminal law sanctions would presuppose the existence of an EC public body endowed with the means to prosecute these crimes, something that could not be accommodated in the current structure of the EC legal system. Therefore, a Treaty amendment seemed necessary. Even proponents of criminal sanctions admitted that while the imposition of individual criminal fines may not raise particular concerns, imprisonment was a different matter and functions of prosecutor and ‘judge’ played by the Commission would have to be separated with the latter function being given to Court of First Instance. Whether this could be done so without any amendment of the Treaty was again debatable. Another recurring argument against the introduction of criminal sanctions for antitrust violations in Europe was that criminal enforcement is too politically sensitive. According to one participant antitrust was not the most obvious area from which such a Community initiative could start. Other areas such as fraud were more appropriate starting points. It is noteworthy that most arguments against the introduction of criminal sanctions were concentrated on imprisonment and not so much on individual

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fines. It is even more interesting that these arguments—in their majority—were not ones of principle, but rather of ‘convenience’. In other words, most participants were accepting criminal antitrust enforcement as a credible perspective, but only as a perspective for the future, at least as far as Community law is concerned. On the contrary, it was felt that criminal sanctions could easier be introduced in a bottom-up fashion, through national laws. Such a ‘decentralised criminal enforcement’ might require a certain degree of Community harmonisation, but such measures should not be difficult to take, thus dispensing with any possibility or necessity of Treaty amendment. Interestingly enough, such a bottom-up emergence of criminal sanctions in the area of antitrust law is already a reality. In the UK the DTI White Paper makes the revolutionary step to propose the criminalisation of cartels and the introduction of a maximum penalty of five years in prison to deter those who dishonestly operate hardcore cartels (agreements to fix prices, share markets, limit production and rig bids).39 Another country that intends to strengthen its criminal enforcement system is Ireland. The draft Competition Bill proposes a substantial increase of the penalties applicable to individuals found guilty of hardcore cartel behaviour (fixing prices, sharing markets or limiting production). As in the UK, the imprisonment penalty for an individual will be increased to a term up to five years, while cartel offences will become arrestable offences, meaning that the police will be able to arrest and detain suspects for questioning. These national developments show that criminal enforcement of EC competiton law might be a very real perspective, certainly more real than many would have initially thought. EUI Florence, Italy 30 March 2002

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Assimakis P. Komninos

See also the report prepared for the Office of Fair Trading by Sir Anthony Hammond and Roy Penrose: OFT, Proposed Criminalisation of Cartels in the UK, November 2001.

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Opening Speech EFFECTIVE PRIVATE ENFORCEMENT OF EC ANTITRUST LAW Mario Monti

I am delighted to present the opening exposé at this important seminar. This conference has brought together many eminent experts from different backgrounds for an in-depth analysis and discussion of issues related to the enforcement of EC antitrust law. The discussion is very timely, and I am grateful to Professor Claus-Dieter Ehlermann for this initiative.

I. The case for more private enforcement As you are aware, the Commission has proposed a major reform of the way in which the Community’s competition rules are applied. One important objective of the reform is to pave the way for the more effective private enforcement of EC competition rules. Obviously, we do not expect crowds of lawyers to flock to the front of the court buildings in order to file lawsuits on the day the new Council Regulation replacing Regulation 17/62 enters into force. However, it is our aim that undertakings and individuals should increasingly feel encouraged to make use of private action before national courts in order to defend the subjective rights conferred on them by the EC competition rules. The intentions behind this aspect of the reform are threefold. First, the combined enforcement action by the Commission, the national competition authorities and the national courts will strengthen the impact of EC competition rules. The competition rules are there to ensure that consumers benefit from lower prices and better products as a result of competition in markets. Effective remedies must be available to stop infringements and to ensure that a party that suffers from a violation can obtain compensation. Consumers should have more access to remedial action in the form of private enforcement in order to protect their rights and to obtain compensatory damages for losses suffered. Secondly, by fostering decentralised application, the reform should bring EC competition rules closer to citizens and undertakings throughout the Internal Market. For a future, enlarged Community with 27 or 28 Member States, it is not a desirable—or even a viable—concept that the application of the EC competition rules should largely be limited to administrations acting as public enforcers. Companies or individuals that suffer from an infringement of the EC competition rules should, as a general rule, be able to seek redress in the locally competent civil or commercial court, possibly before a locally competent specialised court or specialised chamber of a court.

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The Commission, for its part, should focus on the functions it is best placed to carry out due to its central position and function. This includes the legislative development of EC competition policy, as well as its development through judicial decisions that can serve as precedents. This also includes a function as resource-centre for the national courts, as foreseen in Article 15 of the draft regulation. I will return to this. Thirdly, the reform should enable us to make the most of the complementary functions of public and private enforcement of the competition rules. Public enforcers’ investigation powers equip them particularly well to investigate serious (typically secret) infringements. In addition, they can be well placed to bring cases in areas where the application of the rules has not yet been entirely clarified (and where it is therefore unlikely that private parties will take the risk of litigating), thereby contributing to further clarification of the rules through precedent. National courts, on the other hand, are particularly well placed to solve contractual conflicts between parties to agreements. This function of the national courts has so far been hampered by the Commission’s monopoly on the application of Article 81(3) EC, as the courts were often obliged to suspend proceedings in accordance with the Delimitis case law of the European Court of Justice. In addition, national courts have the power to grant damages to a party that is the victim of an infringement in compensation for the losses it has suffered. Action before national courts should increase in this respect.

II. A range of elements must come together to make private enforcement more effective As you know, the Commission has proposed to give national courts the power to apply Article 81 EC as a whole, thereby abolishing the current division of competence under which the national courts can only apply Article 81(1) EC and the Commission has exclusive competence to apply Article 81(3) EC. Reform of the implementing rules for Articles 81 and 82 EC, as proposed by the Commission, is a basic condition for national courts to play their full role in the application of the competition rules, as they have done for a long time in other areas of Community law. However, the abolition of the Commission’s monopoly over the application of Article 81(3) EC—fundamental as it is—might not be sufficient to boost private enforcement of the competition rules in Europe. The Commission is proposing a range of other elements in the text of the draft regulation and in the wider framework of the overall reform effort. I would like to go over the building blocks envisaged by the Community.

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1. Facilitating the application of Article 81(3) EC by national judges So far, discussion about the role of national judges after the reform has largely focussed on the question of whether judges will be able to apply Article 81(3) EC. I do not want to linger on this aspect today, but I would like to recall some points. First, Article 81(3) EC is a rule that applies when its four conditions are fulfilled. The application of these conditions can require economic analysis and the balancing of interests. However, the provision is not fundamentally different in nature from other rules applied by judges. The Commission is therefore confident that, on the whole, the courts will not face insurmountable problems in this respect. Secondly, the draft regulation maintains the instrument of block exemption regulations. These retain their constitutive nature and must be applied by national courts when their conditions are fulfilled, subject to control by the European Court of Justice. This is an important element that gives orientation to undertakings, and it distinguishes the European competition system from US antitrust law. Thirdly, in addition to the block exemption regulations, the Commission has promised to continue working on further elements to provide guidance to companies and judges, such as Guidelines and Notices (for example, the De Minimis Notice). In particular, the Commission has committed itself to the production of Guidelines on the methodology for the application of Article 81(3) EC in order to provide all national courts in the Community with an analytical framework.

2. Private enforcement raises further questions When dealing with a case that requires the application of the EC competition rules, the national courts are not only confronted with the task of interpreting Article 81(3) EC in a legally correct and coherent manner. They also face a range of questions related to the facts of the case, or situated at the borderline between fact-finding and legal analysis. This aspect takes on particular importance with regard to claims for damages. In this field, the expansion of private enforcement is particularly desirable in order to ensure effective remedies for parties that suffer the effects of competition law infringements. At the same time, there is a general impression that there can be problems under national law and procedures with regard to proving the infringement, proving the causal link between the alleged infringement and the damage suffered, and with regard to the determination of the extent of the damage to be compensated. In light of this complexity, additional elements must arguably come together in order to instil real life into the judges’ competence to apply Articles 81 and 82 EC.

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3. Elements in the draft regulation The draft regulation essentially contains two very specific elements that address this borderline area of EC competition law and civil procedure: the rule on burden of proof, and the rule on cooperation with national courts. First, the draft regulation expressly maintains the division of the burden of proof for the two different parts of Article 81 EC: a party that alleges an infringement has to demonstrate that the conditions of the prohibition rule in Article 81(1) EC are fulfilled; a party that wants to invoke the exception laid down in Article 81(3) EC has to demonstrate that the conditions of this provision have been met. Secondly, the draft regulation provides for a framework for the Commission (and the national competition authorities) to interact with national courts. Article 15 formalises the current practice of providing opinions to national courts if they so request. We believe that this instrument can be very useful in the new system. The time has come when more cooperation between courts and administrations is required as a result of the complexity of certain matters to be decided by courts. Administrations can help by providing certain factual information in their possession and/or by giving expert opinions to judges, always subject to a contradictory debate. This instrument is not conceived of as a substitute for the preliminary reference procedure under Article 234 EC. Whereas references to the European Court of Justice concern questions of legal interpretation, national courts may, in particular, want to address themselves to the Commission with questions about economic issues (such as questions related to market definition). Article 15 can therefore be of help in the borderline area between facts and law.

4. The amicus curiae proposal The Commission has also envisaged that it and the national competition authorities should have the power to make written or oral submissions as amicus curiae before national courts. In the case of the Commission, this power would be limited to cases presenting a Community public interest. Such an interest would exist, in particular, in cases raising important issues of coherence with regard to EC competition policy. The Commission would not intervene on behalf of one of the parties, but would present its opinion in the interest of a coherent application of the law. In addition to these elements of our reform proposal, I believe judges can also contribute to the enhancement of private enforcement of EC competition law.

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5. The potential contribution by judges It appears that the procedural rules for civil courts—though highly complex— are a flexible tool. Judges generally have a large margin of discretion as to how they conduct the proceedings in a case. They can adapt the course of the procedures to the various subject-matters that come before them. We should explore the extent to which, and the ways in which, civil courts can take account of the specific requirements of cases involving the application of the EC competition rules, on the basis of the principles governing their procedures. The toolboxes of national courts presents the potential to tackle the apparent problems, particularly with regard to claims for damages. National courts should make full use of the tools available to them in order to give effect to the EC competition rules. When they find themselves blocked from effectively applying the EC competition rules due to aspects of their national procedures, national courts should look carefully into the existing case law of the European Court of Justice for guidance. And they should not hesitate to request preliminary rulings from the Court on issues they find unresolved. The answers given by the European Court of Justice can provide Community-wide solutions for such questions. Increasingly, national judges are also looking outside the confines of their own Member State. Cooperation between judges across borders is an important tool for the collection of evidence. An increase in such cooperation, and the exchange of ideas, may also provide judges with inspiration from solutions found elsewhere. In summary, I believe that national judges have some tools to contribute to the more effective private enforcement of EC competition rules. In-depth research of the factors at work in the different national systems can pave the way for the gradual adoption of solutions by the courts of the Member States. We should bear in mind that, as the paper presented by Professor Jones at this Workshop shows, the system of private enforcement in the form of claims for damages has also developed gradually in the US.

III. Is there a need for new Community legislation at the interface between EC competition law and civil procedure? We could wonder whether EC legislation concerning specific issues at the interface between EC competition law, tort law and civil court procedures could help to enhance the effectiveness of private enforcement. The written contribution by Professor Van Gerven to this Workshop identifies some areas in which such legislation could be possible. I should congratulate him for this excellent paper and for having even made the effort to draft the actual legal articles that would address the issues he identifies.

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However I should note that this is a delicate question. Our reform proposal already introduces substantial changes. We should not try to achieve too much all at once if we want to obtain real progress in reasonable time. I do not exclude the exploration of this course of action at a latter stage. But before proposing any further legislation, we should be very sure of our case and be armed with very good arguments. This Workshop, and the research effort that it represents, as well as the further research that it will certainly inspire, can make an important contribution in this respect.

IV. Should there be criminal sanctions for infringements of EC competition law? Before concluding and inviting the participants to take the floor for today’s discussions about private enforcement, I would like to add a few reflections concerning one of tomorrow’s topics: the issue of criminal sanctions. Let me first say that I welcome this discussion. It is important that academic discussions do not limit themselves to the existing framework, but also look beyond it and explore fundamental questions. In addition, this discussion is an expression of the growing awareness of the harm caused to consumers by violations of the competition rules. I am delighted about that. However, I do not think that, at this stage, the introduction of criminal sanctions is the only way in which to render enforcement of the EC competition rules more efficient. Criminal sanctions involve a large range of questions. While they could help to solve certain specific problems, they also risk creating others. I therefore strongly believe that more efficient enforcement in the EC at this stage can best be achieved by persevering on the course on which we have begun. First, reform of the implementing rules will permit the Commission and the national enforcers to concentrate more on the prosecution of serious infringements. Combined with amended investigatory powers, this will increase the risk of detection of companies that infringe the law. Secondly, there is a potential for further adapting the fines imposed on companies—at the European, as well as the national, level—to better reflect the harm done by violations of the competition rules. Thirdly, the increasing risk of private claims for damages should contribute to the deterrent effect of the competition rules. Taken together, these elements will have a real impact on companies. They will also indicate that the Commission is serious about combating violations that hurt consumers.

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PANEL ONE SUBSTANTIVE REMEDIES

1 PANEL DISCUSSION

P: Antoine Winckler Carl Baudenbacher Clifford Jones Dorothe Dalheimer Guy Canivet Hartmut Weyer Ian Forrester Jacques Bourgeois James Venit Jeremy Lever

Jochen Bornkamm Jürgen Basedow Karel van Miert Karsten Schmidt Marina Tavassi Mario Monti Mario Siragusa Mr Justice Hugh Laddie Walter van Gerven Wouter P. J. Wils

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Panel One: Substantive Remedies K  M—It has become a tradition that the Commissioner responsible for competition opens the proceedings of the Annual Competition Workshops held at the EUI. I wanted to thank Mario Monti for being with us over the last two years. At this edition of the Workshop we discuss one of the thorniest aspects of the Commission’s modernisation initiative, private enforcement of EC antitrust rules, and we all know that the subject is very close to the Commissioner’s heart.




M M—It is a great pleasure to again be in the place where modernisation ideas were first discussed. Indeed, not only were the very first ideas about modernisation exchanged around this table some years ago, but the subject has been further examined at various editions of this Annual Workshop. The European Commission is considerably indebted to this forum. And, of course, I am particularly pleased to be present here today, together with my distinguished predecessor and dear friend, Karel van Miert. Before answering to your questions, I should briefly present the state of play with respect to the adoption of the reform proposal. When we met here last June, the Competition DG was drafting the Commission’s formal proposal for a Council Regulation to replace Regulation 17/62.1 This was both preceded and followed by an intensive pedagogical and political effort to support the modernisation initiative, to which many of the participants around this table contributed in various ways. The negotiations about the Commission’s formal reform proposal that have so far taken place at the Council have shown that the main thrust of the reform finds large acceptance within the Member States. An in-depth debate about various aspects of the reform proposal took place at the Industry Council Meeting on 14 May 2001. This debate showed that the Commission’s reform proposal is generally supported, although further work must of course be undertaken on specific aspects of the reform, as well as on some of its technical details. Today a Working Group is meeting at the Council to discuss Article 3 of the draft regulation. The discussion will be based on a Working Paper prepared by the Commission. At the same time, we keep in close contact with the European Parliament, which is in the process of examining the draft regulation at the level of its Economic and Monetary, Legal and Industry Committees. The European Parliament will probably issue an opinion about the draft regulation in early September. Meanwhile, the Economic and Social Committee at the Council has




1

European Commission: Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, COM(2000) 582 of 27.09.2000.

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already issued a positive opinion on it.2 Our aim is to be able to implement the new regulation from 2003, inter alia because we believe that this reform is of great importance for the implementation of EC competition rules in an enlarged Union. I should add that I see this reform as a perhaps small but pioneering example of a broader spirit of reform that should characterise the Union in general, and the Commission in particular. This example is more and more often referred to in internal discussions at the Commission in the run up to the production of the White Paper on Governance in the European Union, which is due to be published this summer.3
J B—I would like to raise a couple of points: Professor Monti, you said that the draft regulation has drawn considerable support from the governments of the Member States. This is important from a political perspective, and yet I wonder whether the applause is coming from the right direction. After all, the draft regulation implies a transfer of enforcement competencies from the Commission to the Member States, and the latter will of course be very much in favour of that. What I personally observed in reading the draft regulation, is that it opens the way to considerable discretion for the various actors involved in the enforcement process, whether it be the Commission, the National Competition Authorities (NCAs) or national courts. The draft regulation repeatedly mentions that these may do such and such thing. As a lawyer, I would prefer to read something about obligations, and not only about possibilities, and I think this is equally important for the economic actors as well. Legal certainty implies that the economic actors should somehow be able to foresee the action of the Commission, NCAs and courts. For instance, you just referred to Article 15 in the draft regulation, which is about co-operation between national courts and the Commission. Article 15 stipulates that the national courts may address questions to the Commission, but it says nothing about the Commission’s obligations in this respect. You mentioned that the Commission might provide information about the structure of the market, and so on, to the national courts. As an expert in international law, I think that co-operation between authorities belonging to different systems requires the establishment of some clear obligations on their behalf. In other words, if I pose a question to the Commission, I want to have an answer, and not to hear that there is no time for giving that answer, or that the matter has no Community interest.
J B—There is one point on which I would like to react briefly. I understand that the Commissioner is lukewarm about the idea of 2

Opinion of the Economic and Social Committee on the Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No. 1017/68, (EEC) No. 2988/74, (EEC) No. 4056/86 and (EEC) No. 3975/87 (“Regulation implementing Articles 81 and 82 of the Treaty”) COM(2000) 582 final, 2000/0243 (CNS) of 29 March 2001. 3 See ‘European Governance — A White Paper’, COM(2001)428 final, available at http://www.europa.eu.int/comm/governance/white_paper/index_en.htm.

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introducing criminal sanctions for infringements of EC antitrust rules. We all know that this is a very delicate subject in as far as EC law and Community powers are concerned. However, my experience as a legal practitioner tells me that fines are not a very effective deterrent. When you deal with clients who often take important and risky investment decisions, and you tell them ‘if you do this, you risk a fine of “that much”’, you can see they are not really very impressed. At the end of the day, a fine is just part of their profit and loss account, and they won’t worry too much about it. Maybe a growing awareness on behalf of shareholders could change this. I had an opportunity to witness the different impact that the risk of being subjected to criminal sanctions has, in the case of companies getting in trouble with the US law. A fine settled with the US Department of Justice is seen as part of the risk of doing business, but company managers are really concerned about the possibility of criminal sanctions and of treble damages, which might far exceed the fines agreed with the US Department of Justice. Therefore, I really think that one should consider the possibility of introducing criminal sanctions for infringements of EC antitrust rules, and not abandon it for institutional reasons only. M S—A very quick reflection on the burden of proof: the draft regulation proposes an arrangement whereby the plaintiff would have to prove that Article 81(1) EC was infringed and the defendant would have to prove that the conditions for obtaining an exemption under Article 81(3) EC are met. The problem with this arrangement derives from the broad scope of application of Article 81(1) EC. While more recent case law seeks to downsize the scope of the application of this provision, the prevailing view is that the scope of this provision remains broad. This places the plaintiff in a preferential position, in the sense that it will be easier for a plaintiff to prove that an agreement infringes Article 81(1) EC than it will be for a defendant to prove that the conditions for obtaining an individual exemption under Article 81(3) EC are met. In the past, the situation was exactly the opposite due to the theory of provisional validity and the Commission’s exemption monopoly. Furthermore, one should consider the element of time, which is of essence in the application of Article 81(3) EC. Under the current enforcement system, the Commission usually limits the validity of an individual exemption to a certain period of time. Time is also an important element in determining whether the conditions for benefiting from an exemption under Article 81(3) EC are fulfilled. For example, an exclusivity agreement may be considered to be justified for a few years, but for no more than that. To put it another way: a certain restrictive agreement may have positive effects in the short run and loose its justification in the long run. Therefore, under the new enforcement system, the defendant will have to prove that the conditions for obtaining an individual exemption under Article 81(3) EC are met, and will also have to produce evidence relevant to determining the period of time during which the exemption is justified. I think that in this we can see a striking difference from the current system.




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M M—Mr Basedow has drawn a number of interesting ‘geometrical’ implications concerning the nature of the reform and the attitude of the parties involved. I think the situation is a bit more nuanced than that. For instance, you noted that there is considerable support from the Member States for this reform. Yet is it not obvious that there should be such support, since NCAs will be able to play a more important role in the enforcement process? What is paradoxical and intriguing about the political climate surrounding the modernisation initiative is that, while the European Commission is ready to give up its exemption monopoly, at least initially some of the national actors did not appear too eager to take on more enforcement responsibilities. This is why, in a sense, what we are doing is also a test of how serious the Member States—and especially some of them, not necessarily the smallest—are in their claims for simplification and subsidiarity. A lot of effort was, and is still, needed in order to convince the Member States that decentralisation is indeed beneficial to EC antitrust enforcement. While there is largely consensus among the Member States on the main thrust of the reform, there are nevertheless a number of concerns about specific aspects of it. Perhaps the most serious of these concerns, as expressed by some of the Member States, is related to Article 3 of the draft regulation, which defines the relationship between EC and national competition law. Now that the Member States and their competition authorities see the prospect of having a much greater role to play in the enforcement of EC competition rules, some of them are growing a little sensitive to the fact that, when an agreement affects trade between the Member States, Community rather than national competition rules should apply. On the other hand, the primacy of EC law in such cases is crucial for ensuring overall consistency and legal certainty in the enforcement of EC antitrust rules, as requested by companies. Therefore, on this aspect, gaining the support of the business community or the European Parliament may diminish the support from the Member States, some of which are not totally enthusiastic about Article 3. Concerning your second remark—namely that the draft regulation leaves room for a lot of discretion in the interplay between the Commission, NCAS and the national courts—I think that you are right, to some extent. Words such as ‘may’, rather than ‘must’ or ‘will’, are used on quite a number of occasions. Yet this is because we rely very much on constructing a network of competition authorities, comprising the Commission and NCAs. I believe that achieving this objective will require some doses of pragmatism, at least at the initial stage. However, considerable work is under way in order to establish how this network should function. As to the relation between the Commission and national courts: the role of the Commission as amicus curiae will of course be crucial. However, the Commission’s power to submit written or oral observations to the national courts, from the position of amicus curiae, would be limited to cases presenting a Community interest. Above all, the Commission will not intervene to support the interests of one of the parties. How should the amicus curiae system work in practice? In some Member States, NCAs already have the power to intervene before the courts in away

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that is very similar to that proposed by the Commission. Nonetheless, the Commission’s proposal on this point has been received with quite some scepticism. Most of the doubts that were expressed relate, in general, to the issue of how to reconcile the Commission’s powers with the nature of proceedings taking place before civil courts. Let us assume that the Commission comes to know about a case pending before a national court that raises important Community interest issues. In such a case, the Commission would probably send a letter to the national court making known its desire to intervene during the proceedings in accordance with the new regulation. It seems to me that in such a situation the court, without setting aside the principles governing civil procedure, would be able to give effect to the Commission’s right to intervene. The court would, for example, inform the parties about the Commission’s interest in intervening during the proceedings. It would set a deadline for the Commission to submit its amicus curiae brief, and it would then make the brief available to the parties, thus giving them the opportunity to comment on it. On the issue of criminal sanctions: this is a fascinating potential future development in Europe in general and with respect to EC competition law in particular. In fact I do not completely close the door to this possibility; I only think that, at this particular stage, this would not be the most ‘productive’ legislative development. Nevertheless, discussions on this subject are welcomed. I believe that the priority in the medium-term is to strengthen the Commission’s investigative powers (as proposed in the draft regulation) and to encourage private enforcement, particularly the award of damages making right loss resulting from infringements of EC competition rules. As for the introduction of criminal sanctions, I believe that it is not for the Commission to promote the debate on this subject, though I must say I am delighted that gifted Commission officials produce important academic work in this area. Should the political debate develop in favour of introducing criminal sanctions for infringements of EC law, then the Commission will of course have to draw the necessary conclusions and initiate legislation in this sense. Finally, Professor Siragusa, thank you for drawing our attention to the rather fundamental implications of what is being proposed concerning the burden of the proof. I think this is a highly important issue, but also one that is highly technical. Perhaps I could therefore ask Mrs Dalheimer to add a word on this.
D D—I must admit that I was a bit surprised by Professor Siragusa’s intervention. He made a point that goes in the opposite direction to what other commentators have noted so far, ie that it is the plaintiff who might have difficulty proving an infringement of Article 81 EC. This latter view was also supported in the papers presented at the previous edition of this Workshop.4 I wonder whether we could find some middle-of-the-road solution 4

See C.-D Ehlermann and I. Atanasiu, eds (2001): European Competition Law Annual 2000 — The Modernisation of EC Antitrust, Hart Publishing, Oxford and Portland, Oregon.

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concerning the distribution of the burden of proof. Perhaps we could ask for support from judges to arrive at reasonable solutions in individual cases. I also believe that legal advisers have an important role to play in this respect, because what courts can do depends very much on the quality of the evidence submitted to them by the parties. I believe that it will take time for the national courts to develop a practice with respect to the application of Article 81(3) EC, and that they will need assistance in this sense, at least during the initial period. I F—Even if some of the people around this table today are not entirely happy with the decentralising effect of the reform, its broad thrust is approved by everybody. Therefore, the hesitations concern the route that was chosen to achieve the goal of the reform. The adoption of more decisions based on EC antitrust rules by national courts is essential for the success of the reform. To that end, the Commission’s guidance on the application of Article 81(3) EC is important and necessary. However, so far the Commission has found it extremely difficult to take decisions in contested cases of principle involving this provision. It seemed that was much easier to persuade the Commission not to decide than to decide on a controversial case. It was only recently, in the context of Merger Regulation, that the Commission has discovered an attraction for taking a position. I would say that in the past, when applying Articles 81 and 82 EC, the Commission confused rule making and decision taking, and was too perfectionist, too reluctant to take a position in controversial cases. This reluctance to take sides and reach conclusions has also characterised its relationship with the national courts. In the cases in which I was involved and where the Commission was invited by the national court to make a contribution, the Commission behaved very cautiously, so cautiously indeed that its contribution to the deliberations of the court was either so muted or so slow as to not to be helpful. Therefore, if the reform is to succeed and national courts are to do a good job, it will be necessary for the Commission to acquire also in the area of Articles 81 and 82 EC the habits of boldness, clarity and speed that up to now it has shown only in the area of merger control.




J B—I have a couple of questions for Professor Monti related to what he has just commented on Article 3 of the draft regulation and the primacy of EC antitrust law. I hope that discussions on this aspect are continuing at the Council level, because we should still draw a clear dividing line as to the point from which we can stop discussing national law and instead start to discuss the primacy of EC law. It is quite clear that, in the context of Article 81(3) EC, Community law must prevail. German competition law developed an interesting theory about the interface between the scope of the application of national and EC antitrust law, which might not be known abroad. This principle is that both sets of law apply, but whenever a Commission decision exempts a particular agreement from the application of Article 81 EC, this decision should prevail, and decisions based on national competition law cannot conflict




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with it. Under the new enforcement system proposed by the Commission, this principle will gain in practical importance because, as Article 81(3) becomes directly applicable, exemption decisions based on this provision will have to be immediately accepted in the national jurisdictions. However, I have doubts as to whether the primacy of EC antitrust law is fully justified in the area of Article 82 EC. In reality, this provision does not play such an important role in EC competition law. You might have doubts about such a straightforward statement, but if you look at the situation at the national level—and particularly in Germany—competition provisions do play an important role in the courts’ practice by functioning as a ‘sword’ or allowing plaintiffs to claim damages. These provisions can be invoked even if the adversary has not reached a dominant market position. In Germany it is felt that, if Article 3 of the draft regulation were to come into force as it is currently formulated, the long-term effect will be that we will have to adjust national law to mirror the European one, otherwise national law would discriminate against small players and in favour of the global players. This is why, as much as I do see the need to ensure the primacy of EC law in the field of Article 81 EC, I do not find it necessary to have the same primacy in the area in the area of Article 82 EC.
M J H L—Just a small comment on what Ian Forrester said before: I would hate it if anybody believes that everybody around this table agrees on the need for decentralisation. I can tell you, as one of the poor judges who would have to implement EC competition law at the national level, that I have the strongest possible objections to decentralisation . . . I will list these objections in my presentation today. In the meantime, I just wanted to mention that what is now being suggested as a reform means, in essence, that we would abandon the expertise of the Commission and put these important panEuropean provisions into the hands of national judges.
M T—In the Explanatory Memorandum of the draft regulation, the Commission states that one of the core elements of the reform is the establishment of a network of competition authorities, including the Commission and national competition authorities, which will work closely in the application of Articles 81 and 82 EC. The network should allow mutual exchange of information (including confidential information) and assistance. It should also ensure the efficient allocation of cases among its members, based on the principle that each case should be dealt with by the authority that is best placed to do so. This principle seems somewhat difficult to put into practice, and could lead to some confusion. The most suitable jurisdiction might sometimes be unclear, or the same case could be brought before the authorities of two or more Member States. In Italy, there is the risk of divergent decisions on the same case by different institutions (ordinary courts, the national competition authority and administrative courts). Therefore, I believe that the network should be extended to national courts, which already have at their disposal a means by which to prevent

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inconsistencies in the application of EC antitrust rules, namely the possibility of addressing requests for preliminary rulings to the European Court of Justice. Moreover, Article 15 of the draft regulation establishes a right for the national courts to request that the Commission provide information that is in its possession and that is necessary for the purpose of applying Articles 81 and 82 EC. National judges can also ask for an opinion from the Commission on questions relating to the application of the Community competition rules. To the best of my knowledge, this kind of request has never been formulated by an Italian court under Regulation 17/62, and I sense that judges are somewhat reticent to make such a request to an administrative authority outside their jurisdiction. But it might simply be a question of changing attitudes. The Commission’s reform proposal is asking us to change both our approach to competition law and our working methods, difficult as that may be. A W—I have a concern related to the role of the Commission in the context of antitrust litigation. French judges, for example, tend to take on board the Commission’s advice as if it were the very word of law. In the new enforcement system, the Commission might present its opinions before national courts without having had a previous exchange of views with the parties concerned. Yet in such cases the Commission is neither a neutral observer nor a neutral expert, if only because the Commission will very often have acted as a prosecutor against one of the parties in some precedent case. I can think of examples like Tetrapak, Coca-Cola, Microsoft, and so on.





M M—Professor Forrester’s remarks are, in my view, well taken. Mrs Tavassi was speaking of a need for Judges to change their attitudes if the reform is to be successful. I believe that everyone has to change their attitudes, including the Commission. Indeed, such a change of attitude is already noticeable in the area of mergers, where stringent deadlines provoked the Commission to acquire the habit of making decisions more rapidly. Hopefully they were the right decisions, maybe they were sometimes wrong. But, at any rate, they were real-time decisions. I understand Professor Forrester’s note about a lack of boldness and speed in the area of Articles 81 and 82 EC. I think that to some extent he is right, and we are making a considerable effort within DG Competition to change this state of affairs, quite apart from the reform. In general, we intend to better the organisation of our non-merger enforcement activities. Yet this is largely an issue of resources, and not one of intellectual hesitation to decide on cases. This is why I am so glad that the self-evaluation exercise conducted within the Commission led to a considerable increase in the resources allocated to DG Competition. We will have some 90 more staff on top of the current 530.


K  M—After 5 years of debate . . .

M M—Yes . . . But we are fairly happy about the final outcome. I also believe that the proposed reform can further contribute to a better organ-




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isation of our activities, by discharging our staff from the cumbersome and rather dull work related to notifications and allowing it to focus on more important enforcement issues. Concerning Article 3 of the draft regulation and the primacy of EC antitrust law, I see your point, Professor Bornkamm, and I can say that we already are examining the issue that you raised. The intermediate result of our evaluation is that there is indeed specificity in the area of Article 82 EC, and in particular concerning anticompetitive behaviour that does not amount to an abuse of a dominant position under EC law. We are therefore ready to discuss an opening with regard to this area, including rules on below-cost sales, and on the burden of proof in cases concerning access to network problems. Mrs Tavassi, as I said before, I agree that the reform will require some changes of attitude on the part of all the parties involved in the application of EC antitrust rules. However, we would not think of involving national courts in the network of competition authorities. At the same time, we wish to clarify the modalities of co-operating with the national courts in the application of EC antitrust rules. I was particularly struck by the second remark of Mr Winckler, asking how impartial the Commission could be if it had previously adopted decisions against the companies involved in litigation. I can assure you that we can make both positive and negative decisions about the same company, and there are many examples in this sense.
K  M—Thank you very much indeed. We will now open the first session on substantive remedies, and I would like to invite Professor Van Gerven to start by presenting his general report on the situation at the EU level.
W  G—My report covers issues related to the availability and effectiveness of substantive remedies in the application of EC antitrust rules before national courts. I approached this subject from the assumption that the Commission’s modernisation proposal will be accepted. I thus left aside questions concerning the legality of the reform proposal (that is, the consistency of the reform with the provisions of Article 81(1) EC), and assumed that Article 81(3) EC is capable of having direct effect. As you know, the legality of the reform proposal is contested by a number of renowned legal specialists, including for example Professor JE Mestmäcker. In my own view, the legality of the reform proposal may be controversial, but not the fact that Article 81(3) EC is capable of having direct effect. There are already quite a number of Commission decisions and judgments of the European courts interpreting this provision. Indeed, a Treaty provision that was not originally directly applicable can become so over time because of the precision given to it by the case law. My first point is that the Commission’s reform proposal leaves national courts too much in the cold by not providing any consolidation, let alone strengthening and harmonisation, of the substantive remedies available in the application of the EC antitrust rules. The second point concerns co-operation

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between the Commission and national competition authorities on the one hand, and national courts on the other. Here, I believe that we should make a distinction between administrative courts, which perform judicial review of the decisions made by national competition authorities and are therefore better equipped to apply competition provisions, and civil or commercial courts, which are not so well equipped for the same task. Perhaps there should be a clear distribution of the work between these two kinds of courts at the level of the Member States, though this would require legislative harmonisation. Of course, I agree with Commissioner Monti that one cannot do everything at once. Although, as an academic, I am inclined to look for the ideal legal situation and I do not have to take into account strategic considerations, which otherwise I fully understand. All things considered, however, my suggestions are a blueprint of what should be done in the future rather than of what can be achieved immediately. And I should think that something would have to be done with respect to remedies. Nullity, compensation, restitution, damages, interim relief, collective claims are all substantive remedies in the application of EC antitrust rules which national courts should apply with a sufficient degree of uniformity throughout the Community. What is the current situation with respect to their application? The sanction of nullity is available for infringements of Article 81 EC, while Article 82 EC is currently a territory left to the national law. Moreover, the sanction of nullity is currently subject to the limitations resulting from the provisional validity theory, which—as we all know—has not proved to be very popular, but will fortunately be eliminated by the reform. The case law of the European Court of Justice with respect to the sanction of nullity is quite developed, including law concerning aspects such as the absolute character of the sanction and the severability of restrictive contractual clauses. The same cannot be said about the other remedies, including compensation, restitution, damages, and so on. However, there are numerous decisions of the European Court of Justice that give shape to the other categories of remedies in other areas of Community law. A good number of these decisions cover the remedies that give effect to the rights that private persons derive from Community law. To mention just a few examples: the remedy of restitution was the subject of at least 50 ECJ judgments, Fantask5 being among the most recent of them; for the remedy of compensation, one may refer to Francovich6 and Brasserie du Pêcheur;7 the conditions for the granting of interim relief were laid down in Factorime I 8 and Zuckerfabrik Siiderdithmarschen.9 The existing case law very clearly establishes that individuals are entitled to judicial protection of rights that arise from Community law in relation to the 5 6 7 8 9

Case C–188/95, [1997] ECR I–6783. Joined Cases C–6/90 and C–9/90, [1991] ECR I–5357. Joined Cases C–46/93 and C–48/93, [1996] ECR I–1029. Case C–213/89, [1990] ECR I–2433. Joined Cases C–143/88 and C–92/89, [1991] ECR I–413.

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state or public authorities. Yet, with the exception of nullity, there is almost no case law on the judicial protection of individual rights arising from breach of EC law in the context of private relations. During my time at the European Court of Justice, I had the occasion to write an Opinion on the remedy of compensation in Banks,10 a case in which a small coal producer asked for compensation from British Coal under Article 65 of the ECSC Treaty. In this case I advocated that Articles 65 and 66 of the ECSC Treaty should be recognised to have direct effect in the same way as Articles 81 and 82 EC do, but the Court did not accept my argument. In my Opinion to the Court I investigated the matter further. I arrived at the conclusion that, if the ECSC Treaty provisions in question were to have direct effect on a ‘vertical’ dimension, they should also be recognised to produce horizontal effects (that is, in the relationship between individual companies). In consequence, the individual companies should be entitled to compensation for loss caused by other individuals as a result of breaches of Community law, for the same reason why the Court established the liability of the Member States in Francovich. I hope that the Courts will sooner or later accept this reasoning. I hope that the Court will have the courage to take on this line of reasoning in Crehan v. Courage.11 Unfortunately, in the Opinion delivered on this case, Advocate General Mischo did not deal directly with the issue of whether individuals are entitled to compensation for loss resulting from breach of EC antitrust rules, but only with the less important question of whether a party to a contract in breach of Article 81 EC is entitled to ask for compensation for loss resulting from that contract. Deciding that the latter is not a question to be addressed directly, AG Mischo goes on to state that the direct effect of Article 81 is recognised ‘to include rights for individuals to be protected from the harmful effects which an agreement, which is automatically void, may create [though] the individuals who can benefit from such a protection are of course primarily third parties, that is to say consumers and competitors who are adversely affected by prohibitive agreements’.12 I hope that the Court will be more courageous than that and will attack the very question of principle, which is extremely important for the ongoing discussion on the modernisation of EC antitrust.13 Anyway, I would find it preferable that the legislator (that is, the Council, based on a proposal from the Commission) 10

Case C–128/92, [1994] ECR I–1209. Case C–453/99, Judgment of the Court of 20 September 2001. Note that the roundtable discussion here reproduced took place before the Court’s pronouncement in this case. 12 See Opinion of Advocate General Mischo in Case C–453/99, delivered on 22 March 2001 (not yet reported), at para 38. 13 Indeed, the ECJ eventually ruled that ‘a party to a contract liable to restrict or distort competition within the meaning of Art. 85 EC Treaty can rely on the breach of that article to obtain relief from the other contracting party’. Furthermore, ‘Article 85 EC Treaty precludes a rule of national law under which a party to a contract liable to restrict or distort competition within the meaning of that provision is barred from claiming damages for loss caused by performance of that contract on the sole ground that the claimant is a party to (it)’. 11

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adopts a Regulation directly addressing the subject of remedies, rather than relying on the European Courts to gradually ‘construct’ the law on this subject. If such a legislative initiative is taken, it can draw inspiration from the Court’s case law in relation to Article 288(2) EC (previously Article 215(2) EEC) which, as is well known, on the matter of the liability of Community institutions refers to the general principles as being common in the legal systems of the Member States. On the availability of remedies as an incentive to private enforcement: Professor Jones writes in his report for this Workshop that in the US treble damages are important, but perhaps not as important as we Europeans might think, and that the possibility of covering interests running from the very beginning of the occurrence of the damage may actually be more important. In the recent Mulder cases,14 the European Court of Justice ruled in detail on the principles for determining the compensation for the loss incurred, and on the burden of proof with respect to the loss incurred. With respect to interests, the Court distinguished between interests due for the sum established as compensation, which run from the moment at which the damage occurred and are intended to compensate for monetary erosion, and interests that run from the date of the judgment and until when the compensation is actually paid—otherwise known as ‘default interests’—at an annual rate of 8 per cent. So, here again, the case law is to be used as a source of inspiration by the Community legislator. Very briefly, on interim relief: the conditions for the award of interim relief were spelled out in the Court’s case law regarding infringement of Community rights by public authorities, though the same conditions should be valid in the area of private relations, for the same reasons that I mentioned before. It follows that interim relief should be awarded if three cumulative conditions are satisfied: • there is a prima facie case of an infringement of EC law; • there is immediate danger of serious and irreparable harm resulting from this infringement, and • there is a balance of convenience between taking or not taking such a measure. I also want to make a brief point about restitutionary damages, which are not very popular in Europe at present. Restitutionary damages lie at the borderline between damages and restitution. To simplify things, I would define them by saying that, in order to assess the loss incurred in this case, one does not look at the harm caused to the plaintiff but at the profit derived by the defendant. Restitutionary damages are used in English tort law, for example, in intellectual property cases. I believe that restitutionary damages could be useful in private 14

Joined Cases C–104/89 and C–37/90 Mulder v. Council [1992] ECR I–3061 (interlocutory judgment, Opinion W van Gerven), Joined Cases C–104/89 and C–37/90 Mulder v Commission [2000] ECR I–203 (final judgment, Opinion A Saggio)

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litigation based on EC antitrust rules, particularly in cases where large groups of consumers claim damages from a producer. In such cases it might be easier to determine the profit derived by the defendant than the actual damage incurred by the plaintiff. This brings me to the subject of collective claims, which exist in the area of EC consumer law. I believe that collective claims—and not class actions— should also be introduced in the area of EC antitrust law, especially if one accepts the idea that Article 81 EC is ultimately designed to enhance consumer welfare, as one can derive from the Court’s case law. A last point on remedies: as already mentioned by Commissioner Monti, in my report I tried to draw together the principal elements for a Council regulation on the different aspects mentioned before, which could be a point of departure for future debate on this subject. In the second part of my report I discuss a few issues related to the cooperation between the Commission and the national competition authorities on one hand, and the national courts on the other. In the XIIIth Competition Report of the Commission from 1983, and most explicitly in the XVth Competition Report of 1985, the Commission started to play with the idea of some sort of co-operation with the national courts. But not much came out of that. Moreover, these references disappeared in later Annual Competition Reports. In Delimitis,15 the Court stated however that national courts are entitled to seek information from the Commission about the state of proceedings before it and, most importantly, to obtain legal and factual information from the Commission, which the latter can supply. Shortly afterwards, in Automec II,16 the CFI established that the Commission is not obliged to pursue every complaint received down to a formal decision on the substance and, furthermore, it is entitled to choose its enforcement priorities. In the aftermath of these two rulings the Commission published its Notice on co-operation with the national courts.17 More recently the European Court of Justice defined the role of the Commission in supplying information to the national courts as being equivalent to that of a legal or economic adviser. As a short parenthesis, I tend to believe that national courts are sufficiently prepared to apply the conditions of Article 81(3) EC. The first condition for granting an exemption under this provision is that the agreement does not impose unnecessary restrictions on competition. It is, in reality, a proportionality rule, which national courts have actually applied in much more difficult cases relating to free circulation of goods and services. The second condition is that the agreement should not limit competition substantially, and this test is already applied by national courts under Article 81(1) EC, and even more so under Article 82 EC. As to the third condition, that the agreement improve the 15 16 17

Case C–234/89 Delimitis v. Henninger Bräu [1991] ECR I–935. Case T–24/90, [1992] ECR II–2223. OJ C39/10 of 1993.

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distribution or production process and benefit to the consumers, I do not believe that this is much more difficult to determine than the previous conditions, especially as there is an abundant case law of the European Courts and numerous Commission decisions on this matter. Therefore, I am not afraid that national courts will not be capable to apply Article 81(3) EC. At the same time, I would subscribe to the idea that national courts should have the right to ask the Commission for an opinion, rather than the Commission only being given the possibility to intervene as amicus curiae. It was interesting to hear Commissioner Monti saying that the Commission is giving further consideration to this matter. As a last point, and as I said at the beginning, I think that more reflection is needed on the distinction to be made between the administrative courts in charge of reviewing the decisions of the national competition authorities, and commercial or civil courts that deal with contractual disputes and third party claims. Such a distinction has already been made by the European Court of Justice in the early BRT v. Sabam case,18 where the Court decided that national courts may apply Article 8(1) EC (then Article 85 EEC), even if a national authority has already initiated proceedings. In that case, the Court drew a distinction between national authorities (including the national courts in charge of reviewing their decisions) and other national courts, be they commercial, civil, and so on. I think that this distinction is very important, because when a national competition authority has decided a case based on information made available to it by the plaintiff and the defendant, and has already performed an economic assessment and a legal analysis, the task of judicially reviewing such a decision is much easier than that of civil or commercial courts dealing with a completely new situation. Here again, I would like to advocate harmonisation at the EU level. For instance, I would subscribe to Jeremy Lever’s proposal to introduce some sort of partie civile procedure, whereby private parties can bring compensation, restitution and damage claims before a sole specialised administrative court, probably the Appeals Court. Although the partie civile procedure is typical of criminal law proceedings, I believe that the concept could somehow be ‘imported’ into antitrust proceedings taking place before administrative courts—provided, of course, that there is also a right to appeal—so this might require the introduction of a new level of jurisdiction into the existing hierarchy. As a last point, I think that the time is now ripe for drafting a model of competition law that will be administered by the Member States. Countries like the UK, the Netherlands and Belgium have competition laws that are very similar to the European model, and they can therefore request their courts to follow the interpretation given by the European Courts to EC antitrust provisions. A common model would be particularly useful for harmonising national provisions on remedies, and thus rendering the tasks of the national courts easier, and it would be particularly useful for the candidate countries. 18

Case 127/73 [1974] ECR 51.

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K  M—Thank you very much indeed, Professor Van Gerven, for this very impressive and enlightening introduction. We will certainly come back to many of the points you raised during the general discussion. As Claus Ehlermann will remember, the possibility of taking a harmonisation initiative was discussed on several occasions during the period when we were both at DG IV. We always came to the conclusion that such an initiative would perhaps have proved politically counter-productive at the time, and we therefore decided to go about our goals in a different way. That is, we tried to persuade national authorities to take the situation in the rest of the European Union into account when redrafting their competition laws. In other words, we tried to induce harmonisation through ‘soft’ means. Moreover, over time we observed an unprompted trend towards harmonisation in several Member States.




C J—As you know, my assignment for this Workshop was to compare the situation with respect to private enforcement of antitrust rules in the EU and the US. I would now like to highlight a few of the principal points raised in my written contribution. The first question that arises is: why are there so few private antitrust actions in the EU? I think that there are several factors leading to this state of affairs. First, there is uncertainty about basic elements affecting the decision to bring private damages actions in the EU (these reasons include remedies and procedures). Secondly, a number of academic writers have pointed to cultural differences between Europe and the US. One of the causes for such differences is the central role played by the Commission in EC antitrust enforcement. This, of course, contributed to the propagation of the idea that antitrust enforcement is a governmental function. While we never had this perception in the US, many EU lawyers and businessmen have certainly grown up with the idea that it is somehow wrong for individuals to bring antitrust actions. Moreover, there seems to be a general perception that US-style cutthroat competition is not really the way you want to go about business in Europe. There is thus reluctance on the part of those parties—companies—who might bring private antitrust actions. Some commentators suggested that this is a litigation culture question, that is, that companies in the US are more litigious than European companies. I am not quite sure about that. In the first 50 years or the application of the Sherman Act, US companies were certainly less litigious than they are now, and back then we also had relatively little private antitrust enforcement in the US. I believe the problem lies elsewhere: in the Community system, it has always been relatively easy, simple and low-cost to complain to the Commission rather than go to court. In addition to this, the Commission has taken few formal decisions, and it has therefore created few precedents for private actions to follow. The Commission has instead tended to impose conditions on agreements as a way of resolving cases. The third factor may come as a surprise to some, but it might actually have greater importance than we suspect. There is still some ignorance about the




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possibility of bringing a private antitrust action in Europe. To give you just one anecdotal example: a few years ago, at a hearing of the US Department of Justice’s International Advisory Committee on Antitrust Policy, representatives of the United Parcel Service (UPS) criticised the Commission for not acting on their complaint about cross-subsidisation by Deutsche Bundespost. (In the last couple of months the Commission has acted on that matter). After the testimony, I went up to their lawyer and asked: ‘Why don’t you bring a private damage action?’ His reply was: ‘What do you mean?’ So, maybe there is some ignorance out there, and it may be widespread. Next, I wanted to mention a few points about US actions based on the Sherman Act, compare them to those in the EU, and then discuss the differences based on a practical example of a damages action. As you know, the Sherman Act allows the award of treble damages, that is, three times the compensation due for damages to your business or property. I just wanted to say that I liked very much Professor Van Gerven’s suggestion that we take a restitutionary approach to the measure of damages in Europe. You cannot do this in the US, because Section 4 of the Sherman Act states that you can recover damages brought to your property or your business, whereas the general restitution theory applicable in the US foresees more latitude in this respect. In relation to this, it is interesting to note that the maximum criminal fine applicable to corporations for breach of the Sherman Act in the US is $10 million, yet the Department of Justice routinely collects fines of $100 million. This can be done on the basis of a general US statute that allows fines to be based on the amount of profit derived by the violating entity. It is interesting that this is possible in the context of criminal fines for antitrust violations, but not in the area of damages. This is something that should be looked at, particularly in relation to the Community law principle according to which national law must provide adequate relief for infringements of Community rights. If you think that ordinary damage awards are not sufficient in this area of Community law, this Community principle might be a basis for introducing restitutionary damages. Returning to the issue of treble damages, I wanted to remind you that a jury awards such damages in the US. I mention this in relation to the debate over the difficulties faced by national judges in Europe when confronted with antitrust cases for the first time. I happen to believe that judges in Europe, like most judges in the US, are williing to learn on the job. It is the job of counsel to present their cases in such a manner so as to clarify matters for the judges. As someone who spent 18 years in US private practice before becoming an academic, I can tell you that, if you can present the economic issues of an antitrust case to a jury, you can doubtless do the same before a judge. Treble damages aside, we do not have punitive damages in the US and, with very few exceptions, we do not have pre-judgment interest either. When the government brings an antitrust suit on its own behalf, it does not get treble damages but pre-judgment interest, and of course this does not keep the US government from bringing antitrust actions.

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In the EU, on the other hand, you have the adequate compensation principle. You also have quite rich jurisprudence concerning damages in Article 288 EC cases, which I find a very useful reference point for antitrust cases. In fact, I think that there is a strong argument for taking the damage rules emerging from the Article 288 EC jurisprudence as a starting point, and then—outside the context of governmental liability—you might find it useful to relax damage rules for situations in which it can be demonstrated that it is necessary to do so in order to provide adequate compensation. Though this is, in itself, a topic for a whole seminar. There is no textual basis for treble damages in the EC Treaty, and you are not likely to have one in the future. At the same time, the possibility of awarding punitive damages exists in at least in a couple of national jurisdictions, which could be even more effective than treble damages. Most interesting to me is the fact that pre-judgment interest is available, not only as a matter of Community law, but apparently in most, if not all, of the Member States. Pre-judgment interest is an item of compensation that does not exist in the US. Depending on the circumstances, awards of pre-judgment interest may be substantially higher than the actual damage incurred. Of course, the final amount may not always be treble the damages. But then again, if I may ask you: if you advised a client in Europe, how much of a premium over your actual damages do you think the client would expect to obtain before deciding to bring a private damages action? In Europe there is a tendency to think, ‘well, we don’t have treble damages, so we might as well just give up’. I don’t think that should always be the case, and I will give you an example. I will use, as my example, the Control Data Corporation v. IBM settlement for $100 million, back in 1973. (My friend Jeremy Lever, who represented IBM in the European litigation, assured me that IBM was never a monopoly. So, I guess that the $100 million settlement was just a nuisance payment to get rid of Control Data Corporation. . .). Now, let us take this number, transform it into Euro and bring the sum forward to the value in 1995, and assume that IBM, or some other company, engaged in some awful illegal conduct that caused a similar damage. For ease of calculation, I assume that damages accrued evenly over a 10-year period, at 2½ million Euro per quarter. I assume that the damages went on for five years before an action was brought (I chose a period of five years because I think that under the Commission’s proposal five years is the time limitation for bringing an antitrust complaint, and that the litigation took another five years.) Under the treble damage approach in the US, the damages awarded would be 300 million Euro, to which one may add the costs of the trial and the lawyers’ fees for the prevailing party. Now, let us see what would happen under a pre-judgment interest approach. We compound the annual interest (as we would do in a US federal court) at a 7 per cent rate on the 100 million Euro due as damages. Five years down the line, actual damages, including pre-judgment interest are not 50 million Euro, but 61.5 million Euro. At the time of the final judgment the plaintiff is awarded 100 million Euro in actual damages. Adding pre-judgment interests, the plaintiff gains up to 148.7 million Euro. Now, if you can tell your client from the outset that they will not recover treble damages but nevertheless can

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get 1½ the amount of the actual damage incurred, then maybe this is will be a sufficient incentive for them to bring an action. Actually, following the settlement with IBM, the managers of Control Data Corporation declared that this lawsuit was the best investment their company ever made. If you use an even higher interest rate, let us say, 14 per cent (which is the average long-term gain on the stock market, and has been used before in various economic calculations), the numbers look even better and the client ends up with 220.4 million Euro in damages based on pre-judgment interest alone. Even more, if you are in the UK, for example, and you can persuade the court that punitive damages should also be awarded, your client may end up with an award higher than the US treble damages. There are other things that can be done in order to provide an incentive to engage in private antitrust actions. First, outside the area of written contracts, there might also be discovery problems to be settled in Europe. Although US discovery rules are generally criticised by European lawyers, they have recently been changed to follow the British discovery system, at least in some respects. American lawyers are now obliged to turn in all documents relevant to the trial. In a decentralised EC antitrust enforcement system, I see scope for establishing either private discovery methods or giving the parties access to the discovery methods of the national competition authorities. Secondly, although there is not yet an EU level codification of the rules for private antitrust actions, I do not see any reason why this could not be done at the national level. This could be done at the same time as a codification of the obligations of the national competition authorities when applying Community competition rules. Finally, I do not think you should introduce class actions in the area of EC antitrust, but you could find some method to aggregate consumer claims if individual action is not realistic due to the difficulties in determining the amount of the damage incurred. Otherwise, you could adopt the model of the US parens patriae governmental actions, which allows the government to recover consumer damages and establishes a system for distributing rebates to consumers. I realise that all this is just fuel for further discussion. The Commission will continue to hold considerable power and control in the new EU antitrust enforcement system, and I think that one of the most important objectives of this reform should be to successfully de-power the Commission. National courts should not run to the Commission every time they want some input on deciding a case. They should instead turn to the parties’ legal counsel.
J L—My primary argument is that, in the field of antitrust enforcement, private law is not a substitute for public law. In practice, private law is best able to solve the primary purpose of compensating the parties that were injured by antitrust wrongs in most cases. This is not to minimise in any way the importance of private law for providing a compensatory mechanism. If the competition law enforcement system is to work properly, one of the things that it must do is put people who have been injured by antitrust infringements

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into the economic position in which they otherwise would have been. That must be part of the remedial process, the curative process that any effective competition law enforcement system must serve. Having thought a little more about this after I finished my paper for this Workshop, I realised that there is a further question that, I think, has never been actually debated. The question is whether—if we are completely honest about it—there are two distinct sets of competition law, one private and the other public. By this I do not mean to ask whether we have two different sets of procedures and remedies, because of course we do have them. What I mean to ask is whether we regard some specific conduct as constituting an infringement of the competition rules for the purposes of private law only, and not for the purposes of public law. If that is so, then of course my argument is subject to a very big qualification. I personally do not believe that we have two sets of substantive competition law. To suggest that we have them would be like suggesting to somebody who went to a police station to complain about a robbery that the courts of law are also available to him, and he should better address his complaint to a civil court. When we are dealing with antitrust law, this would not be an appropriate reaction. Our politicians constantly tell us that competition law plays an indispensable role in the free market economy. If that is so, one would have thought that it is worth finding the resources to enforce competition law as public law, on the back of which injured persons would be able to recover their compensation quite easily. Likewise to Walter van Gerven, I wonder whether a partie civile type of procedure could provide a possible way forward? I would be very interested to hear whether our French colleagues around this table also think this is so. Clifford Jones spoke about parens patriae actions to recover compensation for large groups of people. Yet who is the parens patriae par excellence? It is the State. Then why should the state not perform the function of establishing the infringement, on the basis of which courts could then award compensation? Of course, the burden of determining the loss caused must fall on the party seeking to recover it. But, beyond that, why shouldn’t the State undertake the task of establishing the facts? I do not see why this should not be so, unless you tell me that there are types of anticompetitive conduct which are better dealt with under private law. In the US, to some extent, this holds true. Returning to remedies, I do not think that there are any uncertainties about rights and procedures in EC antitrust cases in the English jurisdiction. It is quite clear that there are civil rights to compensation if you have been injured by an infringement of the EC competition rules. The Competition Act of 1998 creates an almost perfect symmetry with Community law in so far as civil rights under national law are concerned, in cases where there is no effect on trade between Member States. At the same time, there have been some recent developments on the procedural side to which I have referred in my paper, so I am not going to use the time now repeating them. With regard to what Mr Justice Laddie said earlier about the difficulties that would be caused to our courts if called to apply Article 81(3) EC: I too have felt that this was going to present huge problems.

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This could be because I was indoctrinated by all that has been said in the past, as Claus Ehlermann explains so eloquently and clearly in his wonderful article for the Common Market Law Review.19 However, we could mitigate these problems by establishing within the High Court of Justice what I would call a ‘Competition Court’. We already have a Commercial Court and a Patent Court, so we could also have a Competition Court. Besides, we now have a Competition Commission Appeal Tribunal. True, the judge presiding in this Appeal Tribunal sits together with non-judicial members, but it would not be impossible to have such a system within the procedures allowed in the High Court. The Competition Commission Appeal Tribunal does have to make precisely the same kinds of decision as the competent authority in the United Kingdom, including applying the equivalent of Article 81(3) EC, so it would not be impossible for a Tribunal exercising plein jurisdiction in a wider sense than before the Court of First Instance to do this. It does require a specialised court, and it may require more than one judge sitting alone. In my paper I have also drawn attention to another question, which is how far the application of Article 81(3) EC by the national courts—in the context of civil antitrust litigation—will affect the enforcement results otherwise obtained by the application of the severance doctrine in the context of administrative enforcement. English law does not currently enable our courts to impose conditions or accept commitments in the area of Article 81(3) EC, as the Commission can do. Even if national legislation does not permit courts of law to apply the severance doctrine, Community legislation could enable them to do so in the area of Article 81 EC. However, the draft regulation is wholly silent on this important issue.
A W—I intend to give you a legal practitioner’s view of the current situation in France with respect to the availability of remedies in the application of EC antitrust rules. In order to do this, I will use hypothetical cases. Let us imagine the ‘hypothetical case’ of a very large US aeroplane manufacturer that enters into exclusive purchase contracts with fidelity rebates with two airlines in the US. Now let us imagine that a very large European manufacturer of the same type of products considers bringing an antitrust lawsuit against the first manufacturer before a court in France, because that is where his own headquarters are. First, the plaintiff will have to demonstrate that his US rival committed an infringement of EC antitrust rules. In this particular case, proof might actually be possible, because there is a precedent, that is, a Commission decision can be brought before the court to help it determine the relevant market. But it is not improbable that the defendant disagrees with the Commission’s market definition, either disputing the Commission’s finding or arguing that the market situation has changed in the meantime. 19 C. D. Ehlermann (2000): ‘The modernization of EC antitrust policy: a legal and cultural revolution’, 37 Common Market Law Review, 537.

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Secondly, the plaintiff would probably have to argue that there is an intentional element in the infringement that has been committed, at least under French law. If I were the defendant in this case, I would reply by asking how it is possible that the very same practice (fidelity rebates and exclusive purchase contracts) can be perfectly compatible with EU competition law if I do not enjoy a dominant position? I am not sure what the judge could decide when faced with this line of defence. The third hurdle to overcome for the plaintiff is proof of damages. In this case, the European manufacturer would have to demonstrate exactly what it has lost. I think this would be a very difficult case indeed. Is it that it has not been able to sell aeroplanes to the two airlines in the US? The defendant could argue that the plaintiff actually had the opportunity to enter into the same type of contract with the airline companies but never did so. Likewise, the defendant could argue that any eventual loss would have to be recovered from the airline companies (that is, the impari causa principle). The fourth hurdle to overcome is proof of a causal link. Suppose that the European manufacturer can demonstrate that a loss was incurred, how can he prove the causality link between the fidelity rebates and the loss sustained? Obviously, this case is, in essence, rather simple. But imagine more complex cases, such as predatory pricing. Predatory pricing is very similar to the outcome that a perfectly competitive market would arrive at. These are highly complicated economic issues. My next point refers to the nullity sanction. Let us take another hypothetical example, that of two manufacturers of car components who enter into a coexclusivity contract with a car manufacturer (this happens very frequently in practice). The contract stipulates the delivery/purchase of fixed components quantities and co-development programs. This kind of exclusivity contract is efficient from an economic standpoint: they ensure security of supply to the car manufacturer, and allow the easier financing of new car models. Let us now suppose that, for some reason, one of the car component manufacturers wants to withdraw from the exclusivity contract. He would go before a French court and argue that the contract is illegal because it organises a de facto allocation of the market between himself and the other exclusive supplier. This is, again, a very difficult call for the national courts. Are these contracts illegal? There are no explicit precedents, but everybody knows that these kinds of contracts have been tacitly accepted by the Commission. Second, the nullity sanction is a matter of ordre public in the area of antitrust, therefore the car manufacturer could also invoke it, as could the other car component supplier. But let us assume that the car manufacturer is in a dominant position. Would it be fair to allow the dominant buyer to get out of a contract it no longer likes by invoking an infringement of EC antitrust rules? Third, there is the question of the scope of the nullity sanction. Co-exclusivity contracts have the exclusivity clause at their very heart; therefore, exclusivity is essential for the existence of the contract. So should the court decide that the entire contract is void?

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J B —As you probably know, the German Monopolkommission published a fairly critical position paper on the Commission’s Modernisation White Paper of May 1999.20 In the meantime the composition of the German Monopolkommission has changed, and this new membership will probably publish another position paper on the draft Regulation,21 which I am afraid will be again fairly critical, for the following reasons. The first reason is that, in the formal proposal, we can still see the danger of an inconsistent application of the EC competition rules by national competition authorities and national courts. The second reason is that the Commission has promised that the reform will promote private enforcement of EC antitrust rules, but this promise cannot be fulfilled on the basis of the draft regulation in its current form. As you all know, private enforcement of EC antitrust rules depends consistently on national law. What is still lacking—and I think this is one of the reasons why we are sitting here today—is an in-depth comparative investigation of the substantive and procedural aspects in the legislation of the Member States relevant to the private enforcement of EC antitrust rules. This deficiency is particularly disturbing, and I am not totally convinced by what Commissioner Monti said this morning, in the sense that such discussions can take place at a later stage. On the contrary, I think that there should be a clear concept of what the law should be, even if this is not implemented immediately. Perhaps one reason for this lack of clarity is that, in many European countries, the rules applicable to restrictive agreements fall within the category of administrative or public law. This is not so in Germany—where, like me, many professors of private law teach competition law—or Switzerland—where the private international law statute even contains a specific rule for determining the national law applicable to private claims related to restrictions of competition. In what follows, I intend to discuss two types of private litigation based on antitrust rules. The first type of litigation takes place between the parties of a restrictive agreement. The second refers to third party claims. While court proceedings of the latter type are particularly important, at present they meet serious obstacles (difficulties in proving the relevant facts and a lack of incentives for potential plaintiffs to engage in litigation). As to the first type of claim, at present there is a considerable amount of this kind of litigation in Germany. For a very simple reason, I do not think that this type of litigation will become even more frequent in the future: in these sorts of cases, the plaintiff usually relies on some contractual cause of action, and it is generally left to the defendant to invoke the nullity of the contract, as a defence. This happens quite fre


20 Monopolkommission (1999): ‘Kartellpolitische Wende in der EU? Zum Weissbuch der Kommission’, 28 Sondergutachten. See also European Commission (1999): White Paper on the Modernization of the Rules Implementing Articles 85 and 86 of the EC Treaty, Programme N. 99/027, OJ C 132 of 15.5.1999, 1–47. 21 Monopolkommission (2001): ‘Folgeprobleme der europäischen Kartellvehrfahrensreform’, Sondergutachten 30.10.2001.

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quently, and it will continue to happen in the future. So, if the Commission wants to promote private enforcement, it is not this area of private enforcement that it should concentrate its attention on. The situation is different with respect to the other type of court proceedings, that is, antitrust claims brought by parties who are not involved in the anticompetitive agreement, and who have suffered a loss as a consequence of the agreement. Third parties will usually apply for an interim injunction or for an award of damages to compensate them for the losses they have incurred. The Commission has explicitly pointed out that, in relation to such claims, the role of the national courts complements that of the competition authorities, and that civil courts must therefore be allowed to apply Article 81(3) EC directly. But what is the real situation with respect to such claims? At present they appear to be virtually non-existent, or almost non-existent. Various commentators have characterised the practical significance of such claims as marginal. Moreover, not a single case is reported to have effectively concluded with a damage award in favour of cartel victims. This state of affairs can hardly be described as being due to deficits of the substantive law. Section 823(2) of the German Civil Code (BGB, Bügerliches Gesetzbuch) provides a cause of action that does not give rise to many doubts. Under this provision, a person who has infringed the provisions of a ‘protective statute’ is liable to compensate the damages arising from this activity if the infringement has been committed either intentionally or negligently. It is generally accepted that Article 81(1) EC is a protective provision for the purposes of Section 823(2) BGB. This is at least true in the case of third parties (suppliers or clients). Professor Van Gerven has raised the point of consumers. I should clarify that, under German law, consumers are protected insofar as they are direct clients, yet this is not the case where there is a chain of distribution ending at the consumer. Competitors too are protected, depending upon the type of the restrictive agreement. Therefore, my opinion is that the scarcity of claims of this type is not due to deficiencies of the substantive law providing for the cause of action, but rather to the economic and procedural circumstances that condition the application of the substantive law. Hence, if the Commission wants to boost the role of civil courts in the area of antitrust enforcement, it will have to create conditions encouraging possible plaintiffs to enforce their rights under Section 823(2) BGB. In what follows I will refer specifically to these conditions. Under the general procedural rules governing civil litigation in Germany it is up to the plaintiff to prove the facts giving rise to the claim, and particularly the liability of the defendant. This means that the plaintiff must prove the conclusion of a cartel, or of a concerted anti-competitive practice, and the active involvement of the defendant in this practice. It goes without saying that this kind of proof is particularly difficult to obtain, especially for parties who did not actually participate in the conclusion of such agreements and who have no access to the documents proving their existence. A radical solution to this problem would be to introduce a system of pre-trial discovery, inspired by

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the American experience. However, there are good reasons to reject such a possibility. First, in most continental European countries, civil proceedings do not end up in a single trial to be prepared by pre-trial discovery, which was the reason why pre-trial discovery was originally introduced in the US. Unlike the situation in the US, the instrument of pre-trial discovery is not required in Europe for procedural expediency reasons only. Secondly, it would not be possible to introduce a pre-trial discovery system only in the area of antitrust litigation and maintain the traditional methods of fact-finding in all other areas of law. In order to be effectively implemented, civil law procedures must be as uniform as possible and we should not destroy the unity that now exists only for the shortterm goal of obtaining some advantages in the area of antitrust. Thirdly, the US pre-trial discovery system is tailored to the structures of a court system and a legal service industry which are essentially different from those found in European countries. Therefore, I would suggest that before we think about introducing pre-trial discovery, we should look very carefully at the area of private antitrust enforcement in Europe and see whether there is indeed the likelihood that it will develop in the same direction as it has in the US. One could also think of less radical solutions, such as the introduction of a procedural obligation for the defendant to explain certain facts which occurred in its sphere of influence. Indeed, in other areas of law it is not uncommon for the court to ease a party’s burden of proof with regard to facts and circumstances in its opponent’s sphere of control. I gave an example of this in my paper, and I shall not repeat it here, but I am sure that many of you can think of other similar situations. Therefore, my proposal would be to adopt a rule that, if the plaintiff makes the prima facie case for the existence of an anti-competitive agreement or concerted anti-competitive practice, then it should be up to the defendant to clear up the facts in its sphere of control. An EC measure adopted under Article 83 EC could provide for a corresponding duty on the part of the defendant. Of course, such a measure would have to give all necessary guarantees against the disclosure of business secrets. Similar difficulties concerning proof arise with respect to the loss sustained by the plaintiff as a consequence of an anti-competitive agreement or practice. While it may be possible for the plaintiff to demonstrate a drop in his sales, this fall could have several causes, and the plaintiff will often be unable to link its loss to the restrictive agreement or practice as the sole cause. Again, the burden of proof should be eased for the plaintiff in a similar way to that in the area of patent or trademark law, where the courts allow the plaintiff to calculate its damage in a three-fold way (that is, either by showing the precise amount of the loss incurred, or by charging an average license fee, or by stripping the defendant of the profit derived from the infringement). One might think of general rules of a similar kind. For instance, a decrease in the plaintiff’s turnover should be conclusive evidence of its loss and the causal link to the restrictive practice if it can be shown that the defendant’s turnover was rising over the same period. Again, it would be indispensable for the defendant to disclose relevant information.

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Another precondition for stimulating private antitrust litigation would be to ensure a higher degree of certainty as to the outcome of cases. I shall not elaborate on that, as I think it is quite clear that the rules that we are discussing now, including the Commission guidelines on horizontal restrictions, place an accent on the weighing of economic factors. They cannot increase legal certainty, to say the least. I do not claim that judges cannot weigh the economic factors, but there is always some degree of political discretion in balancing the interests of one consumer group against those of another, and in balancing short-term interests against long-term ones, and so on. I think this kind of balancing should be a task of an institution like the Commission, and it should not be left to a court of law. The victim of a cartel or concerted practice has suffered losses resulting from the conspiracy between its opponents or business partners, and has experienced the power of their combination. It is also aware of the investment in time and money that a legal action against them will mean. A victim will only make that investment if it can be reasonably sure that the advantages to be expected from the litigation exceed the eventual losses. From this perspective, the hope for the compensation of losses already suffered is not a very efficient incentive to bring a lawsuit. Many potential plaintiffs would prefer to invest in other more lucrative activities than to engage in litigation for the mere compensation of sustained losses. Therefore, if the Commission wants to encourage private initiatives for the purposes of enforcing competition law in the public interest, it should consider the US model of an Attorney General, who is spurred to enforce the law by the expectation of treble damages. This means, of course, a very fundamental break from the basic concepts on damage and compensation that exist in many European systems. Nevertheless, I do not think that the Community would be totally foreclosed from introducing such an approach. In my paper, I referred to the very recent Directive on combating late payment in commercial transactions. If you look into that Directive, you will see that compensation is not the essential point that has driven the Community to legislate, but rather the idea of combating late payment. The Community wants to encourage debtors to pay on time. The expectation of treble damages would confer similar incentives. Allow me to finish with some recommendations. First, the Commission should not only allow national courts to request its co-operation. A co-operation rule, like the one currently contained in Article 15(1) of the draft regulation, is nothing but hot air. Rather, the Commission should be under an obligation to cooperate with the national courts and to provide them with all the relevant information at its disposal. Secondly, the plaintiff’s burden of proof relating to the existence of a restrictive agreement or a concerted practice must be eased by introducing presumptions and obligations on the defendant to disclose information in its sphere of control. Thirdly, the burden of proof related to the loss incurred by the plaintiff, and the causality link to the restrictive practice, should also be eased. Fourthly, instead of stressing the weight of balancing the economic elements that must be taken into account in the application of Article 81 EC in the envisaged

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guidelines on horizontal restrictions, the Commission should increase legal certainty by drafting a re-statement of EC competition law that contains clear-cut rules. Fifthly, even if all of the preceding suggestions are followed, it would still appear highly doubtful that potential plaintiffs will assume the risk of engaging in private litigation without the promise of an incentive, such as the expectation of obtaining treble damages. M T—Before I proceed with my presentation, I would just like to comment on a point raised in an earlier presentation, that is the issue of specialised versus ‘ordinary’ judges. I would take the proposal further, in the sense that the whole field of commercial litigation—and not competition law only— should be entrusted to specialised judges. I think that it is somewhat easier for an ‘ordinary’ judge to decide whether or not a particular agreement falls under the scope of the prohibition contained in Article 81(1) EC than to decide whether the same agreement should be exempted under Article 81(3) EC. It would be convenient to take such cases out of the competence of ‘ordinary’ judges and assign them to judges who are specialised, not only in the field of antitrust, but also in the wider field of commercial law. Returning to my presentation, I would like to focus on two topics, which I believe to be the most important in light of what we have discussed so far. These are the topics of interim relief measures and damage compensation. Without any doubt, interim relief is of particular importance in the field of antitrust. Leaving aside the procedural aspects, which will be examined during the second session of our workshop, I would like to concentrate on the content of interim measures. The Italian antitrust law gives the Court of Appeals sole competence in the first and last instances to judge nullity actions and claims for damages, as well as to grant interim remedies in relation to infringements of the Italian antitrust rules. Courts interpreted the reference to interim measures (provvedimenti d’urgenza) in Article 33 in a broad sense, so as to include both remedies that are considered typical in the Italian antitrust jurisdiction and whose content is defined by law (for example, seizure), and remedies that are considered atypical and that are covered only in broad terms by Italian civil procedural rules. The vast majority of the antitrust actions brought before the Italian Courts of Appeal are requests for the granting of typical interim relief. In more concrete terms, these are requests for either restraining injunctions (inibitoria) or positive action injunctions. In terms of their objectives, interim measures can be classified into three categories. The first category comprises interim measures that aim to freeze the existing fact situation pending a decision in a case brought before an ordinary court. The second category comprises measures aimed at preventing the further aggravation of damages resulting from an infringement of the antitrust law, thereby anticipating the effects of a court sanction pending its adoption. The third category comprises measures destined to prevent the risk that the enforcement of an eventual sanction might be hampered in the future or, in other




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words, to take the necessary measures to ensure the effective implementation of an eventual sanction. Another distinction that should be made with regard to interim measures is the difference between conservative measures (provvedimenti conservativi) and anticipatory measures (provvedimenti anticipatori). The former are directed at ensuring the future effective application of a court sanction, and consist of simply preserving the existing state of affairs pending the adoption of a definitive court decision. The latter aim to anticipate, in part or as a whole, the effects of the future judgment. Among interim measures, one of those raising the most interest questions is the restraining injunction (l’inibitoria). In Italy, the possibility of issuing restraining injunctions is explicitly foreseen only in the areas of patent, trademark and copyright law, as well as by the Italian Civil Code in the area of unfair competition. In practice, however, restraining injunctions are also used in circumstances that are not specifically covered by the law. This is based on an atypical interpretation of Article 700 of the Civil Procedural Code, so as to avoid the perpetuation of an infringement of the law—pericolo in mora. In the area of antitrust, the existence of a pericolo in mora is deduced from the fact that, due to its nature, the damage caused by an anti-competitive agreement or behaviour is often uncompensable. One can think, for instance, of damages such as the loss of clientele or employees. These are situations in which the passing of time makes it difficult to return to the initial condition. As case law demonstrates, Italian courts have awarded interim relief quite frequently, and, beyond the immediate purpose of inhibiting a particular anti-competitive behaviour, have sometimes also decided to publicise the interim relief measure among consumers. An inhibitory element can also be found in the warning injunctions (provvedimenti di diffida) issued by the Italian antitrust authority in case of repeated infringements of Articles 2 and 3 of the national antitrust law, as well as in the power of the authority to temporarily suspend concentrated operations pending the conclusion of an investigation. The Italian Courts of Appeal have admitted requests for injunctions to restrain behaviour that is assumed to infringe national antitrust rules and, on a more general level, requests for injunctions imposing non facere, although these kind of restraining injunctions are not specifically provided for in Article 33(2). However, the question that arises is whether such measures can indeed be adopted for temporary and preventive purposes only. By the same token, although interim measures should serve the purposes of the final judgment, they do not necessarily have to be identifiable with the latter. Indeed, an interim measure cannot contain provisions regarding the nullity of agreements or award damages, and if it could not step outside these boundaries, the legal provision concerning urgent interim measures would be left without meaning and effect. As shown earlier, within the ambit of nullity actions and damage claims or with a view to filing such actions or claims, one may request the adoption of the interim relief measures that are most

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appropriate and instrumental to the objectives of the action. These may include restraining injunctions, as indeed one needs to impede anti-competitive behaviour causing further and perhaps irreversible damages. The Italian Courts of Appeal have upheld this view in several cases (some of which cited in my paper). It is also essential that interim measures do not give rise to effects that exceed those of the final judgment in the case. To be more precise, interim measures cannot have a greater impact than the final judgment upon the facts of the case, although they can have different objectives than does the final judgment. Indeed, the temporary nature of interim measures requires that their enforcement does not induce any irreversible change of circumstances that would prejudice the rights of those concerned. Italian courts have granted positive action injunctions in several cases in the area of unfair competition. For example, they have imposed on the defendant the obligation to rectify earlier announcements or to withdraw from commerce goods that are the object of unfair competition proceedings. However, in the area of antitrust, positive action injunctions have very rarely been awarded. Another question concerns the admissibility of requests for interim relief measures that anticipate the effect of a constitutive judgment, that is, interim measures that have the effects of an agreement between the parties or that impose an obligation to conclude an agreement. In the Italian system, constitutive lawsuits are admissible only in cases that have been specifically foreseen by the law. Indeed, Article 2908 of the Italian Civil Code establishes that the courts can constitute, modify or extinguish legal relationships only in cases that have been foreseen by the law. Thus, constitutive judgments represent an exception from the general rule that establish the declarative nature of judicial decisions and the contractual freedom of the parties. This issue was raised in a number of antitrust cases in which the plaintiff claimed to be the victim of a boycott or abuse of dominant position, and requested that the Court of Appeal not award an extension of the contract but instead order the execution of an obligation that was never established on a contractual basis, even at pre-contractual level. In this context, the decisions of the Italian Courts of Appeal have been all negative. My last point concerns the award of compensation for damages incurred as a result of an anti-competitive agreement or anti-competitive behaviour. There are no special statutory provisions concerning the evaluation of damages in the Italian system. There is only a general principle, based on Article 1223 of the Civil Code, that the notion of damages comprises loss sustained by the injured party and the loss of profit insofar as both are direct and immediate consequences of the infringement of the law or the non-performance of an obligation. Therefore the principle for determining damages is the same in cases of contractual liability as in the area of tort. In my written contribution I also commented on two recent cases in which issues concerning the content of interim measures and of damages awarded were tackled, but I do not want to repeat the details here.

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M Z—I totally agree with my friend and colleague Professor van Gerven that, at the moment, private antitrust enforcement in Europe is rather weak. For example, small undertakings that are damaged by their more powerful competitors do not go to court, for reasons that were so well depicted by Professor Basedow. In the future we should find ways to help small undertakings engage in antitrust litigation. Here I would have a proposal drawing on what Mr Winckler pointed out before. He said, and I think quite rightfully, that the concept of amicus curiae that is currently envisaged by the Commission is wrong. Indeed, the Commission cannot be amicus curiae as it is not completely neutral. And the courts do not actually need the help of the Commission in interpreting the law. What is needed is support for the undertakings to engage in private actions. The Commission’s legal advice is very important in this respect. The Commission, or the competition authorities of the Member States, can help small undertakings to decide to engage in private antitrust litigation by easing their burden of proof, starting by providing them with information at its disposal that is relevant to the case at hand.





W W—I would like to make a short comment on Article 15 of the draft regulation, dealing with co-operation between national courts and the Commission. Professor Basedow criticised this article on the ground that it does not establish an obligation for the Commission to answer requests for information or for opinions coming from national courts. I do not think that this is accurate. Perhaps there is still some confusion between the two paragraphs of Article 15. The first paragraph concerns the opportunity for national courts to ask the Commission for information or an opinion. The second paragraph, instead, opens the possibility for the Commission to intervene before national courts as amicus curiae. As Commissioner Monti explained, this kind of intervention is seen by the Commission as very exceptional, that is, the Commission would intervene as amicus curiae during court proceedings only in cases raising important EC antitrust policy questions. This also answers the concerns previously expressed here about the ‘neutrality’ of the Commission’s interventions. At any rate, the criticism mentioned before relates to the first paragraph of Article 15. By contrast, I think it is quite clear that the Commission is indeed obliged to answer to requests coming from national courts. The case law of the European Court of Justice explicitly spells out this obligation, based on Article 10 EC, which concerns loyal co-operation between EC and national institutions. Also, in the Explanatory Memorandum accompanying the draft regulation, the Commission clearly states that Article 15(1) establishes a right for the National Courts to obtain a reply from the Commission, and that the Commission will set out detailed rules explaining its practice in this field in a Notice to replacing the existing Notice on co-operation with the national courts.22 By the way, the 1993

22

Commission (1993): Notice on cooperation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, OJ C 39 of 13.2.1993, pp. 6–11.

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Notice on co-operation with the national courts had already asserted the Commission’s obligation to answer requests coming from the national courts. The new notice will simply re-assert this obligation and introduce deadlines within which the Commission must comply with its duty. Therefore, the reason why we need a special Article in the new regulation dealing with co-operation is not to oblige the Commission to co-operate with national courts (as the Commission is already obliged to do so) but to overcome eventual obstacles in the way of co-operation at the national level. Even with the existing case law of the ECJ, in some Member States (such as The Netherlands), it is still unclear whether a national court can address questions to the Commission, which is an administrative institution. I gather from Mrs Tavassi’s remarks earlier this morning—which conveyed a sense that Italian judges refrain from addressing questions to the Commission—that the situation in Italy is probably the same as in the Netherlands. H W—I would like to raise two issues. The first relates to the very stimulating contribution by Professor Van Gerven on substantive law aspects of private antitrust enforcement in Europe. I will limit myself to the remedies of nullity and restitution. I think that harmonisation of these aspects is quite difficult to agree upon, as we can see from the failure of similar attempts at harmonisation in other areas of the law, such as contract law. In addition, there are a few questions that remain to be clarified with respect to the scope of application of remedies like nullity and restitution in the area of antitrust. One is the question of severability: how far can the national courts go in modifying or amending the terms of a contract? The second question refers to restitution. Here, I think the German law is clearly diverging, at least on one point, from the proposal previously formulated by Professor Van Gerven. In German law, the court can deny restitution only where there is a deliberate infringement of the antitrust law, or when the parties deliberately ‘closed their eyes’ upon the infringement. The third question concerns the fate of contracts resulting from a prohibited behaviour. On this aspect, the European Court of Justice has so far held that it is up to the national courts to determine the consequences of such contracts, whereas the Commission considered that it was empowered to order companies open the possibility to allow third parties to change the terms of a contract that was concluded in infringement of the law. Therefore, I think it is really difficult to find a common denominator on all these questions as basis for harmonisation. The second issue, already raised by Mr Lever, is whether a distinction should be made between Articles 81 and 82 EC based on whether they are applied by public authorities or by the courts of law. This question has arisen in Germany, especially with respect to abuses of dominant position. Until 1999, Germany had two sets of substantive antitrust law: one applicable by the Bundeskartellamt, and the other applicable by the German courts. Some commentators were of the opinion that only the provisions applicable by the Bundeskartellamt could reach further than those applicable by courts, and that this empowered the Bundeskartellamt to forbid behaviours that could not be qualified as outright




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illegal. In 1999, the German antitrust law was amended, and both sets of antitrust provisions are now directly applicable. The question that arises is whether, in the future, private parties will be able to rely to the same extent as public authorities on the rule prohibiting abuse of dominant position. M S —I confess I am perplexed by some turns in this discussion, therefore I would like to take a step back and ask: what is the impact of the draft regulation on private antitrust enforcement? The main change proposed by the Commission consists of eliminating its own monopoly over the application of Article 81(3) EC. Therefore, the principal effects of the reform will be felt in the area of practices or agreements eligible for an exemption under Article 81(3) EC. The reform has nothing to do with the enforcement of anti-cartel provisions, where the situation will remain unchanged. So, the whole discussion on pre-trial discovery powers seems to me to be secondary. This is not to say that the non-existence of pre-trial discovery powers in Europe is an insignificant problem, or that cartels are not important. As we all know, in Europe it is very difficult for private individuals to start an action against the members of a cartel. Yet this area of antitrust enforcement will remain the priority of the Commission and national competition authorities. Of course, proving the existence of a cartel is a very difficult task for a private plaintiff, and it would be naïve to think that private plaintiffs could really do anything against cartels through the court system. Yet I think that the real impact of the reform will be felt in the area of anti-competitive agreements, to be derived from the elimination of the notification system and the move of the European economy towards the prevalence of the private sector.




K S—I wanted to add a comment on a statement made by my colleague, Professor Basedow. On the first page of his written contribution, Professor Basedow states that direct applicability of Article 81(3) EC will speed up private antitrust litigation ‘insofar as effectively conducted’. On my understanding, direct applicability of this provision could pose a further impediment to, and not a strengthening of, private antitrust enforcement. I would expect that, even if the defendants do not invoke this provision as a ‘shield’, the Court would still have to examine ex officio whether the disputed agreement qualifies for an exemption, and this would probably have to be done in close co-operation with the Commission.



J V—I agree with Mario Siragusa’s previous comments. What the reform will essentially do is eliminate the burden of automatic nullity and throw the issue of exemptions into the arena of national courts. I also think that part of the discussion about the burden of proof in the areas of application of Article 81(1) EC and Article 81(3) EC emerges from a general sense among practitioners that not enough has been done to limit the scope of Article 81(1) EC. When you get into the realm of serious private antitrust enforcement, I think that there are two or three areas that need to be treated separately.

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One is the area of cartels where, unless you introduce incredible pre-trial discovery rules, you will remain pretty much in the hands of the public enforcers, except for the case of damage claims based on a decision already taken by the public enforcers. Another area in which there could be considerably greater scope for private enforcement is that of monopolisation. Yet, here again, without pre-trial discovery rules, this kind of cases may be more difficult to bring before courts of law. The third area is that of alliances, especially in highly competitive industries, and here you may indeed see some private enforcement. By and large, I think that the notion of private antitrust enforcement that involves a lot of litigation over contractual arrangements is probably mistaken. If one looks at the broad evolution of private antitrust enforcement in the US, procedural rules evolved in the direction of placing additional obstacles in the way of bringing successful antitrust actions. I believe that if, in the near future, the Commission adopts ‘cruel’ guidelines about when Article 81(1) EC applies and when it does not, you will also see the European system evolving in the same direction.
C B —I would like to take up an issue regarding proof of damages. Mr Winckler has very nicely presented to us with two hypothetical cases, and has spoken to us about the problems that would arise in the French system in the case of such damage claims. I can imagine another scenario, and I tell you outright that this is not an imaginary case. Let’s assume that a big international cartel has been discovered. The cartel has been disclosed by a competition authority, and the clients of the cartel members are considering bringing a private action for damages. The cartel members will argue: ‘We agree that you paid cartel prices over a long period of time, but you have not suffered any loss, because you were just intermediate buyers, and you sold our produce to the final consumers, so you did not personally incur any loss’. I think that such a defence argument would not even be heard in a US court, but my question is: how will this argument be handled in any of the jurisdictions that we examined today? In Switzerland, my country of origin, you would hardly find a judge to decide that, even if there is no proof of real damage, the defence argument is ruled out and damages are to be awarded. I believe that no improvements will be seen in private litigation of this kind while this issue remains unresolved. My second point is a question to Mr Wils. If I correctly remember the text of Article 15 in the draft regulation, it establishes that the Commission and national competition authorities have the right to ask for the file of a case to be brought before a national law at any stage of the proceedings. My question has always been: what is the Commission going to do with the information thus obtained? The obvious answer would be that the Commission returns the case to the national court and intervenes as amicus curiae during the remainder of the proceedings. Yet shouldn’t there be some legal limits with regards to what the Commission can do with the documents thus obtained in the future? After

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the Masterfoods judgment,23 the Commission will be entitled to re-open the case even if a national court has already pronounced a judgment. Yet will the Commission be entitled to use the information obtained from the national court in other future cases?
J B—I will comment on the paper delivered by Professor Van Gerven. I think there are two essential merits in his paper and presentation. First, he has pulled together a certain number of threats to defend a thesis that I would support, namely that liability for breach of rights arising from EC law is not only vertical, but also horizontal. I think that is a very important point, which I fully support. Secondly, I accept his view that applying Article 81(3) EC is not an impossible task for judges, but I think it may be an impossible task for the lawyers of the parties. I think it is here that you identify the genuine difficulty and problem with private antitrust enforcement in Europe. The problem is the following: how does one come up with the necessary evidence? The last points I wanted to make are about the draft regulation. First, I take it that the legal basis of the draft regulation is Article 85 EC. I know that, in a previous public intervention, Mr Van Miert has expressed some doubts about this choice. At any rate, the Member States would be wise to adopt the regulation because, if they do not, the Court is going to do it. Secondly, Article 1 of the draft regulation stipulates that an agreement that is automatically void cannot give rise to any claims for compensation or damages between the parties of the agreement, but Article 5 stipulates that reparation cannot be paid in full if the plaintiff has been guilty of negligence. Isn’t there a contradiction between these two provisions?

I F—I have an analogy to offer, which may perhaps be helpful —or it may instead, like many other analogies, be just confusing—which is taken from the field of product liability law. In the 1960s there were suggestions that the European Commission should propose a directive on product liability to improve the protection of the rights of European consumers that are injured by defective products. This proposal was adopted by the Council in 1975, after ten years of ferocious debate. Manufactures and suppliers vehemently opposed the proposal, for fear that its adoption would bring about a flood of private litigation. The directive entered into force in 1985, and we can now draw some conclusions about its effects. Strangely enough, although the main purposes of the directive were to make it easier for consumers to obtain compensation for defective products and to lift the standards of conduct for the producers and suppliers, the number of cases based on this directive has been amazingly low: 20 reported cases over the last 16 years. The first reference to Luxembourg occurred only ten years after its adoption, in 1995, and the last one was decided only recently (the case concerned a donated kidney).




23

Case C–344/98 ECR [2000] I–1214.

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Therefore, the floods of litigation that had been expected as a result of the creation of a clear EC right in favour of ordinary people—to make their lives easier—did not materialise. A possible explanation would be that the directive persuaded manufacturers to make better products, or perhaps many cases were settled before reaching a final court decision. I would assume that far more people are injured by defective products than those economically damaged by breaches of EC competition rules. I know personally of cases where cartel members who have been fined by the competition authorities were sued for damages in the US, but not in Europe. Here, the consumers instead asked the cartel members for discount prices, and obtained them. Therefore I do not find it convincing to attribute the low incidence of private antitrust enforcement in Europe to date to the existence of the Commission’s monopoly over the application of Article 81(3) EC, and to assume that its elimination will reverse the situation of private enforcement. G C—De manière générale, la problématique de ce débat était de savoir à quelles conditions un opérateur économique victime d’une pratique anticoncurrentielle pouvait choisir de saisir une juridiction pour faire cesser la pratique dont il était victime et en obtenir réparation. En gros, je crois que c’est ça, le problème. Les réponses sont sur plusieurs plans. D’abord, il le fera s’il sait qu’il aura un for ou un tribunal qualifié et indépendant. Ensuite, que la décision puisse être rendue dans un délai acceptable, et par un juge capable de comprendre le litige, de réunir et de confronter les éléments de preuve et d’appliquer exactement la règle de droit, y compris dans les analyses économiques, je suppose. Alors, si on résume: les premières qualifications, le problème d’indépendance et le problème d’assistance technique. Qualification: tout le monde en a parlé, c’est évident, elle se résout, cette condition, en formation des juges—je crois que c’est un enjeu considérable—, en spécialisation des juridictions—c’est l’autre difficulté—et avec la proposition du Conseil Economique et Social d’aller jusqu’à la création d’une juridiction européenne du droit de la concurrence avec la possibilité (me semble-t-il) d’imaginer toutes les solutions originales qui feraient composer les juridictions et par des juges et par des économistes (c’était la solution proposée par Professor van Gerven). L’indépendance: je voudrais insister sur ce point, parce que la crédibilité, la légitimité et le rôle du juge n’existent que si on a à faire avec un juge indépendant. S’il n’est pas indépendant, ce n’est pas la peine d’avoir à faire un juge autant à faire prendre la décision par une autorité qui n’appliquerait pas la démarche juridictionnelle. Et cette indépendance est la mise en cause du litige de concurrence, si on voit comment les choses se présentent dès lors qu’intervient dans le litige une autorité qui sait ce que le juge ne sait pas et que personne ne peut contredire dans le litige. Lorsque la Commission imagine d’intervenir, soit directement soit par les autorités de la concurrence devant des juridictions insuffisamment qualifiées, il y a un vrai problème d’indépendance de ces juridictions par rapport à la doctrine qui sera développée. Et lorsqu’on imagine de prendre soit par communication soit par




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guidelines des instructions données à ce juge, la démarche, la méthode, ça ne serait valable qu’à la condition que ce soit le juge lui-même qui développe cette méthode. On ne peut pas imaginer des guidelines qui soient faites de l’extérieur, qui soient faites par la Commission. Donc, je crois que là c’est un vrai problème. La troisième condition c’est le problème de l’assistance technique qui résulte de la seconde: quels sont les aides techniques dont ce juge peut bénéficier pour rendre sa solution, à la fois pour qualifier les frais, c’est-à-dire faire les analyses économiques que supposent ses qualifications, et calculer le préjudice, ce qui a été développé par Monsieur Winckler tout à l’heure. Avant de savoir si on va appliquer des peines de dommage, encore faut-il savoir calculer exactement le préjudice. Et dans mon expérience j’ai rencontré peu de cas où des experts ont été capables de dire exactement ce qu’était le préjudice concurrentiel et je crois qu’il faut qu’on ait ces organes de calcul en préjudice concurrentiel avec une méthode fiable de calcul. C’est à mon avis à ces conditions-là qu’on arrivera à faire appliquer effectivement par le juge national le droit communautaire de la concurrence. Je crois que si on veut que ce juge soit capable de mettre en œuvre, de décentraliser le droit de la concurrence et d’une manière crédible c’est ces problématiques-là qu’il faut développer et qui renvoient à l’autre problème, c’est comment un juge dans le jugement des litiges privés et non pas comme un juge de contrôle du traité de la concurrence peut-il appliquer un droit qui est en même temps politique, c’est-à-dire qui vise à une finalité déterminée. J B—I would like to add some remarks about what our colleague Mario Siragusa said before, that is, that the draft regulation does not concern the application of Article 81(1) EC but mainly that of Article 81(3) EC. While this is basically true, it should nevertheless be noted that Article 81(3) EC is obviously invoked when an agreement falls under the prohibition in Article 81(1) EC. I should think that there are indeed many cases in which both provisions are applicable. This is why I argued in my written contribution that, when discussing private enforcement of EC antitrust rules, it is not advisable to concentrate only on the application of Article 81(3) EC. We should first ask: what are the incentives for private parties to go to court and file a lawsuit against a violation of Article 81(1) EC? At the same time, I agree that the application of Article 81(3) EC should not be as difficult for the courts as it would currently seem to be. Professor Schmidt asked how the decentralisation project could speed up antitrust proceedings before national courts. Under the current system, and according to the Delimitis jurisprudence, when a national court is called upon to declare an agreement incompatible with Article 81(1) EC, it has to suspend proceedings if Article 81(3) EC is invoked as a defense, and it must wait for the Commission to make a decision. The abolition of the Commission’s monopoly over the application of the exemption provision will eliminate this problem because the national courts will themselves be able to make decisions concerning Article 81(3) EC. Of course, part of the time saved through this change will be re-invested into communication between the national courts and the




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Commission, and in requests for preliminary rulings from the ECJ. Nevertheless, I think that, on balance, the reform will bring about a relative shortening of the court proceedings by comparison to the present situation. Finally, I would like to make one short comment on what President Canivet said before about the specialisation of judges. I think he referred to a model whereby only a limited number of courts would be given the competence to deal with antitrust cases. However, in federal countries like Germany, it would be difficult to transfer cases brought before the courts in one German Land to courts in another. Such transfers are not excluded in other areas of law, such as maritime law, where all the Länder have passed a law that makes it possible to transfer such cases to a court in Hamburg. Yet it is not certain that such agreements could also be concluded in other areas of law. W W—In reply to Professor Baudenbacher’s question about Article 15(2) of the draft regulation: as far as I understand, the question is whether the Commission can use information obtained from a national court for purposes other than those related to the solving of the case brought before the national court. This question is circumscribed to a more general concern that the modernisation project would in practice be little more than a modality for the Commission to obtain information from the national courts, to be used thereafter for other purposes. First, I believe it is quite clear from the text of Article 15(2) that, when the Commission decides to intervene as amicus curiae in a case before a national court, it can request only certain specific documents rather than the whole court file. Secondly, in the majority of cases, the Commission will probably intervene (as amicus curiae) only at the appellate stage. This is quite obvious if one reads para 3 of Article 15 in combination with para 2, which requires that national courts send copies of their judgments to the Commission. In other words, para 2 establishes a mechanism whereby the Commission is alerted to cases in which it should intervene on appeal. As to the specific question formulated by Professor Baudenbacher, that is, whether the Commission could use the information obtained from the national courts for purposes other than preparing its intervention as amicus curiae in the course of court proceedings, I have to admit that this is something I have never thought about. I have the impression that this aspect is not directly addressed in the draft regulation. One could argue that, insofar as the regulation talks about the Commission requesting information from the national courts in order to prepare its intervention as amicus curiae, the information thus obtained can be used for this purpose only. However, a thorough reading of the draft regulation, and in particular of its Article 12, seems to lead to a rather clear distinction between receiving information and using it. What would be wrong with the Commission using information obtained in this way in order to open an investigation, or as evidence of another infringement? If the Commission could not do so, where would this lead? I would say, then, that the rule in this case should be similar to one that already applies in




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the area of cartels. When the Commission finds evidence of the existence of a distinct cartel in the course of one investigation, it is not obliged to act as though it has not come upon the evidence. If it wishes to investigate further, it must summon a new investigation and try to obtain the same evidence over again. In conclusion, I am not exactly sure that it there is any practical merit in regulating whether or not the Commission can use the information obtained from national courts for other proceedings. However, I am very grateful for the question because, to my knowledge, this issue has not been raised before.
W  G—I would like to make a few comments about ways in which to support the implementation of Article 81(3) EC in the context of national court proceedings. Professor Zuleeg asked before what we could do to help small undertakings. Professor Bourgeois raised the issue of how to help lawyers, since they will have a much more difficult task when Article 81(3) EC is applied by national judges. Mr Canivet mentioned, in turn, that the specialisation of judges is also important, and supported Jeremy Lever’s proposal to include economists in the composition of court panels. I think we should not stop at lawyers and judges; we should think about ways in which the barristers and advocates could help ‘train’ the judges. For small undertakings, the expenses related to the administration of justice are, of course, extremely high. This is obvious if one looks at the costs of hiring American or English law firms, or the continental European law firms that try to compete with them. I have always hoped that there would be small European law firms, with lower overhead expenses, that would compete with the larger law firms and specialize in litigating on behalf of undertakings. This would be one solution to the problem. Another solution would be for European bar associations to allow some advertising, so that some law firms could say ‘we are specialized in competition law, and we can make it happen’. Then there is the question of whether law firms can associate with auditing firms. In the Netherlands, France, and the French-speaking part of Belgium, this is only possible subject to certain conditions. The issue at stake is whether such associations can limit the freedom of undertakings. I think it would also be useful if law firms could associate, at least to a certain extent, with expert economists. To sum up, I believe that when we talk about support we should not concentrate only on the courts. We should also look at the bar. Next, I have another question for Wouter Wils related to Article 15(1) of the draft regulation. This paragraph stipulates that, in the context of proceedings concerning the application of Articles 81 and 82 EC, the Member States’ courts may ask the Commission for relevant information in its possession, or for its opinion about questions concerning the application of EC competition rules (emphasis added). It is clear that this does not refer to the interpretation of EC competition rules, as this falls within the competence of the European Court of Justice in preliminary ruling proceedings. Yet, what is application without interpretation? Is it economic analysis of the factual situation? I am afraid that

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‘application’ is just an empty word in this context. It is used to try to disguise the real, namely that, apart from economic analysis, not much support is given to the national courts. In part, this is why I earlier referred to the possibility of introducing a sort of partie civile procedure before administrative courts, which are much more qualified to deal with EC competition law cases. In relation to this, if I may address a question to Mr Winckler, I would like to know what he thinks of introducing a partie civile procedure in administrative court proceedings. On a different note, I was most impressed with what Ian Forrester said about product liability litigation. It is certainly true that, with the single exception of an English case sent to the European Court of Justice, there has been no EC product liability litigation. Jane Stapleton wrote a book on this subject24 and found that there is almost no litigation in this area of law. My interpretation of this finding coincides with that of Ian Forrester: companies are determined to settle cases when they are faced with sufficient legal deterrents. In my view, settlement is the best way to conclude a case. Concerning Mr Weyer’s point about the severability of contracts: this is indeed a serious problem. In my view, severability does not modify the contract. I know that, in the German and some other European national legal systems, severability implies a conversion or transformation of the original contract into a new one. In my opinion, however, severability does not change the basic terms of the contract. It just eliminates the parts that are not valid. At any rate, the European Court of Justice has left the consequences of severability to be decided according to national legislation. Another important question is whether national courts can apply a severability clause that the parties included in the original contract. If the answer is affirmative—that is, if the courts can decide what is prohibited among the parties—wouldn’t this imply a shift in the objectives of EC competition law? A W—I am afraid I will not be able to help very much with the partie civile issue. Partie civile is a very specific procedural concept that applies in the field of criminal law. To the best of my knowledge, there is no such thing as a partie civile procedure in French administrative proceedings. Administrative courts review decisions of the French competition authority in the area of merger control, and particularly merger decisions adopted by way of exception by the Ministry of Economy. By contrast, antitrust decisions are reviewed by the Court d’Appel in Paris. Private parties can obviously intervene in the course of appeal proceedings, and they can ask the competent courts to review decisions made by the competition authority. French competition law has recently been amended to allow the Ministry to intervene in the course of commercial or civil law litigation that involves antitrust questions. As far as I know, the reverse is not yet possible.




24 Jane Stapleton (1994): Product Liability (Law in Context), Butterworths, Oxford and Boston.

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W W—It is difficult to answer the question of how much the Commission can do in the context of cooperation with national courts, especially when such cooperation implies encroaching on areas reserved for the European Court of Justice. This question might be even more difficult to answer after the judgment of the European Court of Justice in Masterfoods.25 In the 1993 Notice on cooperation between the Commission and national courts,26 the Commission has been very careful not to step into areas within the exclusive competence of the European Court of Justice. In practice, the Commission has sought to limit the assistance given to national courts to providing either purely factual information (that is, market analysis) or the kind of legal information available in good textbooks (such as ‘there are four Commission decisions relevant to this subject, which are . . .’). In sum, the Commission has always abstained from applying the law to the case, precisely in order to avoid stepping into an area reserved for the European Court of Justice in preliminary ruling proceedings. At the same time, the issue of ‘boundaries’ to the assistance offered by the Commission to national courts in the context of their cooperation was addressed by the European Court of Justice in a recent judgment, quoted by Professor Van Gerven in his report.27 According to this recent ruling, the Commission can provide national courts with legal or economic analysis appropriate to data supplied by the latter. In such instances, the Commission acts as a legal or economic advisor to the respective court. When I read the decision cited by Professor Van Gerven, I got the impression that, according to the European Court of Justice, the Commission can do just about everything in its quality of ‘legal or economic advisor’ to the national courts. There is one important limitation: its opinions are not binding. To conclude, I do not think that there are legal boundaries on the advisory function of the Commission before national courts. For example, the Commission’s opinions could not touch upon legal questions, and nor could it apply the law to the facts of the case. To the contrary, the European Court of Justice defined the role of the Commission as that of a legal or economic advisor, and what a legal advisor does is precisely to apply the law to the facts of the case. In other words, the Commission can do the same work as the European Court of Justice in preliminary ruling proceedings, with the only difference that its opinions are not binding. I think that the language of Article 15(1) in the draft regulation partially reflects this view. It reflects the view previously expressed by Commissioner Monti, that the areas in which the Commission can be most useful to national courts is where fact and law combine, as in discussions about relevant market definition.


25

See supra note 23. See supra note 22. 27 Joined Cases C–174/98 P and C–189/98 P The Netherlands v. Commission and Gerard van der Wal [2000] ECR I–1. 26

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I Walter van Gerven1 Substantive Remedies For the Private Enforcement of EC Antitrust Rules Before National Courts

I. Introduction The aim of this report is to analyse the substantive legal factors facilitating and hindering the effective enforcement of private rights flowing from the EC competition rules in national courts. Enforcement of those rights before the Community courts (ECJ and CFI) will therefore not be dealt with.2 Nor will I discuss procedural issues, which will be the subject of Advocate-General Francis G. Jacobs’ report for Panel II of this Workshop. The remedies I have in mind are nullity, compensation, restitution and interim relief. In this contribution I will not try to distinguish rights from remedies and procedures.3 A tentative definition may read as follows:4 right refers to a legal position that a legal entity derives from a rule of law and it can normally enforce before a court of law through remedies, that is, classes of action (in the terminology of the ECJ) intended to make good the infringements of the right concerned. The enforcement will occur in accordance with procedures governing the exercise of such remedies and aimed at making the remedy effective before a court of law. However that may be, rights and remedies are closely linked to each other because the adage ubi ius, ibi remedium reflects the Community law principle of access to court, a principle that is also embodied in Articles 6 and 13 ECHR.5 In the first part of this article I will try to summarise the present state of Community law concerning the remedies thought to be useful in the area of EC competition law, and also taking into account the results of comparative law research (that will be dealt with in Annex I). In the second part, I will deal with 1 Former Advocate-General of the Court of Justice of the EC, Professor at the Katholieke Universiteit Leuven, Belgium. The author thanks Jeremy Lever QC for his comments and suggestions to improve an earlier draft of this paper. 2 On the standing of private applicants in an action for annulment under Article 230 EC in general, see A. Arnull (2001): ‘Private applicants and the action for annulment since Codorniu’ in 38 Common Market Law Review, pp. 7–52; and with regard to EC competition rules S. Weatherill (1996): ‘Public interest litigation in EC competition law’ in H.-W Micklitz and N.Reich, eds.: Public Interest Litigation Before European Courts, Nomos, Baden-Baden, at 169–89. 3 On that subject, see my article ‘Of Rights, Remedies and Procedures’ in 37 Common Market Law Review (2000), 501–536. 4 Thereby cutting short to interminable discussions in the continental legal systems on the nature of a ‘subjective’ right. 5 W. van Gerven, supra note 3, at pp. 503 to 525.

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the impact of the proposed modernisation of EC antitrust policy on private enforcement before national courts.6 In both instances I will keep in mind the main objective of the Workshop, which is to examine how present and future rules facilitate or hinder private enforcement. Since this report is intended to be some kind of a general report, I try to take on board the conclusions reached by the other contributors to Panel I.

II. The present state of the law 1. The remedies available 1.1. Nullity According to Article 81(2) EC: ‘Any agreements or decisions prohibited pursuant to this Article shall be automatically void’. No reference is made therein to concerted practices (nor is any reference made to Article 82 EC on abuses of dominant position).7 As the nullity sanction is contained in a Treaty provision, it is a concept of Community law. It is therefore for the ECJ to interpret it, primarily in preliminary rulings at the request of national courts. However, it is solely for the national court, and thus not for the Commission or the ECJ, to apply the sanction to a concrete case. As is sufficiently known and not further exposed here, the national courts’ competence to apply the nullity sanction was, very early, severely curtailed by the doctrine of ‘provisional validity’, which is derived from the principle of legal certainty. Under that doctrine, national courts are required to treat agreements and decisions for which the Commission can still use its (exclusive) competence to grant an exemption under Article 81(3) EC to be valid until the Commission has come to an (unfavourable) decision.8 In later case law the ECJ limited the application of that doctrine to ‘old’ (pre-Accession) agreements, while it is at the national court’s discretion to suspend proceedings until the Commission has taken a decision (where that can still validly be obtained)9 regarding ‘new’ agreements. The national court should not normally do that where it reaches the con6 See C.D. Ehlermann (2000): ‘The modernization of EC antitrust policy: a legal and cultural revolution,’ 37 Common Market Law Review, 537–90. 7 Article 81(2) EC does not mention concerted practices since those practices are not normally legal transactions, which is also why no nullity sanction is provided for in Article 82 EC relating to abuses of dominant position. However, that should not preclude national courts from declaring agreements or decisions null and void where they prepare, accompany or implement concerted practices or abuses of a dominant position (on the basis of illegality or cause illicite: see A. Winckler’s report on French law prepared for this Workshop, at p. 4). 8 Case 13/61 De Geus v. Bosch [1962] ECR 45. 9 That is so when the agreement is not notifiable by reason of Article 4(2) of Regulation No. 17/62 (the scope of which has recently been considerably enlarged by

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clusion that the agreement does not fall under the prohibition of Article 81(1) EC or, if it does (and does not fall under, or cannot benefit from, a group exemption), that it will most probably not be exempted by the Commission.10 If the modernisation proposals are approved, there will no longer be any need for the doctrine of provisional validity, as national courts will have full jurisdiction to apply all of the provisions of Article 81 EC, that is, including the exemption provision of Article 81(3) EC. A possible conflict between a decision of a national court declaring nullity (or not) on the basis of Article 81(1) and (2) EC and a decision of the Commission granting (or refusing) an exemption on the basis of Article 81(3) EC would therefore no longer arise. Apart from the foregoing, the ECJ has clarified the nullity sanction in several respects.11 First, the Court held that the sanction should apply only to those provisions of the prohibited agreement that have the object or effect of restricting competition, and that it is only where those provisions are not severable from the other parts of the agreement (a matter to be decided by the national courts in accordance with its national law, if the matter has not been prejudged by Community law12) that the whole agreement would be void.13 Secondly, the nullity sanction is directly applicable,14 operates retroactively,15 and, being ‘absolute’, has the result that the agreement is without effect between the contracting parties and cannot be invoked against third parties.16 That means also that a party that has concluded the prohibited agreement is entitled to ask for a declaration of nullity, as was explicitly acknowledged by Advocate-General Mayras in his Opinion in Bloos II.17 In recent case law a question has raised about whether the nullity sanction may (or even must) be invoked by a national court of its own motion. That quesRegulation No. 1216/1999 to include all vertical agreements) or, in the alternative, when the agreement has been notified. On the effect on provisional validity of so-called comfort letters, see C.W. Bellamy and C.D. Child (1994): Common Market Law of Competition, Sweet & Maxwell, London. 10 Case 48/72 Haecht II [1973] ECR 77 and Case C–234/89 Delimitis [1991] ECR I–935. 11 See a.o. F. Hubeau (1982): ‘La nullité, au sens de l’article 85, § 2 du Traité CEE, des accords et décisions incompatibles avec le marché commun’, in Liber Amicorum Josse Mertens de Wilmars, Kluwer, at 97–118; J. Stuyck (1986): ‘Civielrechtelijke gevolgen naar Belgisch recht van inbreuken op de kartelbepalingen van het E.E.G.Verdrag’, in Liber Amicorum Jan Ronse, Story-Scientia, at 713–39. 12 Thus e.g. in Article 5, as compared with Article 4, of the group exemption for (large) categories of vertical agreements established by Regulation No.2790/99. 13 Case 56/65 LTM v. Maschinenbau Ulm [1966] ECR 235; Case 319/82 Kerpen & Kerpen [1983] ECR 4173, para. 12 (quoted, and commented on from a viewpoint of French law, by A. Winckler in his report at p. 7–8). 14 Case 127/73 BRT v. Sabam [1974] ECR 51. 15 See Haecht II, supra note 10, at para. 2. But see supra note 8, with respect to nonnotifiable, or notifiable but not notified, agreements. 16 Case 22/71 Béguelin [1971] ECR 949, para. 29. 17 Case 59/77 Bloos II [1977] ECR 2359, at 2376. The Advocate-General states explicitly that the adage nemo auditur suam turpitudinem allegans does not prevent contracting parties from invoking the nullity where public policy provisions are at stake.

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tion was decided in the affirmative in Van Schijndel.18 The Court there stated that, having regard to the domestic law principle prevailing in most of the Member States, ‘that in a civil suit, it is for the parties to take the initiative’, a national court is ‘able to act of its own motion only in exceptional cases where the public interest requires its intervention’.19 That is the case with regard to Community competition rules laid down in Articles 81, 82 and 86 EC—which are ‘binding rules, directly applicable in the national legal order’—where the relevant domestic law requires its courts or tribunals, or confers on them a discretion, to apply of their own volition points of law based on binding domestic rules.20 That the EC competition rules are a matter of public policy was alluded to by the ECJ in its judgment in Eco Swiss,21 where the Court describes Article 81 EC as constituting ‘a fundamental provision which is essential for the functioning of the internal market’ and ‘a matter of public policy within the meaning of the New York convention [concerning the recognition and enforcement of foreign arbitral awards]’.22 The ECJ therefore held that, if an application is made to a national court for annulment of an arbitration award, the court must grant that application if it considered that the award in question was contrary to Article 81 EC. This is the case at least where the court’s ‘domestic rules of procedure require it to grant an application for annulment founded on failure to observe national rules of public policy’.23 It is clear from those judgments that Community law requires national courts and arbitral tribunals to apply the nullity sanction of Article 81(2) EC of their own motion because of the public policy nature of that Treaty provision. National courts have that duty even where their domestic law merely grants them a discretion to apply similar mandatory domestic law provisions.24 The judgments also show that private parties, including contracting parties, should be in a position to invoke Article 81(2) EC before a national court. This is not merely in order to preserve rights that they derive from Article 81 EC, but also in view of securing the preservation of competition that is essential for the functioning of the internal market.25 18

Joined Cases C–430/93 and 431/93 [1995] ECR I–4705. Para. 21. 20 Para. 13 and 14. 21 Case C–126/97 Eco Swiss [1999] ECR I–3055. 22 Paras 36 and 39. 23 Para. 41. The Court added, however, that such a court action is barred when no application for annulment was brought within the time limit prescribed by national procedural law if that limit does not render excessively difficult or virtually impossible the exercise of rights conferred by Community law: see paras. 44–47. 24 See further L. Gyselen (2001): comment in ‘Liability of Supranational, State and Private Actors’, in Principles of Proper Conduct for Supranational, State and Private Actors in the European Union: Toward a ius commune, Colloquium in honour of Walter van Gerven, Intersentia, Antwerp, at pp. 135–154. 25 Ibid., pp. 144–145. See also J. Lever’s report on English law for this Workshop, at p. 3, and A. Wincker’s report on French law, at p. 5. 19

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For the sake of completeness it should be mentioned that nullity is not the only sanction that Community law may prescribe with regard to agreements or contractual clauses that are inconsistent with Community rules. Thus, some provisions of consumer law directives—such as Article 6 of the Unfair Terms Directive 93/1326 —declare prohibited contractual clauses to be ‘non-binding on the consumer’. Such a sanction falls short of nullity, as it does not declare the prohibited clauses to be void, but only not applicable to or enforceable against the weaker contracting party (which the consumer is supposed to be). That does not necessarily prevent a court invoking the ‘not binding’ sanction of its own motion, as was decided by the ECJ judgment in Océano Grupo—that precisely concerned Article 6 of the Unfair Terms Directive.27 In that judgment the Court reached the conclusion that the aim of Article 6 would not be achieved if the consumer were himself obliged to raise the unfair nature of such terms. The question of nullity of an agreement pursuant to Article 81(2) EC relates to the issue of whether the nullity can be raised as a defence to a claim for performance, or for damages because of non-performance, between contracting parties.28 That question is to be distinguished from the question of whether a party to a contract that is null and void might have to give back what he received under it. This is a question of restitution.29 The nullity question must also be distinguished from the question of whether contracting parties, or third parties, can ask for damages in tort (where the contract is void) for harm sustained in connection with the conclusion or performance of the contract that is void. That is a question of compensation. The remedies of compensation and restitution are examined below.

1.2. Compensation In contrast to nullity, there is no reference in Article 81 EC to compensation as a remedy for contracting parties, or third parties (whether competitors, customers or consumers)30 for loss sustained as a result of the operation of an agree26

OJ L 95/29 [1993]. Joined Cases C–240/98 to C–244/98, [2000] ECR I–4941. 28 Or eventually as a defence to a claim for damages brought by a contracting party against a third party who has induced a breach of contract on the part of one or the other of the contracting parties (‘tierce complicité’). 29 K. Zweigert & H. Kötz (1998): An Introduction to Comparative Law, translated by T. Weir, 3rd edn., Clarendon Press, Oxford, at pp. 381–2. 30 It is for the Community courts (and not the national courts) to finally decide whether those three categories, including that of consumers, fall within the scope of protection of Articles 81 and 82 EC. That is indeed a question of interpretation of these provisions. Since both Articles refer explicitly to consumers—see the second condition of application of Article 81(3) EC and the enumeration of abuses in Article 82 EC under b)—it cannot be doubted that consumers are also protected by the prohibitions laid down in those Articles and, consequently, that they must be entitled to claim damages: see AdvocateGeneral Mischo’s Opinion in Courage v. Crehan, infra note 35, at paras. 37 and 38. 27

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ment, concerted practice or a decision in violation of Article 81 EC (or as a result of conduct inconsistent with Article 82 EC). That would imply that it is for the national courts to look at their domestic law in order to determine whether compensation can be obtained and, if so, under which conditions and for what kind of damage. However, it became clear with time that it should not necessarily be so. Indeed with regard to breaches of Community law by branches or public authorities of the Member States, the ECJ’s judgment in Francovich has stated that ‘liability (in tort) for loss and damage caused to individuals as a result of breaches of Community law […] is inherent in the (EC) Treaty’.31 That means that national courts are now required by Community law to apply domestic law to provide private parties with compensation. In later judgments, particularly in Brasserie du Pêcheur, the ECJ has made the principle of State liability more explicit by fleshing out the conditions for its application and the kind of damage, including pure economic losses, which private parties must be able to obtain.32 The question therefore arises whether the liability of private persons for loss and damage caused to other individuals as a result of breaches of Community law is also a principle ‘inherent in the ‘(EC) Treaty’. In my Opinion in Banks, I answered that question in the affirmative with regard to Articles of the Treaty — such as Articles 81 and 82 EC—that are directly applicable not only vertically but also horizontally, that is, in relations between private parties.33 And indeed, the motives applied by the ECJ in Francovich for the imposition of State liability would also seem to apply to private liability. Those motives are that ‘(t)he full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible’.34

The ECJ may be brought to address that question of principle in Courage v. Crehan, a case now pending before the Court35 and relating to an exclusive dealing agreement infringing Article 81 EC between a pub tenant, Crehan, and a brewer, Courage. In that case, the English Court of Appeal referred questions to the ECJ concerning the relief sought by Crehan against Courage for damages that Crehan alleges that he suffered because of the excessive price that he was compelled to pay for supplies of beer as a result of a price clause in the agreement. The brewer also claimed payment for unpaid deliveries of beer, but no question was referred to the ECJ in that regard. In its referral judgment, the Court of Appeal explains the rationale behind its 31

Joined Cases C–6/90 and 9/90 Francovich [1991] ECR I–5357, para. 35. Joined Cases C–46/93 and 48/93 [1996] ECR I–1029. 33 Opinion of 27 October 1993, Case C–128/92 Banks [1994] ECR I–1209, paras. 36–45. 34 Francovich, supra note 31, para. 33. 35 Case C–453/99, Courage v. Crehan [2001] ECR I–6314. The judgment was given on 20 September 2001. The judgment is discussed by A.P. Kamninos, ‘New prospects for private enforcement of EC competition law: Courage v. Crehan and the Community right to damages’, 39 Common Market Law Review, pp. 447–487. 32

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ruling. In its view, Article 81(1) EC is designed to protect third party competitors and not parties to the prohibited agreement, because the latter are the cause and not the victims of the restriction on competition. According to an earlier Court of Appeal judgment,36 where the parties are in pari delicto, the principle ex dolo malo non oritur actio prevents a party to an illegal agreement from claiming damages from the other party—regardless of whether the claim is for restitution (as here, that is, the tenant’s claim for the amount of the price that the brewer was overpaid) or for damages—for loss caused to him by being a party to the illegal agreement. The questions referred therefore did not concern nonperformance of a void contract, but compensation in tort (not in contract), more specifically under the tort of breach of statutory duty or an analogous tort. Apart from the question of principle whether Community law must make the remedy of compensation available for breaches of Community law by private persons, other questions remain to be answered. Thus, for example, is it correct to state that Article 81(1) EC is not designed to protect parties to the prohibited agreement (that is a question of interpretation to be answered by the ECJ), a statement that runs counter to earlier case law of the ECJ?37 And, if contracting parties are also protected by Article 81 EC (in so far as their contractual position is concerned), how does that affect a remedy in tort, rather than in contract, brought by one party against another?38 For example, is it permissible for domestic law to deny compensation in tort because of in pari delicto,39 taking into account that it is essential for the functioning of the internal market (as was stated by the ECJ in Eco Swiss),40 and would therefore seem to require full private enforcement?41 And, if it is not permissible for a national court to totally deny such a claim, may it apportion the claim in tort on the basis of the contributory negligence42 cause of action that is common to the legal systems of the Member States?43 Finally, does the remedy of compensation also cover 36

Gibbs Mew v. Gemmell, commented in European Law Review 1998, 588, at p. 606. Besides Béguelin, supra note 16, there is also Eco Swiss where one of the contracting parties requested the application of Article 81(2) EC, an element which did not prevent the ECJ from answering the issue in that case, that is whether an arbitrator must apply Article 81(2) EC of its own motion: see L. Gyselen, supra note 24, at p. 143. 38 English law permits concurrent liability: see Henderson v. Merrett Syndicates Ltd., HL (per Lord Goff), excerpt with comments in W. van Gerven, J. Lever and P. Larouche (2000): Tort Law, Cases, Materials and Text, 2nd edn., Hart Publishing, Oxford and Portland Oregon, at p. 37. 39 Contrary to Advocate-General Mayras’ Opinion in Bloos II—supra note 17— which, however, relates explicitly only to the sanction of nullity. 40 Supra quotation in text accompanying supra note 22. 41 See also L. Gyselen, supra note 24, at 146–153, however with qualifications. 42 A principle related to the principle of mitigation of damage of which the ECJ stated in Mulder that it is a principle of Community law: Joined Cases C–104/89 and 37/90 [1992] ECR I–3061, para. 33. 43 W. van Gerven, J. Lever, P. Larouche (2000), as cited in supra footnote 38, under 7.1, at 689–728. 37

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‘restitutionary damages’44 (as those claimed by Crehan against Courage are stated to be) as a logical consequence of the nullity of the agreement?45 And, if so, to what extent? On 22 March 2001 Advocate-General Mischo delivered his Opinion in Courage v. Crehan. Addressing the first question put forward by the English Court of Appeal, that is, whether Article 81 EC is to be interpreted ‘as meaning that a party to a prohibited tied house agreement may rely upon that article to seek relief from the courts from the other contracting party’, the AdvocateGeneral accepts that a party to a prohibited agreement is not precluded from relying on the nullity sanction of Article 81(2) EC because ‘a prohibition in reliance on it by a co-contractor, would partially deprive that provision of its effect’ and that, accordingly ‘if the application of the clause has had adverse effects for one of the co-contractors in the past, the question of compensation for such effects arises’.46 Turning to the Court of Appeal’s second question as to whether the party claiming relief is ‘entitled to recover damages alleged to arise as a result of his adherence to the clause in the agreement which is prohibited under Article 81 EC’; instead of treating it separately as a question of principle (as indicated above), the Advocate-General merges the question with the Court of Appeal’s third question, which is ‘whether a rule of national law which provides that courts [should] not allow a person to plead and/or rely upon his own illegal actions as a necessary step to recovery of damages should be allowed as consistent with Community law’. The Advocate-General’s answer to that question, when combined with the second, is that Community law precludes such a rule where it is based on the sole ground that the plaintiff is a party to the contract.47 However, in reply to the Court of Appeal’s fourth question, the Advocate General adds that such a rule is permissible if it is established that the plaintiff bears a more than negligible responsibility for the distortion of competition. This is definitely not the case if the party concerned is in a weaker position than the other party and was therefore not genuinely free to choose the terms of the contract.48 The result of not treating the question of principle laid down in the Court of Appeal’s second question as a question deserving a separate answer leads to uncertainty and speculation as to what the answer to the question of principle might have been. The Advocate General’s statement in paragraph 37 of his Opinion favours an affirmative answer in which the direct effect of Article 81 44

Damages are called restitutionary when the measure of damages is the benefit obtained by the defendant through the wrong, rather than the loss to the plaintiff: W. van Gerven, J. Lever, P. Larouche (2000), supra note 38, at 780. They are in the borderland between the law of damages and the law of unjust enrichment: ibid., at 872. 45 Thus L. Gyselen, supra note 24, at p. 150. 46 Paras. 22 and 26. 47 Para. 60. 48 Para. 78. One may wonder whether in that regard the principle of contributory negligence might not offer a more flexible answer, as it would lead to apportionment of damage between the parties responsible for the breach, rather than to an all-or-nothing solution. See Annex I below, under 1.

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EC in relations between private persons is recognised ‘to include (…) the right, for individuals, to be protected from the harmful effects which an agreement which is automatically void may create’, to which it is added in paragraph 38 that ‘[t]he individuals who can benefit from such protection are, of course, primarily third parties, that is to say consumers and competitors who are adversely affected by a prohibited agreement’.49 Against an affirmative answer could be held the Advocate-General’s statement in paragraphs 49 and 50 that ‘the English legal system, like many other legal systems, allows for actions of damages between individuals’ and ‘have allowed such actions to make good loss caused to third parties by conduct which infringes Community law’, from which it might be inferred that it is irrelevant whether damage claims are already permitted as a matter of, and by virtue of, Community law. One might hope that the judgment of the ECJ will avoid such ambiguity, and that it will choose to acknowledge the principle of liability for breaches of Community law as a principle that also applies to undertakings violating Community competition rules. This is especially the case when the infringed Community rule constitutes, as was recognised in Eco Swiss, ‘a fundamental provision which is essential for the functioning of the internal market’,50 and therefore needs to be protected by all means, including actions brought by individuals against other individuals before the national courts. And indeed, would it not be strange that individuals may bring a liability action under Francovich against a Member State for infringement of Articles 81 and 82 EC in conjunction with Articles 3, 10 and 86 EC, but not against the undertakings that were the direct cause of the infringement?51 If such a head of liability were adopted, it could be subjected to the same, or similar, conditions as those developed by the ECJ in its post-Francovich case law. That is: i) ‘serious breach’ (in the sense of a ‘sufficiently characterised breach’), to be assessed in accordance with similar criteria to those laid down in Brasserie du Pêcheur,52 of rules intended to confer rights on individuals (as Articles 81 and 82 EC unquestionably do); and (ii) a causal link between the breach and the damage sustained by the injured parties. Actually, to introduce such a new head of liability would not cause a legal revolution, as many, if not all, of the Member States have a remedy in tort for infringements of ‘statutory duty’; although they differ in form and substance.53 49

Another indication may be that the Advocate-General, to support that statement, refers in note 11 to my conclusion in Banks where, as said above, I proposed to answer the question of principle in the affirmative. 50 Supra note 21 and the accompanying text. 51 To acknowledge that such liability is also inherent in the Treaty would actually seem to be a lesser step than to acknowledge State liability as in Francovich, since the former type of liability amounts to a logical corrolary of the nullity sanction provided for in Article 81(2) EC. 52 Joined Cases C–46/93 and C–48/93 Brasserie du Pêcheur [1996] ECR I–1029, para. 56–7. 53 See Annex I below, under 2.

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This makes it desirable, in view of the uniform application in the Member States of crucial provisions of Community law,54 that the principle of liability be recognised as a principle of Community law—if not by the Community courts, then, and preferably (as suggested below)—by the Community legislature, and that the conditions and consequences of private liability for infringements of the Community’s competition rules would be fleshed out accordingly. For the creation of such conditions and consequences, inspiration can be drawn (as acknowledged in Brasserie55 and, subsequently, in Bergaderm56) from the Community courts’ case law on the liability of Community institutions, as provided in Article 288 (2) EC (ex 215), and therefore from the common general principles of the Member States’ legal systems.57 That could be the case, for example, with regard to delicate questions such as those addressed in the ECJ’s judgments in Mulder, on burden of proof, heads of damage and the assessment thereof,58 as well as on the award of pre-and post-judgment interests which is a matter of great importance in the awarding of damages.59 As for pre-judgment interests, the ECJ accepted more particularly, with a reference to its earlier judgment in Grifoni,60 that they are granted in order to ‘reconstituer autant que possible le patrimoine de la victime’ and that accordingly ‘les conséquences résultant du laps de temps qui s’est écoulé entre la survenance du fait dommageable et la date du paiement de l’indemnité ne sauraient être ignorées (…) dans la mesure où il y a lieu de tenir compte de l’érosion monétaire’.61 As for postjudgment (default) interests, interest was awarded in Mulder v. Commission from the date of delivery of the 1992 interlocutory judgment to the date of actual payment.62

54 Uniform application is a fundamental requirement of Community law as the ECJ stated in C–143/88 and C–92/89 Zuckerfabrik Süderdithmarschen [1991] ECR I–413, para. 26. 55 Supra note 52, paras. 41 and 42. 56 Case C–352/98 P Bergaderm [2000] ECR I–5291, paras. 39–44. 57 See in that respect the national reports submitted at this Workshop, e.g., to quote one example only, the question of defences (ground of justifications) discussed under French law in A.Winckler’s report, at p. 15 ff. 58 Joined Cases C–104/89 and C–37/90 Mulder v. Council [1992] ECR I–3061 (interlocutory judgment, Opinion by Advocate-General Van Gerven); Joined Cases C–104/89 and 37/90 Mulder v. Commission [2000] ECR I–203 (definitive judgment, Opinion by Advocate-General Saggio). 59 A matter which, according to C.A. Jones—at pp. 8–10 of his report for this Workshop — is of greater importance in the US than treble damages. 60 Case C–308/87, [1994] ECR I–341, para. 40. 61 Mulder v. Commission, supra note 58, para. 51. In that judgment the Case C–104/89, at 1.85%, reflecting the rate of inflation. 62 The rate was fixed in Case C–104/89 at 8%.

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1.3. Restitution The remedy of restitution—or ‘recovery of sums’ as it is called in ECJ case law —has been recognised in Community law for many years with regard to charges levied by national public authorities in breach of Community law.63 For example, in Fantask, the Court stated: ‘It is . . . settled case law that entitlement to the recovery of sums levied by a Member State in breach of Community law is a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions as interpreted by the Court [reference omitted]. The Member State is therefore in principle required to repay charges levied in breach of Community law [reference omitted]’64 (though national laws may require the claim for recovery to be made within a reasonable period of time).

That is also the case where the charges were ‘imposed over a long period (…) without either the authorities of that State or the persons liable to pay the charges having been aware that they were unlawful. . .’.65 In various judgments, the Court gave further shape to the remedy. All of these cases relate to recovery from public authorities of monies unduly paid (or claims to benefits unduly refused66). Other case law concerns recovery of money, subsidies, unduly paid by public authorities from individuals.67 The question has also arisen in the context of monies paid between private persons in breach of fundamental and directly applicable Treaty provision.68 Recovery should be ‘a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions’, to use the wording of Fantask.69 Restitution is a concept with different meanings depending on the legal system involved. It normally covers the return of unduly transferred corporeal property and the repayment of unduly paid money, as well as compensation where the defendant has been enriched other than by the transfer of property 63

See Van Gerven (2000), supra note 3, at 516–21. Case C–188/95 Grifoni [1997] ECR I–6783, para. 38. 65 Para. 40. That statement runs counter to the rule in the common law, but not in other legal systems, that restitution of money paid when not due is excluded if the defendant believed he was entitled to it and the plaintiff, though aware of all the relevant facts, believed himself bound because he drew the wrong legal conclusions from them see Zweigert & Kötz (1998), as cited in supra footnote 29, at 568. However, that rule ‘may be on its way out’ since the Law Commission proposed its abolition and the decision of the House of Lords in Woolwich Building Society v. I.R.S [1993] AC 70 points in the same direction (ibid., at 574). Lord Goff’s speech in that judgment relied partly on Community law to come to his conclusion that money can be reclaimed, a view which was also accepted by the Court of Appeal in British Steel v. Customs and Excise Commissioners [1997] 2 All ER 366: see M. Brealy and M. Hoskins (1998): Remedies in EC Law, 2nd edn., Sweet & Maxwell, London, at 169–70. 66 See Van Gerven (2000), as cited in supra footnote 3, at 520–21. 67 See e.g. Case C–24/95 Alcan [1997] ECR I–1591. 68 Case C–379/98, PreussenElektra AG, [2001] ECR I–2099. In this judgment the ECJ did not find though a breach of Community law. 69 See further Annex I below, under 1. 64

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or payment of money.70 Apart from these there is also a category of compensation called ‘restitutionary damages’ that is situated between restitution and compensation, and that might be of interest in a competition law context. The issue of ‘restitutionary damages’ arises in connection with the principle of full reparation that is a principle of tort law familiar to many, if not all, national legal systems.71 The principle has a particular meaning in cases where the tortfeasor has made profits as a result of the wrongdoing. The question is then whether, within the framework of full reparation, damages may be assessed on the basis of the profits made by the defendant instead of on the basis of injury suffered by the plaintiff. Although the answer to that question is controversial, it cannot be denied that the fact that the tortfeasor has benefited from his wrong will somehow affect the assessment of damages in many legal systems.72 The question arises particularly in cases dealing with infringements of intellectual property rights in which the damage sustained by the holder of the right is often assessed on the basis of the hypothesis that he would have agreed to license his right. And even where a system adheres to the principle of strict equivalence between harm and damages, the defendant’s enrichment is sometimes taken into account as a presumption of fact to assess the amount of harm suffered by the plaintiff.73 Although I do not know of decided cases on the issue, one may wonder whether restitutionary damages might not be a concept that could be used in instances where the infringement of anti-trust laws generates important profits to the tortfeasor(s) at the detriment of large groups of persons, such as consumers,74 and where the amount of injury sustained may be more difficult to assess than the profits made by the tortfeasors. Obviously, such a claim may be successful only when it can be brought by a collective suit for which several legal systems provide, especially in the field of consumer protection, albeit in very different forms.75 Such claims for restitutionary damages may possibly constitute an alternative to ‘treble damages’ or confiscation of profits derived from criminal offences.

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I draw this distinction from a Scottish case, Morgan Guaranty Trust of New-York v. Lothian Regional Council (1995 SC 151, 1995 SLT 299), where Lord President Hope summarised the Scottish law of unjustified enrichment; as quoted by Martin A.Hogg (2001): ‘Lowlands to Low Country: Perspectives on the Scottish and Dutch Law of Unjustified Enrichment’, Ius Commune Lectures on European Private Law, at 4–5. 71 On that principle in English, French and German law, see W. van Gerven, J. Lever and P. Larouche (2000): Tort Law, Hart Publishing, Oxford and Portland Oregon, 2nd edn., at 770–816. 72 Thus the comparative overview at 872 of the above mentioned book where further case law and comments are found. 73 Ibid. at 872. 74 Which, as indicated above (supra note 3), fall under the scope of protection of Articles 81 and 82 EC. 75 On the protection of collective interests in the legal systems of the Member States, see W. van Gerven, J. Lever and P. Larouche, as cited in supra note 71, at 248–77.

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1.4. Interim relief In Factortame I,76 the ECJ recognised the necessity of the remedy of interim relief to preserve the Community rights of private persons in general against acts of national public authorities. The Court stated: ‘the full effectiveness of Community law would be . . . impaired if a rule of national law could prevent a court seized of a dispute governed by Community law from granting interim relief in order to ensure the full effectiveness of the [later] judgment to be given on the existence of the rights claimed under Community law. It follows that a court which in those circumstances would grant interim relief, if it were not for a rule of national law, is obliged to set aside that rule’.77

In its later judgment in Zuckerfabrik Süderdithmarschen78 the Court laid down the conditions under which interim relief can be granted against, in that case, application of a regulation. Those are: serious doubt must exist as to the regulation’s validity and the suspension of application must retain the character of an interim measure; the grant of relief must be a matter of urgency intended to avoid serious and irreparable damage to the party seeking the relief, and must take into account all interests involved, including that of the Community.79 Again, there is no reason why interim relief to safeguard Community rights should not be available against private persons who threaten to impair such rights. And that is indeed what the ECJ had decided in competition cases even before the judgments in the above mentioned cases were rendered (but then with regard to the jurisdiction of the Commission and not of national courts). The first case so decided was Camera Care where the Court held that the Commission may grant interim relief to a complainant when there is a prima facie case of an infringement and immediate danger of serious and irreparable harm;80 conditions that the CFI has interpreted in a later case less strictly than the Commission itself.81 However, that seems not to have encouraged use of the remedy,82 allegedly because it might distract the officials from getting on with the principal proceedings if the Commission complies with a request for interim measures.83 When national courts are required to apply the whole of Article 81 76

Case C–213/89, [1990] ECR I–2433. Para. 21. 78 Supra note 54. 79 See further Van Gerven as cited in supra note. 3, at 513–16. 80 Case 792/79R [1980] ECR 119. 81 Case T–44/90 La Cinq [1992] ECR II–1. See, for a thorough analysis, S. Lehr (1997): ‘Einstwilliger Rechtsschutz und Europäische Union’, in 128 Beiträge zum ausländischen öffentlichen Recht und Völkerrecht. 82 See the judgment of the ECJ in Case 228–229/82 Ford [1984] ECR 1129 and further developments in W. van Gerven, L. Gyselen, M. Maresceau and J. Stuyck (1997): Kartelrecht II, Europese Gemeenschap, at 669–74. 83 V. Korah (2000): EC Competition Law and Practice, Hart Publishing, Oxford and Portland Oregon, 7th edn., at 177–8, who believes that interlocutory relief is obtainable faster in the English High Court. 77

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EC as a result of Commission’s proposals, they may also be confronted more frequently with applications for interim relief. It would seem that the conditions under which they would grant such relief will not be that different from those mentioned above:84 prima facie proof of an infringement, necessity of the relief to avoid irrevocable harm, application of a balance of convenience as to the risk of injustice to either party of granting or refusing an injunction.85

1.5. Collective claims Except for consumer directives and the case law of the Community courts on ius standi of associations in nullity actions under Article 230 EC,86 no Community legislation or case law exists concerning the protection from actual or imminent harm to diffuse interests, such as consumer interests, as a result of infringements of Articles 81 or 82 EC. And, also at the level of the national legal systems, there seem to be no steps being taken in that direction.87 If collective claims for interim relief or compensation are desirable in light of private enforcement of competition rules, as might well be the case, then harmonisation measures will be needed. This is pointed out later on.88

2. Private enforcement under Regulation No. 17/62. 2.1. General background Since the early days of private enforcement of EC competition rules, the number of actions brought before the national courts has been significantly reduced by the policy decision to put the enforcement mainly in the hands of the Commission (a decision made on the occasion of the adoption of Regulation No. 17/62). In derogation from the general rule of EC law that the application and the enforcement of Community policies and Community law is a matter for the national authorities, it was decided to make competition policy primarily a Community matter, both with regard to the enactment of general 84

See Annex I below, under 3. See for English law M. Brealy and M. Hoskins, supra note 65, at 149–52 with regard to actions between private parties with reference, a.o., to the House of Lords’ decisions in Garden Cottage Foods Ltd v. Milk Marketing Board (relating to Article 86, now 82 EC) and in American Cyanamid Co v. Ethicon Ltd. For a comparative overview, see Tarzia (1996): ‘Les mesures provisoires dans les pays de la C.E.E.’, in Annales de droit de Louvain, 163–72. 86 With respect to both areas see infra Annex I, under 4, where reference is made for the second area to the judgments of CFI and ECJ in Greenpeace. 87 See J. Lever’s query in his report for this Workshop on whether ‘a pioneering advocate may one day seek to argue in the English courts that nothing else less than a USstyle class action is capable of providing an ‘effective remedy’ to consumers who have been injured by the operation of e.g. a cartel. . .’. 88 See Annex I, under 4 and Annex II, under Article 9. 85

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rules and with regard to their application in individual cases.89 The emphasis thus laid on the power of the Commission, as evidenced in many articles of Regulation No. 17/62, culminates in the Commission’s exemption monopoly set out in Article 9 (1), according to which, ‘subject to review of its decision by the Court of Justice, the Commission shall have sole power to declare Article 81(1) EC inapplicable pursuant to Article 81(3) EC of the Treaty’. However, that monopoly does not apply to the application of the prohibitions of Articles 81(1) and 82 EC, for which national authorities and courts have concurring competence with the Commission. Nor does it apply to the application of the nullity sanction of Article 81(2) EC, for which the national courts have exclusive competence (subject, however, as indicated above, to the doctrine of provisional validity). Moreover, even the national authorities’ (but not the courts’90) concurring competence to apply the prohibitions of Articles 81(1) and 82 EC ceases to exist as soon as the Commission initiates procedures under Articles 2, 3 and 6 of Regulation No. 17/62. To make the Commission’s ‘exemption monopoly’ operational, notification of old and new agreements, decisions and concerted practices was prescribed if the undertakings concerned wanted to obtain retroactive effect of a favourable Commission decision and exemption from fines. Only a very limited group of vertical restraints specified in Article 4(2) of Regulation No.17/62,91 was originally exempted from the requirement of notification. This led to the well-known result that the Commission was swamped by more than 34,500 notifications (from the six original Member States) requesting negative clearances and/or exemptions.92 This unfortunate start—unfortunate, because it diverted the attention of the scarce human resources of the Commission’s Directorate General Competition (DG IV as it was then called) from the beginning to less important anti-competitive behaviour—gave decisive shape to the Commission’s competition policy turning it into a continuous struggle against the danger of ‘administrative paralysis’.93 It resulted over the years in: ‘. . . the Commission adopt[ing] regulations exempting groups of (however narrowly defined) agreements en bloc, in particular of vertical restraints of competition.94 In addition, the 89 C.D. Ehlermann, supra note 6, at 575–7 pointing out at 576, that ‘the concern for the coherent and consistent application of EC competition law may be considered to be almost excessive.’ 90 According to J. Lever, the English courts have nonetheless deferred to the Commission both in giving precedence in deciding cases and in recognising its decisions (subject to anything said by the Community courts on appeal). 91 At the insistance of the French government, all sole distributorship agreements were subjected to notification: see W. van Gerven (1996): Principes du droit des ententes de la CEE, Bruylant, Brussels, at 166–7. 92 C.D. Ehlermann, supra note 6, at 541. 93 Ibid. 94 Many of the earlier vertical agreements exemptions have been replaced recently by the general, and more modern, group exemption contained forth in Regulation No. 2790/99, OJ L336/21 [1999] (author’s addition).

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Commission published notices and communications that signalled a de facto green light for certain types of agreements, such as the successive ‘de minimis’ notices. Finally, DG IV developed the informal instrument of ‘comfort letters’, which largely took the place of formal Commission decisions. Formal exemption decisions remained extremely rare’.95 Obviously, I do not wish to say or even imply that application of the Community’s competition policy has been wrong or superfluous over these 40 years. That would be utterly unjust as it would deny the establishment of a large body of principles, rules, guidelines and decisions in concrete cases that have fleshed out the succinct rules laid down in Articles 81, 82 and 86 EC dealing with many, and not only less harmful, categories of anti-competitive behaviour on the part of undertakings (and Member States). However, this development has certainly led to a juridification of anti-trust policy, leaving little room for in-depth economic analysis, and distracting the attention and staff of the Directorate General Competition from more important things than fighting administrative paralysis. Combined with other more cultural factors relating to differences in legal mentalities, it was no doubt responsible for the difference in approach from that prevailing in the US. In the US, according to V. Korah: ‘there is a continuum of the level of analysis required under section 1 of the Sherman Act. At the one hand, horizontal price fixing, market allocation or joint sales will seldom bring attenuating efficiencies, and few cases will escape the prohibition. Most can be forbidden after only a quick look to see whether production is being restricted to raise prices. At the other end of the continuum, vertical restraints in a competitive market will seldom be illegal, and only a truncated analysis is required to ensure that the market is competitive and that the parties are not actual or potential competitors. In between these extremes, a less quick look will be required’.96

One may wonder whether, at the end of the day, the overall effect of the Community’s policy has not been the same, albeit that it may have taken more time and resources than needed to achieve that result.

2.2. Limited private enforcement as a result Given this general background it is not surprising that, when it comes to the application of the Community’s (as opposed to their own national) competition rules, national courts and national authorities have had little to add. The courts’ assistance is mainly requested by litigating parties either in a situation where a contracting party wants to be relieved from his contractual obligations and to that effect relies on nullity of the agreement under Article 81(2); or, as in Courage v. Crehan (mentioned above), it sues the other party non-contractually to recover compensation for the loss that the agreement has caused to the claimant; or in a situation where a third party alleges that it has suffered injury as a result of the existence and/or enforcement against it of an anti-competitive 95 96

Ibid. Supra note 83, at 366–7.

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practice prohibited by Articles 81 or 82 EC. In all these situations, it is for the plaintiff to prove that the conditions of the prohibition in Article 81 EC (or, in the second situation, in Article 82 EC) are fulfilled. That may be particularly troublesome in the last situation, where the plaintiff has not participated in the anti-competitive behaviour. Only where national law permits a ‘pre-trial discovery’ procedure97 (often, however, at a discouragingly high cost) is there any chance for the plaintiff to clarify the situation,98 unless the competent authorities have already established the anti-competitive behaviour by action under public law.99 In its Delimitis judgment, the ECJ stated that it is open to a national court ‘within the limits of the applicable national procedures and subject to Article 214 EEC [now 287 EC]’ to seek information from the Commission on the state of any procedure set in motion by the Commission, and more importantly, to obtain the economic and legal information that that institution can supply, where the concrete application of Article 81(1) or 82 EC raises particular difficulties.100 By making that statement the Court actually referred to earlier statements of the Commission in its Annual Reports on Competition Policy.101 However, it was only after the Court of First Instance had confirmed in Automec II102 that the Commission is not obliged to pursue every complaint to a formal decision on the substance and may choose its priorities and investigate only those files that raise a ‘Community interest’103, that the Commission issued its 1993 Notice on cooperation between the Commission and national courts.104 After having summarised the respective competences of the Commission and the national courts, the Commission, drawing the conclusions from Automec II, indicated that there is no sufficient Community interest for it to pursue a case 97 But see the remarks of J. Lever in his report for this Workshop on the counterproductive effect of the process of documentary discovery English style. 98 Ibid., at 4. In his report J. Lever makes a strong plea for the proposition that private enforcement cannot be a substitute for public law but only a valuable adjunct to the enforcement of competition rules by public law action. 99 H. Johannes points out in his ‘Editorial’ in the Competition Law Issue of ERAForum, I-2001, at 2, that the only instance before the ECJ where a third party has been able to prove the existence of a significant cartel without the assistance of the Commission was in Case 319/83 Kerpen & Kerpen [1983] ECR 4173. 100 Case C–234/89 [1991] ECR I–935, para. 53. 101 See the Opinion of the Advocate-General, at [1991] ECR I–959 para. 8, with references to the Thirtheenth Report (on the activities of 1983) and particularly to the Fiftheenth Report (on those of 1985), where the issue of application of EC competition law by national courts was discussed extensively. However, the principle of cooperation was hardly mentioned in later Reports, and contacts between the Commission and national courts remained scarce, as was admitted in Court by the representative of the Commission. 102 Case T–24/90 [1992] ECR II–2223. 103 On that development, see S. Weatherill, supra note 2. 104 OJ C39/10 [1993]. In 1997 the Commission also issued a Notice on the cooperation between the Commission and the national competition authorities, OJ C313/3 [1997].

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in which a complainant can have its rights adequately protected by a national court.105 The Commission sees many advantages in such a decentralised application of Community competition rules (enforcement closer to the citizen, possibility of obtaining compensation and interim measures faster, possibility of joining claims based on Community and national law provisions). Whether those advantages outweigh the advantages of a direct complaint to the Commission (less expensive and less publicity; extensive powers of investigation) remains doubtful. Moreover, when it comes to indicating how the Commission can be of assistance to the national courts in supplying procedural and factual information and in answering questions, the Commission’s observations remain remarkably laconic.106

III. The draft Regulation 1. Impact on private enforcement 1.1. General purpose On 27 September 2000, the Commission submitted to the Council a proposal for a new Regulation pursuant to Article 83 EC, implementing Articles 81 and 82 EC and intended to replace Regulation No. 17/62. The draft Regulation is based on the Commission’s May 1999 White Paper on Modernization of the Rules implementing Articles 85 and 86 of the EC Treaty,107 prepared under the stewardship of Commissioner Karel van Miert.108 The White Paper has been analysed, and by and large approved of, by C.-D. Ehlermann, who regards it as ‘a radical step but also a remarkably courageous one’.109 The draft Regulation itself has been examined from a point of view of law and economics by W. Wils,110 who believes that the draft Regulation has the potential for a more effective enforcement of the prohibitions laid dawn in Articles 81 and 82 EC.111 In his analysis, W. Wils focuses first and foremost on the timing of legal interven105

See further infra note 121. For a discussion see R. Whish (1997): ‘The Enforcement of EC Competition law in the Domestic Courts of the Member States’, in L. Gomley, ed.: Current and Future Perspectives on EC Competition Law 14 European Monographs, Kluwer, at 73–88. 107 OJ C132/1, 1999. 108 The draft Regulation is strongly advocated by his successor, Commissioner M. Monti: see ‘The Application of Community competition law by the national courts in a directly applicable exception system’, ERA-Forum I-2000, at 3–6. 109 Supra note 6, at 590. 110 ‘The Modernization of the Enforcement of Articles 81 and 82 EC: a Legal and Economic Analysis of the Commission’s Proposal for a new Council Regulation replacing Regulation No. 17’, to appear in B. Hawek, ed.: 2000 Fordham Corporate Law Institute. 111 Last paragraph of the article in manuscript. 106

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tion: ‘ex ante enforcement through pre-screening or ex post enforcement through deterrence?’. He indicates: • that the EC merger control of the Community which remains unaffected by the draft Regulation, is and should remain, a clear example of ex ante enforcement through pre-screening (mandatory prior notification, final decision within strict limits, legality of concentration definitively settled before concentration is put into effect); • that, with the exception of the possibility of negative clearance, the prohibition of Article 82 EC on abuses of dominant provision is entirely enforced ex post through deterrence. It will, and should, remain so under the draft Regulation (then fully since the negative clearance option would be abolished); and • that the application of Article 81 EC—which is now a hybrid system of optional pre-screening (prior optional notification within limits in view of negative clearance and/or exemption pursuant to Article 81(3) EC) and ex post enforcement through deterrence (imposition of fines within limits and award of damages where provided by national courts)—will become a clear ex post enforcement system for the whole of Article 81 EC(like for Article 82 EC and, it may be added, for Article 86 EC). As the foregoing suggests, the main difference between the draft Regulation and Regulation No. 17/62 concerns the application of Article 81(3) EC, for which the draft Regulation replaces the current notification and authorisation system with a directly applicable exception system in which prior notification would have no place.112 That would mean that the whole of Article 81 EC, including the ‘inapplicability’ declaration in (3), will be regarded to be directly applicable so that the current ‘exemption monopoly’ of the Commission will be abolished except for the Commission’s reinforced power to issue group exemptions; Article 81 EC would then be enforced ex post both by the Commission and by the national competition authorities (except for the nullity sanction of 81(2) EC) and by the national courts (which would retain the monopoly to apply the nullity sanction, and grant compensation where applicable). This is not the place to discuss whether a directly applicable exception system is compatible with the provisions of Article 81 EC (it is arguable that it is113) or whether the provisions of Article 81(3) EC are sufficiently precise to be capable of having direct effect (which I am prepared to accept, taking into account that the meaning of those provisions has been 112 As W. Wils indicates, (at note 9 of his manuscript) it was suggested in the White Paper that the notification procedure of the EC Merger Regulation should be extended to so-called ‘partial-function joint ventures’, a suggestion which so far has not been followed up in the draft Regulation. 113 See C.D. Ehlermann, supra note 6, at 553–56. But for a strong criticism, see the article of E.-J. Mestmaecker (2000): ‘The EC Commission’s Modernization of Competition Policy: a Challenge to the Community’s Constitutional Order’, in 1 European Business Organization Review, 401–44.

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considerably clarified by case law of the ECJ and CFI and decisions of the Commission114). The overall effect of the draft Regulation should be to enable the Commission to concentrate on its policy function and to limit its involvement in the enforcement of competition rules by following up complaints, or acting on its own initiative,115 only in matters which have a clear Community interest116 (a concept which needs clarification, particularly in relation with the protection of diffuse interests, such as consumer and environmental interests).117 For all other matters, the Commission would rely on the decentralised application of Community competition rules—which are made applicable, to the exclusion of national competition rules, in all areas where inter-State trade is affected118 — by the national authorities,119 and by the national courts. Actually, the more protection available at the national level, the lesser the need for the Commission to intervene, as protection at the national level is seen as one of the elements to be taken into account when assessing the Community interest in a specific instance.120 It is therefore important to know that in its BEMIM judgment the CFI has clarified that element to mean, with regard to enforcement by national courts: 114

Ibid., at 557–560. See Article 7 (1). 116 As to the role of private complainants before the Commission, the draft Regulation repeats in Article 7 (2) that any natural or legal person who can show a legitimate interest can lodge a complaint requesting the Commission to order termination of an infringement. By virtue of Article 34 (b) the Commission would be able subsequently to determine more precise rules, e.g., as suggested in the White Paper to impose upon itself an obligation to inform the complainant within a period of four months whether it intends to take action, and to clarify the concept of Community interest on the basis of which it determines its enforcement priorities. See Wils, as cited in supra note 110, text accompanying note nos. 99–100. 117 So far the concept is not particularly sympathetic, especially not in the area of competition law, to the protection of such interests; see the CFI’s and ECJ’s judgments in Greenpeace —Case T–585/93, [1995] ECR II–2205; Case C–321/95P [1998] ECR I–1651. See also L. W. Gormley (2000): ‘Public Interest Litigation in Community Law’, 7 European Public Law, 51-62. On the protection of consumer rights in competition cases and the role played by BEUC in that respect, see N. Reich, ‘Competition Law and the Consumer’ in Current and Future Perspectives on EC Competition Law, supra note 106, at 127–37. 118 Article 3 of the draft Regulation: the so-called ‘exclusivity clause’; see E.J. Mestmaecker’s criticism, with reference to German and US laws, as cited in supra note 113, at 429–35. 119 Article 5 of the draft Regulation provides that the national authorities shall have the power in individual cases to apply the prohibition in Article 81(1) EC where the conditions of Article 81(3) EC are not fulfilled, and the prohibition in Article 82 EC, and for that purpose, acting on their own initiative or on complaint take any decision requiring that an infringement be brought to an end, adopting interim measures, accepting commitments or imposing fines, periodic penalty payments or any other penalty provided for in their national law. Those powers are to some extent comparable with the powers of the Commission in Articles 7ff. of the draft Regulation. 120 Supra text accompanying note 105. 115

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‘that the rights of a complainant could not be regarded as sufficiently protected before the national court if that court were not reasonably able, in view of the complexity of the case, to gather the factual information necessary in order to determine whether the practices criticized in the complaint constituted an infringement of the said Treaty provisions’.121

As to the enforcement of Community rules by the national competition authorities (also ex post, that is without prior notification) it should be noted that the draft Regulation includes provisions to avoid conflicting decisions.122 I will not go into that subject any further and will concentrate instead on the enforcement of competition rules by national courts.

2.2. Private enforcement before the national courts a. How to stimulate private enforcement? Article 15 of the draft Regulation deals with cooperation between the Commission and the national courts. As stated above, under the draft Regulation those courts will be authorised to apply all of the provisions of Articles 81 and 82 EC. They will thus no longer find themselves in the position that, for reasons of a possible conflict with exemption declarations on the part of the Commission, they would have to suspend proceedings. The new division of work would imply that the national courts will have to include assessment of the four conditions required for Article 81(3) EC to apply. Would that raise insurmountable difficulties for those courts? Personally, I would not think so, at least not for the conditions mentioned in Article 81(3) EC under a) and b) at the end of the sentence (that is, for undertakings to refrain from imposing not-indispensable restrictions and from eliminating competition substantially), taking into account what the national courts are already expected to do now with regard to these two conditions. That is: to apply the proportionality test under Article 81(3)(a), to assess the indispensable character of the restrictions — which is a test the national courts are familiar with under the Treaty provisions concerning the

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Case T–114/92 BEMIM v. Commission [1995] ECR II–147, para. 88. The Court found however that in the case at issue the applicant ‘has adduced no specific evidence from which it might be inferred that its rights and those of its members cannot be satisfactorily safeguarded by the French courts’ (para. 93). For a discussion and further references, see S. Weatherill, supra note 2, at 180–83. 122 See e.g. Article 11(3), which obliges national authorities to inform the Commission about all the cases they deal with, and Article 11(4), which provides for a mandatory consultation of the Commission on all envisaged negative decisions (that is ordering termination of an infringement and/or imposing fines; conflicts between positive decisions are excluded since no authority is empowered to take any constitutive decision comparable to the current exemption decisions). Moreover under Article 11 (6) the Commission can withdraw a case from a national authority. See on all this W. Wils, supra note 110, at pp. 63–70 of the manuscript.

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freedom of goods and services;123 and to assess the minimum threshold of competition under Article 81(3)(b) which is no more difficult than applying the condition of ‘restriction (…) of competition’ in Article 81(1) EC, and the ‘de minimis’ test inherent therein, not to mention the application of Article 82 EC with its many intricate problems of assessing market power and delineating the relevant market. It may well be that the national courts’ approach in the application of competition rules is based primarily on legal considerations, and on little more than ‘common sense’ economic analysis,124 but that is a criticism which is often made in general, and thus also with regard to the decisions of the Commission and the ECJ (less so, of the CFI). The two other conditions (for the restrictive practice to contribute to improving production or distribution, or promoting technical or economic progress, and allowing consumers a fair share of the resulting benefit) may be more difficult to apply but I would think that much can be achieved when precise guidelines are made available to judges as to the concrete questions that are bound to arise in competition cases generally, and how to deal with them125 — particularly when they are able to rely on pleadings by specialised advocates trained in presenting the important issues in competition cases. To make sure that such a group of advocates exists would, in my view, constitute a higher priority than the inception of specialised courts.126 The problems with courts lie elsewhere. In that respect I would agree with W. Wils’ assessment that the ‘relative absence’ of private enforcement by courts is due to other factors as well: ‘These are partly cultural, related to a generally lower level of litigiousness and a weaker competition culture, but also legal, linked to the unavailability of class actions, contingency fee arrangements, treble damages or discovery procedures. The proposed new regulation does not attempt to remove any of these legal obstacles, which are part of national law’.127

123 A court, like the ECJ, called upon to apply an appreciation of an economic and legal nature (Case C–368/95 Familiapress [1997] ECR I–3689) is certainly able to apply the, in my view, simpler proportionality test needed under a) of Article 81(3) EC. 124 Commissioner Monti, himself an economics professor, believes that there is much common sense involved in the application of competition law and that for judges to grasp the basic framework of market economics may well suffice: supra note 108, at 4. 125 See e.g. the enlightening contribution of Justice Brian McCracken of the Irish High Court ‘ Towards the Application of Article 81(3) EC by national courts (an Irish perspective)’ in ERA-Forum I-2000, at 16–17. 126 Continental lawyers may have a lot to learn from the adversarial form of proceedings in common law legal systems where judges who are not specialised are, so to speak, educated on the bench by specialised advocates (barristers and sollicitors). National bars which admit the specialisation of their members to be known to the public (which means that rules are put in place by the bars as to how to acquire and verify the specialisation) should promote the formation of a group of specialised lawyers which then are able to resort to economic experts to support their allegations. 127 Supra note 108, at 72 of the manuscript (text accompanying note 103).

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Far be it from me to advocate that we should become more litigious and therefore unreservedly promote class actions, contingency fees or treble damages. That is not the kind of societal priority I have in mind. But, apart from those characterising the US situation, there are less extreme means that might help to strengthen the lack of competition culture.128 I have already mentioned one of them: to promote the establishment of specialised law firms engaged not only in consultation but also, for some as a priority, in litigation. This would require concentrating particularly on younger law firms with smaller overhead expenses (and having smaller enterprises as their primary ‘client target group’) that are capable of competing with the larger and more expensive law firms, and allowing these law firms to publicise their (ascertained) expertise and to have associative links with auditing firms specialised in economic analysis.129 It would also imply stimulating judges and advocates to improve their knowledge, and to share it with others, through multi-disciplinary training programmes. Other, more structural, means might involve putting in place collective claims mechanisms especially to assist consumers in civil litigation;130 making inexpensive pre-trial discovery procedures available before national courts,131 and under certain conditions, shifting the burden of proof from the plaintiff to the defendant with regard to causation and/or losses (cf. infra); looking into the possibility for national courts, apart from awarding compensatory and default interests (cf. supra), to award restitutionary damages within limits (which, from a viewpoint of the Member States’ legal orders, may be a more acceptable device than exemplary or punitive damages,132 cf. supra and infra); eventually, to impose periodic penalty payments (‘astreintes’),133 also in civil litigation with a view to 128 In (much) earlier writings I have described the Belgian situation as a perfect illustration of what Lon Fuller called a compromise between those who favor and those who oppose legislation: satisfaction is given to the former by adopting the Act, and to the latter by not providing in sufficiently effective means to enforce the Act. That may be the situation which, I am afraid, continues to exist in some Member States, where, in spite of a strong looking competition law, competition policy is not given high political priority. 129 The tendency in many countries to make associative links between law and auditor firms may present an opportunity in that regard (see in that respect Case C–309/99 J.J.Wouters (a.o.) v. Nederlandse Orde van Advocaten, [2002] ECR I–1577). 130 Provided that consumers fall within the scope of protection of Articles 81 and 82 EC, as we believe they do: see supra notes 102 and 105. 131 But see J. Lever’s comment in his report for this Workshop. 132 Exemplary or punitive damages as such are recognised only in common law regimes and, even there, only in limited cases. That does not mean that the idea of punishment as a function of tort law is completely absent from other legal systems; see W. van Gerven, J. Lever and P. Larouche, supra note 72, at 740, where for English law Rookes v. Barnard and Cassell & Co.Ltd v. Broome are discussed at 743–52; see also under German law, a.o. the judgment of BGH of 4 June 1992 on the enforceability of a US judgment awarding punitive damages, at 759–61. 133 Like under the present Regulation No. I7/62 the power to impose ‘astreintes’ or periodic penalty payments is also conferred on the Commission under the draft Regulation, in Article 23, inter alia to comply with a decision ordering interim measures or requiring complete and correct information.

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enforcing court orders; possibly to provide, by means of civil law, liability or disqualification for managers who are responsible for serious breaches of competition rules (cf infra). Some or all of these measures could be an alternative for, or in addition to, administrative fines or even penal sanctions and make private enforcement more attractive for parties that have sustained damage as a result of anti-competitive practices. b. Distinguishing administrative and civil law court proceedings In dealing with the issue of cooperation with national courts, the draft Regulation does not distinguish between courts having jurisdiction to carry out judicial review of administrative authorities (in the present context, national competition authorities) and courts handling civil law litigation, mainly nullity and compensation cases. The distinction was made by the ECJ in its BRT v. Sabam judgment with regard to the application of Article 9(3) of Regulation 17/62, where the Court held that competition authorities in Member States referred to in Article 84 EC include: ‘in certain Member States courts especially entrusted with the task of applying domestic legislation on competition or that of ensuring the legality of that application by the administrative authorities . . . and also rendered competent to apply the provisions of Articles 85 and 86 of the Treaty’.134

In my view, the distinction is crucial in a context of private enforcement: as they tend to be specialised, administrative courts are normally better equipped to deal with competition law cases, especially if the national authorities are empowered (as is already the case in eight of fifteen Member States135) to apply Community, as well as national, competition rules. Obviously, in such cases the court charged with judicial review (often a court of appeal especially designated for that purpose within the whole or an important part of the Member State’s territory) will benefit from the factual, legal and economic information provided, and the assessment made, by the public authority whose decision comes under scrutiny and from the arguments raised before it by the litigating parties; much as the CFI and the ECJ are well informed in proceedings under which competition decisions of the Commission are reviewed on the basis of Article 230 EC. Accordingly, where Article 15 of the draft Regulation refers to means of assisting national courts in proceedings for the application of Articles 81 and 82 EC, it would seem to refer primarily to courts and proceedings that deal with the application of competition rules in civil (including commercial) matters, and therefore mainly with nullity, compensation, restitution and related interim relief claims. In other words, those are the cases in which the principle applies, elevated by the ECJ in Van Schijndel to a principle of Community law, according to which ‘in a civil suit, it is for the parties to take the initiative, the court 134 135

Case 127/73, supra note 14, para. 19. W. Wils, supra note 108, at note 5 of the manuscript.

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being able to act of its own motion only in exceptional case where the public interest requires its intervention’.136 Having regard to the above distinction between administrative and civil law proceedings, it may be desirable to review, and to harmonise, at the level of the Member States the allocation of competences in the enforcement of Community competition rules between national competition authorities and national courts. Obviously, national authorities cannot be put in a position to determine issues of nullity, compensation or restitution; these are issues to be determined by courts. However, that should not prevent national laws from attributing to the courts in charge of judicial review, the task of determining such civil law consequences — at the request of interested parties who would be allowed to intervene at that stage of the proceedings to secure or preserve their private rights (much like private persons are allowed to intervene as a ‘partie civile’ in criminal law procedures in some countries 137) — in cases in which they confirm a competition authority’s finding of the existence of a prohibited restraint of competition. This is not the place to go further into that question but, if the Commission wants to avoid the impression that its modernisation proposals are — to put it bluntly — primarily meant to reduce its own workload at the expense of the national courts and authorities (which are as much, if not more, overloaded with work and certainly do have less resources), then it is for the Commission to look into these and other questions and, if need be, to prepare harmonisation measures on the basis of Article 83 EC; and to make Community resources available in order to put such measures into place.138 c. Assisting civil courts Obviously, the Van Schijndel principle referred to above (that is, leaving the initiative in civil law suits to the litigating parties; outside the area of judicial review), is not of a nature to facilitate direct application of Articles 81 and 82 EC by the civil courts (including any commercial courts). More particularly, it prevents such courts from initiating investigations on their own initiative (only allowing them to order expert advice, but then as a function of the elements produced by the litigating parties).139 136

Thus the ECJ in Van Schijndel, cited at supra note 18, para. 21 (with regard to the question whether national courts may of their own motion raise an issue concerning a breach of Articles 81 and 82 EC; see supra in the text). For a comparative overview of national laws from which it appears, once more, that the distinction between the civil and common law approach should not be exaggerated, see the Opinion of Advocate-General Jacobs, [1995] ECR I–4707, paras. 33–44. 137 Thus also J. Lever in his report for this Workshop. 138 See also J. Basedow in his report for this Workshop ‘The Private Enforcement of Article 81 EC—A German view’. 139 Thus G. Canivet, Premier Président of the French Cour de Cassation, ‘Examen de la proposition de règlement du Conseil relatif à la mise en oeuvre des règles de concurrence prévues aux articles 81 et 82 EC EC du traité. Vers l’application de l’article 81 § 3 CE par les juridictions nationales’ in ERA-Forum I-2000, at 8–12, at 9.

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Article 2 provides that the infringement must be proved by the complainant or the plaintiff (whereas the availability of the exception of Article 81(3) EC must be proven by the other party).140 Apart from that general rule on burden of proof, the draft Regulation contains some specific rules as to how it expects the Commission to assist the national courts in applying Articles 81 and 82 EC. They are not that different from what is currently provided for in the 1993 Notice on Cooperation, referred to above. According to Article 15(1), the courts ‘may ask the Commission for information in its possession or for its opinion on questions concerning the application of the Community competition rules’. Obviously, since questions of interpretation fall within the jurisdiction of the ECJ in preliminary ruling procedures, the information to be given by the Commission must be understood to be limited to supply useful, and accurate, information on the interpretation of Community law laid down in earlier case law of ECJ and CFI. In a recent judgment dealing with disclosure of documents of the Commission (in that case letters addressed by the then DG IV to national courts, pursuant to the 1993 Notice on Cooperation, and thus to be used in judicial proceedings), the ECJ stated: ‘that documents supplied by the Commission may also contain legal or economic analyses drafted on the basis of data supplied by the national court. In those cases, the Commission acts as a legal or economic adviser to the national court and documents drafted in the exercise of that function must be subject to national procedural rules in the same way as any other expert report, in particular as regards disclosure’.141

Furthermore, according to Article 15(3) of the draft Regulation: ‘the Commission may, on its own initiative, submit written or oral observations to courts of the Member States on the subject of proceedings in which questions concerning the application of Articles 81 and 82 EC of the Treaty arise. It may have itself represented by competition authorities of Member States’.142

The national authorities have the same right of submission. One may wonder whether this ‘amicus curiae’ function should not be extended so that national courts (particularly those not in charge of judicial review) are given the right to ask for submissions from the Commission143 and/or the national competition authorities (if those have the resources to comply therewith).144 That would imply 140 The regulation does not specify the standard of proof (‘balance of probabilities’ or ‘beyond reasonable doubt’): see for English law Francis Ferris, ‘Towards the application of Article 81(3) EC by national courts (an English perspective)’ in ERA-Forum I2000, at 12–13. 141 Joined cases C–174/98 P and C–189/98 P The Netherlands v. Commission and Gerard van der Wal [2000] ECR I–1, para. 25. 142 The provision goes on to provide that, to this end, the national courts may be requested to transmit any documents necessary. Obviously, that provision raises delicate procedural questions as well as questions of confidentiality at both ends. 143 Thus also J. Basedow in his report for this Workshop. 144 Under French law, courts have the right to ask the opinion of the Conseil de la concurrence which, with a view to rendering its opinion, may use its investigative powers. Also the Minister chargé de l’Economie may make written and oral statements and produce investigation reports: G. Canivet, supra note 139, at 9.

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that the Commission will have to invest time in this form of assistance more than foreseen, but the possibility for courts to ask for ‘expert reports’ (in the words of the ECJ’s judgment) perhaps has that effect already under the present wording. Of course, national courts ca also draw benefit from more general rules, and from the preliminary ruling procedure. In that respect, it may be desirable to make that procedure, and the principle of cooperation between the Community and the national courts embodied therein, more useful for the national judges by enabling them to interrogate the administration of the ECJ (or the CFI if that court were to be given the competence to deal with preliminary rulings in competition cases) as to whether a question raised before them has already been answered. They could even be given the power to obtain assistance (from, for example, the research department of the Community courts) to help formulate a proposed question as accurately as possible (without of course prejudging the outcome).145 The national courts can also draw significant assistance from other general devices laid down in the draft Regulation. Those are: • block exemptions which, under the new system by virtue of Article 28 of the draft Regulation, the Commission would be able to enact of its own, however with declaratory, and not constitutive, effect only (meaning that they would have the same effect as negative clearances currently146), and which would be justified for those types of restrictions ‘for which a full individual assessment would in the overwhelming majority of cases lead to the conclusion that the conditions of Article 81(3) EC are fulfilled’147; • guidelines and notices which the Commission intends to use under the draft Regulation as well in order to explain its policy and provide guidance to the national courts and authorities in the application of Articles 81 and 82 EC; • non-infringement decisions (again with declarative effect only) which the Commission would still be able to take under Article 10 of the draft Regulation, but only exceptionally for reasons of the Community public interest and acting on its own initiative, for example where a transaction raises a new question. All this may not suffice. In his report for this Workshop, J. Basedow makes some interesting comments concerning problems of proof. Rather than providing a system of pre-trial discovery like the US,148 he suggests enlarging the scope 145 See W. van Gerven (1998): ‘The Role and structure of the European Judiciary now and in the future’, 21 European Law Review, 211, at 220. 146 C.D. Ehlermann, supra note 6, at 566. But see Article 28 of the draft Regulation which sounds mandatory, a characteristic which is an anomaly given the direct effect of Article 81(3) EC. 147 W. Wils, supra note 108, at 43–44 who welcomes the recent new block exemption Regulation No. 2790/1999 for vertical restraints as being less excessively generous, by building in a 30% market share threshold (a condition which, however, makes it less easy for a court to apply it). 148 See also C.A. Jones’ report for this Workshop, concerning the creation of powers similar to pre-trial oral depositions in the USA which private litigants can use under supervision of national judges.

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of the defendant’s procedural obligation to clarify certain facts about what has occurred in his sphere of influence (such as, obliging the defendant to inform the court about the precise background of a business practice when the plaintiff has been able to bring prima facie proof of a concerted practice). And, with regard to proving causation or loss, the plaintiff’s burden of proof could be eased.149 It could also be envisaged, as suggested by C.A. Jones in his report for this Workshop, to provide in liability for damages of responsible individuals who participate in the infringing activities of undertakings.150

2. Back to substantive remedies Before being more specific (in the Annexes), three general comments deserve to be made. The first concerns the harmonisation of Community and national competition laws. In that respect, there is an interesting development in some of the Member States’ legal systems which involves the effort employed by legislators to make their national competition rules conform as much as possible with Community rules, and to require their courts, to secure consistency in their application with that of corresponding parts of EC law when interpreting those national rules.151 Obviously, it is important to ensure that national legislatures are not bound to do so by any obligation of Community law, as national antitrust rules by definition fall outside the realm of Community law, as is confirmed by Article 83 (2)(e) EC which allows Community institutions only to issue regulations or directives to determine the relationship between national and EC competition rules. Nevertheless such development deserves to be encouraged from a viewpoint of private enforcement by national courts; it facilitates those courts’ tasks and increases their expertise in applying (similar, if not identical) Community and national competition rules; it also helps them to secure the principle of equality which requires that, in the absence of particular justification, similar issues be regulated by identical or similar rules. From that viewpoint, there might even be an interest in the preparation of a Model 149 Report cited in supra note 148, at 5–6. As mentioned above, the ECJ has given some useful indications as to proof of damages in Mulder v. Commission, supra note 59. Is it not problematic to read in A. Winckler’s report for this Workshop, at 21-22, that French courts seem to be more lenient to the plaintiff in unfair competition cases than in anti-trust cases? 150 Joint liability of corporate organs and of the legal entity they represent is a principle which the Member States appear to have in common: see C. von Bar (1998): The Common European Law of Torts, vol. I, Beck, München, at para. 177. 151 Thus e.g. the laws of Belgium, The Netherlands and the UK; see J. Lever’s report for this Workshop. This uniformity may have the result that preliminary rulings can be asked from the ECJ where a national provision refers to the content of a Community law provision: see ECJ, Joined Cases C–297/88 and C–197/89 Dzodzi [1990] ECR I–3763, para. 36. For other judgments, see K. Lenaerts and D. Arts (1999), in R. Bray ed.: Procedural Law of the European Union, Sweet & Maxwell, London, at 124, n. 38.

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national competition law, following the Community rules as close as possible, which Member States, and especially candidate Member States may wish to incorporate in their own legal system.152 The second comment is similar. It is also in the common interest of the Community and the Member States, their courts and citizens that remedies allowing individuals to enforce their Community and national rights in the area of competition, conform as much as possible. That would certainly be useful for national courts when they are called upon to enforce Articles 81 and 82 EC under the draft Regulation and, in that context, to put into effect the principle of equal treatment which has a special connotation in the area of remedies as it intends to afford equal treatment to plaintiffs and defendants who are in a similar situation, albeit in the different contexts of Community or national law.153 As is well known, the ECJ has applied that principle within the realm of Community law proper, with regard to liability claims under Article 288(2) EC and under Francovich (that is, against Community institutions as well as against Member States).154 Furthermore, the principle was also applied by national courts, such as the House of Lords,155 to avoid the unhappy situation in which plaintiffs confronted with similar legal situations would be treated differently depending on whether the applicable national rules were affected by Community law, or not. Obviously, research may be needed to prepare the ground for that extensive comparative law.156 The third comment concerns the way in which uniformity should be brought about. Obviously, the most appropriate way would be for the Community legislature to take action on the basis of Article 83(2) EC by issuing rules about remedial relief to allow individuals to enforce their Community rights in the field of competition and, by the same token, to promote a system of undistorted competition in the internal market. For whatever reason, that has not been the attitude of the Community legislature in the past. This has led the ECJ to take the initiative to fill the most obvious lacunae in uniform remedial relief, not so much in the area of competition law (the only notable exception being the remedy of nullity) but in general and mainly (as pointed out in the earlier 152

Why would the Community and Member States not set up a joint Law Commission charged with preparing model legislation in this area (and in other Community law related areas of national law)? 153 See F. Jacobs (1993): ‘Remedies in National Courts for the enforcement of Community rights’ in Hacia un nuevo orden international y europeo, Liber Amicorum Don Manuel Díez de Velasco, 969, at 982 EC–3. 154 See Brasserie judgment referred to in supra note 52, para. 42. 155 M v. Home Office [1994] 1 AC 377. See also the judgment of the Spanish Supreme Court of 20 December 1990 to which F. Jacobs refers in his article, supra note 153, at 983 and discussed by R. Caranta (1997) in ‘Learning from your Neighbours: Public Law Remedies. Homogenization from bottom up’, 4 MJ, 220, at 225. 156 See further my contribution ‘Comparative Law in a Texture of Communitarization of National Laws and Europeanization of Community Law’ to the Liber Amicorum in honour of Lord Slynn of Hadley I, Judicial Review in European Community Law (ed. D.O’Keeffe), Kluwer Law International 2000, 433.

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overview; supra, II.1) to provide remedies against national public authorities in general. Now that the Community envisages strengthening the role of national courts and, in consequence, promoting private enforcement, the time has come for the Community legislature to change that attitude. It is indeed not realistic, as stated above, to require national courts to apply the whole of Article 81— including paragraph (3)—without helping them to cope efficiently with problems of enforcement by making available remedial rules which, for the sake of efficient and homogeneous application of competition rules within the internal market, should be uniform in the Member States and based as much as possible in the general principles that their legal systems have in common.157 In order to make the foregoing more concrete, some indications are given in Annex I as to how the substantive remedies of nullity and restitution, compensation and restitutionary damages (claimed individually or collectively), and of interim relief, might be shaped in accordance with such general principles (as they appear from a brief overview of the three major legal families). To be even more concrete, a draft regulation is attached in Annex II as a discussion draft.

157 See Article 288(2) EC where the ECJ is requested to create Community law rules in the area of extracontractual liability of Community institutions in accordance with such principles. It would seem that such obligation should also be complied with as much as possible by the Community legislature when it creates new law. Is it not a principle of good governance that rules must be made as homogeneous as possible and that differences should only be allowed to exist where justified by objective reasons?

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ANNEX 1: SUBSTANTIVE REMEDIES IN A COMPARATIVE LAW PERSPECTIVE 1. The remedies of nullity and restitution The concept of nullity and its consequences for the validity of an agreement between the contracting parties are very similarly understood in the Member States’ law in the case of rules of public policy, as the prohibitions imposed by Articles 81 and 82 EC undoubtedly are.158 That is particularly so where nullity is regarded as a sanction against both contracting parties for having concluded a contract that unduly restricts their own economic autonomy and that of third parties.159 Such contracts give rise to no claims for performance or for damages,160 even when one or both of the parties were unaware that the law was being broken (though it may be possible for a party acting in good faith to sue the other in tort, for deceit, fraud or otherwise).161 Sufficient convergence also exists with regard to questions of restitution in respect of what has been performed by one or both parties under a void contract. Although, as a general rule, a person must return a benefit that he has received without valid contract or other legal title, the rule is everywhere to be qualified where the reason for the absence of ‘causa’ is the illegality or immorality of the underlying contract. In such a case, a person guilty of illicit behaviour should not be allowed to claim the assistance of the law to undo his dealings. However, whereas all legal systems have now promulgated numerous legal prohibitions that are imposed for various aims of social and economic policy, it is now doubted whether (short of scandalous behaviour contravening elementary rules of morality) it would be fair to deny all restitutionary claims to the parties, or one of them, to transactions which run counter to any of such aims.162 Although denial of restitution is also needed in general to deter persons from improper transactions, it must not necessarily apply to all those involved in a specific transaction. This explains why all legal systems apply maxims, such as in pari delicto or in pari causa, to determine how far the system can go in denying restitution to a (relatively) innocent plaintiff.163 In the words of 158

H. E. Zweigert & K. Kötz, supra note 29, at 386–7. For an early examination of the then six Member States, see also G. Sandberger (1969): Die Nichtigkeit wettbewerbsbeschränkender Vereinbarungen und Beschlüsse im Recht der Europäischen Wirtschaftsgemeinschaft, J.C.B. Mohr. For a recent analysis under French law, see C. Guelfucci-Thibierge (1992): Nullité, Restitutions et Responsabilité, LGDJ, Paris. 159 Ibid., at 383–4. 160 Ibid., at 381. 161 Ibid., at 386. 162 Ibid., at 575–6. 163 Ibid., at 577. Which is also the solution retained by A.G.Mischo in Courage v. Crehan.

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Zweigert and Kötz, the question to be answered in that regard is ‘whether the purpose of the provision which renders the contract invalid is best answered by allowing the recipient to keep what was transferred under that contract or by making him restore it to the transferor’.164 Or, in the words of Nicholls LJ: ‘The court must weigh, or balance, the adverse consequences of granting relief against the adverse consequences of refusing relief’.165 The test is also used in other legal systems, such as the Belgian Court of Cassation, according to which the judge may, at his discretion, allow or deny restitution having regard to the function of deterrence of the nullity sanction as well as to whether the social order requires that any one of the contracting parties should be more seriously penalised than the other.166

2. Compensation and restitutionary damages There are undoubtedly many differences between the Member States’ tort laws. They relate particularly to the scope of protection that tort rules afford to specific and general interests. Whilst the legal systems belonging to the French legal family tend to protect all (legitimate) interests, English and German law are more restrictive in that, as a general rule—that is, apart from specific torts (English law) or special (more or less general) legal provisions (German law)––, they protect only a limited number of interests, such as interests of plaintiffs who are in a relation of proximity (the Atkinian rule under the tort of negligence in English law) or interests protected by ‘absolute’ subjective rights (as enumerated e.g. in § 823 (1) of the German Civil Code).167 Those differences have a more particular impact on the recoverability of pure economic losses and ‘immaterial’ injury (‘dommage moral’). Such a restrictive attitude would be a serious handicap for claims brought for infringements of competition rules— which primarily concern pure economic losses—if it were not that in many, if not all, legal systems, breaches of statutory duties give rise to more generous ways of compensation, including compensation for pure economic loss.168 That means that infringements of Articles 81 and 82 EC which clearly contain a statutory duty—at least towards competitors but also, as suggested supra (under II.1.2 of the text), towards customers and consumers (a matter of interpretation 164

Ibid., 580. In Tinsley v. Milligan [1992] Ch.310 (CA). Although the House of Lords did not take over such ‘public conscience test’, it gave judgment for the defendant on other grounds (per Lord Goff, [1993] 3 Weekly Law Reports 126). 166 Cass., 8 December 1966, R.W., 1967–68, 397; Cass. 24 September 1976, Pas. 1977, I, 101. 167 See W. van Gerven, J. Lever and P. Larouche (2000): Cases, Materials and Text on National, Supranational and International on Tort Law, 2nd enlarged edn., Hart Publishing, Oxford and Portland Oregon, at 44–68 and 71-74. 168 Ibid., 209–10; 227–8; 57–62 and 308–9. 165

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to be determined by the Community courts)—would normally and in most legal systems, be capable of giving rise to compensation for pure economic loss.169 However, that does not in itself resolve all problems as there remain important differences between the legal systems of the Member States with regard to the notion of breach, such as whether it implies fault and, if so, whether fault must be understood in a more or less objective sense, and on the basis of which grounds of justification it may cease to exist.170 Further difficulties will undoubtedly arise with regard to the existence, and proof, of the conditions of causation and damage. As for causation, the legal systems of the Member States use different concepts in order to keep the number of claims within reasonable limits (‘direct causation’, ‘adequate causation’ and ‘reasonable foreseeability’). All of them agree that the conditio sine qua non criterion, or the ‘but for’ test, does not suffice to achieve that result as it reflects ‘a fairly rudimentary understanding of causation’.171 Nor is the addition of the word ‘direct’ (as in the ECJ’s case law regarding State liability172) capable of reaching that result in a sufficient manner. However, in many legal systems there is a clear tendency to introduce ‘probabilistic elements’ into the test, which refer to events that significantly increase the objective probability of the kind result that occurred, and to ignore improbable circumstances to which no attention would be paid if events would have followed a normal course.173 Moreover, also ‘scope of rule’, or eventually ‘sphere of risk’, elements are introduced in the test (particularly in German law).174 Causation will ultimately be assessed by determining the limits up to which a person who brought about the 169 With regard to State liability, the ECJ stated in Brasserie, supra note 52, para. 87 that total exclusion of loss of profit as a head of damage cannot be excepted since ‘especially in the context of economic and commercial litigation, such a total exclusion of loss of profit would be such as to make reparation of damage practically impossible’. It cannot be doubted that this ruling applies a fortiori to infringements of Articles 81 and 82 EC by private persons. Moreover, also under national laws, Article 81 and 82 EC would be regarded to give rise to ‘breach of statutory duty’ remedies: see J. Basedow’s report for this Workshop, and Garden Cottage, supra note 85. 170 W. van Gerven, J. Lever and P. Larouche, supra note 167, at 301–5. 171 Ibid., at 453. The issue of causation under the major legal systems is dealt with extensively at 395–466. 172 See Joined Cases C–178–90 and 188–90 Dillenkofer [1996] ECR I–4845, para. 21, referring to earlier case law; but see para. 27, where the word ‘direct’ is omitted. For a more recent judgment, see Case C–140/97 Rechberger [1999] ECR I–3499, para. 67–77. 173 W. van Gerven, J. Lever and P. Larouche, supra note 167, at 453 by reference to BGH 23 October 1951, referred to in a later footnote. 174 That is particularly so in ‘breach of statutory duty’ situations. ‘Scope of rule’ analyses refer to theories whereby the liability of the defendant can only be engaged if the injury of the plaintiff comes within the scope of protection of the norm which has been infringed. ‘Sphere of risk’ analysis means that a defendant should not be liable for injury which represents no more than the realisation of a risk which came within the plaintiff’s sphere of risk: see W. van Gerven, J. Lever and P. Larouche, supra note 38, at 455–7. See also J. Basedow’s report for this Workshop, where ‘sphere of influence’ is used as a concept in relation with proof of loss and causation.

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event can, in all fairness and reasonableness, be made liable for the consequences of such an event.175 As the above may illustrate, if Community law wishes to resort to private enforcement of competition rules through national courts, it will not suffice to make a reference to the current laws of the Member States. In other words, for private enforcement to work, the Community legislature must—with a view to harmonising the conditions for private liability to arise—take measures that must be sufficiently precise to satisfy the principle of legal certainty and the requirement of uniform application of Community law in the Member States. Such legislative action is particularly needed if private enforcement is to be as effective as, or even more effective than, public enforcement by means of penal or administrative fines. As indicated above, the only way to achieve that result might be to introduce into Community legislation some instances of exemplary (or punitive) damages.176 As suggested by J. Basedow, that might also require the enactment of rules alleviating the burden of proof for plaintiffs, both in respect of causation and damages;177 and, short of exemplary damages, the full use of compensatory and default interests (as suggested by C. Jones) in conformity (as pointed out above) with the ECJ’s case law on Article 288(2) EC.178

3. Interim relief As mentioned above, the remedy of interim relief is seen in the ECJ’s case law as an adjunct to direct effect, to protect the Community rights of private parties against infringements of Community law by Community or national authorities,179 and it is therefore examined primarily in a setting of judicial review.180 The ECJ’s case law has finally led to the formulation of a general principle of interim relief to be granted to an individual by the Community courts against a contested Community measure, or by national courts against national measures alleged to be in conflict with Community law, directly or indirectly. 175

Ibid., at 454 with a reference to BGH, 23 October 1951, discussed at 399–402. See also Article 6:98 of the Dutch Civil Code. 176 For an instance, where Community law already provides in exemplary damages of some sort, see J. Basedow in his report for this Workshop. The same author points out that in the present state of the law there is no single reported case in Germany which ended in an award of damage in favour of the victim of a cartel. 177 Ibid. at 5–6. 178 Supra, text accompanying note 154. 179 See supra text under Section I 1.4, and with respect to competition law, text accompanying supra notes 80 and 81. 180 See e.g. the thourough analysis carried out by S. Lehr in his book referred to in supra note 81, where, at 429–95, an extensive analysis is made of the legal systems of the Member States in a (successful) effort to find support for the rulings of the ECJ primarily in Zuckerfabrik Süderdithmarschen, discussed supra in the text accompanying supra notes 78 and 79.

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As pointed out in the text (supra under II.1.4), it would be inconsistent with that case law if no such remedy would be made available between private parties for infringements of Community law that have direct effect vertically and horizontally. Although there seems to be less comparative law research in that respect (at least recently181), it may be taken for granted that national legal systems apply similar conditions for interim relief against such private acts and, moreover, that those conditions seem to be rather similar to those applied with regard to interim relief against administrative acts. They are: • serious doubt as to the validity of the contested act, that is in the present context a private legal transaction or private behaviour; • urgency to avoid serious and irreparable injury; and • in granting or refusing relief, weighing the risk of injustice to either party, and to the Community interest in the preservation of workable competition.

4. Protection of diffuse interests As mentioned before, the protection of diffuse interests (mainly consumer interests) is of crucial importance in a context of private enforcement of competition rules. So far, and outside the area of consumer law proper,182 that issue has not received much attention under Community law (nor, would it seem, in the national legal systems).183 As a matter of fact, in Greenpeace both Community courts denied the association’s ius standi under Article 230 EC in a nullity action concerning a Community decision to grant subsidies for the building of power stations, and referred the applicant to legal action at the national level.184 However, what matters in the present context is whether cease and desist orders, or even claims for compensation, can be brought before national courts by consumer organisations for infringements of Articles 81 and 82 EC on the part of private undertakings. With regard to claims for compensation, many national legal systems distinguish between collective claims brought for ‘self-interested’ or ‘egoistic’ purposes, and claims brought for ‘disinterested’ or ‘non egoistic’ purposes.185 The first are more readily accepted than the second (which are often 181

For references to older publications, see G. Tarzia (1996): ‘Les mesures provisoires dans les pays de la CEE’ in Annales de droit de Louvain, 163–72. For interim relief in a context of reparation of past or future damage under tort law, see W. van Gerven, J. Lever and P. Larouche, Tort Law, supra note 167, at 847–67. 182 See Directive 98/27 on (cross border) injunctions for the protection of consumers’ interests, OJ L166/51 [1998]. In several Member States there is legislation permitting consumer organisations to bring actions for a cease and desist order: see J. Stuyck (2000): ‘European Consumer Law After the Treaty of Amsterdam: Consumer Policy In or Beyond the Internal Market?’, 37 Common Market Law Review 2, 367–400, at 385–6. 183 Cf. supra text under Section I 1.5. 184 Case T–585/93 Greenpeace [1995] ECR II–2205; Case C–321/95 P Greenpeace [1998] ECR I–1651. 185 See W. van Gerven, J. Lever and P. Larouche, supra note 167, at 248 ff.

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deemed to include diffuse, as opposed to individualised, ‘consumer’ claims).186 And even when claims of the second category are exceptionally admitted, they are organised in very different ways. Thus, in English law for example, they are organised by means of procedural mechanisms, the most far reaching of which is the representative action. In that action, members of a whole class are represented without requiring the express consent of all of the individual members, by a representative plaintiff in accordance with Rules of the Supreme Court187 (unless they have specifically objected, all members of the class will nonetheless be bound by the intervening judgment).188 In other Member States, such as France, collective actions for compensation (as for injunctions) on the part of consumer and environmental associations are made possible by special legislation authorising legally constituted associations to bring an action on behalf of many identified persons who have each suffered individual injury as a result of conduct of one and the same person.189 Still other Member States, like Germany, are reluctant to allow collective claims, except for injunctions (and thus not for monetary compensation) brought by associations expressly authorised by law (Verbandsklagen) in certain areas of consumer law;190 or, as in the Netherlands, and there in all areas, by foundations or associations entitled to bring a claim for injunctive relief with the aim of protecting similar interests insofar as the foundation or association promotes these interests according to its articles of incorporation.191 As far as we know, none of the Member States admits ‘US or Canadian style’ class actions,192 whereby members of a whole class are represented by a representative plaintiff without their consent, and even without having been identified. For such class actions to be admissible, conditions of commonality and preponderance of common issues must be complied with, and compensation must be distributed among the members (including the ‘absent’ members) in accordance with a formula accepted by the court. As will appear from this overview, in the absence of a common core of Community and national law rules, legislative action at Community level will be indispensable if the Community wishes to allow claims in compensation brought before national courts on behalf of a class of consumers who have each suffered damage as a result of the same private anti-competitive behaviour prohibited by Articles 81 and 82 EC. Such Community legislation should specify the rules, substantive and procedural, that must be satisfied in view of bringing 186

In France claims in compensation are exceptionally admitted by civil and criminal courts: thus e.g. in the Le Pen judgment of 14 January 1971, reproduced in excerpt and discussed in W. van Gerven, J. Lever and P. Larouche, supra note 167, at 255 ff. 187 Order 15, Rule 12., o.c. at 265. 188 O.c., ibid. 189 In France: Art. L–421–1 ff. Code de la consommation; Art. L–252–5 Code rural: ibid. at 260–3. 190 Ibid., at 268–70. 191 Art. 3:305a Civ. Code. 192 See W. van Gerven, J. Lever and P. Larouche, supra note 167, at 267–8, and website http://www.rechten.unimaas.nl/casebook>.

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a public interest action (cease and desist orders and claims for compensation) before a national court. It should also specify by whom such actions may, or should, be brought. In that respect it may be recalled that, in consumer matters, no preference is expressed in Directive 98/27/EC as to whether a collective action (in that case for an injunction only) should be brought by either an independent public body, specifically responsible for protecting the collective interests of consumers, or by organisations whose purpose it is to protect such interests in accordance with the criteria laid down by their national law.193 In the context of competition law, it may well be preferable to have such collective actions instituted by a national public authority, that is by a public attorney closely associated with (but not part of) the national competition authority.

193 Directive 98/27, supra note 182, Art.3. The first device is the one used in the UK, the second in France and Germany. See o.c., at 266, under g).

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ANNEX 2: DISCUSSION DRAFT OF A REGULATION ON THE SUBSTANTIVE LAW ASPECTS OF PRIVATE REMEDIES BEFORE NATIONAL COURTS* Section 1. Nullity and Restitution Article 1—Nullity (1) Where part of an agreement or of a decision is automatically void by virtue of Article 81 (2) EC, the nullity shall affect all the provisions of the agreement or decision that cannot be severed from the prohibited part of the agreement or decision. It is for the national court to decide the question of severability taking into account the wording and structure of the agreement or decision concerned. An agreement or decision that is automatically void by virtue of Article 81(2) EC cannot give rise to any claim for performance or damages between the contracting parties or those participating in the decision, nor can it be relied on by any of them in a claim for damages against a third party. The nullity arises regardless of whether the parties, or one of them, were aware that the agreement or decision infringed Article 81 EC. Subject to the application of general principles of procedural law concerning the role of the judge and concerning due process, the court may raise the nullity on its own motion.

Article 2—Restitution A party to an agreement or a decision that is void by virtue of Article 81(2) EC, may not reclaim money paid or title transferred or the value of any benefit conferred under the contract, except where the claim is brought by a party whose responsibility in the illicit transaction is manifestly inferior to that of the other party or parties involved, and provided that the adverse consequences of granting relief are, in the court’s judgment, not greater than the adverse consequences of refusing relief, as further specified in paragraph 2. In deciding whether a restitutionary claim brought under (1) should be granted, the court shall take into account all private and public interests involved. Such a claim shall be refused if in the judgment of the court it would adversely affect [to an appreciable degree] [innocent] third parties who have * The words between square brackets in the text below relate to optional matters.

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acquired interests as a result of the unlawful agreement or decision or have altered their position in reliance on it.

Article 3—Application by analogy The foregoing articles are applicable by analogy to agreements or decisions that, in the judgment of the court, are null and void by reason of their having contributed to, or resulted from, a concerted practice prohibited by Article 81 EC or of an abuse of a dominant position prohibited by Article 82 EC .

Section 2. Compensation Article 4—Liability (1) Anyone who, regardless of fault, causes damage, through a serious breach of Article 81 or Article 82 EC, to another person in whatever capacity [or participates in bringing about such a serious breach,] is liable to make full reparation to the injured person or persons in accordance with the provisions set forth in the following paragraphs. (2) Whether a breach amounts to a serious breach will be determined by the national court having regard to, inter alia, the following circumstances: whether the infringement was committed intentionally or negligently, taking into account the specific character of the behaviour, the complexity of the situation and the clarity of the applicable law, whether the damage was intentionally inflicted or foreseeable, and whether the infringement had a more or less serious adverse effect on competition. Fault as such is not a separate condition for liability to arise, but may be taken into account to assess the seriousness of the breach in accordance with the elements enumerated in the preceding sentence. (3) Damage recoverable under the present Article shall include all heads of material damage, including pure economic loss. [Non-material or ‘moral’ damage shall be recoverable up to an amount of X Euro per injured person.] Compensatory interests shall be granted for the period between the occurrence of a specific head of damage and the judgment ordering compensation, taking into account loss of remuneration of capital and erosion, if any, of monetary value. As from the date of the judgment ordering compensation and the actual payment of damages, default interests shall be due at the rate in effect in the court’s Member State. (4) To determine whether specific damage was caused by a serious breach as described in paragraph (2), the national court will decide whether the damage concerned can in all fairness and reasonableness be attributed to the person or persons having committed the infringement, or being responsible for the infringement, taking into account the normal course of events.

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Article 5—Defences Reparation shall not be in full if the plaintiff has been guilty of contributory negligence and/or, being under a duty to mitigate the damage sustained, has not done so in an appropriate manner. In such a case, the court shall apportion the damage sustained in accordance with the gravity and the causal effect of the litigating parties’ behaviour.

Article 6—Exemplary damages In case of intentional, or reckless, infringement of Article 81 or 82 EC, the national court may order payment of exemplary damages to a claimant in good faith who has sustained damage as a consequence of the infringement. Such damages recoverable from any defendant may not exceed the benefit actually derived from the infringement by that defendant and may not in any event exceed by more than half the compensation established by the court as payable pursuant to Articles 4 and 5 above.

Article 7—Liability of public authorities The liability of Member States for breaches of Articles 81, 82 and 86 EC shall be determined by the national court in accordance with the general principles that the legal systems of the Member States have in common, as laid down in the Community courts’ case law relating to breaches of Community law by Community institutions and Member States.

Section 3. Interim Relief Article 8—Granting interim relief (1) Parties who are entitled to bring an action under sections 1, 2 and 4 of this Regulation, and who have instituted such an action, are entitled to obtain interim relief from a court having jurisdiction to grant such relief where that court entertains serious doubts as to the validity of the contested transaction, and when the relief sought is urgently needed to avoid serious and irreparable damage to the party seeking the relief. In granting such relief the court shall take due account of all private interests involved as well as of the Community interest in safeguarding workable competition in the internal market.

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(2) The interim relief must be provisional in the sense that it must not prejudge any points of law or fact at issue in the main proceedings. The measures imposed by the court may consist in cease and desist orders as well as in orders requiring the taking of specific action. (3) The court may make the granting of the interim relief conditional on [the applicant undertaking to compensate the person against whom the relief is granted for any loss suffered by that person in consequence of the grant of the relief and] the lodging of security by the applicant [for the payment of such compensation].

Section 4. Diffuse Interests Article 9—Collective claims Where a group of many identified persons have suffered individual injury, or are imminently threatened with such injury, as a result of conduct prohibited by Article 81 or Article 82 EC, an action as provided in, respectively, sections 2 and 3 of this Regulation may be brought on their behalf by an independent public body specifically made responsible for protecting the interests of the class of persons to whom that group of persons belong, and in accordance with national rules laid down to that effect by the Member State.

Section 5. Miscellaneous Article 10—Equivalent protection Matters not regulated under the preceding articles shall be determined by the court in accordance with its national law. Where the protection granted for similar issues arising under the national court’s own law exceeds that granted to claimants under the provisions of this Regulation, the court will grant such greater protection if it is requested by the applicant.

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II Clifford A. Jones1 A New Dawn for Private Competition Law Remedies in Europe? Reflections from the US

As the Commission’s proposed amendments2 to Regulation 17/62 approach reality, it may be useful to consider the extent to which the revisions, assuming their entry into force, will enhance private enforcement of competition law in the EU. Toward this end, this paper will review and compare certain factors relating to private enforcement remedies in the US to the situation in the EU, with attention to the situation following the expected implementation of the Commission’s proposal.

I. Overview: forty years of fundamental uncertainty Since the coming into force of Regulation 17/62 prompted close to 40,000 notifications3 in a Community of six Member States, it has been apparent that the Commission’s central role in the administration of Community competition rules could constitute a bottleneck as well as leadership. The Commission’s ‘monopoly’4 on the granting of exemptions under Article 81(3) EC, ex 85(3), combined with institution of the notification system represented a conscious policy choice that resulted in Ian Forrester’s well-known characterisation of the staff of (now) DG-Competition as a ‘priestly class’.5 Of course, national courts had concurrent jurisdiction6 to enforce Article 81(1) and (2) EC, but no jurisdiction positively to enforce Article 81(3) EC. This 1 Frederic G. Levin College of Law, University of Florida, US J.D. (Okla.), M.Phil., Ph.D. (Law), University of Cambridge, England. Author of Private Enforcement of Antitrust law in the EU, UK and US, Oxford Univ. Press, 1999. 2 Commission (2000): Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87, COM(2000) 582 final. 3 Commission (1972): First Report on Competition Policy, para. 48; Commission (1980): Ninth Report on Competition Policy, para. 2. 4 J. Ferry (1992): ‘EEC Competition Law and Policy Panel Discussion’, in B. Hawk, ed., 18 Fordham Corporate Law Institute, at p. 194. 5 I. Forrester (2000): ‘Modernisation of EC Competition Law’, paper presented at the 26th Annual Fordham Corporate Law Institute on International Antitrust Law and Policy, 14–15 October, 1999, at p. 10. See also, I. Forrester & C. Norall (1983): ‘The Laicization of Community Law — Self-help and the rule of reason: how competition law is and could be applied’, in B. Hawks, ed., 10 Fordham Corporate Law Institute, at pp. 305 and 306–7. 6 Case 234/89 Delimitis v. Henninger Bräu [1991] ECR I–935, at para. 47.

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bifurcation of authority to condemn and reprieve was dubbed by Barry Hawk the ‘original sin’ of EC competition law.7 The proposed amendments to Regulation 17/62 would go far to unmake the system under which EC competition law has matured over the last 40 years. It is likely that there will be more private enforcement in Europe than ever before. For decades, the system of concurrent and divided jurisdiction has been subject to criticism, which for the most part has not been unfair. While some have suggested the original approach was ill conceived, the benefits of hindsight are well known. Given the pervasiveness of the European cartel tradition and the lack of experience with and enthusiasm among consumers, businessmen, and governments for vigorous competition,8 it may be that there would have been even less competition law enforcement if national authorities and courts had been left to their own interpretations of the then new and mysterious principles of antitrust law. On the other hand, had EC competition law been decentralised from the outset, there might have been an accelerated dissemination of this innovation among the courts, consumers, lawyers, and business segments of the Community such that compliance and enforcement activities, especially private enforcement, may have reached higher levels with greater rapidity. We will never know. We do know that competition culture probably is now more widespread in the Community than ever before, and the legal and political climate for decentralised enforcement in general and private enforcement in particular is much improved over 1962. The present Regulation 17/62 regime has in some cases discouraged national competition authorities and national courts from whole-hearted enforcement of EC competition law.9 Although I have developed at length elsewhere10 the arguments for concluding that the present system need not prevent private enforcement, there can be no doubt that Regulation 17/62 limits the amount of private litigation likely to occur. By abolishing the constitutive nature of and the Commission’s monopoly on positive application of Article 81(3) EC, the proposed amendments will empower the national courts to address the full range of EC competition law issues for the first time. A number of uncertainties have plagued the development of private enforcement in Europe since the Treaty of Rome came into force. First, although the Commission intended from the outset that private damages actions be available

7 B. Hawk (1994): ‘Enforcement of EC and National Competition Law by Member State Competition Authorities: Roundtable Four’, in B. Hawk, ed., 20 Fordham Corporate Law Institute, at pp. 639, 661. For a more comprehensive theological structure, see B. Hawk (1999): ‘EU ‘Modernisation’: A latter-day reformation’, Global Competition Law Review, at p. 12. 8 Jones, supra note 1, pp. 23–28. 9 Jones, supra note 1, at p. 96, notes 17–19. 10 See ch. 8 of Jones, Private Enforcement, supra note 1.

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to supplement fines imposed11 pursuant to Regulation 17/62, there was no express provision for private damages actions. While the development of the case law of the European Court of Justice has for the most part overcome this deficiency recently,12 the fundamental difficulty faced by private litigants in the Community system is obvious: there are almost no EC-level legislative rules governing private enforcement to set any of the parameters in which private actions may operate. The consequence has been mass uncertainty by lawyers and clients over a period of decades, all too frequently over basic points such as whether a private right to damages existed at all13 and how it should be pleaded under national law.14 Secondly, the ‘provisional validity’ doctrine of Bosch,15 under which national courts were required to give effect to any agreement in force prior to passage of Regulation 17 which had not yet been the subject of an unfavourable Commission or Member State authority action, effectively prohibited private Article 81 EC, (ex 85) litigation prior to de Haecht II.16 Even after de Haecht II sharply limited the doctrine, the existence of this principle explains much about the absence of private enforcement in the Community’s early years. Thirdly, the uncertainties over scope and conditions of substantive and procedural remedies available to a private plaintiff meant that private actions were almost never brought. In contrast, defendants17 much more often sought to invoke Article 81 (ex 85) EC in part no doubt because they had a clear basis in EC Treaty text for asserting the nullity of infringing contracts. While much can be said about the uncertainties which seem to underlie the relative paucity of private enforcement in the Community, it should not be forgotten that the private treble damages actions for which the US are known did not arise instantly upon the adoption of the Sherman Act in 1890. The early

11 ‘A ces sanctions s’ajoutent la publicité éventuelle de la décision et les risques inhérents à la nullité de l’entente et aux demandes de dommages et intérêts qui pourraient être formées par des tiers’. Commission (1960): Premier Reglement D’Application Des Articles 85 et 86 du Traite (Proposition de la Commission au Conseil), 3. 12 See Jones, supra note 1, pp. 45–78 for a detailed explanation of the road from general Community law principles of direct effect and supremacy to the recognition of private damages actions for breach of Community competition rules. Of course, this audience needs no such explanation. 13 It seems that it does. See Case C–282/95 Guérin Automobiles v. Commission [1997] ECR I–1503; Opinion of Advocate General Van Gerven in Case C–128/92 H.J. Banks & Co. Ltd v. British Coal Corp. [1994] ECR I–1212, I–1250–52; and Opinion of Advocate General Mischo in Case C–453/99 Courage Ltd v. Crehan (22 March 2001, not yet officially reported). See also the pages cited in supra footnote 12. 14 See generally, ch. 9–12 in Jones, op. cit., supra note 1. 15 Case 13/61 De Geus v. Bosch [1962] ECR 45. 16 Case 48/72 Brasserie de Haecht v. Wilkin [1973] ECR 77 (hereinafter, de Haecht II). 17 E. Steindorff (1986): ‘Common Market Antitrust Law in Civil Proceedings Before National Courts and Arbitrators’, in B. Hawk, ed., 12 Fordham Corporate Law Institute, at p. 409 et seq. Defendants accounted for ninety percent of assertions of EC competition law.

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history of private enforcement in the US is not greatly more encouraging than the first 43 years since the entry into force of the EEC Treaty. In the first 50 years of the Sherman Act, there were only 175 private actions, and only 13 of those were considered successes for the plaintiff.18 One practitioner reported that by his count, prior to 1946, there were only ten actual awards of treble damages under the Sherman Act.19 I’m not sure if this is encouraging or depressing, but if correct, perhaps the EU may also experience a substantial increase in the second 50 years if not sooner.

II. Coherence and enforcement pluralism in the EU and US One of the premises on which the existing Regulation 17/62 was based was the need for consistent and coherent interpretation and application of competition law throughout the Community. One of the concerns voiced by some in connection with the Commission’s proposal is the idea that decentralisation of EC competition law may lead to a re-nationalisation of competition policy with the potential that uniform application of competition law would be undermined if not negated. This may be more of a concern when considered in light of the prospect of Community enlargement, which may be implemented over the next few years. However, while some divergence20 is inevitable, the US experience suggests that it may not be intolerable. It should be kept in mind that the Commission formulates competition policy through a variety of means, including notices, decisions, and block exemptions. Decisions are always subject to review at least in part by the ECJ or CFI, which serves to ensure consistency by the Commission in its interpretation of EC competition law. While there may be a greater likelihood of inconsistency between decisions of the Commission and national courts or national competition authorities than between decisions of the Commission, the principle remains the same. To the extent that decisions of national courts and appeals from national authorities to national courts may be the subject of Article 234 EC preliminary references, this procedure can alleviate the most serious consequences 18 Report of the Att’y Gen’ls Nat’l Comm’n to Study the Antitrust Laws (1955), 378. The records do not account for settled cases which may have been in fact successful. Another estimate concluded that from 1890 to 1940 there were 423 private cases brought. R. Posner (1970): ‘A Statistical Study of Antitrust Enforcement’, 13 Journal of Law & Economics, at pp. 365 and 371. 19 T.C. McConnell, Testimony in Nolo Contendere And Private Antitrust Enforcement: Hearings before the Subcommittee on Antitrust and Monopoly of the Senate Committee on the Judiciary, 89th Cong., 2d Sess.7, 8 (1966). 20 Two types of divergence suggest themselves. The first is disagreement about the interpretation of EC law itself, and the second would be disagreement about outcome in a particular case when the EC law is applied to a given fact situation. From a systemic perspective, the solution is of course a reconciliation method such as Art. 234 EC.

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of potentially inconsistent decisions or judgments by national authorities and courts. The price of decentralisation inevitably is loss of some control by the Commission. However, compared to the situation in the US, the Commission has always had a dominant role, and this remains true under the proposed amendments to Regulation 17/62. What I have called the US ‘litigation model’21 gives the US Department of Justice (DOJ.) no primacy (except in criminal cases) over private actions or those initiated by State authorities, normally the State Attorneys General. While the US Federal Trade Commission (FTC) exclusively enforces Section 5 of the FTC Act and shares merger enforcement authority with the DOJ, neither of these Federal bodies has ever had position equivalent to that of the Commission in the Community. Numerically, private enforcement actions in the US have dominated government enforcement efforts by factors of approximately ten to one or more. For example, new private actions commenced in the US from 1996 to 2000 averaged 674 per year, with 858 filed in 2000 alone.22 In contrast, the Antitrust Division of the DOJ in the same period averaged 25 civil cases per year and 52 criminal cases filed.23 In earlier years, the ratio of private to government actions has been even higher. The constitutive monopoly on individual exemptions possessed by the Commission and the power to issue block exemptions represent levels of control US Federal authorities have never had. Even after the amendments come into force, the consultation requirements imposed on national authorities24 represent more formal influence than the DOJ has ever had with the States. There is no analogue in US law to the power of the Commission to divest national authorities of competence by opening a proceeding,25 a power retained under the proposed amendments.26 In short, the DOJ can set its own antitrust enforcement policy, but not that of the States or of private litigants. This should be considered as a strength: ‘[P]rivate enforcement also performs an important failsafe function by ensuring that legal norms are not wholly dependent on the current attitude of public enforcers or

21

See Jones, op. cit., supra note 1, at pp. 17–22. Administrative Office of the US Courts, Judicial Business of the United States Courts 2000 (Washington, DC, Sup’t of Documents 2000), at p. 139 (available at http://www.uscourts.gov/judbus 2000). 23 Antitrust Division, US Department of Justice, Antitrust Division Workload Statistics FY 1991–2000 (2000). 24 Art. 11(4) of the proposed Regulation provides in part that ‘Where competition authorities of Member States intend to adopt a decision under Article 81 or Article 82 of the Treaty requiring that an infringement be brought to an end, accepting commitments or withdrawing the benefit of a block exemption regulation, they shall first consult the Commission’. 25 Art. 9(3) of Regulation 17/62. 26 See Art. 11(6) of the proposed amendments to Regulation 17/62. 22

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the vagaries of the budgetary process and that the legal system emits clear and consistent signals to those who might be tempted to offend. Absent private enforcement, potential defendants would have a considerably stronger incentive to lobby against public enforcement efforts or to seek to curtail funds to public enforcement agencies. Ultimately, private enforcement helps ensure the stability of legal norms by preventing abrupt transitions in enforcement policy that have not been sanctioned by the legislature.’27

Of course, any increase in the number of decisions makers raises the possibility of inconsistent decisions, but the system has to rely on the courts to resolve conflicting decisions when they do occur. The concept under the proposed amendments that decisions of national authorities (and presumably national courts) are binding only within that Member State should prevent aberrational decisions from having Community-wide effect. At the same time, when such decisions or judgments occur, the Commission is positioned to intervene if the inconsistency is regarded as serious. While possible, it is doubtful that very many national courts would refuse a request by the Commission to make an Article 234 EC reference. Moreover, in practice, decisions by national courts inconsistent with those of the Commission ought to be quite rare.28 In the US, where there is a more developed system of Federal courts which have exclusive jurisdiction over Federal antitrust cases, decisions of one (of 13) Federal Court of Appeals are not binding in another. This can (but rarely does) lead to conflicting results, as in Mozart Co. v. Mercedes Benz,29 where Mercedes Benz’s practice of parts tying was upheld and Metrix Warehouse, Inc. v. Mercedes-Benz,30 where the Mercedes parts tying practice was found illegal.31 Conflicts on legal issues among the circuits in the US are normally resolved in the Supreme Court by issuance of a writ of certiorari, although not necessarily instantly. A split in the circuits (the Ninth Circuit versus all others) on the issue of the proper legal standard for finding attempts to monopolise existed from the 1964 decision of the Ninth Circuit in Lessig v. Tidewater Oil Co.32 until 1993, when the Supreme Court finally granted certiorari and sided with the rest of the circuits in Spectrum Sports, Inc. v. McQuillan.33 However, such extreme and extended inconsistencies are quite rare. For the most part, variations in court judgments are not considered a serious problem where a mechanism exists to bring consistency. 27 J. C. Coffee, Jr. (1983): ‘Rescuing The Private Attorney General: Why The Model of The Lawyer As Bounty Hunter Is Not Working’, 42 Maryland Law Review, at pp. 215, 217. 28 See Jones, supra note 1, at pp. 93–112. 29 833 F.2d 1342 (9th. 1987). 30 828 F.2d 1033 (4th Cir. 1987), cert.den. 108 S.Ct. 1753 (1988). 31 The cases may have involved the same legal standard but different evidence or markets. 32 327 F.2d 459 (9th Cir. 1964). 33 506 US 447 (1993).

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Another issue, which relates to coherence is the suggestion that litigants will forum shop to locate the law most favourable to their position. As far as private actions are concerned, this happens in every field of law in many nations. For the most part, this is not a serious concern. If it were to become a genuine one, it would be compelling proof that the time has come for legislative harmonisation of national judicial remedies and procedures.

III. Comparing substantive remedies in the EU and US It has been suggested34 that private antitrust litigation did not really get started in the US until the Bigelow35 judgment concerning damages rules was handed down in 1946. While this is not strictly the case, there can be little doubt that the adequacy of available remedies must be assured or private litigation in the Community will never reach its potential. Legal advisors will need to be able to estimate for their clients what they can obtain through private litigation that will be worth the investment of time, resources, and (very reasonable, I’m sure) legal fees. Everyone knows that the US system offers treble damages, class actions, and contingency fees36, etc., and successful private litigation in the US is often attributed to these factors. The argument goes that until these things are available in Europe, it is simply not worth thinking about expensive, uncertain private actions. I don’t accept that this is the case, and my view is that legal advisors must be willing to evaluate private antitrust actions in the concrete to determine if the game is worth the candle. A brief discussion of comparative remedies issues may helpful in setting the stage for some suggestions about energising private litigation in the Community.

1. Nullity The Treaty of Rome explicitly states that agreements or decisions prohibited by Article 81 ‘shall be automatically void’.37 The test in the Community seems to be whether under national law the offending provisions are severable. If not, the entire agreement is void. In the US, this is not the case. A contract that is found to infringe the Sherman Act is not void and does not remove any obligation not itself violative of the Act on, i.e., a distributor to pay for goods received.38 Of course, a US 34

See McConnell, op. cit., supra note 19. Bigelow v. RKO Radio Pictures, 327 US 251 (1946). 36 Contingency fees in antitrust cases are no longer common in the US, with the possible exception of class actions. 37 Art. 81(2) EC. 38 See Kelly v. Kosuga, (1959) 358 US 516, 520–21. 35

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court would not enforce a provision having the effect of making courts a party to an antitrust violation, but related transactions in themselves lawful will not be invalidated.

2. Damages The Court of Justice has made it clear that damages are available as a matter of Community law to persons and undertakings suffering injury from infringements of the competition provisions of the EC Treaty. It is submitted that the relatively strict rules of damages applied in the European Court’s Article 288 EC jurisprudence39 are minimum standards, and outside the context of the liability of Community institutions or Member States more generous standards may apply.40 Even the Court’s Article 288 EC judgments have recognised and applied the concepts of reasonable estimates of damages and ‘yardstick’ measurements41 applied in the US, so it appears that mainstays of private damage actions in the US will be supported in Europe.42 The case law in Europe imposes the requirement that damages when available must be adequate, and this should be kept in mind when considering the pre-judgment interest issue.

2.1. Treble damages Everyone knows the US have them, and Europe does not, at least not any more.43 Europe is unlikely to have them in the future. However, this is not the end of story until counsels have considered what amount is to be trebled. If single compensatory damages are adequate, there should be no need for the treble damage inducement in the Community. In the US, it is understood that 39

‘The limits laid down by the case law in regard to actions brought under Article 215 [now 288] of the Treaty are in fact based on the widespread view that, as a matter of principle, compensation may not be recovered for injury caused by the legislature’. Opinion of Advocate General Tesauro in Joined Cases C–46/93 and C–48/93 Brasserie du Pêcheur SA v. Federal Republic of Germany and The Queen v. Secretary of State for Transport ex parte: Factortame Ltd and Others [1996] ECR I–1029, at para. 64. 40 See Jones, supra note 1, at pp. 240–41. 41 A.G. Toth (1997): ‘The Concepts of Damage and Causality as Elements of Noncontractual Liability’, in T. Heukels & A. McDonnell, eds., The Action for Damages in Community Law, The Hague, at pp. 186–7. 42 See generally, Jones, op. cit., supra note 1, chs 17–19. 43 Multiple damage provisions appeared in many early English statutes. Some 65 different enactments between 1275 and 1753 provided for double, treble or quadruple damages. BMW of North America, Inc. v. Gore, 517 US 559, 580–1(1996). See also, D. G. Owen (1994): ‘A Punitive Damages Overview: Functions, Problems and Reform’, 39 Villanova Law Review, at pp. 363, 368 and no. 23. The treble damages provisions of the Sherman Act were modelled after the English Statute of Monopolies of 1623—see H.B. Thorelli (1954): The Federal Antitrust Policy: Origination of an American Tradition, Baltimore, at p. 213 et seq.

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the Sherman Act’s ‘failure to provide for pre-judgment interest is a shortcoming that leaves a plaintiff less than whole’.44 The treble damage provision in the US does not fully overcome this flaw. Studies have shown that at best treble damages may offset the lack of prejudgment interest and more likely not even that. One study of Hanover Shoe considered that ‘treble’ damages awarded in that case amounted to only twentythree cents on the dollar due to the absence of pre-judgment interest.45 Another study reached the conclusion that ‘antitrust damages are currently not trebled’ and that one can safely ‘conclude that awarded [treble] damages are much more likely to be the equivalent of actual damages than treble damages’.46 As a result, the vision of windfall treble damages in the US falls rather short of reality. Litigants in Europe should concern themselves more with what they can recover rather than what they cannot. Depending on the length of time from injury to judgment and applicable interest rates, the lack of pre-judgment interest alone can reduce nominally treble damages to single damages or less. Conversely, in jurisdictions where pre-judgment interest is available, the practical equivalent to treble damages may be at hand. Counsel should do the arithmetic before concluding that the absence of treble damages makes private damage actions uneconomic. In the US IBM litigation, Control Data settled (therefore, no trebling) its private monopolisation action in 1973 against IBM for ‘upwards of $100 million’, and ‘senior officers of Control Data boasted that the lawsuit had been the best investment the company had ever made’.47

2. Pre-judgment interest In general, it is accepted by the Member States and the European Court that reparation for loss or damage includes an award of interest on the principal sum.48 In the second Marshall judgment, the ECJ found that Mrs Marshall was entitled to receive interest on the award as part of full compensation:49 31. With regard to the second part of the second question relating to the award of interest, suffice it to say that full compensation for the loss and damage sustained as a

44

ABA Section of Antitrust Law (1996): Proving Antitrust Damages: Legal and Economic Issues, Chicago, at p. 109, no. 16. 45 V. Sarris (1984): The Efficiency of Private Antitrust Enforcement: The ‘Illinois Brick’ Decision, New York, pp. 17–18. 46 R.H. Lande (1993): ‘Are Antitrust ‘Treble’ Damages Really Single Damages?’, 54 Ohio State Law Journal, pp. 115, 171. 47 M. Handler, R. Pitofsky, H. Goldschmid & D. Wood (1997): Trade Regulation: Cases and Materials, Westbury, N.Y., 4th edition, at p. 124. 48 Cf. A. van Casteren (1997): ‘Article 215(2) EC and the question of interest’, in T. Heukels & A. McDonnell, The Action for Damages in Community Law, The Hague, 199, 200. (‘In national law, interest is considered an essential part of the damages’.). 49 Case C–271/91 Marshall v. Southampton and South-West Area Health Authority (Marshall II) [1993] ECR I–4367.

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result of discriminatory dismissal cannot leave out of account factors, such as the effluxion of time, which may in fact reduce its value. The award of interest, in accordance with the applicable national rules, must therefore be regarded as an essential component of compensation for the purpose of restoring real equality of treatment.50

Community antitrust actions may not offer ‘treble’ damages, but they should offer adequate compensation through pre-judgment interest, which will in many cases be the equivalent of the US treble damage action. Accordingly, treble damage envy in the Community perhaps should be replaced by a lust for pre-judgment interest, which is actually attainable.

2.3. Sample damages comparisons: doing the arithmetic51 A couple of examples may help illustrate the comparison. If we take as our starting point the $100,000,000 settlement (therefore without any treble damages) received by Control Data from IBM in 1973, treat it as Euro and bring it forward in time to 1995, this gives us a base damages amount and starting point in time. In Example 1, we shall assume that national or Community law permits as part of compensation an award of pre-judgment interest from the time of injury to the time of judgment at the modest rate of seven per cent (7%), compounded annually. In Example 1A, we assume that the permitted prejudgment interest rate is a more generous fourteen per cent (14%) based on an often cited long range rate of return in the US stock market.52 For purposes of Examples 1 and 1A, we assume that damages accrue evenly over a ten-year period from beginning of injury through litigation to judgment, prior to appeal.53 In other words, assume injury first occurs in 1995 and accrues at the rate of
2.5 million per calendar quarter. Imagine that the statute of limitations is five years, suit is filed on the last day, and litigation results in judgment after ten years. 50 See supra note 49, at para. 31. (Emphasis supplied). The interest in question included pre-judgment interest from the date of the discrimination. Supra, at para. 9. 51 In the hands of the author, a spreadsheet may be a dangerous weapon, and no warranty of accuracy or suitability is offered! An economist or accounting expert witness normally may be used to present such calculations at trial. 52 Some may question whether a European court would allow such a high interest rate. Unless national or Community law expressly fixes the appropriate interest rate, I submit that this is a matter of persuasive advocacy and proof. The rationale for allowing prejudgment interest is compensation for the time value of money not received due to unlawful acts of defendants. If the evidence establishes that such a rate of return reasonably could have been achieved in the appropriate stock market over the appropriate period, the argument is that such a rate is necessary to fully compensate plaintiff for the ‘effluxion of time’. See Marshall II, supra note 49. Of course, other evidence such as contractual provisions might also serve as the basis for arguing that a higher rate should be used. The key is what rate fully compensates a plaintiff for lost use of money, which in turn depends on what could have been earned elsewhere. 53 Post-judgment interest accrual is not considered here, as it would apply in any system.

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Using these assumptions, we find that in Example 1 a nominal damages sum of
100 million results in an award of compensation of
147.8 million without treble damages or costs but based on pre-judgment interest compounded annually at the 7 per cent rate. Granted, this is not treble damages, but it is nearly 1.5X damages, which ought to be attractive. On the other hand, Example 1A applies the same assumptions as Example 1 except that the interest rate used is 14 per cent compounded annually. That calculation results in a compensation award of
220.4 million or about 2.2X damages. Both Examples 1 and 1A are in my view conservative approaches. Neither is a full 3X award, but there is no magic to the 3X-multiplier level as an incentive for clients to bring suit. Moreover, it may put this in perspective to consider the present value of an US treble damage award in comparison to these numbers. A nominal
300 million treble damage award, reduced to present value at the 7 per cent rate is
222.74 million and at the 14 per cent rate is
133.1 million. Therefore, the US ‘treble’ damage award is less than it seems and an equivalent actual damage award in the EU is more than expected. Example 2 uses the same assumptions as Example 1 except that compounding is quarterly and the full damages award is assumed accrued in 1995. Similarly, Example 2A uses the same assumptions as Example 1A except that compounding is quarterly, not annually and the damages are assumed already accrued. I consider Examples 2 and 2A more realistic and typical. Compounding could arguably be done monthly, weekly, or even daily under some types of financial accounts or instruments, and advocates may be able to persuade the judge that more frequent compounding is necessary to award full and adequate compensation.54 Under Example 2, the use of quarterly compounding and the 7 per cent rate yields a combined damages and pre-judgment interest award of
214.2 million, over two-thirds of a treble damage award. Under Example 2A, the same approach at the 14 per cent rate yields compensation of
451.4 million, or nearly 50 per cent more than treble damages. At the higher rate, EU law may offer 4.5X damages! It is submitted that litigants in the EU truly do not need the Sherman Act multiplier to have adequate incentive to sue for full compensation.

IV. Reflections on energising private actions The following represent some suggestions on how the climate for private enforcement in the Community might be improved. They are starting points for 54 The more frequent compounding, the greater the interest amount added into the damages award. It may be wise to settle for a lower interest rate but more frequent compounding. I leave the actual arithmetic as an exercise for the readers and their accountants!

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discussion, not fully developed proposals, but they may be useful. The single most useful event might be for some bold Community plaintiff to win a significant damages judgment which really ‘bangs the bell’. An example of such a successful action would go far to persuade counsel and clients that it can be done in Europe.

1. As much as possible, codify key substantive and procedural principles in order to reduce uncertainty Given the status of the amendments to Regulation 17/62 (and the forty years to get here!), I don’t expect this to result in further revisions at EC level soon, but if basic parameters of private actions and damages are not reasonably established by legislation, lawyers and businessmen in the Community could be asking the same questions about standing, damages, and standards of liability thirty years from now. A comparison to Sisyphus is not inappropriate.55 The progress to date is attributable to the development of Community law in the ECJ, but this is a slow process.

2. Develop means of aggregating small claims such as overcharges to consumers The perception in Europe of the importance of class actions in the US is overemphasised, but they do exist, and they work in cases where otherwise no one individual or undertaking can afford to bring suit. Other types of representative actions might be created. For example, when the Member States conform their national legislation following adoption of the pending amendments, they might consider creating parens patriae actions to supplement administrative enforcement. States in the US have been authorised to bring such actions since 1976 to recover damages on behalf of their citizens, and some of the reservations about class actions might not apply to actions brought by national authorities.

55

‘If a plaintiff has to go up to the highest court in his country and through a reference to the Court of Justice, to have a procedural obstacle removed, and if successful, down again to the trial of the case until the next procedural obstacle appears and then have to start the whole exercise again, he may well be far better off trying his chances with a complaint to the Commission.’ —see E. Picañol (1983): ‘Remedies in National Courts For Breach of Articles 85 and 86 of the EEC Treaty: A Review’, 2 Legal Issues of European Integration 1, at p. 32.

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3. Pre-trial oral testimony The Commission has proposed it be granted expanded powers to compel oral testimony under the amendments to Regulation 17/62. Consider creating equivalent powers, similar to pre-trial oral depositions in the US, which private litigants (and national authorities) can use, perhaps under supervision of national judges in civil law systems. This could be done by the Member States in conjunction with adapting their legislation to the amendments. Without such powers, private litigants may have difficulty in bringing some cases except to follow where the Commission has gone before.

4. Personal liability Consider extending the liability for damages and fines to responsible individuals who participate in the infringing activities of undertakings. Personal civil liability for fines or damages might concentrate the minds of those businessmen who have not yet joined the competition culture. A good place to start would be those individuals whose habit of keeping company documents in their homes to avoid ‘dawn raids’ prompted one of the current proposed amendments. The restriction at present of liability to ‘undertakings’ is not the only possible interpretation of the EC Treaty. Undertakings do not fix prices, people fix prices. There has been discussion of whether the EU should consider criminal sanctions such as exist in the US and Japan, among others. There can be little doubt that the deterrent effect of criminal sanctions is great. Anecdotal evidence from European practitioners suggests that some foreign businessmen upon arriving in the EU wish to confirm first that there is no criminal responsibility for cartel activity. It may be that criminal sanctions would not be essential if there were liability for fines or damages imposed on individuals as well as undertakings. In the absence of personal liability, I would favour the adoption of criminal sanctions in the EU. In the US, fines are criminal, not civil, but it may be that personal liability for civil fines would suffice without the prospect of time in gaol.

5. Training for judges National judicial systems can organise lectures, workshops, seminars, or short courses to train judges to cope with competition issues. Judges in the US are not experts in economics, and juries certainly are not. The litigation system in the US depends on counsel to educate the triers of fact in what they need to know to decide a case. Counsel in Europe who are preparing their competition cases properly must already be providing such information. If not, surely the national judges have ways to call for it, or to appoint independent experts.

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V. Conclusion The proposed amendments to Regulation 17/62 do not erase all vestiges of the Commission’s central role in the administration of EC competition law. This is gratifying to some and a disappointment to others. It does not yet make private litigation in the EU the full equivalent of the pluralistic system in the US, and it cannot be said that private litigants will outnumber cases brought by the Commission by the same ten to one ratio which has existed in the US. However, it can be said that the situation is substantially improved over what it was and more private litigation is almost certain to occur. The myth of treble damages and some other practical problems still hang over private litigation in Europe. However, these are not insoluble problems. I can’t yet see the new dawn, but from the US I can see a brighter sky in the east.

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III Jeremy Lever QC* Effective Private Enforcement of EC Antitrust Rules Substantive Remedies: The Viewpoint of an English Lawyer This paper addresses primarily an issue that is of general importance in all Member States of the European Union, though, in so far as the paper considers national law in detail it does so by reference to the common law jurisdictions —mainly England. The thesis that I wish to explore is that in the field of antitrust enforcement private law is not a substitute for public law, and that in practice private law is best able to serve a particular primary purpose that it has, namely compensating persons injured by wrongs, if competition law is vigorously enforced as public law. Such enforcement can provide a basis on which those who have been injured by breaches of competition law can assert their private law rights relatively simply, quickly (once the public law decision has become final) and economically: indeed, if the public law system of enforcement is operated with a proper respect for the rights of defence, the main task of the person seeking compensation for an antitrust infringement that has been established by a public law decision will be the quantification of the claimant’s loss caused by the already established infringement. Such quantification may, unfortunately, itself be difficult and potentially expensive but it is essentially a task the principal burden of discharging which must be shouldered by the claimant. Before I come to the justification of that thesis, I need to spell out a little more fully the conditions that need to be satisfied if private law is to operate as a satisfactory adjunct, but generally no more than an adjunct, to public law in this area. First and most obviously, adequate resources need to be devoted to the enforcement of competition law as public law. We are told, on the whole I think rightly, that the purpose of competition law is to protect competition, not competitors. That does not, of course, mean that Articles 81 and 82 EC and their national law equivalents are not to be treated as what a German lawyer would call statutory provisions of a kind ‘designed to protect another’, breach of which (or at least in German law ‘culpable’ breach of which entitles a member of the protected class to compensation for loss caused by the breach)—in English law by an action analogous to a claim for breach of statutory duty: see e.g. per Sir Thomas Bingham MR in Society of Lloyd’s v. Clementson [1995] Common Market Law Reports 693 (CA) at page 711, and see Askin v. Borchard [2000] UK CLR 495 (High Court).1 * Monckton Chambers, Gray’s Inn, London and All Souls College, Oxford. 1 Precisely because the rules on competition contained in Articles 81 and 82 EC cannot be described as ‘substantially designed to protect a person or group of persons rather than the public as a whole’ (see W. van Gerven, J. Lever and P. Larouche (2000):

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But the fact that the purpose of competition law is not merely to confer private law rights (in particular, injunctive relief and compensation) on suppliers, competitors and customers affected by infringements is amply evidenced by the references in the case law to e.g. Article 81 EC constituting ‘a fundamental provision which is essential for the functioning of the interval market’ and ‘a matter of public policy . . .’ (Case C–126/97 Eco Swiss China Time v. Benetton International [1999] ECR I–3055) is self-evident from the responsibilities assigned to public authorities with regard to the investigation and enforcement of competition law as public law. Thus, again, we see the UK Treasury taking the initiative, with participation by the UK Department of Trade and Industry, in a ‘Competition project’ earlier this year, in the ‘[belief] that competition is a key driver for productivity—along with innovation, enterprise, investment and skills’, to consider amongst other things, whether ‘[we] need a competition régime with real deterrents— Directors’ disqualification? Higher civil fines on companies? Fines on individuals? Jail sentences?’ and asking whether criminal sanctions would be practical. (See now Enterprise Act 2002, sections 188–202.) It seems therefore to be recognised, both at the Community level and at the UK national level, that there is a strong public interest in the implementation of the rules of competition law, since, at least by implication, infringements of those rules significantly reduce consumer welfare: and that must mean that there is a belief that anti-competitive conduct leads to higher prices/lower output, poorer quality or less or slower innovation, or a combination of those adverse effects. One might have supposed that in such circumstances, it would be obviously rational for politicians to ensure that the competent authorities were given adequate resources to enable them to carry out the task assigned to them effectively. Yet the amount allocated to the competition competent authorities at the Community and national levels combined equates to an insignificant proportion of the Gross Domestic Product of the Community and, as an inevitable consequence, those authorities—at least at the Community and UK national level—publicly make very clear that their limited resources severely constrain the action that they are able to take (cf. Joined Cases T–24 and 28/90 Automec II [1992] ECR II–2223). Those who advocate the promotion of the rôle of private claimant as private prosecutor themselves rely on the inadequacy of the resources made available to the competent authorities as public prosecutors, which they take as a datum. But compare the resources available to a competent authority, inadequate though those resources may be, and the resources available to a private claimant, unless it is a substantial corporation that can afford to invest in the required litigation upwards of a million Euro (more if, as one needs to do in the United Kingdom, one takes into account the claimant’s contingent liability to Tort Law, Hart Publishing, Oxford and Portland, Oregon, at p. 66 with reference to §832(2) BGB) it seems appropriate to speak of the private law liability under those statutes as analogous to that under a protective statute.

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pay the defendant’s reasonable costs if the claim fails). It may be said that in a clear case, the task of the claimant should be easy and its costs should be correspondingly low. But that presupposes that the infringement is flagrant, being both easily proved and raising no nice issues of law or economic analysis. Yet those are precisely the cases that even an under-resourced competent authority should be capable of tackling aided by complainants and informers. Moreover even in a case involving a small brewer and the owner of a small outlet for its beer, where the amount in issue was, on any view, small, the exercise which the ECJ propounded as needing to be undertaken in order to determine whether the beer tie in the contract between the parties attracted the prohibition of what is now Article 81(1) EC was so horrendously complicated that one cannot imagine any small enterprise, let alone a consumer, embarking on litigation to establish that the tie infringed the prohibition: see Case C–234/89 Stergios Delimitis v. Henninger Bräu AG [1991] ECR I–935 (the fact that the tie would today benefit from the block exemption of most vertical restraints does not, I think, detract from the general point that I am making here about the complexity of litigation under the rules on competition of the Treaty even when small sums are in issue). For reasons such as those that I have been describing, a private prosecutorial role is unlikely to appeal to an individual or an SME. I accept that that problem is at least in theory, capable of being mitigated by facilitating class or group actions, but the practical difficulties of conducting such actions should not be under-rated. I revert below to one possible way of mitigating those difficulties, albeit in the context of more vigorous enforcement of competition law as public law. However, at least in the United Kingdom, it is simply not the case that the existing substantive law and procedural framework are inimical to private damages suits and are responsible for their relative dearth. Even before the enactment of the Competition Act 1998, which came into force on 1 March 2000, it was clearly established that infringement of Article 81 or Article 82 EC (to use the current numbering of the Articles) gave rise to civil liability, at the suit of a person with a sufficient interest, remediable by injunctive relief and/or damages: see Society of Lloyd’s v. Clementson and Askin v. Borchard (cited above) and MTV Europe v. BMG Record (UK) Ltd. [1997] European Law Reports 100 (CA), where the principle that infringement of Article 81 or Article 82 EC gives rise to civil liability was not even put in issue. And where the infringement is of the competition rules and of the EC Treaty, the English courts regard themselves as bound by the findings of fact and interpretation of law finally reached at the Community level (see Iberian UK v. BPB Industries Ltd [1996] 2 Common Market Law Reports 601 (High Court)). Similarly, where the infringement is of the Chapter I or Chapter II prohibition imposed by the Competition Act 1998 (which correspond to the prohibitions imposed by Articles 81 and 82 EC, without a requirement of an effect on trade between Member States), a party in civil litigation is equally able to rely on the results of the application of public law at the national level in the same

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sort of way as where, under the decision in the Iberian case, supra, the infringement is of public law at the Community level: see section 8(2) of the Competition Act 1998 which provides that, where the Director General of Fair Trading, the principal official entrusted with the enforcement of the Chapter I and Chapter II prohibitions as rules of public law, has made a relevant ‘finding’, then if— • the time for appeal in respect of that finding has expired without an appeal having been brought, or • on such an appeal the Appeal Tribunal has confirmed the finding, the finding becomes ‘binding on the parties’ in any proceedings in respect of an alleged infringement of the Chapter I or Chapter II prohibition which are brought by someone other than the Director General of Fair Trading.2 One may note here parenthetically that it is this provision that indirectly shows that infringements of the Chapter I and Chapter II prohibitions imposed by the Act are intended to be civilly actionable: the reason why the Act does not say that in so many words is because it was desired to preserve in this respect a perfect symmetry with Community law—infringements of the national provisions are intended to be civilly actionable to the same extent as infringements of Articles 81 and 82 EC, and that result is provided for by section 60 of the Act which requires the UK courts to secure consistency between their application of the relevant parts of the Act and EC law and to have regard to the EC Commission’s decisional practice and statements.3 The wisdom of adoption of that course is illustrated by the reference by the English Court of Appeal to the ECJ of the preliminary questions formulated in Crehan v. Courage—as cited by Professor van Gerven in his written contribution for this volume—with regard to the admissibility of a non-contractual claim for damages by one party to a contract that attracts the prohibition of Article 81(1) EC against the other party to that contract. Section 60 of the Competition Act ensures that whatever answers are ultimately given to the four questions referred by the Court of Appeal to the ECJ will apply equally where the cause of action arises under Chapter I or the Chapter II prohibition as when it arises under Article 81 or Article 82 EC. 2 The position is the same where the relevant finding is made by a regulator of one of the regulated utilities (telecommunications, electricity, water, the railways and gas) in the application of the Chapter I or Chapter II prohibitions in relation to the regulated utility: see section 54(2) of, and Parts II and III of Schedule 10 to, the Competition Act 1998. 3 As to ‘statements’ of the Commission, contrast the position of the Community Court to which do not regard such statements as a source of law: see Case 99/98 Austria v. Commission judgment of 15 February 2001, para. 34 of the Opinion of Advocate General Jacobs, citing, by way of example, Case C–325/91 France v. Commission [1993] ECR I–3283, para. 26 of the judgment; and see Joined Cases 53 and 54/63 LemmerzWerke GmbH v. High Authority [1963] ECR 239 at p. 247 and Case 74/69 Hauptzollamt Bremen-Freihafen v. Waren-Import-Gesellschaft Krohn & Co. 1970] ECR 451 at p. 487.

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With regard to certain other procedural rules enunciated by the English Courts for application where there are concurrent private law proceedings and public law proceedings (the point of time at which the stay of the private law proceedings is to operate and the freedom of the claimant to make available to the competent authorities documents obtained through the document disclosure process in the private law proceedings), the extent to which the English Courts will actively assist claimants to take advantage of action at the public law level is less clear than it was since the reform of English civil procedure by the introduction of our new Civil Procedure Rules. Thus, MTV Europe v. BMG Record (UK) Ltd., supra a case decided under the old Rules of the Supreme Court, provides an example of how the English Courts positively sought to facilitate private suits—by allowing litigation which was being pursued currently with a complaint to the EC Commission to proceed up to what is now the state of fixing the trial date and giving directions for the trial, so as to complete all interlocutory steps, such as disclosure of all relevant documentation, but then to await the decision of the EC Commission on the claimant’s complaint to that body. The importance of allowing discovery to be completed was all the greater because the claimants in the English litigation was permitted to supply to the EC Commission copies of the defendant’s documents that the claimant had obtained through the disclosure and inspection process as interlocutory steps in the litigation (see Apple Corps Ltd v. Apple Computer Inc. [1992] 1 Common Market Law Reports 969 (High Court)). If one is not acquainted with the process of documentary discovery, Englishstyle, the full significance of this may not be immediately apparent. Under the process of discovery, the party making discovery is itself obliged to search all the documents in its possession, custody or power to identify those that indicate that it has or might have committed the infringement complained of or that might put its adversary onto a useful line of inquiry. Ordinarily, documents so obtained through the process of discovery can be used only for the purposes of the litigation in which the documents were disclosed. It has been said that foreigners who embark upon litigation in the English Courts do not understand what discovery implies and that, when in due course it is explained to them, they settle rather than continue. However, especially after the invention of the copying machine, discovery undoubtedly added greatly to the cost of litigating in the English courts and under the new civil Procedure Rules its use has been curtailed in that the ‘issues’ in relation to which discovery is to be made are now specifically identified as part of the process of ‘case management’ to contain the costs of litigation. One consequence of pursuit of the new objective of containing the costs of litigation is that the English courts may no longer be so helpful to claimants where there are parallel public law proceedings. This is illustrated by two recently decided cases. Thus, in Synstar Computer Service (UK) Ltd. v. ICL (Sorbus) Ltd., judgment of 30 March 2001, reported in The Times, 1 May 2001, the English High Court was concerned with a situation in which the UK competent authority, the Director General of Fair Trading (‘the DGFT’) had

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informally decided not to investigate the conduct of the defendants, about which it would seem that the claimant had complained to the DGFT; the claimant evidently had in mind the possibility of taking the case on appeal to the Competition Commission Appeal Tribunal (‘the CCAT’) which would have full jurisdiction on such an appeal. The defendants sought an immediate stay of the High Court proceedings. The claimant opposed that course, alleging that, without the benefit of disclosure by the defendants of their relevant documents and sight of the defendants’ witness statements, as part of the pre-trial process in the High Court, the claimant would not have the necessary evidence to prepare its appeal to the CCAJ. The claimant’s opposition to an immediate stay of the High Court proceedings was to no avail. The overriding purpose of the Civil Procedures Rules is to contain the cost of litigation, which had given rise to much concern in England. Allowing civil litigation to proceed in parallel with public law proceedings in the CCAT would fail to serve that purpose. The CCAT has its own discovery rules which it has deliberately adopted as best fitted to achieve the overriding objective of dealing with appeals justly, including the rules regulating the content of, annexes to and amendment of applications to it. It was not for the High Court to arrogate to itself jurisdiction to make good any shortcomings in those rules. Accordingly the High Court granted an immediate stay of the High Court proceedings pending a decision by the claimant whether to appeal to the CCAT from the decision of the DGFT and thereafter, if it did appeal therefrom to the CCAT, until further order. A similar result was reached in Morgan Stanley Dean Witter v. Visa, High Court, judgment of 2 May 2001, where the parallel public law proceedings were before the EC Commission rather than the national competent authorities. In that case the judge took the view that the EC Commission should be allowed ‘to take the lead’ because it is a specialist competition authority which has unrivalled experience in the field of competition law which a national court does not possess (an interesting, though unconscious, reflection on the Commission’s ‘modernisation’ proposals). Here again, as in Synstar, supra, the judge was also influenced by the important objective of the Civil Procedure Rules that the cost of litigation in the English courts should be contained. In the result it now appears unlikely that a person who claims to have been injured by an infringement of Article 81 or Article 82 EC or of the Chapter I or Chapter II prohibition contained in the Competition Act 1998 can gain an advantage as a complainant to the EC Commission or to the UK authorities by commencing civil proceedings in order to get discovery of documents for transmission to the public law authorities in support of the complaint. The position is now probably that such a person can either complain to the public law authorities and await the outcome of the complaint before progressing the person’s civil claim in the courts or proceed exclusively by way of civil litigation in the courts. In a paper that I delivered in Washington DC last June, which was organised with great success by Professor Clifford Jones, I drew attention to the fact that the ECJ has ruled that, in the absence of Community legislation, it is for the

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internal legal order of each Member State to designate the competent courts and to lay down the detailed procedural rules for legal proceedings intended fully to safeguard the rights which individuals derive from Community law,4 such as their right to reparation for infringements of Articles 81 and 82 EC. This is subject to the need for the applicable national law to satisfy certain minimum requirements, viz, the provision of an effective legal remedy, the treatment of claims for infringement of rights conferred by EC law no less favourably than similar domestic claims and the prohibition of rules, whether procedural or evidentiary, that make it impossible or excessively difficult to obtain redress as required by EC law, particularly by means of presumptions or rules of evidence that place an unreasonably heavy onus of proof on the individual in question. The question therefore arises whether the applicable rules of procedure of English law satisfy the minimum requirements of EC law. Especially in circumstances where a multiplicity of (typically) consumers and/or SMEs have individually small claims, a pioneering advocate may one day seek to argue in the English courts: that nothing less than a US-style class action is capable of providing an ‘effective remedy’ to consumers who have been injured by the operation of e.g. a cartel; that EC law therefore requires that such a form of action be made available where an infringement of the rules on competition of the EC Treaty is alleged; and that, reversing the normal rule that the procedure for enforcing directly effective rights conferred by EC law is determined by the national rules, section 60 of the Competition Act 1998, supra, requires that such a procedure be made available where the infringement alleged is of UK law no less than where it is of EC law. An alternative approach, though it is clearly a matter of lex ferenda rather than lex lata, would be to make provision for the participation by injured private parties in public law proceedings relating to the conduct which they allege unlawfully caused them loss—in other words a procedure along the lines of the participation by the victim as partie civile in French criminal proceedings. In that connection it would be interesting to learn from a French lawyer with experience of the participation of partie civiles in a forum of public law proceedings whether or not it works well. A more modest proposal, which would not require primary legislation in the United Kingdom and which would at least ameliorate the position, would be to establish a ‘Competition Court’ as part of the High Court (just as is, for example, the Commercial Court). The President of the CCAT could, so far as his workload in the CCAT permitted, sit as a judge of the Competition Court (technically sitting as a Deputy High Court judge) and a number of High Court judges who were ready, willing and able to make themselves expert in competition law could be appointed to hear competition cases in the Competition Court. 4 See Joined Cases C–6/90 and 9/90 Francovich v. Italian Republic [1991] ECR I–5357 at p. 5415 to 5416, para. 42 of the judgment.

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I have, so far, said nothing about the automatic sanction of nullity for which Article 81(2) and a corresponding provision of the Competition 1998 provide. There has never been any doubt about the existence of that sanction such as initially existed with regard to the existence of non-contractual liability, giving rise to injunctive relief and damages, founded on Articles 81 and 82 EC. But in other respects the difficulties of invoking the sanction are broadly similar to those discussed above in relation to non-contractual liability and remedies founded on Article 81. An interesting point that will arise in connection with the sanction of nullity in the English courts if the Commission’s Proposal for a Modernisation Regulation is adopted with a provision in the form of Article 3 of the present draft. Article 3 provides that where, inter alia, an agreement within the meaning of Article 81 EC may affect trade between Member States,5 it seems likely that Community law rather than the common law doctrine of restraint of trade will apply. Thus, Bellamy & Child (1997)6 record that ‘It is clear from Reuter/BASF, OJ 1976 6254/40 . . . and Nutricia, OJ 1983 L376/22 . . . upheld by the ECJ in Case 42/84 Remia v. Commission [1985] ECR 2545 . . ., that such [restrictive] covenants [entered into by the vendor of a business] may fall within Article [81(1) EC], but that they will not do so if they are essential to the preservation of the transferred value of the undertaking.’ In ascertaining whether they are so essential, Community law adopts an approach almost identical with that adopted by the common law, namely asking whether the covenant is reasonably limited in its duration, its geographic scope and its subject-matter. Thus, on the face of it, Article 3 of the draft Regulation, if implemented, will not make any difference to the treatment in the English courts of restrictive covenants entered into by vendors where the agreement may affect trade between Member States. However, in one significant respect that merits consideration, Article 3 will make a difference. Under English national law if a restrictive covenant, as drafted, is unreasonably wide, the court will, if practicable, cut down its application to a reasonable ambit if it is possible to do so simply by striking out (‘severing’) the words that make it unreasonably wide (the ‘blue pencil test’)— provided always that so doing does not alter the ‘nature of the contract’ and that it is not against public policy to engage the exercise at all. Thus, if the duration of a covenant is expressed to be ten years, the court cannot substitute the figure four for ten; but if the covenant is expressed to cover Great Britain and Ireland and the inclusion of Ireland unreasonably widens the scope of the

5

If the covenant covers the whole of any Member State it is, by its very nature, capable of affecting trade between Member States: Case 42/84 Remia v. Commission [1985] ECR 2545 at para. 22 of the judgment, citing Case 8/72 Cementhandelaren [1972] ECR 977. 6 C. W. Bellamy and G. D. Child (1993): Common Market Law of Competition, 4th edn., Sweet & Maxwell, London, n. 97 to §6–088; see now 5th edn. European Community Law of Competition, 2001, §6–176.

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covenant the court can strike out the words ‘and Ireland’ and enforce the covenant so far as Great Britain is concerned. Reading together the existing case law on the application of Article 81 EC (ex Article 85) to restrictive covenants entered into by vendors of businesses and Articles 3, 4, 6, 9, 10, 15 and 16 of the draft Regulation, it is by no means clear to me that the existing rules of English law with regard to cutting back the application of the covenant to a reasonable ambit will continue to apply if the vendor-purchaser agreement may affect trade between Member States. This is not the place to go into that question more fully since it would require a consideration of the question how, if the draft Regulation is enacted in its present forum, national courts are to apply Article 81(3) EC: Article 8 of Regulation 17/62 provides that decisions in application of Article 81(3) EC are to be issued for a specified period, that conditions and obligations may be attached to them and that in certain specified circumstances they may be revoked or amended. The draft Regulation gives no indication of the extent, if at all, to which national courts, when applying Article 81(3) EC are to enjoy comparable powers. The answer to that question will affect not only the enforceability of restrictive covenants entered into by vendors of businesses but also the application of the sanction of nullity under Article 81(2) EC, generally and also the grant to third parties of injunctive relief, including at the interim stage, where they claim to be injured by provisions of agreements that attract the prohibition of Article 81(1) EC.

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IV Antoine Winckler* Remedies Available under French Law in the Application of EC Competition Rules

The French Supreme Court stated in a significant recent case that, with respect to the availability of civil remedies, the application of Community law calls for a solution identical to that available under French law.1 In this judgment the French Supreme Court rejected an appeal against a decision of the Court of Appeal that had awarded damages to a victim of a cartel. The appellant had based his action on the argument that the Court of Appeal had awarded damages and interests to a victim of an anticompetitive agreement, whereas the letter of Article 81(2) EC provided only for the nullity sanction. In its judgment, the French Supreme Court focused on the fact that, under French competition law, the general principles of civil law that regulate compensation for damages caused by an illegal agreement apply to agreements prohibited by Article 81 EC and fall within the jurisdiction of French courts. In the circumstances, the Supreme Court declared that ‘the Court of Appeal correctly applied the general principles of tort law to the case’. This contribution focuses on the substantive, rather than procedural, issues that arise when EC competition rules are invoked before French courts. This report reveals a certain number of structural difficulties in the context of the reform of Regulation 17/62.2 First, this contribution will deal with the problem of legal certainty. This problem arises from the difficulties that surround the definition and consequences of the nullity of contracts or contractual provisions that are in breach of EC competition rules (e.g., for a practitioner who relies on the administrative safety net provided by the system of prior notification or fears a subsequent claim before the national authorities based on competition law). Secondly, in numerous cases, French application of tort law is not very well adapted to the complex assessments that are necessarily involved when applying competition law. This is particularly true when the courts are applying the legal exceptions, that is, Article 81(3) EC, on the basis of the ‘rule of reason’ approach. Notwithstanding the above, the most important conclusion of this report is that there is nothing in principle in the French legal system to prevent a more * Cleary, Gottlieb, Steen and Hamilton. 1 Cour de cassation, chambre commerciale, 1 March 1982, Syndicat des expéditeurs et exportateurs en légumes et pommes de terre primeurs de la région malouine / L’Hourre, Bulletin civil IV, no. 76, p. 69. 2 Council Regulation No. 17/62, OJ 1962 13, p. 204/62.

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vigorous private enforcement of EC competition law. The prohibitions contained in Article 81(1) EC (ex Art. 85(1) EEC) and Article 82 EC (ex Art. 86 EEC) are directly applicable in the French legal system. Consequently, the Member States must provide for civil remedies where these prohibitions are breached.3 Thus far, French case law offers only a few significant examples of the judicial award of civil law remedies for behaviour which is in breach of EC competition rules. The reform of Regulation 17/62 should, however, lead to a multiplication of such requests. This report examines the principal remedies likely to be used by the civil and commercial courts in cases of a breach of Articles 81 and 82 EC. Essentially, these remedies are: nullity, which renders the agreement unenforceable (Section I); and damage awards, which seek to repair the damage suffered as a result of a prohibited agreement or an abuse of a dominant position (Section II).

I. Nullity In the second edition of Gérard Cornu’s Vocabulaire Juridique, nullity is defined as the legal consequence resulting from an agreement that is flawed either in form or in substance, and that is therefore void.4 In this contribution, we will (1) specify the scope of application of the nullity sanction in cases where an agreement is contrary to the provisions of Articles 81 and/or 82 EC; (2) discuss the conditions under which this sanction will be applied; and (3) discuss its consequences for the agreement.

1. Scope of application Unlike French competition law (Article L. 420–3 of the Code of Commerce— ex Article 9 of Ordinance No. 86–1243 of 1 December 1986) which explicitly provides for the nullity of commitments, arrangements or contractual clauses that are related to an illegal agreement or to an abuse of a dominant position,5

3 Case 127/73 BRT v. Sabam [1974] ECR 51, para. 16. See Christophe Pecnard and Elisabeth Ruiz (1993): ‘Les sanctions civiles du droit communautaire de la concurrence par le juge national: les exemples anglais et français’, Revue de droit des affaires internationales 5, p. 637 (hereafter, ‘Pecnard/Ruiz’). 4 Vocabulaire juridique, 2nd edition, PUF 1990, p. 543 (Nullité). 5 See Jean-Pierre Brill (1987): ‘Les sanctions civiles des violations de l’ordonnance du 1er décembre 1986’, Gazette du Palais, p. 775 (hereafter ‘Brill’); Frédérique DreifussNetter (1990): ‘Droit de la concurrence et droit commun des obligations’, Revue trimestrielle de droit civil 3, p. 369 (hereafter ‘Dreiffuss-Netter’); Lamy Droit Economique, April 2000, nos. 485 and 877 et seq.

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the EC Treaty only provides for the nullity of anticompetitive agreements covered by Article 81 EC. There is no explicit nullity sanction covering contractual abuses of a dominant position that are prohibited under Article 82 EC. According to Article 81(2) EC, agreements or decisions prohibited by Article 81 EC are automatically null and void. The nullity sanction provided for by Community law explicitly covers only agreements between undertakings or decisions by associations of undertakings.6 Conversely, the concerted practices prohibited by Article 81 EC by their very nature do not fall within the scope of application of Article 81(2) EC, which only refers to agreements and decisions.7 Similarly, Article 82 EC prohibits the abuse of a dominant position, but does not deal with the consequences of this prohibition from the point of view of civil remedies. However, behaviour causing an abuse of a dominant position can give rise to a nullity action if it occurs in the context of a typical contractual relationship (e.g., supplier-customer relationship). The nullity of such contracts will not be based on Article 81(2) EC, but on the relevant provisions of national law, in conformity with the principle of direct effect, whereby the national authorities must safeguard the rights and obligations arising from the Treaty. Thus, the French Supreme Court requires the Courts of Appeal to consider whether such contracts may be null as a result of being contrary to the provisions of Article 82 EC.8 For example, the French Supreme Court annulled a 6 See for example, with respect to the application of Art. 81 EC to franchising contracts, and in particular territorial exclusivity provisions, Tribunal de commerce de Paris, 19 May 1992, Tramarine, Europe 1992/10, no. 388 (Jurisdata no. 041565). 7 According to the definition given by the European Court of Justice, the notion of ‘concerted practice’ covers ‘a form of coordination between undertakings, which, without having been taken to the stage where an agreement properly so-called has been concluded, knowingly substitutes for the risks of competition, practical cooperation between them which leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the importance and number of the undertakings as well as the size and nature of the said market. Such practical cooperation amounts to a concerted practice, particularly if it enables the persons concerned to consolidate established positions to the detriment of effective freedom of movement of the products’ (Joined Cases 40/73, 41/73, 42/73, 43/73, 44/73, 45/73, 46/73, 48//3, 50/73, 54/73, 55/73, 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v. Commission [1975] ECR 1663, paras. 26 and 27). 8 Cour de cassation, 1ère chambre civile, 13 December 1983, Basset/SACEM, JCP 1984, II, no. 20167. For an illustration of the treatment of abuses of dominant position under French competition law, see Cour de cassation, chambre commerciale, 22 January 1991, Air Liquide/Liquéfaction de l’Air, Revue Juridique de Droit des Affaires 1991/3, p. 202, whereby the French Supreme Court ruled that a Court of Appeal can annul an exclusive distribution agreement by which a supplier enjoying a dominant market position increases distribution prices when the quantities ordered diminish.

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judgment of the Court of Appeal of Aix-en-Provence which had rejected a plea of a disco owner who claimed that license contracts entered into with a copyright management company were abusive under Article 82 EC and therefore null and void.9 In the absence of explicit provisions in Article 82 EC, under the general principles of French contract law the nullity of the contract at stake may result from its contrariety to public order (Article 6 of the Civil Code) or from its illegal purpose (which is prohibited under Article 1131 of the Civil Code; that article specifies that ‘an obligation based on an illegal purpose has no effect’). This case law equates a plea of nullity of a contract that violates the provisions of Article 82 of the Treaty with pleas brought under the rules applicable in domestic law. Thus, every agreement that involves practices prohibited by Articles 81 and 82 EC may be subject to an action for nullity before the French courts, on the basis of Article 81(2) EC (agreement between undertakings or decisions of associations of undertakings) or on the basis of Articles 6 or 1131 of the Civil Code (abuse of a dominant position).

2. Application In the absence of Treaty provisions or Court precedents specifying precise procedural rules, it is incumbent upon national law to define the conditions that are relevant in applications for nullity. In this respect, the Court of Justice has indicated, as a general matter, that the automatic nullity envisaged by Article 81(2) EC is absolute.10 This is generally construed as meaning that an agreement or a decision that is null and void as a result of this provision has no effect between the contracting parties and cannot be enforced against third parties.11 Consequently, any French court before which Article 81 EC is invoked may decide that the agreement in question falls within the scope of the prohibition laid down in Article 81 EC and so may declare the act null with all the legal consequences flowing from this nullity.12 9 See Pecnard/Ruiz, p. 650. Art. 1133 of the Civil Code provides that the cause of a contract is illicit when it is forbidden by law or contrary to public policy (ordre public). 10 Case 22/71 Béguelin [1971] ECR 949, para. 29. 11 Idem. 12 See for example: Cour d’appel de Paris, 20 December 1971, Gazette du Palais 1972, p. 702; Cour de cassation, 1ère chambre civile, 3 December 1985, no. 8412.295, Jurisclasseur édition générale 1986, IV, p. 63; Cour d’appel de Versailles, 5 May 1988, Gazette du Palais 1986, p. 876; Cour de cassation, chambre commerciale, 9 May 1990, no. 8815.625, Dalloz 1990, p. 509, note by P. Jourdain; Cour d’appel de Paris, 23 March 1989, Gazette du Palais 1989, p. 551, Revue trimestrielle de droit civil 1989, p. 537, observations by J. Mestre.

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In fact, nullity may be invoked by any interested party, including a party to the relevant agreement, as long as such nullity is designed to protect the general public interest.13 A party that has participated in a cartel can invoke the nullity of the arrangement vis-à-vis the other party in order to relieve itself from its obligations. This is the case even where the party must rely on its own wrongdoing in order to obtain a judgment nullifying the agreement. The rule nemo auditur propriam turpitudinem allegans (a plea alleging an own wrongdoing cannot be heard), which may sometimes be relied upon as regards the illicit purpose of an agreement, cannot be used to block an action for nullity but only to prevent the reimbursement of payments made under the agreement. (See below for the consequences of nullity.) The burden of proof rests with the party invoking the nullity of the agreement. There are two options: • The party may ask the judge to declare the agreement null. Depending on whether this action is brought before, or after, the implementation of the agreement, the judge will rule on either whether the contract is void, and whether damages and interests are appropriate, or restitution should be made of the payments already made under the contract (see below for the consequences of nullity). • Initially, the party may unilaterally decide not to comply with the illegal agreement and may wait for the other party to bring an action for breach of contract, and then plead nullity of the contract. In this regard, it should be noted that an action for obtaining a judicial award declaring an agreement ‘absolutely null’ is covered by Article 2262 of the Civil Code, according to which ‘all real and personal actions (in personam and in rem) are barred after 30 years.’14 This limitation period starts to run once the agreement has been concluded, and has the effect of extinguishing the right to bring a nullity action. By comparison, the right to plead nullity as a defence does not expire. In practice, this means that when an agreement has not been executed and one of the parties demands the performance of the agreement, or compensation for non-performance, the defendant may invoke the nullity of the contract as a defence against the action for specific performance or damages. Moreover, as the automatic nullity contained in Article 81(2) EC is based on the violation of a provision of public interest (ordre public), a party entitled to demand nullity of an agreement under this provision cannot waive his/her 13 See in particular Cour d’appel de Paris, 1 October 1980, Dalloz 1983, IR, p. 222, observations by Gavalda and Lucas de Leyssac, Revue trimestrielle de droit commercial 1983, p. 791, observations by Alfandari and Jeantin. 14 See in particular, Cour de cassation, 1ère chambre civile, 26 January 1983, Bulletin civil I, no. 39, p. 34, Dalloz 1983, p. 317, note by A. Breton, Revue trimestrielle de droit civil 1983, p. 749, observations by F. Chabas, and p. 773, observations by J. Patarin.

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rights to invoke the nullity of the act. Thus it is not possible to confirm (ratify) an agreement struck by absolute nullity. Another consequence of absolute nullity that sanctions the violation of a legal provision of general interest is that the court cannot refuse to examine an agreement from the perspective of automatic nullity contained in Article 81(2) EC if the conditions of its application seem to be present.15 The same approach that is applicable to cases involving the nullity of agreements under Article 81 EC can be applied to agreements that amount to an abuse of a dominant position as prohibited by Art. 82 EC. In this case, the measures taken, or the illegal intent of those measures that gives rise to the abuse, will be subject to the sanction of absolute nullity.

3. Consequences of nullity In accordance with the adage quod nullum est, nullum producit effectum, a contract or an agreement that is null and void has no effect. If this principle were applied generally, the consequences of nullity could be reduced to this one principle. Reality, however, is more complex. The decision of a judge can instantly deprive an agreement of any legal effect, but cannot change so easily the circumstances that caused the nullity or that may have resulted from the illegal agreement. Several questions remain to be answered in this respect. First of all, one must determine the scope of the nullity sanction. According to the Court of Justice, the automatic nullity contained in Article 81(2) EC only applies to those elements of the agreement or decision that are prohibited or to groups of prohibited elements that do not seem separable: ‘The automatic nullity contained in Article 81 (ex Article 85) paragraph 2 of the Treaty applies only to those contractual provisions which are incompatible with Article 81 (ex Article 85) paragraph 1. The consequences of such nullity for other parts of the agreement, and for any orders and deliveries made on the basis of the agreement, and the resulting financial obligations for payment are not a matter of Community law. Those consequences are to be determined by the national court according to its own law.’16

15 On this see Joined Cases C–430/93 and C–431/93 Van Schijndel [1995] ECR 4705, paras. 20–22; and for the application of French law, Cour de cassation, chambre commerciale, 26 March 1979, no. 7711.290, Bulletin civil IV, no. 113, p. 88, Jurisclasseur édition générale 1979, II, no. 19249, note by Jeantet; see also Cour de cassation, chambre commerciale, 25 March 1991, no. 89–10.800, Dalloz 1991, IR, p. 124; Cour de cassation, chambre commerciale, 16 April 1991, no. 915.340, Jurisclasseur édition générale 1991, IV, p. 233; and Cour de cassation, chambre commerciale, 7 February 1995, no. 9311.378, Revue juridique de droit des affaires 1995/6, no. 733 and 797, annulled a decision that had declared a contract null and void without having justified the nullity under Art. 81 EC. 16 Case 319/82 Kerpen & Kerpen [1983] ECR 4173, para. 12.

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Consequently, it is for national authorities to determine, in the context of the applicable national law, whether the automatic nullity sanction contained in Article 81(2) EC applies to the entire contract/agreement or only to certain provisions.17 Under French law, the scope of nullity usually depends on what the parties hold to be the determining nature of the annulled provision. Thus, in order to decide whether the relevant provision is essential to the agreement, the judge must ascertain the intention of the parties at the moment of concluding the contract/agreement.18 Generally, the anticompetitive clause is declared null, rendering it unenforceable against the affected party. The following types of provisions have been annulled: discriminatory clauses in exclusive distribution contracts imposed on customers by companies in a dominant position;19 restitution clauses relating to petrol tanks imposed on petrol stations by petrol companies20 and clauses establishing exclusive ‘commercial agency contracts’ aimed at suppressing competition on the market.21 Sometimes the agreement is annulled in its entirety. This has been the case with agreements not to compete concluded between traders and estate agents that have undertaken not to exploit certain trades,22 with distribution contracts imposing a fee that became ‘a penalty pure and simple in the case of 17

Case 10/86 VAG France [1986] ECR 4071, para. 15. See in particular Bernard Teyssié (1976): ‘Réflexions sur les conséquences de la nullité d’une clause d’un contrat’, Dalloz Chronique, p. 281; and François Terré, Philippe Simler and Yves Lequette (1996): Droit Civil —Les obligations, 6th edition, Précis Dalloz, p. 326. 19 For examples of French case law in the area of competition (in the absence of precedents in EC law), see Cour de cassation, chambre commerciale, 2 December 1986, no. 8510.547, Bulletin civil IV, p. 197, Revue du droit de la propriété industrielle 1987, p. 11, Jurisclasseur édition générale 1987, IV, p. 50; Cour d’appel de Lyon, 2 June 1988, Petites affiches 27 June 1988, p. 6; Cour de cassation, chambre commerciale, 22 January 1991, no. 8816.188, Revue juridique de droit des affaires 1991/3, p. 202; for the annulment of various agreements involving prohibited practices, see Cour d’appel de Lyon, 13 June 1960, Dalloz 1961, p. 148, note by Goré; Cour d’appel de Paris, 4 May 1961, Jurisclasseur édition générale 1962, II, no. 12517, note by Gendrel and Lafarge; Cour de cassation, chambre commerciale, 1 March 1982, no. 8015.834, Bulletin civil IV, p. 69; Cour de cassation, chambre civile, 16 April 1985, no. 8315.527, Jurisclasseur édition générale 1985, IV, p. 227. 20 Cour d’appel de Paris, 1ère chambre, 5 May 1988, BOCCRF 11 May 1988; Cour de cassation, chambre commerciale, 18 February 1992, no. 8712.844, Jurisclasseur édition générale 1992, IV, p. 127, no. 1161, Revue trimestrielle de droit civil 1992, observation by J. Mestre; Cour de cassation, chambre commerciale, 26 May 1992, no. 9013.499. 21 Cour d’appel de Paris, 5ème chambre, 12 December 1996, Bulletin rapide de droit des affaires 1997, no. 3, p. 12, Revue juridique de droit des affaires 1997/5, no. 665. 22 Cour d’appel de Paris, 5ème chambre, 3 November 1982, Gazette du Palais 1984/1, juridique, p. 58, note by Laurent, Dalloz 1985, Informations rapides, p. 219, observations by Ch. Gavalda an Cl. Lucas de Leyssac. 18

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non-delivery’,23 or with agreements stipulating that the products in question could only be sold to ‘dispensing chemists’.24 Secondly, it is necessary to consider the question of restitution. According to the Court of Justice, the automatic nullity sanction contained in Article 81(2) EC applies retroactively.25 The retroactive nature of the nullity sanction presupposes that the parties’ status quo ante should be restored. This results in the restitution of benefits already given to either party. This principle applies to the parties to the agreement as well as to third parties who have dealt with them in the context of the stipulated obligations. As a matter of principle, restitution should be made in kind. However, when it proves impossible, a financial restitution must be ordered. There are, however, many exceptions to this principle, in particular when mutual restitution would be unfair. Case law provides for an important exception to the principle that the annulment of an agreement obliges the parties to pursue mutual restitution. This exception, sometimes called the ‘disqualification exception’, expresses a traditional rule that combines two maxims: nemo auditur propriam turputidinem allegans (no plea alleging an own wrongdoing can be heard) and, more often, in pari causa turpitudinis cessat repetitio (there is no room for restitution if the parties are associates in the wrongdoing). This rule prevents the litigants from invoking their own immorality in order to obtain restitution. The rule cannot be invoked to hold a nullity action at bay. The declaration of the nullity does not give effect to the wrongdoing—to the contrary, it prevents the wrongful agreement from having any effect. It must be noted that the above rule applies only if the nullity is based on a wrongdoing. If the contract/agreement is ‘simply’ illegal, the benefits already obtained from the performance of the contract/agreement could in principle be restituted. However, the courts have not hesitated to apply this rule to illegal contracts as well.26 Certain authors maintain that the rule nemo auditur hides something more in that it allows the judge to make a value judgment with respect to the behaviour of the parties.27 This weighing of the relative morality of the parties’ behaviour would explain why the courts have sometimes refused to grant restitution where the contract was merely illegal, rather 23 Cour d’appel de Lyon, 2 June 1988, Gazette du Palais 1988/1, juridique, p. 669, Quotidien juridique 2 March 1989, no. 26, p. 15; compare with Cour de cassation, chambre commerciale, 25 March 1991, no. 8910.800 and no. 8911.124. 24 Cour de cassation, chambre commerciale, 3 January 1996, no. 9413.169. 25 Case 48/72 Haecht II [1973] ECR 77, para. 27. 26 For operations in breach of the monopoly of exchange agents, see Cour de cassation, 1ère chambre civile, 16 July 1959, Bulletin civil I, no. 358, p. 298, detailing the application of the nemo auditor rule and the refusal to restitute reclaimed gains for reasons of ordre public; and Cour d’appel de Paris, 29 May 1986, Dalloz 1986, informations rapides, 308. 27 See Philippe Le Tourneau (1970): La règle nemo auditur, LGDJ Paris, no. 162, and note on Cour de cassation, chambre commerciale, 27 April 1981, Dalloz 1982, p. 51.

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than refusing to grant restitution only in cases of wrongdoing, as is normally the case. Finally, independent of the question of restitution, if the dissolution of an agreement causes prejudice to one of its ‘innocent’ parties or a third party, the grant of damages and interest as a compensation for the damage suffered is justified (see below).

II. Damages The second edition of the Vocabulaire juridique defines damages—also called damages and interests’ (dommages et intérêts)—as the sum of money that will be used to compensate a victim in order to make good an injury caused by a fault or the wrongful implementation of a contract. This value thus appears both as the remedy for a damage and as the result of a liability. Although remedies are not expressly stipulated in Articles 81 and 82 EC, the principle of ‘identity of treatment’ of Community and national provisions implies that any person considering himself the victim of an anticompetitive practice can claim compensation for the loss sustained as a result of this practice.28 The action for damages based on Article 1382 of the Civil Code29 can either be filed jointly with an action for nullity or brought separately. Pursuant to French law, the plaintiffs in practices prohibited by Article 81 or 82 EC cases will have to prove (1) the existence of a liability; (2) the damage; and (3) a causal link between the two.30 By way of introduction, it is worth emphasising that French as well as the Community competition rules are traditionally enforced by competition authorities, i.e., the Competition Council at the national level in France, and the Commission at the Community level, which both have the power to adopt interim measures, prohibit anticompetitive practices or abuses of dominant positions, and impose sanctions. As opposed to US antitrust law, complainants have only a secondary role in the enforcement of competition rules. This

28

See Cour de cassation, Syndicat des expéditeurs et importateurs en légumes et pommes de terre primeurs de la région malouine, mentioned above. 29 The general principle of liability of Art. 1382 of the Civil Code, according to which ‘any act of man that causes damages to another obliges the person at fault to repair it’ is the legal basis of the claims for damages linked to anticompetitive practices before French courts. This ground is supported by nearly all legal authors. One of its interests is that it unifies the ground without distinguishing according to the type of victim (e.g., a third party or party to the illicit agreement). 30 See Daniel Fasquelle (1988), ‘La réparation des dommages causes par les pratiques anti-concurrentielles’, Revue trimestrielle de droit commercial, 4, p. 763 (hereafter ‘Fasquelle 1’) and also from Fasquelle (2000), ‘Les damages et intérêts en matière anticoncurrentielle’, Contrats Concurrence Consommation 5–6, p. 14 (hereafter ‘Fasquelle 2’).

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reduced role is compounded by the difficulties encountered in proving before French courts the existence of an anticompetitive practice in the absence of a prior decision by a competition authority, in assessing the extent of the damage suffered and in proving the existence of a causal link between the fault and the damage.

1. The fault Under the general principles of French tort law, the victim has to prove the existence of a fault to the extent that the fault cannot be exonerated by a legally valid justification.

1.1. The existence of a fault In accordance with Articles 1382 and 1383 of the Civil Code, a natural or legal person is responsible for a fault he has committed. There is no definition of a fault in the Civil Code, although there is a definition of what constitutes an intentional, wrongful act under Article 1382 and what constitutes a mere negligence under Article 1383. In exercising judicial review over lower courts’ decisions, the French Supreme Court has defined more precisely the scope of this notion. On the basis of established case law under French criminal law or civil rules a fault arises where a legal provision provides for a legal sanction. Under French competition law, however, it would be theoretically sufficient for the victim to demonstrate the existence of an anticompetitive practice, even if this practice is not caught by a specific prohibition (e.g., under the de minimis rule). An action for damages can therefore be based simply on the proof of the existence of an anticompetitive practice. a. Practices that are specifically prohibited under EC competition rules Articles 81 and 82 EC can be invoked before national courts,31 and the Commission has encouraged private enforcement of these rules.32 The existence of a fault will result from the mere fact that Articles 81 or 82 EC were infringed.33 Two cases illustrate the possibility for plaintiffs to rely on EC law in 31 ‘As the prohibitions of Arts 85(1)[now Art 81(1)] and 86 [now Art 82] tend by their very nature to produce direct effects in relations between individuals, these Arts create direct rights in respect of the individuals concerned which the national courts must safeguard’, Case 127/73, BRT v. SABAM [1974] ECR 5, para. 16. 32 See the Notice on cooperation between national courts and the Commission on applying Arts 85 and 86 of the EEC Treaty, para.17 et seq. 33 It should be noted that in practice it is rare that an infringement of EC competition rules does not constitute an infringement of French competition law as well. Moreover, in case of doubt (in particular in the absence of a decision by the EC authorities punishing an anticompetitive behaviour), a French court may always refer a question to the Commission.

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order to bring an antitrust action before the French civil or commercial courts. The first case, Mors/Labinal,34 arose because two companies, Mors and Westland, had decided to create a joint venture in order to bid for a tender offer organised in July 1998 by British Aerospace (BA) for procuring a specific piece of equipment for Airbus model A330/340 (the TPIS pressure gauge for tyres). Their joint offer was initially short-listed. In the meantime, a third company, Labinal, which supplied most of the relevant equipment on the market, contacted Westland and obtained from BA that its bid would be considered. Mors reacted by bringing a combined action based on Article 81(1) EC (ex Art 85(1) EEC), invoking in particular a concerted anticompetitive action by Westland and Labinal, and on the basis of Article 82 EC (ex Art 86 EEC), invoking abuse of a dominant position by Labinal. The Court of Appeal of Paris found that an illicit anticompetitive practice had been carried out by the defendants with a view to delaying the signing of the contract and enabling Labinal to continue progressing in its research and development activities. The Court also found that Labinal enjoyed a dominant position on the relevant market, since it could act independently from its competitors and customers on neighbouring markets. The Court established that Labinal had abused this dominant position in particular by adopting an abnormal behaviour.35 The second case, Eco System/Peugeot, concerned parallel imports. Eco System was an agent that bought new cars from franchisees on behalf of individual buyers who were located in other EU countries. Having been cut off from its supplies by Peugeot, Eco System complained to the Commission. The Commission imposed an interim relief injunction on Peugeot36 and thereafter issued a prohibition decision.37 Peugeot’s appeal against the Commission’s decision was rejected by the Court of First Instance.38 Next, Eco System brought an action against Peugeot before the Paris Commerce Tribunal, which found that the judgment issued by the Court of First Instance on the basis of Articles 81 and 82 EC was enough to prove a fault for the purposes of Art. 1382 of the French Civil Code. According to the Paris Commerce Tribunal, it was clear that the company had engaged in anticompetitive practices in violation of Articles 81(1) and 82 EC.39 34

StéLabinal c/ StéMors et Sté Westland Aerospace, Cour d’appel de Paris, 19 May 1993, Europe July 1993, no. 299 ; JDI 1993/4, p. 357, observations by L. Idot. Labinal’s appeal to the Cour de cassation was dismissed on 14 February 1995. 35 In particular, Labinal was found to have used fidelity rebates aimed at deterring its customers to buy products from its competitors for the new market of TPISA 330/340 and proposed to match systematically its competitors prices. 36 By a decision of 26 March 1990, the Commission imposed interim measures on Peugeot, requesting in particular that Peugeot suspend a notice it had sent to its franchisees in Belgium and in Luxembourg requesting them not to supply Eco system. Peugeot’s appeals against this decision were all discussed (Case T–23/90 R [1990] ECR II–195; Case T–23/90 [1991] ECR II–653; Case C–322/93P [1994] ECR I–2727. 37 Commission decision of 4 December 1991, Case IV/33.157, OJ 1992 L66/1. 38 Case T–9/92, Automobiles Peugeot SA and Peugeot SA v. Commission [1993] ECR II–493. 39 Tribunal de Commerce de Paris, decision of 22 October 1996, unpublished.

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b. The enforcement of the de minimis rule As opposed to US antitrust rules, under which a plaintiff must prove antitrust injury,40 in the French system an antitrust fault is actionable under the law of torts even if there is no violation of a specific legal provision. Accordingly civil liability may be found even if the behaviour concerned is not specifically prohibited by competition law. For example, in the case of an anticompetitive practice that does not have an appreciable effect on the market, neither EC nor French competition rules would apply (e.g., under EC de minimis rules).41 Yet even in such a case a private party may have an interest in proving the existence of an anticompetitive practice under the law of torts. The case may be that the anticompetitive practice in question constitutes a fault. It is therefore irrelevant that this practice has not been investigated by the competition authorities (for example, for reasons of competition policy priorities, i.e., to the extent that competition authorities prefer to focus their efforts on more significant cases).

1.2. Legal defences Defences under the general principles of tort law must be distinguished from those resulting specifically from competition law. a. Common law defences In a classic private antitrust action the defendant can invoke the following defences: • force majeure, or inevitable accidents (e.g., proving that a price rise is not the result of a concerted anticompetitive practice, but the result of a financial or stock exchange variation for example); • contributory negligence of the plaintiff (in particular, the participation of the plaintiff in the concerted anticompetitive practice can lead to an apportionment of the liability); • contributory action of a third party in causing a damage (e.g., in the case of a price rise, it may be the case that the new price level does not result from a concerted anticompetitive practice, but from the actions of other market players); or • statutory authority (i.e., the anticompetitive practice can in fact be the result of the implementation of an order given by a public authority; even in the absence of such statutory authority situation, the existence of ‘irresistible pressure from a public authority’, if proved with clear, objective and converging elements, enables a defendant to protect itself from a claim).42 40

Phillip Areeda and Herbert Hovenkamp, Antitrust Law, para. 366 et seg. See Commission Notice on agreements of minor importance which do not officially restrict competition under Art 81(1) of the Treaty, OJ 2001 C368/13. 42 See Case T–387/94 [1996] ECR II–961. 41

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A defendant could also try to shift the responsibility for the wrongdoing on another party on the basis that it, the defendant, acted under constraint. This will, for instance, be the case, where a retailer of goods is forced by a supplier to accept a particular provision in a distribution contract or where a company has acted under pressure imposed by a dominant market player. Likewise, the judge may inquire whether the subsidiary or the parent of the defendant company is liable for the anticompetitive practice.43 b. Specific defences in concerted practices cases Provisions such as Article L 420–4 of the Code of Commerce (ex Article 10 of the Ordinance of 1986) and Article 81(3) EC (ex Article 85(3) EEC) allow for exemptions from the prohibition of anticompetitive practices where the restrictive practice results from a statute or where there is an economic justification for such derogation. The question thus arises of whether such provisions have an effect on the issue of liability. Under Article L 420–4 of the Code of Commerce, practices resulting from the application of legal provisions are not subject to the prohibitions contained in Articles L 420–1 and L20–2 of the Code (ex-Art.s 7 and 8 of the 1986 Ordinance). The Kam’s/Cerruti 1881 case is a good illustration of this approach.44 Thierry Kam’s was a business operating in the fashion industry. In 1991 Cerruti ceased supplying Kam’s orders on the basis that it had opened a competing shop under its own name. Thierry Kam brought an action against Cerruti based on the latter’s refusal to sell, seeking to obtain an order enjoining Cerruti to supply the goods and pay damages. In a judgment dated 4 May 1999, the French Supreme Court rejected Thierry Kam’s action. The Court found that although the refusal to sell constituted a prohibited practice, in the circumstances of the case Cerruti benefited from the legal exemption provided under Article L 420–4 of the Code of Commerce. Since no fault was established on the part of the defendant, the claim for damages failed. Case law interpreting these provisions often equates the exemptions from a prohibition with the absence of a constitutive element of the infringement. Namely, the prohibition provided in Articles L 420–1 and L 420–2 of the Code of Commerce would not apply if an important constitutive element of the infringement were missing, e.g., the autonomy of action of the defendant. There may be a question as to whether the application of Article L 420–4 exemption under French Law may bar a claim for damages based on Articles 81 and 82 EC. An important thing to note in this respect is that even if an agreement or an abuse of a dominant position is not caught under French competition rules, e.g., because of the existence of an exemption under Article L 420–4 43 It should be noted, however, that even a minor participation to the agreement would generally be enough to find joint liability. 44 Cour de cassation, chambre commerciale, 4 May 1999, Sté Thierry Kam’s/Cerruti 1881, Revue juridique du droit des affaires , 1999/8 p. 807, no. 101.

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of the Code of Commerce, they may still be caught under Articles 81 and 82 EC,45 and it cannot be excluded that a claim for damages might be made on the basis of EC provisions. Likewise, any restrictive agreement falling within the scope of Article 81(1) EC may qualify for an exemption under Article 81(3) EC. It is not clear whether the latter provision may be relied upon as a defence in the case of damage claims taken under Article 81(1) EC (the issue does not arise with respect to Article 82 EC, because it provides for a general prohibition without exception that can always be relied upon, including in the case of damage claims46). The answer to this question probably depends in most cases on whether an exemption has been granted by the Commission under Regulation 17/62. In the absence of a Commission exemption and if the conditions for the application of Article 81(3) EC do not seem to be met, national courts are free to determine whether the agreement infringes Art. 81 EC and thereafter draw all consequences under the relevant national law. If, by contrast, the conditions under Article 81(3) EC are met (and a notification has been filed under Regulation 17/62), the national courts have the option to stay the proceedings and, if necessary, issue an interim order. It is worth noting that the filing of a notification on Form A/B protects the parties to the agreement from fines as of the date of the filing. The notification, however, does not have the same effect with respect to actions based on the law of torts. It will therefore be for the judge to decide whether it is better to stay the proceedings or issue a decision, given that an exemption decision is normally retroactive and that there is a risk that the national judgment may contradict the Commission’s decision. It is unclear, given the above, what will be the attitude of a French court with respect to the exemption decision once the notification system under Regulation 17/62 will be scrapped. This is mainly due to the fact that the economic justification for the granting of an exemption under Article 81(3) EC — which the judge will have to apply directly in the new enforcement system — is not necessarily a valid defence in actions that are based on the law of torts (this is true under the ‘old’ system, even where there is an explicit exemption decision issued by the Commission). It is far from clear whether an undertaking that has implemented an exempted agreement that resulted in a damage can base its defence on the existence of the exemption provided under Article 81(3) EC. Under current French rules, and despite the Thierry Kam precedent, the possibility of successful action for damages cannot be excluded. The existence of an exemption decision or a ‘safe harbour’ may not be enough to annul the compensation rights that third parties derive from the law of torts. In particular, the French Supreme Court has found in the past that the fact that a law or a regulation authorizes a behaviour or an agreement under certain circumstances does not have the effect of exonerating those who implement this 45 46

See, e.g., Cour de cassation, 1ère chambre civile, 28 May 1994, Bulletin civil, no. 172. Case T–51/89, Tetra Pak Rausing SA v. Commission [1990] ECR II–309.

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practice from the general obligation of care and diligence under Article 1382 of the Civil Code.47

2. The loss (damnum) The plaintiffs, or the victim of a practice prohibited under Article 81 or 82 EC, also have to demonstrate the existence of a loss or damage. In accordance with the French Civil Code, the damage must meet certain conditions and be fully established before an indemnity can be paid. These conditions are often difficult to meet in the case of litigation relating to anticompetitive behaviour.

2.1.

The conditions

In most cases the damages sustained by a victim of a practice prohibited under Articles 81 and 82 EC will be of pecuniary nature, regardless of whether they are in the form of additional expenses or a loss of earnings. In certain cases the victim may also be in a position to obtain moral compensation for certain damages such as a loss of reputation. For example, in the Mors/Labinal case mentioned above, Mors was successful in obtaining the recognition of and the compensation for a moral damage resulting from Westland’s attitude and secret negotiations with Labinal, despite the prior joint offer by Mors and Westland. In addition, the damage must meet certain legal standards in order to give rise to a case for compensation under the law of torts. In particular, the damage must have actually occurred and be real (i.e., not be too remote). The two different situations could arise. First, (damnum emergens): French courts recognised that the victim of an anticompetitive practice can seek a compensation for the difference between the price paid to a company participating in a collusive agreement or abusing its dominant position and the price it would have paid in the absence of such a practice. In the Mors/Labinal case, Mors obtained the reimbursement of commercial and administrative expenses incurred as a result of the anticompetitive practice. Secondly, the damage may consist of a loss of future earnings that have not yet occurred (lucrum cessans). As an example, in a 1963 case the French Supreme Court recognised that buyers who had not been in a position to obtain their supplies from a fish market as a result of a concerted anticompetitive practice could invoke the loss of future earnings as a basis for their claims for damages. Damages can also be prospective, as long as they can be assessed with reasonable certainty. However, a simple possibility of future losses cannot give 47 Cour de cassation, 2ème Chambre civile, 14 June 1972, Dalloz 1973, p. 423, note by Lapointe. See also Ph. Le Tourneau and L. Casliet, ‘Droit de la responsabilité’, Dalloz Action, nos. 946–948.

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rise to compensation. For example, the loss of an opportunity to obtain new clients because of an illicit cartel or an abuse of dominant position would not give rise to compensation unless the loss is sufficiently certain. The assessment of the damage may be difficult in practice, in particular when the loss of earnings that resulted from the anticompetitive practice cannot be distinguished from the losses due to normal market fluctuations. The prospective nature of this assessment makes the evaluation of the damages even more difficult. The Eco System/Peugeot case illustrates these difficulties well. In this case, Eco System demanded more than 61 million French francs in damages for the loss in the value of the company that resulted from its almost complete disappearance from the market as a result of Peugeot’s practices. In addition, the plaintiff claimed 38 million French francs for the loss of earnings. These figures were calculated by Eco System on the basis of its turnover during the years preceding Peugeot’s refusal to supply and on the basis of the value of the company as assessed by Paribas in the context of a proposed partial acquisition. The claims were, however, partially rejected by the Paris Commercial Tribunal. In particular, the Tribunal considered the first type of loss to be too remote given that the value assessment made by Paribas during the proposed acquisition was influenced by the partial nature of the acquisition proposal and that market circumstances had changed since this proposal. Therefore these damages could not be linked solely to Peugeot’s anticompetitive actions. The Tribunal accepted, however, the demands put forward by Eco System with respect to the loss of earnings, but limited the amount of the compensation to 1.6 million French francs, instead of the 38 million French francs initially requested by Eco System. To arrive at this figure, the Tribunal calculated the losses sustained during the fiscal year when the anticompetitive practice occurred from the profits derived by the plaintiff during the previous year. This calculation method is surprising, as it does not take into account the evolution of the plaintiff’s turnover, the impact of the anticompetitive practice in question on the other activities of the company or the economic consequences of this practice.

2.2. Proof of damage As opposed to unfair competition litigation, where the case law traditionally seems to infer the existence of a damage from the mere fact that a fault has been committed, the plaintiff must prove precisely the existence and scope of the damage incurred. For example, as a result of anticompetitive practices in the Mors/Labinal case, Mors, the plaintiff, argued that the delay in negotiations that resulted from Westland’s and Labinal’s practices caused a loss of more than 1.5 million French francs, in addition to administrative and commercial expenses. This claim was based on precise accounting methods; however, the Court of Appeal of Paris rejected this claim because the plaintiff had not supplied any document or evidence to establish precisely the amount in question.

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3. The causality link The victim, or the plaintiff in tort cases that relate to anticompetitive practices, must also prove a cause-and-effect relationship between the infringement of Articles 81 or 82 EC and the damage incurred. In the following sections, we will examine the nature of causation and the burden of proof.

3.1. The nature of the causality link The nature of causation is determined by the Courts, which are called to choose among competing legal theories. In particular, the Courts can choose to follow either the theory of ‘equivalence of conditions’ or the theory of ‘proximate/dominant cause’. The theory of equivalence of conditions is based on the idea that all causes can be considered as equivalent and will eventually converge to produce the same effect. Under this theory it is enough that a loss is reasonably linked to the fault of the defendant for the defendant to be declared liable. The proximate/dominant cause theory is based on the idea that among the various causes that could have produced an effect, the Court must distinguish the dominant one (i.e., the cause in the absence of which the event would not have happened) from the secondary ones (i.e., the causes in the absence of which the effect would not have been prevented). Under this theory defendants are considered liable if they were at the origin of the dominant cause of the relevant damage. The case law related to damages awarded in the case of anticompetitive practices shows that French courts generally rely on the proximate/ dominant cause theory. For example, in the Eco System/Peugeot case, the Commercial Tribunal of Paris noted that the infringement committed by Peugeot had had a direct effect on Eco Systems’ activities. The Tribunal then proceeded to define the period during which the infringement was carried out by Peugeot. The Tribunal concluded that for the period following the cessation of the illegal practice it was impossible to find a direct link between Peugeot’s fault and the loss incurred by Eco System. However, it is clear that the dominant cause test can be very difficult to meet in the case of complex antitrust violations. For example, a price rise could be the result of an anticompetitive practice, but also of numerous other economic factors, such as the rise of raw material prices or fluctuations of exchange rates. Likewise, in cases of predatory pricing it is difficult to distinguish between actual barriers to entry and simply aggressive and vigorous competition.

3.2. The burden of proof It is for the plaintiff to prove that the infringement is at the origin of the loss incurred. To facilitate the plaintiff’s task, the Courts may in certain cases base their decisions on a quasi-legal presumption of causality and rely on the proof

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of the damage itself, assuming that the plaintiff can demonstrate that it has not caused such damage itself. On the basis of the case law referred to above, it seems that this presumption of causality is not applied in cases where the damage claims relate to anticompetitive practices. In such cases, the plaintiff must also evaluate the amount of the loss incurred and prove precisely the causal link between the infringement and the damage incurred. This task is, however, facilitated if the plaintiff can base its demonstration on a prior decision by an antitrust authority related to the relevant anticompetitive practice. For instance, in the Eco System/Peugeot case, the Commercial Tribunal of Paris took into account the Commission’s decision, relying on the interim relief injunctions adopted by the Commission to establish that Peugeot’s behaviour had impacted Eco System’s business. In particular, based on the analysis of the Commission (as confirmed by the Court of First Instance), the Court accepted the link between Peugeot’s behaviour and the losses incurred by Eco System.

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V Jürgen Basedow* Private Enforcement of Article 81 EC: A German View

I. Introduction The ‘modernisation’ of European competition law amounts to a decentralisation of the application of Article 81(3) EC that will have a double impact on the private enforcement of EC competition law in civil courts. The immediate consequence will be that Article 81(3) EC will be directly applicable. Therefore, civil courts will be in a position to decide whether a certain anti-competitive practice violates the prohibition contained in Article 81(1) EC. Besides not having to suspend anymore the proceedings and wait for a decision of the European Commission, civil courts will also be allowed to evaluate a possible exemption of the respective anti-competitive behaviour under Article 81(3) EC. These possibilities should certainly speed up private litigation, if effectively used. A second and indirect consequence of the decentralisation project will be a shift of the responsibility for the enforcement of EC competition law from the Commission to civil courts in the Member States. As the Commission pointed out in the Explanatory Memorandum preceding its proposal for a Council regulation,1 this ‘proposal aims at promoting private enforcement through national courts.’ This would seem to be necessary in order to compensate for the Commission’s partial withdrawal from enforcement. However, the framework of civil litigation is almost exclusively provided by national law, with regard to both substantive and procedural provisions. It is particularly disturbing that, apparently, the Commission has not investigated these aspects in relation to its reform proposal. The following survey is meant to shed some light on the German legal system and point out those elements that might hinder the efficient private enforcement of EC competition law. As the Commission is becoming aware of such flaws, it might also realise that the decentralisation proposal entails some follow-up problems. If these problems are not dealt with through appropriate measures concerning the harmonisation of national laws, the purported increase of private litigation might remain just wishful thinking, and the overall level of enforcement of EC competition law could in fact decrease. * Director, Max-Planck-Institute for foreign private law and private international law; Member, German Monopolies Commission. 1 Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No. 1017/68, (EEC) No. 2988/74, (EEC) No. 4056/86 and (EEC) No. 3975/87 (‘Regulation implementing Articles 81 and 82 of the Treaty’), COM (2000) 582 fin., see the Explanatory Memorandum, section 2 C1(a).

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For the purposes of the following analysis we distinguish between litigation between the parties to a restrictive agreement (II) and third-party claims (III). While claims of the latter type are particularly important in the field of antitrust, they meet serious obstacles in terms of proving the relevant facts (IV), lack of legal certainty (V), and lack of litigation incentives for the potential plaintiffs (VI).

II. Contractual enforcement claims Litigation is very common between parties to contracts containing restrictive clauses. The plaintiff will usually claim specific performance of a contract, payment of the agreed remuneration or damages for breach, while the defendant will invariably argue that the whole contract or relevant parts of it are void under Article 81(2) EC because of their anti-competitive content or effects. In turn, the plaintiff will plead the prevailing competitive advantages of the agreement that make it lawful under Article 81(3) EC. Under Regulation 17/62, the latter falls within the exclusive competence of the European Commission, and the national court should suspend proceedings until the Commission has decided on an exemption.2 It is certainly true that the time needed for this type of private proceedings could be reduced considerably if the courts were able to decide for themselves whether the restrictive effects of the agreement are outweighed by the rationalising effects and consumer advantages within the meaning of Article 81(3) EC. However, it should be remembered that Article 81(3) EC also requires an assessment of the remaining competition in the market; this is difficult to assess for anyone who does not have sufficient market information. While competition authorities such as the European Commission may acquire that information through appropriate investigations, civil courts rely on the information provided by the parties.3 If the party who claims the benefit of Article 81(3) EC cannot produce sufficient data concerning the relevant market, it will have to bear the consequences under Article 2 of the draft regulation. It cannot expect the court to provide any information on the relevant market. The gap could be filled by the Commission, and Article 15 of the draft regulation allows the national courts to ask the Commission for information in its possession or for its opinion. However, it is significant that the Commission has no corresponding duty to respond, although such a duty flows in general terms from Article 10 EC.4 2 3

Case C–234/89 Delimitis v. Henninger Bräu AG [1991] ECR I–935, paras. 51-54. See Rosenberg/Schwab/Gottwald (1993): Zivilprozeßrecht 15th ed., München, p. 424

seq. 4 See Delimitis (supra note 2), para. 53; Case C–2/88 Zwartveld [1990] ECR I–4405, para. 10.

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Of course, this defect of the draft regulation may be amended. But irrespective of possible modifications, the aforementioned type of contractual disputes can hardly account for private enforcement of competition law, and they certainly do not increase in number on the sole ground that private courts are in a position to directly apply Article 81(3) EC. This is because the unlawfulness of the restrictive agreement is a point that every defendant will raise, regardless of how long the proceedings will last, that is, irrespective of the decentralisation of the application of Article 81(3) EC. It follows that this type of proceeding need not be encouraged as a kind of compensation for the partial withdrawal of the Commission.

III. Third party claims The other type of proceedings—claims made by parties who are not involved in the anti-competitive agreement and who have suffered loss as a consequence of that scheme—is different. Plaintiffs will apply for an injunction or for an award of damages to compensate their losses. The Commission has explicitly indicated that ‘the role of the national courts here complements that of the competition authorities’,5 and that the civil courts must therefore be allowed to apply Article 81(3) EC directly. But what is the reality of such claims? They appear to be virtually inexistent. Commentators have characterised their practical significance as marginal,6 and do not cite a single reported case which ended in an award of damages in favour of a cartel victim.7 The reasons for this can hardly be ascribed to deficits of the substantive law. Section 823(2) of the German civil code (Bürgerliches Gesetzbuch, BGB) provides a fairly clear cause of action. Under that provision, a person who has infringed a statute that purports to protect another is liable to compensate the resulting damages if the infringement has been committed intentionally or by negligence. It is generally acknowledged that Article 81(1) EC is a protective statute for the purposes of Section 823(2) BGB insofar as the restriction directly affects actors on the other side of the market, that is, suppliers or clients.8 Depending upon the type of restrictive agreement, competitors may also be 5

Preliminary consideration no. 7 of the draft regulation, see supra note 1. See, e.g., Karsten Schmidt (1997), commentary in Immenga/Mestmäcker, eds: EGWettbewerbsrecht vol. I, München, p. 318 no. 71, with further reference. 7 See S. Kon (2000): ‘The Commission’s White Paper on Modernisation: The Need for Procedural Harmonization’, in Barry Hawk (ed.): 1999 Fordham Corporate Law Institute, pp. 233, 247. 8 BGH 10.11.1987 Neue Juristische Wochenschrift 1988, 2175 at 2177; BGH 23.10.1979 Neue Juristische Wochenschrift 1980, 1224, 1225; see H. Weyer (1999): ‘Gemeinschaftsrechtliches Verbot und nationale Zivilrechtsfolgen—Eine Untersuchung am Beispiel der Artikel 81, 82 EG-Vertrag’, Zeitschrift für Europäisches Privatrecht, pp. 424, 439 and 447, with further references. 6

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protected.9 The protective effect would appear to extend to consumers who are clients of a cartel member but not to those who purchase the goods or services after further intermediary transactions at the end of the chain of distribution. While the explicit requirement of fault in Section 823(2) BGB has been criticised by the European Court of Justice in other contexts because of its subjective character,10 it does not appear to be the decisive obstacle hindering the effective enforcement of EC competition law in this respect. The infringement of Article 81(1) EC presupposes intentional behaviour of the participating undertakings.11 Section 823(2) BGB allows for the award of damages, but it is generally accepted that a claim for the termination of the infringement is wellfounded under the same conditions on the basis of the analogous application of Section 1004 BGB.12 Thus, the absence of third party claims is not due to deficiencies of the substantive rules providing the cause of action. Advocate-General Van Gerven’s13 suggestion that there is a need for an independent claim flowing from Community law can hardly be assessed from a German point of view, although such a cause of action might facilitate the enforcement of claims subject to the national laws of other Member States. From a German perspective, the only perceptible advantage of a cause of action provided by Community law would be the extension of standing to consumers and perhaps to consumer associations.14 Those who wish to understand the present lack of third party claims should not speculate about substantive law, but should rather look to the economic and procedural circumstances that determine its application and that apparently deter the victims of cartels from bringing suit. If the Commission wants to boost the role of civil courts in this area, it will have to create conditions that encourage possible plaintiffs to enforce their rights under Section 823(2) BGB.

IV. Problems of proof Under the general rules governing civil proceedings, the plaintiff bears the burden of alleging and proving facts that give rise to the claim, and particularly 9

See K. Schmidt, supra note 6, p. 320 s. at no. 79. Case C–177/88 Dekker [1990] ECR I–3941, paras. 23–25; Case C–180/95 Draehmpaehl v. Urania [1997] ECR I–2195, para. 21; see also Joint Cases C–46/93 and C–48/93 Brasserie du Pêcheur and Factortame [1996] ECR I–1029, paras. 76, 78. 11 See Emmerich (1997), commentary in Immenga/Mestmäcker, supra note 6, vol. I, p. 152 no. 103, who describes both agreements and concerted practices as two forms of an ‘intentional coordination of behaviour.’ 12 BGH 23.10.1979 Neue Juristische Wochenschrift 1980, 1224, 1225; K. Schmidt, supra note 6, p. 322 no. 85. 13 See the opinion of Advocate-General Van Gerven in Case C–128/92 Banks [1994] ECR I–1209, paras. 36 seq.; contra, H. Weyer ( supra note above no. 8), pp. 437–39. 14 Under section 33 of the German statute against restrictions of competition industry associations have standing to apply for injunctions, but not for damages; consumer associations are not mentioned. 10

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the liability of the defendant.15 This means that the plaintiff must prove the existence of the cartel or the concentration of anti-competitive practices, as well as the active involvement of the defendant in that scheme. It goes without saying that this is particularly difficult for someone who, although affected by the practice, did not actually participate in the agreements and has no access to the documents that give evidence of their existence. A radical solution would be to create a system of pre-trial discovery, as in the US,16 but there are good reasons to reject such a proposal. First, civil proceedings in most continental countries do not end with one trial that can be prepared by a pre-trial discovery; contrary to rules in the US, such discovery is not required to create procedural expediency and efficiency. Secondly, it would not be possible to limit the rules on pre-trial discovery to the small sector of antitrust litigation, and to maintain the traditional methods of fact finding in all other areas of the law. In order to be implemented effectively, the law of procedure must be as uniform as possible. However, a comprehensive harmonisation of the fact-finding rules of civil procedure appears to be out of the Community’s reach at present.17 Thirdly, the rules on pre-trial discovery are tailored to the structures of a court system and a legal services industry that are essentially inexistent in most European countries. One might think of a less radical solution, consisting of a procedural obligation of the defendant to clarify certain facts that have occurred in its sphere of influence. It is not uncommon that the courts ease a party’s burden of proof with regard to facts and circumstances allocated in the sphere of the other party. An example is provided by the case law dealing with the infringement of liability limits in the carriage of goods. Under Article 29 of the Convention for the international carriage of goods by road (CMR), the carrier looses the right to limit its liability in case of gross fault. It is widely acknowledged that the organisation of the carrier’s transport business may contain defects that make it grossly negligent for the purposes of Article 29. While it is up to the sender or the consignee of the goods to prove gross negligence, that party will usually not know the details of the carrier’s internal business organisation. Therefore it could be deprived of the benefit of full compensation for procedural reasons; the courts do not accept this. Thus the Federal Court has imposed a procedural duty on the carrier to inform the court about its internal organisation, and this duty arises as soon as the sender or consignee has made a prima facie case for the carrier’s gross negligence relating to the internal organisation of its business.18 By analogy, one might envisage a corresponding duty of the defendant when the plaintiff provides information that justifies the prima facie assumption 15

See Rosenberg/Schwab/Gottwald (supra note 3), p. 670 seq. See Rule 26 of the Federal Rules of Civil Procedure, 28 U.S.C.A. 26. 17 A limited legislative competence is laid down in Art. 65(c) EC. 18 BGH 19.6.1986 VersR 1986, 1019, 1020 f.; OLG Nürnberg 10.12.1992 TranspR 1993, 138, 139; see also J. Basedow (1997), in Münchener Kommentar zum Handelsgesetzbuch, vol. VII, p. 1189; Art. 29 CMR no. 38. 16

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of a concerted practice; in that case it would be up to the defendant to inform the court about the precise background of that business practice. A Community measure adopted under Article 83 EC could provide for such a corresponding duty of the defendant. That act would have to take precautions against the disclosure of business secrets. Similar difficulties exist with regard to proof of the loss sustained by the plaintiff as a consequence of anti-competitive practices. While it may be possible for the plaintiff to show a fall in his sales that may have several causes, he will often be unable to identify the restrictive agreement or concerted practice as the relevant cause. Here again, the plaintiff’s burden of proof should be eased. In the similar context of a patent or trademark infringement, the courts have allowed the plaintiff to calculate its damage in a threefold way: either by showing its precise losses, or by charging an average licence fee, or by stripping the defendant of the profit derived from the infringement.19 One might think of similar generalising rules. Thus a drop in the plaintiff’s turnover that is somehow related to the market affected by the restrictive practice should be conclusive evidence of relevant losses and their causation by the restrictive practice (if the defendant’s turnover related to that market was simultaneously rising). Here again it would be indispensable that the defendant disclose the relevant information. Community action in this field appears all the more important given the differences in the standards of proof applied in the various Member States. While a fact is established in the light of the balance of probabilities in common law jurisdictions, German and other continental laws require a ‘probability next to certainty’ (that is, beyond reasonable doubt).20 The higher standard of proof is obviously more difficult to match. Thus fact finding by the courts more often depends upon rules relating to situations of uncertainty, that is, upon the onus of proof.

V. Legal certainty A second condition precedent to the initiation of civil litigation would be a high degree of legal certainty. While the Commission notes that ‘in the new enforcement system, undertakings’ legal certainty will remain at a globally satisfactory level,’21 this appears to be rather meaningless. Legal certainty cannot be 19 RG 8.6.1895, RGZ 35, 63 (67 ff.); RG 31.12.1898, RGZ 43, 56 (58 f.); BGH 6.3.1980 Neue Juristiche Wochenrecht 1980, 2522 (2524); Bernhardt/Kraßer (1986): Lehrbuch des Patentrechts, 4th ed., München, p. 629; Hubmann/Götting (1998): Gewerblicher Rechtsschutz, 6th ed., München, p. 213. 20 Coester-Waltjen (1983): Internationales Beweisrecht (1983) p. 276 seq. 21 European Commission: White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty — Commission Programme No. 99/027, COM (1999) 101 fin. p. 29 no. 78.

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assessed globally, but only individually with regard to a specific situation. Before making the decision to sue the defendant, the plaintiff must be reasonably sure of winning.22 Otherwise it will either try to reach arrangement with the members of the cartel or will leave the relevant market altogether. The plaintiff will not tie its resources to an endeavour with a very uncertain outcome. However, it would appear that the Commission is going to reduce the level of legal certainty rather than to raise it. The draft guidelines concerning horizontal cooperation23 purport to lay greater weight on economic factors that are to be taken into account in the application of Article 81 EC. Thus the Commission increases the significance of economic information to the outcome of a case, although such information is outside the reach of civil courts in many cases. It also requires the court to make decisions that are not inherently legal, such as the weighing of short-term consumer interests against their long-term interests, or weighing the interests of one consumer group against the interests of others, and so on. The rising significance of economic factors, as envisaged by the Commission, will by necessity reduce the predictability of decisions and thus discourage some plaintiffs from bringing suit in civil courts.24

VI. Litigation incentives The victim of a cartel or concerted practice has suffered losses as a result of the conspiracy of its competitors or business partners, and knows about the power of their combination. He is also aware of the investment in time and money that legal proceedings will entail. He will make that investment only if he can be reasonably sure that the expected advantages of the litigation exceed the possible losses. From this perspective, the hope for compensation of the losses already suffered is not a very efficient incentive to bring suit. Many plaintiffs will prefer to invest in other, more lucrative, activities than in the conduct of litigation for the mere compensation of sustained losses. If the Commission wants to use private initiative for the purposes of enforcing competition laws in the public interest, it should consider the US model of a private attorney general who is spurred to enforce the law by the expectation of treble damages.25 It is certainly true that a punitive element and a steering purpose are inherent 22 Cf. J. Basedow (1996): ‘Rechtssicherheit im europäischen Wirtschaftsrecht. Ein allgemeiner Rechtsgrundsatz im Lichte der wettbewerbsrechtlichen Rechtsprechung’, Zeitschrift für Europäisches Privatrecht, pp. 571–74. 23 OJ C118/3 2000. 24 J. Mestmäcker (2000): ‘The EC Commission’s Modernization of Competition Policy: A Challenge to the Community’s Constitutional Order’, 1 European Bussiness Organisation Law Review, pp. 401, 425. 25 Section 4 Clayton Act, 38 Stat. 730 (1914), codified as amended, 15 U.S.C.A. § 15, grants the plaintiff treble damages for violation of the ‘antitrust statutes’ which include the Sherman Act, see the definition in Section 1 Clayton Act.

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in treble damages, and that most legal systems in Europe reject the idea of damages exceeding pure compensation. However, this would not preclude the Community from introducing similar rules in its own legal order. To a certain extent this has already occurred in the framework of Directive 2000/35 on combating late payment in commercial transactions.26 The Directive establishes a legal interest rate for late payment that is seven points above the refinancing rate applied by the Central European Bank. There is no question that the resulting interest rate by far surpasses the rate that the creditor would have to pay on the financial market in order to procure the sum owed by the debtor. Thus, the payment prescribed by the Directive exceeds pure compensation of the creditor’s loss. The reason is indicated in the preliminary considerations of the Directive that describe the harmful effects of late payment and that therefore conclude that the consequences of the delay in payment must be such to ‘discourage’ this practice.27 It clearly emerges from the use of the language of ‘discouragement’ and the content of the Directive that Community law has moved beyond limiting damages to pure compensation. It has instead espoused the idea of providing incentives to market actors by means of private law provisions. The Commission would be well advised to elaborate on that idea in order to foster the private enforcement of competition law.

VII. Conclusions The application of EC competition law by private courts currently has some practical significance in contractual disputes between the parties to restrictive agreements. The ‘modernisation’ of EC competition law will not affect this type of litigation. However, third party claims filed by victims of a restrictive agreement or a concerted practice against the participating undertakings are virtually non-existent in Germany. If that type of litigation is intended to compensate for the partial withdrawal of the Commission, some legal changes are required: • The Commission should not only allow national courts to submit requests for co-operation; it should be under an obligation to grant that co-operation. • The plaintiff’s burden of proof concerning the existence of a restrictive agreement or a concerted practice must be eased by presumptions, and obligations on the defendants to disclose information about their business practices. • The plaintiff’s burden of proof concerning its own loss and the causation of that loss by the restrictive practices should be similarly eased. • Instead of emphasising the weight of economic elements in the application of Art. 81 EC by adopting the envisaged guidelines on horizontal restrictions, 26 27

Directive of 29.6.2000, OJ L200/35 of 2000. See supra note 26, preliminary consideration no. 16.

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the Commission should increase legal certainty by drafting a restatement of European competition law containing clear legal rules. Even if these amendments are carried out, it would appear highly doubtful whether private plaintiffs will take the risk of commencing a private action without a promising incentive such as the expectation of treble damages.

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VI Marina Tavassi* Substantive Remedies for the Enforcement of National and EC Antitrust Rules before Italian Courts

I. Content of antitrust remedies I would like to focus on the types of remedies that can be awarded by Italian courts in antitrust cases, and to relate some of the issues that arise in—and some of the solutions emerging from—the case law. Interim relief is undoubtedly of particular importance in the field of antitrust, as this is what litigants often seem to be most interested in. Leaving aside the procedural aspects—to be examined during the second session of the workshop—I would now like to examine the content of the interim relief measures. Law no. 287/90 gives the Italian Courts of Appeal sole competence, in the first and last instance, to judge nullity actions and claims for damages, as well as to grant interim relief in relation to infringements of the Italian antitrust rules. The reference in Article 33, II of the Law no. 287/90 to ‘interim measures’ (‘provvedimenti d’urgenza’) was broadly interpreted so as to include both remedies that are considered ‘typical’ in the Italian jurisdiction and that are only broadly covered by Italian civil procedure rules—these are remedies whose content is defined by law (for example, seizure), and those that are considered ‘atypical’. In practice, cases brought before the Courts of Appeal almost exclusively request the granting of ‘atypical’ forms of interim relief, that is, requests for restraining injunctions (‘inibitoria’) or for the injunction of positive action obligations. Interim measures can be aimed at: • preventing an infringement of the law by ‘freezing’ the existing state of facts pending a decision on the case via the ordinary court procedures; • preventing aggravation of the damaging consequences of an infringement of the law by anticipating the effects of a sanction pending its adoption; • preventing the risk that the enforcement of an eventual sanction will be hampered in the future. (In other words, taking the necessary measures for ensuring the effective implementation of an eventual sanction.1)

* Counsellor, Court of Appeal of Milan. 1 The classification is taken from Jannuzzi (1951): Per la ricerca di un diritto sostanziale di cautela, in Giust. civ., 582; see also Dini-Mammone (1997): I provvedimenti d’urgenza nel diritto processuale civile e nel diritto del lavoro, Milano, 21 e ss.

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Another distinction, in so far as interim measures are concerned, is that between ‘conservative’ (‘provvedimenti conservativi’) and ‘anticipatory’ measures (‘provvedimenti anticipatori’).2 The former are directed at ensuring the future effective application of a sanction. They consist of simply preserving the existing factual or legal situation pending the adoption of a definitive court decision. The latter aim to anticipate the effects of the future judgment, in part or as a whole, on the merits of the case.

II. Restraining injunctions (‘L’inibitoria’) One of the interim measures raising the most interest is the restraining injunction (‘l’inibitoria’). The possibility of adopting a restraining injunction is explicitly foreseen in the areas of patent, trademark and copyright law (Articles 83, 63 e 163 of the corresponding special laws3), as well as by the Italian Civil Code, in the area of unfair competition (Article 2599). In practice, restraint injunctions are also used in circumstances that are not specifically covered by the law, based on an atypical interpretation of Article 2

The distiction was established in Calandrei (1996): Introduzione allo studio sistematico dei provvedimenti cautelari, Padova, p.55 e ss.; and re-proposed by Proto Pisani (1991): La nuova disciplina del processo civile, Napoli, 306. See also Frisina (1986): ‘La tutela anticipatoria: profili funzionali e strutturali’, Rivista di diritto procesuale, 377; Ricci (1990): ‘Per un’efficace tutela provvisionale ingiunzionale dei diritti di obbligazione nell’ordinario processo civile’, Rivista di diritto procesuale, 1021; Lapertosa (1997): La tutela sommaria anticipatoria, ivi, 767; Calvosa (1963): La tutela cautelare, Torino, 268; Ghirga (1997): ‘Principi generali del processo e misure provvisorie’, Rivista di diritto procesuale, 489; Montesano (1985): ‘Problemi attuali e riforme opportune dei provvedimenti cautelari e in ispecie d’urgenza, nel processo civile italiano’, in Rivista di diritto procesuale, 220; Rapisarda (1987): Profili della tutela civile inibitoria, Padova, 113; Tarzia (1985): ‘Considerazioni comparative sulle misure provvisorie nel processo civile’, in Rivista di diritto procesuale, 240, and ‘Rimedi processuali contro i provvedimenti d’urgenza’, ivi, 1986, 35; Mandrioli (1985): ‘I provvedimenti d’urgenza: deviazioni e proposte’, ivi, 657; Tommaseo (1983): I provvedimenti d’urgenza—struttura e limiti della tutela anticipatoria, Padova; Conte (1995): ‘Dalla tutela d’urgenza alla tutela sommaria’, Giurisprudenza italiana, I, 2, 849; by the same author, ‘Tutela d’urgenza fra diritto di difesa, anticipazione del provvedimento ed irreparabilità del pregiudizio’, in Scritti in onore di Mandrioli, I, Milano, 1995, 509, and ‘La tutela del diritto di credito tra provvedimento d’urgenza e ordinanza ex art. 186 quater c.p.c.’, in a note to the Court of Milan dated 14 August 1995 (where the author sustains the view that interim relief measures could even fully anticipate the final judgment), Giurisprudenza italiana, 1996, I, II, 354; Tommaseo (1996): ‘Vizi del consenso . . . e abuso dell’inibitoria urgente’, note to the Court of Udine of 22 June 1995 (for the hypothesis of restraining injunction granted on the basis of art. 700 Civil Procedure Code), Giurisprudenza italiana, I, II, 427. 3 See text modified by D.Lgs. of 19 March 1996 n. 198, enforcing in Italy the TRIPs agreement on patents and trademarks, ann the recent law of 18 August 2000, no. 248, on the subject of copyright. Art. 83 l.inv. is invoked in Art. 1 R.D. of 25 August 1940, no.1411, as a model of utility and for decorative purposes.

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700 of the Civil Procedure Code, which seeks to prevent the perpetuation of an infringement of the law.4 In antitrust, periculum in mora is presumed, given that the damage caused by the anti-competitive behaviour often and by its nature cannot be compensated. For instance, one can imagine the loss of clientele or employees incurred by a competitor, or the damage inflicted on a company’s image; these are situations in which the passing of time makes it difficult to return to the preceding situation. As the case law demonstrates,5 the Italian Courts have often awarded interim relief and, beyond the immediate purpose of inhibiting a particular anti-competitive behaviour, have also decided to publicise the measure among consumers.6 An inhibiting element can certainly be found in the warning injunction (‘provvedimenti di diffida’) to be issued by the Italian Antitrust Authority in cases of repeated infringements of Articles 2 and 3 of the national antitrust law (as defined in Article 15 of the same law), as well as in the power to temporarily suspend operations pending the conclusion of an investigation (Article 18).7 The Italian Courts of Appeal have considered admissible requests for injunctions to restrain a behaviour assumed to infringe national antitrust rules and, on a more general level, for an injunction imposing non facere. As restraining injunctions are not specifically foreseen by Article 33, paragraph 2, the question arose as to whether such types of remedies can be used for temporary and preventive purposes. At the same time it must be observed that, even if an interim relief measure serves the purposes of the final judgment,

4

For a discussion on this subject see: Rapisarda (1987): Profili della tutela civile inibitoria, Padova; Libertini (1988): ‘La tutela civile inibitoria’, Jus, 42. 5 Among the numerous court decisions in the application of Art. 700 on the subject we mention: Pretura di Milano, 2 febbraio 1988, ivi, 1989, 109; Pretura di Roma, 3 dicembre 1988, ivi, 1988, 856; Tribunale di Monza, 3 luglio 1992, ivi, 1992, 751; Tribunale di Firenze, 15 maggio 1993, ivi, 1994, 3215; Tribunale di Treviso, 14 luglio 1993, ivi, 1993, 662; Tribunale di Pistoia, 22 novembre 1993, ivi, 1993, 760; Tribunale di Ravenna, 13 agosto 1994, in AIDA, 1995, 328/2; Tribunale di Milano, 3 ottobre 1994 in G.A.D.I., 1994, 325 e 17 novembre 1994, ivi, 1994, 941; Tribunale di Roma, 20 gennaio 1995, ivi, 1995, 3285; Tribunale di Torino, 8 giugno 1995, ivi 1995, 3322, e 7 luglio 1995, ivi, 1995, 3330; Cassazione, 30 maggio 1981, 3546, ivi, 1981, 1373. For the procedural issues arising in the enforcement of restraining injunctions, it is interesting to note the decision of the Corte di Cassazione of 25 July 1995 n. 8080, which establishes that the issuing of restraining injunctions directed at unfair competition acts that have as their object an an obligation to restrain from action is prone to direct execution, including forceful, yet via indirect coercive measures (‘misure coercitive indirette’) generally foreseen by the law. 6 The following judgments contain positions favourable to the publication of interim relief measures: Pretura di Milano 19 luglio 1991, in Foro pad., 1992, 166; Tribunale di Milano, 4 luglio 1985, in G.A.D.I., 1985, 1940 e 6 luglio 1989, ivi, 1989, 50; Tribunale di Firenze, 15 maggio 1993, ivi, 1994, 3215, e 22 marzo 1995, ivi, 1995, 3302; Tribunale di Torino, 22 marzo 1995, ivi, 1995, 3302 e 8 giugno 1995, ivi, 1995, 3322; Trib. Firenze, ord. 5 marzo 1998 in G.A.D.I., 1998, n. 3798 e 7 maggio 1998, ivi, n. 3809. 7 We remind in this context that the Commission requests national competition authorities to adopt efficient interim measures; see Commission Communication of 15 October 1997.

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it does not necessarily have to preclude the substance of the latter; indeed, an interim measure cannot contain provisions regarding the nullity of agreements or award damages. Without these limitations, the legal provision concerning urgent interim measures would be left without meaning and effect. As already indicated, within the ambit of nullity actions or damage claims, or with a view to filing such actions or claims, one may request the adoption of the interim relief measures that are the most appropriate and instrumental to the cause. Restraining injunctions are one example; indeed, one needs to impede an anti-competitive behaviour causes further, and perhaps irreversible, damage. The Italian Courts of Appeal upheld this view in several decisions appealing against restraining injunctions. In particular, the Court of Appeal in Milan pronounced this result in Avir/ENEL, Telsystem/Sip and Comis/Ente Fiera di Milano.8 In the last of these cases, the Court—although excluding fumus boni iuris for lack of proof concerning the dominant position in the relevant market of the Ente Fiere, and consequently of lack of proof concerning the inferred abuse of its dominant position—confirmed the principle of the admissibility of requests for restraining injunctions that are aimed at upholding the law and containing the alleged damages. In this context, the Court referred to wellestablished principles arising from the jurisprudence of the European Court of Justice and the Court of First Instance, and to the numerous interim measures —varied and tailored to the case— that have been adopted.9 A contrary view was taken by the Court of Appeal of Rome in a case concerning the broadcast of a television advertisement [Case 6/17 April 1995, Comitato per il Referendum/Fininvest-R.T.I. Reti Televisive Italiane]. The Court excluded the admissibility of a request to adopt a restraining injunction on the basis that only the Antitrust Authority (and, at second instance, the Regional Administrative Tribunal of Latium) was competent to adopt such a measure.

III. Positive action injunctions (‘Ordini di fare’) It has been shown above that interim remedies can include injunctions imposing ‘positive action’ obligations or ‘restraining-from-action’ obligations in cases involving absolute rights or the rights of creditors. It is important that the effects of the interim measure do not exceed those of the final judgment in the case, considering its instrumental role with respect to the latter. To be more precise, interim measures cannot have a higher impact upon the situation at hand than that of the final judgment, although they can have a different object with respect to the measures imposed through the latter. Indeed, the temporary nature of interim measures requires that they do not induce an irreversible 8

Decisions of 15 July 1992, and 5 February 1996. See Tavassi, p. 241 e ss., in Tavassi-Scuffi (1998): Diritto processuale antitrust, Giuffré, Milano. 9

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change of situation that would prejudice the rights of those whom they address.10 Atypical interim measures imposing positive action obligations have been adopted in the area of unfair competition. Examples include the obligation to correct earlier announcements11 to withdraw goods that constituted the object of an unfair competition act,12 to remove distinctive signs whose display represents an act of unfair competition,13 or to modify the packaging of goods similar to a competitor’s.14 Another example concerned the poaching of employees from a competitor (‘storno di dipendenti’).15 However, positive action injunctions have very rarely been awarded in the area of antitrust.

IV. The obligation to enter a contract (‘Obbligo a contrarre’) Another question often arising in antitrust concerns the admissibility of requests for interim relief measures that anticipate the effects of a constitutive judgment. That is, requests for interim measures that have the effect of an agreement between the parties or impose the obligation to conclude an agreement. In the Italian system, constitutive lawsuits are admissible only in ‘cases foreseen by the law’. Indeed, Article 2908 of the Civil Code establishes that ‘the courts can constitute, modify or extinguish legal relationships in the cases foreseen by the law’. Constitutive judgments represent an exception from the general rule by establishing the declarative nature of judicial decisions and the contractual freedom of the parties. The issue above was raised in a number of cases whereby the plaintiff, claiming to be the victim of a boycott or an abuse of dominant position, requested that the Court of Appeal not award an extension of an existing contract, but instead order the execution of an obligation arising from a legal relationship between the parties that was never established on a contractual basis, or that was established at a pre-contractual level. 10

Warnings in this sense in the jurisprudence were severe and repeated; we mention in this context those of the authors cited at note 6, and in particular Mandrioli, ‘I provvedimenti d’urgenza. Deviazioni e proposte’, op.cit., and Tarzia, ‘Rimedi processuali’, op. cit. 11 Pretura di Milano, 15 febbraio 1973, in G.A.D.I., 1973, 295; Pretura di Venezia 29 ottobre 1992, Foro italiano, 1994, I, 933. 12 Pretura di Monza, 20 dicembre 1989, in G.A.D.I., 1990, 283; Tribunale di Monza 11 dicembre 1993, ivi, 1994, 491; Trib Torino, Lego System A.S. e Lego S.p.a./Lima S.r.l., ordinanze 20 novembre 1998 e 22 dicembre 1998, entrambe pubblicate in Riv. dir. ind., 1999, II, 3. 13 Tribunale di Roma, 16 marzo 1994, in G.A.D.I., 1994, 749; Trib. Benevento, 8 aprile 1999, in Giur. mer., 1999, 703. 14 Pretura di Monza, 26 luglio 1984, in G.A.D.I., 1985, 215. 15 Pretura di Firenze, 16 settembre 1980, in G.A.D.I., 1980, 1334; Pretura di S. Donà del Piave 9 novembre 1981, ivi , 1981, 1443.

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In this context, the first question before the court is whether it is possible to anticipate the effects of a constitutive judgment with an interim measure. Many Italian Courts of Appeal have answered negatively to this question. Judging a request for an interim relief measure based on Article 33 of Law 287/90,16 the Court of Appeal in Milan was asked to order Enel to conclude a contract for the delivery of electricity under the conditions indicated by the plaintiff. It held that an injunction to conclude a contract was not compatible with the provisory nature of interim relief measures, as the requested relief would have definitive effects. This position was upheld in another case several years later.17 Following the termination of his retail contract with the defendant, the plaintiff (the producer) requested that the court order the defendant to cease its discriminatory practices, and in substance prolong its contractual relationship with the defendant. The Court established that the behaviour of the defendant did not imply an abuse of dominant position, but was rather the natural consequence of the termination of the contract The legitimacy of the contract could not be put into question in the context of court proceedings based on a request for interim relief within the meaning of Article 33.18 In a case before the Court of Appeal of Rome,19 plaintiffs requested that the defendant be ordered to execute their obligations according to the terms of the contract. However, the contract had in the meantime been replaced by a new one, and the plaintiffs were thus asking that the Court take into account a likely eventual judgment declaring the nullity of the latter contract. The Court rejected the plaintiffs’ claim. It held that, in reality, the issuing of such an injunction was equivalent to the Court suspending a contract currently in force and enforcing a different one, and the Court was not competent to issue decisions replacing a contractual intention that has never been expressed. This above position was maintained by the Court of Appeal in Rome in other similar cases; it suffices to mention its judgments in the cases CMS/ENEL, Gruppo Sicurezza/Aeroporti di Roma, De Montis Catering/Aeroporti di Roma, which excluded the possibility of issuing restraining and ‘positive action’ injunctions. Furthermore, in these decisions the Court stated that the Italian antitrust law entrusted an administrative authority—the Antitrust Authority — with specific technical-economic enforcement attributions in this field, including the assessment of alleged infringements of the antitrust rules and the 16

Corte d’appello di Milano, ordinanza 7/15 luglio 1992, A.V.I.R. S.p.a./ENEL. Corte d’appello di Milano, ordinanza 10/16 gennaio 1996, SCAMM S.r.l./FAI Komatsu Industries S.p.a., confirmed on appeal (ordinanza 15/20 febbraio 1996). 18 In similar terms see also Corte d’appello di Napoli, ordinanza 13/14 luglio 1993, V.E.A.R./R.S. Components Ltd; Corte d’appello di Trieste, ordinanza 12/16 maggio 1995, Duratorre-Del Rivo/Litoranea Editoriale s.r.l. 19 Corte d’appello di Roma, ordinanza 20/28 dicembre 1994, and on appeal, ordinanza 1 marzo/1 aprile 1995, S.r.l. Giovanni Grassano/Consorzio obbligatorio degli olii usati. 17

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power to impose sanctions or to order that certain anticompetitive behaviour be ceased (Articles 15 and 17, Law no. 287/90). The Court of Appeal in Milan adopted a partially different position in its decision of 30 May/3 June 1995 in Ceit/Novamont-Ciuffo Gatto.20 In this case, the plaintiff (Ceit) asked the Court to order the defendant (s.p.a. Novamont) to sell to it a newly patented raw material on the same terms as it had sold it to its exclusive distributor (la s.r.l. Ciuffo Gatto). The Court held that such an injunction could be issued. However, this decision was reversed on appeal by another section of the Court which, taking into account the legality of exclusive agreements based on intellectual property rights,21 considered that the defendant could not be obliged to enter a contract on the basis of Article 2597 of the Civil Code, because the defendant was not operating in a regime of legal monopoly. The judgment on the merits of the case22 finally rejected Ceit’s claim. These views were recently confirmed by the Court in its judgment of 14 May 2001,23 concerning a request for an injunction restraining an abuse of dominant position. In this case, a pharmaceutics company producing an active ingredient of a medicine was ordered to sell this ingredient at a fixed price to an Italian pharmaceutics company producing the medicine in question. Once more, the Court rejected the hypothesis that a court decision based on antitrust rules can substitute the contractual terms already agreed by the parties for terms of its own making.

V. Damages (‘Il risarcimento dei danni’) In relation to the subject of ‘substantive remedies’, I would like to comment on other two cases in which the issues of the content of interim measures and damages awards were addressed. By contrast to its position in the cases mentioned above, where it rejected all claims for interim relief, the Court of Appeal in Milan issued a positive action injunction in Telsystem/SIP-Telecom. In this case, the Court ordered Telecom to give Telsystem access to a telephone line, already rented by the latter from the former, to be used for establishing a communication system for closed groups of clients. However, the facts of this case were different from those of the cases 20

Ordinanza 30 maggio/3 giugno 1995 on appeal, Appendix II. On the links between antitrust and intellectual and industrial property rules, see Marenco (1990): ‘Tutela della proprietà industriale e libera circolazione delle merci nella giurisprudenza comunitaria’, in Foro italiano, IV, 147; Sena (1998): ‘Proprietà intellettuale: esclusiva e monopolio’, in E. A. Raffaelli, ed: Antitrust between EC Law and National Law I, Giuffrè, Milano, 263; Tavassi (1997): ‘Diritti della proprietà industriale e antitrust nell’esperienza comunitaria e italiana’,and in Rivista di diritto industriale, 1997, 147. 22 Judgment of 5 June/12 July 1996. 23 Case Istituto Biochimico Italiano Lorenzini/ Bayer AG. 21

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previously mentioned, as the injunction imposed the execution of contractual obligations already agreed between the parties. To the best of my knowledge, Telsystem is the only Italian case where, once Telecom was held responsible for an abuse of dominant position, the plaintiff’s claim for damages was accepted by the court. Telecom was required to pay to Telsystem the sum of 3,600,000,000 Lire (about US$1,700,000), covering both actual damage (‘danno emergente’)—or the loss sustained by the injured party (‘costi sostenuti’)—and loss of profit (‘lucro cessante’)—or the loss of opportunity (‘perdita di opportunità’). The Milan Court of Appeal also issued a restraining injunction in another case asserting the existence of an anti-competitive agreement in the sense of Article 2 of the Italian antitrust law, and the Court’s order was upheld on appeal. The case was Tramaplast/Agriplast,24 and the Court recognised an in principle right to receive compensation for damages incurred. However, the Court did not award damages in this case given lack of proof on both the causality link and the amount of the damage to be compensated.

24

Order of 13 July 1998, decision of 16 June 2000.

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Panel Two: Procedural Issues
F J—For the purposes of this introductory presentation I will briefly review the procedural issues that were examined in some detail in Section II of the paper that I co-authored with Mr Deisenhofer. Some of them have already been touched upon during our discussion this morning. What emerged from our discussion this morning is that it is quite difficult to draw an accurate borderline between substantive remedies and the procedural issues that arise in their application. There is an obvious overlap between substantive rules in general (that is, rules relating to remedies) and the rules governing procedure. Indeed, each of these concepts is quite fluid. One can see this very clearly when considering, for example, the subject of access to court, which is fashioned partly by procedure and partly by substantive rules. The French and Italian reports prepared for this second Panel of the Workshop indicate that the issue of access to court is very much a question of locus standi in those countries, usually arising in administrative law procedures. By contrast, in English law it is a question of whether the defendant owes a duty to the plaintiff. Therefore access to court would depend on the nature of the duty invoked, that is, whether it is a general duty of negligence or a duty under the law of breach of statutory duty. To sum up, it appears that rules governing locus standi vary quite significantly across the Member States. In some jurisdictions, remedies for infringements of the EC competition rules are difficult to obtain for certain categories of plaintiffs. Consumers, in particular, face difficulties related not only to locus standi but also to proving the causal link between the loss or harm incurred and the antitrust infringement. Consumers are not entitled to bring individual antitrust actions in most European jurisdictions. At most, they can bring some kind of collective or class action, or can be represented by a consumer association. I was very interested to read in Professor Tesauro’s report for this session that the Italian law was recently amended to grant locus standi to consumer associations, particularly in consumer protection and unfair competition matters. This might be a model to follow. Beyond purely procedural obstacles, there are sociological hindrances to access to courts, as indicated in the French report for this session. For instance, there seems to be a certain reticence to grant more rights to consumers, and a certain adversity towards what is described as the ‘compensation culture’ in the US. So, the tendency is not to confer broader rights of action on consumers, but very often to resist the extension of already-established ones. A similar trend is observable at the level of the European business communities. European companies seem to dislike the idea of using litigation as a weapon against their competitors (although there are, of course, some notorious exceptions to this rule, in the field of air transport for example). Companies find other things to spend their money on, rather than antagonising other people in the industry by bringing lawsuits against them. There is a telling anecdote

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related to this, which I just heard from Jeremy Lever earlier today: a company executive, when advised to sue a cartel formed by his company’s competitors, replied: ‘Why should we? We might want to join in.’ Indeed, if there were real pressures from the business community to obtain easier access to courts, then some of the existing procedural obstacles would have probably been removed already. Instead, several Member States are looking at proposals to introduce mechanisms for resolving disputes outside the court system, such as alternative dispute resolution. In sum, the background is not particularly favourable to increasing the rights of persons injured by infringements of competition rules. The next topic on my list is rules of evidence. Here again, there are both formal and practical obstacles for the potential plaintiff in competition cases. To begin with, there is a degree of uncertainty about what the rules of evidence are in different national court proceedings. In France and Italy, for example, different types of competition cases go before different types of courts, each following different sets of rules on matters such as the method of proof. Yet, even if one refers to the standard rules of evidence applying in common civil proceedings, the burden of proving an infringement of the law to the satisfaction of the court is particularly difficult in the field of competition law. Firstly, in this field of law it is more difficult to obtain and produce the necessary evidence. Secondly, the courts do not have the power to investigate the facts of their own motion. The possibilities of obtaining assistance from NCAs are, as a rule, very limited in this respect, perhaps only with the exception of France. As a result, even if the standard of proof is not unusually high, it will be very difficult to reach it in practice. On this aspect there seems to be consensus among the authors of the national reports prepared for this session. Professor Basedow suggested in his report that these difficulties may be overcome by switching the burden of proof to the defendant in certain determined circumstances. In particular, once the plaintiff produces prima facie evidence of a restrictive practice, the defendant(s) could be enjoined to produce whatever relevant information is in his (their) possession with respect to the disputed practice. Professor Basedow admitted that this proposal entails some difficulties, all related to guaranteeing the procedural rights of the defendant: business confidentiality, guarantees against self-incrimination, and so forth. Therefore, there are doubts as to how effective such a switch of the burden of proof could be in practice, as well as to whether it would be justified in the case of litigation that involves competition matters. One may add to these the problems that are specific to transnational litigation, which is an aspect that we have not touched upon thus far. EC competition cases affect trade between Member States, and consequently the relevant evidence will quite often be dispersed in different jurisdictions. For the plaintiffs, the difficulties related to obtaining evidence in other Member States would be even greater than those related to obtaining evidence at home. On this aspect, the UK and US pre-trial discovery rules have proved to be very effective in certain circumstances. However, Professor Basedow’s objections to introducing such rules in the continental European

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legal systems, at least in relation to competition cases, need to be taken seriously. To these one may add that, although pre-trial discovery has indeed proved effective in the Anglo-American litigation system, it is also true that it considerably increases the costs of litigation. Therefore, in the context of competition cases, where we are constantly thinking of entry barriers, one may argue that changes of this kind would raise a sort of new barrier to entry in terms of access to the courts. A final point on rules of evidence: another difficulty in competition litigation is establishing the causal link between the harm incurred and the agreement or behaviour whose legality is called into question. In other words, the issue is whether the plaintiff can prove that the losses incurred were caused by an infringement of the competition rules, and not by other factors. I refer here to Professor Tesauro’s report for this session, where this problem is very clearly expressed. According to Professor Tesauro, this problem is particularly acute with respect to the determination of loss of profit. It is generally very difficult to prove with a sufficient degree of certainty that a loss of profit by a viable firm was caused directly by the anti-competitive conduct of its competitor(s). There are indeed a number of external, or conjectural economic factors, which could affect a firm’s capacity to generate profits, such as an economic slow-down, changes of consumer preferences, or simply a poor commercial strategy. Moreover, the mere presence of one or more of these external factors could result in the damages claim being rejected by the court for lack of causality. Therefore, given such difficulties of proof when contrasted with the advantages of an administrative investigation conducted by the competition authorities— to which Professor Tesauro draws attention in his report—it isn’t altogether surprising that there aren’t many examples of successful competition litigation so far in many of the European legal systems. The next issue I wanted to refer to is the consistent application of the EC competition rules by national courts. Here again, there are both practical problems and problems of legal culture to consider. Competition cases fall within the jurisdiction of ordinary courts in many European legal systems. In the new enforcement system, these courts will be called upon to deal with matters they are simply not familiar with. Furthermore, as my personal court experience tells me, not even specialised commercial courts are much more successful in getting to grips with the application of competition rules. (Then again, perhaps I base my impressions on an unfortunate experience before the English High Court shortly before I went to Luxembourg, when I tried to argue a case based on Article 82 EC (then Art. 86 EEC) before a judge who was totally unwilling to recognise any perceivable relevance of the EEC Treaty in the case). This is why I feel quite persuaded by Jeremy Lever’s proposal that we create special competition courts, as perhaps not even commercial courts would be sufficiently well equipped to deal with competition cases. I am even tempted to believe that it should not be impossible to impose the creation of such courts on the Member States by way of Community legislation. This has been done in the area of trademarks, where Community law requires that certain national courts be

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designated as specialised fora to deal with trademark disputes. Of course, one can always foresee other difficulties with such a proposal; for example, one might need to consider exactly what the extent of such courts’ jurisdiction should be. Will they deal only with EC competition law, or also with national competition law? I believe they should deal with both, and also with connected aspects of consumer protection law, and so on. One can of course foresee difficulties, but difficulties will always find solutions. Another point that I wanted to address (very briefly) is the Commission’s approach to tackling these problems. I certainly do not want to give the impression that I am criticising the Commission for not dealing in its formal proposal with all of the questions that might have been considered, because that would have been unrealistic. A number of problems have not been addressed in the draft regulation but need very careful consideration. One of these is the issue of the Commission’s intervention in the course of national court proceedings. At present, it seems that such intervention is not permitted by the domestic law of some Member States (apparently this is the case in Italy, and as we heard today, also in the Netherlands). However, if special provisions of this sort were to be introduced by means of Community regulation (and more concretely, through Article 15 of the draft regulation) then such interventions would become possible. The question would then be whether the Commission is obliged to assist the national courts, as discussed earlier. However, if the Commission were under a legal obligation to do so (as Mr Wils thinks is already the case under Article 15 of the draft regulation), then wouldn’t this be simply a new way to overburden the Commission? At the same time, I must say I was not persuaded by the arguments formulated today by those who believe that the Commission should not intervene during national court proceedings, as this would undermine the role of the European Court of Justice in preliminary ruling procedures. For my part, I would welcome any measure by the Commission that would alleviate the workload of the European Court of Justice. The Commission has built special expertise in the field of competition law, and this places it in an appropriate position to assist national courts. I would not have any objection to the Commission going as far as interpreting EC competition rules, as we know that the borderline between interpretation and application is flexible in this field of law. I accept that the Commission might not always be perceived to be a neutral interlocutor, and that it would be unfortunate if, in some cases, too much weight were to be given to a particular view expressed by the Commission. Nonetheless, given the great difficulties that the national courts will face in applying EC competition rules, I would think that any assistance they could get from the Commission would indeed be welcome. Yet, assistance should not consist only of intervention during court proceedings. Equally—and perhaps even more important—the Commission should publish guidelines (for example on the application of Article 81(1) and (3) EC), and on a more general level, comments upon the decisions of the national courts. It should possibly publish summaries of such decisions as well.

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The last two topics that I wanted to comment upon, in the light of the procedural problems discussed here, are the future role for the Community courts and the future role for the Community legislature. As for the Community courts: I do not think we can expect more than the application of the already-existing principles, that is, national procedural rules should not obstruct the effective exercise of rights arising from Community law, and they should not discriminate between rights arising from Community law and those arising from national law. In other words, we only can expect a sort of ‘negative integration’, if you like, that removes national procedural obstacles to the exercise of Community rights. The European courts cannot be expected to adopt ‘positive’ measures of the kind that may be necessary in order to make national procedures suitable for the application of EC competition rules. This is something that must be done either by the national legislatures, in a coordinated action, or by means of Community legislation. It is useful to remember that the Community legislature intervened to establish procedural rules in other legal areas. Examples such as collective action and burden of proof remove any doubt about the ability of the Community legislature to act in this field, and they demonstrate that it is not impossible to devise effective means of Community legislative intervention. Three brief points by way of conclusion: first, our discussion today revealed that the link between abolishing the Commission’s exemption monopoly under Article 81(3) EC and a more effective enforcement of EC competition rules is rather a tenuous one. The practical consequence of this reform will be that national courts will be allocated more complex tasks than they have under the current enforcement system. This is something that deserves careful consideration, particularly in relation to the procedural rules relevant in the application of EC antitrust law. Secondly, the majority of the papers prepared for this Panel of the Workshop emphasise that the obstacles getting in the way of national courts effectively applying EC antitrust rules are not only procedural and technical in nature, but are also of the cultural or sociological variety. Finding adequate remedies for the latter will of course be much more difficult than remedying procedural obstacles. Thirdly, and last, I just wanted to say that this Workshop is an excellent opportunity to discuss some of these difficulties and their underlying causes.
J H L—For me, being here today is rather like for the man who won a prize for having the prettiest flower-box outside his apartment and was then invited to present a paper at a seminar on international farming. And that is not just a piece of false modesty. The reality is that I stand in the position of any English High Court judge, certainly not imagining to know about as much EC law as any of my colleagues around this table. I consider myself to be a flower-box tenderer, rather than a farmer, as all of you are. My intervention concerns procedural matters arising from the application of EC competition law by English courts. I would start by saying that procedure is a reflection of what the courts are asked to do. As such, procedure is reactive. Courts would not make up procedures for things that they have not yet been

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asked to do. Bearing this in mind, we are today asked to reflect on what the courts are capable of doing. I was very flattered when Professor Van Gerven and others said that national court judges are capable of applying EC competition law. I was even more touched when Professor Jones said that if an American jury could do it, then so could a judge. I do not say that normal, competent judges are incapable of dealing with competition law issues. Yet, this capacity that we are taking about implies two characteristics. One is to be intellectually equipped to understand certain issues. Here, I am prepared to accept that judges, generally speaking, are capable of understanding just about anything: a bit of family law on Monday, a bit of commercial law on Tuesday, neuro-surgery on Wednesday afternoon, and so on. The other is that judges have experience in doing so. For instance, I am no doubt capable of driving a heavy vehicle, but I would need some training first. The trouble is that, at least for the moment, national judges are not trained to deal with competition law issues. This is not because of cultural differences with respect to the Americans, or because Europeans do not want to litigate before a national court. If you want to Europeans to litigate competition cases before national judges, all you need to do is introduce treble damages, have juries decide on the size of damages, give the judges vast interrogatory and pretrial discovery powers, and have the lawyers employed on contingency fees. Until you do that, people will continue to go to the bodies that are best capable of dealing with their dispute. And there is no doubt that the Commission has all the expertise in this important area of EC law. This leads me to a reflection upon the attitude of English courts when confronted with competition law disputes. I have heard a few cases, and I suspect that I approached them in very much the same way as any other English judge or any of my colleagues in other EU Member States would have. In the standard case, where a complaint has already been made to the Commission, the court stays the proceedings so that the Commission can deal with it. Therefore, the court immediately passes the parcel back to the Commission. Nobody is surprised because the Commission has powers of investigation and economic expertise that exceed those of most normal litigants. What happens when the Commission makes a decision about the complaint it has received? There is at least one High Court decision (it was actually one of my decisions, and it was not appealed; the parties eventually settled) in which the parties were not allowed to re-argue their case once the Commission had reached a conclusion about whether there was a breach of Articles 81 or 82 EC or not. What would be the point of allowing them to re-argue the case? If somebody beats you over the head with a brick and is successfully prosecuted, then that decision is not vulnerable to attack in subsequent civil proceedings. Competition cases are exactly the same: once the Commission decides there is a breach of Articles 81 or 82 EC, you may not argue against that. This means that the Commission makes the decision about the crucial fact of liability. So far we have been very happy to accept that as a sensible distribution of work.

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The issue of interim relief was also raised today. Very interestingly, the courts in England do not have difficulty in deciding whether or not to grant interim relief. Why? Because at the stage of deciding whether to grant interim relief or not the court does not need to make a final decision about whether or not there is a breach of the law; it must simply decide whether prima faciae it looks like there is one. Most English judges are capable of doing that (except for those who are genetically indisposed to believe that the EC Treaty exists, and there are not many of them left). Furthermore, the court that grants interim relief is not normally the same court that will make the final decision, and I am not only talking about competition cases. I have already indicated how the English courts deal with cases in which the Commission has already made a decision. The alternative—that is, choosing to litigate in an English court rather than filing a complaint with the Commission — is too horrible to even contemplate. I should make it clear that, although I operate in a court system where discovery and cross-examination is standard, I and many of my colleagues consider that there are limitations to the benefits obtained by discovery and cross-examination. In reality, judges are not inquisitorial, but only reactive. That is, they decide cases on the basis of the material put before them. Therefore, the truth is that judges are not well equipped to deal with competition cases. This is not only because they do not have the necessary day-to-day exposure to such cases, but also because fighting a civil cause of action in an English court involving such complex issues as arise in the competition area would be horrendously expensive. This is why I agree with Ian Forrester: the reform will not bring a flood of work to the English courts or, for that matter, to the courts of any other Member State. For the same reason, all this discussion about creating specialised competition courts in Europe is, if I may say so, a mirage. You would create courts that just have fancy titles and no work. Their judges will acquire no expertise because they will have no cases to get their expertise on. The creation of such courts is, of course, very good for a judge’s promotion prospects: I would not mind being called a competition judge in England, particularly if I do not have to decide any cases. To sum up, I believe that English procedures are not satisfactory for dealing with competition cases. I am not an expert on the way in which civil courts operate in other Member States, but I would be surprised if they were much better. Furthermore, I do not believe that an English judge will ever volunteer to tackle a competition point that was not advanced by the parties. This was the advantage of Commission’s procedures: the Commission does not have to react only to what the parties complain about. It can go further and work out all the facets of the case. There are also other serious problems, even with decentralising the application of Art. 81(3) EC towards national courts. EC competition disputes are par excellence international in their flavour because they affect trade between the Member States. As such, they do not fit naturally within the tasks of a domestic court. What would happen if, for example, an English court finds that an

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agreement is in breach of Article 81(1) EC but nevertheless qualifies for an exemption under Article 81(3) EC, and a French court decides exactly the opposite? The essence of Article 81(3) EC is to give Europe-wide permission to conduct a contractual relationship that prima facie is illegal but which, for a variety of reasons, is nevertheless considered acceptable from a European standpoint. Now, you are saying that the decision about whether or not such an exemption should be granted will be in the hands of national courts. I fear this will give rise to inconsistent court decisions, and worse, will very possibly lead to forum shopping of the worst kind. I am therefore fairly hostile to the idea of national courts dealing with EC competition cases. I understand why the Commission wants to get rid of this burdensome job, but this is not a good reason for passing it on to other less competent fora. I am not here to encourage you to think that the proposed reform is a great thing. I think the reform is taking this important legal area from the hands of those who know the subject and is giving it to others who do not know it well, and who will never apply it well. K  M—We should thank you for the most brilliant plea against subsidiarity that I have heard in months! And the fact that it comes from an Englishman adds to its special flavour . . . Having said this, you raised some very important issues, which of course will need to be addressed. Nevertheless, I must join Mario Monti by supporting what he said before: there are compelling reasons why this reform needs to be undertaken.





C M—The role of ordinary French courts in the application of EC or national antitrust law has been limited thus far. First, actions for damages or annulment of contracts based on Articles 81 or 82 EC are very rare. In practice, the competition law issues would usually arise only incidentally in cases before the French courts. Secondly, most of the cases seem to concern a restricted group of economic sectors, such as perfumes and car manufacturing. Very few such cases would concern cooperation agreements. The limited role played by the French courts in the application of competition rules cannot be attributed only to legal reasons. The French courts closely follow the existing principles regarding the division of work between them and the Commission. Therefore, in my opinion, the explanations for this state of affairs lie elsewhere. One of them is the prominent role played by the French competition authority—the Conseil de la Concurrence—in the area of competition law enforcement in France. The second is that most disputes concerning cooperation agreements are submitted to arbitrators, rather than to courts. The third is that the parties and/or the court do not always identify the competition issues arising in relation to a contractual dispute. At any rate, the main purpose of my presentation is to identify and discuss the advantages and drawbacks of the French judicial system with respect to the application of EC antitrust rules. Concerning the institutional framework, I

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should start by pointing out that, under the new enforcement system, in France at least the most important role will be reserved for commercial courts. It is certainly true that all categories of French courts have the competence to apply EC antitrust rules with direct effect, including criminal and administrative courts. However, disputes related to agreements covered by Article 81(3) EC are normally brought before commercial courts. For that matter, French commercial courts have some particularities; for example, first-instance cases are not heard by professional judges, but by business people who are elected for this function. At any rate, this system is currently being contested. A first reform of the system was approved at the beginning of May 2001. On the basis of this reform, only certain commercial courts will be enabled to apply French antitrust rules in the future. Although the law is unclear on this point, one can assume that this limitation will also apply to EC antitrust law. A second reform, yet to be adopted, will introduce the so-called échevinage system (that is, the combination of elected with professional judges). Thus, professional judges could also be appointed to the commercial courts in the future, and this should modify the terms of our discussion on the preparation of judges for antitrust law cases. Moreover, in France we have the institution of the juge de référé: emergency cases would be allocated with preference to such specialised judges. There are actually two categories of juges de référé in the area of antitrust, one specialises in general antitrust matters, and the other specialises in restrictive practices. Indeed, under French law, the latter type of antitrust infringement is considered distinct from ‘anti-competitive practices’. (However, restrictive practices may be considered to bear a connection to anti-competitive practices such as those covered by Articles 81 and 82 EC. Nevertheless, this possibility of connection does not have any practical interest for private actors. It is relevant only for the French Ministry of Finance, which is not entitled to file an action before ordinary courts.) The French Supreme Court (Cour de Cassation) established that a juge de référé has the same competence as an ordinary judge, in the sense that he must establish an infringement of the competition rules. Thus, if certain specific conditions (like the existence of a prima facie breach of the law— trouble manifestement illicite—are met, most of the cases in which the plaintiff invokes a breach of competition rules are brought before a juge de référé. Specialised judges have extended powers, and they may adopt any interim measures deemed necessary. Thus, the envisaged reform could substantially affect the role of the juge de référé. For instance, if deciding upon a case involves deciding whether Article 81(3) EC applies or not, the juge de référé might no longer be competent to deal with it because the existence of a trouble manifestement illicite cannot be proven in such cases. In terms of procedure, it must be noted that competition cases brought before ordinary courts in France will be dealt with under ordinary procedures. This means that the parties play a determinant role for the outcome of the proceedings. Companies can easily file an action against their competitors as long as they can prove their locus standi under the French civil procedure rules. However, the possibility of filing class actions does not exist in France, and the burden of

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proof always lies with the claimant. This is problematic, particularly in cases involving an abuse of dominant position. At the same time, the judge may assume an active role by helping either the claimant or the defendant to establish the facts. French judges may, for instance, appoint an expert to the case. To conclude, I believe that the decentralisation of EC antitrust enforcement should be accompanied by the introduction of some assistance mechanisms for the parties with respect to court proceedings. Opening the possibility to file class actions would be useful, for example. At the same time, I believe that the main problems lie with the burden of proof. Under the current French law, the Ministry of Finance is entitled to assist the parties in this respect during court proceedings, but this option does not yet seem to have been taken advantage of. As to assistance for the courts and judges: the French system makes it possible for judges to seek advice from the Conseil de la Concurrence on the application of the French competition rules. Although in theory this is also possible in relation to Articles 81 and 82 EC, the French courts have rarely taken advantage of it in practice. Then again, the assistance mechanisms proposed in the draft regulation are not very helpful. The 1993 Communication on cooperation between the Commission and national courts1 did not produce any notable impact in France. The codification of the same principles by way of adopting a Community regulation will probably not change this situation very much. Last but not least, it is still rather unclear (at least to me) how the amicus curiae procedure proposed in the draft regulation will work in practice, particularly in the context of French court procedures. K S—I intend to focus on the suitability of German civil procedures for the application of EC competition rules. The draft regulation is based on the assumption that NCAs and the national courts will apply EC competition rules within the context of national procedural settings. However, in this respect, one should keep in mind three basic principles of civil law procedure. To begin with, the principles of judicial investigation do not apply in the context of civil proceedings. This means that the facts of the case must be submitted and proven by the parties. Therefore, considering that the burden of proof in competition cases rests on the plaintiff, the effectiveness of the civil procedure for disputes involving competition law issues is questionable. Secondly, in civil proceedings, the legal effects of a final judgment, including the res iudicata effect, are limited to the dispute that was the object of the judicial decision. Moreover, in the German legal system at least, the res iudicata effect is limited to the parties addressed by the decision. This means that the effects of a court decision can be extended to third parties only if they intervened during the court proceedings, or if they were brought into the dispute by the parties. Even so, it is impossible to extend the legal effects of the judicial decisions to all actors on the relevant market.


1

OJ C39 of 13.02.1993, pp. 6–11.

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Thirdly, the principle of the binding effect of legal precedent does not usually apply in the German legal system; it applies only in relation to preliminary reference proceedings. In other words, German civil procedure does not prevent diverging judicial decisions concerning the same legal question, except when res iudicata applies. For instance, the decisions of the Federal Supreme Court are generally only binding de facto, but not de iure. This is part of the German concept of judicial independence. In these circumstances, the preliminary reference procedure established by Article 234 EC is the only mechanism for ensuring consistency of decision-making within the German judicial system. The cooperation principles laid out in Article 15 of the draft regulation do not have binding force. However, such cooperation principles support the aim of legal consistency only in so far as national courts are ready and prepared to comply with the terms of Article 16 in the draft regulation. (According to this Article, the national courts and NCAs should avoid making decisions that are in conflict with the Commission’s own decisions.) Yet, in so far as Article 16 does not have a legally binding character, its practical influence in the future can be considered doubtful. Drawing a bottom-line: legal consistency in the new enforcement system will mostly depend on the courts’ willingness to cooperate with each other and with the Commission. One must admit that this perspective is less appealing than the situation we have today under Regulation 17/62. The current enforcement system is complicated, but at least it promises a maximum of legal certainty by avoiding discrepancies of decision-making and procedures. The new enforcement system offers a simpler way to obtaining a decision, but it denies the erga omnes effect of the decisions obtained. If, on the other hand, the new system were indeed to bring about better cooperation between the Commission and national courts, then I wonder if the decision-making acceleration promised by the reform would still eventuate. Returning to private enforcement of antitrust law in the German legal system: there are three ways of applying antitrust rules in Germany. The first involves administrative fines, which are imposed by the federal competition authority (the Bundeskartellamt) under Section 81 of the German Antitrust Code. The second involves administrative orders (Untersagungverfügungen), which are imposed by the same federal competition authority under Section 32 of the German Antitrust Code. The third consists of private litigation before civil law courts: requests for injunctions and damage claims under Section 33 of the German Antitrust Code. In Germany, private litigation based on antitrust rules has played a less important role in comparison to administrative (public) enforcement to date, at least in so far as national antitrust rules are concerned. However, there are a remarkable number of German civil court decisions applying EC competition rules. Therefore, German courts have been familiar with the application of Articles 81(1) and 82 EC for quite a long time now. The situation will obviously change once that Article 81(3) EC becomes directly applicable. As far as I understand, the new enforcement system

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proposed by the Commission will require national courts to apply Article 81(3) EC ex officio, as if it were some sort of non-written block exemption. If my understanding is correct, the new enforcement system will develop two distinct categories of block exemptions. The first category would comprise block exemptions issued by the Commission, defining in writing the categories of exempt agreements and practices, to be applied by national courts as binding Community law. The second category would comprise exemptions defined in the course of the application of Article 81(3) EC by the national courts. Thus, while the first category of exemptions will be clearly defined in writing by the Commission, the second will evolve as case law, step by step. Another issue to be considered is whether, and to what extent, Section 823(2) of the German Civil Code (Bürgerliches Gesetzbuch) allows private parties to obtain adequate judicial remedies for infringements of EC antitrust rules. Professor Basedow has already shown that this question can be answered in the affirmative. My own task at this Workshop is to examine whether the same can be said about the German civil procedures that are relevant to the application of EC antitrust rules. In my opinion, German civil procedure does not raise any significant obstacles to the effective private enforcement of EC antitrust rules (with the exception of the specific problems concerning the burden of proof, which were commented upon before). It is worth mentioning that German courts apply antitrust rules ex officio, meaning that these rules will be applied when relevant to the case even of the parties do not invoke or plead them. In practice, antitrust rules are invoked by way of defence against contractual claims in most of the cases brought before German courts, whereas damage claims directly based on such rules are quite rare. Perhaps this somehow obscures the potential effectiveness of private litigation based on antitrust rules in the German legal system. My next point relates to the specialisation of judges in Germany. Perhaps it is not entirely correct to say that we have specialised courts in Germany. Rather, we have specialised lawyers and court chambers specialised in antitrust matters. Until 1998, the competence of such specialised chambers was limited to ‘main issue antitrust claims’ (Prozeßkartellhauptfrage), such as injunction petitions and damage claims based directly on Articles 81 or 82 EC. In other words, specialised chambers were not competent to deal with cases in which the antitrust issue arose only as a preliminary question, such as in the context of a contractual litigation between a supplier and its authorised dealer. Such cases fell within the competence of ordinary civil courts. When a preliminary antitrust issue was raised, ordinary courts had to suspend proceedings in order to give to the parties the opportunity to obtain a declaratory judgment about the preliminary antitrust question. In the course of this second procedure, the antitrust chamber of the German federal court could request a preliminary ruling from the European Court of Justice under Article 234 EC. Of course, this procedural arrangement implied a significant delay of the final judgment in the main case.

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The German Antitrust Code was amended in 1998 so as to also give federal courts and specialised chambers in the courts of appeal the competence to deal with cases in which antitrust issues arose as a preliminary question (Kartellvorfrage). This amendment discharges the litigants from the burden of undergoing separate court proceedings. The workload of specialised antitrust chambers will probably increase because of this reform. A last brief comment on the preliminary reference procedure under Article 234 EC. The German Federal Court used to refrain from undertaking this procedure in relation to several important cases involving the application of EC law (although not antitrust cases). In relation to this, it is worth mentioning that the German Constitutional Court (Bundesverfassungsgericht) ruled that the competence of the European Court of Justice in preliminary ruling proceedings is ‘a matter of jurisdiction of the lawful judge’. This means that a court decision that is made without first referring the case to the European Court of Justice for a preliminary ruling—which is considered mandatory—can then be annulled by the Constitutional Court.
G T—Although the Commission has a monopoly over the application of Article 81(3) EC under the current enforcement system, there is already ample room for private enforcement of EC competition rules. However, it is a fact that the record of private litigation based on EC antitrust rules before national courts is very poor in most European countries, and Italy is not an exception in this respect. Similarly, private enforcement of national competition rules is not very frequent in the case of Italy. Why is this so? Where are the difficulties? One of the reasons is that the administrative model of antitrust enforcement prevails in Europe. For the potential plaintiffs, it appears much easier to complain before the competition authority than to put together a lawsuit. Competition authorities receive a complaint and start their own investigations into the case. The Italian antitrust enforcement system closely follows the EC model. Public enforcement is carried out by the Italian Antitrust Authority, whose decisions are subject to judicial review by an administrative court and, on appeal, by the State Council. The private enforcement system is somehow more complicated: while the application of national antitrust rules (including damage claims and interim relief measures) is entrusted to the courts of appeal, cases involving the application of EC competition rules fall within the competence of ordinary, first instance civil courts. This division of competencies is clearly problematic, as it can generate conflicts within the judiciary. The division stems from the late adoption of antitrust law in Italy. Before the 1990s, there were only EC competition rules. When the Italian competition law was adopted, the Court of Appeal was entrusted with the competence to examine such cases because it was considered better equipped to deal with complex economic disputes. A related reason for the division is the attempt to avoid fragmentation of the case law.

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However, this choice has led to divergent decisions emanating from the Court of Appeal and ordinary civil courts on issues such as damages. In theory, there is of course the same potential for conflicting decisions emerging from the competition authority and the administrative judiciary. However, this danger has never materialised, because these institutions learned to cooperate with each other throughout the ten years in which they have been applying the national antitrust law. With respect to the debate concerning specialised courts: I wanted to say very clearly that I do not think that specialised courts are a good idea. At the same time, I also believe that it is a mistake to base the reform project on the idea that judges are not well prepared to apply EC competition rules because such cases involve difficult economic assessments, and so on. The fact is that there are good judges and there are bad judges. The good judges will always be prepared to study their cases. And, after a few years of practice, a judge will always specialise on the job. I do not think that national courts need the Commission to intervene as amicus curiae. I do not understand the purpose of including cooperation provisions of the kind contained in Article 15 of the draft regulation. If this article generates so many disputes and problems, then wouldn’t it be better to remove it from the draft regulation altogether? In any event, the principles of cooperation between the Commission and national courts have already been established by the Delimitis jurisprudence and Article 10 EC. I wanted to mention very briefly a few points that I made in my paper about private enforcement of EC antitrust rules in Italy. On the burden of proof: in competition matters in Italy, like almost everywhere else in Europe, the plaintiff must demonstrate his claims and the judge has no discovery powers. Moreover, Italian courts do not have a tradition of calling experts in their cases; I do not remember a single Italian case in which the court appointed an expert. Another problem typical of the Italian judiciary system is the extensive delay of proceedings. However, we should distinguish between civil courts and administrative courts. The latter have shorter deadlines that have been established by a special law. To give you an idea: court proceedings would last from eight to twelve months in cases involving the application of national antitrust law (a maximum of fifteen months in exceptional cases). Finally, like almost everywhere else in Europe, damage claims based on antitrust rules are very rare in Italy. I will conclude by returning to my initial question: why is private enforcement of antitrust rules so rare in Italy? The answer, in a nutshell, is that private enforcement is much more complex and difficult to go through than public enforcement. J B—First, I would like to thank Mr Justice Laddie for enriching my vocabulary: ‘A court with a fancy name and no cases’, this is really beautiful, and it reminds me so much of the international tribunal for the law of the sea established in Hamburg two or three years ago. That tribunal has a very beautiful building, but it has dealt with only two or three cases thus far.




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Secondly, I wanted to raise a point about locus standi for consumer associations (this could have been discussed this morning, but I left it out because I thought it was a procedural matter. I now realise that it is somewhere in between substance and procedure). Mr Jacobs said that there is reticence in the UK about increasing the power of consumer organisations. So, I understand that UK consumer policy is perceived to be outside the sphere of influence of the legal world. It must be said that the matter is understood quite differently in many continental European countries. Here, strengthening the position of consumers in the area of competition law is not necessarily associated with a strengthening of the position of consumer associations in other policy areas. I would support the idea of introducing locus standi for consumer associations in the area of competition law, if only because this would offer some kind of compensation for the (partial) withdrawal of the Commission from the enforcement process. Moreover, we seem to need parties that are willing to undertake private litigation based on EC competition rules. Why not use consumer associations for this purpose?
C B —I would like to raise a sociological or cultural question. It has been argued that, in Europe, companies that wish to sue the parties to a hardcore cartel or a competitor abusing its dominant position have difficulties in finding legal counsel. This is said to be because the big law firms operating in Europe are very much linked to the potential defendants. I would like to know if this is a real problem.
J B—Related to Professor Basedow’s remarks about locus standi for consumer organisations: I wanted to mention that the German antitrust law actually allows consumer organisations to file requests for interim relief (injunctions). This provision was borrowed from the area of unfair competition law, where it applies more often. It is less popular in the field of antitrust law. Another point: my colleague Mr Justice Laddie talked before about Articles 81 and 82 EC as if they were non-domestic legal matters. I wanted to question this suggestion. National courts might not have applied these Treaty provisions very often under the current enforcement system, but that does not mean they are not part of our domestic law. My second point relates to Professor Basedow’s proposal to reverse the burden of proof in circumstances in which the plaintiff has prima facie proven his case. In the past, whenever Article 81 EC was invoked before the court by way of defence against claims arising from the non-performance of contractual obligations, it was up to the defendant to demonstrate that the contract was in beach of Article 81 EC. At that stage, we did not see any necessity to include a proposal such as that formulated by Professor Basedow, which amounts to a lowering of the standard of proof. The reason is that, until now, the normal way of dealing with EC antitrust matters has been to go to the Commission. The

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reform will oblige the courts to adopt a different position with respect to the difficulties of proof faced by private litigants. I therefore think that Professor Basedow’s proposal is very interesting, and that we should probably re-think the standards of proof in antitrust cases even on a more general level. It has been suggested that the Commission be allowed to step in and help establish the facts during court proceedings. However, I do not believe that this is possible in the context of civil court proceedings. By establishing the facts of the case, the Commission would inevitably side with one of the parties, and I do not find this acceptable. The Commission should not be in the position to decide on the facts of the case, but only to give legal advice to the national courts. There is a whole controversy about whether national courts should or should not accept legal advice from the Commission. I do not have many concerns about accepting the Commission’s advice, yet this is probably because German courts have had a very good experience with legal advice from the Bundeskartellamt. I must say, however, that if the Commission will offer legal advice to the national courts, then it will also have to accept that the national court might eventually decide not to follow it. This might be a good reason for the national court to address the European Court of Justice with a request for a preliminary ruling. In the past, some people had the impression that the Commission attempted to control the application of EC law by national courts. I do not think that this is the Commission’s aim, but this point has to be made very clearly in the draft regulation. My last remarks are related to specialisation. If we look at the application of national antitrust law by German civil courts, we can see that most of the antitrust cases that have been brought before them concern the validity of contracts or, at most, damage claims arising from discriminatory treatment by the plaintiff. By contrast, cases involving hard-core cartels or monopolisation are usually brought before administrative courts. We have been very happy with the work of the administrative courts to date. We did not see reasons for the creation of specialised competition courts, and there were not that many competition cases to be dealt with in court anyway. In these circumstances, specialisation would mean bringing all competition cases within the competence of a single specialised court. This is not easily done in the sort of federal judicial system that we have in Germany. Each of the Lander would probably have to create a specialised competition court of its own. Then again, Germany has fifteen Lander, but probably only five or six of them are relevant venues for competition disputes. Professor Tesauro said before that he does not recall of a single case in which an Italian court brought in an expert. The reality is that not only in Italy, but also elsewhere in Europe, judges are perfectly happy to decide complex economic cases without calling on external experts. This is an additional reason for competition cases to be entrusted to specialised courts.
J B—It has been repeatedly said here that establishing causality is particularly difficult in competition cases. Yet, I have never heard the

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same claim by our American colleagues. I wonder whether Professor Jones could explain to us why it is that we Europeans see such great difficulties in proving causality in competition cases, and why this is not such a problem in the US. I F—Some of the participants have asked me whether I agree that what Justice Laddie said about English courts is accurate. I would therefore like to make a sartorial remark: one can value the quality of justice in a country by many standards, and one of them is the beauty of the judges’ costumes. By such standards, English judges are the most gorgeous to look at anywhere in Europe. Moreover, English justice is luxury justice: one is able to argue his case for days and days, the judges and lawyers are very highly paid, and the infrastructure is splendid. Sadly, the circumstances are very different just across the channel in Belgium (where I live). The Belgian judiciary system is very troubled. This is why, on the one hand, I would respectfully disagree with what Justice Laddie said before about his incapacity to deal with EC competition cases. To the contrary, I think that his colleagues are probably among the best-equipped in Europe to deal with any judicial assignment given to them. On the other hand, it is idle to discuss the enforcement of any kind of law—including competition law— in the abstract, without recognising the very grave enforcement deficiencies and the disadvantages that exist in certain European countries.


B H—I have a couple of observations to make about cultural differences as an explanation for the relative lack of private antitrust enforcement in Europe in comparison with the US. I think that it would be somehow mistaken to consider cultural differences as a main explanation for this difference. Americans are considered to be very litigious in general; they run to court every time they have a dispute. However, I do not think this is all about having a ‘litigation culture’. Let us take the example of private actions for damages resulting from price fixing by very large firms who happen to be the purchasers of a given product. Such actions were not very common thirty years ago, but they have become so now. One of the reasons why such actions have become more frequent is that, if the affected companies do not bring an action for damages when price fixing by a cartel has become public knowledge, they run the risk of being sued by their shareholders for bad management of corporate assets. Therefore, the reason why large companies sue other large companies for price fixing today is to be found in US corporate law. It has nothing to do with a litigation culture. Francis Jacobs said earlier that European firms do not like to sue their European competitors. However, it is common for European companies to lodge complaints about their competitors in the area of merger regulation, although this admittedly occurs in the area of public enforcement.





D D—I cannot resist a small comment on Justice Laddie’s interesting intervention. He was very flattering about the Commission, praising its great expertise, and saying that national judges would be wise to stay

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proceedings once a complaint has been filed with the Commission. Yet, this ignores the fact that the Commission does not have the resources to follow up all the complaints that arrive from different corners of the Community. I think that the reform will give the Commission the opportunity to focus on important cases, and this positive effect is not to be dismissed. My second point concerns consistency of decision-making in the new enforcement system. Will there be forum shopping? Is there a real danger of inconsistent decision-making? We are receiving mixed signals in this respect. On one hand, there is an abstract concern about inconsistency, which is generated by the fact that the elimination of the Commission’s exemption monopoly will disperse decision-making from the centre towards numerous and diverse national institutions (NCAs and national courts). On the other hand, as Professor Tesauro said before, there is not much evidence to support the view that having multiple decision-making centres automatically leads to inconsistent decision-making, at least at national level. The current enforcement system admittedly contains certain mechanisms that de facto ensure consistent decision-making. However, I believe that facilitating cross-border information flows about the decisions adopted and crossborder recognition of decisions could substantially reduce the danger of inconsistent decision-making in a decentralised enforcement system. The interpretation of EC competition rules by the European courts will ultimately contribute to alleviating this danger as well. If I may also venture to mention a personal point of view: I think that the Commission should intervene as amicus curiae in support of the national courts. Professor Tesauro has said that national courts already have the support of NCAs, but maybe there is a role for the Commission to play in this respect from a Community perspective. T D—Private enforcement of EC antitrust rules is indeed difficult, so perhaps we should think of the advantages of a combination of private enforcement and administrative enforcement. An optimal combination of private and public enforcement would be when plaintiffs go to court for interim relief—which might be obtained faster in court than from an administrative authority—and then proceed to the administrative authority with the actual complaint. The administrative authority would then investigate the facts of the case, and the process would conclude with an action for damages before the courts once the facts have been established by the public enforcer. However, the important question is: will the Commission change its attitude towards complaints in the new enforcement system, or will it maintain the approach in Automec II 2 and under the 1993 Cooperation Notice?3 That is, will it stress the advantages of


2

Case T–24/90 Automec v. Commisssion [1992] ECR II–2223. European Commission (1993): Notice on Cooperation between National Courts and the Commission in Applying Articles 85 and 86 of the EEC Treaty, OJ C39 of 13.2.1993, pp. 6–11. 3

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private enforcement without really paying attention to its disadvantages? Or, will it instead investigate more complaints because it will have fewer notifications to deal with? Perhaps it will decide to focus on ex officio cases, sending complainants to NCAs? If this were the case, what would be the legal effects of a prohibition decision adopted by a NCA in other Member States? Would the courts of other Member States be able to rely on such prohibition decisions in dealing with damage claims brought before them? Last, but not least, I wanted to ask what position the national courts should adopt with respect to conditional decisions of the competition authorities that accept commitments by the parties?
J L—I sympathise with the Commission’s desire to get rid of its monopoly over the granting of individual exemption decisions based on Article 81(3) EC. I can certainly understand why many Commission officials currently feel like the members of a police force whose time is mostly spent verifying dog licences and rabies vaccination certificates, instead of going after the real criminals. It occurs to me that, in the new enforcement system, companies who still want to obtain an individual exemption from the Commission could be charged a fee for that service. At the same time, I do not see why the issue of individual exemptions should prevent national courts from applying Article 81(3) EC. I agree with those who argue that the application of EC antitrust rules should be entrusted to specialised courts. These could be the same courts as the ones hearing appeals against decisions by the competent authorities. I also agree with Mr Justice Laddie that the task of applying EC antitrust rules is almost impossible for the ordinary courts. The application of antitrust rules implies understanding a range of complex economic concepts, such as ‘internalisation of externalities’, ‘vertical externalities’, ‘horizontal externalities’, to name just a few examples. It would not be a sensible use of judicial resources to ask ordinary courts to cope with this. I therefore propose having specialised courts deal with individual exemptions under Article 81(3) EC, and introducing a special fee for companies who choose to obtain individual exemptions from the public enforcer. (As to that possibility now in the UK, see section 16 of the Enterprise Act 2002.)

S M L—I would like to make some short comments about the application of EC antitrust rules by the Spanish judiciary. You may remember that last year I mentioned three Supreme Court judgments treating Article 82 EC in the same way as its equivalent in the Spanish competition law, thereby implicitly denying the direct effect of Article 82 EC.4 According to these judgments, companies wanting to file damage claims based on abuse of


4

S. M. Lage and M. Brokelmann (2001): ‘Article 81(3) before national courts: THe CAMPSA doctrine of the Spanish Supreme Court and Articles 84 and 85 revisited’, in C.-D. Ehlermann and I. Atanasiu, eds.: European Competition Law Annual 2000: The Modernisation of EC Antitrust, Hart Publishing, Oxford and Portland, Oregon., pp. 593–612.

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dominant position under Article 82 EC would first have to file a complaint with the competition authority, and only then could they return to the court for the part regarding damages. In the aftermath of last year’s Workshop the Spanish Supreme Court adopted a quite different position in a judgment about the application of Article 81 EC. The case concerned a contractual dispute between a petrol producer and a petrol distributor, in which the defendant claimed the contract was null because it did not comply with the EC block exemption applicable in the area. The Supreme Court accepted the direct applicability of Article 81 EC and the EC block exemption. Thus, the situation is now as follows: civil courts may apply Article 81 EC and the equivalent provision of the Spanish competition law whenever it is invoked as a shield (that is, in defence). So, if the defendant alleges the nullity of the agreement in the context of a contractual dispute, the courts are obliged to apply Article 81 EC, but they would never do so if Article 81 EC is invoked as a sword (that is, as a basis for bringing a legal action). In the latter kind of case, civil courts will continue to direct the plaintiffs towards filing a complaint before the competition authority. This is probably for the same reasons as those Justice Laddie invoked earlier: the general impression is that the public enforcer does the job best. Yet there are also other reasons why companies and consumer associations prefer to file complaints before the administrative authorities rather than go to court. Some of them were mentioned before. One is that the administrative authorities have the means of investigating the facts of the case. Another is that, unlike civil court proceedings, companies do not risk having to pay the legal expenses of litigation if they lose an administrative case. At least in Spain, administrative proceedings are also much faster and more effective that court proceedings. The Spanish competition authority is now obliged to solve cases in twelve months (and in a maximum of twenty-four months, in exceptional circumstances). Moreover, it is quite generous in granting interim relief. By contrast, civil proceedings may last as long as three or four years in Spain. C J—I have a couple of comments on the various issues that were raised in this discussion. With regard to Professor Schmidt’s comments, I would like to go back to something that was said this morning concerning the distinction between rule making and decision-making. I would like to emphasise that, in my view and speaking from an US perspective, discussion of antitrust enforcement—be it private or public—refers mainly to decision-taking and its legal effects. From this perspective and unlike those of the Commission, the decisions made by national courts will not have erga omnes effects. I see this as a benefit, and not a detriment, because this is what allows national courts to adjudicate cases on their own merits rather than on the basis of what happened in another court or before another authority. Moreover, if there is a risk of getting conflicting decisions from different national courts, then Article 234 EC will intervene and the preliminary ruling procedure will quickly be resorted to as soon as the first conflict of this kind develops.


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As to the procedural issues, I agree with Barry Hawk: we do indeed have many cases in which big companies sue other big companies in the US, but we also have cases of small companies suing big companies. I do not think that company managers sit around and say ‘well, let’s see, should we invest our money in suing Microsoft today, or should we go and buy a mobile phone company instead?’ If companies can stand the risk of incurring a loss in court, they will opt to engage in an antitrust litigation no matter what their size. They would do it in order to improve their situation or simply because they cannot stand the loss incurred as a result of the antitrust infringement. Therefore, I think that regardless of all the other problems with private litigation that we discussed before, private enforcement of antitrust rules will also be invigorated in Europe once it becomes known that damage awards are possible. Finally I would like to answer to Professor Bourgeois’ question: I do not think that there is one simple way of proving causality in antitrust cases, as proof depends largely on the factual characteristics of each case. The causality link will be obvious in some cases, but in cases with multiple possible reasons for the loss, the plaintiff will have to produce evidence indicating which events brought about the injury. Of course, the defendant will try to suggest other reasons for the loss. The plaintiffs will often rely on expert testimony in such cases. The expert will offer an opinion about causality and will explain why a certain event caused the loss, as opposed to the other possible culprits. The defendants will probably call their own experts who will offer a countervailing opinion. This is where the judge steps in to resolve the conflicting issues of fact. Earlier today we talked about the complexity of applying the antitrust law to the issues of fact. This is precisely what the judge is there for: to resolve the conflicting issues of fact, apply the law to them, and make a ruling. It is not a real problem that European judges are currently unfamiliar with the application of EC antitrust rules. All that is necessary is the accumulation of some experience and training, so that the judges can not only decide antitrust cases but also gain the confidence of being able to do it well. I happen to believe that any judge in Europe can do what a jury in the US does, and I know that any lawyer in Europe can do what US lawyers do. It is just that one is not born knowing these things; expertise is developed by application. If you do not initiate a system of private enforcement, you will remain stuck with the current situation. In that case, the bar will continue to defend companies against actions brought by national competition authorities and the Commission. W  G—I will refer first to Francis Jacobs’ remark that the Commission should also be able to interpret Community rules. I think that the Commission can of course offer an interpretation of Community rules based on the decisions of the European courts, which is something that national courts can do equally well. A problem arises if the Commission interprets Community rules. The chances are very high that one of the parties will disagree with the Commission’s interpretation given in the course of national court proceedings. The national judge will have to make a request for a preliminary ruling




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from the European Court of Justice when this occurs. Considering the workload of the already burdened ECJ, I do not think that this would be a good solution. I am also puzzled by Ian Forrester’s remark that the Belgian judiciary system is ill. He must be reading a newspaper that I am not reading, because I do not get the same impression when I see how Belgian courts work. I also believe that the issue of the budget allocated for judiciary administration is very important. From this point of view, the judiciary of the Anglo-Saxon world is doubtlessly in a more favourable position. Nevertheless, when one looks at the input and output of courts in the continental European systems—for example the number of decisions issued every year by the French Court de Cassation in comparison with the hundred cases of the House of Lords—one sees that even badly paid judges do a lot of work. And I believe the quantity-quality ratio is very good. M S—I found Mr Deisenhofer’s remark on the complementary role of the national competition authorities, the Commission and national courts in the application of EC antitrust rules to be very useful. I think this is a very important issue. We already see a lot of that happening under the current enforcement system. For instance, we have already a number of cases in Italy where the court awarded interim relief while the competition authority was still conducting an ex officio investigation into the case. In relation to this, an important question is whether the national courts have the competence to reject the competition authority’s interpretation of the facts of the case. Contrary to what Justice Laddie said, the courts in Italy and most continental European countries feel absolutely free to second-guess opinions given by the national competition authority. Of course, in practice, the courts will be very much influenced by the competition authority’s opinion, but I do not think that there is any legal doctrine obliging them to follow it. I think that this will become an issue in the future: the more EC antitrust rules are privately enforced, the more necessary it will become to establish boundaries to the national courts’ freedom in this respect. A quick comment on cooperation under Article 15 of the draft regulation: I agree with the critical views expressed here on the premises of this provision. I also happen to believe that it is totally unrealistic to expect the Commission to police thousands of cases pending before the courts of the Member States. That should happen only when there is a danger of contradictory application of the EC antitrust rules. If the Commission is not able to handle 200 notifications per year, how would it be able to police the several hundred cases pending before the national courts every year? There are also linguistic and procedural problems to be taken into account, not to mention that the whole process is going to be extremely expensive. Therefore, I think the Commission would put its resources to better use by drawing up guidelines on the award of damages. I am not suggesting the creation of actual legislation, but it would be useful to at least have some guidelines




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to help national courts. These could help determine, for example, which activities are core violations of EC antitrust rules, what types of damages are thereby incurred by third parties (including consumers), and examples of ways to investigate the causality link. J V— Antitrust damage claims do indeed require a very sophisticated analysis in the United States. The court has to hear economists and accountancy experts in order to establish the level of the harm incurred and the causal link, and so on. However, these concepts are not impossible to come to grips with. It is the responsibility of the litigants, and ultimately of the litigants’ counsel, to produce evidence and shed light on these aspects. In this sense, the litigants and their counsel are also responsible for the ‘education’ of the judges. Furthermore, a significant advantage of private litigation in antitrust cases is that the judges are more impartial than the Commission. The judges do not have a policy agenda: they decide on a case-by-case basis. What strikes me, as someone from an Anglo-Saxon background who has been involved in the application of EC law for a reasonably long period, is the lack of faith in Europe when it comes to the ability of the judicial system to deal with sophisticated factual analysis.




H W—I would like to make one comment on the role played by the Commission when intervening in national court proceedings to deliver an opinion on the application of Article 81(3) EC. Considering the comments that have been made here, I have the feeling that the majority of the participants around this table assume that the value of such a Commission opinion is the same as under the old enforcement system. I doubt that this is an accurate perception. Under the current enforcement system, a positive or negative Commission decision based on Article 81(3) has a constitutive effect, and if necessary, a retroactive effect; the national courts are bound to respect it. I do not think that it will be the same in the future. Under the new enforcement system, national courts may decide to request a preliminary ruling from the European Court of Justice according to the procedure established by Article 234 EC. This is where the main difference lies: under the current system, the European Court of Justice allows the Commission wide discretionary powers in its application of Article 81(3) EC. When Article 81(3) EC becomes directly applicable, it will only be able to be applied in the same way as Article 81(1) EC, meaning that the Commission’s discretionary powers will be limited. So, under the new enforcement system, the Commission will no longer have the last word on controversial issues; that will be left to the European Court of Justice. I do not think that this shift has yet been clearly worked out. I would like to know whether the Commission subscribes to this interpretation or whether it is of a different opinion.



W W—I will not speak for the Commission as I am here today in a personal capacity. Nevertheless, I would like to reply to some of the points raised earlier.

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Professor Siragusa is concerned that the Commission will not be able to police all the cases pending before the national courts. I do not think that the Commission has the slightest intention of policing all these cases. The Commission’s intervention as amicus curiae during court proceedings will only occur on an exceptional basis, and only in cases where a is particular Community interest involved. Commissioner Monti has already made this clear this morning. Furthermore, the opinion delivered by the Commission as amicus curiae certainly will not be binding on the court. This is spelled out very clearly in the Explanatory Memorandum that accompanies the draft regulation. As to Dr Weyer’s comment that, because the Commission will loose its monopoly over the application of Article 81(3) EC, the Commission’s opinions about the application of this provision will carry less weight before the national courts under the new enforcement system than they do at present: I would have agreed with this point of view until a few months ago, but we now have the European Court of Justice’s judgment in Masterfoods.5 This stresses the special role played by the Commission in the application of the EC competition rules, based directly on the Treaty rather than Regulation 17/62. In Masterfoods, the Court established that the Commission is entitled to hear a case even after a national court has pronounced a judgment in it, the Commission is entitled to decide the case in a different way from the national court, and that national courts are basically bound by Commission decisions (the only exception being when they request a preliminary ruling from the European Court of Justice). The other path foreseen by Article 15 in the draft regulation is the Commission delivering an opinion upon request from the national court. The question that was raised here was whether the Commission is under an obligation to answer to such requests. I would agree with Mr Jacobs that there is a risk of the Commission receiving too many requests of this kind, and this could end up being just another way of over-burdening the Commission. However, I would not personally be concerned by the workload, and I do not think this is just a way of replacing one kind of work (notifications) with another. From my point of view, the main reasons for abolishing the notification system and switching to direct applicability of Article 81(3) EC is not to ease the workload of the Commission, but to eliminate the inherent inefficiencies of the current enforcement system. The first benefit of the reform is to eliminate a system whereby different decision-makers apply halves of what is basically one integrated Treaty rule. In other words, national courts apply Article 81(1) EC and the Commission applies Article 81(3) EC under the current system. I think this division of work is inefficient because the application of Article 81 EC should normally involve an integrated assessment. The second benefit of the reform is to eliminate the legal uncertainty for agreements that, although clearly prone to be exempted under Article 81(3) EC, 5

Case C–344/98 Masterfoods [2000] ECR I–1214.

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would nevertheless have to obtain an administrative stamp of approval after the Commission has been notified of their existence. The third benefit of the reform will be more flexibility for the national courts to decide whether they can do without the Commission’s help or not. Under the current system, the national courts are obliged to wait for the Commission’s opinion even if they feel perfectly able to do the work. The fourth benefit of the reform, which I find very important, is that by rendering Article 81(3) EC directly applicable, something is said about the nature of this provision as well. This links to what Mr Canivet said this morning about judges having difficulties applying a Treaty rule that is both policy and law. I think that one could have raised the question of whether Article 81(3) EC is law or policy some 40 years ago, but after decades of application by the Commission and the European courts it has become clear that Article 81(3) EC is more law than policy, and the reform will consolidate this. A W—My first remark is also about the Commission’s intervention during ordinary court proceedings. I have two main concerns about this intervention. One is that the Commission still has a policy-maker role, and any individual case brought before a national court will be assessed from this perspective by the Commission. If only for public perception reasons, I think it is essential for an enforcement system to be seen as fair and consistent if it is to work well. Secondly, I also think that the Masterfoods judgment6 is absolutely essential for determining the role of the Commission in the new enforcement system. This judgment places the Commission in the double position of a superior court and Community legislator. The Commission’s decisions are binding on the national competition authorities. Against this background, the Commission’s intervention during court proceedings raises important issues of fairness and due process. Last, but not least, I wanted to say that at least twice this year I was asked for advice by clients involved in complex antitrust investigations. They wanted to know whether I would recommend they act under the leniency guidelines and cooperate with the Commission, or whether they should consider the possibility of facing damage claims before national courts to be a more real threat than in the past as a result of the modernisation initiative. From this perspective, I believe that the objectives of the leniency program and those of the reform may contradict each other.


C-D E—I believe that the point made by Mr Weyer is worth discussing in more detail. My understanding of Mr Weyer’s remark about the Commission’s position with respect to the application of Article 81(3) EC is as follows. Under the current enforcement system, the European Court of




6

See supra note 4.

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Justice allowed the Commission a wide margin of discretion in the application of Article 81(3) EC, to the point that the Commission’s decisions concerning this article were not subject to judicial review. This margin of discretion must change when Article 81(3) EC becomes directly applicable. Of course, the Commission’s margin of discretion is not affected by Masterfoods, because this judgment is relevant to a different point. Yet it is quite clear that Masterfoods does not, in any way, guarantee the Commission the same wide margin of discretion that it had in the past. And it is precisely this discretion to raise concerns, because it is very often the basis on which we have determined whether a company is a victim rather than the aggressor, so to speak. This margin of discretion is simply incompatible with the direct applicability of Article 81(3) EC.
M J H L—On the issue of whether national courts are equipped for applying EC antitrust rules: Mr Venit finds that Europeans lack faith in the judicial system, Mr Forrester thinks that judges are capable of this task, and Mr Bornkamm says that court specialisation works well in Germany. I said it initially, and I will repeat it: of course national judges are capable of applying EC antitrust rules. I never suggested they were not capable of doing it. The question is whether this is an efficient use of resources. I must say that parts of the discussion we have had today reinforced my original views on this subject. This reform is a little bit like Mrs Thatcher’s attitude towards the civil service: when she wanted to cut down the number of people employed in the UK civil service, she simply privatised parts of the civil service. The result was that same people were doing the same jobs, but they were no longer employed by the government. In fact, the reform of EC antitrust enforcement is a slightly worse case because such a lot is being done in this area of law. ‘Decentralisation’ is actually the same work being done slightly less efficiently. Then Professor Basedow asked why we don’t give consumer organisations locus standi in private antitrust litigation. This is a very important point, as it touches upon a vital issue. One of the advantages of having EC competition law enforced primarily by the Commission is that parties who are adversely affected by an antitrust infringement do not need to worry about the costs of the proceedings because the Commission will do the work for them. I can tell you that, if the Commission stands back so that antitrust claims have to be brought by the harmed individuals, a significant number of them will decide not to litigate because it will cost them money. The result is that we will actually have less enforcement of EC competition law. I think that the basic purpose of EC competition law is to encourage and reinforce European business. And if you take its application away from the Commission, a lot of it will fall out of the net. Let us assume that a subsidiary of an American company believes it has been adversely affected by a breach of EC competition law committed by a European competitor, and it decides to file a damages action. Where is the company going to go? It will to the courts of the European jurisdiction that offer pre-trial discovery, because this is the only practical way to find out what is going on. This is even more the case for consumer organisations because they have no ability

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to gather proof on their own. So everyone might want UK courts to deal with their cases, but I do not happen to think this is a good idea. Mr Bonkamm asked how could I have described EC competition law as nondomestic law. Of course it is domestic law; what I meant is that it has a panEuropean facet. In fact, that is why it is particularly important that the Commission deal with its application. This is why I will also have to disagree with Mr Venit on his view that the Commission is less impartial than national courts. I can tell you that, at least in a case I had in which British plasterboard manufactures were excluding cheap Spanish plasterboard from the market, you can bet your bottom dollar that if they had been litigating the case before a Spanish court, the British producers would have complained that the Spanish judges were biased towards the Spanish producers. Since the litigation took place in England, exactly the opposite occurred. Mr Bornkamm also says that national courts can always go to the Commission and ask for an opinion on both facts and law. But this is like running back to Mummy! We should make up our minds: is the Commission going to apply the rules itself, or not? To say that national courts can go to the Commission for a non-binding view on facts and law seems to me to have only one advantage, which is to make things longer and more expensive. Mrs Dalheimer said that the advantage of the reform is that it will allow the Commission to concentrate on the most important cases. Yet this is simply a budgetary consideration; it is like saying that the Commission does not have a big enough budget to do all the work it is faced with. The solution to this problem is not to pretend not to expand the budget by passing the work to national courts, but to give the Commission a bigger budget. Finally, Mr Deisenhofer asks why we shouldn’t have a combination of private and public enforcement, with national courts granting interim relief, administrative bodies carrying out the enforcement, and courts assessing the damages? That is, if I may say so, precisely what I think we should have. It is in fact the way it works in England at present.
K S—I think that giving locus standi to consumer organisations is primarily a political issue. If we do so, then we should think of strengthening the litigation position of commercial organisations too, because we are not only speaking of consumer law here. I also wanted to remind Justice Laddie that we should not neglect the current importance of antitrust defences in the context of contractual disputes. In my opinion, this is proof that ordinary courts are not overburdened by the difficulties of applying EC competition law. The reason why civil procedure is less suitable for the application of EC competition rules is that civil proceedings traditionally only affect the litigants, whereas we need decisions with erga omnes effects in the area of competition law. Finally, I learned today from Professor Tesauro that undertaking antitrust litigation before civil courts is a waste of time in Italy, whereas administrative court proceedings are fast and effective. I must say that the situation is exactly

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the opposite in Germany (except of course in cartel cases, where Mr Bornkamm and his specialised colleagues are so effective). S M L—In a very few words: I believe that we should let the Commission concentrate on the most important cases and allow decentralisation in favor of the national competition authorities. We should also allow the national competition authorities to concentrate on the most important cases from a nation-wide perspective, by allowing decentralisation towards regional competition authorities. This is what the Spanish government is doing at present; it is promoting a draft law that will allow the creation of 17 regional competition authorities. Involving national courts in the direct application of Article 81(3) EC is quite a different matter, which has nothing to do with decentralisation.
D D—I just wanted to put a few nuances of grey into Justice Laddie’s black-and-white second intervention. First of all, I think that the cases that the public enforcer should go after do not always start ex officio; they are sometimes based on complaints. And there may be more potential complaining out there than the public authorities can reasonably handle, so complainants should have access to justice and should have a choice to opt between private and public enforcement. The combined private/public enforcement scenario that Justice Laddie and Mr Deisenhofer described is perfectly possible under the draft regulation. So, we can start from there and see how it works. National courts will thus be able to develop their toolbox (with respect to the estimation of damages, and so on) and can gradually become more active in the application of Articles 81 and 82 EC in the future.

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I Francis G. Jacobs and Thomas Deisenhofer1 Procedural Aspects of the Effective Private Enforcement of EC Competition Rules: A Community Perspective

I. Introduction This report seeks to examine, from a Community law perspective, the procedural issues that arise in the debate about effective private enforcement of EC competition rules. The subject is difficult because it requires assumptions to be made about the procedural laws of the 15 Member States2 and perhaps the countries that are candidates for accession. It might well be that the differences between the procedural systems in Europe are more pronounced than those between the substantive rules. The distinctive legal culture of a national legal order often reveals itself in the practice and procedure of its courts. A number of delicate assumptions must also be made about the possible adoption, with or without substantial amendments, of the Commission’s proposal for a new Council Regulation on the implementation of Articles 81 and 82 EC.3 Therefore, this report will mainly raise questions and it will provide few answers. The purpose is essentially to establish a framework for discussion at the workshop and for further research. There are basically two situations in which national courts may be called upon to apply the Community competition rules. In ‘administrative’ judicial review proceedings they may be requested by a private actor to review the legality of a decision made by a national competition authority. This report will deal only with the second situation, namely the ‘private enforcement’ of the Community competition rules in ‘civil’ proceedings between private actors. Moreover, as Session III deals with arbitration, we will deal only with private actions before courts of law that are established by, and exercise their jurisdiction under, the authority of a State. The report is about ‘procedural issues’, as opposed to the remedial issues that are dealt with in the first Session. It is notoriously difficult to define concepts such as ‘remedies’ and ‘procedure’.4 Within those categories, the classification 1

Advocate General, European Court of Justice and respectively Legal Secretary. Taking into account the situation in the UK there are 17 different systems of civil procedural law in the Community. 3 Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 (‘Regulation implementing Articles 81 and 82 of the Treaty’), COM(2000) 582. 4 See for a thorough discussion and tentative proposals W. van Gerven (2000): ‘Of rights, remedies and procedures’, 37 Common Market Law Review, 501–36. 2

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of issues such as ‘interim relief’, the ‘burden of proof’ or ‘prescription of rights’ will vary from one legal order to another. Even within one legal order, what is procedural for one purpose (for example, for the conflict of laws) may well not be so for another (for example, for determining the applicable legislative procedure).5 As regards the Community legal order, it will become apparent below that (a) the scope of the concept ‘procedure’ varies according to the context in which it is used, and (b) the dividing line between procedural, remedial and substantive rules is likely to gain in importance for the Court’s case-law and the Community legislature. At this stage, and merely for determining the subjectmatter of this report, it is perhaps sufficient to state that we will adopt a relatively wide approach and examine not only procedural issues stricto sensu (such as rules about third party intervention or costs), but also borderline issues such as collective claims, the burden of proof or conditions for interim relief. We will not address purely ‘substantive’ questions that arise with regard to the remedies of nullity, compensation or restitution. What does ‘effective’ private enforcement actually mean? On one view, private enforcement is effective if it grants full and effective protection of the individual rights emanating from the competition provisions. The accent here is on the enforcement of rights. On a second (wider) view, effective enforcement means the existence of procedures that not only ensure the protection of individual rights, but that make additional contributions to the public interest goal of the overall effectiveness of the competition rules.6 Here the accent is on effective enforcement of the law and the protection of the interests of third parties or society as a whole. Rules on raising the competition rules ex officio in contractual litigation may, for example, contribute to effective enforcement within the second meaning, while in the empirical case they may not add anything to the effective protection of the rights of the parties involved. In certain circumstances, such rules might actually work against the interests of both parties. In this report, special attention will be given to procedural rules that influence the effectiveness of private enforcement within the second meaning. Section II of the report will try to establish an inventory of existing or potential procedural issues that are of relevance for effective private enforcement. With regard to the issues so identified, Section III will try to evaluate the measures that the Commission has already adopted or envisages adopting (Cooperation Notice, White Paper, draft Regulation). Section IV will discuss whether remaining procedural problems could be resolved or at least mitigated by the Community Courts’ case law. Section V will deal with possible coordination through Community legislation. We will not address the issues arising from the parallel applicability of national competition law, which might complicate the already complex picture even further. 5 See J.A. Jolowicz (2000): On civil procedure, Cambridge, Cambridge University Press, at p. 60. 6 By overall effectiveness of the competition rules we mean that undertakings in Europe are aware of their obligations, comply with them and respect the legal rights of others.

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II. An inventory of procedural issues The purpose of this section is to establish a structured catalogue of procedural issues that might affect the effective enforcement of the competition rules by private litigants. That catalogue is not meant to be exhaustive because it is manifestly impossible to foresee all the problems that might arise under the different procedural systems in Europe. Before starting we will examine the ways in which the competition rules can be used in civil litigation. In its Modernisation White Paper,7 the Commission suggests distinguishing between three types of civil litigation, namely disputes between parties to an agreement, disputes between a third party and one or more parties to an agreement, and applications for injunctions. Others propose to distinguish between cases in which Articles 81 and 82 are relied on by the plaintiff or by the defendant. As regards the distinction suggested by the Commission, it must be borne in mind that there are non-contractual disputes in which competition law is used as a defence (such as when a third party raises Article 82 EC as a defence to an intellectual property infringement action introduced by a dominant firm8) and ‘contractual’ disputes in which it is used as the basis for a positive claim (such as a claim for damages introduced by the ‘weak’ party to an agreement). The second suggested distinction between competition rules invoked by the plaintiff or the defendant overemphasises, in our view, the formal role of the parties, which does not always correspond to the reality of the dispute. For instance, a plaintiff who initiates — as a preventive measure — court proceedings to obtain a declaration that a contract with the defendant is void by virtue of Article 81(2) EC is really using the competition rules as a defence against potential contractual claims. For the purposes of the present report it might therefore be more helpful to distinguish between: • cases in which the competition rules are used positively as a ‘sword’, that is, as a basis for claiming something from the other side (such as damages, restitution, injunction, interim measures), and • those cases in which they are invoked in defence, as a ‘shield’ against actual or potential claims by the other side, which may be based on a contract but also on other rules (such as the nullity defence in contractual disputes). In Europe, the competition rules seem to be used mainly as a shield and only rarely as a sword and there appears to be almost unanimous disappointment 7 White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ 1999 C 132, p. 1. 8 R. Whish (1997): ‘The Enforcement of EC Competition Law in the Domestic Courts of Member States’, in L. Gormley, ed., Current and Future Perspectives on EC Competition Law — A Tribute to Professor M.R. Mok, Kluwer Law International, London/The Hague/Boston, 73–88, at p. 88.

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about that state of affairs.9 Why should it be preferable that the competition rules are used as a sword rather than as shield? Where the competition rules are used as a shield, for example in contractual proceedings, the rules: • are often not invoked by victims of a restraint, but by participants thereof; • are mostly used by coincidence, if and when the defendant is or might be attacked in court, and not because and whenever competition is endangered; • are often applied only after competition has already been harmed; • do not lead to compensation for harm suffered by victims of anti-competitive behaviour; • act as a deterrent mainly in cases in which contractual stability is important (such as joint ventures and distribution systems); however, they cannot have such deterrent effects as regards ad hoc anti-competitive behaviour directed against third parties (such as boycotts, predatory pricing or price discrimination): those third parties have to go to court themselves and use the competition rules as a sword; • will rarely be invoked in cases involving hardcore restrictions (price cartels, market sharing) because potential plaintiffs are normally not trying to enforce those restrictions in State courts;10 • therefore, cases in which the competition rules are used as a defence do not normally contribute to a better understanding or a clarification of the rules on serious infringements. Where Articles 81 and 82 EC are used as a sword (for example, in damages proceedings introduced by a competitor) the proceedings may, by contrast: • lead to full compensation for the harmful effects of the restraint for one victim, and perhaps indirectly also to compensation for other victims;11 • have a preventive deterrent effect on the undertakings involved and, if publicised, also on other undertakings; • prevent or stop anti-competitive behaviour at an early stage, for example, through an injunction or interim measures; • lead, if publicised, to a better understanding and clarification of competition law, particularly with regard to serious infringements, since actions for injunctions or damages are more likely to be brought and to succeed in those areas. 9 See for statistics and further references C.A. Jones (1999): Private Enforcement of Antitrust Law in the EU, UK and USA, Oxford University Press, Oxford, p. 86. 10 Whish, supra note 8, at p. 74. 11 The damage done to the competitive process will rarely be fully remedied, see E.-J. Mestmäcker (2001): ‘The Modernization of EC Antitrust Policy: Constitutional Challenge or Administrative Convenience?’, in C.D. Ehlermann and I. Atanasiu, European Competition Annual 2000: The Modernisation of EC Antitrust Policy, Hart Publishing, Oxford and Portland, Oregon 2001, at p. 225.

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In view of those differences we will attach greater importance to rules that might have a positive or negative impact on proceedings in which the competition rules are used positively as a sword.

1. Procedural incentives and disincentives to initiate proceedings against anti-competitive behaviour There are at least two basic features of civil litigation12 that distinguish it from action by administrative enforcement authorities. The first and most important feature is that nobody can be forced to initiate litigation against another (nemo agere cogatur). A victim of anti-competitive behaviour is not obliged to pursue his claim. Once he has decided to initiate proceedings, he may accept as compensation a sum of money that is less than that to which he is entitled, and he may abandon his case. Settlements are even strongly encouraged by procedural systems.13 Unlike the legislature or the administration, courts have no power to initiate actions of their own motion or to determine their decisional agenda. Secondly, the plaintiff usually acts in his own interest. If he is not obliged to engage in litigation, it is unlikely that he will do so unless he expects to gain an advantage from that action. Those advantages will normally be personal to the plaintiff. An administration will, by contrast, not be motivated by potential gains but by the public interest. In view of those characteristics, an analysis of procedural incentives and disincentives to engage in litigation is clearly important. A potential plaintiff who wants to rely on the competition rules will ask four questions: • Will my case be heard by the courts (access to the courts)? • If the case is heard, what will be the chances of success (predictability of the outcome)? • What are the benefits/costs if the action succeeds or if it does not? • What are the advantages/disadvantages of civil proceedings as compared with an administrative complaint?

1.1. Access to the courts If one person hurts another, either the affected private individuals or, if the affected interest is ‘public’, a representative of the public (for example the Attorney-General or the ministère public), are traditionally allowed access to the court. Competition law is a difficult ‘intermediate’ field because an anticompetitive practice often harms competitors, customers, consumers and the general public alike.

12 13

See Jolowicz, supra note 5, p. 20 et seq. See on the limits of settlements below Section IV, 3.3.

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With regard to private actions in the courts, it must first be remembered that some Member States usually allow those actions only if the plaintiff has a sufficiently strong interest in the outcome of the case. In such Member States, it is therefore likely that direct victims of a restraint (such as competitors or suppliers/customers on the other side of a cartelised market) will find it easier to bring an admissible action for damages than more indirect victims (such as consumers). A crucial issue is therefore whether—and, if so, under what conditions —those affected by a particular restraint (competitors, customers or suppliers, consumers) have locus standi to bring an action.14 In other Member States, such issues are issues of substance: in English law, for example, the question may be to what class of persons a duty is owed under the relevant tort. Secondly, the rules concerning the admissibility of a third party intervention will be important. As anti-competitive behaviour usually affects more than one actor, it will be relevant which categories of actors have the opportunity to intervene in proceedings brought by other victims so that the restraint can be dealt with more effectively in the framework of a single set of proceedings. Perhaps the most crucial issue is, thirdly, whether a Member State’s legal system provides for mechanisms of ‘public interest litigation’ in civil courts that have been specifically designed to protect fragmented, diffuse or collective interests. Even if it is perhaps not necessary to introduce US type class actions into the European procedural systems, other possible modes of private litigation with public interest features could be permitted, or even encouraged. In the UK, for example, a member of the public who would not otherwise have standing may be allowed to bring suit as a ‘relator’ in the name of the Attorney General. In several areas, such as consumer protection, labour law and unfair competition law, many of Europe’s national procedural systems (sometimes in response to Community directives) provide for special rights of action to be exercised by associations. Affected victims may thus gain access to the courts, where they are represented by an association entitled to bring proceedings. Associations might also be established with the sole purpose of bringing civil proceedings. The obvious dangers of such arrangements are that litigation might become too easy, and that proceedings allegedly brought in the ‘public interest’ are in reality misused for individual or special group interests.

1.2. What are the chances of success: predictability of the outcome and the rules of evidence Most plaintiffs will only bring potentially costly suits if they foresee good chances of success. It is therefore essential that they can properly evaluate those chances in advance. The methods the court uses to find and evaluate the facts (the rules on evidence), and the substantive rules it applies to those facts (predictability of the substantive rules), should be decisive. The latter aspect will be dealt with below when we discuss consistent application of the competition 14

See Mestmäcker, supra note 11, at p. 234.

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rules, legal certainty and quality of judgments. The first aspect, namely the rules of evidence, will be dealt with in this subsection. The first crucial issue in this regard is which facts must be proven, and this in turn depends on the interpretation of the applicable rules. For example, it makes a difference whether one adopts an essentially legalistic or a more economic approach with regard to the concept of restriction of competition in Article 81(1) EC. On a more legalistic approach, it might be sufficient to submit a contract to the court (simple documentary evidence) that contains a restriction on one party’s freedom to compete. On a more economic approach, the plaintiff might have to provide data about the economic conditions in which the agreement functions, and particularly about the economic context in which the undertakings operate, the products or services covered by the agreement, and the actual structure of the market concerned. With regard to claims for damages, it will be important whether the plaintiff has to prove bad faith or a particular type of fault on the part of the participants in a restraint, or whether evidence of an objective infringement of the competition rules will suffice. The second issue is the allocation of the burden of proof. With regard to the application of Article 81 EC, it will be crucial for the effectiveness of private enforcement whether potential plaintiffs can just provide evidence concerning the conditions of Article 81(1) EC, or whether they must also prove that the requirements of Article 81(3) EC have not been satisfied. It must however also be remembered that, even if the plaintiff does not have to prove that the conditions of Article 81(3) EC are fulfilled, his effective burden of proof will ultimately depend on the interpretation—narrow or wide, economic or legalistic —of the concept of restriction of competition within Article 81(1) EC. Thirdly, the required standard of proof must be considered. It might be argued that the standard of proof should be particularly high and similar to the one used in criminal proceedings because of the possibility of subsequently imposed administrative fines. It might also be argued that the standard should be lower than in ordinary civil cases because evidence, and particularly economic evidence, is so difficult to obtain. Another question is whether the standard of proof for obtaining an interlocutory injunction and/or a final injunction should be the same as for a claim for damages, or whether a kind of prima facie evidence would be sufficient. Fourthly, the means of proof must be considered. Possibly the greatest problem for a potential plaintiff is that critical evidence will often be in the hands of the other side or of third parties. For example, a competitor or customer will only rarely be in possession of documentary evidence of a cartel agreement concluded by the defendant and third undertakings. It has therefore been argued that the competition rules will hardly ever be used as a ‘sword’ in EC Member States where plaintiffs do not use effective procedural means to oblige the other side or third parties to disclose facts or documents relevant for the proceedings. Many refer to the US and UK rules concerning discovery and disclosure, and note that litigants do not have the same rights in continental Europe. It must however also be remembered that a judge in some European

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legal systems might be allowed to enquire into the facts of his own motion, and might have relatively greater powers to order the parties to produce certain documents. Disadvantages of ‘discovery’ or ‘disclosure’ might be that the plaintiff must also disclose documents relevant to the other side’s case (such as commercially sensitive data) and that preliminary fact-finding procedures can cause considerable delay and expense. A further issue is the role of expert evidence and expert reports. The outcome of a case might depend on questions such as whether competition has been restricted to an appreciable extent, or whether the defendant holds a dominant position within a substantial part of the common market. In relation to those issues, judges might find it difficult to evaluate all the economic data and arguments submitted to them. Therefore, the effectiveness of private enforcement will also depend on issues such as whether it is exclusively for the parties to appoint their own experts and whether the court can appoint an independent expert. If the latter, further questions will be whether that independent expert can only be chosen with the consent of both parties or whether he can be appointed by the court acting on its own initiative.15 The dividing line between the expert’s advisory role and the independence of the court will also have to be considered. The status of public documents from the Commission or a national competition authority, for example, is equally important in court proceedings. The factual and economic information contained in a Commission decision or in Commission background information might be of limited probative value in some EC Member States, while in others it might have the status of conclusive evidence or de facto determine the outcome of the case.16 A distinction might have to be made between three types of information: • general statements about markets, statistics and other background information; • concrete statements about facts directly connected with a case; and • statements about the authorities’ legal assessment of a case. With regard to concrete statements of facts, it might be tempting for private litigants to lodge an administrative complaint with the Commission or a national competition authority in parallel, or even prior to, court proceedings. Those authorities have considerable investigative powers and might be able to uncover the necessary evidence at no cost to the complainant. It will be important to the plaintiff, and also for the effectiveness of private enforcement in

15

In the UK it is possible for the courts to appoint so-called assessors who are available for the judge to consult in respect of the meaning and effect of technical evidence. See for further details S. Kon (2000): ‘The Commission’s White Paper on Modernisation: The Need for Procedural Harmonisation’ in B. Hawk, ed., 1999 Fordham Corporate Law Institute, at pp. 242 and 243. 16 See in the English High Court the judgment of Mr Justice Laddie in Iberian UK Ltd. v. BPB Industries plc and another [1996] 2 Common Market Law Review, 601.

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general, whether that type of evidence obtained by the Commission or the competent national competition authority may be used in civil proceedings. Problems might arise as a consequence of different conceptions of basic procedural rights. Finally, we must draw attention to the difficulties involved in gathering evidence abroad. Trade between Member States must be affected before Articles 81 and 82 EC apply. It is therefore likely that crucial documents or witnesses might be located in another Member State or—worse—in states outside the European Union. It follows that the plaintiff’s and national court’s already difficult task of uncovering and evaluating the relevant evidence might often become de facto impossible, or at least far too costly.

1.3. Costs and benefits A potential plaintiff will not only inquire about his chances of success but also about the possible costs or benefits of the envisaged proceedings. Two of the decisive factors for the plaintiff will be the expected duration of the proceedings and their costs. With regard to the duration of proceedings, the Commission argues in favour of its planned reform that it will enable national courts to participate fully in the enforcement of EC competition rules as a consequence of the direct applicability of Article 81(3).17 There can be no doubt that the exemption monopoly granted to the Commission by Article 9(1) of Regulation 17/62 constitutes a serious obstacle to the effective private enforcement of the EC competition rules. Under the current system, a potential plaintiff must fear that the defendant effectively stays the proceedings by notifying authorities of the agreement in question and requesting an exemption. However, the importance of the exemption monopoly’s ‘chilling effect’ should not be overestimated. In those areas in which actions for damages or an injunction are most likely to succeed (namely, in cases of flagrant abuses of a dominant position or of hard-core price cartels), defendants have never been able to stop court proceedings by notifying authorities of the agreement in question. Either the case fell under Article 82 EC, which allows no exemption at all, or it was clear that the agreement could ‘on no account be the subject of an exemption decision’ within the meaning of the Court’s case law.18 There might therefore be other reasons why such cases have only rarely been brought. At this stage, it is difficult to foresee the effects of the envisaged future system of administrative enforcement with its different types of decisions on parallel civil litigation before the courts. However, it cannot be excluded that national courts decide (perhaps only informally) to stay proceedings and to wait for the 17 See A. Schaub (2000): ‘Modernisation of EC Competition Law: Reform of Regulation No. 17’, in B. Hawk, ed., 1999 Fordham Corporate Law Institute, p. 148. 18 Case C–234/89 Delimitis v. Henninger Bräu [1991] ECR I–935, para. 50 of the judgment.

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outcome of parallel administrative proceedings before the Commission or national competition authorities. That would also have effects on the duration of court proceedings. A last point concerning the expected duration of proceedings is the possibility that the national court requests a preliminary ruling from the Court of Justice. It usually takes approximately two years to obtain such a ruling from the Court. Whether that time span will remain the same (entry into force of the Nice Treaty, enlargement, developments concerning the Community trademark, etc.) is difficult to foresee. From the plaintiff’s point of view, such a request may guarantee a relatively foreseeable outcome on the one hand, but on the other hand, it will cost precious time in situations in which rapid decisions might be critical (such as in injunction proceedings). In some cases, however, the national court may be able to grant an interlocutory injunction to protect the plaintiff pending the outcome of the reference proceedings. With regard to costs it must be borne in mind that the procedural rules about the costs of proceedings differ widely between Member States, and that they play a determinant role as incentives or disincentives to engage in litigation. For example, it appears that the courts in some legal systems do not have the power to award legal costs to the successful applicant. Even where that possibility exists, there might be important variations with respect to the recoverability of costs, both generally and under particular heads (for example, for in-house lawyers, for economic experts or for foreign lawyers necessary to cover the transnational aspects of a case). The costs rules in some legal systems encourage settlements. Settlements have advantages as regards the effective resolution of an existing dispute and the enforcement of ‘rights’. With respect to the broader concerns of effective private enforcement of the ‘law’, it must be remembered that settlements are based on considerations of convenience and not necessarily on considerations of legality. And they are rarely publicised. Thus, settlements cannot contribute to the clarification and a better understanding of the competition rules to the same extent as judgments. It has been argued that the combination of an ability to agree on contingency fees and a rule under which the defendant must pay his own costs even if he succeeds would be an important incentive for litigants to use the competition rules as a ‘sword’. The applicant would not have to pay anything in extreme cases. However, it has also been argued that such arrangements are incompatible with views about the role of lawyers in the Member States. Opponents to the introduction of such rules also point to the dangers of vexatious litigation. There are specific problems in connection with damages proceedings. A plaintiff will not only have to prove an infringement of the competition rules, but also damage, as well as a causal link between the infringement of the competition rules and that damage. It is therefore likely that actions for damages will be more expensive, take more time and have less chances of success than proceedings for an interlocutory or final injunction.

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1.4. The alternative of an administrative complaint to the Commission or a national competition authority The last point we would like to explore in this section on incentives and disincentives is the potential plaintiff’s choice between civil litigation before the courts and an administrative complaint to the Commission or to a national competition authority. For a potential plaintiff, an action before the court might have the following advantages: • only a court can grant damages (an administration cannot); • interim measures might be obtained faster before the courts than before the Commission or a national competition authority; • legal costs can only be recovered (if at all) through court proceedings; • a court is obliged to hear an admissible case brought before it, whilst an administrative body might be allowed to pursue other priorities. In contrast, an administrative complaint to the Commission or a national competition authority might have the following advantages: • the authorities have wide investigative powers, substantial financial and personnel resources at their disposal, and may be able to gather evidence on a transnational basis (either the Commission itself or a national authority as part of the ‘network’); • an administrative complaint generates almost no costs for the complainant; • a high level of legal and economic expertise within those specialised bodies guarantees a certain quality and predictability of outcome; • the Commission can make decisions and order, for example, interim measures that have effects throughout the Community, whilst the effects of a national court’s interim measures will often be limited to the national territory; • judicial review of authorities’ decisions will take place before the Court of First Instance or a specialised national court, which contributes to a high level of quality and predictability. The exact relationship between private enforcement through the courts and privately triggered public enforcement seems therefore likely to be of great importance for the overall effectiveness of the future enforcement system. The first question in that regard is whether one of those enforcement modes will be given priority. Under the existing system, the Commission considers that there is not normally a sufficient Community interest in examining a case in which the plaintiff is able to secure adequate protection of his rights before the national courts.19 Under the envisaged future system, we believe that administrative complaints could be treated more favourably because the Commission will have less personnel engaged in dealing with notifications, and many complaints can be 19 European Commission (1993): Notice on co-operation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, OJ 1993 C39, p. 6.

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processed by national competition authorities. That also seems to be the view of DG Competition, whose Director General has stated that under the future system, complainants will be able to choose freely whether to turn to the Commission, a national competition authority or a national court.20 The second issue is the interaction between parallel or consecutive administrative and civil proceedings. There might be duplication of effort if there is no interaction between the two enforcement modes. For example, precious time will have been lost if evidence that is gained in administrative proceedings cannot be used in civil litigation. Even worse is the danger that one mode of enforcement blocks or disrupts the other. Under the current system, for example, the Commission’s exemption monopoly negatively affects the effectiveness of civil litigation. It will be crucial that the future system of administrative enforcement does not have similar effects. It is not yet clear, for example, what effects will be produced on parallel civil litigation by decisions accepting commitments. Ideally, the two enforcement modes should be designed so that they complement each other. In the light of the issues discussed in the present section, a satisfactory system for the victim of a restraint could be one in which he may, first, request that the courts adopt interim measures, second, complain to the Commission/national competition authority so that that body will investigate and put a definitive end to the restrictive behaviour. Thirdly, the victim could then bring a court action for damages in which the evidence gathered by the authorities can be used in a way in which the main remaining issue will be the evidence concerning the victim’s damage and the causal link.

2. Consistent application of the competition rules, legal certainty and quality of judgments The risk of the competition rules being applied inconsistently emerged as one of the main concerns following the publication of the White Paper.21 One commentator says that the ‘administration of justice in civil law courts from Palermo to Helsinki and Lisbon to, soon, Warsaw’ can only lead ‘to chaos or —more realistically—to inactivity’.22 It is clear that any system of decentralised enforcement carries risks of inconsistencies and a lower level of legal certainty. But it must be remembered that enforcement is, and always has been, decentralised in practically all other areas 20

Schaub, supra note 17, p. 152. M. Monti, ‘The application of Community competition law by the national courts in a directly applicable exception system’, presentation given at the conference ‘Towards the application of Article 81(3) by National Courts’ organised in Trier on 26 and 27 November 2000, published in ERA Forum I-2001, p. 3. 22 W. Möschel (2000): Guest Editorial: ‘Change of Policy in European Competition Law?’, Common Market Law Review, p. 495. 21

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of Community law (for example, VAT, free movement, and agriculture). Moreover, there has already been decentralised enforcement in some areas of competition law (particularly with regard to Articles 82 and 86 EC) and no major problems of consistency seem to have arisen. And, in our view, it is not entirely correct to characterise the envisaged new system as a ‘decentralised’ system. Unlike almost all other areas of Community law, the Commission will continue to be the most important enforcement actor. Enforcement from the centre will thus coexist with enforcement at the national level. Some have also argued that it could be beneficial to the development of the law to have a certain degree of competition between decision-makers under the ultimate control of the Court of Justice.23 In this section we will try to list procedural mechanisms designed to contribute to greater consistency and legal certainty, and better quality judgments. However, it should be remembered that the advantages of those mechanisms must always be weighed against their disadvantages in terms of delay and costs. Their effects on basic procedural rights of litigants and on the independence of the judiciary must also be taken into account.

2.1. Preventive mechanisms The best way to prevent the risk of inconsistencies is obviously to establish clear-cut substantive rules through block exemption regulations, guidelines and Commission decisions. But which ‘procedural’ mechanisms might assist? First, there are the traditional mechanisms that are well known in all other fields of Community law. The horizontal relationship between two courts faced with the same or a related case is regulated by national rules on lis pendens and res judicata and, where courts from more than one State are involved, by similar rules in the Brussels and Lugano Conventions.24 Consistency of outcome within one national legal order is usually guaranteed through a system of appeals: the highest court of each Member State controls the lower courts. Overall consistency between courts in the Community is guaranteed through the preliminary ruling procedure. Lower courts may refer questions, and the highest courts must refer questions concerning the interpretation of Community law. To declare a Community measure invalid, a court must refer a question as to the validity of the measure to the Court of Justice.25 One problem with requests for a preliminary ruling is delay.26 A further concern is whether competition cases will remain with the Court of Justice or whether 23 E. Paulis (2001): ‘Coherent Application of EC Competition Law in a System of Parallel Competences’, in European Competition Annual 2000: The Modernisation of EC Antitrust Policy, supra note 11, p. 399, at p. 408. 24 See, for the future, Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2001 L12, which will enter into force on 1 March 2002. 25 Case 314/85 Foto-Frost v. Hauptzollamt Lübeck Ost [1987] ECR 4199 26 See above Section II, 1. 3.

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they will be transferred to the Court of First Instance after the Nice Treaty enters into force. Secondly, it has been suggested that, beyond these traditional mechanisms, specialised courts, sections or chambers in courts should be created. While specialisation undoubtedly contributes to a better grasp of the difficult economic and legal issues that arise in competition cases, there might also be disadvantages concerning the private enforcement of the competition rules. An issue of EC competition law might arise in a great variety of private disputes and at different moments within those proceedings. In some cases, a national judge will only identify a competition issue at a later stage. If that judge transfers the case to a specialised court, wasteful duplication of work, and supplementary delay and costs, might entail. However, there would be clear advantages associated with specialised courts or chambers that could review the legality of decisions of national competition authorities. A supplementary possibility would be to set up a central system of information exchange (perhaps comprising a central database) with regard to judgments by national courts and Community courts dealing with Articles 81 and 82 EC. This could be similar to the systems used under the Brussels and Lugano Conventions, and such a database could provide summaries of judgments of other Member States in (a) language(s) that would be understood by most judges in the Community.27 The competition rules pose a particular problem, in that the issue of consistency does not only concern the relationship between different courts but also the relationship between national courts and the administrative enforcement agencies, particularly the Commission. It has, for example, been suggested that national courts should inform the Commission in advance whenever they plan to apply the EC competition rules.28 A further proposal was to create a national Advocate General who could intervene as an amicus curiae in EC competition law cases, and who could advise on economic issues or on the formulation of references to the Court of Justice.29 Difficult and important questions concern the possibility that a national court might ask the Commission for background information, for concrete procedural information or for its legal opinion.30 Should a national judge stay proceedings and perhaps adopt interim measures? Within what period will the Commission (be obliged to) reply? Is the Commission obliged to reply? Is it entitled, or obliged, to disclose all the relevant information at its disposal? What will be the status, in the national proceedings, of the different types of information 27 Such a system has been suggested by Judge Sevon at the ERA Conference referred to in note 21. 28 J. Temple Lang: ‘Decentralised enforcement of Community Competition Law’, available on the DG Comp’s website at http://europa.eu.int/comm/competition/ antitrust/others, p. 5. 29 Ibidem, at p. 6. 30 See Joined Cases C–174/98 P and C–189/98/P Kingdom of the Netherlands and Gerard van der Wal v. Commission, judgment of 11 January 2000.

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received? Are any limits to that exchange of information imposed by the independence of the national judge, the rules on professional secrecy, or the rights of defence of an affected litigant? If some categories of information cannot be used, how effective will be private enforcement and its interaction with administrative enforcement?31 It has also been proposed that national courts should be empowered (as they apparently are in France) to transfer the file of the case to the Commission or the national competition authority whenever the national court is required to rule on Articles 81 and 82. The authorities would then provide their own advice on the case by way of expert evidence, and would refer the case back to the national court.32 Similar questions to those raised in the previous paragraph would arise.

2.2. Conflict rules that a national court should/must observe where the Commission has already made, or is expected to make, a decision There will be considerable scope for parallel administrative and private enforcement in the envisaged system. Judges might be increasingly faced with cases in which the Commission or a national competition authority (which is part of the ‘network’) has already adopted a decision, or is expected to adopt such a decision in the near future. Important issues seem to have been clarified by the recent judgment in Masterfoods,33 which we will present in more detail below. But some questions remain, such as concerns about the effects on civil litigation of Commission decisions that accept commitments or decisions rejecting complaints (for example, on the ground of lack of Community interest). It may also be asked whether decisions on the same case that are adopted by a national competition authority of the same or another Member State will affect civil proceedings.

2.3. Corrective mechanisms What corrective mechanisms should be envisaged if, despite preventive mechanisms and conflict rules, a national court has given a judgment with which the Commission or a national competition authority disagrees? A precondition for any ex post correction is awareness of the judgment. It is thus essential to impose a duty on national courts to transmit relevant judgements to the Commission as soon as possible. It appears unrealistic to consider allowing appeals against national judgments to a centralised Community court. There has also been discussion of a right to appeal the decisions of national courts that would be exercised by the Commission, the competent national competition authority or a national Advocate General.34 31 32 33 34

See above Section II, 1.4. See S. Kon, supra note 15, at p. 251. Case C–344/98 Masterfoods v. HB Ice Cream [2000] ECR I–1214. J. Temple Lang, supra note 28, p. 4.

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The Commission has opted for a less far-reaching alternative, namely making it possible for the Commission or a national competition authority to intervene in national proceedings as amicus curiae. That mechanism seems to differ from the national court’s right to request information in two respects: the national court must hear the competition authority even it does not want to, and the authority acts on its own motion and the national court cannot oblige it to intervene. The amicus curiae mechanism seems to be more corrective than preventive, because the Commission or the national competition authority seem particularly likely to intervene if they disagree with a first instance judgment. They may even be unaware of a case until the court of first instance hands down its judgment. A more radical way to correct a too ‘lenient’ judgment (in which, for example, an agreement is enforced or an injunction is refused) would be to adopt an administrative prohibition decision.35 Ultimate, and perhaps theoretical, options would be infringement proceedings against the Member State concerned, based on the national court’s failure to comply with the competition rules or damages proceedings brought by individuals under the Francovich principle. No such case has yet reached the Court.

3. The respective roles of the parties and the judge We have already stated that no plaintiff can be obliged to commence or continue litigation, and that they will usually do so only if that is in their own interests. But it must also be borne in mind that civil litigation does not occur or continue without the will of the defendant. A defendant is free, if he so wishes, to accede fully or partly to the claim made against him. The main interest of the parties is the enforcement of their rights or the resolution of their dispute. Competition law is one of the areas in which those private interests can easily conflict with the public interest of enforcing the law.36 Thus, an important question will often be the extent to which the national judge should disregard the will of the parties in defence of the public interest. The most obvious example is where two members of a cartel engage in contractual litigation about the scope of their obligations under the cartel agreement. If a judge resolves the dispute on the basis of the agreement alone, as the parties request, he effectively reinforces the anti-competitive effects of the agreement in question. If, by contrast, he refuses to enforce the agreement by raising the competition rules ex officio, and declares the agreement void, he dis35 See the strategy which the Commission adopted in Masterfoods and which is described in Case C–344/98, cited in note 33. 36 See S. M. Lage and H. Brokelmann (2001): ‘Article 81(3) before National Courts: The CAMPSA Doctrine of the Spanish Supreme Court and Articles 84 and 85 EC Revisited’, in European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, supra note 11, p. 593, at p. 599.

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regards the will of the parties and thus the fundamental principle that underlies all systems of civil procedural law. Even in systems in which the principles iura novit curia or da mihi factum dabo tibi ius fully apply, judges must in principle respect the parties’ wish not to raise a certain issue (for example the reality/existence of an obligation if the parties want to limit their dispute to the compliance with that obligation). The exceptions to that basic principle are usually issues of public policy or ordre public, which might have to be raised against the will of both parties. The decisive question is thus whether the EC competition rules are (always) issues of public policy. Similar questions arise with regard to jurisdiction, arbitration or choice of law clauses, the fact-finding process and settlements. The Director-General of DG Competition, and the competent Commissioner himself,37 have drawn attention to the possibility of agreeing on arbitration, jurisdiction and choice of law clauses as a means by which to prevent forum shopping. The possible problem with such clauses is that they may be an essential part of the anticompetitive strategy embodied in a cartel agreement. The parties to a cartel agreement might, for example, attribute exclusive jurisdiction for all contractual disputes between them to a court in a State outside the European Union that has a reputation for not being very strict with regard to the EC competition rules. If a party to that agreement brings an action for a declaration that the said cartel agreement is void, should a judge of a Member State decline jurisdiction on the basis of the jurisdiction clause? What about the recognition of judgments passed by the court or arbitral tribunal designated by the jurisdiction clause? Both the plaintiff and the defendant might sometimes have an interest in seeing that certain facts are not revealed. Is the national court bound to respect the wishes of both sides, or can it investigate certain facts on its own motion? Should the national court be allowed to make factual statements in a judgment against the will of both parties (bearing in mind that the judgment will be sent to the Commission)? Finally, what attitude should the national judge take towards settlements in which competition law is at issue? What should be the status of a given settlement in proceedings before another court, which considers that the settlement in question infringes for example Article 81 EC? Should there be different rules for out-of-court settlements and settlements concluded before a court?

4. The problems of transnational litigation Many of the procedural issues listed above may become considerably more complex when the procedural rules of more than one Member State are involved. That could be one reason why both the plaintiff and defendant appear 37

A. Schaub, supra note 17, p. 158 and M. Monti, supra note 21, at p. 5.

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to have been resident in the same Member State in most of the cases in which Articles 81 and 82 have been used.38 On the other hand, many cases in which the Community competition rules could apply present cross-border elements in light of the required ‘effects on trade between Member States’. The discussion so far has focussed on forum shopping. One fear is that differences between the ways the competition rules are interpreted in different jurisdictions could be exploited to sue in either the strictest or the most lenient courts in the Community. In view of the existing and envisaged measures to promote consistency, the risk of substantial discrepancies in the interpretation of the competition rules might perhaps not be great enough to trigger forum shopping on a large scale.39 Thus, we consider that the issue is essentially whether the differences between legal systems with regard to remedies (such as the quantum of damages) and procedural rules (for example, the protection against self-incrimination) are sufficiently pronounced to make it likely that litigants would adopt harmful forum shopping strategies.40 However, it must also be borne in mind that the plaintiff will always weigh the comparative advantages of a given foreign legal order against the advantages of suing (if possible) in his own jurisdiction, with which he is more familiar and where costs and risks might be better able to be evaluated in advance. Another fear is that decentralisation might encourage multiple and vexatious litigation on essentially the same contracts in several fora (such as within distribution networks). Critics of the proposed system point out that the lis pendens rules of the Brussels and the Lugano system only govern proceedings between the same parties, and that litigation within distribution networks may involve different parties. Other transnational issues that have not yet been fully discussed are, for example: • the possibility of agreeing on jurisdiction, arbitration and choice of law clauses, and the limits of such arrangements under the competition rules and public policy considerations; • the difficulties of gathering evidence located in other jurisdictions; • the practical problems of legal representation in foreign courts (taking language barriers into account); • whether and how the doctrine of forum non conveniens might be applied in competition cases; • the rules about jurisdiction and recognition/enforcement with regard to crossborder interim measures and injunctions; and • the divergent conceptions of public policy concerning the recognition of 38 C.S. Kerse (1998): E.C. Antitrust Procedure, 4th edition, Sweet & Maxwell, London, point 10.26. 39 See Schaub, supra note 17, p. 157. 40 See S. Kon, A. Maxwell (1998): ‘Enforcement in National Courts of the EC and New UK Competition Rules: Obstacles to Effective Enforcement’, European Competition Law Review, 443, at p. 446.

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foreign judgments (it appears, for example, that judgments awarding treble damages might be contrary to the ordre public of some Member States).

5. Basic procedural rights 5.1. Procedural rights in civil litigation designed to prevent indirect adverse effects on procedural rights in criminal or administrative enforcement procedures In ordinary civil proceedings the defendant neither needs nor receives the same protection through basic procedural rights as does, for example, a defendant in criminal proceedings. Both parties to civil proceedings have equal rights and obligations, the court itself does not normally have strong investigative powers and the possible outcome of the procedure is not a criminal sanction but, at worst, an award of damages. Procedural rights in civil litigation will usually guarantee the equal and fair treatment of both sides. However, with respect to the private enforcement of the competition rules, there might be special procedural rules designed to prevent indirect adverse effects on procedural rights that might exist or arise in parallel or later criminal or administrative enforcement proceedings. A national legal system might, for example, allow a party in proceedings for damages to refuse to answer a question or produce a document that might expose that person to criminal investigations. It is likely that such special procedural rights are more important in those legal systems in which the defendant can be obliged by either the other side or the national judge to disclose information or documents against his will.

5.2. Repercussions in civil proceedings of enforcing basic procedural rights in administrative enforcement procedures The repercussions of basic procedural rights in administrative enforcement procedures on parallel or subsequent civil proceedings (for example, in subsequent proceedings for damages), will perhaps be of greater practical relevance. It might be argued that there is some tension between the strengthening of the Commission and national competition authorities’ investigative powers under the envisaged Regulation on the one hand, and broader tendencies in the national and Community legal systems towards increasing protection of fundamental procedural rights on the other hand.41 Under Article 20(1)(b) of the draft Regulation, enforcement officials would be empowered to, for example, enter the homes of the staff of the undertakings concerned, and under Article 20(1)(f) they would be allowed to ask members of the staff ‘for information 41

See for a detailed discussion I. S. Forrester (2000): ‘Modernisation of EC Competition Law’, in B. Hawk, ed., 1999 Fordham Corporate Law Institute, at p. 208 et seq.

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relating to the subject-matter and purpose of the inspection. . .’. Almost simultaneously, the Council, Parliament and Commission have ‘proclaimed’ the ‘Charter of Fundamental Rights’ in Nice. Litigants before national and Community Courts are invoking fundamental procedural rights more often than they used to. Considerable problems for the effective private enforcement of the competition rules might arise where a national court refuses to take into account documents from the Commission, where the latter investigated the case on the basis of procedural rules that conflict with national principles regarding the legal privilege against self-incrimination or the lawyer-client privilege. The problems might become even more complex if litigants want to use facts that were established in decisions made by the national competition authority of another Member State.

III. The Commission’s approach as regards procedural issues: the Cooperation Notice, the White Paper and the draft Regulation In this Section we will examine the Commission’s evolving attitude towards the procedural issues identified above, as expressed in the ‘Notice on co-operation between national courts and the Commission’42 (the ‘Cooperation Notice’), the ‘White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty’43 (the ‘White Paper’), and the Proposal for a new Regulation implementing Articles 81 and 82 of the Treaty44 (the ‘draft Regulation’).

1. The Cooperation Notice In the Cooperation Notice, the Commission essentially: • sets out how the competition rules may be used in civil proceedings before national courts (paragraphs 4 to 6, 8, 9, 11, 17); • exposes its view of the relationship between national procedural and remedial rules and Community law (paragraphs 9 to 11); • enumerates advantages of civil proceedings for complainants (paragraph 16); • states that it will not normally examine administrative complaints if the plaintiff is able to bring an action before a national court (paragraphs 13 to 15); • lays down conflict rules that indicate what national courts should do in order to avoid decisions that could conflict with those taken or envisaged by the Commission (paragraphs 18 to 32); and 42 43 44

Cited in note 19. Cited in note 7. Cited in note 3.

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• establishes a co-operation mechanism, under which the national court may ask the Commission for procedural information as to the status of a given case, for its opinion on points of law and for factual background data (paragraphs 33 to 43). The following points deserve particular attention. The Commission hopes that ‘more effective participation by the national courts in the day-to-day application of competition law [will give] the Commission more time to perform its administrative task, namely to steer competition policy in the Community’ (at paragraph 34 of the Notice). The Commission states that the application of Community competition law by the national courts has ‘considerable advantages for individuals’ (at paragraph 16). It cites the possibility of obtaining damages, the more rapid awards of interim measures, the ability to combine a claim under Community law with a claim under national law, and the right (in some Member States) to obtain an award that includes the legal costs of a successful action. The Commission appears to refer to those advantages as a justification for its policy not to examine administrative complaints if the plaintiff is able to bring an action before a national court (at paragraph 15). The disincentives of taking court proceedings (as identified in the previous Section) are not discussed. With regard to the principles governing national procedures and remedies in cases in which directly applicable Community rules are invoked, the Commission quotes from the judgment in Rewe45 (at paragraph 10). However, the Commission only refers to the ‘principle of equivalence’, namely that individuals and undertakings must have access to all procedural remedies provided for by national law on the same conditions as if a comparable breach of national law were involved. It is not clear why it does not refer to the ‘principle of effectiveness’, which the Court laid down in the same judgment, and which imposes greater limitations on national ‘procedural autonomy’.46 The Commission states that, at the request of the litigants or ‘on their own initiative’, national courts are able to ensure that the competition rules are respected (at paragraph 6). The Commission is thus aware that some national courts might be allowed, or even obliged, under their national procedural law to apply the competition rules ex officio. However, that point is not developed and national courts are not specifically encouraged to raise important competition law issues of their own motion. The principles designed to avoid judgments by national courts that could conflict with those made or envisaged by the Commission (at paragraphs 18 to 31) are formulated as mere suggestions rather than obligations. The Commission expressly accepts, for example, that even if it has already made a decision on a given agreement, national courts are not formally bound by that decision (at paragraph 20). The Commission also recognises that those 45 46

Case C–158/80 Rewe v. Hauptzollamt [1981] ECR 1805 See below Section IV, 1.

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principles are complex and that they might sometimes be insufficient to enable the national courts to ‘perform their judicial function properly’. Under the cooperation mechanism established by the Notice, a national court may ask the Commission for information about a procedural nature (paragraph 37), for its opinion on points of law (paragraph 38), and for background data (paragraph 40). The Commission states that it should answer such requests for legal and factual information ‘in the shortest possible time’ (paragraph 41), but it does not impose any concrete time limits on itself. The Commission also mentions the following limitations of that co-operation mechanism: • requests for information can only be made ‘within the limits of national procedural law’ (paragraph 37); • the answers given by the Commission are not binding on the courts that have requested them (paragraph 39); • the Commission will not reply if the requisite data is not actually at its disposal (paragraph 41), which seems to exclude Commission investigations at the request of a national court; • the Commission will not reply if it is precluded from doing so by its obligation to respect professional secrecy under Article 287 EC; the Commission does not refer to other basic procedural rights that might further limit the possibility of transmitting information to a national court; it also omits to mention the Spanish Banks judgment, in which the Court held that information provided by an undertaking in the course of an administrative procedure before the Commission cannot be relied upon by the authorities of the Member States (including, perhaps, the courts) to justify a decision based on Community or national competition law;47 • the Commission will not reply to requests for information from the parties, but only to those which come directly or at least indirectly from the national court itself. The Commission also announces that it intends to publish an ‘explanatory booklet regarding the application of the competition rules at national level’ (paragraph 43). In the Competition Report, it will also publish an annual ‘summary of the answers given by the Commission’ pursuant to the Notice (paragraph 48). With regard to transnational litigation, the Notice raises the possibility of extending the scope of the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters to competition cases assigned to administrative courts (paragraph 44). However, the Notice does not deal with the other problems of transnational litigation identified in Section II.

47 Case C–67/91 Dirección General de Defensa de la Competencia v. Asociación Espanola de Banca Privada (AEB) and Others [1992] ECR I–4785, paras. 37 et seq.

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2. The White Paper The objective of the White Paper is to propose a more efficient and simpler enforcement system (paragraph 10). In order to achieve these ends, the Commission suggests, in essence, abolishing the notification and exemption system, strengthening decentralised control by national authorities and courts, and intensifying ex post control (paragraphs 74 et seq.). The Commission again enumerates advantages of private enforcement in national courts: national courts are ‘close to European citizens’, they can apply both Community and national competition law in parallel, and they can rapidly order interim measures and they can grant damages (paragraphs 99 and 46). The Commission acknowledges that complainants remain reluctant to bring proceedings before national courts, despite the advantages and the Cooperation Notice (paragraph 39). It suggests this is mainly because national courts have no jurisdiction to apply Article 81(3) EC and undertakings can, by lodging a notification with the Commission, block private actions before national courts (paragraphs 6, 39, 47, 61, 72, 78, 100). The Commission considers that, by removing the exemption monopoly, the envisaged reform would enable those bodies to apply the competition rules ‘most effectively’, that is national courts and authorities (paragraph 47). Moreover, in a directly applicable exception system, defendants would be able to invoke Article 81(3) before the courts, which would strengthen their legal certainty and victims of illegal agreements would be able to obtain damages more quickly (paragraph 100). The Commission also states in a somewhat elliptic fashion that judgments of national courts would have the force of res judicata. However, there is no indepth discussion of procedural incentives or disincentives to bring proceedings, or of procedural obstacles to effective private enforcement. With reference to the problems of transnational litigation, the Commission states that national courts’ judgments are recognised by the courts of all Member States under the Brussels and Lugano Conventions. No other problems of transnational litigation are discussed. In order to prevent inconsistencies in the application of Community competition law, the White Paper proposes a set of principles for the resolution of conflicts between decisions of the Commission and a national authority or court (paragraphs 101 to 103). The basic rule is that once the Commission has initiated proceedings, and a fortiori when it has adopted a decision no longer open to appeal or already confirmed on appeal, there is a ‘clear obligation’ (paragraph 15) for national courts to ‘avoid conflicting decisions’ (paragraph 102(1)). The Commission distinguishes in essence between two situations, namely (1) a national court takes a more favourable approach to a restrictive practice than the Commission, and (2) a national court takes a stricter approach. In the first situation, the Commission can always intervene ex post ‘to prohibit the agreement, subject only to the principle of res judicata, that applies to the dispute between the parties themselves, which has been decided once and for all by the national court’ (paragraph 102(2), see also paragraph 102(4)). In situation (2)

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‘the Commission believes that it should not normally seek to intervene otherwise than as an intervener on a reference for a preliminary ruling . . .’ (paragraph 102(3)). The second group of proposals for more consistency is based on the idea of strengthened cooperation (paragraph 107). In that respect, it is proposed: first, that there should be an obligation for national courts to inform the Commission of proceedings in which Articles 81 and 82 EC ‘are invoked before the courts’. Secondly, the Commission should be allowed, ‘subject to the leave of the national court’, to intervene as amicus curiae in judicial proceedings that come to its attention as a result of information supplied in this way. Thirdly, the envisaged Regulation should incorporate the co-operation mechanism currently contained in the Cooperation Notice (requests for information of a procedural, legal or economic nature). Finally, the Commission mentions that there are further special cooperation mechanisms between the courts and the national competition authorities under French and German law, but it is not clear whether the Commission envisages proposing similar mechanisms at a Community level.

3. The draft Regulation The White Paper gave rise to a lively discussion.48 Despite opposition from some quarters, the Commission’s draft Regulation follows relatively closely along the lines suggested in the White Paper. The central element of the draft Regulation is the replacement of the current notification and authorisation system with a directly applicable exception system. With respect to the private enforcement of the competition rules, it follows from Article 6 of the Proposal that the national courts in which the prohibition in Article 81(1) EC is invoked must also have jurisdiction to apply Article 81(3) EC. According to recital 7 of the Preamble, national courts have an ‘essential part’ to play in the enforcement of the competition rules, where they protect the rights of individuals and complement the role of national competition authorities. According to the explanatory memorandum, the Commission believes that national courts will play an ‘enhanced role’ in the enforcement of the Community competition rules under the proposed system, and one of the declared aims of the proposal is to ‘promote’ private enforcement through the courts. Article 2 of the draft Regulation contains an important suggestion concerning private enforcement. Under that rule, the burden of proving an infringement of Articles 81(1) and 82 rests with the party alleging the infringement, 48

See for an account of that discussion C.D. Ehlermann (2000): ‘The Modernisation of EC Antitrust Policy: A Legal and Cultural Revolution’, 37 Common Market Law Review 3, p. 537; see also the Summary of Observations of 29 February 2000 which may be found on the DG Comp website at http://europa.eu.int/comm/competition/antitrust/ others.

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whilst the party claiming the benefit of Article 81(3) must bear the burden of proving that the conditions of that paragraph are fulfilled. That is because the latter party is ‘usually best placed’ to prove that the requirements of Article 81(3) are satisfied (recital 5 of the preamble), and also because such a rule is in line with ‘the principle, widely observed in the laws of the Member States, that each party to litigation has to prove the facts on which it relies’ (Explanatory Memorandum). Article 15 of the draft Regulation contains the envisaged rules on the ‘Cooperation with national courts’. Article 15(1) provides for a preventive mechanism that is similar to the one already in place under the Cooperation Notice. National courts ‘may ask’ the Commission ‘for information in its possession’, or for its ‘opinion on questions concerning the application of the Community competition rules’. That wording does not necessarily imply a right for the national court to receive a reply. However, in the explanatory memorandum the Commission seems to assume that such a right exists (‘Paragraph 1 establishes a right . . . to obtain . . . information’). Moreover, the formulation in Article 15(1) appears to exclude the possibility that a national court could oblige the Commission to search for information that is not yet in its possession. It is perhaps also interesting that the national court is not confined to asking the Commission for an opinion on the ‘interpretation of the competition rules’, but may ask any question ‘concerning the application’ of the competition rules. That wider formulation appears to encompass questions about necessary or appropriate national remedial or procedural rules. In the explanatory memorandum, the Commission announces that it will set out more detailed rules on that mechanism in a Notice, replacing the existing Cooperation Notice. The envisaged Notice will lay down a deadline within which the Commission must reply. Article 15(2) and (3), which are best dealt with together, provide for a monitoring and intervention mechanism that is designed to prevent and correct, at the appellate stage, judgments that do not accord with the Commission’s views. Under Article 15(2), national courts must send the Commission ‘copies of any judgments applying Article 81 or Article 82 of the Treaty within one month of the date on which the judgment is delivered’. The Commission may thus monitor the development of national jurisprudence in the application of Community competition law. The obligation in issue is narrower and less problematic than the mechanism initially foreseen in the White Paper to ‘inform’ the Commission of any ‘proceedings’ in which the competition rules are ‘invoked’. Where necessary, the one-month time limit allows the Commission to prepare an intervention at the appellate stage. Article 15(3) introduces a right for the Commission and the national competition authorities to submit written or oral observations to the courts of the Member States. Contrary to the mechanism outlined in the White Paper, it appears that because their intervention is not subject to the leave of the court, those authorities may intervene even if the national court does not want to hear their observations. The authorities may request the national court to transmit to them any necessary documents under

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the second subparagraph of Article 15(3). Such a rule appears to be indispensable in order for the Commission or national competition authorities to make useful observations in national proceedings. However, some might argue that it raises questions concerning certain basic procedural rights of the parties and the independence of the judiciary. Under Article 16, entitled ‘Uniform application of Community law’, national courts are obliged (in accordance with ‘Article 10 of the Treaty’ and ‘the principle of the uniform application of Community law’) to ‘use every effort to avoid any decision that conflicts with decisions adopted by the Commission’. That obligation does not seem to be the same as the obligation foreseen in the White Paper to avoid conflicts tout court. Since it concerns decisions ‘adopted’ by the Commission, the rule does not appear to cover potential conflicts with ongoing Commission procedures and envisaged Commission decisions. Conflicts with the existing or envisaged decisions of national competition authorities in the network are apparently also outside its scope. Contrary to the Cooperation Notice, the draft Regulation does not lay down concrete rules about how to resolve conflicts with the different types of decisions adopted by the Commission. The Explanatory Memorandum refers only to the effects of infringement decisions (Article 7 of the draft Regulation) and decisions that find the competition rules to be inapplicable (Article 10). It is not clear what the effects of Commission decisions rejecting a complaint or accepting commitments (Article 9) should be. It is also unclear whether the Commission wants to clarify the relationship between administrative enforcement decisions and private enforcement, for example, in a notice to replace the corresponding rules of the Cooperation Notice. The Explanatory Memorandum notes that, through the preliminary ruling procedure, the Court of Justice will continue to play an important role in ensuring the consistent application of Community competition law by the national courts. While ‘an initial increase in Article 234 references can be expected’, a ‘significant increase . . . is unlikely, as it is expected that most litigation before national courts will concern areas where the law has been clearly established’. The Commission’s view about the risk of forum shopping is clear from the terms of the Impact Assessment Form that accompanied the draft Regulation: the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters ‘largely’ prevents forum shopping and multiple litigation in civil courts.

4.

Comments

Thus far, the Commission has concentrated its efforts on procedural measures that promote consistency and legal certainty. All three measures examined provide for co-operation mechanisms and for rules designed to give national judges guidance if a judgment of a national court might conflict with envisaged or adopted Commission decisions. The Cooperation Notice created ‘soft law’,

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while the draft Regulation intends to turn similar principles into ‘hard law’. The Proposal also strengthens the innovation in the White Paper regarding the Commission’s right to intervene in national proceedings, removing the requirement of leave from the national court. Community law is normally applied to individuals by national authorities, and those individuals have to turn to their national courts to have their rights enforced under Community law. The problem of consistency thus exists beyond the field of competition law, in which the Commission is and will continue to be a central enforcement actor. It has therefore been stated that ‘compared with the overall situation generally prevailing on the internal market, the concern for coherent and consistent application of the competition rules may be considered to be almost excessive’.49 It might be regretted that the Commission apparently does not intend to give clearer guidance for national courts in order to avoid conflicts between their judgments and envisaged or adopted Commission decisions and/or decisions of national competition authorities. But, even if the measures proposed to promote consistency might be open to some specific criticisms, globally they may be sufficient to guarantee a satisfactory level of coherence in the application of the competition rules. To create procedural incentives and disincentives to bring court proceedings against anti-competitive behaviour, the Commission proposes to abolish its exemption monopoly and to impose on the defendant the burden of proving that the conditions of Article 81(3) EC are fulfilled. It is not certain that those measures will be sufficient to increase the number of cases in which the competition rules are used as a ‘sword’. Besides cultural obstacles and the unavailability of certain remedies, this report has identified a series of procedural obstacles (such as rules on access to the courts, rules on evidence, rules on costs, rules affecting the duration of proceedings, and the interaction between administrative enforcement and court proceedings) that the Commission has not discussed in the three documents at issue. However, it might also be argued that the moment for the coordination of national procedural rules has not yet arrived, since that would be more controversial than EC rules for the functioning of national competition authorities.50 In the absence of further measures to abolish or mitigate the obstacles that flow from national procedural rules, it might perhaps be wiser not to overestimate the role of national courts in the effective enforcement of EC competition law. The Commission apparently believes that there are no special problems of transnational litigation in the competition law field, and that the existing general measures (Brussels Convention etc.) suffice. However, an in-depth study by specialists might reveal specific problems, and could suggest particular measures designed to resolve those problems. Finally, the Commission does not discuss in detail the issues of basic procedural rights or the respective roles of the parties and the judge. It might be argued 49 50

See C.D. Ehlermann, op. cit. in the previous note, at p. 576. See C.D. Ehlermann, op. cit. in note 48, at p. 586.

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that it would be useful for the Commission to develop an active policy concerning those issues and to publicise its views. It might also be argued that it is sufficient for the Commission to wait for the Community courts to establish the applicable principles through their case law.

IV. The role of the Community Courts This Section examines some of the principles established by the Community Courts, and seeks to evaluate their potential role in resolving or at least attenuating some of the procedural problems identified above.

1. A brief reminder of the main principles Community law’s essential characteristics are its primacy over the law of the Member States and the direct effect of many of its provisions.51 Directly effective provisions constitute a source of rights and duties for those who are involved in legal relationships under Community law.52 The prohibitions in Articles 81(1) and 82, which are addressed to undertakings, tend to produce direct effects and therefore also create direct rights for the individuals concerned.53 Under the system of judicial protection established by the treaties, it is mainly left to the national courts to enforce the rights and duties of individuals arising under Community law. There are no regional ‘Community courts’ of general jurisdiction. The Court of Justice is also not competent to apply Community law in cases between natural or legal persons, or between such persons and national authorities. For example, with respect to the private enforcement of the competition rules, neither the Court of Justice nor the Court of First Instance has jurisdiction to hear cases brought by one undertaking against another undertaking. In such cases the Court may only intervene indirectly through its replies to references for a preliminary ruling. The existence of the preliminary ruling mechanism shows that the enforcement of rights arising under Community law was always intended to occur in the national courts. Community law generally defines only the rights and duties of individuals and does not provide for the remedies, procedural rules or sanctions that are necessary for their enforcement. It is well-established case law that ‘in the absence of Community rules on this subject, it is for the domestic legal systems of each Member State to designate the courts having jurisdiction and to deter-

51

Opinion 1/91 [1991] ECR I–6079, para. 21 of the Opinion. Case 106/77 Amministrazione delle Finanze dello Stato v. Simmenthal [1978] ECR 629, para. 15. 53 Case 127/73 BRT v. SABAM [1974] ECR 51, para. 16. 52

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mine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law’. That rule is sometimes referred to as the principle of ‘procedural autonomy’ of the Member States. However, the enforcement of Community rights and obligations on the basis of national remedial and procedural rules may have negative consequences for both the effective and the uniform application of Community law. Thus the Court established two important limitations on the Member States ‘procedural autonomy’ and held that the applicable national remedial and procedural rules must not: (1) be less favourable than those governing similar domestic actions (the principle of equivalence); nor (2) render it virtually impossible or excessively difficult to exercise rights conferred by Community law (the principle of effectiveness).54 An additional recognised basic principle is that a rule of national law must be set aside if it would prevent the preliminary ruling procedure under Article 234 EC from being followed.55

2. Some general questions 2.1. The concept of ‘procedural autonomy’ One controversial issue is what the term ‘autonomy’ means. It has been argued that national courts belong functionally to the Community legal order by virtue of applying Community law, and therefore cannot be said to possess the sort of procedural autonomy that is a manifestation of Member States’ sovereignty. National procedural law is said to be a merely ancillary body of law that is intended to ensure the effective application of substantive Community law.56 However, it has also been argued that national courts that apply Community law continue to act as organs of their national legal order and do not act as mere ‘agencies’ of the Community. Moreover, as the constitutional, administrative and judicial systems of the Member State are the result of their different historical experiences and the expression of fundamental political choices, the Community legal order must respect the organisational autonomy of the Member States, which comprises the power to determine the organisation of their jurisdictions and the procedures applicable before their courts.57 54

Joined Cases C–430/93 and C–431/93 Van Schijndel and Van Veen v. SPF [1995] ECR I–4705, para. 17 of the judgment with further references. 55 Ibidem, at para. 18 of the judgment. 56 Kakouris (1997): ‘Do the Member States possess judicial procedural “autonomy”?’ Common Market Law Review, 1389. 57 G. Montagnier: ‘Droit Communautaire et Procédure Civile’, Répertoire de procedure civile Dalloz 1997, paras. 8 and 10.

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For the purposes of the present report it is perhaps not necessary to take sides in that fundamental debate. It might be sufficient to recall three points with which many might agree. First, national procedural autonomy exists only in so far as there are no Community rules on the subject. In Rewe, the Court pointed out that Articles 94 et seq. and 308 EC enabled the Community legislature to take appropriate measures where necessary to remedy differences between the procedural provisions of the Member States. It was only in the absence of such harmonisation that the rights conferred by Community law had to be exercised in accordance with the conditions laid down by national rules.58 Secondly, it is widely accepted that Community legislative interference concerning most areas of national remedial or procedural law is politically sensitive, and that independently of the question of the Communities’ competencies. Perhaps it is therefore realistic to assume that de facto basic jurisdictional, remedial and procedural rules will continue to be adopted at the level of the Member States, at least in the medium term. Thirdly, the fact that Member States must generally adopt procedural rules, does not mean that Community law cannot affect this branch of the law. Even in areas in which the Member States have exclusive legislative competencies (such as the organisation of armed forces), those States must respect certain constraints imposed by Community law (such as the principle of equal treatment of men and women). That reasoning can be fully transposed to the procedural field: it is true that the Member States often possess legislative competence in procedural matters. However, they must exercise that competence within the limits imposed by Community law. The second element of the concept ‘procedural autonomy’ is the term ‘procedural’. It is generally accepted that the term is somewhat misleading and that it really covers both procedural rules stricto sensu, and jurisdictional or even ‘remedial’ rules, which some national legal orders regard as purely substantive rules. With regard to the award of damages for infringements of Articles 81 and 82 EC, it is in principle for the legal orders of the Member States to determine the applicable national legal basis for the remedy, and the form and extent of the remedy (for example, which heads of damage can be recovered: pure economic loss or moral damage?), the jurisdictions that will hear the case, and the procedural rules that those jurisdictions will apply. In that broad sense, ‘procedural’ refers to all rules that are not part of ‘substantive’ Community law. Hence, the dividing line between ‘substantive’ and ‘procedural’ rules appears to be important because national substantive rules are subject to the principle of supremacy, while procedural rules must only comply with the principles of equivalence and effectiveness. If, for example, the content of the national ordre public used for the control of arbitral decisions is to be classified as a substantive issue, no element of the national ordre public may conflict with the 58

Case 33/76, cited in note 45, para. 5 of the judgment.

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Community ordre public. If it is to be classified as a merely ‘procedural’ issue, it must only comply with the principles of equivalence and effectiveness. Finally, it has also been pointed out that the wide understanding of ‘procedural’ matters in the context of ‘procedural autonomy’ cannot be transposed to the interpretation of the concept of ‘the rules on civil procedure’ in Article 65(c) EC.59

2.2. The limitations of national procedural autonomy From where has the Court drawn the limitations that it has established through its case law? It must be borne in mind that the principles of equivalence and effectiveness do not have an express legal basis in the Treaties, and that the Court does not have jurisdiction to rule directly on questions of national (procedural) law. Many argue that those principles are based on the duty of national courts under Article 10 EC to ensure fulfilment of their State’s obligations arising from Community law.60 Others argue that they are a practical expression of the supremacy and direct effect of the Community provision at issue in the case at hand. The true position is perhaps that the Court’s case-law is based on a combination of those two principles, as well as a third principle that is enshrined in Articles 6 and 13 of the European Convention on Human Rights. According to this additional principle, in order to obtain protection of his rights, a private person must have access to an independent and impartial Community or national court. A more important practical issue concerns which tests the Court applies or should apply, when it examines whether a given national procedural provision conflicts with the principles of equivalence and effectiveness. With regard to the principle of equivalence, the practical difficulty may sometimes be to identify a comparable situation under national law. For example, with which purely internal procedure should the procedure for the expulsion of foreigners be compared? However, with regard to the competition rules, it appears to be clear that the principle of equivalence does not allow the procedures for the private enforcement of Community competition rules to be less favourable than those governing the private enforcement of national competition rules. The appropriate ‘intensity of review’ is more problematic concerning the principle of effectiveness. The Court has used several formulas in its case law, which would appear to correspond to different tests. In addition to the classic formula (national rules may not render ‘virtually impossible or excessively difficult’ the exercise of rights conferred by Community law), the Court has also held that the national legal order must guarantee ‘adequate’ protection against 59

See W. van Gerven, supra note 4, at p. 524, note 114. See, for example, J. Temple Lang, ‘The duties of national courts under EC Constitutional Law’, at DG Comp website at http://europa.eu.int/comm/ competition/antitrust/others, p. 3. 60

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infringements of Community rights,61 and that it must not impair the ‘full effectiveness’62 of Community law. Professor Van Gerven has proposed to adopt a system of differentiated tests that would distinguish between the existence of a remedy, the form and extent of that remedy, and the procedural rules that allow individuals to invoke the remedy before a court of law. Under that system, the creation of Community rights for individuals under the Community law principle of access to the courts necessarily gives rise to the existence of a remedy (ubi ius ibi remedium). In the absence of Community rules, the form and extent of the remedy are a matter for the Member States, provided that the remedy provides adequate (not just minimum) judicial protection. And, in the absence of Community rules it is also let to the Member States to lay down applicable procedural rules, provided that such procedural rules do not make adequate judicial protection virtually impossible or excessively difficult and that they do not treat Community claims less favourably than similar national claims.63 When does a national procedural rule render the exercise of rights conferred by Community law excessively difficult? In Van Schijndel, the Court held that: ‘each case which raises the question whether a national procedural provision renders application of Community law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national instances. In the light of that analysis the basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure, must, where appropriate, be taken into consideration’.

It is not very likely that two lawyers applying that test to a given national provision will always reach the same result. For practical purposes it might be helpful for litigants to make a comparative analysis of the procedural laws of the Member States. The Court will be reluctant to ‘strike down’ a procedural rule that exists in that form in practically all the legal systems of the Member States. The Court might be even more reluctant to condemn a national procedural provision if it can be shown that the Rules of procedure of the Community Courts contain the same rule, or a very similar one. As a last question in this subsection, it might be asked: in the context of the enforcement of Community rights before national courts, must national procedural rules not only respect the principles of equivalence and effectiveness but also comply with Community fundamental (procedural) rights? In SFI,64 the Court found that a Belgian provision concerning the calculation of time-limits in certain VAT matters complied with the principles of equivalence and effectiveness, but it then examined whether it also respected the general principle of 61

Case C–217/91 Marshall v. South West Area Health Authority [1993] ECR I–4367, para. 26. 62 Case C–213/89 Factortame [1990] ECR I–2433, para. 21. 63 W. van Gerven, supra note 4, at p. 503. 64 Case C–85/97 SFI v. Belgium [1998] ECR I–7447.

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non-discrimination. Suppose that a procedural rule concerning permissible means of evidence promotes the effective enforcement of competition rules before a national court, but it conflicts with the defendant’s basic procedural rights. In our view, the Court—which, under Article 220 EC, must ensure that in the interpretation and application of the Treaty the law is observed—cannot just concentrate on effective enforcement and ignore the repercussions on the basic procedural rights of litigants.

3. Some important judgments concerning the private enforcement of the competition rules 3.1. Rules that a national court must or should observe if a conflict might arise with a decision taken or envisaged by the Commission The central case in this field was until recently Delimitis.65 The proposed abolition of the Commission’s exemption monopoly might render some aspects of that judgment nugatory insofar as it deals with the application of Article 81(3) EC. However, the Court also stated that the Commission shares competence with national courts with regard to the application of Articles 81(1) and 82. The consequences of that division of competencies had therefore to be examined. In a carefully drafted passage, the Court held as follows: ‘Account should here be taken of the risk of national courts taking decisions which conflict with those taken or envisaged by the Commission in the implementation of Articles 85(1) and 86, and also of Article 85(3). Such conflicting decisions would be contrary to the general principle of legal certainty and must, therefore, be avoided when national courts give decisions on agreements or practices which may subsequently be the subject of a decision by the Commission.’

In the recent Masterfoods judgment,66 the Court established the following principles. First, the Commission cannot, ‘in order to fulfil the role assigned to it by the Treaty’, be bound by a decision given by a national court in application of Articles 81(1) and 82 EC. It is therefore entitled to adopt individual decisions at any time, even if those decisions conflict with a prior judgement of a national court. Secondly, if a national court rules on an agreement that is already the subject of a Commission decision, the court in question cannot make a decision that is contrary to that of the Commission, even if the latter’s decision conflicts with a decision given by a national court of first instance. In that regard the Court relied on Article 10 EC, the binding effect of Commission decisions under Article 249(4) EC, and an a fortiori argument67 based on a comparison with the 65 66 67

Case C–234/89 Delimitis v. Henninger Bräu [1991] ECR I–935. Case C–344/98 Masterfoods v. Commission, judgment of 14 December 2000. The a fortiori argument is much clearer in the French version of the judgment.

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situation in Delimitis, which concerned a potential conflict with a merely contemplated Commission decision that had not yet been made. Thirdly, the principle that the national court cannot make a decision that is contrary to one of the Commission applies even where an action for annulment against the Commission decision has been brought and the President of the Court of First Instance has suspended the application of the Commission’s decision until final judgment has been given. Fourthly, when the outcome of the dispute before the national court depends on the validity of the Commission decision, it follows from the obligation of sincere cooperation that the national court ‘should’ (in the French version ‘devrait’) stay its proceedings pending final judgment in the action for annulment by the Community Courts, unless it considers that a reference for a preliminary ruling about the validity of the Commission decision is warranted. Finally, if the national court stays proceedings, it is incumbent on it to examine whether it is necessary to order interim measures.

3.2. Cooperation between the Commission and the national courts In Delimitis the Court held that the Commission is under a general duty to cooperate with national courts to ensure that Community law is applied and respected. That cooperation may take the form of responses to particular questions or the provision of market information and statistics. Subject to Article 214 EC, the national court can—within the limits of its procedural rules— obtain information as to the status of the Commission’s procedures in relation to the agreement in question. Those statements of the Court are the basis of the corresponding rules in the Cooperation Notice and in the draft Regulation. In Van der Wal68 the Court dealt with the issue of third party access to the Commission’s replies to questions submitted to it by national courts. For the purpose of the present report, it is perhaps of interest that the Court quotes extensively from the Cooperation Notice. That might be interpreted as an indirect endorsement of the rules about cooperation contained therein.

3.3. The role of the parties and the court a. Settlements In Nungesser,69 the Court was requested to consider the validity of a settlement concluded under the German Code of Civil Procedure before a German court. The applicants submitted that such a settlement was not an ordinary private contract but amounted to an order of the court. The Court resolved the case without deciding whether judicial settlements can be declared void under

68

Joined Cases C–174/98P and C–189/98P Netherlands and Van der Wal v. Commission, judgment of 11 January 2000. 69 Case 258/78 Nungesser v. Commission [1982] ECR 2015.

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Article 81(2) EC. However, it noted obiter that, whilst it was true that the judicial settlement in question was enforceable, it did not have force of res judicata under German law and was therefore not effective against other courts, public authorities or third parties. It also noted that, under German law, a judicial settlement ‘must comply with the requirements of public policy and bonos mores and therefore cannot infringe mandatory rules of competition law’. In Bayer v. Süllhöfer,70 the Court distinguished between simple settlements and judicial settlements. The Court saw no reason to treat the former differently from other agreements. The question of the possible invalidity of judicial settlements was again left open. The Court has thus adopted a cautious approach to the status of judicial settlements. Perhaps the Court has tacitly balanced the positive effects of settlements in terms of procedural economy against their negative effects of hindering the public interest in maintaining the effectiveness of the competition rules. b. The ability or obligation of a national court to raise points ex officio The ability or obligation of a national court to raise points ex officio arose in Peterbroeck71 and Van Schijndel,72 which were decided on the same day. In Peterbroeck, the Court condemned a Belgian rule that prevented the national court from considering on its own motion whether a measure of domestic law was compatible with Community law if the latter had not been invoked within a certain period. An important reason for that judgment might have been that the national rule in issue de facto prevented the preliminary ruling procedure from being followed. In Van Schijndel, the Court reached the opposite result with regard to a Netherlands rule that prevented the Hoge Raad from raising issues on its own motion. As those judgments have been widely discussed,73 the following remarks might suffice for the purposes of the present report. Peterbroeck did not concern the competition rules at all and Van Schinjndel did not involve the typical competition law situation of the enforcement of an invalid contract. The issue in Van Schijndel was not the compatibility of private behaviour with Articles 81 and 82, but the compatibility of a State measure with Article 86 EC, and with Article 10 EC read in conjunction with Articles 81 and 82 EC. Procedural rules that allow or oblige a national civil court to raise ex officio the issue of the validity of a contract between private parties are common to many jurisdictions. Procedural rules that allow or oblige the civil courts to raise ex officio the issue of the validity of a law (of Parliament) on which one of the parties could have relied are perhaps less common. 70

Case 65/86 [1988] ECR 5249. Case C–312/93 Peterbroeck v. Belgium [1995] ECR I–4599. 72 Joined Cases 430 and 431/93 Van Schijndel v. SPF [1995] ECR I–4705. 73 See, for example, S. Prechal (1998): ‘Community law in national courts: The lessons from Van Schijndel’, Common Market Law Review, 681. 71

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In Eco Swiss v. Benetton,74 the Court held that where domestic procedure rules require a national court to grant an application for the annulment of an arbitration award founded on the failure to observe national rules of public policy, that national court must grant the application if it considers that the award in question is in fact contrary to Article 81 EC. One possible interpretation of that judgment is that Article 81 EC must, as a matter of Community law, be part of the national ordre public. Interestingly, in its reasoning the Court did not refer to either the procedural autonomy of the Member States and its limitations, or to the principle of supremacy. It merely stated that Article 81 EC constitutes a fundamental provision that is essential for the accomplishment of the tasks of the Community and, in particular, the functioning of the internal market. As in Peterbroeck, the effectiveness of the preliminary ruling procedure seems to have been an important concern. Because arbitration tribunals cannot refer questions for a preliminary ruling, it was important that the courts involved at the recognition and enforcement stage can refer those questions where necessary.

3.4. Basic procedural rights and their interaction with civil enforcement In Otto v. Postbank,75 the Court held that Community law does not require a national court to apply, in civil proceedings, the principle established in Orkem76 that an undertaking is not obliged to answer the Commission’s questions if the answer to those questions entails an admission that the competition rules have been infringed. The Court argued that the Orkem principle was essentially intended to protect an individual against measures of investigation ordered by public authorities to obtain an admission leaving him open to administrative or criminal penalties. However, in order to protect the parties to civil proceedings, the Court went on to state that the information obtained in the course of civil proceedings cannot be used by the Commission or a national authority in administrative proceedings that might result in the imposition of a penalty, or as evidence justifying the initiation of an investigation prior to such proceedings.

4. To what extent can the Community Courts’ case-law serve to resolve or mitigate the procedural problems identified above? An optimistic proponent of increasing the amount of private enforcement has argued that the Court will, in due course, be obliged to decide on the basis of the principle of effectiveness whether Community law includes (among others) 74 75 76

Case C–126/97 [1999] ECR I–3055 Case C–60/92 [1993] ECR I–5683. Case 374/87 Orkem v. Commission [1989] ECR 3283.

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the right to discovery of the defendant’s documents, the right to cross-examine, or the right not to have to meet an unreasonable burden of proof.77 Another commentator has pointed out that, in view of the number and importance of the limitations already imposed by the Court, the Member States have already lost most of their procedural autonomy.78 Others maintain the contrary, that the principles established by the Court guarantee only a minimum restraint. A first remark in that regard is that the Court’s case-law concerning the limitations of procedural autonomy is essentially a tool of ‘negative integration’. The Court is not usually asked to determine what procedural mechanisms the Member States must introduce, but which existing national procedural rules they must refuse to apply. However, negative integration might not suffice if it is mainly the absence of special mechanisms in the national legal orders that hinders effective private enforcement of the competition rules (such as the absence of modes of public interest litigation, of effective means of proof, or of special rules on costs). Secondly, the case law in question is a relatively ‘soft’ tool of negative integration. The Court has demanded an effective remedy in cases such as Factortame or Francovich. However, with regard to procedural rules stricto sensu, it has usually only applied the ‘excessively difficult’ test. It is significant that Professor Van Gerven suggests subjecting national remedial rules to a stricter test than purely procedural rules. Thirdly, it must be remembered that many civil procedural rules have a technical nature. They are often inextricably linked to other procedural rules or to particular substantive rules of the legal system in question. It might thus be difficult to introduce the necessary rules through case-law. As a matter of principle, technical rules should be introduced through legislation. Finally, it might be time-consuming and unsatisfactory to rely on future caselaw alone. Progress in the procedural field is contingent on relevant requests for preliminary rulings from national courts, which in turn presuppose a sufficient number of national civil proceedings in which the antitrust rules are invoked. However, one of the problems is precisely that there are procedural disincentives, or insufficient incentives, to commence civil litigation before the courts. As cases are, by their very nature, introduced in a disorderly fashion, it might also be difficult for the Court to develop a systematic and coherent policy concerning procedural issues.

V. Coordination by the Community legislature The last section of this report examines some of the prospects for Community coordination or harmonisation of national rules of civil procedure. 77 78

J. Temple Lang, supra note 60, pp. 4 and 5. G. Montagnier, supra note 57, para. 32.

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1. Horizontal coordination of national rules on civil procedure Some competition law specialists might not be aware that there is already a considerable body of general/horizontal Community rules covering issues of civil procedural law. More coordination is likely in the short to medium term. The most important instrument in force is the Brussels Convention on jurisdiction and enforcement of judgments in civil and commercial matters concluded on the basis of Article 293 EC. The courts of the Member States apply that Convention every day, and the Court of Justice has given numerous preliminary rulings on the interpretation of its provisions on the basis of a special protocol. Any competition lawyer who wishes to start civil proceedings on the basis of the EC competition rules—the applicability of which presupposes an effect on trade between Member States—should be aware of the rules of that Convention. Service of process abroad is regulated by a Convention of 1998.79 On the basis of the newly introduced Article 65 EC, the two Conventions in question have been transformed into Regulations.80 Germany has proposed a Regulation on cooperation between national courts in the taking of evidence in civil and commercial matters,81 and the Commission has proposed a Council Decision establishing a European judicial network in civil and commercial matters.82 Further measures are under discussion (on topics such as legal aid). The appropriate legal basis of that dynamic process of coordination of civil procedural rules is an important issue. The first problem is the relationship between Articles 65, 95 and 293 EC, particularly with respect to intraCommunity litigation in commercial matters. For example, it might be argued that Article 65 is located in Title IV of the EC Treaty on ‘policies related to the free movement of persons’ and that it therefore concerns only the law of persons, family and succession.83 Others maintain that Article 65 EC contains a horizontal work programme for the Community legislature in civil matters, which must be carried out under the lex specialis of Article 65 EC and not under the general rule of Article 95 EC. The interpretation of Article 65 EC also raises many controversial questions.84 Article 65(c) EC may be of special interest in the context of the present 79

OJ 1998 C 261. Council Regulation (EC) No. 1348/2000 of 29 May 2000 on service in the Member States of judicial and extrajudicial documents in civil or commercial matters, OJ 2000 L 160, p. 37, and Council Regulation (EC) No. 44/2001, supra note 24. 81 Initiative of the Federal Republic of Germany with a view to adopting a Council Regulation on cooperation between the courts of the Member States as regards in the taking of evidence in civil and commercial matters, OJ 2000 C 314, p. 1. 82 Proposal for a Council Decision establishing a European judicial network in civil and commercial matters, OJ 2001 C 29, p. 281. 83 J. Basedow (2000): ‘The Communitarization of the Conflict of Laws under the Treaty of Amsterdam’, 37 Common Market Law Review, 687, at p. 696. 84 See, for example, O. Remien (2001): ‘European Private International Law, the European Community and its Emerging Area of Freedom Security and Justice’, 38 Common Market Law Review 1, 53. 80

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report. That rule allows the adoption of measures ‘promoting the compatibility of the rules on civil procedure applicable in the Member States’. It is not entirely clear what ‘promoting the compatibility’ means. Does it allow the adoption of uniform rules, only harmonisation measures or measures falling short of harmonisation? It is also unclear the extent to which the procedural rules in issue must have ‘cross-border implications’ (see the introductory part of Article 65 EC). Is it sufficient that the rules in question might also affect individuals from other Member States? A further problem concerning Article 65 EC as a legal basis is that Article 69 EC, in conjunction with special protocols annexed to the Treaties, grants a special status to the UK, Ireland and Denmark. Whereas the UK and Ireland at least have the ability to ‘opt in’, one can only hope that Denmark transforms Community measures adopted under Article 65 EC into national law. Finally, one must take into account the problems generated by Article 68 EC, which limits references for preliminary rulings to the highest courts in the Member States.

2. Sector-specific coordination of national civil procedural rules Several commentators have suggested coordinating or harmonising (for the purposes of the competition rules alone) certain national procedural rules in order to promote increased effective private enforcement of those rules.85 At first glance it is unclear whether the Community is competent to adopt rules concerning civil procedural law that are specifically designed for the private enforcement of competition law. However, it should be remembered that there are a number of areas in which the Community legislature has adopted both substantive rules and rules that coordinate sector-specific procedural aspects for the enforcement of those substantive rules in national civil courts. For example, under Article 7 of the Directive on unfair terms in consumer contracts,86 Member States must ensure that adequate and effective means exist to prevent the continued use of unfair terms in consumer contracts. Those measures must include provisions whereby persons or organisations that have a legitimate interest to protect consumers under national law may take action before the courts or before competent administrative bodies. In the field of public procurement, an entire directive is devoted to the coordination of procedural rules relating to the application of review procedures to the award of public supply and public works contracts.87 There is also a Directive concerning the burden

85

R. Whish, supra note 8, at p. 87, Kerse, supra note 38, para. 10.23, S. Kon suggests even ‘full’ procedural harmonisation, op. cit. at note 32, at p. 248. 86 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993 L 95, p. 29. 87 Council Directive 89/665/EEC of 21 December 1989, OJ 1989 L 395, p. 33.

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of proof in sex discrimination cases.88 Those measures are not isolated examples. They instead represent a growing number of sector-specific measures that contain rules concerning procedural issues for the purposes of civil litigation. If the Community legislature wishes to introduce particular measures concerning the private enforcement of the competition rules (such as a right of action of organisations representing consumer interests), what would be the appropriate legal basis? Article 83(1) EC provides a legal foundation for ‘appropriate regulations or directives’ to ‘give effect’ to Articles 81 and 82 EC. It might be argued that such a formulation covers measures to coordinate national rules on civil procedural issues, and that Article 83(2)(e) EC may be interpreted broadly. Others might point out that the coordination of national procedural rules is not expressly envisaged in the catalogue in the second paragraph of Article 83 EC. The interpretation of the introductory passage of Article 83(2) —the measures referred to in the first paragraph must be ‘designed in particular’ to achieve the objectives listed in the catalogue of Article 83(2)—may also be relevant. The possibility of basing the desired measures on Articles 95 or 308 EC would also have to be examined.

3. Coordination through soft law: Guidelines, Notices and other publications The Commission has not yet publicised its views concerning many of the procedural issues identified in the present report (procedural incentives, the roles of parties and the national court, basic procedural rights and their impact on civil litigation, and transnational issues of civil litigation). It is also possible that the Commission has not yet carried out the necessary preliminary studies to form its views on those complex issues. It might perhaps be useful for the DG Competition to acquire some in-house specialist expertise (such as specialised officials and studies) concerning civil procedural issues, particularly with respect to transnational issues. The Commission’s Guidelines, Notices and other publications (comparative studies, for example) have the advantage of not requiring a particular legal basis in the Treaties. They might be a useful contribution to the clarification of difficult issues that national civil courts encounter when they have to deal with a case involving the EC competition rules. They might also indicate whether it is desirable to introduce new procedural mechanisms into the laws of the Member States.

88 Council Directive 97/80/EC of 15 December 1997 on the burden of proof in cases of discrimination based on sex, OJ 1998 L 14, p. 6.

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VI. Conclusion In our view, The main procedural issues that arise in the debate about the effective private enforcement of the EC competition rules are: • the procedural disincentives (such as problems of standing, problems in obtaining evidence, costs, delay), and the absence of specific incentives (such as modes of public interest litigation) to use the competition rules as a sword in civil litigation; • the design of procedural mechanisms to ensure legal certainty and consistency between the different enforcement actors; • the impact of basic procedural rights in administrative enforcement procedures on parallel or subsequent civil litigation; and • the difficulties of transnational litigation in competition cases. The interaction between private enforcement through the courts and privately triggered administrative enforcement through the Commission and/or national competition authorities will be of particular importance to the overall effectiveness of the future enforcement system. To date, the Commission has concentrated its efforts (Cooperation Notice, White Paper and draft Regulation) on procedural measures that promote consistency and legal certainty. It has not yet publicised its views concerning the other procedural problems identified in this report. The Court’s case law on the limitations of national procedural autonomy is only a tool of ‘negative integration’, and it is a relatively ‘soft’ tool. Furthermore, it is not clear whether there will be a great number of requests for preliminary rulings concerning procedural aspects of the private enforcement of EC competition rules. Finally, the technical nature of procedural law will often require intervention by the legislature. The Community Courts might therefore be unable to resolve or mitigate all of the procedural problems identified in this report. In our view, it would be useful to examine the possibility of coordinating national procedural rules through Community legislation. One should be aware of the growing body of Community measures coordinating certain general aspects of national civil procedural rules. Specific solutions for procedural problems that arise only in the context of the private enforcement of competition rules could also be envisaged (such as the introduction of modes of public interest litigation). Finally, guidelines, notices and published studies might make a useful contribution to a more coordinated application of national procedural rules.

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II Justice Hugh Laddie* Procedural Issues Related to the Private Enforcement of EC Antitrust Rules: The Case of England

I. Procedural links between the national courts and the Commission There are no links between the English courts and the Commission. The English courts consider themselves independent of any executive or administrative body, whether national or supranational. However, that does not mean that the English courts pay no regard to the activities of the Commission. In at least two areas, the English courts are likely to pay particular attention to the expertise and functions of the Commission. First, the courts have wide powers to stay proceedings to await the outcome of judicial or administrative proceedings elsewhere. Where a competition issue arises in an English action and the same issue has arisen or is about to arise in proceedings before the Commission, the court is likely to consider (even if not so requested by any of the parties) whether to stay the whole of the English proceedings, or the part which duplicates what is to be decided by the Commission. The question of whether or not to stay proceedings in whole or part is within the discretion of the court. It therefore must balance the advantages and disadvantages of taking that course. Factors which will point against granting a stay will include the inevitable additional costs and delay which would be caused. On the other hand powerful factors which will point towards the grant of a stay will be the undesirability of there being inconsistent decisions of the Commission and the courts and the comparative expertise of the former over the latter. Furthermore, if a party has made a request for exemption to the Commission, in many cases the national court would consider this to be a matter where it should defer its decision until the Commission has come to a decision on this issue. Secondly, the court may take into account any decision given by the Commission in the dispute before it. This subject will be considered under the heading of evidence below.

* High Court, Chancery Division, Royal Courts of Justice—London, UK.

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II. Availability of interim relief measures during antitrust proceedings before national courts There is no doubt that the English courts feel themselves free to deploy all the interim measures that exist in the judicial armoury in respect of antitrust issues arising in the course of litigation. The current rules relating to the grant of interlocutory injunctions (i.e. temporary restraining orders) require the court to decide first whether there is an arguable case and, if so, to then balance the hardship which would be caused by wrongly granting relief against the hardship which would be caused by wrongly refusing it. In a sense this has made it easier for courts to intervene with interim measures because they do not need to be persuaded that the complaining party’s case is strong, only that it is reasonably arguable. So, if a party wishes to complain, for example, about the refusal of supply and alleges that it amounts to a breach of Article 82 EC, the court would not need to determine that such a breach had been proved, only that it was reasonably arguable that it had been breached. If that hurdle has been crossed, the court must then balance the pros and cons of granting interim relief. Competition law issues may arise on applications for interlocutory relief in two ways. First, as indicated above, a party may wish to have the intervention of the court to prevent a course of conduct that offends against Articles 81 or 82 EC. Secondly, a defendant to proceedings for interlocutory relief may raise a competition issue as a defence—for example where the proceedings are brought by a plaintiff to prevent the parallel import of its own goods from one Member State into another.

III. Rules of evidence In the draft Regulation published in September 2000,1 the Commission proposed general rules on burden of proof—Article 2—. The detailed issues of evidence remain however governed by national procedural laws. There are, as such, no special rules of evidence relating to antitrust claims. The normal course for an English court to follow would be to place the burden of proving a point on the party asserting that point. Therefore if a party asserts that there has been a breach of Articles 81 or 82 EC, the court will start from the position that it is for that party to prove his case. However in some areas, the rules of evidence are determined by judicial authority. That is to say, the law of evidence is decided by the courts themselves. 1

Commission Proposal for a Council Regulation on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty and Amending Regulations (EEC) No. 1017/68, (EEC) No. 2988/74, (EEC) No. 4056/86 and (EEC) No. 3975/87 (Regulation Implementing Articles 81 and 82 of the Treaty), COM(2000) 582 final, OJ C365E/284 [2000].

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In the case of Community competition law, it has been held that a decision of the Commission on the same issue between the same parties which subsequently comes before the national court is, in effect, binding on the parties and, as a consequence, on the court. This decision is a decision at the High Court level only. It has not yet been considered in the Court of Appeal.

IV. Time limits (e.g. for filing an action, for intervening on the case as third party, for filing an appeal, etc.) There are no special time limits relating to competition law issues.

V. Procedural ‘safety mechanisms’ for ensuring the application of EC competition rules: ex officio raising of EC competition law issues during court proceedings All courts have the power, in theory, to raise issues in proceedings before them. In practice this is very rarely done. Because of the adversarial nature of our legal system, the courts assume that the parties themselves know which are the points that are open for serious argument. It follows that if a party does not raise a competition issue, it is most unlikely that the court would do so on its own behalf. This reluctance would be reinforced by two considerations. First, competition issues have a reputation for being expensive to litigate. A court would be nervous about forcing an issue on the parties that they do not wish to litigate but for which they will have to pay. Secondly, the courts have very limited powers to obtain evidence or documents on their own behalf. Without them, it would be very difficult to decide a competition issue fairly. This does not mean that the courts will never be pro-active. A judge who believes that a serious competition issue arises in a case but has not been relied upon by one or other of the parties will be free to bring that to the party’s attention. Furthermore on ex parte applications (that is to say emergency applications where only one side is present before the court) it would be open to the court to raise any obvious competition issue which comes to its attention.

VI. The procedural rules on third party interventions during court proceedings English courts have power to allow the intervention by third parties that might be affected by the determination of a competition issue. Under CPR 19.4

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anyone can apply to be joined in an action. The court has wide discretion to accede to any such request. Normally the intervention is by someone who has a joint claim with the existing plaintiff against the defendant or by a defendant (e.g. a supplier of allegedly offending goods) who is anxious to take over defending an action brought against someone who he is obliged to protect (e.g. his customer). However the courts have sometimes allowed intervention from more distantly interested persons.

VII. The procedural rules on the intervention of the Commission and NCAs during court proceedings (amicus curiae, expert opinions, etc.). There are some that believe that the English adversarial process is not well suited to determine antitrust allegations. Unlike systems in which the courts have powers to make their own inquiries on issues of importance, the English courts are supposed to be reactive. They assess the respective strengths of the cases put before them. Furthermore, save for the Restrictive Practices Court, most courts in England have no particular expertise in deciding antitrust issues. In those circumstances it might be thought that they would be happy to ask the Commission to intervene. However there appears to be no power to issue such an invitation and, even if there were, it is unlikely that the court would do so. It would be much more likely to use its power to stay the proceedings until parallel proceedings before the Commission have run their course. There are powers to appoint assessors to help the court and to invite the Attorney General to appoint an amicus curia to assist. However these powers are very rarely used. An amicus will normally only be appointed where one of the parties is not present (e.g. ex parte applications raising points of general principle) or where the party is present and incapable of representing himself. The appointment of assessors is extremely rare, although it has been done, with the agreement of the parties and at their cost, in highly technical cases.

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III Chantal Momège and Laurence Idot* Application of Articles 81 & 82 EC by the French Ordinary Courts: A Procedural Perspective

I. Introduction At first sight, ordinary courts in France play a secondary role in the application of EC or French antitrust law. Very early on, French judges understood the implications of the direct effect of Article 81(1) and (2) and Article 82 EC.1 However, it has to be noted that most litigation regarding anti-competitive practices is dealt with by the Conseil de la concurrence (French competition authority). This may be explained by the fact that, since the reform provided by the ordinance of 1 December 1986,2 any company may bring an action before the competition authority concerning restrictive agreements or an abuse of dominant position.3 If the action is justified (that is, if the alleged practice could be considered to be a restrictive agreement or an abuse of dominant position, and if there are sufficient convincing elements), the Conseil de la concurrence is obliged to examine the case,4 whereas the European Commission may decide not to.5 These procedural rules apply to articles L420–1 and L420–2 Com. Code6 that, under French law, prohibit restrictive agreements, abuse of dominant position and abuse of economic dependence. In addition, they apply to Articles 81(1) and 82 EC, as was made clear in 1992 by the introduction of a new provision in the ordinance of 1 December 1986.7 This possibility of bringing the action before the Conseil de la concurrence explains the secondary role played by the French ordinary courts in the

* Chantal Momège is a lawyer with Bredin/Prat/Saint-Esteben, Brussels. Laurence Idot is Professor at Université Paris I — Panthéon Sorbonne. 1 See, Loy (1980) p. 438; Berlin (1991) p. 1, 211. 2 In September 2000, the ordinance was codified in a new Commercial Code under Book IV. The new numbering system will be used. 3 Art. L462–5 Com. Code. (ex Art. 5, ordinance 1 December 1986). 4 Art. L462–8 Com. Code. This text has just been modified by the law on the new economic regulations (15 May 2001). The ordinary procedural conditions (interest and quality to sue) have been added to the conditions that were initially required in former Article 19 of the ordinance. 5 For a comparison of the status of the complainant under EC and French antitrust law, see, Barthe (2000). 6 Ex Articles 7 and 8, ordinance 1 December 1986. 7 Art. L470–6 Com. C. (ex Art. 56 bis, ordinance 1 December 1986).

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application of EC and French antitrust law.8 The gradual ‘eclipse’ of the French judge manifests itself in different ways. First, there are few main actions (actions à titre principal). It is exceptional for a claimant to bring an action for damages before a national court. Indeed, it would seem that there has only been one such reported action, Mors/Labinal. In that case, a French company, Mors, accused another French company, Labinal, of having come to an agreement with a British company, Westland, and of having excluded it from an Airbus invitation to tender for providing a braking system. The action was based on Articles 81(1) and 82 EC. The tribunal de commerce (commercial court) of Paris9 found in favour of the claimant and ordered the defendants to pay a provisional amount while waiting for the precise quantum of the damage caused to be determined. Labinal appealed, and the Court of Appeal of Paris10 confirmed the first instance’s ruling. Labinal then appealed again (pourvoi en cassation under the French system), to the Cour de Cassation, which rejected the appeal.11 However, it took the Court of Appeal of Paris five years to decide on the quantum of damages.12 In order to avoid such problems, the alleged victim of a restrictive agreement or of an abuse of dominant position generally prefers to obtain a decision from the Conseil de la concurrence or the Commission before bringing an action for damages. The parties usually reach a settlement, but if this is impossible, they bring an action before a national judge, who will have to decide on the amount of damages, as in the Peugeot case.13 Actions asking that a contract be declared void are also very rare.14 However, competition may well be invoked as a secondary matter (à titre incident), and 8 When they examine the appeals (‘recours’) on the decisions of the Conseil de la concurrence, the Court of Appeal of Paris and the Cour de Cassation do not intervene as ordinary courts, but as national competition authorities. The procedural rules before the commercial division (chambre commerciale) of the Cour de Cassation are not modified, but some specific rules apply before the Court of Appeal of Paris. These ‘appeals’ are examined by a division specialised in financial and economic matters, and follow some specific rules (Decree n° 87–849, 19 October 1987, ‘relatif aux recours exercés devant la Cour d’appel de Paris contre les décisions du Conseil de la concurrence’). These specific rules will not be examined in this study. 9 T. Com. Paris, 3 June 1992, not reported. 10 CA Paris, 13 May 1993, Europe, July 1993, comm. n° 300, Journal du droit international, 1993.957, note by L. Idot. 11 Cass. Com., 14 February 1995, Bull. IV, n° 48, Europe, April 1995, comm. n° 146. 12 CA Paris, 30 September 1998, Europe, December 1998, comm. n° 410. 34.2 million FF were attributed to Mors. 13 T. com., Paris, 22 October 1996, Europe, December 1996, comm. n° 471. This judgment intervened after the prohibition of Peugeot’s conduct by the CFI then by the ECJ (Case C–322/93 P [1994] ECR I–2727). 14 In the case ‘on the return of tanks’ (affaire dite de la restitution des cuves), the managers of the petrol stations asked the court to declare void a ‘tanks refund clause’ that was legal under the Civil Code. The Cour de Cassation (Cass. Com., 18 February 1992 Bull. IV n° 78) reversed the decision of the Court of Appeal that refused to make such a ruling. However, we do not know whether the voidance was the basis of the main action, or whether it had been requested in a counterclaim. See also, Cass. Com., 24 October 2000, C.S.M. v. Caulet, Dalloz affaires 2000, p. 429, obs. A. Marmontel, Les Petites Affiches, 20 April 2001, n° 79, pp. 10–11.

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different issues are at stake. The scope of competition law is rarely discussed outside recurrent litigation regarding payment of social contributions15 and the notion of restrictive agreement is not particularly problematic.16 There are two main categories of litigation. The first concerns manufacturers or members of distribution networks, who often bring actions for unfair competition against ‘free riders’. The second concerns actions for breach of contract, mainly distribution contracts. The second reason for the gradual eclipse of the French judge is that, generally speaking, the same sectors are concerned. On the rare occasion that Article 82 EC has been invoked, it has usually been in intellectual property and royalty cases, such as those involving the SACEM (Société de gestion de droits d’auteur).17 The monopolistic position of funeral homes is another example.18 More recently, there have been such cases in the field of telecommunications.19 By contrast, Article 81 EC is invoked mainly in cases concerning car distribution20 and 15 Cass. Crim., 17 March 1992, Bull. crim., n° 114; Cass. Crim., 25 October 1992, Bull. crim., n° 389; Cass. Com., 6 April 1993, Bull. IV, n° 137; Cass. Com., 12 July 1993, Bonet, Europe, November 1993, n° 446; Cass. Soc., 25 January 1996, Europe, April 1996, n° 158; Cass. Crim., 29 January 1997, Bull. crim., n° 40; Cass. Soc., 22 June 2000, in Les Petites affiches, 20 April 2001, n° 79. 16 See, for administrative homologation of price agreements in air transports, Cass. Civ., 1ère, 24 May 1989, Bull. civ., I, n° 212; for workers’ collective agreements, Cass. Crim., 31 March 1992, Bull. crim., n° 138; Cass. Com., 23 February 1994, Bull. IV, n° 74. 17 Cass. Civ.1ère, 28 May 1984, Bull. I, n° 172; Cass. Civ.1ère, 30 January 1985, Bull. I, n° 45; Cass. Crim., 16 May 1991, Bull. crim., n° 210. More recently, the copyrights of phonogramme producers have been challenged; see, Cass. Crim., 2 February 1994, Bull. crim., n° 48; CA Paris, 13 October 2000, Juris-data n° 126287, Communication, electronic commerce, 2000, n° 12, comm. n° 127. 18 Cass. Com., 20 January 1987, Bull. IV, n° 21; Cass. Com., 10 July 1989, Bull. IV, n° 216; Cass. Com., 20 March 1990 (2 decisions), Bull. IV, n° 85 et 86; Cass. Com., 4 June 1991, Bull. IV, n° 202; Cass. Com., 14 January 1992, (2 decisions), Bull. IV, n° 12, 13; Cass. Com., 15 July 1992, Bull. IV, n° 92; Cass. Com., 27 February 1996, Europe, April 1996, comm. n° 158; Cass. Civ.1ère, 30 June 1998, Juris-data n° 003069. See also, CA Paris, 29 September 1999, SARL Bourgogne Funéraire, Juris-data n° 118625. 19 Cass. Com., 6 May 1996, France Telecom, Europe, July 1996, comm. n° 287. 20 Cass. Com., 9 May 1990, Bull. IV, n° 136; Cass. Com., 9 November 1993, Bull. IV, n° 386; Cass. Com., 7 December 1993, Bull. IV, n° 450; Cass. Com., 7 February 1995, Bull. IV, n° 35; Cass. Com., 27 February 1996, Bull. IV, n° 63, Europe, May 1996, comm. n° 209; Cass. Com., 9 July 1996, Bull. IV, n° 204; Cass. Com., 15 October 1996, Europe, December 1996, comm. n° 471; Cass. Com., 7 October 1997, Bull. IV, n° 245; Cass. Com., 13 January 1998, Sté L’Oceane Automobiles, Europe, December 1998, comm. n° 410; Cass. Com., 7 April 1998 (2 decisions), Bull. IV, n° 125 et 126; Cass. Com., 1 December 1998, Sté Sodifa, Europe February 1999, comm. n° 81; Cass. Com., 26 January 1999, Sté Automobiles J.Y. Berthier, Bull. IV, n° 29, Europe, June 1999, comm. n° 116; Cass. Com., 23 March 1999, Volkswagen, Revue trimestrielle de droit commercial, 2000.255, obs. S.P.P.; Cass. Com., 9 October 1999, Le Brasseur, Revue trimestrelle de droit europeén, 2000.256, obs. S.P.P.; Cass. Com., 10 October 2000, SA Cachia Holding, Jurisdata n° 006177, Les Petites Affiches, 20 April 2001, n° 79. See also, CA Paris, 18 February 2000, Volkswagen, Dalloz affaires 2000, AJ, p. 195.

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perfumes.21 In the first category, block-exemption regulations 123/85 and 1475/95 have often been applied. There are also cases involving regulations on exclusive distribution22 or franchising.23 In other words, agreements—mainly cooperation agreements—that might give rise to individual exemption decisions are rarely brought before national courts. Over the last five years there has only been one reported judgment regarding a research and development agreement,24 and one case of acquisition in which the validity of the non-competition clause25 was at issue. It would seem that, at least for this type of contract, companies in France prefer to resort to arbitration.26 Theoretically, the fact that the French courts will be able to apply Article 81 EC in full should increase the number of cases under competition law. Nevertheless, judges are fully aware of the principles that govern the jurisdiction of the Commission and the national courts respectively, as laid down in the notice of February 1993.27 French courts have observed, on several occasions, that they are not ‘an authority’ under the provisions of Article 9(1) of Regulation 17/62,28 and have agreed to defer judgment (if necessary) until after the Commission has handed down its decision.29 This paper will not re-analyse the above-mentioned principles, which have already been studied in detail.30 Instead, and in the light of the proposed reform, it will examine the practical advantages and disadvantages of the French legal system from an institutional and procedural point of view. 21

There is important case law in France, see before 1993, the numerous decisions quoted in Ch. Momège, M. Schodermeier, Jurisclasseur Europe, fasc. 1451, Distribution sélective, sp. n° 127 and subs.. After 1993, see for instance, Cass. Com., 21 June 1994, Bull. IV, n° 235; Cass. Com., 9 April 1996, Europe, June 1996, comm. n° 256; Cass. Com., 13 January 1998, Sté Gift Shop, Europe, December 1998, comm. n° 410. CA Pau, 11 May 1999, SARL Anais, Juris-data n° 041680; CA Paris, 15 February 2001, Dalloz.2001, p. 1465. 22 Cass. Com., 4 June 1996, Europe, June 1996, comm. n° 256; Cass. Com., 14 December 1999, Mme Sterczinski, Bull. IV, n° 227, Contrats conc. cons., March 2000, n° 46, obs. S. Peruzzetto; Cass. Com., 14 December 1999, Ziliotto, Dalloz affaires, 2000, AJ, p. 79. CA Lyon, 19 October 2000, Juris-data n° 138 087. 23 Cass. Com., 17 November 1998, Pluri-Publi, Bull. IV, n° 271, Europe, January 1999, comm. n° 32; Cass. Com., 6 April 1999, Daubresse, Europe, January 2000, comm. n° 25; Cass. Com., 6 April 1999, Phildar, Revue trimestrielle de droit commercial, 2000.257, obs. S.P.P. CA Toulouse, 1 March 1999, Cejibe, Juris-data n° 040 352. 24 T. com., Nanterre, 29 May 1998, Les Petites Affiches, 1999, n° 159, note by Fl. Le Cohennec 25 CA Paris, 23 September 1999, SA Fleury Michon v/Sté Aoste Holding, Juris-data n° 024258. 26 See Panel III. 27 OJ C39 [1993]. 28 See, for instance, Cass. Crim., 16 May 1991, Bull. crim., n° 211; Cass. Com., 18 February 1992, Bull. IV, n° 78. 29 For a recent application, see, T. Com., Paris, 10 October 2000, Sté OCP Repartition v/ Sté Laboratoires Merck, Juris-data n° 134562. 30 See notes 30 and 31; adde, the French report by M. Bazex (1997) in the study published by the Commission.

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II. The institutional framework Under the French legal system, all courts are entitled to apply competition rules. However, it is usually the commercial court that has jurisdiction (1). In urgent cases, the claimant may bring an action before the juge des référés (2).

1. Prevalence of the commercial courts over other courts The French system is based on a fundamental division between l’ordre judiciaire (subdivided into civil and commercial courts on the one hand, and criminal courts on the other), and l’ordre administratif (which includes administrative courts). All courts may theoretically enforce competition rules within their normal jurisdiction, but the commercial courts, which are very specific, play an essential role.

1.1. Secondary part played by non-commercial courts Criminal and administrative courts are not affected by the reform of Regulation 17/62, and will only be mentioned briefly. a. Criminal courts Let us start with criminal courts. A specific offence exits under French law for fraudulent participation in an illicit restrictive agreement or in an abuse of dominant position prohibited by Article L420–4 Com. Code. (ex Article 17 of the ordinance of 1 December 1986). This offence is tried by the Tribunal correctionnel (a criminal court) of the place where it was committed, and the rules of criminal procedure apply. Whether or not the French criminal courts may hear cases concerning a breach of EC law has been discussed,31 but to date there have been no actual cases on this issue. The rare actions that have been brought were based on a breach of French law.32 Most of the cases deal with horizontal restrictive agreements (particularly concerted bids in the field of public procurement), but such agreements cannot obtain an exemption anyway. A problem of competition law may also be brought before the criminal court as a secondary matter, when a defendant invokes EC law in order to neutralise an offence. This was the case with actions brought for non-payment of social security contributions33 or other contributions such as those owed to the SACEM34 or

31

See, L. Idot (1998); D. Berlin, (1991); colloque d’Aix (1995). Cass. Crim., 14 December 1995, R. Lebourgeois, Bull. crim., n° 384, p. 1126. 33 Cass. Crim., 17 March 1992, Bull. crim., n° 114; Cass. Crim., 25 November 1992, Bull. crim., n° 389; Cass. Crim., 29 January 1997, Bull. crim. N° 40. 34 Cass. Crim., 16 February 1991, Bull. crim., n° 210. 32

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similar entities.35 Another example is the breach of the monopoly of the Agence Nationale pour l’Emploi, ANPE36 (National Employment Agency). There again, the reform does not affect the solutions, because the issue usually revolves around the applicability of the competition rules or the legitimacy of a monopoly. b. Administrative courts Nor are the administrative courts directly concerned by the reform of Regulation 17/62, even though the Conseil d’Etat (Supreme Administrative Court) has integrated EC competition rules37 into the bloc de légalité (rules of reference) since 1996. This means that French administrative judges must now apply Articles 81(1) and 82 EC.38 However, they may only apply these provisions within the framework of their usual jurisdiction, that is, when annulling delegated legislation or administrative contracts. Most such cases deal with monopolies, and the question is whether or not Article 82 EC applies.39 It is highly unlikely that contracts covered by Article 81(3) EC will be brought before the administrative court. Accordingly, the ‘natural’ competition judge is the civil judge lato sensu under the French system. However, actions in tort and contract are brought before the civil courts stricto sensu (that is, the tribunal de grande instance or the commercial court) depending on the parties concerned. The commercial court has jurisdiction when both parties to the case are traders, or if the claimant chooses the commercial court. As competition litigation usually involves traders—be they natural persons or corporations—and actions are only rarely brought against a craftsman, a farmer, a sales representative, and so on, the tribunaux de grande instance do not apply EC competition rules very often.40 Most cases are therefore heard by commercial courts. This is of great practical importance, because the commercial courts have very specific features, as it will be shown below.

1.2. The specific features of commercial courts There are over 200 commercial courts in France. So far the judges of such courts have been elected,41 rather than being professional judges. Nevertheless, they 35

Cass. Crim., 2 February 1994, Bull. crim., n° 48. Cass., Crim., 16 November 1999, Bull. crim., n° 263 37 CE, 8 November 1996, FFSA, Europe, December 1996, comm. n° 468. 38 Atelier de droit de la concurrence (2000); adde, P. Cassia (2001). 39 CE, 12 février 1997, FFSA, Europe, May 1997, comm. n° 161. 40 TGI, Paris, 31 January 1986, Magne v/VAG, Gazette du Pal., 1986.2, somm. 445, for a litigation on Regulation 123/85. 41 In Alsace Lorraine, a special system is being upheld for historical reasons. There are seven Courts of first instance with commercial divisions that operate according to the échevinage principle (a panel composed of professional and non-professional judges). There are also seven mixed courts for the DOM (French overseas departments). Moreover, there are 26 Courts of first instance that decide commercial cases in districts where there are no commercial courts. 36

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had the right to apply both EC and French competition law. This situation is currently changing, and this might have an impact on the effective application of EC law. a. First reform: specialisation The first reform consisted of the adoption, on 15 May 2001, of a law on new economic regulations modifying the ordinance of 1 December 1986. Henceforth only certain commercial courts will have the right to apply Title II, Book IV (Articles L420–1 to L420–5 Com. Code) on anti-competitive practices. Pursuant to the new Article L420–7 Com. Code, the list of approved commercial courts will be decided by the government. It is not yet known what the government will decide; probably only major commercial courts will be chosen. Leaving the political aspect aside, this reform raises a problem of construction: the issue of court specialisation has been explicitly mentioned in relation to the application of French law, but no comment has been made concerning EC law. It would seem logical to adopt the same solution for EC law. The reasons for asking specialised courts to apply French competition law are even more valid when it comes to the application of Articles 81 and 82 EC. There will also be a practical problem, due to the fact that competition law is usually invoked as a secondary matter. This might slow down the procedures. Let us imagine an action for breach of contract brought before the appropriate commercial court whereby the legality of a clause is challenged under the provisions of Article L420–1 Com. Code and Article 81 EC, but the court is not authorised to hear actions concerning restrictive agreements. Will the action have to be transferred to another, authorized, court? The answer to this question would probably be ‘yes’. b. Second reform: the introduction of professional judges The second reform is still under discussion. Commercial courts are an old institution in France; in Paris, this institution dates back to 1563. Over the last few years, the French commercial courts have been increasingly criticised, mainly for the lack of legal training of their judges. Moreover, the ethics and impartiality of certain judges were questioned, especially in some bankruptcy cases.42 In response to this criticism, a bill was recently introduced, aiming to bring professional judges into the commercial courts, alongside the non-professional ones (échevinage). (The bill also intends to reform the geographic distribution of courts, which no longer corresponds to the current economic situation.) Although non-professional judges went on strike to contest this reform, it seems quite certain that in the near future there will be major changes with respect to the appointment of judges. It should be noted that the above comments apply to first instance commercial courts. Their decisions may be appealed against before the commercial 42

Colcombert et Montebourg (1998).

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division of the Cours d’appel (Courts of Appeal), where only professional judges sit. Further appeal to the Cour de Cassation (Supreme Court) is possible, following the standard rules of appeal.

2. The importance of the juge des référés in emergency situations Another important fact has to be considered in competition litigation: the actions frequently do not follow the standard rules of procedure. Given the urgency of the situation, claimants might prefer to apply directly to the juge des référés (a kind of judge in chambers). Under French competition law, there are two kinds of référés (special emergency proceedings): the référé concurrence as laid down in Article L442–6 IV Com. Code (ex Article 36–2 of the ordinance), and the référés de droit commun.

2.1. The référé-concurrence At first sight, the référé-concurrence does not concern the application of antitrust law, since it comes under Title IV of the ordinance (which remained Title IV of Book IV of the Commercial Code) on restrictive practices.43 However, the practices listed under Article L442–6/I Com. Code include the breach of established business relations44 and the violation of exclusive or selective distribution systems by ‘free riders’.45 In addition, the new law of 15 May 2001 has introduced the (new) tort of abuse of economic dependency.46 These different restrictive practices may interfere with the application of the law on restrictive agreements. This is the case when a manufacturer or a distributor brings an action against a free rider on the basis of this law. In its defence, the free rider could argue that the distribution network is illegal and, if Community law is applicable, contrary to Article 81 EC(1) EC. However, for procedural reasons this option is only rarely used. It is only useful to the Finance Minister, who may bring a case before the court;47 this is something that could not have been done within the framework of the ordinary procedural rules. This procedure is less useful however to undertakings, as the Cour de Cassation has aligned it with the standard procedure. One might have thought that an emergency action (action en référé) was subordinate to a main action—as is the case before the specialised competition authorities—but the Cour de Cassation has removed the necessity of a prior 43

Malaurie (1993). Art. L442–6 I. 5° Com. Code. 45 Art. L442–6 I. 6° Com. Code. 46 Art. L442–6 I. 2° b) Com. Code. 47 Art. L442–6 III Com. Code. This method of bringing a matter before a court is also attributed to the President of the Competition Council. However, he has never used it. This text has been modified substantially by the law of 2 May 2001. 44

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main action.48 However, even though initial analysis suggests that it is not necessary to prove the conditions required under general rules, the Cour de Cassation has reintroduced these requirements.49

2.2. The ordinary référé (référé de droit commun) In these proceedings, the president of the court examines the matter alone. It might be the president of the Tribunal de Grande Instance, in which case Articles 808 and 809 NCPC (new Code of Civil Procedure) are applicable. However, if the case falls within the jurisdiction of the commercial court, the president of that court examines the matter in accordance with Articles 872 and 873 NCPC. The content of the rules is the same but, for the reasons mentioned above, the référé commercial will be used. Before analysing the impact of the reform on this action, some rules must be considered. a. French substantive law From a legal point of view, there are two référés de droit commun. For Article 872 NCPC (or Article 808 NCPC, if the civil court has jurisdiction) to be applied, two conditions must be met: first, there must be an emergency and, secondly, there must be no serious objection (absence de contestation sérieuse) or dispute (existence d’un différend ). The conditions under which Article 873 §1 NCPC (or Article 809 §1 NCPC) is applied are easier to meet. Following a reform introduced through decree on the 17 June 1987, remedies may be requested even in the presence of a contestation sérieuse, and no emergency needs to be proved. It is sufficient to establish either a trouble manifestement illicite (obviously unlawful harm) or imminent injury. The judge can award an injunction or an order of specific performance. This explains why the référé under Article 873 §1 NCPC is becoming the rule in commercial matters. In practice, the claimant frequently prefers to bring an action where competition rules apply before the juge des référés. For instance, the claimant will ask for an order to perform a contract, and the defendant will base his defence on competition law;50 or the main action is based on a breach of competition law. These examples are mainly found in cases of abuse of dominant position.51 The number of such emergency procedures has increased considerably in recent 48

Cass. Com., 17 July 1990, Dalloz 1991 Jur.471, note Reynés, Jurisclasseur éd. G, 1990.II.20436, note by Virassamy. The solution has been confirmed (see, Lamy droit économique, n° 1140). 49 Cass. Com., 27 June 1989, JCP éd. G, 1990.II.21530, note Virassamy; adde, Lamy droit économique, n° 1140. 50 See, the Quantel case, Cass. Com., 24 March 1991, Jurisclasseur éd. G, II. 21887, note by Virassamy. 51 Cass. Com., 10 July 1999, op. cit.; see also, for an application of the Continental Can way of reasoning, CA Nancy, 27 November 1987, Gazette du Palais 1988.1.251.

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months, particularly with the development of competition in the field of telecommunications and e-commerce.52 In this case, when applying EC law,53 the juge des référés has the same powers as the judge in ordinary proceedings. Moreover, if he has jurisdiction, the juge des référés may ask the European Court of Justice for a preliminary ruling under Article 234 EC, and many French juges des référés have done so. Some questions reside, as to the application of EC law, on whether the juge des référés is enabled to decide that there is a trouble manifestement illicite justifying his jurisdiction, as provided for by Article 873 §1 NCPC. The Cour de Cassation decided that the juge des référés has the right to give a ruling on the substance of the case as well. The judge must decide whether or not anticompetitive practices exist.54 If, without examining the legality of the contract, he orders the performance of a contractual provision on grounds that there is a trouble manifestement illicite, his ruling can be overturned. The Quantel case55 is a good example in this sense. In this case, a French plaintiff asked the juge des référés to enforce the non-competition clause of a licence agreement ancillary to an acquisition agreement. The juge des référés considered that there was a trouble manifestement illicite, and ordered the American defendant to stop looking for clients in Europe. The Court of Appeal in Paris confirmed this order,56 but the decision was overturned by the Cour de Cassation, which held that the agreement divided the market between the two undertakings and therefore the judge could not find any trouble manifestement illicite. This means that the power of the juge des référés is extensive. In economic matters, he may terminate acts of unfair competition, and he may award injunctions. He may even award an interim injunction to continue or resume business relations.57 There is only one limit to the judge’s power: he may not impose measures that the ordinary court cannot reverse through its final judgment.58 However, parties do not seem to object to this limit, as they often obtain the measures they have asked for. b. The impact of the reform So far, the French procedural rules have not limited the power of the juge des référés to apply Articles 81(1) and 82 EC. Even though the juge des référés 52

CA Paris, 2 December 1999, Dalloz affaires, 2000, AJ, p. 92; CA Paris, 20 June 2000, Dalloz aff., 2000, p. 382; T. com. Paris, 30 May 2000, Dalloz affaires, 2000, p. 349. 53 Parléani (1990). See, e.g., TGI Paris, 31 January 1986, CA Nancy, 27 November 1987, op. cit. 54 Cass. Com., 10 July 1989, Bodson, Bull. Civ. IV, p. 145. 55 The French party to the agreement filed this case during proceedings to obtain an exemption from the Commission. The request for an exemption was denied by the Commission (déc. 27 July 1992, 0J L235 [1992]). For a discussion of the whole case, including some developments before the French Conseil de la concurrence, see Blaise and Idot (1995). 56 CA Paris, 27 October 1988, not reported. 57 Guinchard (1998). 58 Lamy droit économique, n° 1141.

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cannot declare a contract to be void under Article 81(2) EC, he may block its performance. Within the framework of the reform, the question is whether or not the juge des référés may also apply Article 81(3) EC. The application of Article 81(3) EC requires complex economic considerations.59 One might initially think that this characteristic is incompatible with the notion of trouble manifestement illicite, a pre-requisite for the application of Article 873 §1 NCPC. When discussing the application of Article 81(3) EC, it is indeed possible to argue that there is necessarily a doubt as to the legality of the behaviour that makes it impossible to bring the case before the juge des référés. The Cour de Cassation will have to decide on this issue—both solutions are possible, and the question remains open. Even if the answer is negative, there might be alternative solutions. Under the provisions of Article 873 §1 NCPC, the juge des référés may also intervene in order to prevent an imminent damage. In theory, this notion of dommage imminent does not refer to the legality of the alleged wrong, but to the damage that the claimant will soon suffer.60 Although in the French context such an action is mainly used in cases of invasion of privacy, a possible extension to EC competition law might be considered.61 Similarly, a dispute might also justify emergency measures as provided for by Article 872 NCPC.62 A matter might be brought before the juge des référés on the basis of one of the aforementioned grounds. However, the measures he could order would be more limited, and would deal only with emergency situations. A subsequent main action regarding the substance of the matter would still be necessary. This could be compared to the procedure for interim measures that can be brought before the specialised authorities.63 In conclusion, although it is impossible to predict the impact of the reform, it is highly probable that the relevant cases will go before a juge des référés who is accustomed to deal with competition disputes. Similarly, the parties will use this type of action, whenever possible.

III. The procedural framework Commercial courts play a determining role in the enforcement of French competition law. The procedures of the French commercial courts are, at least in theory, less rigid than those of the French civil courts.64 The litigants do not 59

This explains why regulation by the Community judge is greatly reduced. Droit et pratique de la procédure civile, op. cit., n° 1057. 61 Parléani (1990) sp. n° 25. 62 Guinchard (1998) n° 1049; adde, Parléani (1990) n° 33. 63 The French Conseil de la concurrence may order interim measures (Art. L464–1 comm. Code modified by Law May 15 2001). The rules are quite similar to those applicable under EC law. See, Idot (1993), p. 581. 64 Putman (1998). 60

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have to be represented by lawyers,65 and the pleadings are mainly oral.66 However, this flexibility is very theoretical in competition matters. In view of the complexity of such cases and the assets at stake, litigants prefer to be represented by professionals and always file written submissions. Standard rules of procedure are used before the Court of Appeal concerning appeals against judgments of commercial courts or decisions of a juge des référés. Standard rules of procedure apply to competition litigation (1). The issue to be examined is whether or not there should be specific procedure rules giving account of the complexity of competition law matters (2).

1. The application of standard rules of procedure Under French rules of procedure, the parties have an essential part to play (1.1). However, this does not mean that the judge remains passive (1.2).

1.1. The role of the litigants As the rules of civil procedure67 are too complex to be studied in full, this paper will focus only on those points that are of particular interest when applying Articles 81 and 82 EC: the introduction of an action, and the burden of proof. a. The introduction of an action In order for an action to be declared admissible, standard rules are applied regarding the different conditions that have to be met. In compliance with standard rules, the claimant has to justify locus standi (an interest in the case and the right to sue). First, the interest of the litigant must be personal, existing and real,68 and legitimate.69 This requirement seems problematic when bringing a case before the Conseil de la concurrence, but similar problems do not seem to exist before the ordinary courts. Secondly, the litigant must have the right to sue. In France the right to file an action is personal, and class actions do not exist under French law. This might explain the small number of actions for damages in cases of anti-competitive practices. Exceptionally, the Ministère Public may act as well, either on the basis of the general provision under Article 423 NCPC, ‘pour la défense de l’ordre 65

Art. 853 al. 1 NCPC. Art. 871 NCPC. 67 Among numerous books on French Civil Procedure, Guinchard (1998). 68 Art. 31 NCPC. 69 Article L462–5 Com. C. (ex Art. 11, ordinance 1 December 1986) provides that an undertaking may bring a case before the Conseil de la concurrence. The Conseil has considered that, if a natural person has stopped his activity and is no longer an undertaking within the meaning of competition law, he may no longer bring the case before it. 66

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public’, or on the basis of the special provision under Article L442–6 III NCPC. The President of the Conseil de la concurrence and the Minister of Finance also have locus standi, but only for cases of restrictive practices under Title IV, Book IV of the Commercial Code, and not for anti-competitive practices under Title II. Accordingly, the extension of the locus standi to cases involving the application of EC law seems out of the question. In addition, professional organisations and consumer associations may bring a matter before the Conseil de la concurrence for advice,70 but consumer associations cannot represent collective interests before the ordinary court if competition rules are violated.71 Under the provisions of the law of 1 February 1995, only professional organisations have the right to take action for facts infringing the collective interest of their profession or sector.72 Claims are time-barred after ten years (the standard limitation period for actions: Article L110–4C),73 in contractual and non-contractual matters, as most cases are commercial in nature. The deadline for initiating actions before the civil courts is of thirty years. It is not necessary to examine in detail here procedural time limits. Suffice it to say that an appeal must be brought within one month74 unless it is against a decision of the juge des référés, in which case the time limit is reduced to two weeks.75 An appellant has two months to appeal to the Cour de Cassation (a pourvoi en cassation).76 Under the standard rules, time runs from the moment when the court delivered the judgment that is appealed. To conclude on this point, one could say that it is quite easy for the economic operators to sue before the ordinary courts. Therefore, the fact that the number of main actions (actions à titre principal) for breach of Articles 81 and 82 EC is rather low may be explained more by psychological and sociological reasons than by legal ones. Another factor is the problem of the burden of proof. b. The burden of proof In accordance with the standard rules, the burden of proof lies with the party making the claim. In the area of competition law this raises a variety of difficulties, depending on the type of dispute. If the claimant asserts that the contract or a contractual provision is in breach of Article 81(1) EC, the burden of proof is not too heavy. In such cases there is no doubt as to the existence of the contract, and the only question is the validity of the contract or of part of it. Accordingly, the party that invokes Article 81 EC, either in a main action or a secondary one, is not hampered. However, things become more complicated in 70

Art. L462–1 Com. C. (ex Article 5, ordinance 1 December 1986). Putman, (1998) p. 300. Consumer associations may only act on a main basis to eliminate abusive clauses (Art. L421–6 Consumer Code). 72 Art. L470–7 Com. Code. (ex Art. 56 ter, ordinance 1 December 1986). 73 Putman (1998) p. 315. 74 Art. 538 NCPC. 75 Art. 490 NCPC. 76 Art. 612 NCPC. 71

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cases involving claims of abuse of dominant position, except where the undertaking being sued holds exclusive rights and where the dominant position is not being contested. The fact that the burden of proof lies with the person making the claim—a fundamental principle of civil procedure—explains why there are so few claims for damages in competition matters. It also explains why there are more disputes relating to the application of Article 81 EC than of Article 82 EC. It is not always easy to apply these principles within the context competition disputes because actions are usually brought before the juge des référés, as we shall see in the examples below concerning Articles 82 and 81 EC. Starting with Article 82 EC: in France there was a long-running dispute between discotheque managers and the SACEM (the French entity responsible for collecting music royalties). In the Tournier judgment of 13 July 1989,77 the ECJ established that SACEM had no right to abuse its dominant position and charge excessive prices if these prices were substantially higher than those charged in the other Member States (judged on the basis of standardised comparisons). The Cour de Cassation has consistently held that it is up to the discotheque manager to prove by means of ‘a comparison made on a standardised basis’ that the royalties were ‘substantially higher’.78 In this case the principle laid down in Article 1315 Civ. Code was fully respected, as it is when judges declare that it is up to the party claiming that a monopoly is unlawful to prove its allegation.79 However, taking the case before the juge des référés may modify the outcome of the case, as can be seen in the other long-lasting dispute concerning the monopoly of French local undertakers (the monopoly was abolished in 1993). The monopolist undertakers complained of the trouble manifestement illicite (obviously unlawful harm) caused by a competitor to the detriment of the monopoly. The defendant, Leclerc (a hypermarket chain), argued that the monopoly was in breach of EC competition law. Since the claimant had to prove that the condition of trouble manifestement illicite had been met, the undertakers wanting to stop Leclerc from competing had to prove that their monopoly was in compliance with EC competition law.80 As for the application of Article 81 EC, disputes concerning ‘free riders’ are of particular interest. The Cour de Cassation has asked for a long time that the producer or manufacturer prove that his network was lawful, but this case law was highly criticised. Since 1992 the Cour de Cassation became less demanding in terms of the proof of the lawfulness of the distribution contracts. The court simultaneously dropped idea that the producer had to prove that the ‘free rider’ 77

Case 395/87 [1989] ECR 2521. Cass. 1ère civ., 14 mai 1991, Cass. 1ère civ., 14 mai 1992, Lamy droit économique, n° 2040; Cass. Crim., 16 mai 1991, Bull. crim. n° 210. 79 Cass. Com., 4 January 1994, Bull. IV, n° 2; Cass. Crim., 16 November 1999, Bull. crim., n° 263. 80 See, for instance, Cass. Com., 20 mars 1990, Bull. IV n° 85 et 86, Dalloz 1991, somm. 253; adde, Putman (1998) p. 406; Cass. Com., 14 January 1992, (2 decisions), Bull. IV, n° 12, 13; Cass. Com., 15 July 1992, Bull. IV, n° 275. 78

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had committed a wrong. Once the producer has justified the lawfulness of his system, the network is presumed to be closed to outsiders. Accordingly, the ‘free rider’ will have to prove that the goods have been acquired legally.81 This solution applies equally in the perfume sector and in the car industry,82 because these are areas of selective distribution. However, this solution does not seem to apply in franchise agreements, where the Cour de Cassation has recently repeated that it is up to the franchiser to prove the legality of the network.83 These examples show the importance of the rules governing the burden of proof. Article 2 of the draft regulation is very clear on this point. The burden to prove that the provisions of Article 81(3) EC have been met lies with the party invoking the exemption. Even though it is the parties who play the essential role in ordinary court proceedings, this does not mean that the judge is passive in the French procedural system.

1.2. The role of the judge The judge has a dual role. He must first determine the facts and, secondly, apply the appropriate law. a. The judge and the facts When the case is heard by a tribunal de grande instance (civil court), the juge de la mise en état (judge in charge of the pre-trial proceedings) plays a very important role at the stage prior to the hearing.84 He has at his disposal all the measures contained in the French Code of Civil Procedure to investigate the case, including recourse to the services of an expert.85 He is also in charge of preparing and finalising the case. However, there are no juges de la mise en état operating before commercial courts hearing the case as courts of first instance chosen by the claimant. At the first or preliminary hearing, the court will decide either to adjourn and hear the case another day, or to designate a juge-rapporteur.86 The juge-rapporteur has similar powers to those of the juge de la mise en état. He can hear the litigants, request explanations that he deems necessary to reach a decision, and order the disclosure of documents or justifications,87 but he does not formally finalise the case. 81

For a detailed study of this case law, Momège & Schodermeier, n° 130 and subs. For recent applications, see Cass. Com., 26 January 1999, Soc. Automobile J.Y. Berthier, Les Petites affiches, 1999/n° 58; Cass. Com., 9 October 1999, Le Brasseur v/Sté Automobile des garages Sorin, Revue trimestrielle de droit europeén, 2000.256, obs. by S.P.P. 83 Cass. Com., 10 October 2000, Sté Catamini v/Sté Cofotex, Les Petites Affiches, 20 April 2001, n° 79, p. 5. 84 Guinchard (1998) n° 3426 and subs. 85 Art. 232 NCPC. 86 Art. 861 to 869 NCPC. Adde, Putman (1998) p. 79–80. 87 Art. 862 al. 2 et 865 al. 1 NCPC. 82

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Of the various procedural measures at his disposal, some are of particular interest in competition law cases. One such tool is the legal disclosure of documents.88 If an order for disclosure is addressed to third parties (that is, not the litigants) during the proceedings before the commercial court, the order must be issued by the court, and not by the juge-rapporteur. All parties must respond, unless they have a legitimate reason not to do so. It is still unclear whether confidentiality of information concerning one’s business can be successfully pleaded.89 With the exception of the Mors/Labinal case, in which the defendant had deleted certain terms of the contract and had pleaded that this information was confidential, the principle of business confidentiality has not yet been tested. This practice has been validated by the Cour de Cassation, which considered that the rights of the defence had not been infringed in this particular case.90 However, this is not the case where the court can ask expert witnesses to make a report,91 especially when the judge has the delicate task of assessing the damage suffered as a result of anti-competitive practices.92 Whereas the disclosure of documents can only be ordered by the court, the designation of an expert to produce a report can be ordered by the juge-rapporteur, ex officio. Another question is to determine whether the judge has to apply EC competition law ex officio. b. The judge and the law The repercussions of the Van Schijndel case93 on French law are of relevance on this issue. They have already been analysed by eminent judges,94 who came to the following conclusions: French procedural law is mainly based on Article 12§1 NCPC, which provides that ‘le juge tranche le litige conformément aux règles de droit qui lui sont applicables’ (the judge resolves the dispute in accordance with the corresponding legal rules). Under French civil procedure, a distinction has to be drawn between the purely legal grounds (moyens de pur droit) and a combination of factual and legal grounds (moyens mélangés de fait et de droit). Purely legal grounds: The judge must apply the purely legal grounds (moyens de pur droit) ex officio, that is, the decision must not be based on any facts other than those that have already been established or that do not have to be reconsidered.95 This means that the appeal judge (juge de cassation) leaves aside all questions of fact as they have already been addressed. 88 89 90 91 92 93 94 95

Art. 11 al. 2 NCPC, art. 138 to 142 NCPC. G. Couchez (1999), sp. n° 31. Cass. Com., 14 February 1995, Bull. IV, n° 48. Art. 263 to 284–1 NCPC. See, for instance, the case Mors/Labinal. Cases C–430 and 431/93 [1995] ECR I–4705. Canivet and Huglo (1996). Art. 620 al. 2 NCPC.

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The solution results from Article 12 NCPC and has to be applied by the juge du fond (judge sitting in the court of first instance, usually the commercial court, and on appeal the court of appeal). When EC competition rules are applicable to the dispute, they must be applied ex officio. The situation is somewhat different before the Cour de Cassation. Under Articles 619 and 620 NCPC, the moyens de pur droit may be invoked for the first time before the Cour de Cassation, which means that the court can apply them ex officio. In the light of ECJ jurisprudence, the Cour de Cassation also has a duty to apply them, and must consider a ground based on EC competition law as a public order ground (moyen d’ordre public). Two factors may limit the application of this principle by the juge du fond and the Cour de Cassation: the issue giving rise to the application of Article 81 EC must be related to the main subject of the claim, and the solution must not infringe the principle of res judicata. Combination of fact and law: If the ground for the application of Article 81 EC is a combination of fact and law (that is, the judge has to reassess the facts as disclosed by the parties), the solution is rather more complicated. Under French law, the juge du fond has the right to examine a case on both factual and legal grounds, and to ask the litigants to clarify and complete the information in his possession. He must not change the factual grounds of the claim. When the judge applies EC law, this right becomes an obligation as long as Article 6 NCPC is respected. Mr Canivet and Mr Huglo, for instance, consider that a French court dealing with a case concerning the performance of a contract that is apparently contrary to Article 81(1) EC is under the obligation to apply the Treaty provision ex officio, and to request that the litigants provide the factual explanations that are necessary for the dispute to be resolved. If the case is being heard by the Cour de Cassation this would be difficult, as the court cannot examine a case on factual and legal grounds ex officio. According to Mr Canivet and Mr Huglo, the Cour de Cassation should nevertheless react if EC law is plainly applicable and would lead to a solution that is different from that reached by the juge du fond. So all the effects of the Van Schijndel case law are carried over into French procedural law, but no concrete example of can be found in recent French case law.

2. The need for specific procedural adjustments If the desired increase in the number of competition disputes brought before national courts is to be achieved, the appropriateness of the means provided by the Commission under Article 15 of the draft regulation must be questioned. One thing is clear: the Commission has thus far only been interested in the assistance that could be given to the national judge, whereas assistance to the litigants should also be considered.

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2.1. Assistance to the litigants It is possible to act on the two points identified above: a. Introduction of the action The first problem regards the introduction of the action and the non-existence of class actions. In order to fill this gap, one might consider a directive similar to the one adopted under EC consumer law.96 The Member States would be asked to introduce collective consumer actions under competition law into their respective legal systems and to allow cross-border actions. Technically speaking, this solution is rather simple. It is followed by the question of deciding whether or not consumer associations should play an increasingly important role. In the absence of direct actions, the possibilities for intervention could be enlarged. The right to intervention exists under the French law.97 It may be principal or ancillary, and may occur in all types of procedure, including before the juge des référés. However, in addition to the condition for intervention (the existence of a sufficient link with the main action), this right is subject to the same restrictive conditions as the introduction of the main action. b. Burden of proof The second difficulty concerns the burden of proof. An interesting provision under Article L470–5 Com. Code (ex Article 56) provides that the French Minister of Finance may intervene before any court—but particularly civil or commercial courts—in order to submit written opinions (including minutes and inquiry reports) and present them orally. The aim of this intervention is to help the claimant prove the alleged behaviour. Apparently this provision has only been used in the context of the application of Title IV on transparency and restrictive practices. However, it could be useful when applying antitrust law, and it could be extended to the procedures for breach of Articles 81 and 82 EC.

2.2. Assistance to the judge The preliminary ruling mechanism of Article 234 EC does not need to be discussed here, as it will not be modified by the reform. All that needs to be said is that, under French law, both the juge des référés98 and the ordinary judges ( juges du fond) can apply to the ECJ for a preliminary ruling. The advantages and disadvantages of preliminary rulings are well known, and do not need to be discussed further. What is important is to discuss the assistance that the specialised authorities can give to the ordinary court. Hence the existing mechanisms under

96 Directive 98/27/EC of the European Parliament and the Council, 19 May 1998, OJ L66 [1998]. 97 Art. 325 and subs. NCPC; adde, Guinchard (1998) n° 3024 and subs. 98 V. supra n° 28.

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French law will be examined, before studying how the Commission’s proposals may fit into the French procedural system. a. Assistance provided by the French competition authorities Unlike the German system, the French courts have no obligation to inform the competition authorities of any judgments or rulings applying competition law. Such a measure would certainly not be viewed kindly. However, the provisions of Article L462 Com. Code (ex Article 26 §2, ordinance) allow the ordinary court to ask for the opinion of the Conseil de la concurrence in order to benefit from its expertise. Legal precautions have been taken so that the conditions of the right to a fair hearing are satisfied. Not only has this right been laid down in Article L462–3 Com. Code, but the Conseil de la concurrence has also expressed its view in an opinion notice.99 More than 30 opinions have been given on this basis within the last 13 years, the majority of cases coming from the criminal courts. More recently, in 1998, the Conseil d’Etat asked the Conseil de la Concurrence for an opinion in a case concerning the occupation of public property in airports.100 Since the litigants settled the case by mutual agreement, the procedure was brought to an end. The Council has never been asked for its opinion about the application of EC competition law. The text only concerns Articles L420–1, L420–2 and L420–4 Com. Code (the French equivalent of Articles 81 and 82 EC). However, in the decentralised enforcement system brought about by the reform of Regulation 17/62, one might wonder whether this procedure should also refer to the application of EC competition law. b. Assistance provided by the Commission As far as the measures suggested by the Commission are concerned, the principle of the notification of judgments provided for by Article 15(2) of the draft regulation might pose psychological problems and might be considered to infringe the principle of judicial independence. Even if the one-month time limit is necessary in order to maintain the coherence of the application of Community law, this limitation poses a problem when considering the short period within which an appellant has to lodge an appeal under French law. This time limit is probably too long for référé claims, which are frequent in competition matters. The codification of the co-operation procedure set up by the February 1993 notice resulting from Article 15(1) of the draft regulation raises more difficult questions. Its success in France has been very limited. No decision has been reported and only one judge has used this procedure and requested an informal opinion.101 French judges and lawyers are very reluctant because they consider 99

Avis 95 A. 09, Report of the Conseil de la concurrence for the year 1995, p. 897. Conseil d’Etat, March 1998, EDA. 101 Declaration of Mrs C. Favre, Conseiller à la Cour de Cassation, former judge at the Court of Appeal of Paris, Atelier de la concurrence, Paris, 2 May 2001. 100

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that there is no guarantee that the rules governing a fair hearing will be respected. This means that such a procedure can only work if it is more closely supervised, and that it must respect the fundamental principles of civil litigation. There are even more reservations about the amicus curiae procedure provided for by Article 15(3) of the draft regulation. This procedure is unknown in the French procedural system. Even though the procedure whereby one authority gives an opinion to another is known,102 this is a far cry from the Anglo-Saxon notion of amicus curiae. In 1991, the Cour de Cassation agreed for the first time to hear the views of third parties (in a case concerning surrogate mothers) and it allowed the views of the President of the National Ethics Committee to be presented.103 This technique was apparently not very successful and, to the best of our knowledge, has never been used in the area of commercial law. This procedure may be introduced into the French system only if accompanied by serious guarantees, particularly concerning the right to a fair hearing. Another question is whether it should be up to the Commission to take the initiative for such an intervention (which is what the Commission would prefer), or whether the court and the litigants can take the initiative. From the French point of view, the court has the discretionary power to ask for an amicus curiae intervention. In addition, the litigants must have the right to attend the amicus curiae’s presentation, make any comments they feel are useful, and propose that the court hear witnesses of their choice in order to complete the unbiased and well-balanced information available to the court. These requirements seem rather removed from the Commission’s vision concerning the amicus curiae procedure.

IV. Conclusions In conclusion, the French procedural rules allow the integration of the proposed reform without any major difficulties, provided that a few adaptations are introduced. Yet this is not where the true difficulty lies: in reality, everything will depend on the people who are going to implement the reform. It is obvious that most of the professional judges in the French courts of appeal and the Cour de Cassation will rise to the challenge; the problem lies further down along the line. Only a few commercial court judges are aware of the importance of competition law. The same is true of many lawyers. Just like private international law, competition law is too often considered to be an area for specialists, or a field of law for Parisians.

102

On the relations between sectoral authorities and general competition authorities, Idot (1998) and (2001). 103 Laurin (1992).

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IV Karsten Schmidt* Procedural Issues in the Private Enforcement of EC Competition Rules: Considerations Related to German Civil Procedures

I. Introduction 1. The arguments considered In what follows, I explore whether German civil procedural law is suitable for the private enforcement of EC competition rules, and in particular for the private enforcement of Articles 81(3) and 82 EC. The arguments presented in Sections II and III are based on the assumption that the Commission’s draft regulation on the implementation of Articles 81 and 82 EC will be adopted as proposed.1 This means that the highly debated consequences of the draft regulation will be the pre-condition, but not the subject, of my further consideration and statements. I will not repeat the well-known arguments concerning the legal uncertainties that arise from the proposal with respect to the legality of law suits based on EC competition rules, the effectiveness of contracts (or the validity of statutes), and the applicability to individual cases of the exemption rule set out in Article 81(3) EC.

2. The background debate As a consequence of my limited assignment, and following my initial remarks, my contribution is set against the background of the general issues discussed at the previous edition of the Annual EUI Competition Law and Policy Workshop (2–3 June 2000).2 These are as follows:3 * Professor of Law, Institut für Wirtschaftsrecht, Bonn University, Vice-President, Bucerius Law School in Hamburg. 1 European Commission: Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, COM(2000) 582 of 27.09.2000. 2 Claus-Dieter Ehlermann/Isabela Atanasiu, eds. (200l): European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, Hart Publishing, Oxford and Portland, Oregon. 3 For a thorough review and discussion see Mario Monti (2001): ‘The application of Community competition law by the national courts in a directly applicable exception system’, 2001 ERA-Forum, 3; Hartmut Weyer (2000): ‘Nach der Reform: Gestaltung der Wettbewerbspolitik durch die Kommission?’, 164 Zeitschrift für das gesamte Handels-

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• whether the Commission’s assessment is correct (in the sense that the direct application of Article 81 EC by civil courts will be less difficult once national courts are empowered to apply the law without being bound by central administrative decisions on possible exemption decisions);4 • whether replacing centralised administrative enforcement with private litigation before national courts will guarantee the degree of legal certainty necessary for EC competition rules to be applied consistently throughout the internal market;5 • whether the Commission is too optimistic in expecting that the case law and a consistent interpretation of Article 81(3) EC will develop rapidly once national courts are empowered to apply Article 81(3) EC in its whole, including the third paragraph;6 and • whether the permanent risk to which undertakings will be subjected—in the sense of constantly having to check their legal position in the absence of the res judicata effect of an individual exemption decision—can be considered to be ‘progress in the enforcement of EC competition law’.7

3. Resistance against the Commission’s modernisation proposal in the German legal doctrine: an anti-European enigma? Each of the questions enumerated above has already been touched upon in the first Session of this Workshop. Nevertheless, due to the well-known overlap and und Wirtschaftsrecht, 611, 622; Thomas Eilmansberger (2001): ‘Zum Vorschlag der Kommission für eine Reform des Kartellvollzugs’, Juristenzeitung, 365; Ernst-Joachim Mestmäcker (2000): ‘The EC Commission’s Modernization of Competition Policy: A Challenge to the Community’s Constitutional Order’, 1 European Business Organization Law Review, 401, 413 sqq. and 421 sqq.; Georg Stillfried/Peter Stockenhuber (2001): ‘Der Entwurf einer neuen Verfahrensverordnung zum EG-Kartellrecht’, Juristische Blätter, 145, 150; Francis Ferris (2001): ‘Towards the Application of Art. 81(3) by National Courts (an English perspective)’, 2001 ERA-Forum, 12; Brian McCracken (2001): ‘Towards the Application of Art. 81(3) by National Courts (an Irish perspective)’, 2001 ERA-Forum 15; Marina Tavassi (2001): ‘Towards the application of Art. 81(3) by national courts in Italy’, 2001 ERA-Forum 17. 4 See for an optimistic view Mario Monti, op. cit., 3; for criticism, see Ernst-Joachim Mestmäcker (2000). 5 See for criticism Wernhard Möschel (2000): ‘Systemwechsel im Europäischen Wettbewerbsrecht’, Juristenzeitung, 61; Georg Stillfried/Peter Stockenhuber (2001): 145, 150 sqq.; Hartmut Weyer, (2000): ‘Wettbewerbspolitik nach dem Weißbuch der Kommission’, 164 Zeitschrift für Handels- und Wirtschaftsrecht, 611, 622 sqq.; Thomas Eilmansberger (2001), 365, 368. 6 See Kirsten Thorup (2001): ‘Coherent application of Article 81(3) and the role of the European Court of Justice and the Commission’, 2001 ERA-Forum, 6; for criticism, see Hartmut Weyer (2001): ‘Wettbewerbspolitik nach dem Weißbuch der Kommission’, 164 Zeit für das gesamte Handels- und Wirtschaftsrecht 611, 622 sqq. 7 See Antonio Pérez van Kappel (2001): ‘The reform of Regulation 17 and the problem of legal certainty for undertakings’, 2001 ERA-Forum 25.

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links between substantive and procedural law, these questions cannot be completely set aside in the session concerning procedural issues (Panel Two). Perhaps I should add, in referring to Professor Jürgen Basedow’s written contribution for Panel One, that most German commentators do not welcome the Commission’s modernisation proposal in terms of the method chosen for promoting the direct applicability of EC competition rules.8 This phenomenon is surprising only if the whole debate is reduced to a superficial level. Does the hesitation of the German commentators indicate that they mistrust a decentralised enforcement of EC competition rules? Is this distrust part of a more general dogmatic and complicated approach that is typical of German legal doctrine? Or is it just part of a conservative legal strategy that seeks to suppress unexpected regulatory developments? The answer to all these questions is negative. On the contrary, German resistance to the Commission’s reform proposal is rooted in the desire to maintain EC competition law enforcement at no less than the levels that were guaranteed in the past.

4. Direct applicability in German competition law: the traditional view In order to explain the German commentators’ views concerning the Commission’s reform proposal, I will refer again to Professor Basedow’s written contribution for Panel One of this Workshop. I will add that, in the view of the German commentators, the decentralised enforcement of Articles 81(1) and 82 EC poses no substantive problems under German law, because: • anti-competitive agreements can easily be sanctioned as void under Art. 81(2) EC by either dismissing actions to impose the performance of contractual obligations contained therein, or by issuing declaratory judgments;9 and • third parties can also make claims based on EC competition rules under Section 823(2) of the German Civil Code (Bürgerliches Gesetzbuch), which refers to ‘any protective legal provision’, therefore including Articles 81 and 82 EC.10 8

See Mestmäcker (2000), supra note 3, 401, also including further references; for a more optimistic view, see commentary by Hermann-Josef Bunte in Langen/Bunte, eds. (2001): Kommentar zum deutschen und europäischen Kartellrecht, Einführung zum EG-Kartellrecht (9th edn). 9 Case 13/61 Bosch [1962] ECR 97, 112; Case 48/72 Brasserie de Haecht [1973] ECR 77, 86, 89; Bundesgerichtshof case KZR 43/71 Eiskonfekt I, WuW/E BGH 1226, 1231 sq. (BGH 1972); case KZR 18/84 Schaumstoffplatten, WuW/E BGH 2565, 2567 (BGH 1989); Karsten Schmidt (1997), commentary in Ulrich Immenga/Ernst-Joachim Mestmäcker, eds.: 1 EG-Wettbewerbsrecht Art. 85 par. 2, nr. 38 sqq.. 10 Case 127/73 BRT v. SABAM [1974] ECR 51, 62; Case 155/73 Sacchi [1974] ECR 409, 431; Case 37/79 Estée Lauder [1980] ECR 2481, 2500; Case C–234/89 Delimitis v. Henninger Bräu [1991] ECR I–977, 992; Bundesgerichtshof cases NZR 21/78 BMWImporte, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 1643, 1645 (BGH 1979) and NZR 15/86 Cartier-Uhren, Wirtschaft und Wettbewerb/Entscheidungssammlung BGH 2451, 2457 (BGH 1987).

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Many commentators agree that German civil law already permits a decentralised application of EC competition rules along the lines suggested by the Commission. But is there some still-uncharted territory on the direct applicability map of EC competition rules? It is true that the German Federal Court of Justice (Bundesgerichtshof) recently declined an application to obtain a judicial order obliging a defendant to enter a contract based on the provisions of Article 81 EC,11 thus taking a view contrary to my own on this legal issue.12 However, the Federal Court of Justice did not deny the protective legal quality of Articles 81 and 82 EC in this decision. Rather, the Court’s decision was based on the view that, in the case in question, there were other ways in which to restore legality under Article 81 EC. The Court admitted that, in so far as the defendant was in breach of Article 82 EC for abusing its dominant position in the case in question, there were grounds for imposing an obligation to enter into a contract. Moreover, the Court held that Article 81 EC is directly applicable. Yet it indicated that, in contrast to Article 82 EC, the legal consequence of the direct applicability of Article 81 EC cannot be an obligation to enter into a contract. In the case of Article 81 EC, the defendant should be in a position to choose between two alternatives: either start supplying the plaintiff in a non-discriminatory way (as requested by the latter), or terminate the discriminatory distribution agreement that was in breach of Article 81 EC. Indeed, the infringement of Article 81 EC ceases once that the anti-competitive distribution agreement in question is terminated. Consequently, in the view of the Federal Court of Justice, there was no precise obligation on the defendant to simply enter the contract that had been requested by the plaintiff. At any rate—and leaving such special cases to one side—the German courts and German legal doctrine have been familiar with the direct applicability of EC competition rules for decades.

5. ‘Direct applicability’ of Article 81(3) EC: a hidden trap? One issue to be examined concerns the direct application of the exemption provision contained in Article 81(3) EC by national courts. In my view, direct applicability of Article 81(3) EC will not bring about a strengthening of private enforcement, but rather the contrary. The prohibition rules contained in Articles 81 and 82 EC are already directly applicable by civil courts and directly enforceable through civil procedure, while the application of the exemption provision contained in Article 81(3) EC is currently within the Commission’s exclusive competence.13 In my view, the enforcement of Article 81 EC could be diluted when 11

Bundesgerichtshof case KZR 23/96 Depotkosmetik, Wirtschaft und WettbewerblEntscheidungssammlung DE-R 206 (BGH 1998). 12 Karsten Schmidt (1997): commentary in Ulrich Immenga/Ernst-Joachim Mestmäcker, eds.: 1 EG-Wettbewerbsrecht Art. 85 (2), nr. 86. 13 Arts. 4–8 of Regulation No. 17/62.

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civil courts will be allowed to directly apply the exemption provision in Article 81(3) EC. Other German commentators share my opinion and also doubt that the consequences of the new arrangement will be positive.14 In addition, the relationship between block exemption regulations, an instrument that is to be maintained (Article 28 of the draft regulation), and the direct application of Article 81(3) EC in the course of civil law proceedings would probably become more complicated (and perhaps more confusing) than under the current enforcement system. This viewpoint was comprehensively argued by Professor Ernst-Joachim Mestmäcker and Ulrich Immenga in their written contributions for the last edition of the Workshop,15 so I do not need to go here into further detail. To my understanding, the system proposed by the Commission would give national courts the obligation to apply Article 81(3) EC ex officio, as if it were a non-written block exemption. If this is correct, we will witness the parallel development of two types of block exemptions, comprising: • formal block exemption regulations issued by the Commission, applicable to defined categories of agreements and practices, to be interpreted and applied by national courts in the traditional way (that is, as belonging to the binding corpus of EC competition law); and • ‘non-written’ exemptions, to be defined by case law in the context of the direct application of Article 81(3) EC. The first group will clearly be defined by the Commission itself, while the second will be an arena for gradual, step-by-step progress in civil procedure, depending on the individual views of national courts. These considerations explain why the Commission’s modernisation proposal is of great concern to German competition law practitioners.

II. The impact of general procedural principles on private enforcement The substantive legal issues that arise in relation to the private enforcement of EC competition rules were discussed under Session I of the Workshop. Nevertheless, these issues are also a matter of legal politics, and they cannot be examined without taking procedural aspects into account. The Commission’s

14 See T. Eilmansberger (2001), pp. 365, 366; E.-J. Mestmäcker (2000) 401; W. Möschel (2000) 61, 62; for the Position of the German Monopolies Commission, see Monopolkommission (1999). 15 See Ernst-Joachim Mestmäcker (2001): ‘The Modernisation of Antitrust Policy: Constitutional Challenge or Administrative Convenience?’, in: Ehlermann/Atanasiu eds. (2001): European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, p. 223 sqq.; Ulrich Immenga (2001): ‘Coherence: A Sacrifice of Decentralisation?’, ibid., p. 353 sqq.

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modernisation proposal is based on the premise that national competition authorities (NCAs) and national courts (NCs) will apply EC competition law in accordance with their national procedural rules (German civil procedure law in the case of Germany). In this context, three main principles of civil procedure must be taken into account.

1. Principles of civil law procedure in Germany First, the principle of judicial investigation does not apply in German civil law proceedings; in other words, there is no judicial inquisitorial system. The facts of the case are submitted entirely by the litigants (the principle of ‘party presentation’).16 However, if the burden proof rests entirely on the party alleging an infringement of EC competition rules (see Article 2 of the Commission’s regulation proposal), the effectiveness of the judicial solution is doubtful. Secondly, the legal consequences of a final judgment, including the res judicata effect, are limited to the case in question. This implies a double restriction: the res judicata effect of a final judgment is limited to the specific legal matter addressed by the court and to the individual parties present before it (that is, the plaintiff and the defendant).17 Effects of the judgment can only be extended to third parties if the latter are given notice to appear before the court, or if the latter themselves decide to intervene in the case. There is no possibility of extending the legal effects of the judgment to all other participants operating in the relevant market. Thirdly, neither the rule of the strict binding legal precedent nor the stare decisis doctrines apply in the German legal system. As long as no such deference rule applies, not even the judgments of the German Supreme Court have a de jure binding effect.18 In other words, German civil procedure law does not prevent divergent judgments about the same legal question, although the judgments must refer to different matters concerning different parties (so decisions must be consistent in any particular matter between certain parties). This is regarded to be inherent to the judiciary’s independence; as a general rule, even judgments of the Federal Court of Justice are legally binding only de facto, and not de jure. In these circumstances, the preliminary ruling procedure under Article 234 EC will be the only—albeit rigid—instrument for ensuring consistency of decision-making.

16

See Astrid Stadler (1996): ‘The Law of Civil Procedure’, in: Werner F. Ebke/Matthew W. Finkin, eds. Introduction to German Law, Kluwer Law international, The Hague/London/Boston, p. 357 et seq. 17 Ibid., p. 372 sq. 18 Ibid., p. 373.

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2. Informal co-operation with the Commission: an unreliable guarantee of consistent decision-making By comparison with the formal instrument of the request for a preliminary ruling from the ECJ, the safeguard contained in Article 15 of the draft regulation—that is, co-operation between the Commission and national courts—is only an informal support given to the national courts with the purpose of securing legal consistency. It will function only to the extent that national courts are ready and willing to comply with the terms of Article 16 in the draft regulation. This Article asks the national courts, as well as the competition authorities of the Member States, to avoid adopting any decision that would conflict with decisions adopted by the Commission. However, because of its informal and unenforceable character, it can be doubted that this rule will have binding effect. Consequently, in the worst-case scenario, the effectiveness of this instrument depends on the willingness of national courts to co-operate.

3. Preliminary result Admittedly, the above-mentioned peculiarities of German civil procedure can be easily accommodated in the enforcement system governed by Regulation 17/62. This system is complicated, but it promises maximum legal certainty and it avoids divergent decision-making in civil proceedings. By contrast, the Commission’s modernisation proposal may simplify the road to obtaining decisions in individual cases, but it denies parties the inter omnes effect of legally-binding court decisions which are very important in competitive market systems. In addition, even if the national courts and the Commission manage to establish perfect cooperation, I wonder whether this would have a spin-off effect of making civil proceedings more effective in general. The effect would probably be the contrary. Thus, from the standpoint of consistency in EC competition law enforcement, the Commission’s modernisation proposal might actually be considered to be a step backwards. From the standpoint of the Commission itself, it might indeed allow a concentration of its enforcement resources in sectors and areas of law that have political priority. But for enforcement in general, the new system can be regarded as a change of doubtful benefit.

III. Special aspects of antitrust civil procedure Private enforcement of the EC competition rules in Germany is not only governed by the general rules contained in the Civil Procedure Code (Zivilprozessordnung), but also by special rules contained in the German Antitrust Code (Gesetz gegen

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Wettbewerbsbeschränkungen). Section 96 of the latter refers in particular to private law suits under Articles 81 and 82 EC. This means that the special procedural rules contained in the German Antitrust Code prevail in cases raising questions of EC competition law.

1. The general importance of civil procedure in German antitrust enforcement Private enforcement, and the effective application of EC competition rules, have been given due importance in Germany ever since the enactment of the Treaty of Rome. Both aspects will certainly gain in significance under the new enforcement system, whereby civil courts will partly replace the competition authorities in the application of Articles 81 and 82 EC. In Germany, national competition rules are enforced through a system of remedies combining the following three elements:19 • Administrative fines (Bußgelder) to be imposed by the Federal Competition Authority (Bundeskartellamt) under section 81 (formerly section 38) of the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen); • Administrative orders (Untersagungsverfügungen) issued under section 32 (formerly section 37a) of the German Antitrust Code by the Federal Competition Authority (Bundeskartellamt); and • Civil procedure remedies (injunctions and damages) available under section 33 (formerly section 35) of the German Antitrust Code. The third category of remedies (namely private enforcement in civil proceedings) was formerly of minor importance in the application of national competition law. Nevertheless, a remarkable number of judgments in Germany now deal with the private enforcement of EC 20 competition rules.20 Private enforcement of EC competition rules has repeatedly been the subject of decisions by the European Court of Justice,21 and the concept has long been familiar to German courts.22 However, one must note that most of the judgments in this area of EC law have not been addressed to the offender of competition rules, but rather obtained by a defendant invoking the rules in his defence. Private third party claims against offenders are particularly infrequent in litigation based on EC competition rules. Private enforcement mainly occurs indirectly, via defences against contractual claims, rather than as damage claims 19

See Fritz Rittner (1999): Wettbewerbs- und Kartellrecht, 6th edn, §14 nr. 1–24. See Karsten Schmidt (1997), commentary in Immenga/Mestmäcker, eds. 1 EG-Wettbewerbsrecht XIV B. 21 See Case 127/73 SABAM I [1974] ECR 51, 62; Case C 234/89 Delimitis v. Henninger Bräu [1991] ECR I 977, 992, 993. 22 See Karsten Schmidt (1990): ‘EG-Kartellrecht vor Zivilgerichten’, Neue Juristische Wochenschrift, 2109. 20

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against the offender. The effectiveness of private enforcement in Germany might consequently be hidden from the eyes of many outside spectators, and perhaps even from the scope of our discussion today, because this discussion mainly (and perhaps excessively) concentrates on damages claims formulated by third parties.

2. There is no legal obstacle to the private enforcement of EC competition rules in Germany The application of EC competition law in civil proceedings consists of: • petitions for injunctions and damage claims based on section 823(2) German Civil Code (Bürgerliches Gesetzbuch); and • raising antitrust defences against contractual claims. The general suitability of using German civil law proceedings for dealing with the specialised problems arising in the field of competition law is demonstrated by the remarkable number of such cases that have been dealt with by the State Courts of Appeal (Oberlandesgerichte) and the Federal Court of Justice (Bundesgerichtshof )23 This is predominantly a matter of substantive law and, as such, is the subject of the written contribution presented by Professor Basedow. More precisely, the question is whether and to what extent Section 823(2) of the German Civil Code (Bürgerliches Gesetzbuch) provides parties with effective remedies—I refer to injunction and damage claims—in cases involving infringements of Articles 81 or 82 EC. As Professor Basedow indicates, this question can be answered in the affirmative. In tort cases, the German courts recognise EC competition rules as legal provisions intended for the protection of others (protective law) in the sense of section 823(2) German Civil Code (Bürgerliches Gesetzbuch).24 In so far as antitrust defences invoked against contractual claims are concerned, the substantive legal question is directly answered by Article 81(2) EC: a contract infringing the basic provision of Article 81(1) EC will automatically be void if there is no possibility of exemption under Article 81(3) EC. In terms of procedure, my argument follows same lines. Regardless of the problem of legal costs—which are borne entirely by the unsuccessful party— German civil procedure erects no legal obstacles to the private enforcement of EC competition rules. German courts apply competition rules ex officio, which means that there is no need for the parties to invoke the competition law issues in particular. (Nevertheless, it is obvious that a special treatment of the competition law issues in the case is common, and of concern to any good competition lawyer.) 23 24

See ibid. See Rittner (supra note 19) § 14 nr. 39.

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As far as third party claims are concerned, the main difficulty is usually not the legal situation itself, but the plaintiff’s difficulty in alleging and proving the facts. In order to diminish the burden of proof—at least in cases of abuse of dominant position by discrimination—the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen) has established a remarkable rule: in such cases, a prima facie situation cannot be used as proof. This is common in German civil procedure, and will help shift the burden of proof to the offender (section 20[5])25: Ergibt sich auf Grund bestimmter Tatsachen nach allgemeiner Erfahrung der Anschein, dass ein Unternehmer seine Marktmacht im Sinne des Absatzes 4 ausgenutzt hat, so obliegt es diesem Unternehmen, den Anschein zu widerlegen und solche anspruchsbegründenden Umstände aus seinem Geschäftsbereich aufzuklären, deren Aufklärung dem betroffenen Wettbewerber oder einem Verband nach §33 nicht möglich, dem in Anspruch genommenen Unternehmen aber leicht möglich und zumutbar ist.

This useful rule is not expressly referred to in section 96 of the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen), which is the procedural provision dealing with EC competition cases. The reason for this omission is that rules concerning the burden of proof are customarily regarded as part of substantive law in Germany, rather than as part of procedural law. However, Section 96 only ensures that the procedural provisions of the German Antitrust Code are applicable in EC competition cases. The German legislative should consider amending this situation, although I believe that the German courts would not hesitate to apply the substance of this rule in EC competition law cases.

3. Technical rules of the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen) that are applicable in EC competition cases The following remarks do not deal with the principal rules of German civil law procedure, but rather with the special procedural rules contained in the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen). No German courts or tribunals specialise in antitrust matters, but the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen) contains 25 Translation by Martin Heidenhain/Horst Satzky/Christoph Stadler (1999): German Antitrust Law, 5th edn, Frankfurt am Main: ‘If on the basis of specific facts and in the light of general experience it appears that an undertaking has used its market power within the meaning of subsection (4), it shall be incumbent upon this undertaking to disprove the appearance and to clarify such circumstances in its field of business on which legal action may be based, which cannot be clarified by the competitor concerned or by an association referred to in § 33, but which can be easily clarified, and may reasonably be expected to be clarified, by the undertaking against which action is taken.’

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specific provisions regarding the jurisdiction of civil courts and of specialised divisions and senates in German courts that deal with antitrust claims (section 87 ss.). These provisions refer to the application of both German and EC competition rules (section 96), and are intended to guarantee that specialised judges deal with competition cases, including the supervision of arbitral awards.26 Until 1998, the system of civil litigation concerning German antitrust law issues was rather complicated. The competence of the specialised civil courts, divisions and senates was limited to ‘main issue antitrust claims’ (Prozesse mit Kartell-Hauptfrage).27 This meant that the special jurisdiction of antitrust divisions and senates covered only cases where the principal claim was an antitrust issue (for example, injunction and damage claims based directly on Article 81 or 82 EC). If instead the court was asked to deal with an antitrust issue only as a preliminary question (for example, in a penalty claim between a supplier and his authorised dealer), the case did not fall within the jurisdiction of the specialised courts and was instead destined for the ordinary courts. As soon as a preliminary antitrust question arose, the ordinary court was obliged to suspend the proceedings in order to give the parties an opportunity to obtain a declaratory judgment on the preliminary competition law question.28 Considering that in most competition cases the EC rules are invoked only as defence against contractual claims, it is understood that this undesirable situation could occur frequently in commercial law cases. It also has to be considered that, in the course of this second preliminary procedure, the antitrust senate of the Federal Court of Justice might have considered requesting a preliminary ruling from the European Court of Justice on the interpretation of a European competition rule, under Article 234 EC (ex Article 177). All in all, for the litigants this separation of procedures generally implied an excessive delay in obtaining the final judgment. Since 1998, however, regional courts and special senates in the Courts of Appeal and the Federal Court have had the competence to deal with any case where national or EC competition law questions arise as a main issue (Kartell-Hauptfrage) or as a preliminary question (Kartell-Vorfrage; sections 87, 96 Gesetz gegen Wettbewerbsbeschränkungen).29 This amendment of the

26

German Civil Procedure Code (Zivilprozessordnung) sections 1059, 1060. German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen), section 87, old version. 28 Section 96(2) of the German Antitrust Code, old version: ‘Hängt die Entscheidung eines Rechtsstreits ganz oder teilweise von einer Entscheidung ab, die nach diesem Gesetz zu treffen ist, so hat das Gericht das Verfahren bis zur Entscheidung durch die nach diesem Gesetz zuständigen Behörden und Gerichte auszusetzen. Wer an einem solchen Rechtsstreit beteiligt ist, kann die von dem Gericht für erforderlich erachteten Entscheidungen bei den dafür zuständigen Stellen beantragen.’ 29 See Joachim Bornkamm (2001), commentary in Langen/Bunte, eds.: Kommentar zum deutschen und europäischen Kartellrecht, § 87 nr. 123 sqq., 9th edn; Karsten Schmidt (2001), commentary in Immenga/Mestmäcker, eds: GWB (Gesetz gegen Wettbewerbsbeschränkungen), § 87 nr. 18 sqq., 3rd edn. 27

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German Antitrust Code will discharge the parties from the burden of double court proceedings, and it may thus be seen as a remarkable step forward. However, jurisdiction in the case might be more difficult to determine as a result. Article 234 EC guarantees the jurisdiction of the European Court of Justice over requests for preliminary rulings on EC competition law questions, and has given rise to considerable discussion in Germany. The Federal Court of Justice refrained from using this procedure in several European—but not directly antitrust-based—cases. It is noteworthy that the German Federal Constitutional Court (Bundesverfassungsgericht) considers the monopoly jurisdiction of the European Court of Justice over the Article 234 EC procedures to be a matter of ‘jurisdiction of the lawful judge’. This means that a court decision taken without the mandatory referral to the European Court of Justice for a preliminary ruling on the interpretation of an EC competition law question can be annulled by the German Constitutional Court.30

4. Arbitration Although arbitration issues are examined within Panel Three of this Workshop, I would nevertheless like to make some comments on a problem related to the arbitration of competition cases in Germany — a problem caused by the original wording of the German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen), and which is less known outside the German legal environment. Until 1998, German antitrust law mistrusted arbitration procedures and tried to prevent the arbitration of competition issues by means of a strange provision, according to which the parties to an arbitration agreement must have been given the opportunity to bring their dispute before a state court as well. If the possibility to choose between an arbitration tribunal and a state court was not expressly guaranteed, the whole arbitration agreement was null and void (section 91 of the German Antitrust Code old version).31 This old rule applied

30

Bundesverfassungsgericht case 1 BvR 1036/99 2001 Zeitschrift für Wirtschaftsrecht

350. 31 Section 91(1) German Antitrust Code old version: ‘Schiedsverträge über künftige Rechtsstreitigkeiten aus Verträgen oder Beschlüssen der in den §§ 1 bis 5c, 7, 8, 29, 99 Abs. 1 Nt. 2, §§ 100, 102, 102a und 103 bezeichneten Art oder aus Ansprüchen im Sinne des § 35 sind nichtig, wenn sie nicht jedem Beteiligten das Recht geben, im Einzelfalle statt der Entscheidung durch das Schiedsgericht eine Entscheidung durch das ordentliche Gericht zu verlangen. Schiedsverträge über künftige Rechtsstreitigkeiten aus Verträgen oder Beschlüssen der in § 6 bezeichneten Art, die nicht jedem Beteiligten das Recht geben, im Einzelfall statt der Entscheidung durch das Schiedsgericht eine Entscheidung durch das ordentliche Gericht zu verlangen, sind unwirksam, soweit nicht die Kartellbehörde auf Antrag eine Erlaubnis erteilt.’

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in cases involving the application of both national and EC competition law (section 97 of the German Antitrust Code previous version). It must be said, however, that this had no practical effect, because questions of competition law do not arise as a main issue (Hauptfrage) in arbitration cases, but rather as preliminary questions (Vorfrage), and the above/mentioned rule about arbitration agreements did not apply in such circumstances.32 The 1998 amendment of the German Antitrust Code follows in this respect the traditional jurisprudence of the Federal Court of Justice: there is no need to declare null and void in their entirety arbitration agreements that do not contain such an optional clause. However, arbitration tribunals are obliged to apply EC competition rules in the same way as are state courts. If an arbitration tribunal fails to comply with this obligation, the state court can refuse to order enforcement of their awards, and can even set aside the arbitral award.33

5. Collective actions (Verbandsklagen) I would like to conclude with a brief remark about collective actions (Verbandsklagen), which could perhaps help to make third party claims more effective. Collective action (Verbandsklagen) is a highly developed institution in the German law concerning unfair competition (section 13 Gesetz gegen unlauveren Wettbewerb).34 This right of action can be granted to associations promote industrial interests, and it is regarded to be a very effective instrument for the enforcement of the prohibition of unfair competition. German competition law provides a similar rule for injunction claims against actions prohibited by antitrust law (section 33[3] German Antitrust Code [Gesetz gegen Wettbewerbsbeschränkungen]), and this rule is not to be applied in EC competition cases. The German legislature should consider extending it to the EC cases mentioned in Section 96 German Antitrust Code (Gesetz gegen Wettbewerbsbeschränkungen). This legal strategy could contribute to the private enforcement of Articles 81 and 82 EC via third party claims in a much more effective way than the Commission’s reform proposal.

32

See Karsten Schmidt (1988), in Strafrecht, Unternehmensrecht, Anwaltsrecht. Festschrift für Gerd Pfeiffer zum Abschied aus dem Amt als Präsident des Bundesgerichtshofes, p. 765, 774. 33 Bundesgerichtshof case KZR 3/68 Fruchtsäfte, Wirtschaft und Wettbewerb W/E BGH 1000 = 1969 Neue Juristische Wochenschrift 978; case KZR 43/71 Eiskonfekt, Wirtschaft und Wettbewerb/E BGH 1226, 1227 = 1972 Neue Juristische Wochenschrift 2180, 2181; Daniel Zimmer (1991): Zulässigkeit und Grenzen schiedsgerichtlicher Entscheidungen von Kartellrechtsstreitigkeiten. Eine rechtsver-gleichende Untersuchung auf der Grundlage US-amerikanischen und deutschen Rechts, Nomos Verlagsgesellschaft, Baden-Baden, p. 90 sqq. 34 See Bernhard Jestaedt (1999): commentary in Wilhelm L. Pastor/Hans-Jürgen Ahrens, eds.: Der Wettbewerbsprozess. Ein Praxishandbuch, Carl Heymann Verlag KG, 4th edition, ch. 24 (pp. 339 sqq.).

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V Giuseppe Tesauro* Private Enforcement of EC Antitrust Rules in Italy: The Procedural Issues

I. Introduction Judicial enforcement of EC antitrust rules is currently a much discussed topic in light of the modernisation exercise undertaken by the Commission. This is due to the Commission’s expectation that, as a result of the envisaged direct applicability of Article 81(3) EC by both national competition authorities (NCAs) and national courts (NCs), decentralised enforcement of EC antitrust rules will increase in importance. In this paper I intend to review the most relevant topics that seem to affect the judicial enforcement of antitrust rules in Italy. I will focus essentially on those procedural issues that appear to undermine the effective enforcement of EC competition rules by the judiciary. From this review, it appears that the problems with private enforcement of antitrust rules in Italy have little to do with the lack of jurisdiction of judges to enforce Article 81(3) EC; they rather derive directly from the typical features of the judiciary. It is thus submitted that, while an increase in the private enforcement of competition rules would be beneficial, antitrust enforcement systems in most EU countries and in the European Community remain primarily administrative and are effective as such. Accordingly, any legislative effort by the Community towards a procedural harmonisation of the judiciary would be too problematic, and it would also require a fundamental rethinking of the antitrust enforcement systems currently in force in most European countries.

II. Private enforcement of antitrust rules and the modernisation proposal The question of the private enforcement of EC antitrust rules has recently become prominent in connection with the Commission’s ambitious process of reform of the rules implementing Articles 81 and 82 EC. This is due to the fact that the ‘modernisation’ exercise will primarily involve the abolition of the current authorisation system and its replacement by a directly applicable exception system. The result is that Article 81 EC would be applied as a whole by the * President of the Italian Antitrust Authority.

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Commission, national competition authorities (NCAs) and national courts (NCs). In essence, the allocation of responsibilities would be changed under a directly applicable exception system, and NCAs and NCs would have jurisdiction to assess antitrust cases under Article 81 EC as a whole, that is, including Article 81(3) EC. The Commission therefore expects a substantial increase in the number of competition cases being dealt with at national level under Community rules. Against this background, it is helpful to explore the extent to which the judicial systems of EU countries function properly when it comes to the enforcement of competition rules. A preliminary question deserves further scrutiny, namely whether the devolution of Article 81(3) EC to NCAs and NCs would really change anything in the current allocation of competition cases between the Commission and the Member States. As Regulation No. 17/62 confers the right to grant exemptions exclusively to the Commission, NCs currently cannot apply Article 81(3) EC in order to exempt an agreement. Undertakings can therefore bring court proceedings to a halt by lodging a notification with the Commission. According to the Commission White Paper, this constitutes a major obstacle to a more extensive application of competition rules by NCs. By contrast, once Article 81(3) EC becomes directly applicable, complainants would be able to obtain damages in the context of non-contractual liability proceedings when they are victims of illegal agreements, and there will be no possibility for defendants to delay the court proceedings by filing late notifications. In the context of contractual liability proceedings, undertakings would be able to invoke Article 81(3) EC before the courts as a directly applicable provision with a view to obtaining the enforcement of the agreement. In sum, the Commission argues that following the reform NCs will rule upon more cases involving the application of EC competition rules, without fear that the parties to a restrictive practice might invoke a notification pending before the Commission, thus halting the entire proceedings in the national court. It should be remembered that NCs already have full power to apply Article 82 EC. Moreover, there is no doubt that litigants can invoke Article 81(2) EC when it comes to hard-core cartels. So, while the Commission’s exclusive power to apply Article 81(3) EC is indeed an obstacle to decentralisation, there is already wide scope for the private enforcement of EC competition rules before NCs.1 Nonetheless, it is a fact that NCs have little experience in enforcing Community competition law.2 This is the case in Italy and also in other EU countries. 1

In favour of the idea that decentralised enforcement of Community competition rules is feasible in the current context, speaks the growing activism of the Italian Competition Authority, which in the last two years, has handled four antitrust investigations under Articles 81 and 82 EC (Stream/Telepiù, CIF/Consorzio fiammiferi, Enel/Unapace, Assoviaggi/Alitalia). 2 For a review of this topic, see S. Kon (1999): ‘The Commission’s White Paper on modernisation: the need for procedural harmonisation’, in B. Hawk, ed: 1999 Fordham Corporate Law Institute, New York, and C. A. Jones (1999): Private Enforcement of Antitrust Law in the EU, UK and USA, Oxford University Press, Oxford.

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The same can be said of judicial enforcement of national competition rules.3 Thus, the problems—if any—of private enforcement of competition rules lie elsewhere. In this regard, it is useful to provide a more comprehensive picture of the current state of private enforcement of antitrust rules in Italy.

III. The Italian enforcement system The Italian Competition Act (Law n. 287/90) has established an antitrust enforcement system with two concurrent and independent lanes: • administrative enforcement is entrusted to the Italian Competition Authority; judicial review of the Authority’s decisions is then conferred in first instance on the Administrative Court of Latium (TAR), which has exclusive competence at this level, and on appeal to the State Council; • judicial enforcement is carried out by the ordinary appeal courts, as far as annulment and damage claims proceedings are concerned. These courts also have sole jurisdiction to grant interim relief.4 In addition, ordinary process rules apply to civil suits based on EC competition rules, so that first instance ordinary courts (‘tribunali ordinari’) have jurisdiction over antitrust claims based on Articles 81 and 82 EC.5

1. Possible conflicts within the judiciary The legislature has conferred the private enforcement of competition rules on Courts of Appeals in recognition of the fact that a higher court is better equipped to deal with disputes involving complex economic assessments. This choice also reflects an effort to avoid judicial fragmentation, and to secure 3 So far, there have been few cases of judicial enforcement of domestic competition rules. See M. Tavassi and M. Scuffi (1998): Diritto Processuale Antitrust, Giuffrè, Milano. See also on this topic, M. Tavassi (2001): ‘Towards the application of article 81 (3) by National Courts in Italy’, 2001 ERA Forum, Academy of European Law, Trier. For a review of the antitrust cases treated by Italian courts, see also M. Franzosi and M.H. Polo (1999): ‘Italian Antitrust Law — A Survey of Twenty-Eight Cases’, 20 European Competition Law Review 5, 299–307. In this paper I do not consider private actions based on the ‘unfair competition’ rules contained in the Italian Civil Code (Art 2598 cc), which may, in some respect, cover claims potentially relevant under antitrust rules. Nor do I deal with interim measures that fall within the exclusive competence of the Court of Appeal. 4 Article 33.2 of Law No. 287/90 provides that claims of nullity and for damages, as well as requests for interim measures relating to the infringement of the provisions of the Law, fall within the exclusive jurisdiction of the Court of Appeal. 5 These actions fall within the category of standard nullity and damages suits, and thus are handled by first instance ordinary courts.

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uniformity and specialisation, through the appointment of a small number of courts with a regional jurisdiction. At the same time, this allocation of competencies within the judiciary is a source of concern. The concurrent presence of two different courts with jurisdiction in antitrust disputes can be a possible source of conflicts and overlaps, as the scope of EC competition rules is not always clearly distinguishable from that of domestic competition rules.6 Suppose that a question concerning the application of domestic competition rules arises in the context of an action for annulment of an agreement brought before the competent ‘tribunale’ on the basis of an alleged infringement of Articles 81 or 82 EC. The judge should decline jurisdiction in respect of the purely domestic antitrust aspects of the case, as the Court of Appeal has sole competence over these issues. This mechanism can lead to two negative consequences. First, it can delay the outcome of the court proceedings, contrary to the need for quick resolution of such matters. Secondly, it can also result in conflicting decisions by the different judges who are called upon to apply national and EU competition law respectively.

2. Conflicts between administrative and judicial systems As the judiciary constitutes an enforcement system independent from the administrative one, filing an antitrust suit before an ordinary judge is not conditional upon a prior complaint being lodged before the Italian Antitrust Authority. A court can thus rule freely and possibly ignore the Authority’s decisions.7 This can give rise to possible conflicts between decisions, but this risk is inherent in any system built upon concurrent and parallel law enforcement mechanisms. On this point, while the independence of the judiciary must not be questioned, judges should refrain from developing antitrust case law that conflicts with the mainstream principles enunciated by the Authority in its prac6

The notion of effect on trade between Member States defines the boundary between conduct, which is subject to Community law, and conduct, which is governed solely by national law. The European Court of Justice has shaped a broad but also generic notion of what affects trade between Member States, which has allowed an extensive application of domestic law by NCAs. A shrinking effect on the scope of EC competition rules may also result from the recent case law of the European Court of Justice (See Joined Cases C–215/96 and C–216/96 Bagnasco e altri v. Banca Popolare di Novara e Cassa di Genova e Imperia [1999] ECR I–135) interpreting more narrowly the concept of ‘effect on interstate trade’. 7 As Tavassi reports (see supra note 3), it is illustrative that over these years none of the ordinary courts called upon to rule over an antitrust dispute felt the need to suspend the proceeding pending the decision of the Competition Authority, nor did they consider the Authority decisions to be binding on them. However, in several cases, they made reference to the Authority decisions as factual evidence supportive of their conclusions. See Rome Court of Appeal, Order 20/1/1993, Gruppo Sicurezza v. Aeroporti di Roma; Milan Court of App., 18/06/1995, Telsystem v. Sip; 15/05/1996, Auchan v. Faid; 29/09/1999, Inaz Paghe v. Consiglio Nazionale Ordine consulenti del lavoro.

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tice (which, incidentally, are directly based upon EC principles).8 This is all the more important because, despite the explicit recognition in Law 287/90 of the judiciary as an alternative means of enforcing competition rules, the enforcement system chosen by the Italian legislature remains primarily administrative.9

3. Specialisation of courts Judges in Italian courts of appeal and tribunals are generalists, and there are no specialised courts in Italy (with the exception of courts in big cities, where some chambers acquire particular expertise in the treatment of disputes involving corporate and trade law, which could include antitrust).10 Some commentators consider lack of specialisation to be an obstacle to the effective and consistent enforcement of antitrust rules. This argument is particularly evoked in connection with the future devolution of Article 81(3) EC to domestic courts, which will require a larger margin of appreciation and mastery of economic analysis. Although it will take some time before national courts master all the assessment criteria spelled out by both the Commission’s practice and the case law of the EC courts, I believe this concern should not be overestimated, particularly if one considers the situation in other fields of EC law. The enforcement of Articles 81(1) and 82 EC by national authorities does not exhaust the issue of decentralisation within the whole context of the Treaty. In this respect, it suffices to recall that national judges and administrative agencies are the main actors in the application of most EC rules, and competition rules should not be an exception. Indeed, prohibition rules and exceptions have been equally enforced at national level by both courts and national administrative agencies without major difficulties in other crucial fields of the EC Treaty, such as the four freedoms. This is due to two well-known characteristics of the EC rules, supremacy and direct effect. While these provisions have raised the issue of uniform application, the case law of the European Court of Justice has developed sufficiently so as to ensure that divergent application of these rules at national level remains exceptional. In sum, if one considers the overall architecture of the EC legal system, the modernisation reform should not be perceived as a revolution having disruptive effects on the current system of allocation of competencies between the 8

On the other hand, the risk that courts will develop a line of jurisprudence inconsistent with the Authority practice seems quite unlikely as they are also bound to apply Law No. 287/90 in accordance with the principles of EU competition law (see Article 1.4 of Law No. 287/90). 9 See on this point M. Libertini (1998): ‘Il ruolo del giudice nell’applicazione delle norme antitrust’, 25 Giurisprudenza Commerciale, 649. 10 Lately a new legislative proposal (the so-called ‘Mirone proposal’) has provided for the reorganisation of the judiciary in the field of commercial law, with a view to introducing specialised courts. The proposal has not been adopted.

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Community and national institutions. Quite the reverse, this is a return to the general norm. In this sense, we may more properly talk of ‘normalisation’ rather than of ‘modernisation’.

4. Procedural features Turning now to purely procedural issues: ordinary procedural rules relevant in civil litigation apply without exception to antitrust disputes in the Italian system. I will focus only on those aspects that in my view are likely to undermine an effective enforcement of competition rules by ordinary courts.

4.1. Rules on evidence—Burden of proof — Investigative powers The Italian rules concerning the burden of proof in civil law proceedings are equivalent to those applied in common law systems. The burden of proof is governed by Article 2697 of the Italian Civil Code, according to which a person wishing to assert a right before the court must prove the facts upon which that right is based. Any person who challenges the relevance of these facts, or who claims that the law has either been changed or expired, must prove the facts on which the exception is based. The parties are therefore under an obligation to submit all proper evidence of the facts they have alleged. This rule plays a key role in the proceedings, as disputes are often decided on whether or not one of the parties has discharged its burden of proof. If the plaintiff fails to substantiate his claim, the court will reject it regardless of the opposing party’s attitude. However, it is a distinctive aspect of the Italian system—but one that is not uncommon to other countries of continental Europe that the principle of allegation by the parties is very strictly enforced. Courts can therefore only hear evidence from or supplied by the litigants, and they do not have major investigative powers. This implies that a judge must base his decision on the evidence provided by the parties concerning disputed facts that are relevant to the decision in the case. In essence, Italian courts cannot inquire into the facts on their own initiative,11 and they have limited investigative powers independent of allega11

It is illustrative that, according to Tavassi and Scuffi (supra note 3) almost all private actions for alleged breach of Article 3 Law No. 287/90—on abuse of dominant positionhave been rejected because of the plaintiff being unable to sufficiently prove the existence of one of the conditions required for the provision to apply—namely: the existence of a dominant position; the existence of an abusive conduct; a loss suffered from this conduct; and the causal link between the loss suffered and the anti-competitive conduct. See inter alia Rome Court of Appeal 29/3/1995 Omnitel/Telecom, Milan Court of App. 21/3/1993, BB Center Parabella; 12/07/1995, Ceit/Novamont-Ciuffo Gatto; 20/09/1995, Sanguinetti/Ania; 31/01/1996, Comis/Ente Fiera Milano.

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tions by litigants. Among those limited measures, the most relevant for the purpose of antitrust disputes are expert reports and requests for information from the public authorities.12 At the same time, even these limited investigative tools are seldom properly employed. The case of expert reports provides a very illustrative example in this sense. The availability of expert reports is fundamental to an antitrust dispute. Judges have only generalist backgrounds, so some assistance from economic

12

More specifically, the judge has a number of powers to collect evidence which may be considered to be ancillary to the evidence introduced by the parties: a) Appointment of experts to perform an investigation or to give a technical opinion (Article 61 of the Italian Code of Civil Procedure). The procedure in question is used only with respect to the specific technical questions set out in the judge’s order appointing the expert. b) ‘Interrogatorio libero’ (Free cross-examination of the parties) (Articles 117 and 183 c.p.c.). The judge may order the parties to appear before him in order to submit to them questions concerning the matters under litigation. This kind of questioning is not aimed at eliciting a confession from the parties and does not represent ‘formal evidence’. The ‘interrogatorio libero’ is, instead, aimed at allowing the parties to clarify their claims and defences during an open confrontation with the judge. c) Inspection and search (Article 118 c.p.c.). The judge can order inspections of premises or buildings of the parties or third parties, as well as body searches. Searches and inspections can be ordered on the condition that they do not cause harm to the parties or to third parties and do not compel them to break a professional confidentiality duty. The purpose of inspection and search is to allow the judge to establish direct proof of the facts alleged by the parties. The judge attends these examinations personally and may be assisted by an expert. d) ‘Compellability’ of witnesses (Articles 253 and 257 c.p.c.). Witnesses are called by the parties, but they must be admitted to testify by the judge, who will permit them to testify only if their evidence is admissible and relevant. The judge hears the witnesses on the facts on which they have been called to give evidence, and may also ask them all questions necessary to complete or clarify their testimony. Furthermore, the judge can also call other witnesses, provided that it appears from previous testimony that these witnesses would be useful in providing relevant evidence. Finally, the judge may order the re-examination of a witness in order to clarify his previous testimony or to correct the irregularities of a prior examination. e) ‘Giuramento suppletorio’ (supplemental oath) (Article 2736 n° 2 of the Italian Civil Code). Article 2736 (n° 2) c.c. defines ‘giuramento suppletorio’ as ‘. . . the oath with which the judge on his own initiative charges one of the parties for the purpose of deciding the case when the claim, or the defences to it, have not been completely proved, although some proof has been provided, or, for the purpose of ascertaining the value of the subject-matter of the claim, if such value cannot be otherwise ascertained’. This particular oath has the function of subsidiary evidence, that may be ordered when a relevant fact has not been entirely proved (so-called ‘probatio semi-plena’). f) Request for information to the public administration (Article 213 c.p.c.). The judge can, on his own initiative, request bodies of the public administration to furnish him with written information concerning acts and documents of the same, where this is necessary for the proceedings. Where evidence needs to be collected abroad, the judge ensures that the proper request to the foreign judicial authority is sent, through diplomatic channels. The foreign judicial authority then takes the requested evidence according to its own internal procedural rules.

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experts should be of great value.13 This is increasingly true as there is an evergrowing tendency to conduct antitrust scrutiny founded on solid economic analysis.14 In Italy, an expert can be appointed upon an order of the court setting out the specific technical questions that the expert is required to answer.15 The expert submits his report to the judge. The parties can also comment the work of the expert by appointing their own experts who, in turn, can submit their comments and counter-reports. However, the expert’s opinion does not constitute evidence; it serves only to supplement the judge’s technical knowledge. Furthermore, the power of the expert and the ability of the judge to confer an investigation on him are limited by a principle of civil procedure as interpreted by the Supreme Court, whereby an expert cannot be given a purely exploratory role. The expert’s role is confined to providing technical clarification of the evidence submitted by the parties to the case. The expert’s opinion is not binding on the judge, but the latter must explain the reasons for rejecting or departing from the expert’s conclusions. To date there have been no recorded cases in which a court has asked for an expert report. This extremely poor record shows that: • most proceedings do not reach an advanced stage at which the Court would feel the need for a careful analysis of the market characteristics in order to deliver a well founded judgment; and • most claims end up being dismissed by courts for lack of or insufficient evidence, due to the principle of allegation of the parties that governs the process. The request for information provided for by the Italian system also seems to be a useful device, as it could allow some cooperation between the judge, the national competition authority and the EC Commission. However, this option has not been so far explored in antitrust disputes. This is probably related to the fact that such requests should concern documents and information already at the disposal of the administration. As a consequence, the antitrust authority could never provide evidence of a given infringement in response to such requests. Nor could it express an opinion or undertake an investigation on behalf of the judge.

13

Incidentally, those who are familiar with antitrust authorities know that antitrust cases are investigated by teams composed of both economists and lawyers, and that the contribution of economists in such investigations is as important as that of the lawyers. 14 The EC experience is very illustrative in this respect. If one should identify the cornerstone of the overall process of reform, which has characterised EC competition law and policy over the last years, this is the recognition that a more economic-based approach is required in the competitive assessment of any commercial deal. 15 Tavassi, supra note 3, reports that in Italy there have been so far no antitrust disputes where a court has appointed an expert.

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4.2. Duration of proceedings The length of civil proceedings in Italy is well known. According to official statistics, the average duration of a civil proceeding is of approximately five years at first instance level, and three years at appellate level.16 About 3,500,000 civil proceedings are pending at the moment before Italian courts. The number of rulings against Italy by the European Court of Human Rights in Strasbourg for violation of the fundamental principle of due process of law is striking, and they usually concern the excessive duration of proceedings. This is probably one of the major deterrents to private parties bringing antitrust suits in civil courts. It is illustrative that, in the last two Annual Reports on the state of justice by the Supreme Court’s General Prosecutor, much emphasis has been put on the urgent need to find alternative solutions to the judicial settlement of disputes. In the 1999 report, the General Prosecutor explicitly refers to the experience of Administrative Independent Authorities (among which the Competition Authority) as an effective, alternative law enforcement system.

4.3. Damages In most EU countries, a private party seeking damages for an antitrust law violation encounters great difficulties in obtaining monetary compensation. Italy is no exception, and the reasons are numerous. The general rules governing torts (Article 2043 of the Civil Code) apply without exception for the purposes of assessing damages. In this context, some difficulties typically arise in relation to: • the identification of the injured party entitled to damages; and • the proof of the causal link. Concerning the identification of the injured party entitled to damages: starting from a locus standi problem, the procedural rules deny standing to some categories of persons relevant for antitrust cases. Consumers appear to be the group most affected by such rules. This is due to the fact that under Article 2043 of the Civil Code the plaintiff has locus standi to file an action for damages only in so far he can prove he has been directly harmed by a particular anticompetitive conduct. The problem for consumers is that their claims arise from the purchase of goods or services through intermediaries (distributors or retailers), who are themselves direct victims of the alleged anti-competitive conduct (such as over-pricing by a firm enjoying a dominant position). In such situations, consumers could not claim to be directly injured in the sense required by the law. It remains to be seen whether a consumer who can prove direct harm caused by anti-competitive conduct would ever see his action upheld by a court. The 16 See 2000 Report of Supreme Court General Prosecutor on the State of Justice, published on 12/01/2001.

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Supreme Court has recently dismissed for lack of locus standi a consumer suit seeking annulment of a bank loan for violation of Article 81 EC (according to the plaintiff, the contract contained some clauses contrary to Article 81 EC). The Court stated that EC competition rules are primarily addressed to undertakings and are designed to secure the constitutional principle of freedom of private enterprise. As a consequence, a consumer can only receive an indirect benefit from the beneficial effects of competition, and cannot claim standing to bring an action in court against alleged anti-competitive conduct by undertakings.17 A further impediment to consumers filing an antitrust suit lies in the lack of standing of consumers’ associations. This is due to the fact that consumers, taken as a group, cannot prove a direct injury resulting from an alleged anticompetitive conduct; at most they can prove a general and indirect economic interest. Thus consumers’ associations are holders of collective interests that do not amount to subjective rights entitled to full judicial protection. Due to this state of affairs, no class actions seeking monetary compensation based on antitrust rules have so far been recorded in the Italian judicial system.18 Another major difficulty encountered by plaintiffs claiming damages in antitrust disputes is proving the existence of a causal link between the loss suffered and the alleged breach of the competition rules. These problems are particularly acute with respect to the determination of lost profit. It is generally very difficult to prove with a sufficient degree of certainty that the profit lost in performing an economic activity derives directly from a competitor’s anticompetitive conduct. A number of factors can affect a firm’s capacity to generate profits: there might be external speculative factors (such as an expected economic slowdown), a change in the trend of consumer preferences, or simply a poor commercial strategy. The presence of one or more of these factors could result in a damage claim being rejected by the judge for lack of a causal link between the anti-competitive conduct and the economic harm allegedly suffered by the plaintiff. Other problems also arise in relation to the factual quantification of the damages resulting from an antitrust violation. Given these problems, in Italy there have been no successful claims for damages for breach of EC competition rules so far, and only one claim for damages based on breach of national competition law was successful so far.19 17 Corte di Cassazione, Sez.I, 4 marzo 1999, n. 1811. On the topic of consumers’ locus standi in antitrust civil suits, see P. Fattori and P. Cassinis (2001): ‘Disciplina Antitrust, funzionamento del mercato e interessi dei consumatori’, 4 I contratti, 425–426. 18 The situation does not seem to have changed following the entry into force of a recent law, granting an explicit locus standi to consumers’ associations in particular matters. Law No. 281/99 has indeed conferred to both consumers’ associations and single consumers locus standi to bring in courts claims based on violation of fundamental rights such as the protection of health, security, products and services’ quality, and fairness of commercial transactions. 19 According to Tavassi and Scuffi, (see supra note 3, p. 314) there is only one recorded case of damages being awarded for breach of antitrust rules (Milan Court of Appeal 24/12/1996, Telsystem/Sip).

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5. Other impediments to the judicial enforcement of competition rules In the light of the above, it appears that some features of the Italian judicial system undoubtedly hinder the development of the private enforcement of competition law. The main obstacles concerning procedural issues are the following: • • • •

rules in a civil trial are such that courts have limited powers of investigation; evidence must primarily be collected and presented by parties to the dispute; rules on locus standi are very strict regarding consumers; damages are rarely awarded because of the difficulty of proving the existence of a causal link; and • trials are usually costly, cumbersome and very lengthy.

5.1. Lack of substantive remedies However, one should not infer from the above considerations that judicial enforcement of antitrust rules is ineffective in Italy only because of procedural obstacles. In fact, there are a number of equally important factors that arguably discourage private parties from bringing an antitrust suit before courts in order to protect their rights resulting from competition rules. Private parties are typically discouraged from going to trial by the lack of substantive remedies and incentives for private actions comparable to those that exist, for example, in the USA,20 such as treble damages, contingency fees and class actions.21 In addition, the judiciary has a crucial role in enforcing competition rules in the USA 20

The US have a very developed private enforcement system. See, inter alia, D. Wolf (1996): ‘The reform of EC competition law: member state perspectives’, presented at the 23rd Annual Conference on International Antitrust Law and Policy, New York. The author notes that the Commission’s reform model follows the example of US antitrust law, where judicial enforcement is very developed. However, the European context is characterised by an entirely different legal framework. In particular, the author refers to the criminal sanctions and the extensive investigative powers existing in the US judicial system, or, as regards civil sanctions, to treble damage suits. He concludes that ‘[T]here is nothing similar at supranational or national European level for the foreseeable future’. For a contrary opinion, see C. Jones (supra note 2) who explores how various principles developed in US private antitrust litigation can be applied in similar cases in the EU. As regards treble damages claims in the US, he notes: ‘It is submitted that the perceived superiority of treble damages provisions of US law over damages rules available in Europe is exaggerated. (...) comparable results are in fact obtainable in Europe, especially in the UK, without a treble damage multiplier’. In relation to contingency fees and class actions, he states: ‘Similarly, the idea that there is no point in antitrust litigation without contingency fees or class actions is another myth which should not be accepted without careful inquiry. In the past, many antitrust cases in the USA were brought on a contingency basis, but this is now the exception rather than the rule’. On class actions, Jones notes: ‘class actions have never accounted for more than a small percentage of private antitrust claims’ (p. 249). 21

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because of the criminal nature of serious antitrust infringements.22 These problems are also recorded with few exceptions, although with different levels of intensity, in a great number of other Member States.

5.2. The primacy of administrative enforcement There is still more that explains the traditional reluctance of private parties to take antitrust claims to court. The underdevelopment of the judiciary in this respect is explained by the fact that the antitrust enforcement system is primarily administrative in Italy, as in other EU countries including the European Community. More importantly, the administrative enforcement system is proving to be very effective, and to some extent an alternative to judicial enforcement. While the protection of private complainants is not the objective of the administrative intervention,23 the outcome of an antitrust case conducted by the competition authority can be largely equivalent to a judicial ruling.24 Thus, given the presence of an administrative enforcement system that works effectively, expeditiously, and at no cost to the complainants, and that has extensive investigative powers and short deadlines, private party complainants tend to prefer such an option.

IV. General procedural issues arising in relation to private enforcement of EC competition rules in the Member States Returning to the issue of decentralised private enforcement of EC competition rules, the above-described obstacles identified in the Italian system are not uncommon in other countries of the EU.25 There are also a number of significant differences in civil procedure between Member States that could pose 22

See D. Goyder (1999): EC Competition Law, Oxford University Press, Oxford. According to Goyder, ‘there are signs that litigation under Articles 85 and 86 is becoming more common in the United Kingdom’. 23 In particular, the complaints filed with the competition authority are not to be deemed private actions aimed at protecting and asserting individual rights belonging to single citizens or to groups, categories or classes of citizens, which are affected by anticompetitive agreements, practices and abuses of dominant positions. The Authority’s action is rather aimed at protecting public interests, which may happen to coincide with private interests. 24 Take in particular an antitrust infringement decision by the Authority which contains a cease-and-desist order that is binding upon the companies found guilty of the antitrust conspiracy. The competitors-complainants would find satisfaction in the anticompetitive conduct being removed. 25 In particular, the rules on evidence provided by the Italian Code of Civil Procedure are not dissimilar to those applicable in most countries of the EU. Also, in most Member States damage liability is very difficult to prove. Typically, the difficulties focus around the causal link between the injury claimed and the infringement of a competition rule.

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further obstacles to Articles 81 and 82 EC being enforced consistently across the EU.26 Against this background, it is difficult to envisage a Community-generated solution to the existent problems. Community law has played a fundamental role in trying to build a level playing field so as to secure a minimum standard of substantive judicial protection of community rights across the EU. The European Court of Justice has asserted what remains a fundamental principle of the EC legal system, namely that individual rights stemming from Community law must be effectively protected in each Member State. This implies inter alia that national judicial remedies must be adequate, and that any impediment to Community rights being effectively enforced should be removed in the name of the supremacy of Community law.27 As regards more specifically procedural issues, the ECJ has upheld the principle of the procedural autonomy of each Member State, with the limitation that judicial protection of Community rights must be fully secured. It is thus for the domestic legal system of each Member State to specify the detailed procedural rules governing actions for safeguarding rights that individuals derive from EC law. Such rules must not be less favourable than those governing similar domestic actions, nor render the exercise of rights conferred by EC law virtually impossible or excessively difficult.28 26 See, on this point, S. Kon, supra note 2. The author mentions a number of divergences existing in civil procedures before NCs in the EU, such as rules of disclosure, expert reports, standard of proof, legal privilege, and damages. 27 In this line of jurisprudence, there are landmark rulings whereby the Court has established novel remedies aimed at securing full protection of individual rights stemming from Community law. See, inter alia, Case 213/89 Factortame [1990] ECR I–2433, whereby the Court stated that in presence of a flagrant violation of Community rights resulting from a national legal provision (in that case some provisions of the British Shipping Act were inconsistent with the Community freedom of establishment and services), Community law empowers a national court to grant an interim relief suspending the effect of such provision even when this power does not exist under national law. See also Case 143/88 Zuckerfabrik [1991] ECR I p. 4189; Case C–465/93 Atlanta [1995] ECR I p. 3761. Most recently, the Court has upheld the principle that an individual can sue for damages a Member State which has acted in breach of Community provisions having direct effect. See, in particular, the well-known judgments in Case C169/90 Francovich [1991] ECR I–5357; Case C–46/93 Brasserie du Pecheur [1996] ECR I–1029. In Francovich, the Court stated that an individual can sue for damages a Member State that has not implemented within the prescribed deadline a Directive whose provisions provide for an unequivocal right in favour of that individual. In Brasserie du Pecheur, the Court recognised that the same principle applies whenever a Member State acts in breach of a Community rule having direct effect. In the latter judgment, the Court has even specified the conditions under which damage liability is deemed to exist. 28 In essence, the ECJ has tried to promote a common minimum level of judicial protection across the EU, by virtue of two general principles: • equality of treatment —according to which the judicial protection provided by a national legal system to an individual right stemming from Community law should not be lower than the protection secured to an equivalent individual right based upon an internal provision;

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While ECJ case law can reduce the diversities of the national systems in the name of minimum common standards of protection of Community rights,29 it remains to be seen whether a different, more ambitious approach would be fruitful, or workable. For instance, an ambitious plan of legislative procedural harmonisation of the judicial systems of Member States would give rise to a number of delicate and complex issues. First, harmonisation of proceedings before domestic courts of Member States appears to be very difficult in the context of the current Community legislative framework, because it would encroach upon matters that fall outside the competencies of the Commission. Member States retain their sovereignty in these matters, with the exception of the cooperation contemplated by the Third Pillar of the EU Treaty. The problems that the draft Regulation to replace Regulation 17/62 raises in relation to the few provisions regarding the cooperation between the Commission and domestic courts are quite illustrative. In the draft Regulation, the Commission proposes new and improved information and cooperation mechanisms with NCs to ensure the consistent application of EC competition rules. In this respect, some initiatives (such as the possibility that the Commission could to act as amicus curiae) would raise legal problems. Indeed, such an initiative would be workable only in so far as it harmonises with similar features already contemplated by the judicial system of a Member State. Regrettably enough, there appears to be no such judicial tool in Italy that would allow courts to benefit from the assistance of the Commission.30 The same can probably be said of the possibility of granting the Commission locus standi to challenge judicial decisions by NCs enforcing Articles 81 and 82 EC.31 • minimum standard of protection —which implies that in any event domestic judicial rules cannot render practically impossible the enforcement of Community rights. See, on these points, inter alia, Case 1999/82 San Giorgio [1983] ECR I–3595; 29 It is instructive that the ECJ was called upon to rule on some of the procedural issues identified above. In particular, in Joined Cases C–430/93 and C–431/93 Van Schijndel [1995] ECR I–4705, the ECJ was asked whether the limitation provided by domestic law that in a civil proceedings a court must or may raise points of its own motion only in exceptional cases could in any way jeopardise full protection of Community law. On that occasion, the Court stated that the limitation is justified by the principle that, in a civil suit, it is for the parties to take their initiative, the court being able to act of its own motion only in exceptional cases where the public interest requires its intervention. That principle reflects conceptions prevailing in most of the Member States as to the relation between the state and individuals; it safeguards the rights of defence; and it ensures proper conduct of proceedings, in particular by protecting them from the delays inherent in examination of new pleas. See also Case C–312/93 Peterbroek [1995] ECR I–4599; Case C–126/97 Eco Swiss [1999] ECR I–3055. 30 See Tavassi and Scuffi, supra note 3, at p. 269. 31 However, this idea does not seem to have been retained in the current version of Article 5 of the draft Regulation. As for the obligation for NCs to keep the Commission informed, no legal impediments exist to this arrangement, as long as it concerns the communication of the judgment rendered by NCs. By contrast, it may prove too heavy a task for the NCs if it implies an obligation to send the whole file.

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Secondly, a Community legislative procedural harmonisation would also open a new season in contrast with the now well-established Community principle that no harmonisation is required if national systems are largely equivalent to each other and effectively secure community rights. Thirdly, pursuing such an ambitious plan only in the name of the increased judicial application of EC competition rules would be somehow disproportionate compared to the ultimate objective. In this respect, it should again be stressed that: • a high level of enforcement is already achieved through the administrative enforcement; and • good cooperation exists already among NCAs, as well as a certain degree of homogeneity in terms of their effectiveness.

V. Conclusions The possibility for the national courts to apply Article 81(3) EC directly will not have a dramatic impact in terms of giving an impulse to the private enforcement of EC competition law. The major impediments to EC competition rules being enforced more effectively by national courts, in Italy at least, are to be found elsewhere, namely in: • the difficulty of collecting the evidence through the typical powers of a judge in the context of civil dispute; • the scarce likelihood of obtaining damages; • the length of civil proceedings. Other factors should be added to the above, such as the absence of substantive judicial remedies acting as incentives for private antitrust actions, and the supplementary role played by administrative enforcement. Some of the above-described problems are probably not uncommon in other Member States, though they manifest with a different intensity and some variety. Apart from the harmonising role played by ECJ case law, other more ambitious plans of legislative harmonisation seem to be far from becoming reality. Nevertheless, any effort to improve and increase the judicial application of EC competition rules should undoubtedly be supported. In the meantime, administrative enforcement is playing a crucial role in the enforcement of EC competition rules, and will continue to do so for a while.

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Panel Three: Arbitration Courts L I —I would like to start with some clarifications about the terminology, since arbitrators in general feel that the EU institutions have little understanding of what arbitration really is about. ‘Arbitration’ is often referred to in a very broad sense, to include what is nowadays called ADR (alternative dispute resolution), which is a form of arbitration that has no application in the field of competition law enforcement. When we talk about the arbitration of disputes involving competition law issues, we refer to arbitration in the narrow sense, or what we call in French arbitrage juridictionnel. The ‘arbitrator’ can be defined as a private judge whose enforcement powers derive from a private agreement. The arbitrator has enforcement competencies that are similar to those of the courts of law. Many of the disputes concerning contracts falling under the scope of EC competition rules are, in fact, brought before arbitration tribunals, and not before courts of law. Arbitration is often used as a method of settling disputes concerning distribution agreements, licensing agreements, cooperation agreements, and so on. Arbitrators also settle numerous disputes concerning non-competition provisions, exclusivity provisions, and so on. Personally, I have dealt with three arbitration cases involving EC competition law issues over the last five months, either as an arbitrator, or as a consultant for one of the parties involved. In two of these cases, the competition law issues arose in relation to restrictive provisions in the context of exclusive purchasing agreements. That is why I am convinced that most of the contractual disputes affected by the reform of Article 81(3) EC end up before arbitrators rather than national courts. Of course, not all contractual disputes are submitted to arbitrators. National courts have an important role to play in solving unfair competition cases, such as those arising in actions against ‘free riders’ in distribution networks. The same is true of damage actions (however, these are quite rare in Europe). The first kind of litigation is not brought before arbitrators for a quite simple reason: a serious arbitration agreement would not cover this type of dispute. And although it might be relatively easy to agree on an arbitration clause at the time at which a contract is concluded, it would be much more difficult to agree on arbitration at a later stage. Thus, if a competition issue arises in the context of a dispute whose main subject is unfair competition or damages, the action will most likely be brought before a national court. But if the competition issue arises in the context of a contractual dispute and the contract contains an arbitration clause (which happens very frequently), the action will be brought before an arbitrator. What are arbitrators entitled to do under the current enforcement system? The current legislation of most countries enables arbitrators to deal with competition law issues. Everybody heard about the US Supreme Court’s 1985 decision in the Mitsubishi case.1 Even in France, where arbitrators’ competence to


1

Mitsubishi Motor Corp. v. Soler Chrysler-Plymouth, Inc., 473 US 614 (1985).

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apply legal provisions involving policy considerations was traditionally disputed, in 1993 the Cour de Cassation opened the possibility that arbitrators could deal with competition law issues. So it can safely be said that arbitrators’ competence to deal with competition law matters is no longer an issue for debate in Europe. Arbitration tribunals have exactly the same powers as national courts in the application of Articles 81 and 82 EC (of course, within the limits established by the arbitration agreement). This means that arbitration tribunals are entitled to examine whether an agreement (or part of it) is void under Article 81(1) EC, or to pronounce the nullity of an agreement (or of a part thereof) according to Article 81(2) EC. However, under the current enforcement system, arbitration tribunals cannot decide whether the conditions for obtaining an individual exemption under Article 81(3) EC are met. International arbitration tribunals can apply EC competition rules on different grounds from those used by the EC Member States. EC competition rules belong to the category of mandatory rules in private international law— or what the French call lois de police. EC competition rules are integrated in the national legal order as far as the courts of the EC Member States are concerned. They can therefore be classified as mandatory rules of the forum—or in French lois de police du for. This means that national courts must apply EC competition rules ex officio if they are relevant to a case but were not invoked by the parties. In so far as international arbitration tribunals do not have a forum, the difference between the ‘foreign mandatory rules’ and the ‘mandatory rules of the forum’ makes little sense in the sphere of arbitration. International arbitrators have a mandatory duty to apply EC competition law, even if the law applicable to the contract under dispute (lex contractus) is not of one of the EC Member States. This viewpoint is not generally accepted, yet the majority of arbitration specialists agree that arbitrators are obliged to apply EC competition law. The famous ECJ decision in the Eco Swiss case2 contributed little to clarifying the technical issues of international private law that arise in international arbitration. For instance, are international arbitrators obliged to apply EC competition rules ex officio? The Court’s position on this issue is unclear. When I first read the decision, it seemed to me that the answer to this question was quite clear. However, after having reading some commentaries on this decision (for example, that of Mr Assimakis Komninos3), I am no longer sure about it. It all seems to depend on the place at which the award will be enforced. According to Eco Swiss, arbitrators are not under an obligation to apply EC competition rules ex officio, the Court instead ‘recommends’ that they do so. Nonetheless, my practical experience as an arbitrator shows that it is really difficult for arbitration tribunals to apply EC competition rules ex officio when the parties clearly do not want these issues to be debated. 2 3

Case C–126/97 Eco Swiss China Time v. Benetton International [1999] ECR I–3055. Komninos A.P. (2000): 37 Common Market Law Review 459.

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What changes will the reform bring about in the area of arbitration? The most important consequence of the reform is that arbitration tribunals, like national courts, should be entitled to apply Article 81(3) EC. There is no logical or practical reason why arbitrators should be excluded from the direct application of Article 81(3) EC. Once it becomes generally accepted that this is a logical consequence of the reform, the next question to address is what kind of mechanisms should be introduced in order to secure coherence in the application of EC competition rules by arbitration tribunals. The danger of inconsistency is quite real, as most of the disputes concerning contracts that may be covered by Article 81(3) EC are in practice submitted to arbitrators rather than the national courts. In this context, we can talk about ex ante or preventive mechanisms, and ex post or corrective mechanisms for ensuring consistency and coherence in the application of EC competition rules by international arbitration tribunals. With regard to preventive mechanisms, there is an ongoing debate about opening up the possibility that arbitrators request preliminary rulings from the ECJ under Article 234 EC. In Nordsee4 the ECJ established the principle that arbitrators do not have the right to make such requests. This position was later re-affirmed in Almelo5 and Eco Swiss. There are practical reasons that I do not favour a shift in this jurisprudence: the workload of the ECJ is already overburdened, and the additional workload deriving from requests for preliminary rulings coming from arbitrators could not be sustained. We would thus have to think up alternative mechanisms for securing coherence and consistency of decision-making. In Nordsee the ECJ established that arbitrators could indirectly derive the benefit of preliminary rulings via requests formulated by the national courts. However, this method of ensuring consistency is not wholly satisfactory: national courts become involved only after the adoption of an arbitration award, and only if the party that loses the case decides to challenge the enforcement of the award. As an alternative solution, arbitrators could rely on the institution of the juge d’appui—or the ‘supporting judge’—in order to obtain preliminary rulings on questions of EC competition law that arise during arbitration proceedings. What is the role of the juge d’appui in the course of arbitration proceedings? The arbitration legislation of most European countries currently establishes that national courts should offer support to arbitration tribunals in clarifying certain procedural aspects, such as the deadlines for the issuing of an award, etc. My proposal is that such support mechanisms should be expanded in order to address requests for preliminary rulings to the ECJ. (I understand that this sort of procedure was recently introduced in the UK). Of course, one could also think about extending to arbitration tribunals the mechanisms for ensuring coherence and consistency of decision-making that the Commission has proposed in Article 15 of the draft regulation with respect 4 5

Case 102/81 Nordsee Deutsche Hochseefischrei Gmbh [1982] ECR 1095. Case C–393/92 Almelo [1994] ECR I–1477.

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to the application of EC competition rules by national courts. However, since these mechanisms are not considered to be very useful to the national courts themselves, they could hardly be more useful to arbitrators. Some corrective mechanisms are already in place. National courts are able to review arbitration awards during proceedings to execute an arbitration award. Most national arbitration laws contain provisions referring to awards that are contrary to public policy provisions. Eco Swiss made clear that EC competition rules are part of the public policy provisions in the legislation of the Member States. However, it can be difficult to determine whether a mandatory provision has been infringed. For instance, is it a violation of mandatory rules if an arbitrator does not apply Article 81 EC to the case, even though the provision is clearly applicable? Furthermore, would it infringe a mandatory rule if the arbitration tribunal finds that the conditions for granting an individual exemption under Article 81(3) EC are met, even though this finding is not correct? The latter question is very problematic: one of the basic principles of arbitration law is that, in reviewing arbitration awards, national courts cannot re-examine the issues of substantive law (la prohibition de la révision au fond). In summary, the first and most important consequence of the EC antitrust reforms will be that arbitration tribunals—like national courts—will become entitled to apply Article 81(3) EC directly. As long as the Nordsee jurisprudence remains in place, one mechanism for ensuring the consistent application of EC competition rules by arbitration tribunals would be to enable a ‘supporting judge’ (le juge d’appui) to refer a request for preliminary rulings to the ECJ on behalf of arbitration tribunals. Such a procedure is not likely to lead to a considerable increase of workload for the ECJ. In spite of its shortcomings, the review of arbitration awards by the national courts remains the most effective ex post corrective mechanism. An important issue remaining to be clarified is whether arbitration awards wrongly applying Article 81(3) EC are to be considered under breach of public policy provisions in the light of the Eco Swiss jurisprudence. It is obvious that this issue cannot be clarified in the draft regulation, but it would be useful to have some clear indications in this sense. One option would be to clarify this through a Commission Notice, as suggested by Mr Komninos in his article.6
Y D—I would like to start with a few remarks on the issues Professor Idot raised in her presentation. I am not sure whether I share Professor Idot’s view that the Modernisation White Paper and the draft regulation should have addressed the issues related to arbitration. This is because I do not think that the contact between arbitration and the European institutions should be very direct. To the contrary, I believe that such contacts should occur only when there is an enforcement problem. As it emerged from yesterday’s discussion, private enforcement of EC competition law is mostly about enforcing 6 Komninos A.P. (2001): ‘Arbitration and the Modernization of European Competition Law Enforcement’, 24 World Competition 2, pp. 211–38.

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agreements that breach these provisions. In such cases, regardless of whether the dispute is brought before a national court or an international arbitration tribunal, the defendant would typically invoke EC competition rules as a defence, claiming that the agreement is void according to these provisions. This is also the issue most commonly examined in the context of international arbitration. Other aspects, such as damage claims by third parties, are not relevant in the sphere of arbitration. Therefore, I think that there are three main questions to consider in the area of arbitration: 1. Could arbitration be used as a way of avoiding the application of EC competition rules? 2. How do international arbitrators intend to deal with the application of EC competition rules? 3. Do courts exert sufficient control over the course and outcomes of arbitration proceedings? I think that the reply to the first question is ‘yes’ in theory, and ‘no’ in practice. There are two aspects to be considered in this context: the first is the law to be applied by arbitrators. Professor Idot already explained that, contrary to the courts of law, arbitration tribunals do not have to apply the so-called ‘law of the forum’ (lex fori), but the law chosen by the parties to apply to their contract (lex contractus). Problems can therefore occur when the parties did not choose the law of one of the EC Member States as lex contractus. (By contrast, whenever the lex contractus is that of an EC Member State, the arbitrator will apply EC competition law as part of the domestic legal order). In such cases, the international arbitration case law clearly indicates that the arbitrators will not accept that the parties exclude the applications of mandatory rules (lois de police) by choosing a non-EU country’s legislation as lex contractus. In my written contribution for the workshop I gave two examples of this. The first is a 1983 ICC award in which, even before determining the lex contractus, arbitrators first examined whether the contract in dispute was valid under EC competition rules.7 The second is an ICC award of 1996,8 given in a case between a German licensee and an American licensor, in which the lex contractus was the law of the State of New York. In the latter case, the arbitrators decided that the contract was valid under EC competition rules. Thus, even when the parties choose the law of a non-EU country as lex contractus, arbitrators will still apply EC competition rules. This basically occurs for two main reasons. First, because arbitrators do not have a ‘law of the forum’ (lex fori), they have developed ways of determining the law applicable to the case according to the legitimate expectation of the parties. It is not considered to be within the legitimate expectation of the parties that mandatory rules 7 ICC Case No. 4132, reported in Yearbook of Commercial Arbitration, Vol. X (1985), p. 49. 8 Journal du Droit International vol. 126/1999, Issue 4, p. 1073—Note by J.-J. Arnaldez.

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applicable to their contract be disregarded by the arbitration tribunal. Secondly, as it is the duty of the arbitrator to produce an enforceable award, it cannot be within the legitimate expectation of the parties that rules affecting the enforceability of the award be disregarded. With respect to the ex officio application of EC competition rules by arbitration tribunals, I think that there is some confusion as to the distinction between the claim submitted to the arbitration tribunal and the legal issues to be decided in the context of that claim. Some commentators suggest that arbitrators cannot apply EC competition rules ex officio because the result would be an award made ultra petita. This is not correct: an award would be ultra petita if the arbitration tribunal were to decide on a claim that was not made by the parties. For instance, the arbitrator could be asked to decide that the plaintiff should pay royalties. The arbitrator could decide that the royalties should not be paid, for a variety of reasons, including that the contract is null and void under Article 81(2) EC. My next point concerns the question of whether arbitrators are capable of applying Article 81(3) EC directly. In my view, arbitrators have more means at their disposal in order to perform this task than many of the courts in the EC Member States. First, the parties to an agreement will choose arbitrators from among the most specialised legal professionals. Secondly, arbitrators have more time at their disposal than national judges, and this is a very important factor to take into account. If you just take as an example the functioning of the French judiciary, I would say that litigants who obtain one-hour sessions before the judges were lucky to get a very long hearing! Add to this the fact that the judges have little time to prepare their cases (and will therefore be unable to ask the right questions), have limited powers of discovery, and cannot hear witnesses on competition issues. By contrast, arbitrators have all the time in the world; they are paid for that. They have large powers of discovery, and the ability to hear witnesses. Moreover, arbitrators can even request the support of courts in obtaining evidence or convening witnesses. My last point refers to the judicial control of arbitration decisions. I think that we must consider the possibilities for such control to be exerted at two different levels. To be more specific, any arbitration law offers the options of challenging an arbitration award in two different ways. Firstly, the parties can file an action for setting aside the award at the place where the award was given. Secondly, they can object to the enforcement of the award in the country in which enforcement is sought. I believe that the Eco Swiss decision made an useful clarification concerning the latter alternative. However, this was probably not absolutely necessary as, under the New York Convention (which was ratified by all EC Member States), the courts may refuse the enforcement of an arbitration award that was pronounced in disregard of public policy provisions. The very same principle applies to actions to set aside the award at the place at which it was made. The parties can ask the court to set aside the award because it is in breach of EC competition rules. But problems could occur when the place of arbitration is not in one of the EC Member States. Let us take the

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example of Switzerland, where a lot of arbitration now takes place. As Professor Baudenbacher will show in more detail, the Swiss courts set a very good example in this respect. In 1992, the Swiss Federal Tribunal decided that an award given in Geneva, in which the arbitrators refused to apply EC rules, was null and void. It is true that this decision of the Swiss Federal Tribunal was quite clear because the arbitrators had argued they had no jurisdiction to apply EC competition rules. However, in 1998 the very same Swiss Federal Tribunal refused to annul an award in which the arbitrators did not apply EC competition rules ex officio. This decision may be worthy of criticism, but, at the same time, the decision re-stated that the arbitrators should have applied EC competition rules if they were requested to do so by the parties. I think this is a step in the right direction, because the decision establishes that arbitrators should apply EC competition rules at the request of the parties, even if these provisions are not part of the lex contractus. This is quite some progress. For example, in a 1994 decision the same Swiss Federal Tribunal refused to annul an award because the arbitrators had applied an Algerian law against corruption, even though the plaintiff had argued that Swiss, and not Algerian law, was applicable to the case. My conclusion is that the present judiciary control arrangements function rather well. The courts of the EC Member States have the ability to refuse to enforce arbitration awards that breach EC competition rules. There is a risk that an arbitrator might establish that a contract is null and void on the basis of EC competition rules in a case in which a court would find otherwise. However, this may be a marginal problem, and there is nothing worse than introducing rules to deal with marginal problems! C B —In the past, using arbitration outside the EU was seen as a way in which to circumvent EC competition law. A former ViceChairman of the ICC Commission on the Law and Practices Relating to Competition once described the classic case of two EC companies that concluded an agreement infringing Article 81 EC, whereby the agreement was subject to Swiss law and arbitration took place in Switzerland. He wrote that: ‘Only one copy of the agreement existed, and this was hidden in a Swiss bank. When the dispute started, the arbitrators were asked to examine the contract, but not to mention it in their decision.’9 This is concern with which the Commission viewed arbitration in non-EU countries for quite some time. Switzerland, in particular, was always suspected to be the heart of the resistance to the application of EC competition rules. Switzerland does indeed have a record of not accepting EC competition rules, which is due to several factors. First, the country has had in the past—and probably still maintains today—a tradition of hosting cartels that operate on the EC market. Secondly, Switzerland tried to avoid the extraterritorial


9 Werner J. (1995): ‘Application of Competition Laws by Arbitrators: The Step Too Far’, 12 Journal of International Arbitration, p. 23.

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application of EC competition law. Thirdly, Switzerland is a traditional host of arbitration tribunals, which were themselves suspected of helping companies to avoid the application of EC competition rules. Fourthly, and last, in 1974 the Swiss Federal Supreme Court ruled that the competition provision in the bilateral Free Trade Agreement between Switzerland and the EC did not have direct effect. Arbitration tribunals located in other non-EC countries were, of course, also a cause of concern, but most of the other traditional arbitration locations in Europe have now joined either the EU or the EEA. Switzerland remains the only European arbitration location ‘outside the reach’ of EC competition law. The question is whether Swiss arbitrators take advantage of this situation to undermine the application of EC competition policy. Before attempting to answer to this question, I want to make a few remarks about the legal situation of arbitration tribunals in the Member States and in the EEA/EFTA countries. The situation of the latter is quite special because EEA competition rules mirror those in the EC Treaty. Arbitration tribunals in the Member States are, according to the case law of the ECJ, under an obligation to apply Articles 81(1) and (2) EC. Following modernisation, they will also be able to, and will have to, apply Article 81(3) EC. However, under the current enforcement system, arbitration tribunals do not have the right to request preliminary rulings from the ECJ under the procedure established by Article 234 EC. As mentioned by the previous speakers, this limitation follows from the ECJ judgment in Nordsee, and was confirmed in Eco Swiss. The Commission’s 1993 Notice about cooperation with the national courts10 does not mention arbitration tribunals, so nor do they have the right to ask for support from the Commission. Last but not least, the draft regulation of September 2000 does not contain a word about arbitration. I would assume that arbitration tribunals in the EEA/EFTA countries are obliged to apply Articles 53 and 54 of the EEA Agreement in the same way as arbitration tribunals in the Member States are obliged to apply Articles 81 and 82 EC. The EFTA countries have made it very clear that they would like the modernisation project to be extended to the EFTA pillar of the EEA. If this happens, arbitration tribunals in the EFTA countries will also have to apply Article 53(3) of the EEA Agreement in the same way as arbitration tribunals in the Member States will have to apply Article 81(3) EC. At the same time, it is worth noting that arbitrators in the EFTA countries already act along the lines set out by the ECJ in Eco Swiss, meaning that they will apply EC competition rules if trade between contracting parties is affected. I would next like to discuss whether arbitration tribunals in the EFTA countries do have a right to make requests for preliminary rulings from the EFTA Court under the procedure established by Article 34 in the Agreement for the Establishment of a Surveillance Authority and Court of Justice (SCA). To date, 10

European Commission (1993): Notice on cooperation between national competition authorities and the Commission in handling cases falling within the scope of Articles 85 and 86 EC, OJ C39 of 13.2.1993, pp. 6–11.

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there is no EFTA Court case law on this issue. The preliminary reference procedure established by Article 34 SCA is modelled on the Article 234 EC procedure. The main differences between the two are, first, that no courts of the EFTA State countries are not obliged to request preliminary rulings from the EFTA Court, and secondly, that the EFTA Court’s rulings in response to such requests are not formally binding on the requesting courts. As long as homogeneity rules oblige the EFTA Court to follow ECJ case law, a question arises as to whether the Nordsee jurisprudence binds the EFTA Court in relation to the right of arbitration tribunals to summon it with requests for preliminary rulings. One could argue that homogeneity rules could not prevent the EFTA Court from granting more access to justice than is granted by the ECJ. Most commentators consider that the Nordsee judgment was motivated essentially by the fear of opening the floodgates to a deluge of cases being brought before the ECJ. The EFTA Court actually deals with more cases than the Tribunal for the Law of the Sea, but it is not really over-burdened. At the same time, it is clear that a request for a preliminary ruling from an arbitration tribunal could be accepted by the EFTA Court only within the limits of its jurisdiction. This means it could only be accepted if the agreement under dispute affects trade between the contracting parties. Returning to the situation in Switzerland, I will start with a couple of remarks about the Swiss courts. According to the jurisprudence of the Swiss Federal Supreme Court, Swiss courts called to rule upon the validity of a contract producing effects on the EC market are required to examine this issue against the background of Article 81 EC. (The same will apply with regard to Article 82 EC and Articles 53 and 54 EEA if the respective conditions for their application are fulfilled.) As far as Swiss arbitration tribunals are concerned, the Federal Supreme Court established in a landmark decision of 199211 that an arbitration tribunal based in Geneva was competent to examine whether a contract affecting the EC market violated Article 81 EC (then Article 85 EEC Treaty). This case involved two EC companies, one Belgian and the other Italian, that signed a ‘specialisation and participation contract’. The purpose of the contract was to ‘achieve mutual synergies’ by partitioning the geographical market and applying certain agreed prices. The contract was subject to Belgian law. When asked to express its views about the compatibility of the contract with Article 85 EEC, the arbitration tribunal rejected the request. The Swiss Federal Supreme Court ruled instead that the arbitration tribunal was competent to examine whether the contract infringed Article 85 EEC. Most commentators believe that this decision creates a legal obligation for Swiss arbitration tribunals to apply EC competition rules when asked by the parties to do so. Some even conclude that the decision establishes an obligation that arbitration tribunals apply EC competition rules ex officio. However, in a subsequent judgment of November 1998, the Swiss Federal Supreme Court rejected the contention that arbitration tribunals would have an obligation to 11

Judgment of 28 April 1992 (BGE 118 II 193).

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apply EC competition rules ex officio (although the same decision re-confirmed the obligation to apply these rules at the request of the parties).12 This second decision is somewhat disappointing. The Court’s reasoning was as follows. First, the Court stated that arbitrators couldn’t reasonably be expected to have a good knowledge of all the foreign competition rules that could be applicable. Secondly, the Court doubted that EC competition rules were part of the public policy in Switzerland. With regard to the second argument, perhaps the time has come to reconsider the dogma according to which EC competition rules are not part of the public policy in the way that other legal principles—such as pacta sunt servanda, the principle of good faith, or the prohibition of discrimination are. At the same time, one should note that in Eco Swiss the ECJ left unanswered the question of whether all types of breach of EC competition law should be considered in the same way, or whether the concept of public policy should be limited only to certain fundamental types of breach. Moreover, the Court did not determine whether arbitrators are under an obligation to apply EC competition law ex officio (as Mr Komninos pointed out in his beautiful article13). Interestingly, the 1998 decision of the Swiss Federal Supreme Court concerned a bid-rigging agreement, which is among the worst types of infringements of competition law in some European jurisdictions, and which almost amounts to criminal behaviour. It is also interesting to note that the Swiss Federal Supreme Court was criticised for this decision even by some arbitrators, who are of the opinion that EC competition rules should be applied ex officio by arbitration tribunals. Some sort of revolution would therefore appear to have occurred: irrespective of the lex contractus chosen by the parties, Swiss arbitration tribunals are now very likely to take Articles 81 and 82 EC into account when reviewing agreements. This also means that the choice of Swiss law as lex contractus would not shelter an agreement from the application of EC competition rules. Moreover, Swiss arbitrators will apply EC competition rules even when contractual disputes are to be decided on the basis of equity principles. Swiss arbitration tribunals have the right to suspend proceedings until the Commission reaches a decision about the application of EC competition rules to a case. In the landmark decision of 1992,14 the Swiss Federal Supreme Court annulled the award of an arbitration tribunal that had rejected a request to suspend proceedings until the adoption of a Commission decision based on EC competition rules. In that case, the arbitration tribunal had (wrongly) assumed that it was not competent to rule on the compatibility of the contract with EC law. Another issue to be considered is the cooperation between Swiss arbitration tribunals and the EC institutions. A Swiss arbitration tribunal cannot address the ECJ with requests for preliminary rulings under Article 234 EC. At the same 12 Judgment of 13 November 1998, ASA Bulletin 19999, 529, also reported in Yearbook of Commercial Arbitration, vol. XXV (2000), p. 511. 13 See supra note 6. 14 BGE 118 II 193.

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time, it remains uncertain whether the EFTA Court would accept such a request. Finally, as matters now stand, the Commission would probably not answer Swiss arbitrators’ requests for assistance. To conclude, I never shared the view that national judges are not able to apply Article 81(3) EC, and I am of the opinion that arbitrators are at least as well equipped as national judges to apply this provision. Arbitrators in non-EU countries are willing to make a contribution to the implementation of EC competition rules, and a new generation of arbitrators is even ready to apply EC competition rules ex officio. On a different note, I do not believe that the juge d’appui solution proposed by Professor Idot is a viable way to secure consistency and coherence in the application of EC competition rules by arbitration tribunals. I also doubt that the judicial control conducted by the national courts in the course of enforcement proceedings would be sufficient. In my view, the exclusion of arbitration tribunals from the preliminary reference procedure under Article 234 EC based on the Nordsee jurisprudence is no longer acceptable, particularly after the implementation of the reform. Of course, concerns about the heavy workload of the European courts are justified, and this is why I think that a solution should be found within the framework of the Treaty of Nice. To be more specific, Article 225(3) of the Treaty of Nice opens the possibility of transferring to the Court of First Instance the competence to hear references for preliminary rulings in specific areas laid down by the Statute of the Courts. Competition law could be one of these areas. The President of the German Federal Supreme Court, Professor G. Hirsch, supported this solution at a recent competition law conference in St. Gallen, Switzerland.15 If such a solution were to be adopted, then I think that the situation of arbitrators in non-EU countries should also be addressed. As I mentioned before, it remains unknown whether the EFTA Court would accept requests for preliminary rulings from arbitration tribunals. At any rate, I believe that arbitrators should be allowed to have recourse to at least the Commission. T D —With regard to the Nordsee judgment: it was said before that the main motivation behind the ECJ’s decision was to avoid opening access floodgates. However, if I remember correctly, the ECJ argued in its judgment that arbitrators could not have access to the preliminary reference procedure because they were not bound by the Court’s decisions under Article 5 EEC (now Article 10 EC). The case of the EFTA Court is different in this respect: it might be willing to accept an arbitrator’s request for a preliminary ruling because its opinions are not legally binding anyway.




15

G. Hirsch: ‘Die neue Justizarchitektur der Europäischen Union und ihre Auswirkungen auf das Wettbewerbsrecht’, paper presented at the St. Gallen International Competition Law Forum on 27 April 2001, thereafter published in C. Baudenbacher, ed. (2002): Neuerste Entwicklungen im europäischen und internationalen Kartellrecht, Helbing & Lichtenhahn, Basel, 2002.

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A very important question is whether arbitrators are, as a matter of EC law, obliged to apply EC competition rules ex officio. This question was not answered in the Eco Swiss judgment. It could be argued that arbitrators do not have such an obligation because this is a procedural obligation, which in the case of national courts derives directly from Article 5 EEC (now Article 10 EC). It is quite clear to me that Article 10 EC does not apply to private persons, such as arbitrators, and in particular arbitrators in non-EU countries. At any rate, however, as Mr Derains said before, arbitrators will in practice apply EC competition rules ex officio as a matter of meeting the legitimate expectations of the parties, and in order to guarantee the enforceability of their award. A K—I wanted to comment upon the absence of any reference to arbitration in the Commission’s modernisation initiatives, and try to find its causes in an historical analysis. For that purpose, I would refer to the Delimitis decision,16 and then to the Commission’s Notice of 1993 on cooperation with the national courts, which is at least in part an outcome of the Delimitis decision. The part of the September 2000 draft regulation dealing with cooperation between the Commission and the national courts echoes the 1993 Notice, so it is understandable that arbitration is totally ignored. This does not mean that the Commission would always reject arbitrators’ requests for assistance. I recall John Temple Lang reporting that the Commission has in fact supplied information to arbitrators in some cases in the past.17 Is there a need and justification for the Commission to issue a special Notice on arbitration? I think that the only advantage of such a Notice would be to raise the awareness of arbitrators with respect to EC competition law issues. I also believe that, in drafting such a Notice, the Commission should seek to ‘offer’ to, rather than ‘demand’ from, arbitrators. As to the 1998 decision of the Swiss Federal Supreme Court commented upon by Professor Baudenbacher:18 I do not think that this decision raises many problems, because the Court established only that the award does not violate ordre public as a matter of Swiss law if arbitrators do not apply EC competition rules ex officio. It must be said that Swiss law is very liberal in this respect. Yet the ECJ took exactly the opposite stand in so far as the enforcement of such an award in one of the EU Member States is concerned. Hence, arbitrators should know better and should try to guarantee the enforceability of their awards in the EU Member States. Finally, as there are so many legal practitioners around this table today, I would like to make a modest suggestion to be put to the Bar: in light of the


16

Case 234/89 Delimitis v. Henninger Bräu [1991] ECR I–935. J. Temple Lang (1995): ‘Panel Discussion: International Arbitration’, in Hawk B., ed.: International Antitrust Law and Policy 1994—Annual Proceedings of the Fordham Corporate Law Institute, New York/The Hague, p. 420. 18 See supra note 11. 17

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advantages of arbitration in comparison to the judicial system, competition law disputes should be more frequently submitted to arbitration. First, the parties can select their arbitrators. Secondly, the New York Convention is currently in force in more than 140 countries,19 which means that arbitration awards are legal instruments that are enforceable practically in all countries. Thirdly, arbitrators have wide discovery powers. My last comment relates to the Commission’s recent tendency to use arbitration as a sort of ‘procedural remedy’ in merger cases. I wonder if this use of arbitration as a decoy is going to be effective. Some commentators speak about arbitration clauses that are ‘pathological’, although, of course, companies will accept the insertion of an arbitration clause in their agreement rather than see their deal stalled by the Commission. K S —I would like to make a short comment about the arbitration of disputes involving EC competition law issues in Germany. Until the amendment of 1998, German competition law contained a provision aiming to dissuade the parties from bringing their disputes involving competition issues before arbitration tribunals. This provision established that the parties to an agreement containing an arbitration clause must also have the opportunity to bring their disputes before a court. If the agreement did not clearly guarantee this possibility of choosing between an arbitration tribunal and a court of law, the arbitration agreement was to be considered null and void. This legal requirement was considered to apply not only to agreements falling under the scope of German competition law, but also to those caught by EC competition rules. However, it is interesting to note that this peculiar legal requirement did not have significant practical effects. This was because the majority of the cases brought before arbitration tribunals concern contractual disputes, whereby issues of competition law used to arise only as preliminary questions or in such cases, where the strict legal requirement mentioned before did not apply. At any rate, the 1998 amendment of the German competition law eliminated this requirement. However, this does not imply that arbitration tribunals will be allowed to ignore EC competition rules when the latter are applicable to the case before them. German arbitration tribunals have the obligation to apply EC competition rules ex officio, as do the German courts. If an arbitration tribunal were to fail to do so, the German courts would set the award aside.





W  G—I have always been puzzled by the ECJ’s refusal to accept the requests for preliminary rulings that come from arbitration tribunals. This attitude is somewhat illogical: on the one hand, arbitration courts are requested to apply Articles 81 and 82 EC. On the other hand, they are denied the support of the ECJ in performing this task. At the same time, I do not think that this position is motivated by Article 10 EC. The floodgate argument— 19 The New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

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mentioned earlier by Professor Baudenbacher—is probably a more realistic explanation. However, since we all seem to agree that we need more private enforcement of EC competition rules, I support the idea of opening the possibility for arbitration tribunals to address the ECJ with requests for preliminary rulings under the procedure established by Article 234 EC. F J—I do not believe that the floodgate argument is particularly decisive in this area. It might be relevant for issues of locus standi for individuals before the European courts, but I do not think it is particularly important in this area of EC law. I do think that considerations related to the competence of the ECJ to interpret national provisions modelled on EC law should be taken seriously. As a matter of fact, I expressed my views on this issue some years ago in the Leur-Bloem20 and Giloy21 cases. My general opinion is that the ECJ should not give preliminary rulings in cases in which the national legislation borrows from EC law and transposes it to the domestic context. Nevertheless, I think that an exception should be made in the field of competition, because this is an area in which the links between national and Community law are very tight. Indeed, the borderline between the spheres of application of national and EC competition law is very thin, because it is determined in terms of the effects on trade between the Member States. This problem arose in Oscar Bronner,22 where the national court had (wrongly) taken the view that it was not competent to apply EC competition law, but only national competition law that was modelled on EC competition law. In this case, the ECJ rightly took the decision to issue a preliminary ruling.


J B—I would make a short comment on the res judicata effect of arbitration awards adopted in disregard of the fact that the disputed agreement is void under Article 81(1) EC (this issue was touched upon by Mr Komninos in his article23). Let us imagine a case brought before an arbitration tribunal whereby the latter does not apply Article 81 EC. Indeed, this situation is similar to cases in which the parties do not supply a court of law with the factual evidence necessary to decide on the applicability of Article 81(1) EC. In such cases, both the arbitration tribunal and the national court will probably hold the contract under dispute to be valid from the perspective of EC competition law. According to the draft regulation, in similar circumstances the Commission—if it comes to know about it—could take over a case from a national court and could prohibit the agreement. The same control mechanism


20

Case C–28/95 A. Leur-Bloem v. Inspecteur der Belastingdienst/Ondernemingen Amsterdam 2 [1997] ECR I–4161. 21 Case C–130/95 Bernd Giloy v. Haupftzollamt Frankfurt am Main-Ost [1997] ECR I–4291. 22 Case C–7/97 Oscar Bronner GmbH & Co. KG v. Mediaprint Zeitungs und Zeitschriften Verlag GmbH & Co. KG et al. [1998] ECR I–7791. 23 See supra note 12.

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should be applied with respect to arbitration proceedings. I do not think that the Commission should be prevented from prohibiting an illegal agreement because a national court or arbitration tribunal has arrived at a different conclusion.
J L—My first remark relates to the hypothetical case mentioned by Professor Baudenbacher, whereby an arbitration tribunal chooses to ignore the fact that the disputed agreement is in breach of Article 81(1) EC. I think that an arbitrator giving an award in such circumstances is himself liable for having infringed Article 81(1) EC. I derive some support for this statement from the treatment applied to the financial institutions that assisted the parties in the Aluminium Imports from Eastern Europe case.24 This should sound a warning note for all arbitrators faced with an obvious infringement of Article 81(1) EC, who may find themselves liable to pay a very substantial fine if they disregard EC competition rules in their analysis of that case. Second remark: the fact that arbitrators do not have the ability to address the ECJ directly with requests for preliminary rulings under Article 234 EC does not cause problems in the UK. This is because British courts exercise a supervisory role vis-à-vis arbitration in the course of judicial review or on appeal. Thus, if there is any lack of clarity as to the applicability of EC competition rules to the case that is the subject of the award, British courts will request a preliminary ruling from the ECJ at that stage. A last remark: very recently, a solicitor told me that he had negotiated a very substantial settlement in an antitrust case through alternative dispute resolution. The defendant wanted to avoid the publicity that would have become unavoidable if the case went to court. Damages were paid non-contractually, and the cost of the ADR operation was less than five per cent of the total amount recovered. I thought it would be interesting to mention that this course of action is also available.

S M L—I have a question for Professor Baudenbacher, related to the ‘classic scenario’ he invoked before. That is, the case of two EC companies that are parties to a restrictive agreement and that seek to avoid the application of EC competition law by choosing Swiss law as the lex contractus. Suppose these parties bring a contractual dispute before a Swiss arbitration tribunal, knowing that Swiss arbitrators will apply EC competition law only at the request of one of the parties. In such a case, can one of the parties invoke the nullity of the agreement under EC competition rules? I ask this because, according to the Spanish Civil Code, the party that provoked the nullity of a contractual clause cannot take advantage of the nullity in the course of court proceedings.




24

Commission Decision 85/206/EEC of 19 December 1984 Relating to a Proceeding under Article 85 of the EEC Treaty (Aluminium Imports from Eastern Europe), OJ L92/1 [1985].

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J B —First, I agree with Mr Derains that an international arbitration tribunal would apply EC competition law even if the parties had chosen the law of a non-EU country as lex contractus. This is because the connecting factors used in determining the applicability of Articles 81 and 82 EC are independent of the choice of the law applicable to the contract. At the same time, the fact that the parties have chosen the law of an EC Member State as lex contractus is not sufficient to make EC competition law applicable. For example, there may be cases in which the lex contractus is that of an EC Member State, but the restrictive effects of the agreement are felt in a non-EU country, so there is no ground for applying Articles 81 or 82 EC. Secondly, I also think that it is time to reconsider the Nordsee decision, and I agree very much with what Professors Baudenbacher and van Gerven have said in this respect. The current situation is paradoxical. Nordsee prevents arbitrators from addressing requests for preliminary rulings to the ECJ, and Eco Swiss transfers the task of addressing requests for preliminary rulings with respect to questions of EC competition law that arise in the course of arbitration proceedings to the courts of law that perform the judicial review of the arbitration awards. This course of action can render arbitration proceedings uneconomical and inefficient. In order to eliminate this negative effect, the ECJ should revise its position as expressed in Nordsee and make it possible for arbitrators to request preliminary rulings. There will be a further reason to do this if the draft regulation of September 2001 is adopted because encouraging private enforcement of EC competition law will become official Community policy. I do not find the floodgate argument relevant in this context, but there is indeed a need to establish some criteria for determining which arbitration tribunals are entitled to request preliminary rulings from the ECJ. As nationality is irrelevant in this context, another criterion could be based on the ordre public communautaire principle established in Eco Swiss. To be more specific, since arbitration tribunals whose awards would have to be enforced in one of the EC Member States must apply EC competition law as part of the ordre public communautaire, the same arbitration tribunals should also be allowed to make references for preliminary rulings to the ECJ. If, however, the arbitration award should be enforced outside the EC, and Articles 81 and 82 EC do not apply to the case, then the arbitration tribunal should not be allowed to make requests for preliminary rulings, even if it is composed of EC arbitrators.


H W— My comment takes us one step back from the discussion taking place here; it refers to the direct applicability of Article 81(3) EC. If this provision becomes directly applicable, then it would have to be applied not only by national courts and arbitration tribunals, but also by every national authority that comes across a breach of Article 81 EC. I would use an example from the area of public procurement: a national authority might be called to choose among different offers, and one of them could be the result of a restrictive agreement to which Article 81(3) EC is applicable. The discussion about the direct




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applicability of Article 81(3) EC has thus far concentrated on the ability of national judges and arbitrators to apply this provision, yet the situation of other national authorities confronted with the subject was not taken into consideration. M S —I have the same line of thought as Professor Basedow with respect to the issue of access of the arbitration tribunals to the preliminary ruling procedure. I would only add that, since arbitration awards can be reviewed by the courts of law from the perspective of their compatibility with rules of ordre public, the arbitrators are implicitly obliged to follow the preliminary rulings of the ECJ. If the arbitration tribunal were to ignore the answer received from the ECJ to their request for a preliminary ruling, then the award is not enforceable by the courts of the EC Member States.





M J H L—I would like to bring some nuance into this discussion: in practice there is an enormous difference between what courts of law and arbitration tribunals do. If a judge does not take up a point of EC competition law because the parties do not give him sufficient evidence to do so, he can at least make a statement about this in the decision, and this is at least a warning signal. An arbitrator does not have the same possibility at hand. This is because arbitration proceedings are usually ‘secret’, so to speak, in the sense that in many cases the parties do not even need to enforce the award. Indeed, most awards are complied with without the need to ask a court of law to enforce them. From this perspective, whether arbitrators do or do not take on board EC competition law issues is a different situation from that where the courts of law state publicly that they could not deal with the competition issues due to a lack of (or shortage of) evidence.
B H—With respect to the floodgates argument, I wonder how many references for preliminary rulings could practically be expected to arrive from arbitration tribunals. Let us take the example of a case arbitrated in New York: no matter what the lex contractus is, if the agreement under dispute produces restrictive effects on the EC market, the arbitrators will apply Article 81 and 82 EC at the request of the parties. I wonder how often a panel of arbitrators in New York would spend the time and money necessary to undertake a preliminary reference procedure before the ECJ in Luxembourg. The floodgate argument may be no more than a red herring issue. As to the direct application of Article 81(3) EC by arbitration tribunals: I remember an arbitration case in which I acted as counsel for one of the parties. In this case, once they realised they had to apply Article 81 EC, the arbitrators literally obliged the parties to agree that arguments related to the applicability of Article 81(3) EC will be heard. They simply did not want to decide on only half of the case. This might be a giant error in the application of the legal principles of litigation but, in any event, the case was eventually settled. I am curious as to whether this is current practice.

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C B —We will probably never know the principal motivation behind the Nordsee judgment. If I remember correctly, the AdvocateGeneral raised the floodgate argument in the opinion delivered in that case. At the same time, it is quite clear that arbitration tribunals clearly fall outside the scope of so-called ‘six-factor test’ developed by the ECJ in order to define what constitutes a court of law. The question is whether it makes sense to maintain this formalistic approach, or whether the time has arrived to develop a more functional approach. I am very pleased to see that the latter option has gained quite some support around this table. Arbitrators are now quite willing to apply Articles 81 and 82 EC. This is fine, but not enough: even if arbitrators act in good faith and are well qualified to apply EC competition rules, they might nevertheless make mistakes of interpretation. It would therefore be in the interest of ensuring coherence and consistency in the application of EC competition law to allow them to obtain support from the ECJ. The European Community would be shooting itself in the foot, to put it bluntly, by not giving them this opportunity. As far as the juge d’appui solution is concerned, I fully agree with Professor Basedow: this would only prolong the procedure, and it is against the very essence of arbitration. The question of whether a party to an illegal agreement may invoke the nullity of the agreement at a later stage is clearly to be answered in the affirmative. The very essence of Article 81 EC is to ensure that restrictive agreements are unenforceable.



W  G—If I may add something, this also depends on the exact responsibility of the party. For example, in the case of a party that is in a clearly weaker position (such as a distributor), the responsibility is not the same as that of the producer who imposed the restrictive agreement on him.

C B —Yes, but in this context we would have to distinguish between just invoking the nullity of an agreement (or part of it) and claiming damages as well.




Y D—One point to be taken into consideration is that, in many arbitration cases, the request for a preliminary reference from the ECJ would be just dilatory tactics, or a way for the parties to postpone the payment of penalties. If any of the parties to the dispute think that a request for a preliminary reference from the ECJ will give them the ability to postpone the award for at least six months (which is the minimum period of time necessary for obtaining a preliminary ruling), then they will use this option. Nevertheless, it would be good for arbitration tribunals to be allowed to request preliminary rulings in justified cases. I also believe that it is a bit dangerous to oblige arbitrators to apply EC competition rules ex officio. Our main purpose here is not to set aside each and every award in which the arbitrators did not raise the EC competition law issues ex




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officio. We instead want to sanction agreements that breach EC competition rules. As to Mr Martínez Lage’s question about whether a party to an agreement that breaches EC competition rules has the right to invoke the nullity of the agreement: I think that the reply is ‘yes’. There is a basic difference between a ‘void’ contract and a ‘voidable’ contract, or what in French would be the distinction between nullité absolue and nullité relative. A breach of EC competition law brings about a nullité absolue, which can be invoked by everybody. Whether the party to an agreement in breach of EC competition rules is entitled to claim damages is a different issue. One last comment: it is evident that the arbitrator will not apply EC competition rules if none of the parties involved in the dispute will provide the relevant evidence. This creates a serious risk because, contrary to other methods of solving contractual disputes (such as direct negotiation, alternative dispute resolution and so on), arbitration results in decisions (awards) whose legal effects are similar to those of decisions made by any court of law. L I —I observe that that the issue of the right of arbitration tribunals to make requests for preliminary rulings is very disputed. There are a lot of arguments in favour and against. I share the view of Barry Hawk: if we open the door for arbitration tribunals to make such requests, I am not sure that this will result in the ECJ being flooded with such requests. If the ECJ will eventually reverse the Nordsee jurisprudence, then it is clear to me that the criterion proposed by Professor Basedow for establishing the right of access to the preliminary ruling procedure is most appropriate. To conclude, I noticed that today there were many comments about the right of arbitrators to make requests for preliminary rulings, but not many about the right of arbitrators to ask questions to the Commission. The Commission’s future attitude with respect to arbitration remains an open question.





C-D E —It seems to me that, in the future, the Commission will have to take a more positive stand towards arbitration, as this is a pre-condition for the success of the modernisation exercise. Besides, as we heard before, there are already proposals to transfer the competence to deal with requests for preliminary rulings on EC competition law issues to the Court of First Instance, on the basis of Article 225(3) in the Nice Treaty. If this were to become reality, then a logical consequence would be to open up the possibility that arbitration tribunals could make such requests as well.

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I Laurence Idot* Arbitration and the Reform of Regulation 17/62

I. Introduction The Commission has always had a rather ambiguous attitude towards arbitration.1 For a long time the Commission has looked upon this way of resolving disputes with mistrust, if not hostility. Its fear has been that the parties concerned would turn to arbitration in order to avoid the application of competition law, and more particularly the sanctions to be incurred for breach of Articles 81 and 82 EC.2 If we refer to a recent Commission exemption decision3 and the provisions in some regulations on liner shipping companies,4 it is clear that such mistrust still exists. Nevertheless the Commission has recently started to encourage arbitration, most probably because of an overall favourable reaction towards ADR (alternative dispute resolution). However, it does not make any distinction between jurisdictional arbitration (arbitrage juridictionnel) and other means of resolving disputes, such as mediation or conciliation. Regulation 1475/95 on motor vehicle distribution is a typical example in this sense insofar as anti-competitive practices are concerned.5 Very recently and surprisingly, DG Competition’s Merger Task Force resorted to arbitration in a merger control matter. In this exceptional context, the ‘arbitrator’ had to make sure the parties met their ‘behavioural’ commitments.6 One thing is clear: the Commission puts all * Professor at the University Paris I — Panthéon Sorbonne. 1 There is an overabundant literature on the links between arbitration and Community law. Prior to 1992, see a bibliography in Jarrosson and Idot (1992). For more recent studies see ICC, Institute of International Business Law and Practice (1993); Idot (1996) 561; P. Slot (1996) 101; Cepani (1997); Abdelgawad W. (2001). 2 This explains in part the charges in some exemption decisions which force the parties to communicate the sentences to the Commission, or provisions in old exemption regulations on technology agreements. On this practice, see the studies mentioned underneath. 3 Dec. 2000/400/EC Eurovision OJ L 151/18 [2000]. 4 Regulation 823/2000 of 19 April 2000 on the Application of Article 81 (3) EC to Certain Categories of Agreements, Decisions and Concerted Practices between Liner Shipping Companies (Consortia), OJ L 100/24 [2000], Art. 9 (4); Regulation 2843/1998 of 22 December 1998 on the Form, Content and Other Details of Applications and Notifications (…) Applying the Rules on Competition to the Transport Sector, OJ L 354/22 [1998], Art. 5. 5 Regulation 1475/1995 of 28 June 1995, OJ L 145/25 [1995]; for a critical approach, see Idot (1996) n° 61. 6 On this practice, see for an analysis under arbitration law, Idot (2000); for an analysis under EC merger law, Idot, Momège (2001).

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possible means of settling disputes into one and the same category, without taking into account the fact that different legal regimes might apply. In between the past mistrust and the current favourable reaction there is a third possible attitude: indifference, or even ignorance. Ignorance seems to prevail in the relations between antitrust and arbitration strictly speaking, that is, jurisdictional arbitration. Jurisdictional arbitration underlies a certain number of very precise rules, be they international or national, state-derived or private.7 Without making an in-depth analysis of these rules, let us just recall the two-fold nature of arbitration: it is both conventional and jurisdictional. The arbitrator’s power is based on the arbitration agreement concluded between the parties to the dispute (also known as ‘arbitration clause’ or ‘agreement to arbitrate’). Accordingly, the arbitrator may be referred to as a private judge, who settles a dispute as does a national judge, and the parties have to obey his ruling. The award is considered res judicata and is executed like a judgment, as soon as it has received exequatur. When the ‘Notice on co-operation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty’8 was adopted back in 1993, arbitration already seemed to have been forgotten.9 Although such an oversight was justified from an institutional point of view—this notice being the logical extension of the Delimitis decision10 and Article 10 EC—it nevertheless revealed ignorance of an important reality in business disputes. However, the consequences are limited within the framework of the current system (while waiting for the reform that is underway). Extreme situations do not raise any particular difficulties. If the clause is obviously void, the arbitrator does not need the Commission’s assistance. If the agreement is covered by an exemption regulation, the arbitrator has to apply it like any other Community text with direct effect. In any intermediary situation in which an individual exemption might be considered, the arbitrator comes up against the Commission’s exclusive jurisdiction, as does the national judge. He may check whether the Commission has been notified of the agreement and, if this is the case, he may theoretically postpone his judgment until the Commission makes its decision, if any. There are no similar examples in arbitration practice. Generally speaking, it is the arbitrators who mistrust competition law and the parties who refer to it. Though the question may sometimes be revised, the arbitration tribunal usually concludes that clauses are valid under the provisions of Article 81(1) EC.11 In his capacity equivalent to that of a national judge, the arbitrator is concerned by the reform of the exemption system initiated with the White Paper just like any traditional judge. Unfortunately the arbitration issue was not 7

Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999). OJ C39 [1993]. 9 Europe, April 1993, comm. by L.Idot n° 173. 10 Case C–284/89 Stergios Delimitis v. Henninger Bräu AG [1991] ECR I–935. 11 See the analysis of awards in the aforementioned studies. 8

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raised in the White Paper, as was mentioned at last year’s edition of the Workshop.12 The proposal for a new regulation to replace Regulation 17/6213 does not lift the difficulty either. Even though it is understandable that, mainly for institutional reasons, this question may not be dealt with in the basic regulation, the difficulty will nevertheless have to be addressed, and if necessary in a Commission communication. Panel Three of our Workshop aims to evaluate the impact of the ongoing reform on arbitration, as well as the difficulties that the reform proposal will raise for arbitration tribunals. However, in order to reach this aim (Section III), we will first have to summarise the current situation (Section II).

2. The arbitrator and the application of Article 81 EC under the current system The current situation has to be analysed from both a practical and a legal point of view. In practical terms, we first need to identify those disputes with competition concerns that are submitted to arbitrators (1). In legal terms, the principles on which the application of Article 81 EC rests must be considered (2).

1. Disputes relating to Article 81 EC submitted to an arbitrator In order to answer this question, two criteria should be considered. The first focuses on the nature of the litigation, and distinguishes non-contractual disputes (litiges en matière délictuelle) from contractual ones. The second refers to the way in which competition law is invoked. The situation is different depending on the basis on which Article 81 EC is invoked, that is, as a main issue or collaterally. In practice, both criteria are involved. In non-contractual disputes, arbitration is secondary (1.1), whereas it is pre-eminent in contractual disputes (1.2).

1.1.1. Secondary role in non contractual disputes So far, the arbitrator has played a very limited part in non-contractual disputes. Non-contractual disputes deal mainly with actions for damages that arise from an anti-competitive agreement. Unlike actions for treble damages that are a basic element in US antitrust law, actions for damages have so far been very rare 12

Idot (2001) pp. 347–48. European Commission: Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, COM(2000) 582 of 27.09.2000. 13

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in the European context.14 Moreover, the rare actions that are brought usually result from abuse of dominant position rather than from anti-competitive agreements. This is not the case in actions for unfair competition—which are very frequent in Europe—in either Member States that have special legislation in this sense (such as Germany), or in Member States that refer to the general law of obligations (such as France).15 In actions for damages, the plaintiff invokes Article 81 EC as a basis for the claim. In the case of anti-competitive agreements, it is the defendant who will argue that the contract is illegal under the provisions of Article 81 EC. Accordingly, he denies any grounds for an action for unfair competition. The most frequent example is that of retailers selling out of the network and being sued for unfair competition. They will claim that the manufacturer’s distribution channel is contrary to Article 81 EC.16 In the above non-contractual actions, the arbitrator plays a very marginal role, for psychological reasons rather than legal ones. From a legal point of view, such disputes can be submitted to arbitration: an arbitrator may award damages for claims in tort without any problem.17 But the arbitrator’s intervention needs to be based on an arbitration agreement. By definition, there is no arbitration clause in tort matters. In such cases, a specific agreement to arbitrate is required. This leads to psychological obstacles. A claimant’s normal reaction would be to bring an action before the appropriate national judge. It is unlikely that one of the parties would suggest a submission agreement; it is even more unlikely that the other party would accept it. If the matter is not finally brought before the national judge, this means that the parties have reached a settlement in the meantime. This explains why there are few legal decisions awarding damages for breach of Articles 81 and 82 EC.18 The reform should not have any impact on this fact. However, the situation is completely different in contractual disputes, where arbitration plays a very important role.

1.2. Prominent role in contractual disputes Business contracts usually contain arbitration clauses. It is well known that arbitration is the main way of solving disputes concerning international contracts. At least in some countries (such as France), it is just as important at a national level. Many categories of business contracts contain arbitration clauses. This is commonly the case for distribution contracts, licence agreements (whatever the 14 15 16 17 18

See on this point the written contributions presented under Session I of this Workshop. Unfair competition actions are based in French Law on Article 1382 Civil Code. See Session II, French report. Reymond (1990) p. 97. See, Session II, French report.

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object of the licence) and cooperation agreements. All of these contracts have one thing in common. Unlike cartel agreements, they are not inherently contrary to Article 81(1) EC. However, they might contain one or several clauses that competition concerns. This is particularly the case for exclusivity or noncompetition clauses that are widely used in business. In such contracts, where the application of Article 81(1) and (3) EC is at stake, a possible dispute will more probably be taken to an arbitrator than to a national judge. Main actions for annulment of an agreement or of a disputed clause are indeed rare. However, it is very frequent that during a non-performance dispute, one of the parties may claim the nullity of the agreement and its non-performance clauses, or another might make such a claim because of an alleged breach of Article 81(1) EC. In the case of a counter-claim, competition law is used as a means of defence by a party that is sued for the breach of its contractual obligations. All the above suggests that the contractual disputes that are affected the most by the reform have as good a chance of being settled by an arbitrator as by a national judge. These contractual disputes concern contracts without block exemption regulations (BER), co-operation agreements that do not fall under BER, or distribution agreements with a producer market share of more than 30 per cent. Accordingly, what can the arbitrators do in such a situation?

2. The principles according to which the arbitrator implements Article 81 EC In order to be able to enforce Article 81 EC, the arbitrator has to be recognised as having jurisdiction (2.1), in which case his powers are similar, but not identical, to those of the national judge (2.2).

2.1. The arbitrator’s jurisdiction The arbitrator’s jurisdiction depends, first, on the existence of an arbitration agreement. Moreover, such an arbitration agreement must be valid, which means that the dispute must be considered to be subject to arbitration. There are seldom problems regarding the first requirement. Generally speaking, arbitration clauses are very broad and cover all possible disputes relating to the contract’s conclusion, execution and performance. However, some practical problems might arise in the case of parallel disputes. In such a situation it has to be decided whether the disputes can be separated or not. Such a difficulty is illustrated by the Mors/Labinal case in France.19 19 CA Paris, 19 May 1993, Journal de droit international, 1993.957, note by L. Idot; Revue de l’Arbitrage, 1993.645, note by Ch. Jarrosson.

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There has been a great evolution regarding the second point. For many years, the European states’ positions varied considerably as to whether or not a dispute under competition law was subject to arbitration. Under most laws (for instance, German or Swiss law), such disputes have always been subject to arbitration, because these legal systems use a criterion founded on the fact that the parties are free to dispose of their rights, or on the nature of the rights that involve property. However, the situation was more confused20 in other Member States (such as France or Belgium) that also apply the criterion of mandatory public public policy norms. An arbitrator did not generally have the right to sanction a breach of a ‘public policy’ rule. Accordingly, it was said that an arbitrator did not have the right to declare void a contract or a clause that was contrary to Article 81(1) EC. This situation has changed: at present such disputes can be taken to arbitration under French law. The Paris Court of Appeal clearly came down in favour of this in 199321 and 1994.22 The Cour de Cassation (Supreme Court) has implicitly confirmed the ruling.23 Belgian law also seems to have evolved in this direction.24 The acceptance of the arbitrator’s jurisdiction leads to fundamental consequences. Indeed, under the Member States’ arbitration laws, the national judge no longer has jurisdiction.25 This means that he may not examine any cases involving competition law; the arbitrator is the only one who can make a decision in competition matters. The only exception occurs when interim measures are requested. In such a situation there might be competition between the national judge and the arbitrator.26

2.2. The arbitrator’s powers As far as Article 81 EC is concerned, the arbitrator’s position initially seems comparable to that of the national judge. They have identical powers. Just like the national judge, the arbitrator will have to face the Commission’s exclusive 20

For a state of substantive law in Europe at the beginning of the 90s, ICC (1993). CA Paris, 19 May 1993, op. cit., note 18. 22 CA Paris, 14 October 1993, Revue de l’Arbitrage, 1994. 164, note by Ch. Jarrosson; Europe, April 1994, comm. by L. Idot n° 155. 23 See for example, C. Cass., 5 January 1999, Gallay, Europe, January 2000, comm. n° 29. 24 Hanotiau (1994) 879. 25 See e.g. under French Law, Art. 1466 NCPC. 26 Much case law is dealing with this very tricky question, outside the context of competition law. Most of the time litigation concerns settlement of a debt. In France, as well as in other countries, we have a particular type of summary proceeding, the référé provision. This proceeding allows the judge to settle the problem in a permanent way. The problem is still complicated because of the Brussels Convention. It has been settled in this context by the European Court of Justice in Van Uden (Case C–391/95 [1998] ECR I–7122, Europe, January 1999, comm. L. Idot, n° 42; Revue de l’Arbitrage 1999.143, note by H. Gaudemet-Tallon. 21

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jurisdiction as far as the enforcement of paragraph 3 is concerned. On the other hand, he may—just like the national judge—provide civil law remedies on the basis of Article 81(1) EC and declare a contract or clause void under the provisions of Article 81(2) EC. He may also apply BERs, because such texts have direct effect. The solutions are no longer disputed and tend to be increasingly enforced.27 That is where the comparison ends. Even though the applicable rules are the same, important differences appear later on. There are two kinds of differences: substantial ones and procedural ones. The first difference lies in the detailed rules for the application of Article 81 EC. Like the national judge, the arbitrator must of course meet the requirements of Community law, check whether the conditions for the application of Article 81 EC are satisfied and, more particularly, check whether the agreement or challenged clause affects business between Member States. However, it is more complicated than this. Article 81 EC has to be considered as applicable under the appropriate arbitration law. It is true that this question does not arise in national disputes. Just like the national judge, the arbitrator has to apply Article 81 EC as a rule of public order integrated in the Member States’ national legal order. If he fails to do so, and in case the award has to be judicially reviewed, the national judge will have to sanction such ignorance in the same way as in other cases where national rules of public order are being breached.28 Cases in which Article 81 EC applies frequently involve international contracts. These are consequently matters for international arbitration, as in the Eco Swiss case.29 In such cases, the national judge and the arbitrator are no longer in the same situation. For the national judge of a Member State, EC competition rules are, by nature, just like mandatory rules of lex fori, which have to be applied regardless of the law applicable to the contract. This principle is stated in Article 7.2 of the Rome Convention, among others.30 Unlike the national judge, the arbitrator has no lex fori. The basic international private law distinction between national mandatory rules and foreign mandatory rules is no longer relevant. If the law that is applicable to the contract is the law of an EC Member State, the arbitrator will apply Article 81 EC as lex contractus. However, if the applicable law is that of an outside/third state, the arbitrator does not have to apply Article 81 EC according to the principles of international private law and international arbitration law. Of course, he may apply Article 81 EC, but he does not have to do so.31 27

Idot (1996) n°17. Racine (1999). 29 Case C–126/97 [1999] ECR I–3055, Revue de l’Arbitrage 1999.631, note by L. Idot, Common Market Law Review, 459 [2000] note by A. Komninos. 30 On the application of this way of reasoning, see, Idot (1995) n° 33 et seq. For a general study of the application of mandatory rules by the arbitrators, see Seraglini (2001). 31 Idot (1995) n° 35. 28

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The presence of an amiable composition clause does not necessarily modify the solution. For instance, this is the case under French arbitration law, where the amiable compositeur arbitrator is only exempt from applying non-mandatory rules of law (règles de droit supplétives).32 The difficulty lies in the fact that not all EC Member States give identical powers to the arbitrators acting as amiables compositeurs. Under Swiss law, for instance, the exemption also concerns mandatory rules of law.33 The second difference lies in the detailed procedural rules for the application of Article 81 EC. Indeed, the rules on the burden of proof and the arbitrators’ means of investigation depend on the law applicable to the arbitration procedure.34 The rules that are characteristic of national arbitration laws are generally very similar to the rules applied by national judges.35 Only those questions that are discussed within the framework of the application of Article 81 EC are of interest to us. The first difference is well known. In the application of competition law, the arbitrator does not have the same means of legal assistance as the national judge. He decides alone. We know that he may not ask the European Court of Justice directly for a preliminary ruling. Since the Nordsee case,36 the national judge in charge of monitoring arbitration awards may refer to the Court, but this does not have any effect on the development of the way in which arbitrators apply EC law.37 It is only possible to send the case to the Court in this context once the decision has been handed down. On the basis of the 1993 Notice,38 the judge may not seek advice from the Commission either. The second difference is more subtle. It concerns the ex officio application of Article 81(1) EC. Following Van Schijndel,39 the national judge has to apply EC competition rules ex officio. This solution may be explained by the public policy nature of Articles 81 and 82 EC. This question was raised in the Eco Swiss case.40 However, the Court did not answer it directly. It merely stated that the national judge must annul an award that is contrary to Article 81 EC if the internal rules of procedure provide for the annulment of the award because of a breach of public order. In practice, this means that the arbitrator is ‘obliged’ to apply Community law, even ex officio, in cases in which the award may be executed on Community territory.41 Indeed, the arbitrator risks having his award nullified if he does not 32

Idot (1996) n° 28. See, P. Lalive in Competition and Arbitration Law (1993); also Fouchard, Gaillard, Goldman (1999) n° 1502. 34 Fouchard, Gaillard, Goldman (1999) n° 1171 et seq. 35 See, under French law of international arbitration, art. 1495 NCPC. 36 Case 102/81 Nordsee Deutsche Hochseefischerei Gmbh [1982] ECR.1095. 37 Case C–393/92 Gemeente Almelo et al. [1994] ECR I–1477. On the arbitration issue of this decision, see Revue de l’Arbitrage, 1995, 503, note by Ph. Fouchard. 38 Supra note 8. 39 Cases C–430/93 and C–431/93 [1995] ECR I–4705. 40 See supra note 28. 41 Idot (1996) n° 29 et seq. 33

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apply Community law. The award can be set aside in the country in which it has been handed down. Providing he belongs to one of the EC Member States, the national judge will regard the non-application of the EC Treaty—in line with the Eco Swiss case law—as a breach of a public policy rule. Moreover, if the losing party is the owner of goods in one of the EC Member States, the winning party may request exequatur of the award. This will lead to another review by one of the EC Member States’ national courts. However, this is not a legal obligation. The Court has sent a strong message, thus reaching in a way not dissimilar to that of arbitrators, as can be seen in Article 35 of the ICC Rules of Arbitration, where the situation is summarised as follows: ‘The Arbitral Tribunal shall make every effort to make sure that the award is enforceable at law’. In such a context, the new draft regulation raises difficulties that will be analysed below.

III. The impact of the reform on the application of Article 81 EC by the arbitrator The reform of Regulation 17/62 automatically leads to the question of what the arbitrator’s position under the new system will be. First, there is a matter of principle: can the arbitrator apply Article 81(3) EC in the same way as the national judge (1)? If we answer in the affirmative, it is necessary to analyse the corrective mechanisms to maintain consistency in the application of EC competition rules (2).

1. Can the arbitrator apply Article 81 (3) EC? There seems to be no need to question arbitrators’ intellectual abilities to apply Article 81(3) EC. If the national judge, who is a practitioner, is in a position to apply Article 81 EC in full, the same should apply to the arbitrator. Moreover, using arbitration has advantages, as one can choose an arbitrator but not a judge. The party that has seen the competition problem may take this into account when designating the arbitrator. The true problem lies elsewhere. The problem is more sociological (two different professional communities with little inter-exchange) and psychological (most of the arbitrators are hesitant about everything linked to public order42). Beyond such practical considerations, the question is mainly legal. The answer to the question seems positive, as far as the foundation of the arbitrators’ power (1.1) and the logic of the reform (1.2) are concerned. 42

Racine (1999).

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1.1. The foundation of the arbitrators’ power The arbitrator has a judicial mission. This means that he settles disputes by applying regulations. Within the framework of the arbitration agreement, the arbitrator has the same powers as the national judge43 and, as far as EC block exemption regulations are concerned, the arbitrator and the national judge are in the same position. The only thing to be taken into account is the regulation’s direct effect. It is because of this direct effect that Articles 81(1) and 82 EC are applied by the national judge as well as by the arbitrator, within the limits of their respective roles. One of the consequences of the reform is to give Article 81(3) EC44 direct effect. This is implicitly confirmed by Article 1 of the proposal. However, the national judge and the arbitrator are in competition when examining contractual disputes. If the parties decide to go to arbitration rather than to go before a national judge, the maintenance of the parties’ rights—which is at the basis of the recognition of the direct effect—requires that the arbitrator have the same powers as the national judge. To some extent, there has to be equal treatment. The arbitrator must also be able to reach a decision based on Article 81(3) EC as far as the legality of the contract is concerned. It has been stated that Article 6 of the draft regulation could challenge this conclusion.45 The text says: ‘ National courts before which the prohibition in Article 81 (1) of the Treaty is invoked shall also have jurisdiction to apply Article 81 (3)’. This is restrictive in many respects. It affects only national jurisdictions. Moreover, the wording ‘shall also’ seems to limit the reform’s benefits to the national authorities mentioned in Article 5 and, in addition, only to the national jurisdictions covered by Article 6. But we should not focus too much on the above Article 6. Articles 5 and 6 have to be put into context. The Commission draws its most important conclusions from the transition from the prior authorisation system to the legal exception system: the possibility that both the national authorities and the national courts have to apply Article 81(3) EC. The wording ‘shall also’ may be justified by the fact that a decentralised prior authorisation system could have been maintained, given that the national authorities have the right to deliver exemption decisions in line with the Commission. Moreover, the Commission only aims at the national jurisdictions because, within this framework regulation, it can only focus subsequently on the cooperation mechanisms with the national jurisdictions. Even though arbitration is not mentioned in this text, this has no effect. The Commission would have had to include an express provision46 if it intended to exclude the arbitrators from this reform. Moreover, the logic of the reform is also in favour of an affirmative answer.

43 44 45 46

Idot (1996) n° 19 et seq. Ehlermann (2000). Komninos (2001). Idem.

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1.2. The logic of the reform As already mentioned, the Commission aims to bring paragraph 3 into line with paragraph 1. In the future, the authorities will have to be able to apply the full text of Article 81 EC, whatever the authority in charge. This seems obvious, all the more because if the arbitrators are prevented from applying Article 81(3) EC, it would be difficult to find a substitution mechanism. It would not be possible to submit such cases to either the Commission or the national authorities. This means that the only solution would be to resort to a national court, and it would be very difficult to handle such a situation. For instance, in order to check whether the conditions of Article 81(3) EC are met, arbitrators would be forced to postpone their decisions and would have to refer to the national courts of the place of arbitration. Such a system would have no legitimacy because, unlike the specialised authority, the national court does not have more expertise in this matter than the arbitrator. It would delay arbitration and be counterproductive. Regarding such a risky situation, both the parties and the arbitrator would probably avoid invoking possible problems of competition. Accordingly, the arbitrator may—just like the judge—apply Article 81 EC in full, and all that remains is to look for mechanisms that might facilitate his task.

2. The necessity of mechanisms to maintain coherence There are no specific mechanisms, the only distinction being that between preventive mechanisms and corrective mechanisms. For national courts, preventive mechanisms seem to be more efficient, whereas it is the opposite in arbitration matters. Preventive mechanisms seem uncertain (2.1), whereas corrective mechanisms could well be efficient (2.2).

2.1. Preventive mechanisms Preventive mechanisms have mainly been analysed in the relations between national jurisdictions and EC institutions. However, although it is possible to consider relations between the national competition authorities and the national courts,47 transposing these mechanisms to arbitration seems difficult, mainly because of its international character. It is for this reason that the analysis will be limited to the relations with the Commission and the Court. As far as the relations with the Commission are concerned, one basic fact should be remembered. It is out of the question to consider a solution in which the Commission intervenes in the course of arbitration. Consequently, it is

47

See written contributions for Session II of this Workshop.

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impossible to apply the new mechanisms provided for the national courts in the draft regulation. In general terms, notifying the Commission of awards implementing Article 81 EC seems inconceivable. However, in particular circumstances in which the parties accept commitments,48 such notification is possible. Further, the Commission should not be allowed to intervene as amicus curiae before an arbitration tribunal. As far as arbitration is concerned, all mechanisms depend, first, on the will of the parties. Only the assistance of the Commission, at the request of the arbitration tribunal, seems likely. The legal foundation of such assistance initially seems uncertain. It has rightly been underlined that Article 10 EC was inapplicable in such an event.49 Even if the Commission does not have to help the arbitrators, it might very well publish a communication on its cooperation with the arbitrators, as has been suggested.50 The arbitrators’ power to implement Article 81 EC is sufficient to legitimate such a text that can in no way be binding. The form of such assistance must not differ fundamentally from what was mentioned in the 1993 Notice:51 factual information on the existence of parallel procedures, information on the state of applicable law. However, all of this is rather informal and the efficiency of such mechanisms could be questioned. The 1993 Notice has not been very successful.52 Why would it be different concerning relations with the arbitrators? Finally, one could well imagine that it is the impact of such announcement that will be the most important consequence. The relations with the European Court of Justice must be analysed in different terms. Giving up the Nordsee and Commune d’Almelo case law certainly seems out of the question, even if only for practical reasons, such as a great increase in the Court’s workload. This was again confirmed by the Court in its 1999 Eco Swiss decision.53 The preliminary ruling may only be requested by a national court, which means that it is in such a legal context that a solution may be found. Such a solution might be found in arbitration law. Henceforth, the arbitrator and the national judge should be complementary to each other. Next to his traditional task of monitoring awards, the national judge may intervene during the arbitration procedure as ‘supporting judge’ (juge d’appui). This is the case under French law, where the parties may address the national judge for any difficulties relating to the composition of the arbitration tribunal, the duration of its mission.54 Broadening the functions of the ‘supporting judge’ might be considered, although the precise terms would of course still have to be defined.

48 49 50 51 52 53 54

On this issue, see supra note 2. Komninos (2001). Idem. OJC 39 [1993], op.cit. See written contributions for Session II. Supra note 29. Art. 1493 NCPC.

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Whatever the situation, this should remain an exceptional solution. In conclusion, corrective mechanisms seem to be best adapted to arbitration matters.

2.2. Corrective mechanisms Of course, allowing the arbitrators to implement Article 81 EC in full increases risks of conflicting outcomes. The greater the number of decision-makers, the bigger the risk of contradictory decisions. This is inherent to such a system. As with the national judges, there are different types of conflicts. Generally speaking, the arbitration award may be contrary to the competition authorities’ policy and case law. The arbitrator might be too harsh and consider a clause to be contrary to Article 81(1) EC, whereas the competition authority, the Commission or the national authority considers this same clause to be covered by Article 81(3) EC. The contrary assumption seems more likely. That is, the arbitrator validates, under Article 81(3) EC, a clause that would be condemned by the competition authorities. The risks are even higher because of the prior market definition that is fundamental to the current approach of Article 81 EC. Beyond such general conflicts, there may be conflicts between decisions. Bringing a matter before a specialised authority—be it the Commission or a national authority—does not prevent the arbitrator from handing down a decision in the case that has been submitted to him.55 This means that different procedures may develop in parallel. Such is the case in present law, and the reform does not modify this situation at all. Accordingly, an arbitration award may be completely different from the decision taken by a specialised authority. The solutions regarding the relations with the national judge, as provided in the draft regulation, are limited. Article 16 only provides that the judge should avoid making a decision that is contrary to the Commission’s position. As has already been pointed out,56 Article 16 is the continuation in a given context of the general obligation provided for by Article 10 EC. Therefore, the arbitrators do not have to respect it, even though nothing prevents them from doing so. Other mechanisms must accordingly be sought, by analysing the possibilities offered by arbitration law on the one hand, and competition law on the other. The best solution results from the very mechanism of arbitration. If an arbitration award automatically benefits from res iudicata, enforced execution may only occur when exequatur has been granted. Similarly, the losing side may introduce an action to set aside the award (recours en annulation) in the country in which the decision was made. The national judge may then review the award. As far as review of the award is concerned, all arbitration laws recognise, more or less, the same grounds upon which to set aside awards. Among these is always the situation in which the recognition or enforcement of the award would be contrary to public policy. In accordance with the Eco Swiss case law,

55 56

Art. 9(3) of Regulation 17/62 does not apply to arbitrators. Komninos (2001).

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the ignorance of EC competition rules has to be sanctioned like any breach of public policy. Accordingly, setting aside the award, or declaring it unenforceable, for lack of exequatur, is undeniably a corrective means. Such corrective means may be relevant in the first kind of conflict, as well as in conflicts between decisions. The Eco Swiss case law has great merit, as well as limitations. The first limit is a general one and is inherent to arbitration; therefore, it cannot be changed. Since not all awards are submitted to the national judge, automatic enforcement should be the general rule. However, this phenomenon is limited because more and more arbitration awards are taken to court. From an arbitration perspective, one might deplore such a tendency; from the point of view of the aim pursued by the competition authorities, it might be positive. The other limits are inherent to the Court’s decision in itself. The solution is based on Article 10 EC, which means that it only applies to the judges of the Member States.57 Even though nothing prevents judges from third States from adopting a similar solution, they do not have to do so. Moreover, the Court only suggested the possibility of an award ‘that is manifestly contrary to Article 81 EC’. This wording leaves some room for manoeuvre to the national judge, who does not have to make a thorough review of the award. This considerably limits the review judge’s ability to ask for a preliminary ruling. In the second kind of conflict between decisions, the corrective mechanism may be reinforced. Indeed, if the Commission’s decision is made after the award, it will be necessary to avoid any contradictory solutions under Article 16 of the draft regulation. One might also consider referring to Article 15(2) of the draft regulation, under which the review judge is asked to inform the Commission of his decision. This could lead to adapting the second corrective mechanism that is inherent to competition law. Indeed, alongside court review of awards, there is another exceptional solution that may be found in competition law. Studies on the relationship between Community and national competition law always refer to the ‘old’ Preflex case.58 An award that validates an agreement in no way prevents the competition authority from subsequently taking a decision that wipes out the consequences of an award that was contrary to Article 81 EC. There are already solutions for both cases, and the reform does not modify them. However, they might be more widely used because of the arbitrator’s discretion to apply Article 81 EC in full.

57 58

See our obs., Revue de l’Arbitrage,1999, op. cit. Civ., Bruxelles, 15 October 1975, Journal des Tribunaux, 1976.493.

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IV. Conclusions The impact of the reform on the application of Article 81 EC by the arbitrator is obvious. In the future, the arbitrators should apply Article 81 EC in full, as does the national judge. As questions regarding the relations between arbitration and community law cannot be addressed within the regulative framework, a soft instrument (such as a Notice) would at least be of educational interest. The Commission could show its interest in arbitration by means of a notice, while reminding the arbitrators of their duties. Obviously, arbitration should not be a way of avoiding competition law. If the arbitrators ignore the impact of competition law on contracts, national courts might challenge the permissibility of such disputes going to arbitration. While we follow the Nordsee case law, an intermediary solution would be to enable the ‘supporting’ judge to bring the case before the European Court of Justice at the request of the arbitration tribunal. Such a mechanism would probably not have that much impact on the Court’s workload. Generally speaking, the operators and the arbitrators prefer flexible solutions, and such a procedure would certainly only be used in exceptional situations. The most important corrective mechanism is the national judge’s a posteriori control of the award. From this point of view, it would certainly be useful to think about the exact nature of an ‘award that is manifestly contrary to public policy rules’.

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II Yves Derains* Specific Issues arising in the Enforcement of EC Antitrust Rules By Arbitration Courts

I. Introduction The 1999 White Paper on Modernisation of the Rules Implementing Articles 81 and 82 of the EC Treaty1 ignores the international arbitration phenomenon. So does the Proposal for a Council Regulation adopted by the Commission on 27 September 2000 (hereafter ‘the draft regulation’).2 Under Article 6 of the draft regulation it is indicated that ‘[N]ational courts before which the prohibition in Article 81(1) of the Treaty is invoked shall also have jurisdiction to apply Article 81(3)’. The question whether arbitrators may have a similar jurisdiction is an immediate consequence of this innovation and an affirmative answer is inevitable. The arbitrability of EC antitrust law is no longer seriously challenged. Under the law of the majority of the EC Member States, which relates arbitrability to the free availability of rights or their patrimonial nature, the arbitrability of antitrust EC law was easily admitted.3 The problem was more difficult to solve in France and in Belgium, where matters of public policy (ordre public) were deemed to be non-arbitrable. However, these discussions are now moot,4 and it is currently admitted that EC antitrust law issues are arbitrable. In fact, arbitrators have been applying Articles 81 and 82 EC (previously 85 and 86 EEC) for years.5 * The author is a member of the Paris Bar and Former Secretary-General of the International Court of Arbitration, International Chamber of Commerce. 1 Commission White Paper of 28 April 1999 on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme n° 99/027, COM(1999) 101 final, OJ C132/1 [1999]. 2 Commission Proposal for a Council Regulation on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty and Amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 (‘Regulation Implementing Articles 81 and 82 of the Treaty’), COM(2000) 582 final, OJ [2000] C365E/284. 3 Competition and Arbitration Law, Institute of International Business Law and Practice, ICC Publication n° 480/3, 1993. 4 For France, see Paris, 19 May, 1993, Journal de Droit International 957, note by L. Idot; Revue de l’Arbitrage, 1993, 645, note by Ch. Jarrosson; Paris, 14 October, 1993, Revue de l’Arbitrage 164, note by Ch. Jarrosson. For Belgium, see B. Hanotiau (1994) : ‘L’arbitrabilité et la favor arbitrandum: un réexamen’, Journal de Droit International, p. 879. 5 Y. Derains (1982) : ‘Arbitrage et droit de la concurrence’, 14 Revue Suisse du Droit International de la Concurrence, pp. 39 ff.; ICC Publication n° 48013, 1993; the ICC International Court of Arbitration Bulletin Special European Supplement, November 1994.

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Obviously, as national judges, they have not had jurisdiction to apply Article 81(3) EC in view of the Commission’s exclusive jurisdiction. If such exclusivity disappears, arbitrators will have the same jurisdiction as national judges in this respect. The fact that their intervention is not taken into account by the Commission is as irrelevant as it was concerning the application of Article 81 (1 and 2) and Article 82 EC by arbitrators. Irrespective of the silence of EC antitrust law, national courts have upheld the arbitrability of these issues. At least implicitly, the European Court of Justice has done so too.6 This may be seen as a paradox. But from a practical point of view, arbitrators are often in a better position than national judges to apply EC antitrust law. If wisely selected, arbitrators are likely to have technical and economic skills that national judges generally lack. They also have more time to devote to a single case than have many national judges. More significantly, arbitrators do not feel the limitation imposed by national rules of procedure on judges as far as the gathering of evidence is concerned.7 Most national arbitration laws give arbitrators the largest freedom in this field, provided that they act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.8 The ICC Rules of Arbitration provide a good example of such freedom. Article 15 of the ICC Rules of Arbitration reads as follows: ‘1. The proceedings before the Arbitral Tribunal shall be governed by these Rules, and, where these Rules are silent, by any rules which the parties, or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration. 2. In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case’.

Article 20(1) indicates: ‘The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts of the case by all appropriate means’.

Among such appropriate means, according to Article 20 (3, 4, 5, 7), are: • ‘The Arbitral tribunal may decide to hear witnesses, experts appointed by the parties or any other person, in the presence of the parties, or in their absence provided they have been duly summoned ’. • ‘The Arbitral tribunal, after having consulted the parties, may appoint one or more experts, define their terms of reference and receive their reports . . .’

6

Case C–126/97 Eco Swiss China Time v. Benetton International NV [1999] ECR I–3055; Revue de l’ Arbitrage 1999, 631, note by L. Idot; Common Market Law Review, 459 [2000] note by A. Komninos. 7 See G. Canivet (2001): ‘Examen de la proposition de règlement du Conseil relatif à la mise en oeuvre des règles de la concurrence prévues aux articles 81 et 82 du Traité: vers l’application de l’article 81(3) CE par les juridictions nationales’, 2001 ERA-Forum I, at p. 8. 8 P. Mayer (1995): ‘Le pouvoir des arbitres de régler la procédure. Une analyse comparée des systèmes de civil law et de common law’, Revue de l’ Arbitrage, 163.

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• ‘At any time during the proceedings, the Arbitral Tribunal may summon any party to provide additional evidence’. • ‘The Arbitral Tribunal may take measures for protecting trade secrets and confidential information’.

With these means at their disposal, arbitrators may adapt the procedural framework to the characteristics of the dispute in each case. This flexibility applies to antitrust issues as well as to any other. In particular, the power to order the disclosure of documents plays a significant role in this field. On the other hand, it is true that arbitrators do not have the same legal assistance from the EC authorities as national judges. They can neither submit a prejudicial question to the European Court of Justice,9 nor can they obtain advice from the Commission.10 As Article 15(2) of the Proposal for a Regulation11 refers expressly to ‘Courts of the Member States’, it hardly seems conceivable that the Commission or the National Competition Authorities would intervene as amicus curiae in an arbitral procedure. An Arbitral Tribunal may not be assimilated to a ‘Court of a Member State’, and this puts the application of EC antitrust law by arbitrators under a very specific light (II). In fact, many Arbitral Tribunals applying EC antitrust law do not have their seat in one of the EC Member States. This is one, inter alia, of the problems of controlling the application of EC antitrust laws by arbitrators (III). This discussion is limited to international arbitration as the role of domestic arbitration is necessarily marginal in this field.

II. The application of EC antitrust law by international arbitrators It has been suggested that, as an implicit result of the Eco Swiss judgment,12 arbitrators are under an obligation to apply EC antitrust law, even ex officio, every time their award is to be enforced in the territory of an EC Member State.13 Although this proposition is globally acceptable, it must be elaborated with respect to the conditions under which international arbitrators apply EC antitrust law. In order to assess the existence and scope of the duty of international arbitrators to apply EC antitrust law, it is necessary to take into account the specificity of the international arbitrator’s position with respect to the determination of the 9

Case C–393/92 Gemeente Almelo et al. [1994] ECR I–1477; Revue de l’Arbitrage, 1995, 503, note by Ph. Fouchard. 10 This is implicit in the Commission’s ‘Notice on Cooperation between national courts and the Commission in applying Article 85 and 86 of the EEC Treaty’, OJ C 39 [1993]. 11 See supra note 2. 12 See supra note 6. 13 See L. Idot, note in Revue de l’Arbitrage 1999, p. 648.

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law applicable to the merits of the dispute (1). In this context, the characterisation of EC antitrust law as mandatory rules must also be explored (2).

1. The international arbitrator’s position with respect to the determination of the law applicable to the merits of the dispute An international arbitrator or arbitral tribunal cannot be incorporated into a court of a Member State, according to the EC authorities. In reality, it cannot be incorporated into a national court at all, particularly when the problem of determining the applicable law is at stake. The main characteristic of the position of the international arbitrator called upon to decide on the rule of laws applicable to the merits of the case is his or her freedom (1.1). In using that freedom, the arbitrator seeks to find an answer to the legitimate expectations of the parties (1.2).

1.1. The arbitrator’s freedom The arbitrator’s freedom in determining the law applicable to the merits of the case is usually implied. This results from the fact that, when enforcement proceedings are required to make an arbitral award effective, judicial review does not generally relate to the application of one law rather than another to the merits of the case. This is taught by comparative law.14 If the content of the law that is actually applied breaches the international public policy of a country where enforcement of the award is sought, such breach may be ground for refusing enforcement. However, in this case, it is not the choice of law that is in question, but the solution on the merits. For example, an award ordering a party to pay interest may not be enforceable in Saudi Arabia. But it is irrelevant whether it is dependent on German, English, French or any other law. The cause of the refusal to enforce the award is the fact that it provides a solution contrary to the notion of public policy as defined by the Islamic Shari’a vis-à-vis the choice of one law rather than another. This has a bearing on the problem of the control of the application of EC antitrust law by international arbitrators by the courts of Member States. The New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards was ratified by about 140 countries and implicitly confirms the arbitrator’s freedom in this field. In its list of grounds for refusal to enforce awards, Article V of the Convention does not refer to the question of the law applicable to the merits of the case. 14 Cf. Ph. Fouchard (1965): L’arbitrage commercial international, Paris, 562. The application of a law that is improper under the conflict rules of the judge ruling on the enforcement is analysed as an error of law that could only be rectified by a review of the merits of the case, which is now forbidden everywhere.

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Some more recent texts expressly recognise the arbitrator’s freedom. First, Article VII(1) of the Geneva Convention of 21 April 1961 on International Commercial Arbitration states: ‘The parties shall be free to determine, by agreement, the law to be applied by the arbitrators to the substance of the dispute. Failing any indication by the parties as to the applicable law, the arbitrators shall apply the proper law under the rule of conflict that the arbitrators deem applicable. In both cases, the arbitrators shall take account of the terms of the contract and trade usages’.

Since 1981, Article 1496 of the French New Code of Civil Procedure has provided: ‘The arbitrator shall decide the dispute according to the rules of law chosen by the parties, in the absence of such a choice he shall decide according to the rules which he deems appropriate. In all cases, he shall take into account trade usages’.

Section 46 of the 1996 English Arbitration Acts reads: ‘(1). The Arbitral Tribunal shall decide the dispute (a) in accordance with the law chosen by the parties as applicable to the substance of the dispute, or, (b) if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal. (2) For this purpose, the choice of the law of a country shall be understood to refer to the substantive laws of that country and not its conflict of law rules. (3) If or to the extent that there is no such choice or agreement, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable’.

Article 28 of the Model Law adopted on 21 June 1985 of the United Nations Commission on International Trade Law (UNCITRAL), which is the basis of many national laws, provides: ‘(1) The arbitral Tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given state shall be construed, unless otherwise expressed, as directly referring to the substantive law of that state and not to its conflict of laws rules. (2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.

The extent of the arbitrator’s freedom is obviously limited by the parties and by the law from which he derives his powers lex arbitri. When the parties have agreed on the lex contractus, the arbitrator must apply this law. It may be a national law or it may be transnational rules, described as ‘rules of law’ in national or international legislation referring to them. When the parties have not agreed upon the lex contractus, the extent of the arbitrator’s freedom depends on the lex arbitri that authorises him to apply rules of law (for example, French law) and not just a national law (for example, English law). However, the parties’ choice of arbitration rules also plays a significant role, as illustrated by

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a comparison between the ICC Arbitration Rules and the UNCITRAL Arbitration Rules. Article 17 of the 1998 ICC Rules reads: ‘(1) The parties shall be free to agree upon the rules of law to be applied by the arbitral tribunal to the merits of the dispute. In the absence of any such agreement, the arbitral tribunal shall apply the rules of law which it determines to be appropriate’.

Article 33(1) of the UNCITRAL Arbitration Rules reads: ‘The arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable’.

As a result, an ICC arbitrator sitting in London is free to apply the ‘rules of law which it determines to be appropriate’, and not only ‘a law’, while an arbitrator under the UNCITRAL Rules seating in Paris must apply a ‘law’ and not ‘rules of law’. Whatever the circumstances, the consequence of the arbitrator’s freedom to determine the law applicable to the merits of the case is that he or she has no lex fori in the private international law meaning of the term. Consequently, the arbitrator’s position is fundamentally different from that of a national judge faced with a conflict of laws problem. The judge rules on behalf of the State. The State imposes on judges two types of procedure for regulating international relations: — rules of conflict which define the boundaries between the legislative jurisdictions of the various states; and — substantive rules peculiar to international relations. The judge must also apply mandatory rules or laws of immediate application; what characterises them is that they apply regardless of whether a given relationship is or is not international. Thus, as far as a judge is concerned, there is always a law that must be applied, either directly or through the system of conflict of laws of the lex fori. The arbitrator does not rule on behalf of the State when he or she carries out the mission requested by the parties. He or she is not bound to abide by any given rule of conflict, nor are there material or substantive rules requiring compulsory application; such opposition is conceivable only within a broader system of the regulation of international private legal relations, which is precisely what is lacking in the case of international arbitration. As early as in 1957, Henri Batiffol noted that the international arbitrator ‘is not bound to apply the rules of conflict of one country than the rules of another’.15 ICC arbitrators had no doubt explicitly laid down the principle of their freedom in this respect long before the ICC Rules on Arbitration formalised this tenet. 15

H. Batiffol (1957): ‘L’arbitrage et les conflits de lois’, Revue de l’Arbitrage, p. 11.

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In ICC case n° 1512,16 the sole arbitrator, Pierre Lalive, declared in an award issued in 1971: ‘The international arbitrator has no lex fori from which he can borrow rules of conflict of laws’.

An important consequence of the absence of lex fori for the international arbitrator is that there is no foreign law in international arbitration, in the sense of a rule that is not part of the legal system of the authority responsible for resolving the dispute.17 All national laws of the world have the same value and none has a privileged status. The same applies to international conventions. This has important implications at the level of the proof of the contents of the applicable law, and also with regard to the initiation of the ‘overriding public policy’. The international arbitrator does not have to ensure respect for concepts that are purely national or common only to a group of countries. Thus, unless one accepts that EC antitrust law is part of transnational public policy—which would be abusive—an international arbitration tribunal is not a natural guardian of these rules. To make sure that they are enforced, this latter standpoint must be accepted. Without a lex fori—and thus lacking the concepts of a law that has to be applied and of foreign law—the international arbitrator cannot deal with the problem determining the law applicable to the merits of the dispute, as a judge would do. As a result of their freedom, international arbitrators must support their decisions with regard to the determination of a law or rule of law that they apply differently. They must thus endeavour to convince the parties that such law or rule of law meets the parties’ legitimate expectations.18

1.2. The legitimate expectations of the parties It has been noted19 that, with the exception of certain cases where they decided to place themselves within the framework of a national conflict of laws system, arbitrators usually look for the law applicable to the merits of the case on the basis of one of the following three methods: — cumulative application of conflict of laws systems concerned with the dispute; — recourse to general principles of private international law; or — ‘voie directe’. 16

ICC Award n° 1512, Yearbook Commercial Arbitration, 1976, p.128. See in particular B. Goldman (1964) : ‘Les conflits de lois deans l’arbitrage international de droit privé’, in Recueil des Cours 1963 II, Académie de Droit International, Leiden, vol. 109, pp. 347 ff., in particular, p. 443. 18 See Y. Derains (1985): ‘Attente Légitime des parties et droit applicable au fond en matière d’arbitrage commercial international’, in Travaux du Comité Français de Droit International Privé, 1984–1985, at p. 81. 19 P. Lalive (1976): ‘Les Règles de conflit de lois appliquées au fond du litige par l’arbitre international siégeant en Suisse’, Revue de l’Arbitrage, 155. 17

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Under the first of these methods, the arbitrator considers the conflict of laws rules of the various national legal systems connected to the disputes submitted to him one by one. If these rules, whose contents are almost always different, converge towards one single domestic law, the arbitrator declares that this is the applicable law.20 Under the second method, the arbitrator refers to a conflict of laws rule that is widely accepted internationally. And under the third system—the ‘direct method’—the arbitrator decides that the contract must be subject to the law of a certain country in view of its nature and characteristics, without concerning himself about making reference to one particular conflict of laws system. Despite their differences in form, the common denominator of these three methods is the fact that they result in the selection of the law whose application best corresponds to the parties’ legitimate expectations. This is clearly the case with the cumulative application of the conflict of laws systems connected with the case, and recourse to general principles of private international law. Both methods select a law that a community to which the parties belong agrees to recognise as applicable (regardless of whether this is a limited community as in the first case, or the international community as in the second). The concern to respond to the parties’ legitimate expectations is also present when arbitrators have recourse of the ‘voie directe’. The outcome of their analysis of the contract demonstrates to the parties that they could not legitimately expect the arbitrators to apply any law other than the one finally chosen. This has been very well described by Arthur Von Mehren in the following terms: ‘Their approach [the arbitrators] can and should be more in terms of what the parties’ expectations or understanding were or would have been, had they addressed the issue’.21 Thus, the concern to apply the law that best responds to the parties’ legitimate expectations seems to be the central pivot around which the international arbitrator’s actions revolve when he or she has to determine which legal rules to apply to resolve a dispute. These lengthy explanations were necessary to understand that international arbitrators will enforce EC antitrust law only if such enforcement is within the legitimate expectations of the parties. But what is understood by the expression ‘the legitimate expectations of the parties’? Negatively, one might say that ‘the legitimate expectations of the parties’ are not to be confused with ‘the will of the parties’. This is so, first, because the problems of determining the law applicable to the merits of the case arise mainly in cases where the will of the parties had not been expressed. Secondly, the expres20

For more details, see Y. Derains (1972): ‘L’application cumulative par l’arbitre des systèmes de conflit de lois intéressés au litige’, Revue de l’Arbitrage, p. 93. 21 A. Von Mehren (1987): ‘To what extent is international arbitration autonomous’, in Le droit des relations économiques internationales. Etudes Offertes à B. Goldman, Litec, Paris, p. 227.

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sion of the will of the parties does not necessarily cover all their legitimate expectations. The express or implied choice by the parties of the law applicable to the merits of the case does not preclude the possibility in some cases that it is legitimate to expect that the arbitrator will take into account the operation of a rule that the parties had not specified as applying to the contract, or indeed, had deliberately excluded from it. It is in this specific context that the application of the EC antitrust law by international—mandatory—rules must be considered.

2. The application of the EC antitrust law by international arbitrators as mandatory rules In the Eco Swiss judgment,22 the European Court of Justice stressed that the prohibition resulting from Article 81(1) EC is a rule of public policy and part of the legal order of each Member State. This is certainly true but, when dealing with the problem of the application of EC antitrust law by international arbitrators, it is preferable to give these rules their exact characterisation as mandatory rules whose ‘field of application is . . . determined basically with regard to their objective’.23 This precision is important both conceptually and in a practical sense because an international arbitrator, failing a lex fori, will deal with mere rules of public policy and mandatory rules differently. Also, in this respect, the international arbitrator’s position is not that of a national court. As there is no national law that must be a priori applied (with the exception of the law agreed upon by the parties), the international arbitrator will be concerned only with the rules of public policy that belong to the lex contractus; this is with the qualification that, when they contradict the contractual provisions, he or she may legitimately hesitate to apply them. The parties could have freely selected another law or, failing such a selection, the arbitrator could have determined to apply another law. In such a case, the contractual provisions would have been perfectly valid. Thus, is it legitimate to enforce mere rules of public policy that are incompatible with the parties’ transaction? There is no straightforward answer to that question and it has not to be dealt with here because EC antitrust law imposes mandatory rules which are intended to be respected whatever the lex contractus. The problems of the applicability of mandatory rules (such as the EC antitrust law) are of a different nature. The very aim of mandatory rules is to stop parties from excluding them by making their contract subject to a law foreign to the legal system from which they stem, and to stop a judge or 22

See note 6. Ph. Francescakis, ‘Conflits de lois, principes généraux’, Répertoire Dalloz de Droit International V, no. 124 and no. 137. 23

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arbitrator preventing them from coming into effect by deciding to apply a foreign law to the contract. The national judge has to distinguish between mandatory rules ‘of the forum’ and foreign mandatory rules. The mandatory rules of the forum have a natural priority and the judge has to apply them, whatever the proper law of the contract. Therefore, a court of a Member State must give effect to EC antitrust law, irrespective of the lex contractus. The very existence of the mandatory rules of the forum preclude the operation of the law applicable by virtue of the conflict of laws rule of the lex fori. The question of foreign mandatory rules is more complicated. Subject to the intervention of overriding international public policy, should the judge apply them only when they fall within the legal system that the conflict of law rules of the lex fori designates as being jurisdiction? Does the judge, on the contrary, have to require foreign mandatory rules to be observed in all cases in which he or she considers this necessary if they are to achieve their objective? These questions have not yet been answered definitively, although the Rome Convention of 19 June 1980 provides useful guidance. In the absence of a lex fori and the accompanying distinction between the respective national and foreign laws, the international arbitrator does not approach the question of the application of mandatory rules in the same way as a judge. He or she takes no account of the distinction between mandatory rules of the forum and foreign mandatory rules. Only the distinction between mandatory rules of the lex contractus (2.1) and mandatory rules of another legal system (2.2) has a role to play.

2.1. Mandatory rules of the lex contractus Arbitrators seem to approach the problem of the intervention of mandatory rules of the lex contractus differently according to whether the parties have chosen this law (a), or whether it is left to the arbitrator to determine it (b). a. The lex contractus has been chosen by the parties The international arbitrator is bound to apply the law specified by the parties. If the parties have chosen a law to apply to their contract, it will be concluded from the outset that the arbitrator has to apply the mandatory rules of that law. Naturally, one may envisage an arbitrator refusing to give effect to a mandatory rule forming part of the law selected by the parties in the name of ‘transnational public policy’, but the decision would then depend on the content of that law rather than on its nature. And, in any case, EC antitrust law does not raise this type of problem. Unlike mere public policy rules, the fact that mandatory rules are incompatible with the contractual provisions, or more generally with the parties’ transaction, is not in itself relevant. Possible conflicts between the contractual provisions and the mere public policy of the law chosen by the parties ought to be resolved by discovering what effect the parties intended their stipulated

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choice of law to have. This is explained by the power that parties have to select the law most appropriate to their needs, to exclude the application of any national law, and so on. There is therefore nothing unusual in the parties deciding to restrict the field of application of the chosen law by excluding some of the clauses in their contract from its effect, as these would otherwise be void. The parties might instead have chosen another law that did not nullify them. On the contrary, the claim that mandatory rules affect a contractual operation is not dependent on the choice of the lex contractus. EC antitrust law is intended to be applied to a contract whether the lex contractus chosen by the parties is a law of a Member State or, for instance, Swiss law. The consideration that the parties might have selected Swiss law instead of the law of a Member State is of no interest because, if they had done so, the international arbitrator would also have had to decide on the application of EC antitrust rules. But the fact that the parties have chosen the law of a Member State taints any attempt of the parties (or one of them), to assert that they wanted to remove their transaction from the scope of EC antitrust law. Such a claim would sound fraudulent. In fact, international arbitration case law shows that when the law of a Member State has been chosen by the parties as lex contractus, arbitrator do not hesitate to enforce EC antitrust rules24 now that the problem of the arbitrability of these issues is moot. It is probably more significant that International Arbitrators do not hesitate to check, ex officio, whether an agreement governed by a law of a Member State is compatible with EC antitrust law. The ICC award rendered in 1995 in the Case No.753925 could not be clearer : ‘Il incombe en effet aux arbitres de soulever même d’office, mais avec toute la prudence requise, l’incompatibilité d’un accord qui leur est soumis (ou de certaines de ses clauses) avec l’article 85 du Traité de Rome’. In this case, between a French and a Greek company, and with French law being applicable, the Arbitral Tribunal decided that a patent licence clause prohibiting passive sales in the markets of the licensees in Member States was null and void. b. The lex contractus is determined by the arbitrator Unlike the national judge, the arbitrator is not affected by the concept of a particular law that must apply to a contract. Consequently, unless the parties have chosen the lex contractus, all laws that claim to affect the contract have a priori equal right to be applied. It is therefore not surprising to find that arbitrators directly decide on the applicability of mandatory rules without asking whether they belong to the lex contractus. An award rendered in ICC Case No.4132 in 1983 illustrates this type of process.26 The arbitral tribunal was dealing with a dispute concerning a contract 24 See, inter alia, the ICC International Court of Arbitration Bulletin, op. cit., supra note 5. 25 Journal de Droit International, 1996, 1030, note by Y. Derains. 26 Yearbook Commercial Arbitration, vol. X (1995), p.49.

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that had to be performed by one party in Korea and another party in the EC. Before determining the lex contractus, it considered the question of the application Korean mandatory rules and EC competition law to the contract. The Tribunal distinguishes between the (private) law governing the Agreement on the one hand, and other rules of (public) law that may be applicable to the Agreement on the other: ‘The parties agree that the Agreement is for an important part to be performed within the territory of the Republic of Korea. Therefore, whatever national private law may govern the Agreement, the latter is likely to affect the domain of Korean (public) law, so that this Tribunal must determine whether Korean law as invoked by the defendant is applicable to the Agreement, even if it does not govern it. However, the national public law as invoked by the defendant in this case (antitrust law, price law, fair trade law) is by nature of public order . . . The Tribunal is empowered to apply national public law insofar as the tribunal is satisfied that in the circumstances of the case pursuant to published jurisprudence of the competent national courts and/or the published and stated policy of the competent national authorities the acts under consideration of the Arbitral Tribunal are deemed null and void and unenforceable as prohibited by any relevant national law. As a consequence of this, the party which in arbitral proceedings appeals to any national public law must prove that this law, indeed, is applicable in the case and to what extent. ... Since the defendant did not provide sufficient evidence as to the structure of the relevant market and the position of the claimant thereupon, the Tribunal is not satisfied that at the time the claimant was in a dominant position and able to abuse his market power, nor can it see that the technical know-how relating to the manufacture of (the product) on the one side and the supply of the latter raw material on the other side are two independent items causing a tie-in in the sense of Art. 4 of the above Notification (cf. preamble and Clause 1 of the Agreement). Therefore the tribunal is of the opinion that the defendant did not sufficiently prove his case that Clause 1 and Clause 2 of the Agreement contain tie-in provisions prohibited by Korean public law. ... As set out hereabove . . . with respect to national public laws also the rules on competition (Art. 85 et seq.) of the Treaty are of public order and part of the public policy of the Community. As far as the possible application of those rules on competition of the Treaty in this arbitral case is concerned, the tribunal refers, mutatis mutandis, to its considerations hereabove . . . Pursuant to Art. 85, para.2, of the Treaty — which provision is according to the relevant jurisprudence of the competent Court of Justice of the European Communities (CJEC) directly applicable in that any party is entitled to request a national court to ensure the protection of its rights arising out of this Treaty provision — all agreements between undertakings, decisions by associations of undertakings and concerted practices in violation of Art. 85 of the Treaty are prohibited and shall be automatically void. If this tribunal finds that the agreement in whole or in part contravenes Art. 85 of the Treaty, the consequence thereof is likely to be that the relevant clauses, if not the Agreement in toto are deemed void and unenforceable.

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With reference to its considerations hereabove, the Tribunal must, therefore, on its own initiative, investigate whether the Agreement comes under the prohibition of Art. 85, para.1 of the Treaty’.

It was only after indicating that it would ex officio enforce EC antitrust law in any case, that the arbitral tribunal determined the lex contractus and decided that it was Korean law. The process followed in this award consisted of placing the antitrust rules of the lex contractus on the same level as all the antitrust rules liable to claim to be applied to the parties’ agreement. The fact that Korean antitrust rules belong to the lex contractus did not apparently confer on them any special grounds for being exclusively applied. It is worth adding that the claim of a mandatory rule to apply to a transaction might convince an arbitrator that the law of the State from which such mandatory rule originates is the lex contractus. The ICC award rendered in 1982 in the case No. 293027 is a good example, although it does not involve EC antitrust law. In that case, the arbitrators preferred to chose Yugoslav law as the lex contractus and not another law, stressing that the mandatory provisions of Yugoslav law on import and expert control would be applicable in any event, and that it was preferable that ‘one single law should be applicable to the entirety of the contractual obligations of the parties’. Mutatis mutandis, one may conclude that international arbitrators will be inclined to submit a contract entered within the realm of EC antitrust law to the law of a Member State.

2.2. Mandatory rules foreign to the lex contractus This is obviously the more interesting situation. Should arbitrators apply mandatory rules originating from a legal system different from that of the lex contractus, or more specifically, should they enforce EC antitrust law when the lex contractus is not the law of a Member State? The question is not too difficult when the parties have not chosen the lex contractus. In that case, there is no reason why the arbitrators should disregard EC antitrust law if it has legitimate titles to be applied. Indeed, in the absence of a direct legal statement that the international arbitrators must apply, all national laws and transnational rules of law have the same weight unless the arbitrators have not decided that one or more of them are to be applied. There is thus nothing to prevent the application of a mandatory law that is foreign to the law designated by the arbitrator as the lex contractus. In fact, in such a case the arbitrator will decide to restrict the field of application of the lex contractus by excluding those questions that he or she considers should be subject to one or other mandatory law which has a serious right to be applied. This refers mostly to the mandatory laws of the state where the contract is performed. The 1983 ICC award in Case No. 413228 is a good example of this

27 28

Yearbook Commercial Arbitration, vol. IX (1984), p. 105. See supra note 26.

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since it applied not only Korean competition law rules—the law contractus determined by the arbitrator—but also the provisions of the Treaty of Rome because the contract was performed in Italy. The arbitrator even took the view that he had to apply these mandatory rules ex officio. More serious is the question whether international arbitrators should enforce EC antitrust law when the parties have chosen as lex contractus a law that is not a law of a Member State. For instance, parties of two Member States have chosen Swiss law as the lex contractus. There has been some hesitation in this respect, as illustrated by an ICC award rendered in case No. 6503 in 1990.29 As the contract was governed by Swiss law, the Arbitral Tribunal refused to apply EC antitrust law; its rationale was that they were ‘amiable compositeur’ and that EC law was not part of transnational public policy. Fortunately, the situation was clarified by the ICC Award issued in 1996 in case No. 862630 where the arbitral tribunal, sitting in Geneva, decided to apply Article 85 EC to a licence agreement executed between a US licensor and a German licensee, although the contract was governed by New York law. The arbitral tribunal declared a noncompetition clause in the contract to be illegal. This solution seems to represent the position of the majority of international arbitrators. An arbitrator analysing the parties’ intentions may not assume that, when choosing the lex contractus, these wished to exclude the application of mandatory rules with a prima faciae relevance to the case, and in particular the mandatory rules of the place(s) of performance of the contract. In general, when the parties decide that a law will govern their contract, it is because it is a neutral law or the law of the party with more bargaining power, and not because they want to avoid mandatory rules of another law. Obviously, one cannot completely disregard the possibility that parties of two Member States might provide that a contract contrary to EEC antitrust rules would be subject to the law of a non-Member State country and that disputes would be settled by arbitration, for instance in Switzerland, with the sole intention of avoiding being penalised for infringing EC antitrust law. However, arbitrators should not accept to be an accomplice to a deliberate fraud of mandatory rules such as EC antitrust rules that indisputably apply. Arbitrators have to respect the legitimate expectations of the parties, not the illegitimate ones. Moreover, as stressed in Article 35 of the ICC Rules, an Arbitrator must ‘make every effort to make sure that the Award is enforceable at law’. Similar provisions are found in other arbitration rules. As a result, there is a basic contradiction between having recourse to arbitration and inducing the arbitrators to make awards that will not be enforceable in the countries most connected to the case. Thus, international arbitrators should never assume that the parties entered into such a contradiction; and, if it were unfortunately to be proven that this had occurred, International Arbitrators must refuse to play the parties’ game. 29 30

Journal de Droit International 1995, p. 1022, note by Y. Derains. Journal de Droit International 1999, p. 1073, note by J.J. Arnaldez.

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In conclusion, due to their great freedom in deciding which law or rules of law they will apply, international arbitrators have no general obligation per se to enforce EC antitrust law. However, most do not hesitate to do so, even when the parties have chosen a law to govern their contract that does not belong to a Member State or when the arbitrators determined that such a law is the lex contractus. As indicated above, they even do it ex officio. It has been suggested that they would not have the power to do so because such a case would be decided ‘ultra petita’. This is the result of confusion between ‘issues in dispute’ and ‘claims’ to be decided. There is no doubt that an arbitral tribunal would decide ultra petita if it were to rule on a claim that was not submitted by one of the parties. However, when an arbitrator raises an EC antitrust issue ex officio, it is in order to rule on an existing claim. For instance, if one of the parties requests the arbitrators to decide that royalties are not due under a licence agreement because the contract never came into force, the claim is the lack of obligation to pay the royalties, and the way in which the contract entered into force is an issue to be solved in order to decide that claim. The arbitrator may freely raise a new issue of law—the validity of the agreement with regard to EC antitrust law—provided the parties are invited to express their views. If the arbitrator is convinced the license agreement is contrary to Article 81 EC, and thus illegal, he or she will say so and will dismiss the claim. The decision will not be ultra petita. On the contrary, if the claim was just to fix the amount of a royalty that both parties believe to be due in principle, the Arbitrator could not dismiss the claim on the grounds that the contract is illegal; in that case, the decision would be ultra petita, as no party asked the arbitrator to declare that the royalty was not due. In that case, only an order by a court may guarantee the enforcement of EC antitrust law.

III. Inspection of the application of EC antitrust law by the arbitrators In the Eco Swiss judgment,31 the European Court of Justice directed the courts of Member States to set aside arbitral awards that breach Article 81 EC when an award that violates rules of public policy may be set aside under their national arbitration laws. One can infer that the courts of Member States have the same duty when an award made in a non-Member State State country is against public policy. The difference is that, in such a case, the court may not set aside the award but may only refuse to order its enforcement. Indeed, under all national arbitration laws, a court has no jurisdiction to set aside an award made in a foreign country, regardless of whether that country is a Member State. This is a problem only if the parties have fixed the place of arbitration outside the 31

See supra note 6.

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European Union. A party will always be able to request the setting aside of an award by the courts of a Member State in which the arbitration took place, with the result that the award in a successful action will cease to be enforceable in all the countries that ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards (with the exception of Algeria, Belgium, France, the Netherlands and the USA, the few countries which may agree, to a certain extent, to enforce an award that has been set aside in the country where it was made).32 This indicates that there is a risk that, when the place of arbitration is outside the European Union and the award is not set aside for breach of the EC antitrust law, a party may intend to obtain its enforcement in many different countries, and might have a chance of success, particularly if the lex contractus was not the law of a Member State. Fortunately, Switzerland—the non-Member State country where the majority of arbitrations concerning parties of Member States take place—has given a commendable example of judicial cooperation. In a decision on 28 April 1992, the Swiss Federal Tribunal set aside an award made in Geneva in a dispute between a Belgium and a Spanish company for not having assessed the validity under EC antitrust law of a contract governed by Belgian law.33 The circumstances of the case raised specific problems of Swiss law on international arbitration, but it is nevertheless a very encouraging example. Although it is not sure that it will always be followed—particularly when the lex contractus is not a law of a Member State—it is a good start. However, the precedent of the Court of Justice in the Eco Swiss case guarantees that no award that upholds a transaction contrary to EC antitrust law should be enforced in the Member States. It does not follow that awards that incorrectly apply EC antitrust law would have the same fate. By its reference to situations where the national arbitration laws require that the award be set aside for breach of public policy, the European Court of Justice ignores cases where a contract valid under EC antitrust law is declared illegal by the Arbitrators pursuant to an incorrect interpretation of EC antitrust law. Indeed, this is not a breach of public policy and, failing such a breach, no national arbitration law of any Member State entitles a Court to set aside an award that incorrectly applies the law.

IV. Conclusion It has been seen that, although the position with respect to the determination of the applicable law is very specific, international arbitrators do not hesitate to enforce EC antitrust law even ex officio. If the Commission’s exclusivity dis32

See Fouchard, Gaillard, Goldman on International Commercial Arbitration, n° 1595, p. 913. 33 Swiss Trib. Fed., 28 April, 1992, Revue de l’Arbitrage 1993 p. 124, note by L. Idot.

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appears, they will continue to do so with regard to Article 81(3) EC as well. Reference to the courts of Member States is not a full guarantee that EC antitrust law will always be correctly applied by international arbitrators, but it seems to be a sufficient one. It prohibits the recognition, in the Member States, of awards enforcing transactions made in breach of EC antitrust law. That is the main objective of any restraint. Improving the quality of the award dealing with these issues will not be achieved by controlling them, but by spreading knowledge of EC antitrust law. There is no reason to believe that international arbitrators are generally less knowledgeable about the subject than many national judges. But they have means by which to investigate the cases that judges rarely enjoy. The fact that most international contracts contain an arbitration clause should therefore not be seen as a danger for the application of EC antitrust law.

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III Carl Baudenbacher* Enforcement of EC and EEA Competition Rules By Arbitration Tribunals Inside and Outside the EU

I. Introduction There appears to be a widespread view that the application of EC competition rules, and in particular of Articles 81 and 82 EC, may be circumvented if the parties to a contract agree on the application of the law of a non-EC country and on arbitration in a non-EC forum. In this context, Switzerland has long been suspected of hosting arbitration tribunals that disregard EC competition law. The former Vice-Chairman of the ICC Commission on the Law and Practices Relating to Competition1 describes a classic scenario whereby two EC companies enter a market-sharing agreement infringing Article 81 EC subject to Swiss law, and arbitration takes place in Switzerland. Only one copy of the written agreement exists, and it is hidden in a Swiss bank. The arbitrators are asked to examine the agreement, but not to make mention of it in their decision. It seems that until the late 1980s many Swiss arbitration tribunals were willing to reward such expectations, even if one of the parties raised an EC competition law issue. The Swiss arbitrators tended to see themselves as the helpers of the parties, and acting according to their will. The governing principle was the autonomy of the parties in deciding on the substantive rules to be applied to their case and in choosing their arbitrators. Accordingly, many arbitrators were reluctant or even refused to apply EC competition law (and for that matter, any other foreign public law). This kind of attitude was part of a more general trend manifest in Switzerland to resist the influence of EC competition law. Switzerland has a long record of not accepting EC competition rules, of rebelling against them, and of being recalcitrant. Moreover, Switzerland also has a tradition of hosting cartels operating on the EC market.2 It is not just a coincidence that this country

* Judge of the EFTA Court, Director of the European Law Institute at the University of St. Gallen, Switzerland and Visiting Professor at the University of Texas School of Law. 1 Jacques Werner (1995): ‘Application of Competition Laws by Arbitrators. The Step Too Far’, 12 Journal of International Arbitration 23, p. 21. 2 See Case 52/69 Geigy v. Commission [1972] ECR 787; Case C–277/87 (Summary publication) Sandoz v. Commission [1990] ECR I–45; Joined Cases C–89/85, C–104/85, C–114/85, C–116/85, C–117/85 and C–125/85 to C–129/85 Ahlström Osakeyhtiö v. Commission [1993] ECR I–1307, ‘Woodpulp’; Commission OJ 1999 L 24/1 Heating Pipes; furthermore, see US v. Watchmakers of Switzerland Info. Center, Inc., 1963 Trade Cases (CCH) § 70,600 (S.D.N.Y. 1962) (price cartel affecting the US market). Concerning abuse of a dominant position, see Case 85/76 Hoffmann-La-Roche [1979] ECR–461.

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has tried in the past by all means to avoid the extraterritorial application of EC competition law, as well as that of US antitrust law.3 In 1974 the Swiss Federal Supreme Court ruled that the competition provisions contained in the bilateral Free Trade Agreement between the EC and Switzerland were not directly applicable.4 The reason for this refractory attitude was, obviously, that Switzerland was a cartels country, whose Cartel Act aimed not at protecting competition, but rather at protecting its restriction. The Swiss were corporatist and true believers in the benefits of cartels. Of course, this is not to say that arbitration tribunals in some of the EC Member States, such as France and Belgium, have not generated similar concerns.5 By the same token, Sweden— which is one of the three European countries mostly used as arbitration venues —also had in the past a reputation of being a safe haven for arbitrators who disregarded EC competition law, inter alia in cases involving transactions with the former Soviet Union. At present all the European countries that are important arbitration forums are also either Members of the European Union or of the European Economic Area—which in practice is the same with respect to the scope of application of EC competition law. Switzerland remains the only ‘outsider’, and the question is, therefore, whether this position is still used in order to host arbitration tribunals willing to lend a hand to undermine EC competition policy. This article will first address briefly the role of national courts inside and outside the EU in the application of EC/EEA competition rules. It will then turn to the question of whether arbitration tribunals are obliged to apply, and do in fact apply, EC/EEA competition rules. This part will deal with arbitration tribunals in countries inside and outside the EU and EEA. In view of its importance as an arbitration forum, the considerations concerning third countries will concentrate on Switzerland. Obviously, the question of whether arbitration tribunals should, like national courts, have a right to refer requests for preliminary rulings to the ECJ under the Article 234 EC procedure and/or to the EFTA Court under the Article 34 CSA procedure is of particular interest. The same holds true of the question as to whether arbitrators should be able to ask the Commission and/or the EFTA Surveillance Authority for assistance when dealing with competition law matters. The article will conclude with some policy considerations. Obviously, throughout the article we take into account 3

See Geigy and Sandoz, supra note 2. BGE 104 II 175 Adams. For the sake of order, it may be mentioned that the Commission too was of the view that the provision in question lacks direct effect. But unlike the Community, Switzerland did not have at all an effective competition law regime at the time. See Carl Baudenbacher (2001): ‘Kartellrechtsreform 2001—Nach dem Aufstieg in die Oberste Liga 1995 nun die Qualifikation für die Championsleague?’, in Jürg Furrer and Bruno Gehrig, eds.: Aspekte der schweizerischen Wirtschaftspolitik. Festschrift für Franz Jaeger, Rüegger Verlag, Chur / Zürich. 5 See Laurence Idot, Arbitration and the Reform of Regulation 17/62, paper prepared for the Sixth EU Competition Law and Policy Workshop held at the EUI, Florence on 2–3 June 2001. 4

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not only the current enforcement system, but also the situation following the reform and modernisation of EC antitrust enforcement.

II. Application of Articles 81/82 EC and 53/54 EEA by national courts 1. Courts in EC Member States Under the current system of EC competition law enforcement, only Articles 81(1) and (2) and 82 EC, and not Article 81(3) EC as well, are directly applicable. National courts in EC Member States are therefore obliged to apply Articles 81(1) and (2) as well as Article 82 EC. They are, however, prevented from applying Article 81(3) EC. They nevertheless have the right to decide whether an agreement is covered by a group exemption regulation and the right of ‘negative forecasting’—the latter meaning that the national courts ‘can decide whether there is a realistic chance to get an individual exemption from the Commission provided that a notification has taken place.’6 Following modernisation, national courts will have to apply Article 81 EC in its entirety, i.e., including paragraph 3 of this provision.7

2. Courts in EEA/EFTA States Articles 81 and 82 EC were transposed into the EFTA pillar of the EEA as Articles 53 and 54 EEA. Whether EEA provisions are able to produce direct effect in the same way as provisions of Community law is a question that has not yet been addressed by the EFTA Court.8 While Liechtenstein is a monistic

6

Helmuth Schröter, in Carl Baudenbacher, ed. (2000): Neueste Entwicklungen im Europäischen und internationalen Kartellrecht, Siebentes St. Galler Internationales Kartellrechtsforum, Basel/Genf/München. 7 See Claus-Dieter Ehlermann and Isabela Atanasiu, eds. (2001): European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, Hart Publishing, Oxford and Portland, Oregon. 8 See Sven Norberg and Mads Magnusson (2001): ‘The EFTA Court,’ in Plender, ed., European Courts Procedure, London, 3001 ff., 3017. The Court of First Instance of the European Communities held in its Opel Austria judgment that a provision of the EEA Main Agreement, namely Article 10, which corresponds to Article 25 (ex Article 12) EC is able to produce direct effect in the Community; 1997, II–39. With regard to possible repercussions of that ruling on the legal situation in the EFTA pillar of the EEA see Carl Baudenbacher (2000): ‘The Legal Nature of EEA Law in the Course of Time—A Drama in Six Acts, and More May Follow’, in Afmaelisrit for EFTA Chief Justice Thor Vilhjalmsson, Reykjavik, 53 ff., 62 ff.

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country, Norway and Iceland adhere (like all other Nordic countries) to the dualistic approach in international law. In competition law enforcement this approach has not posed any practical problems, since the EEA Main Agreement, and thus its Articles 53 and 54, have been incorporated into the national legal orders of those countries. National courts in the EEA/EFTA States do in fact apply Articles 53(1) and 54 EEA.9 According to the comments of the EEA/EFTA States on the Commission’s Modernisation White Paper, there seem to have been substantially more nullity actions than third party actions pursuant to Articles 53 and 54 EEA so far.10 The EFTA side has made it clear that it wishes modernisation to be extended to the EFTA pillar of the European Economic Area. Moreover, the EEA/EFTA countries and the EFTA Surveillance Authority (ESA) have participated actively in the preparatory work of the reform. Following an extension of the reform to the EEA/EFTA States, their national courts will have to apply Article 53(3) EEA.11

3. Courts in countries outside EC/EEA Switzerland is a founding Member State of EFTA, but following a negative referendum, it did not join in the EEA Agreement. However, according to the case law of the Swiss Federal Tribunal, Swiss courts called upon to rule on the validity of an agreement that has effects on the EC market are required to examine that question against the background of Article 81 EC, irrespective of the fact that the parties made the agreement subject to Swiss law.12 The same will apply with regard to Articles 82 EC and 53/54 EEA, if the respective conditions for their application are fulfilled. One will have to assume that, following modernisation, Swiss courts will also have to apply Article 81(3) EC and eventually Article 53(3) EEA.

9 See also, in this respect, the EFTA Court’s judgment in Opel Norge, 1998 Rep. EFTA Court, 4 ff., 36 Common Market Law Review 1, 1999, 147 ff. 10 EEA/EFTA States’ comments on the Commission’s White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty of 30 September 1999, para. 33. 11 See Carl Baudenbacher (2001): ‘The European Commission’s Reform Proposal Seen from the Point of View of the EEA/EFTA Countries, the EFTA Surveillance Authority and the EFTA Court,’ in Claus-Dieter Ehlermann and Isabela Atanasiu, eds., European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy, Oxford and Portland, Oregon, 521 ff. 12 See the judgments of 28 April 1992 (BGE 118 II 193) and 13 November 1993 (ASA Bulletin 1999, 529 et seq.).

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III. Application of Articles 81/82 EC and 53/54 EEA by arbitration tribunals 1. Arbitration tribunals sitting in EC Member States It is well established by now that disputes involving EC competition law issues are arbitrable. One will also have to assume that arbitration tribunals sitting in EC Member States are obliged to apply Articles 81(1) and (2) as well as Article 82 EC basically in the same way as the national courts of the Member States, irrespective of whether they reach their decision in accordance with the law or based on equity considerations. The ECJ held in Nordsee that ‘Community law must be observed in its entirety throughout all the territory of all the Member States; parties to a contract are not, therefore, free to create exceptions to it.’13 This statement was re-confirmed in Eco Swiss.14 Furthermore, arbitrators have to consider whether an alleged infringement falls within the scope of a block exemption regulation or if it may obtain negative clearance, and must also express a view on the likelihood of an individual exemption being granted if a request for such an exemption has been lodged to the Commission.15 After modernisation, arbitrators will also have to apply Article 81(3) EC. In practice, arbitration tribunals sitting in EC Member States do apply Articles 81(1) and (2) and 82 EC. As early as 1983, a sole arbitrator sitting in the Netherlands had to rule on a supply and purchase agreement concluded between an Italian supplier and a South Korean buyer.16 The arbitrator applied Korean and EC competition law provisions. With regard to the latter, the arbitrator found that since Article 85(2) EEC (now Article 81(2) EC) had, according to the case law of the ECJ, direct effect, the arbitration tribunal must ‘on its own initiative investigate whether the agreement falls under the scope of the Treaty.’ (In this particular case the arbitrator was not convinced that the agreement affected trade between Member States to an appreciable extent.) An even further reaching example is provided by ICC case 7181 (1992). A Paris-based arbitration tribunal was confronted with the question of whether it should apply Articles 85(1) and 86 EEC (now Articles 81(1) and 86 EC) to a joint venture agreement for the development, marketing, and support of software packages. The arbitration clause provided for the application of Belgian law.

13

Case 102/81 Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG [1982] ECR 1095, para. 14; see also Broekmeulen v. Huisarts Registratie Commissie [1981] ECR 2311, para. 16. 14 Case C–126/97 Eco Swiss China Time Ltd. v. Benetton International NV [1999] ECR I–3055, para. 34. 15 Hamid G. Gharavi (1997): ‘EC Competition Law and the Proper Scope of Arbitation’, 63 Arbitration, pp. 59–66; J. H. Dalhuisen (1995): ‘The Arbitrability of Competition Issues’, 11 Arbitration International, pp. 151, 163. 16 ICC 4132 [1983], Yearbook of Commercial Arbitration XX (1995), 49.

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The tribunal held that ‘(I)n view of the public policy character of Article 85, (the arbitration tribunal) does have to examine ex officio whether Article (...) of the agreement is not caught by the prohibition of restrictive agreements.’17 Although the draft regulation advanced in September 2000 by the Commission does not contain any mention of arbitration, one is bound to conclude that, following modernisation, arbitrators will be set on an equal footing with the national courts when it comes to applying Articles 81 and 82 EC, meaning that they will also have to apply Article 81(3) EC. The same will hold true with regard to Article 53(3) EEA once modernisation has been extended to the EEA/EFTA States.

2. Arbitration tribunals sitting in EEA/EFTA States What has been said with regard to arbitration tribunals in EC Member States must also apply to such institutions sitting in the EEA/EFTA States. They are under an obligation to apply Articles 53(1) and (2) and 54 EEA. According to information received from practitioners, Norwegian arbitrators will apply these provisions in line with what the ECJ established in Nordsee and Eco Swiss. If the parties do not raise the competition issue themselves, the arbitrators will most probably bring it to their attention and will take a decision accordingly.18 Whether arbitration tribunals in EEA/EFTA States are also obliged to apply Articles 81(1) and (2) and 82 EC if trade between EC Member States is affected will depend on the national law of the country concerned. Practitioners indicate that Norwegian arbitrators will proceed in the same way as they do with regard to Articles 53(1) and (2) and 54 EEA. They will apply the EC competition rules if trade between EC Member States is affected.19 Following modernisation, this will include Article 81(3) EC. When modernisation is extended to the EFTA pillar of the EEA, arbitration tribunals in EEA/EFTA States will also have to apply Article 53(3) EEA, the provision corresponding to Article 81(3) EC.

III. Arbitration tribunals sitting in countries outside of EC/EEA: The case of Switzerland 1. Case law concerning arbitration It has already been mentioned that, for a long time, Swiss arbitration tribunals had a tendency to disregard EC competition rules. Swiss courts appeared to 17 18 19

Published in Yearbook of Commercial Arbtitration XXI (1996), 99 ff. Interview with Supreme Court Advocate Jonas Myhre, Oslo. Interview with Supreme Court Advocate Jonas Myhre, Oslo.

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agree with this practice. As late as 1990, an ICC three-member arbitration panel sitting in Geneva had to decide on a case involving two parties from EC Member States that concluded an agreement on the distribution of certain goods in Spain. The parties subjected the contract to Swiss law and agreed on Geneva as place of arbitration. In a partial award, the arbitration tribunal left open the question of whether Community competition law was applicable to the contract, arguing that the parties had chosen Swiss law to govern their contract. The tribunal held that: ‘En effet la clause arbitrale autorise les arbitres à statuer en qualité d’amiable compositeurs. Or, l’exception de nullité soulevée par la demanderesse, et fondée sur le droit communautaire, aboutirait, si elle est admise, à un résultat profondément inequitable et choquant, si l’on considère que la même demanderesse a exécuté le contrat sans réserve, en a reconnu la validité à une date postérieure à l’entrée de l’Espagne dans la Communauté Européenne et a admis . . . que’elle ne pouvait y mettre fin que moyennant une résiliation et le paiement de l’indemnité qui y est prévue.’20

In the 1990s, however, the above-described situation changed fundamentally. Courts and arbitration tribunals in Switzerland came to realise that, in certain circumstances, EC competition law applies even outside the borders of the Community. For the sake of good order, it should be mentioned that the issue at stake here must be seen in a broader context: according to some estimates, in more than 50% of all international arbitration cases the question arises as to whether (domestic, foreign, or international) mandatory rules of public law nature demand to be observed or directly applied. Examples in this sense are to be found in relation to cases involving exchange control rules, import and export restrictions, trade sanctions, expropriation decisions, and, more specifically, competition rules.21 As an example regarding foreign antitrust law, a Zurich-based arbitration tribunal had to rule in 1994 on a license agreement between a German manufacturer and a US licensee that had been made subject to Swiss law. The arbitrators affirmed their jurisdiction to review the contract from the standpoint of US antitrust law, and, accordingly, to rule on a claim for treble damages.22 On 28 April 1992 the Swiss Federal Supreme Court rendered a landmark ruling on a matter that has significantly changed the situation of arbitrators in Switzerland (and is frequently cited in academic literature).23 An ad hoc arbitration tribunal based in Geneva had to decide a case involving a Belgian and an Italian company that in 1986 had signed a ‘specialisation and participation contract’. The purpose of the contract was to achieve mutual synergies by ICC 6503 [1990], Journal de Droit International 4/1995, 1022 ff., 1024. Marc Blessing (1999): Introduction to Arbitration—Swiss and International Perspectives, Helbing and Lichtenhahn, Basel, 228 ff. 22 Zurich Chamber of Commerce Case No 202/1992. 23 ATF 118 II 193; see, for instance, Carl Baudenbacher/Anton K. Schnyder (1996): Die Bedeutung des EG-Kartellrechts für Schweizer Schiedsgerichte, Basel/Frankfurt am Main, 34 ff.; Gharavi (1997) 194 ff. (supra note 15); Blessing, 246 ff (supra note 21). 20 21

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partitioning the marketing territories and concluding certain price agreements. The contract was subject to Belgian law. The arbitration tribunal rejected an application by one of the parties to express its views on the compatibility of the contract with EC competition law. Both parties appealed the final award to the Federal Supreme Court under Article 190(2) PIL.24 According to this provision, an arbitration award may be set aside only where (a) the sole arbitrator was not properly appointed or the arbitration tribunal was not properly constituted, (b) the arbitration tribunal erroneously declared to have or not to have jurisdiction, (c) the arbitration tribunal decided beyond the claims submitted to it or failed to decide on one of the claims, (d) the principle of equal treatment of the parties or the right to be heard was violated, or the award is incompatible with the public order.25 The Federal Supreme Court found that the arbitration tribunal was competent to examine whether the contract in question violated Article 85 EEC (now Article 81 EC) and annulled the award. This judgment has generally been interpreted to mean that an arbitration tribunal is in fact bound to exercise its jurisdiction to examine a contract under Article 85 EEC (now Article 81 EC).26 Commentators pointed to the fact that the contract was governed by the law of an EC Member State27 and that the Federal Supreme Court ‘did not provide any guidance as to the power of the arbitrator in dealing with EC competition law’.28 One may nevertheless assume that an arbitrator is entitled to impose civil sanctions, such as declaring the nullity of a contract and awarding damages. It has also been noted that, interestingly, the Federal Supreme Court has considered the issue at stake to be a jurisdictional issue according to Article 190(2)(b) PIL.29 For the sake of completeness, one may add that the Cantonal Court of Vaud held in dicta several years earlier that an ICC arbitrator had jurisdiction to examine a contract under Article 85 EEC (now 81 EC).30 In its 1992 judgment, the Federal Supreme Court did not consider the question of whether an arbitration tribunal is under an obligation to apply the EC competition rules ex officio. In that case, one of the parties had made a request to that effect. In a judgment of 13 November 1998, the Federal Supreme Court ruled, however, that arbitrators are under no obligation to apply the EC com-

24

Private International Law Statute of 18 December, 1987. Author’s translation. 26 Blessing 232, 246 (supra note 21); Baudenbacher/Schnyder, 35 (supra note 23). 27 See on this point also François Dessemontet: Arbitrage, Propriété Intellectuelle et Droit de la Concurrence, ASA Special Series 6, 55, 79 ff., emphasising that EC competition law is part of a Member State’s law and that the result would probably be the same if the parties had chosen the law of an EEA/EFTA State; furthermore Nathalie Voser (1996): ‘Mandatory Rules of Law as a Limitation on the Law Applicable in International Commercial Arbitration’, 7 American Review of International Arbitration 319, 331 no. 60. 28 Gharavi 195 (supra note 15). 29 Blessing, 247 (supra note 21); see with respect to Article 190(2)(d), PIL supra. 30 Infra. 25

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petition rules ex officio.31 At the end of 1991, a consortium (C) had obtained a concession for the realisation of various works from the government of an EC Member State. Three companies based in another EC Member State (X, Y, and Z) were invited to submit tenders. The three concluded an agreement under which Z would submit an offer to C based on conditions X and Y set out. X and Y were obliged to pay Z a certain sum if the contract for the works were awarded to Z. Half of the amount was to be paid in the form of a subcontract to be awarded to Z, who submitted the offer to C based on the conditions formulated by X and Y. C obtained the contract, but its concession was subsequently annulled, and, following this, the contract in question was void. A new concession was granted to K, and in the next tender procedure only X and Y were awarded a contract. Z, who was no longer involved in the matter, commenced arbitration proceedings against X and Y. According to the contract between X, Y, and Z, the applicable law was Swiss. The sole arbitrator ruled that X and Y had to pay Z the sum claimed. Y and X appealed to the Swiss Federal Supreme Court and argued, inter alia, that the award was incompatible with the public order because the agreement in question was unlawful under Article 85 EEC (now Article 81 EC). The Federal Supreme Court referred to its 1992 decision and held that Swiss judges and arbitrators who are called upon to rule on the validity of a contract affecting the EC market must examine that question in the light of Article 85 EEC. They are obliged to do so even if the contract is, by the parties’ choice, governed by Swiss law. This would, according to the Federal Supreme Court, in any case apply if one of the parties invoked the nullity of the contract during the proceedings. In the case at hand, however, this had not happened. The Court concluded that an arbitrator who is called upon to apply the Swiss law of obligations is not obliged to apply foreign law if that law has not been invoked and the nullity of the contract has not been pleaded. An arbitrator cannot, in the Court’s view, reasonably be expected to know all the possible foreign competition laws that may have a claim to applicability. As for the rest, the Court noted that it is doubtful whether national and European competition rules are part of the ordre public that must be respected by the arbitration tribunal. With respect to the first argument, it suffices to say that the case was not about the application of just any competition rule, but of the very cartel prohibition provision in the EC Treaty. As regards the second point, one will notice that the Federal Supreme Court’s ruling is basically in line with its longstanding case law on the notion of ordre public within the meaning of Article 190(2)(d) PIL.32 One is nevertheless bound to ask whether the time has come to re-think the dogma that, unlike principles such as pacta sunt servanda, good faith, and the prohibition of discrimination, national and European competition rules are not part of the ordre public that needs to be respected by arbitration tribunals. In the last ten years or so, competition law has gained in stature at the national, 31 32

The judgment is published in ASA Bulletin 1999, 529 ff. See the description of that case law in Baudenbacher/Schnyder, 98 (supra note 23).

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European, and global levels. Reference must be made to the 1995 Swiss Cartel Act and to the current reform of that act, which is designed to give the Competition Commission the right to impose fines upon first infringement;33 to the extension of the EC model to the EEA Agreement and the Europe Agreements as well as to its adoption in many national jurisdictions;34 to the European Commission’s modernisation project; and to the attempts to set up some kind of global governance in the competition field. Modern arbitrators themselves take the view that competition law is part of the ordre public and that they are able to handle such questions. If an arbitrator suspects that competition law may be decisive for the outcome of the case, he or she should inform the parties and invite them to submit their view on the issue. If the parties are not prepared to raise the question, the tribunal should apply the relevant provisions ex officio.35 One should not overlook that the ECJ, in Eco Swiss China Time,36 did not answer to the national court’s question as to whether arbitrators are under a duty to apply EC competition rules ex officio,37 and left open the question as to whether all breaches of competition policy should be considered in the same way or whether the concept of public policy should be confined to certain more fundamental breaches, such as horizontal price fixing, production and sales quota fixing, or market partitioning.38 It is to be emphasised in this context that the case decided by the Swiss Federal Supreme Court on 13 November 1998 most probably concerned a bid-rigging agreement. According to common understanding, bid rigging is among the worst types of violations of competition law, and in some European jurisdictions it may even fall under the scope of criminal law provisions.

33 See Carl Baudenbacher (2001): ‘Kartellrechtsreform 2001—Nach dem Aufstieg in die Oberste Liga 1995 nun die Qualifikation für die Championsleague?’ (see supra note 4). 34 See Carl Baudenbacher (1997): ‘Das europäische Modell bei Kartellverbot und Missbrauchsaufsicht — ein Exportartikel?’, in Schwerpunkte des Kartellrechts 1997: Referate des XXV.FIW-Seminars, Köln, 1998, S. 9–26; Carl Baudenbacher/Simone Beeser (1997): ‘Gesamteuropäische Konvergenzentwicklungen im Kartellrecht’, 9 Wirtschafts und Wettbewerb, 681 ff. 35 Franz Hoffet (2000): ‘Plädoyer für die ex officio Anwendung von Kartellrecht durch Schiedsgerichte in der Schweiz’, ASA Bulletin 2000, 697 ff., 703 ff.; Blessing (1999) 246 ff.; see also Daniel Hochstrasser (1994): ‘Choice of Law and ‘Foreign’ Mandatory Rules in International Arbitration’, 13 Journal of International Arbitration 57 ff., 76 ff. 36 Supra note 14. 37 See the third question of the Hoge Raad der Nederlanden, para. 30 of the ECJ’s judgment; Assimakis P. Komninos (2001): ‘Arbitration and the Modernisation of European Competition Law Enforcement’, 24 World Competition 2, 211–238. 38 See also Christoph Liebscher (1999): ‘European Public Policy After Eco Swiss’, 10 American Review of International Arbitration 81, 89 ff.

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2. Arbitration practice 2.1. Application of EC competition law irrespective of the lex contractus chosen by the parties In accordance with state-of-the-art procedure, a Swiss arbitration tribunal will subject an agreement to a review under Articles 81(1) and (2) or 82 EC irrespective of the law that the parties have chosen to govern their contract. An example of this is provided by ICC case 7673 [1993].39 Although the contract at issue was subject to Swiss law, the arbitration tribunal found that ‘it is generally agreed that under Article 187(1) PIL, arbitrators must or at least may observe the international public policies of other States or of the European Communities irrespective of the substantive law applicable. (…) Alternatively, the Tribunal’s competence to apply or take into account provisions outside the lex causae can also be derived from Art. 19 PIL.’40 In the view of the ICC arbitrators there is no reason ‘why an Arbitral Tribunal should not have the same authority as ordinary courts to decide over the consequences of an alleged abuse of a dominant position. The tribunal is in the matter of competition law therefore in the same position when dealing with a claim based on Article 86 as it is when facing a claim which involves Article 85 of the Treaty of Rome.’ In ICC case 8626 [1996], the arbitration tribunal sitting in Switzerland had to rule on the following facts. The plaintiff, a US corporation, had concluded a licensing agreement for Germany concerning certain televideo equipment for jet fighters with the defendant, a German corporation. According to the agreement, the law of the State of New York was applicable. The agreement contained a clause banning competition for five years after termination. The defendant argued that the whole agreement was void because the non-compete clause violated, inter alia, Article 85(1) EEC. The plaintiff took the view that EEC competition law was irrelevant since the agreement was governed by the law of the State of New York. The arbitration tribunal referred to the Federal Supreme Court’s 1992 ruling and held that it was obliged to apply Article 85(1) EEC because there was an effect on trade between EEC Member States. The product in question was to be used in at least three EEC Member States. Based on these considerations, the arbitration tribunal found the non-compete clause to be void under Article 85(2) EEC. 39

Published in The ICC International Court of Arbitration Bulletin vol. 6, No. 1 May 1995, 57 ff. 40 Article 187(1) PIL states: The arbitration tribunal shall decide according to the law chosen by the parties, or, in the absence of such choice, according to the law with which the action is most closely connected. Article 19 PIL provides: (1) If, according to Swiss legal concepts, the legitimate and manifestly preponderant interests of a party so require, a mandatory provision of a law other than that designated by this Statute may be taken into account if the circumstances of the case are closely connected with that law. (2) In deciding whether such a provision is to be taken into account, its purpose is to be considered as well as whether its application would result in an adequate decision under Swiss legal concepts. [Author’s translation.]

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2.2. Application of EC competition law irrespective of whether the parties have agreed that the arbitration is to be governed by any national law In another ICC case,41 the arbitration clause provided that the arbitrators ‘shall not decide in accordance with a specific national law but pursuant to the principles of equity and justice.’ The sole arbitrator, a national of an EC Member State sitting in an EC Member State, found nevertheless that ‘Article 85 of the Treaty of Rome is a directly applicable supra-national law and may be invoked by the parties in the context of disputes in the field of private law.’ Based on this, he examined the validity of the agreement in question. One of Switzerland’s leading arbitrators is obviously of the opinion that an arbitration tribunal sitting in Switzerland would take the same stand.42

2.3. Staying proceedings until the Commission has adopted certain decisions A question that often arises is whether an arbitrator or an arbitration tribunal has the right to stay the proceedings until the Commission has adopted certain decisions.43 In the Federal Supreme Court’s landmark decision of 28 April 1992,44 the arbitration tribunal had rejected an application by one of the parties to stay the arbitration proceedings until the Commission reached certain decisions. The award, which was based on the (wrong) assumption that it was not for the arbitration tribunal to rule on the compatibility of the contract in question with Community law, was annulled by the Federal Supreme Court.45

2.4. Conclusions There can be no doubt that arbitration tribunals in Switzerland are not only prepared to apply EC competition law upon request of a party. There are also examples of Swiss arbitrators carrying out an ex officio examination where the circumstances give rise to doubts concerning the compatibility of a transaction with EC competition law provisions. As compared to the old days, there appears to be a new generation of enlightened arbitrators who are determined to take such public policy aspects into account. In this context, the centre of gravity in international arbitration seems to have been shifted from the French-speaking part of the country to Zurich. 41

ICC case 7097, quoted in Herman Verbist, ‘The Application of European Community Law’ in ICC Arbitrations, The ICC International Court of Arbitration Bulletin, Special Supplement November 1994: International Commercial Arbitration in Europe, 33 ff. 42 Blessing, 248 (supra note 21). 43 See, for instance, Baudenbacher/Schnyder, 36 ff. (supra note 23); ICC 7181 [1992], Yearbook of Commercial Arbitration (1996), 104 ff. 44 Supra note 22. 45 ATF 118 II 193.

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IV. A right to refer questions to the European Courts under the preliminary ruling procedure? 1. The Article 234 EC procedure 1.1. Arbitrators sitting in EC Member States Article 234 EC confers on the ‘courts or tribunals of a Member State’ the right to make a reference for a preliminary ruling. To define what constitutes a court or tribunal, the ECJ uses a six-factor test:46 the referring body must (1) be established by law; (2) be permanent; (3) have compulsory jurisdiction; (4) conduct hearings on an inter partes basis; (5) apply rules of law and evidence; and (6) be independent. In an individual case, an entity may be regarded as a court or tribunal even if one of these elements (in particular the requirement of an adversarial procedure) is missing. The definition is nevertheless clearly oriented toward state jurisdiction. The ECJ was for the first time faced with the question whether an arbitration tribunal is entitled to request a preliminary ruling in the 1982 Nordsee case.47 The Court drew a distinction between consensual arbitration and what might be termed as ‘compulsory arbitration’. In the case of the latter, the arbitrator or the arbitration tribunal fulfils a role similar to that of a national court. The State is involved in the establishment and operation of arbitration tribunals, and it plays some role in the appointment of members. Those bodies are regarded as constituting a court or tribunal for the purpose of the preliminary ruling procedure under Article 234 EC.48 The referring arbitrator in Nordsee did not, according to the ECJ, constitute a ‘court or tribunal’ within the meaning of Article 234 EC because the arbitration was not mandatory, and because there was not a sufficiently close link between the arbitration procedure and the State—the German public authorities were in no way involved in, or associated with, the arbitration proceedings. This judgment was recently re-confirmed by the ECJ in Eco Swiss China Time.49 With respect to the question of how to secure an uniform application of Community law by so-called consensual arbitrators in this system, the ECJ fully relies on national courts in the Member States. On the one hand, national courts are entitled, or in the case of courts of last resort, obliged to refer questions of Community law to the ECJ. It is for them to make a reference for a preliminary 46 See, for instance, Case C–54/96 Dorsch Consult Ingenieurgesellschaft v. Bundesbaugesellschaft Berlin [1997] ECR I–4961; see also EFTA Court, Restamark [1994/95] Rep. EFTA Ct., 15. 47 Supra note 13. 48 See, for instance, Case G. Vaassen-Göbbels v. Management of the Beambtenfonds voor het Mijnbedrijf, ECJ [1966] ECR 258; Handels-og Kontorfunktionærernes Forbund I Danmark v. Dansk Arbejdsgiverforening [1989] ECR 3199. 49 Supra note 14.

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ruling when exercising their control over disputes referred to arbitration.50 On the other hand, they are prevented from enforcing arbitration awards that wrongfully did not take into account EC competition rules. The assumption is that this a posteriori approach will prompt the arbitrators to give effect to the EC competition rules.51 A recent example is the judgment of the Austrian Supreme Court in Radenska v. Kajo on the enforcement of an award issued by an arbitration tribunal in former Yugoslavia. The arbitration was the result of the early termination of a production and sale licensing agreement. The Austrian Supreme Court held that the primacy of Community law over national law implies that in EC Member States Articles 85 and 86 EEC (now Articles 81 and 82 EC), which are part of the foundations of the regulation of the Common market and of its fundamental principles, are part of the ordre public in the Member States. An arbitral award violating these provisions cannot therefore be enforced in Austria.52

1.2. Arbitrators sitting in EEA/EFTA Member States One has to conclude from the case law of the ECJ that not only arbitrators sitting in EC Member States, but also are their colleagues sitting in EEA/EFTA States, are excluded from referring questions under the Article 234 EC preliminary ruling procedure.

1.3. Arbitrators sitting in countries outside EC/EEA The same obviously holds true for third-country arbitration tribunals. For the sake of completeness, one should mention in this context the judgment given by the Chambre de Recours of the Canton of Vaud on 28 October 1975,53 i.e. six years before the ECJ ruling in Nordsee. In that case, one of the parties made an application to an ICC arbitrator to refer a question concerning the validity of the contract in question to the ECJ. The party asked the arbitrator if it was possible for him to hold that the contract was void under Article 85 (now 81) EC. The arbitrator refused to stay the proceedings and to refer the question to the ECJ, and he found that the competition rules of the Treaty of Rome had to be respected not only by national courts but also by arbitration tribunals. He therefore affirmed his jurisdiction to examine the contract under Article 85 (now 81) EC.

50 Nordsee, supra note 13, paras 14 and 15; see also C–393/92 Almelo [1994] ECR I–1477. 51 See, for instance, Natalya Shelkoplylas and John P. Gaffney (2001): ‘The European Community Doctrine of ‘Direct Effect’ and Arbitration: N’er the Twain Shall Meet?’, 16 Mealy’s International Arbitration Report 4, 84. 52 Revue de l’arbitrage No. 2/1999, 385 ff., with note by Pierre Lastenouse and Petra Senkovicˇ. 53 Journal des Tribunaux, 1981 III, 71.

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2. The Article 34 SCA procedure Under Article 34 of the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (Surveillance and Court Agreement, SCA), national courts in the EEA/EFTA States may request the EFTA Court to give an opinion on the interpretation of the EEA Agreement. The procedure is broadly analogous to the preliminary reference proceeding under Article 177 (now Article 234) EC, the main differences being that national courts of the EEA/EFTA States are not obliged to refer questions of interpretation of the EEA law to the EFTA Court, and that the EFTA Court’s rulings are not formally binding upon the national courts making such requests. It is clear, however, that, should the referring court disregard an opinion of the EFTA Court finding parts of the law in an EFTA State incompatible with EEA law, this would amount to a violation of the EEA Agreement by the EFTA State concerned. Experience shows that in reality there is hardly any difference between the situation in the Community and that in the EEA. The EFTA Court has so far not had an opportunity to express a view on the question of whether it would accept a reference from an arbitration tribunal. According to Article 6 EEA, the EFTA Court is required to follow ECJ judgments on provisions of Community law that are identical in substance to corresponding provisions of EEA law, insofar as they have been delivered before 2 May 1992, the date of signature of the EEA Agreement. Article 3(2) SCA obliges the EFTA Court to pay due account to relevant ECJ rulings given after that date.54 The ECJ rendered its Nordsee ruling in 1982 and confirmed it with regard to the issue in question in the 1999 Eco Swiss China Time judgment. Nevertheless, the above-mentioned homogeneity rules would not prevent the EFTA Court from accepting a reference from an arbitration tribunal. The principle of homogeneity cannot hinder the EFTA Court from granting individuals and economic operators more access to justice than is granted in the Community.55 In this context, mention must be made of the EFTA Court’s liberal case-law concerning the notion of a court or tribunal under Article 34 SCA, the provision that mirrors Article 234 EC,56 and regarding the standing of associations to bring an action for annulment in competition law cases.57 54 See Carl Baudenbacher (1997): ‘Between Homogeneity and Independence. The Legal Position of the EFTA Court in the European Economic Area’, 3 Columia Journal of European Law, 169 ff.. 55 See also, with regard to the purpose and limits of the obligation to follow ECJ precedent, the speech by former EFTA Court President and now ECJ Judge Leif Sevón, given on 20 October 2000 at a Luxembourg seminar organised by the EFTA Court. 56 1994/95 Rep. EFTA Ct., 15, Restamark E-Gr. 7–31, 1995 Common Market Law Review, 161; 1994/95 Rep. EFTA Ct., 113, Mattel/Lego E-Gr. 14, 1996 Common Market Law Review, 313. 57 1994/95 Rep. EFTA Ct., 59 ff. Scottish Salmon Growers, 1995 Common Market Law Review 851 et seq.; 1998 Rep. EFTA Ct., 38 ff. Husbanken I, 1998 Comon Market Law Review, 281 et seq.

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Most commentators agree that the ECJ’s attitude to exclude arbitration tribunals from submitting questions under the preliminary ruling procedure is probably driven by the fact that the Court is overburdened and by the fear of opening further floodgates.58 One may take the view that this is hardly a convincing reason and that such fears may be overstated. The EFTA Court for its part is not overburdened at all. On balance, it is an open question whether the EFTA Court would adopt a more functional approach, rather than an institutional one, in deciding the matter.59

V. A right to refer questions to the European Commission and to the EFTA Surveillance Authority? 1. The current system The position of the Commission toward arbitration is not easy to understand. On the one hand, it has long suspected arbitrators of serving as tools for circumventing the EC competition rules. This mistrust has even lead the Commission to insert special rules for arbitration into its block exemption regulations for patent and know-how licensing agreements. Article 9 of Regulation (EEC) No 2349/84 of 23 July 198460 and Article 7 of Regulation (EEC) No 556/89 of 30 December 198861 gave the Commission the right to withdraw the benefit of the regulation where an exempted agreement nevertheless had certain effects that were incompatible with the conditions laid down in Article 85(3) EEC (now Article 81(3) EC). This was possible, inter alia, when such effects would arise from an arbitration award. This meant in practice that the Commission had to receive notice and approve of arbitration awards in the fields covered by the regulations in questions. The 1996 Technology Transfer Agreements Block Exemption Regulation that replaced the aforementioned regulations does not contain such a provision.62 On the other hand, the Commission has apparently been reluctant to help arbitrators to carry out their 58

See Josephine Steiner (1992): EEC Law, 3rd edn., London, 291; in Nordsee, Advocate-General Reischl warned that ‘one must reflect the risk that the Court of Justice would be burdened with a work-load the extent of which it would be difficult to estimate if it were to be thus diverted from its own work to deal with private disputes, often of very minor significance, involving some aspects of Community law.’ Loc. cit., 1122. 59 One could argue that since the EFTA Court’s preliminary rulings are not formally binding, it should a fortiori accept references under the Article 34 SCA procedure. 60 European Commission (1993): Notice on cooperation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, OJ C 39 [1993] pp. 6–11. 61 Id. 62 Commission Regulation (EC) No 240/96 of 31 January 1996 on the application of Article 85(3) of the Treaty to certain categories of technology transfer agreements, OJ L31/1992, p. 2.

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tasks in the field of competition law. The 1993 Cooperation Notice63 does not mention arbitration at all. One could, however, argue that, since it does not explicitly exclude businesses from making a reference to the Commission either, arbitrators could just give it a try.64 As far as the application of Articles 53(1) and (2)/54 EEA by arbitrators is concerned, the situation is analogous to the one in the EC with regard to Articles 81/82. The Cooperation Notice has been taken over into EEA law.65 But since arbitrators are not mentioned, it is an open question whether the EFTA Surveillance Authority would answer requests for advice.

2. The new EC competition law enforcement system The regulation proposed by the Commission in September 2002 does not address the issue of whether arbitrators will have the right to refer questions to the Commission in the new enforcement system. The question that arises is whether, in light of the importance of arbitration and of the fact that modernisation is heavily relying on private enforcement, the Commission should, in one way or another, include arbitration tribunals within the new enforcement system, with a view to ensuring coherent application of the EC competition rules. Such a system would eventually have to be extended to the EFTA Surveillance Authority.

VI. Conclusions 1. Arbitrators in and outside the EC are willing to apply EC and EEA competition rules Arbitration tribunals sitting in the EC are, as a rule, prepared to take into account the EC competition rules. The days when arbitrators in countries outside the European Community were unwilling to apply the EC competition rules too seem to be over. The fear that arbitration taking place outside of the EC could undermine its competition policy is not, therefore, justified. Nowadays the arbitrators sitting in EEA/EFTA countries as well as in Switzerland are, generally speaking, determined to make their contributions to the implementation of EC/EEA competition law. In the case of a contract, they will also do that if the parties have decided to subject that contract to the law 63

Supra note 60. According to senior officials of DG Competition, a number of requests for information by arbitration tribunals have in the past been answered. 65 OJ C307 [2000], p. 6, and Supplement to the OJ 2000, 61/05. 64

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of a third country or to the rules of equity. There are even those who are of the opinion that an arbitrator must take the EC competition rules into account even if no party invokes those rules during the proceedings.

2. Uniform application needs to be ensured by giving arbitrators access to the preliminary ruling procedure 2.1. The current situation is unsatisfactory The fact that arbitrators are willing to apply Articles 81 and 82 EC does not guarantee that their decisions will be based on a correct interpretation of these rules. In other words, the approach of the ECJ not to accept references from arbitrators constitutes a threat to the very objective that Article 234 EC is meant to pursue, namely the uniform interpretation and application of Community law.66 It has been rightly said that ‘courts and arbitrators are in the same business, namely the administration of justice. The only difference is that the courts are in the public and the arbitrators are in the private sector of the industry.’67 When the ECJ stated in Nordsee that arbitrators are merely private individuals, it was only half-right. In international business transactions, arbitration tribunals seem to be even more important than State courts.68 Placing the burden of ensuring coherent application of EC competition rules on the national judiciaries is problematic for several reasons. Control by national courts adds an additional tier of delay and expense before the Community law question can be referred to the ECJ for interpretation. This is in direct conflict with one of the main goals of arbitration, namely, to obtain a final award within a reasonable time frame. To place this responsibility on the national courts is also at odds with the general tendency noticeable in all modern arbitration statutes to limit the influence of the State judiciary to the greatest possible extent. A posteriori control at the enforcement stage is no substitute for the right to refer a question of law interpretation to the ECJ, because in the vast majority of cases arbitration awards are not contested in court.69 66 See Gerhard Bebr (1985): ‘Arbitration Tribunals and Article 177 of the EEC Treaty’, 22 Common Market Law Review 489, 495; Piet Slot (1996): ‘The Enforcement of EC Competition Law in Arbitral Proceedings’, 1 Legal Issues of European Integration, 101. 67 Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corporation Ltd., [1979] 3 WLR 471, 479. 68 See Carl Baudenbacher and Imelda Higgins: ‘Decentralization of EC Competition Law Enforcement and Arbitration’ (forthcoming in Columbia Journal of European Law). 69 See Ulrich Drobnig (1997): ‘Internationale Schiedsgerichtsbarkeit und wirtschaftsrechtliche Eingriffsnormen’, in Internationales Gesellschaftsrecht—Festschrift für Gerhard Kegel, Stuttgart, 95, 115 ff.; Eckard Rehbinder (1965): Extraterritoriale Wirkungen des deutschen Kartellrechts, 327, 329.

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There is another argument against placing the responsibility of securing uniform application on national courts: if enforcement takes place in a country outside of the European Union, there is no national court that would be entitled to refer questions to the ECJ under the Article 234 EC procedure. A solution must be found so as to ensure coherent application of EC competition rules regardless of whether the arbitrators are sitting in an EC Member State, in an EEA/EFTA country, or in a country outside the EC/EEA, and regardless of where enforcement occurs. Community competition law claims to be respected if an agreement or a behaviour fulfils the criteria set out in Articles 81 and 82 EC, and that means, inter alia, that competition in the Community is restricted and trade between Member States within the meaning of the formula developed by the European Court of Justice is affected.70 It has been said that although Community competition law is to be applied by arbitrators, there appears to be a greater chance of avoiding its unwanted consequences in arbitration than in a court of law. The lack of a right to request a preliminary ruling may therefore in some cases still allow some freedom in dealing with EC competition rules.71 It cannot be excluded that certain arbitrators like this situation—at least deep in their heart. On the other hand it is interesting to observe that some of the most prominent arbitrators in Switzerland resent the absence of the right to make preliminary references to the ECJ.

2.2. An approach based on whether competition in EC/EEA is aVected 2.2.1. The ECJ The considerations set out above would seem to justify that the ECJ overrule its decision in Nordsee, and recognise that arbitration tribunals may constitute a court or tribunal for the purposes of submitting a request for preliminary ruling. With regard to the question of which arbitrators should enjoy such a right, what has been described as a trend toward ‘a-national’ or ‘de-localised’ international arbitration should be taken into account. As one commentator stated: ‘It is possible to envisage an ideal world in which the country or place in which a particular arbitration is held makes no difference to the legal principles applied or the procedure followed. In such a world, the arbitral tribunal would be guided by the agreement of the parties, or failing such agreement, by its own judgment; it would decide the substantive matters in issue before it on the basis of the applicable law or legal rules or, if the parties so wished, ex æquo et bono; and it would make an award

70 According to settled case law, in order that an agreement between undertakings may affect trade between Member States, it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States. See, for instance, Case 42/84 Remia BV and Others v. Commission [1985] ECR 2566, para. 22. 71 Frank-Bernhard Weigand (1993): ‘Evading EC Competition Law by Resorting to Arbitration?’, 9 Arbitration International 249, 258.

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which was enforceable on the same conditions in any state in which the losing party had assets. Moreover, its award would be the same, uninfluenced by national laws or attitudes of mind, in whichever state the arbitral tribunal happened to sit for the purpose of conducting arbitration.’72

Whether the arbitration tribunal has its seat in an EC Member State should not be the decisive issue. What is needed instead is an approach based on whether competition in the EC and trade between EC Member States are affected. International arbitrators called to rule upon an agreement or behaviour that is possibly caught by Articles 81 and/or 82 EC should have the chance to seize the ECJ independently of whether they are sitting in or outside the European Community. 2.2.2. The CFI Most commentators are of the opinion that the ECJ will not be prepared to overrule its Nordsee judgment in the near future. They are most probably right. Quite another matter is, however, whether the European legislature will seek a solution to this problem. It should be borne in mind in this context that, according to the Nice Treaty (Article 225(3)), in the future the Court of First Instance (CFI) could be given jurisdiction to hear references for preliminary rulings in specific areas laid down by the Statute.73 Competition law may conceivably be one of those areas. If the CFI considers that the case requires a decision of principle likely to affect the unity or consistency of Community law, it may refer the case to the Court of Justice for a ruling. If, on the other hand, the CFI decides to answer the question, review by the ECJ will be possible only in exceptional cases ‘where there is a serious risk of the unity or consistency of Community law being affected’ (Article 225(3)(2)). In this framework, a new solution for arbitration tribunals, that would take into account the de-localisation phenomenon, should be found. Were Member States to adopt such an approach, one possibility would be to provide that questions raised in the context of arbitration and concerning competition law are to be referred to the CFI rather than the ECJ, thus alleviating somewhat its heavy workload. 2.2.3. The EFTA Court The EEA homogeneity rules would not prevent the EFTA Court from accepting references from arbitration tribunals in spite of the Nordsee precedent. Should the EFTA Court in fact be willing to answer questions addressed to it

72 Theodore C. Theofrastous (1999): ‘International Commercial Arbitration in Europe: Subsidiarity and Supremacy in Light of the De-Localization Debate’, 31 Case Western Reseserve Journal of International Law 2, 456; also see concerning denationalisation, Blessing (1999) 210 ff. 73 See Günter Hirsch (2001): ‘Die neue Justizarchitektur der Europäischen Union und ihre Auswirkungen auf den Wettbewerbsrecht,’ in Carl Baudenbacher, ed., Neueste Entwicklungen im Europäischen und internationalen Kartellrecht, Achtes St. Galler Internationales Kartellrechtsforum, Basel/Genf/München.

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by arbitration tribunals, the decisive point would have to be whether trade between the EEA/EFTA States in the meaning of Articles 53, 54, and 56 EEA is affected. That means that a possible right of arbitration tribunals to refer questions to the EFTA Court would relate to cases fulfilling the criteria of Articles 53, 54, and 56 EEA.74 The seat of the arbitration tribunal would have to be irrelevant. If the EFTA Court were to accept questions from arbitration tribunals having their seat in Norway, Iceland, or Liechtenstein, then it would be logical to also accept references from arbitration tribunals having their seat outside the EC/EEA. 2.2.4. The European Commission and the EFTA Surveillance Authority It has already been stated that, in the interest of uniform application of EC competition rules, arbitrators should be given the right to submit questions to the Commission and the EFTA Surveillance Authority. Since modernisation places so much emphasis on private enforcement, such a right should be granted a fortiori following modernisation. In the future, national courts will have two information and cooperation systems at their disposal: the preliminary ruling procedure on the one hand, and assistance from the Commission as envisaged under the proposed Regulation on the other. Arbitrators should at least have recourse to the Commission procedure (most probably in a different form than in the case of national judges). In the light of de-localisation, third-country arbitrators who frequently deal with cases that affect trade between Member States should be included. The same considerations would mutatis mutandis apply to the EFTA Surveillance Authority if modernisation were to be extended to the EFTA pillar of the EEA. Such a right could, by the way, be considered even if the Commission for its part should decide not to grant it. 74

According to these provisions, the EFTA Court’s jurisdiction is regulated in the following way: Article 53(1) EEA declares incompatible with the functioning of the EEA Agreement agreements, decisions and concerted practices which may affect trade between Contracting Parties. Article 54 EEA prohibits abuses of dominant positions within the territory covered by the EEA Agreement or in a substantial part of it as incompatible with the functioning of this Agreement in so far as they may affect trade between Contracting Parties. According to Article 56(1) EEA, cases falling under Article 53 shall be decided upon by the surveillance authorities in accordance with the following provisions: (a) individual cases where only trade between EFTA States is affected shall be decided upon by the EFTA Surveillance Authority; (b) without prejudice to subparagraph (c), the EFTA Surveillance Authority decides on cases where the turnover of the undertakings concerned in the territory of the EFTA States equals 33% or more of their turnover in the territory covered by this Agreement; (c) the EC Commission decides on the other cases as well as on cases under (b) where trade between EC Member States is affected. Pursuant to Article 56(2) EEA individual cases falling under Article 54 shall be decided upon by the Surveillance Authority in the territory of which a dominant position is found to exist. The rules set out in Article 56(1)(b) and (c) shall apply only if dominance exists within the territories of both surveillance authorities. Article 56(3) states that individual cases falling under subparagraph (c) of paragraph 1, whose effects on trade between EC Member States or on competition within the Community are not appreciable, shall be decided upon by the EFTA Surveillance Authority.

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IV Assimakis P. Komninos* Assistance to Arbitral Tribunals in the Application of EC Competition Law

I. Introduction While arbitral tribunals deal with competition issues, it is very likely that they are confronted with complicated legal and economic issues referring to the interpretation and application of EC competition law. In the modernised system of EC competition enforcement this fact becomes more evident. The basic parameters of this proposed system is the abolition of the notification and exemption procedures and the decentralisation of EC competition enforcement through the direct applicability of Article 81(3) EC by national competition authorities and national courts. Although neither the White Paper1 nor the formal proposal for a regulation adopted by the Commission2 make a reference to arbitrators, it is beyond doubt that the latter will also have jurisdiction to apply that provision.3 The question arises as to whether and how it is possible for an arbitral tribunal to get assistance in the application of the EC competition provisions in the modernised system of enforcement. Such assistance may be (a) generic and (b) EC competition law-specific. I speak of generic assistance, when state courts are called upon to assist arbitral tribunals in certain functions, which the latter cannot execute. This form of assistance is irrespective of the particularities of EC competition law or of Community law in general, and its fashion is prescribed invariably in state procedural laws. On the other hand, in the field of EC competition law and in the context of its application by national courts there have been developed specific techniques of assistance to the latter by specialised bodies. The specificity of such techniques is * LL.B.(Athens), LL.M.(Cantab), LL.M.(NYU). Advocate (Athens); Researcher, European University Institute, Florence. 1 Commission White Paper of 28 April 1999 on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme No 99/027, COM(1999) 101 final, OJ [1999] C132/1. 2 Commission Proposal for a Council Regulation on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty and Amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 (‘Regulation Implementing Articles 81 and 82 of the Treaty’), COM(2000) 582 final, OJ [2000] C365E/284. 3 In that respect see Komninos A.P. (2001): ‘Arbitration and the Modernisation of European Competition Law Enforcement’, 24 World Competition 2, 211.

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owed to two cumulative and inseparable qualities of the EC antitrust regime. The first one appertains to the highly technical nature and to the public interest character of competition law. This characteristic explains the particular role that may be ascribed in the context of civil litigation to the European Commission and/or to national competition authorities.4 The second quality refers to the supranational nature of the antitrust rules in the EU, i.e., to the fact that EC competition law is part of general Community law and has, as some put it, constitutional importance being part of the basic European Community Treaty.5 This explains the fundamental role of the European Court of Justice and of the preliminary reference procedure of Article 234 EC. The present contribution will mainly examine the applicability of the EC competition law-specific form of assistance to arbitrators, after a short descriptive reference to the generic one.

II. Generic assistance by national courts It is common ground that arbitral proceedings in any given legal system are dependent on state courts. Notwithstanding a certain global trend of delocalisation and autonomy of arbitration6 —in particular of international commercial arbitration—a certain dialogue with the state jurisdictional power is in any legal system unavoidable. The balanced relationship between courts and arbitrators is considered to be one of the key criteria for the attractiveness of an arbitration site.7 The complementarity between courts and arbitrators basically centres in two diverse circumstances: review and assistance.8 An arbitral award is reviewed by 4 At this point one should reflect on the difference of philosophy between US antitrust and EC competition law. Assistance by the Antitrust Division of the Department of Justice or by the Federal Trade Commission to US courts applying the antitrust laws has never been an issue in America. In the EU, however, it has been a persevering concern. The reasons of this diversity lie in the profound development of US antitrust private enforcement and also in some endemic characteristics of the EU system, where the prior authorisation system and the centralised enforcement at the level of the Commission make natural such dependence of civil courts on the former. 5 See, e.g., Temple Lang J. (1995): ‘Panel Discussion: International Arbitration’, in Hawk B., ed., International Antitrust Law and Policy 1994, Annual Proceedings of the Fordham Corporate Law Institute, New York/The Hague, p. 420. 6 See T. Theofrastous (1999): ‘International Commercial Arbitration in Europe: Subsidiarity and Supremacy in Light of the De-localization Debate’, 31 Case Western Reserve Journal of International Law 455. 7 See K.P. Berger (2001): ‘Das neue Schiedsverfahrensrecht in der Praxis: Analyse und aktuelle Entwicklungen’, 47 Recht der Internationalen Wirtschaft 7, p. 17. 8 On the complementary roles of judges and arbitrators see, e.g., G. R. Delaume (1994): ‘L’Arbitrage Transnational et les Tribunaux Nationaux’, 111 Journal de Droit International (Clunet) 521; B. Goldman (1984): ‘The Complementary Roles of Judges and Arbitrators in Ensuing that International Commercial Arbitration is Effective’, in:

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state courts either in respect of a setting aside motion, when a party to arbitration requests the annulment of the award, or in respect of a request for recognition and enforcement. Assistance, on the other hand, takes place before the rendering of the award and during the arbitration proceedings. Only the latter instance of court intervention will be examined here, because it is only during the arbitral proceedings that the question of assistance arises. The state courts’ intervention during that stage usually takes place in order to remedy the arbitrators’ lack of power of coercion, which is attached to state prerogatives. It is true that arbitrators possess some powers, which may serve as satisfactory alternatives to the courts’ sovereign authority.9 They issue instructions to the parties by means of procedural orders, they may summon witnesses and order the production of documents—in some jurisdictions by means of subpoenas, they may even impose fines for the parties’ default, or they may draw the appropriate consequences of a party’s failure to comply with a procedural order. However, there are those instances, where the intervention of a state court is indispensable. State courts may, thus, intervene to assist the formation and composition of the arbitral tribunal against a defaulting party, usually in ad hoc arbitrations. Recourse to state courts of the seat of arbitration might also be called for in obtaining provisional and conservatory measures. Although the modern trend is that arbitral tribunals can grant provisional measures themselves,10 there are still jurisdictions, where this is not possible.11 Then there are those measures that are inherently connected with the state power of coercion, such as attachment, that again may have to be granted by state courts only.12 Provisional measures might be necessary to be taken in a foreign jurisdiction, different from the one of the seat of arbitration. This transnational element is very likely to exist in a dispute involving EC antitrust issues. Such measures can only be ordered by the state courts of that jurisdiction, on the condition that they are allowed by their procedural law to offer such assistance. Such an exceptional possibility exists under the 1968 Brussels Convention on the Recognition and Enforcement of Judgments, which applies also to provisional and protective International Arbitration. 60 Years of ICC Arbitration, A Look at the Future, ICC Court of Arbitration, Paris; K. D. Kerameus (1989–1990): ‘The Examination of an Arbitration Agreement by State Courts while Arbitration Is Pending’, 42–43 Revue Hellénique de Droit International 217; F. Carpi, ‘Les Rapports entre l’Arbitrage et le Juge Ordinaire’, 2 Zeitschrift für Zivilprozeß International 397 (1997); P. Sanders (1999): Quo Vadis Arbitration?, Sixty Years of Arbitration Practice, A Comparative Study, The Hague/Boston/Dordrecht, p. 18 et seq. 9 See B. Goldman, supra note 8, p. 276 et seq.; Y. Derains (1999): ‘State Courts and Arbitrators’, in Arbitration in the Next Decade —Special Supplement 1999, The ICC International Court of Arbitration Bulletin, Paris, p. 27. 10 See Art. 17 of the UNCITRAL Model Law on International Commercial Arbitration. 11 This is so for example under Italian law (Art. 818 of the Code of Civil Procedure). 12 See, e.g., Gaillard E. and Savage I. eds. (1999): Fouchard, Gaillard, Goldman on International Commercial Arbitration, The Hague/Boston/London, p. 711 et seq.

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measures, even in case of arbitral proceedings that have been or may be commenced in another signatory country.13 More importantly, the taking of evidence is another instance of state courts’ intervention. Again arbitral tribunals are usually in the position to order the production of documents that are in the possession of the parties. Depending on the procedural law, they may also summon the parties to provide any relevant evidence and to that effect they may also issue procedural injunctions and even attach penalties thereto. However, it is recognised that, since arbitrators lack imperium, their procedural orders are less effective than those of the courts.14 Furthermore, the privity of the arbitration agreement and procedure means that third parties cannot be compelled by arbitrators to produce evidence or to give witness testimony. Arbitral tribunals that deal with EC competition law might be more dependent on the assistance of state courts. Antitrust disputes invariably involve third parties (e.g., trade associations, other competitors, etc.). Therefore, evidence in order to prove conspiracies or to determine market power as far as these third parties are concerned will always be a weakness of arbitration, which necessarily can be remedied only through the intervention of the ordinary courts.15 Court intervention in order to assist arbitral tribunals in the taking of evidence may also be necessary if the evidence is situated in a third country, something which is the rule rather than the exception in cases involving EC antitrust. In this case the courts of the place of arbitration—and not the arbitrators themselves—may request the assistance of foreign courts or of foreign judicial authorities.16

13

See Art. 24 of the Convention as interpreted by the ECJ in Case C–391/95 Van Uden Maritime BV v. Kommanditgesellschaft in Firma Deco-Line et al. [1998] ECR I–7091, at I–7132, paras. 28–34. See now Art. 31 of Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, OJ L12/1 2001. 14 See Fouchard, Gaillard, Goldman, as cited in supra note 12, p. 697 and 727 et seq. 15 On third party evidence in arbitration see, e.g., T. H. Webster (2001): ‘Obtaining Evidence from Third Parties in International Arbitration’, 17 Arbitration International 143. 16 See in particular M. Rubino-Sammartano (2001): International Arbitration Law and Practice, Kluwer Law International, The Hague/London/Boston, p. 399. The 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters does not apply to arbitrators, although it appears that in ad hoc cases some of the signatory states have granted judicial assistance directly to foreign arbitral tribunals (see C. Bühring-Uhle (1996): Arbitration and Mediation in International Business, Designing Procedures for Effective Conflict Management, Kluwer Law International, The Hague/London/Boston, p. 67).

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III. Assistance by the European Court of Justice 1. Direct preliminary references 1.1. The Nordsee obstacle The preliminary reference procedure of Article 234 EC has been the great success story of Community law and is by far the most efficient mechanism for encouraging national courts to apply Community law, providing at the same time for them assistance in the interpretation of that law. While preliminary rulings of the Court of Justice ensure to a great degree that national courts apply EC competition law in a uniform way, it is clear, however, that arbitrators cannot avail themselves of such a possibility, since the Court, ever since its ruling in Nordsee,17 does not consider them as ‘a court or tribunal of a Member State’ in the sense of Article 234 EC and this jurisprudence is very unlikely to be reversed in the future.18 The notion of courts or tribunals in Article 234 of the Treaty has been given by the Court of Justice, generously enough, a broad meaning in a series of cases. In admitting preliminary references the Court has been generally guided by the wish to open up its jurisdiction to all organs of the Member States exercising a judicial function.19 It has adopted over the years an ad hoc approach, where apart from legal, policy issues come also into play. Such judicial bodies must according to the Court’s case law be permanent and independent, established by law, charged with the resolution of disputes defined in general terms, bound to apply rules of law in inter partes proceedings that lead to a determination that is binding, and the parties must be required ex lege or even sometimes de facto to submit their disputes to them.20 All these criteria, however, are not absolute or conclusive, but every case is judged on an individual basis. In Nordsee the Court acknowledged that an arbitral tribunal deciding private disputes has many similarities with state courts, in respect of the fact that arbitration is provided for within the framework of the law (national civil procedural laws), in that it decides according to law (at least in that case) and its award enjoys res judicata effect as between the parties. However, those characteristics 17 Case 102/81 Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern AG & Co. KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co. KG [1982] ECR 1095. 18 See Lord Mackenzie-Stuart (1993): ‘Arbitration and the Court of Justice of the European Communities’, 4 ICC Bulletin 1, 51, p. 52; W. van Gerven (1995): ‘L’Arbitrage dans le Droit Européen’, 72 Revue de Droit International et de Droit Comparé 67, p. 73. The Nordsee ruling was confirmed in Case C–126/97 Eco Swiss China Time Ltd. v. Benetton International NV [1999] ECR I–3055. 19 See A. Arnull (1990): ‘References to the European Court’, 15 European Law Review 375, pp. 376–77. 20 See, e.g., K. Lenaerts and D. Arts (1999): Procedural Law of the European Union, Sweet & Maxwell, London, p. 20.

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were not sufficient to give it the status of a ‘court or tribunal of a Member State’ in the meaning of Article 234 EC.21 Since recourse to arbitration was freely decided by the parties and the Member State in question was not involved in their decision, nor was it entitled to intervene automatically in the arbitral proceedings, it followed that the link between the arbitration procedure and the organisation of legal remedies in that State was not sufficiently close so as to make preliminary references under Article 234 EC admissible.22 Nevertheless, the Court of Justice, accepting that the former covers a wide spectrum of the commercial activity, recognised that it would not be proper to deny any access whatsoever to arbitral tribunals dealing with disputes that involve an EC law issue. Such access could be indirect through the intervention of national courts. The latter in the context of their powers of supervision and review over arbitral proceedings and awards may examine those questions and ascertain whether it is necessary for them to make a reference to the Court under Article 234 EC.23 The Nordsee ruling has been criticised severely in the past and continues to be so in the present. It is not the purpose of this contribution to revisit the arguments in favour of or against the admissibility of preliminary references by arbitrators. In my personal view there were two basic concerns that led the Court to that conclusion. One concern must certainly have been the ‘floodgates argument’.24 As the Court of Justice continues to be overburdened, particularly with preliminary references by national courts, this concern is as present as ever.25 The second concern and one of the fundamental grounds on which the Court relied in order to deny access to arbitrators was the absence of a close link between arbitration and the power and authority of a state, that can guarantee that the Article 234 EC procedure is not abused by arbitrators or parties in arbitral proceedings. The fact that Nordsee was decided shortly after Foglia v. Novello26 has not been missed by commentators.27 As Lenaerts and Arts note, 21

Nordsee, supra note 17, at 1110, para. 10. Ibid, at 1110–1111, paras. 11–13. 23 Ibid, at 1111, paras. 14–15. 24 See, e.g., van Gerven’s intervention in the arbitration session of this Workshop; idem, supra note 18, p. 72. See also AG Reischl’s Opinion: ‘. . . one must reflect the risk that the Court of Justice would be burdened with a work-load the extent of which would be difficult to estimate if it were to be thus diverted from its own work to deal with private disputes, often of very minor significance, involving some aspects of Community law’ (Nordsee, supra note 17, at 1122) 25 On the Art. 234 EC debate in view of the Court’s increasing workload see D. Edward (2000): ‘Reform of Article 234 Procedure: The Limits of the Possible’, in O’Keeffe & Bavasso, eds.: Liber Amicorum in Honour of Lord Slynn of Hadley, vol. I, Judicial Review in European Union Law, Kluwer Law International, The Hague/ London/Boston. 26 Case 244/80 Pasquale Foglia v. Mariella Novello Magliano Alfieri (II) [1981] ECR 3045. 27 See R. Hepting (1982): ‘Art. 177 EWGV und die private Schiedsgerichtsbarkeit’, 17 Europäische Rechtsprechung 315, pp. 328–29. 22

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‘by declining jurisdiction to answer questions referred for a preliminary ruling by arbitrators, the Court sought to prevent contracting parties from creating ‘courts and tribunals’ of their own and subsequently inducing (obliging) them to seek preliminary rulings’, since ‘in the Court’s view this mechanism would be endangered if parties to a contract could circumvent it by setting up an arbitration board whose organisation is in no way based on action on the part of the public authorities and which is not recognised as the obligatory legal authority for dealing with a particular class of disputes’.28 This argument can be further developed by reference to Article 10 of the Treaty. It may be submitted that there is a inherent link between Articles 10 and 234 EC:29 the legitimacy of a body to seize the Court of Justice with a preliminary reference entails that Community law binds the former through Article 10 EC and that ultimately a Member State becomes answerable under EC law for the conduct of such bodies.30 Furthermore, Article 10 EC imposes certain duties on national courts with the ultimate aim to guarantee the effective judicial protection of individuals and the uniformity of application and interpretation of Community law through the Article 234 EC procedure. Thus, in Peterbroeck31 and in Eco Swiss national courts were by virtue of Article 10 EC under a duty to raise Community law questions even ex officio and at a late point of the proceedings, in order to proceed to a preliminary reference to the European Court of Justice, because the first instance body did not qualify to do so itself. In this way the Article 234 EC possibility makes a criterion for the effectiveness of the application of Community law by national courts. The problem with arbitration is that the duty of cooperation in Article 10 EC is limited only to Community institutions and to official authorities and organs of the Member States. Arbitrators do not fall into this provision,32 since, although enjoying jurisdictional and quasi-judicial powers, still they remain a 28

See Lenaerts and Arts, supra note 20, p. 24. That there is such a connection between Articles 10 and 234 EC can also be adduced from the letter of Nordsee: ‘the Federal Republic of Germany, as a Member State of the Community responsible for the performance of obligations arising from Community law within its territory pursuant to Article 5 and Articles 169 to 171 of the Treaty, has not entrusted or left to private individuals the duty of ensuring that such obligations are complied with . . .’ (at 1110, para. 12). See further on this issue K. Lenaerts and M. Pittie (1997) : ‘Conclusions Générales’, in R. Briner, Y. Derains et al., eds., L’Arbitrage et Le Droit Européen, Actes du Colloque International du CEPANI du 25 Avril 1997, Bruxelles, p. 209. 30 See case note by J.J. Van Haersolte-van Hof (1995), 6 American Review of International Arbitration 83, p. 85; F. Auletta (1997): ‘Le Questioni Incidentali’, in G. Verde ed., Diritto dell’Arbitrato Rituale, Torino, pp. 203–4. 31 Case C–312/93, Peterbroeck, Van Campenhout & Cie SCS v. Belgian State, [1995] ECR I–4599. 32 See Van Gerven, supra note 18, p. 71 et seq.; P.J. Slot (1996): ‘The Enforcement of EC Competition Law in Arbitral Proceedings’, 23 Legal Issues of European Integration 1, 101, p. 105. 29

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creation of private autonomy. In this respect they cannot directly bind the Member State in which they sit. Such a responsibility of the Member States can only be indirect through their courts, which on their turn must exercise a certain control over arbitral proceedings and awards taking into account Community law requirements. Being bound by Article 10 EC to ensure the effectiveness of Community law, they are precluded from enforcing arbitral awards which are contrary to EC (competition) law.33

1.2. A tempering of Nordsee? Ever since Nordsee it has been submitted that the European Court of Justice should reconsider its ruling by attributing more weight to the fact that arbitrators do apply and, indeed, under certain circumstances are under a duty to apply EC competition law, as directly effective provisions of Community law, which form part of national law. As the Court itself emphasised in Nordsee ‘Community law must be observed in its entirety throughout the territory of all the Member States; parties to a contract are not free to create exceptions to it’.34 Therefore, the argument goes, since arbitral tribunals must apply Community (competition) law, it is because of this and to that extent that they should also have access to the preliminary reference procedure.35 In other words a criterion for the admissibility of such references would not just be the nature of the referring body, but also its obligation to apply EC law.36 A more advanced argument of the same nature albeit taking into account the Eco Swiss case and its implications has been put forward during the proceedings of this conference.37 According to this view, since the Court of Justice recognised that arbitral awards in violation of the Treaty competition rules could be set aside or refused recognition or enforcement as contrary to public policy, thus de facto introducing a duty on arbitrators to respect such rules,38 33 Already before Eco Swiss see Temple Lang (1990): ‘Community Constitutional Law: Article 5 EEC Treaty’, 27 Common Market Law Review 645, p. 649. 34 Nordsee, supra note 17, at 1111, para. 14. See also Case 246/80 C. Broekmeulen v. Huisarts Registratie Commissie [1981] ECR 2311, at 2328, para. 16, according to which ‘it is incumbent upon Member States to take the necessary steps to ensure that within their own territory the provisions adopted by the Community institutions are implemented in their entirety’. 35 See among others G. Bebr (1985): ‘Arbitration Tribunals and Article 177 of the EEC Treaty’, 22 Common Market Law Review 489, pp. 497–98; U. Kornblum (1988): ‘Private Schiedsgerichte und Art. 177 EWGV’, 2 JPS 102 (1988), pp. 109–10; K.P. Berger (1993): International Economic Arbitration, Studies in Transnational Economic Law, Vol. IX, Deventer/Boston, p. 454; F.-B.Weigand (1993): ‘Evading EC Competition Law by Resorting to Arbitration?’, 9 Arbitration International 249 (1993), p. 253. 36 See J.-B. Racine (1999): L’Arbitrage Commercial International et l’Ordre Public, Paris, p. 264. 37 See Basedow’s proposal in the arbitration panel of the current volume. 38 The nature of this duty of arbitrators is debated. According to a balanced reading of Eco Swiss, arbitrators, not being bound by Art. 10 EC, are not under a Community

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the former should be able in a proportional way to hear preliminary references from arbitrators in those particular cases where ordre public comes into play. With all due respect, it is difficult to use as a criterion for the admissibility of references by arbitrators during the course of arbitral proceedings the likelihood of a public policy violation, since the latter will be decided by the national courts on an ad hoc basis at a much later point, after the end of the arbitration process. Then another problem is that the whole preliminary reference procedure is too rigid to accommodate the necessary discretion that this proposal entails for the Court of Justice in the admission of preliminary references. There would have to be a preliminary prima facie examination on its part that there is a valid case appertaining to ordre public, before the reference could be admitted, thus introducing a sort of certiorari, which the Court currently does not enjoy. Additionally, in practice there may be no real necessity to proceed in such a tempering of Nordsee. The prevailing view considers that there has to be a certain degree of seriousness of the infraction of EC competition law, in order for an arbitral award to be considered offensive to ordre public and to be set aside or refused enforcement.39 A complete disregard or unawareness of that law by the arbitrators is certainly objectionable, even if non-deliberate. A fortiori so, when the agreement or practice in question is particularly repugnant, such as price-fixing, market-sharing or bid-rigging. On the other hand, a simple misapplication or incomplete application of EC competition law might not qualify as a violation of ordre public, at least if arbitrators have acted in an honest and diligent way, unless a gross mistake has been committed by them, for example in holding a market partitioning agreement as falling under the de minimis Notice. Therefore, if this is so, I wonder whether the likelihood of an ordre public violation can be a suitable criterion for the admissibility of preliminary references by arbitrators. There are three alternatives: (a) First alternative is that the agreement in question raises no serious competition concerns that could lead to a public policy violation, although the arbitrators may still be in doubt as to certain questions. It is clear that in this case, following the line of argumentation above, they could not seize the Court with their questions, because of the remoteness of

law duty as such to apply EC competition rules. They rather de facto are inclined to do so, in order to avoid the danger of their award’s annulment or non-enforceability on public policy grounds. See among others the arbitration report by Idot in this volume, under II 2.2. in fine; case note by A.P. Komninos (2000), 37 Common Market Law Review 459, p. 475 et seq.; idem, supra note 3, p. 236 et seq. 39 See Weigand, supra note 35, p. 257; P. Schlosser (1997): ‘Arbitration and the European Public Policy’, in: R. Briner, Y. Derains et al., eds., L’Arbitrage et Le Droit Européen, Actes du Colloque International du CEPANI du 25 Avril 1997, Bruxelles, p. 86; case note by L. Idot (1999), Revue Arb. 639, p. 646; C. Liebscher (1999): ‘European Public Policy after Eco Swiss’, 10 American Review of International Arbitration 81, p. 89 et seq.; L. G. Radicati di Brozolo (1999): ‘Arbitrato, Diritto della Concorrenza, Diritto Comunitario e Regole di Procedura Nazionali’, 9 Rivista dell’Arbitrato 665, p. 687 et seq.

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a public policy violation. (b) Second alternative is that the agreement contains competition distortions that are considered particularly objectionable by EC competition law, for example a price fixing or a market-sharing clause. In such cases, where an ordre public violation of the prospective arbitral award that would uphold such clauses is easy to prove, one wonders whether the possibility of the arbitrators to request a preliminary ruling from the Court of Justice would be of valuable assistance to them. Such extremely anti-competitive clauses can already be dealt with by the arbitrators themselves, and even if the latter for some reason are not able to do so, there would be no big benefit for the uniform application of EC competition law, if the Court of Justice intervened, since the issue would hardly be a novel one. (c) Third alternative is that the arbitrators are faced with a competition law issue, which is not prima facie very serious so that it could pertain to public policy, but under certain circumstances important public interests might come into play. If the arbitrators decide the whole issue paying due respect to EC competition law, there are two further possibilities in this grey area: One is that they get the competition issue correctly and no further problem arises. The second possibility is that they err in that application. Still it seems that most likely their error would not lead to a public policy violation, thus, the admissibility of a preliminary reference from them would not be admitted. It, therefore, arises that, bar some boundary cases, the de facto duty of arbitrators, as recognised by Eco Swiss, to apply EC competition law intertwined with their inability to seize directly the European Court of Justice might not be such a paradox.40 Summing up, one may wonder whether a reversal of the Nordsee ruling by the Court of Justice is any longer attainable. Since Nordsee the Court further elaborated its stance towards arbitration in the Almelo41 and ultimately in the Eco Swiss cases. It now appears that a certain balance exists between arbitration and Community law. This balance can be identified in two interconnected levels, one being Article 10 EC and the other Article 234 EC: (a) Arbitral tribunals are not directly bound by Article 10 EC to apply Community law and vice versa they cannot base rights on that provision that national courts may enjoy.42 It is only indirectly that Article 10 EC comes into play, through the intervention of state courts assisting or reviewing arbitral proceedings and 40 See in that respect the thorough analysis made by Radicati di Brozolo, supra note 39, pp. 692–93. 41 Case C–393/92, Municipality of Almelo et al. v. Energiebedrijf Ijsselmij NV [1994] ECR 1477. In that case a Dutch court was sitting on appeal from an arbitral award and had to decide on equity grounds. The Court recognised that ‘it follows from the principles of the primacy of Community law and of its uniform application, in conjunction with Article 5 of the Treaty, that a court of a Member State to which an appeal against an arbitration award is made pursuant to national law must, even where it gives judgment having regard to fairness, observe the rules of Community law, in particular those relating to competition’ (ibid, at I–1515, para. 23). 42 See infra on the question of co-operation between arbitrators and the European Commission.

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awards. Since the state courts are bound by that provision to review awards on Community law grounds, arbitrators are expected in an indirect way to pay due respect to that law. (b) At the same time arbitrators cannot directly seize the Court of Justice by virtue of Article 234 EC, since they are not judicial organs of the Member States. Again, a question of EC law arising in arbitration can reach the Court only indirectly through the state courts, while the latter exercise their functions of assistance and supervision. This balance of indirectness, whether satisfactory or not, is now well established and in view of the Eco Swiss judgment it is very difficult to vary or to scrap altogether.43 One could submit that this indirectness might well be to the favour of the institution of arbitration, since it leaves to the latter a wide range of discretion and freedom to deal appropriately with Community law. At the same time, this flexibility entails a higher degree of responsibility on behalf of the arbitrators. Having these points in mind, it seems to me that the possibility of an indirect preliminary reference through national courts remains at the current stage of development of the law by far the best solution.44

2. Indirect preliminary references 2.1. The possibility of indirect preliminary references through national courts As seen above, the Court of Justice has denied direct access to arbitral tribunals, but it has recognised the possibility of a preliminary question on Community law being brought before it indirectly through the national courts. This could happen either while the arbitration is still going on in the form of a request by the arbitrator for assistance from the national courts, or in the course of a review of the arbitral award by the national courts, or at the stage when an exequatur of an arbitral award is sought after in a national court. It is clear that of all these alternatives only the first one could be used in the context of an

43

See van Gerven, supra note 18, p. 73, who refers to this interconnection between Articles 10 and 234 EC in regard to arbitration. He rightly concludes that any change of attitude on behalf of the Court in considering arbitrators as ‘courts or tribunals’ in the sense of Art. 234 EC would by implication mean that they would also be considered as such under Article 10 EC, thus being directly bound to ensure an effective judicial protection of individuals relying on their Community law rights. 44 According to an eminent academic the current state of affairs is satisfactory, since the EC competition rules are nowadays well known to international arbitrators, so that the latter can deal with them without the need to request the ECJ’s intervention. If under certain specific circumstances such a need arose, the possibility of an indirect reference through national courts is sufficient — see P. Fouchard (1997): ‘L’Arbitrage—Les Règles de Procédure face aux Problèmes Économiques’, 11 Revue Internationale de Droit Europeen 237, p. 252.

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on-going arbitration. The other channels can only be used after an arbitral award has been rendered and one may no longer speak of assistance to an arbitral tribunal, but rather of assistance to a court reviewing the award. However, as opposed to the setting aside and recognition and enforcement procedures, which are a common feature of national procedural laws, specific provisions on assistance provided by state courts to arbitrators during the arbitration proceedings that could be used as a vehicle for an indirect preliminary reference are rather exceptional. In Nordsee the Court expressly referred to two possibilities of national court interference at this early stage: assistance in certain procedural matters and intervention in order to interpret the law applicable.45 Section 45 of the 1996 English Arbitration Act is by far the most suitable national provision that can be used for an indirect preliminary reference to the European Court of Justice and is here our paradigm. Under its wording the High Court ‘may on the application of a party to arbitral proceedings determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties’. Such an application is made either with the consent of all the parties to the arbitral proceedings, or with the permission of the arbitral tribunal if not all parties agree. In the latter case the determination of the question must be likely to produce substantial savings in costs and the application must be made without delay. A Community competition law question is certainly an important issue of law that may have significant effects not only on the on-going arbitration proceedings but also on a much more general scale. Its decision by the Court of Justice through the intervention of the High Court at an early stage, as opposed to the review or enforcement stages, produces substantial savings in costs. It should be noted that the section 45 procedure has its limits in the autonomy of the parties to determine the law and procedure of the arbitral process. Thus, an application for the determination of a preliminary point of law to the High Court can only be made by a party and not by the arbitrators themselves. Therefore, at least one party must be willing to use this possibility, which means that the arbitral tribunal cannot make use itself of section 45 ex officio. At the same time the parties can under section 45(1) exclude this reference to the state court. However, even in such cases the arbitrators may wish to draw the parties’ attention to the advantages of this procedure, when a serious EC competition law question arises that requires a preliminary reference to the European Court of Justice via the High Court. They could argue that it would be less costly, if the parties agreed at this stage to address that question through the section 45 procedure. In this case the efficacy of the arbitral award would be secure, in contrast to an award that risks misapplying mandatory provisions of Community law. It has been submitted that, since under section 82(1) of the Arbitration Act a section 45 application can only be made where the law governing the sub45

Nordsee, supra note 17, at 1111, para. 14.

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stance of the dispute is the law of England, Wales or Northern Ireland, Community law does not fall under this definition.46 However, the Community legal system is an integrated system, where EC law is an integral part of each Member State’s legal heritage47 and it, therefore, should not be considered as foreign to national laws in the private international law or in the comparative law sense. It is beyond doubt that this procedure can be used for EC competition law as well. As was already mentioned, the prevailing pattern in Europe’s arbitration and procedural laws is to exclude ‘dialogues’ between state courts and arbitrators and to ensure the full independence of the arbitral process. The English solution is rather exceptionable and it is recognised that it is in marked contrast to the UNCITRAL Model Law on International Commercial Arbitration, which does not permit judicial determination of preliminary points of law.48 Article 5 of the Model Law expressly prohibits any court intervention, unless specifically and expressly provided so therein. The new German law on arbitration, in force since 1998, has adopted the Model Law and espouses the independence of the arbitral proceedings from any court intervention. Indeed, section 1026 ZPO incorporates Article 5, thus prohibiting court interferences. However, section 1050 ZPO expressly provides that ‘the arbitral tribunal or a party with the approval of the arbitral tribunal may request from a court assistance in taking evidence or performance of other judicial acts which the arbitral tribunal is not empowered to carry out’ (emphasis added). The latter reference to such judicial acts is a departure from the Model Law and echoes the old section 1036 ZPO, which, some minor differences apart, provided for the same possibility. An indirect preliminary reference to the European Court through the intervention of the German courts seems to fit well into this procedure. The old section 1036 ZPO had been thought to encompass applications for preliminary rulings49 and there is no reason why the same should not be accepted for the new provision. The request to the courts is made either by one of the parties with the arbitrators’ consent or by the arbitral tribunal itself. It would therefore seem from the wording that the latter could proceed so even ex officio. However, it is recognised that it is preferable in any case for the arbitral tribunal, in order to avoid 46

See Liebscher, supra note 39, p. 86. Case 26/62 NV Algemene Transport- en Expeditie Onderneming Van Gend en Loos v. Nederlandse Administratie der Belastigungen [1963] ECR 1, at 12. 48 This is so, because the Model Law does not permit review of awards for error of law. See O. Chukwumerije (1999): ‘Judicial Supervision of Commercial Arbitration: The English Arbitration Act of 1996’, 15 Arbitration International 171, pp. 180–81. 49 See W. Kühn (1992): ‘Die Bedeutung der Gerichte bei der Durchführung von Schiedsverfahren’, in K. H. Böckstiegel, ed., Schiedsgerichtsbarkeit im Umfeld von Politik, Wirtschaft und Gerichtsbarkeit, Köln/Berlin/Bonn/München, p. 66 et seq. and p. 68 in particular; F. Hermanns (1997): ‘Public Policy and Arbitration—Cartel Law’, in K. H. Böckstiegel, ed, Acts of State and Arbitration Köln/Berlin/Bonn/München, p. 66. 47

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doubts, to hear both parties and to invite them to make a corresponding statement authorising the request for a preliminary ruling.50 A similar provision exists in Austrian law. Under section 589 of the Austrian Code of Civil Procedure the arbitrators may request the courts to carry out those judicial acts that are necessary for the arbitral proceedings but the former have no jurisdiction to undertake. In all these cases of indirect preliminary references through the intervention of state courts the arbitral tribunal must exercise a high degree of prudence and must always use its best endeavours so that a consent of the parties also exists, bearing in mind the dramatic effects of such a detour on the privity, confidentiality and ultimately on the duration of the arbitral process.51 Party authorisation, although not an absolute requirement, should however always be requested by the arbitrators in all such cases of envisaged indirect preliminary references to the European Court of Justice. Unlike the situation in English, German and Austrian law, where existing specific provisions could be used for an indirect preliminary reference, it will be much harder to do so, when national laws do not provide for such channels and prohibit any state court intervention in arbitral proceedings, as prescribed in Article 5 of the Model Law. However, it is recognised that complete party autonomy and freedom from any judicial interference should not be seen as an absolute principle and might not always be in the best interests of the parties or might not further the efficiency of arbitration in a particular case.52 Thus, section 1(c) of the English Act, which is equivalent to Article 5 of the Model Law in precluding any court intervention,53 except insofar as expressly provided for, is interpreted as reducing the powers of interference of courts but not as extending to cases of courts’ assistance to arbitrators.54 These arguments apart, it remains a fact that in most EU legal systems no provisions exist that could serve as an indirect channel to seize the European 50

See Hermanns, supra note 49, pp. 66–67. See L. Goffin (1990): ‘L’Arbitrage et le Droit Européen’, 67 Revue de Droit International et de Droit Comparé 315, p. 334; Berger, supra note 35, p. 456; J. Erauw (1997): ‘Reference by Arbitrators to the European Court of Justice for Preliminary Rulings’, in R. Briner, Y. Derains et al., eds., L’Arbitrage et Le Droit Européen, Actes du Colloque International du CEPANI du 25 Avril 1997, Bruxelles, p. 129 and p. 134; L. Simont (1998): ‘Arbitrage et Droit de la Concurrence—Quelques Réflexions d’un Arbitre’, in Revue de Droit des Affaires Internationales/International Business Law Journal 4/5, 547, p. 554, who are in favour of the parties’ consent in such cases and stress the fundamental fact of the delay that the preliminary reference procedure entails for arbitration. 52 Theofrastous, supra note 6, p. 460; Chukwumerije, supra note 48, p. 171. See also Berger, supra note 35, p. 198, who thinks that the Model Law maybe went too far in espousing to an excessive degree party autonomy. 53 See A. Samuel (1999): ‘Arbitration Statutes in England and the USA’, 8 Arbitration & Dispute Resolution Law Journal 2, p. 24. 54 The Departmental Advisory Committee in its Report on the Arbitration Bill in February 1996 expressed its favour for the modern approach of the courts to intervene only in order to support rather than displace the arbitral process. See generally Chukwumerije, supra note 48, pp. 175–77. 51

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Court under Article 234 EC during the arbitral proceedings.55 One finds only provisions that usually deal with state court interference in the formation of the arbitral tribunal, in the taking of evidence and in provisional measures.56 Whether such provisions can be relied upon to that end is very unlikely, with the possible exception of provisional measures. Of course, it is up to those national laws and courts to give a solution to this problem. Among the solutions that have been proposed is to provide expressly by means of legislation for such a possibility57 or to explore broadening the functions of the juge d’appui or supporting judge so as to include also the transmission of preliminary references by arbitrators to the Court of Justice.58

2.2. Community law requirements and limits Let us now deal with the following question: Does Community law impose on national procedural rules and on national courts interpreting them any duty in this specific respect? In other words, does the absence of a national provision, that could lead to arbitrators seizing the Court of Justice in an indirect way, offend EC law or its effectiveness? Probably not. The only bearing of EC law in this instance is in the interpretation of national law by national courts, which has to be in conformity to the former. Thus, a national court interpreting a provision of national procedural law, for example a provision that refers to court assistance in certain matters, shall have to proceed in a way that conforms with Community law, and, thus, also with Article 234 EC and with its interpretation in Nordsee by the Court of Justice. Conform interpretation can be an efficient and welcome mechanism in extending court assistance for arbitration proceedings to Article 234 EC. But it has its limits and it cannot go as far as intruding into the procedural autonomy of the Member States. Notwithstanding that,

55

See, e.g., J. C. Moitinho de Almeida (1999) : ‘La Notion de Juridiction d’un État Membre (Article 177 du Traité CE)’, in G. C. Rodríguez Iglesias et al., eds., Mélanges en Hommage à Fernand Schockweiler, Nomos, Baden-Baden, p. 470 with a specific reference to Spanish law. 56 The latter channel has been suggested in Belgium, where the development of the case law on provisional measures might seem to accommodate this possibility. See Goffin, supra note 51, p. 334, according to whom the arbitrators could suggest to the parties to request from the juridiction de référé to submit to the ECJ questions of EC law. 57 E.g., in the Netherlands it has been proposed to add a new Art. 1044a in the Code of Civil Procedure, which would require Dutch arbitral tribunals to have an EC law question submitted to the ECJ through the President of the District Court of Amsterdam (see Berger, supra note 35, p. 457). 58 See in the context of French law L. Idot, supra note 38, under III 2.1. in fine. In Italian law it is debated whether Art. 819(1) of the Code of Civil Procedure may apply by analogy, which refers to the decision of incidental questions by state courts. Arbitrators could stay the proceedings and invite the parties to submit the specific incidental question to national courts, which on their turn can refer it to the ECJ (see E. D’Alessandro (1997): ‘Pregiudizialità Comunitaria ed Arbitrato Interno’, 7 Rivista dell’Arbitrato 445, pp. 449–51).

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such an intrusion would be entirely disproportionate, since the effectiveness of Community (competition) law is protected at the later stage of setting aside and enforcement proceedings of arbitral awards.59 True, the absence of any mechanism of indirect preliminary reference procedure at an earlier point is disappointing, but not intolerable, in view of the other possibilities just mentioned. By the same token, the existence of an indirect possibility to seize the Court of Justice with a preliminary ruling at the stage of the arbitral proceedings does not mean that national courts are not under a duty to exercise an adequate degree of control over arbitral awards at the later stage of recognition and enforcement or in setting aside procedures. Such a view60 relies on the fact that the Court in Eco Swiss specifically justified the necessity of intensified state court over arbitral awards by having recourse to the arbitrators’ inability to forward preliminary references on questions of EC law to it.61 However, this argument is in conflict with the Court’s powerful assertion that EC competition law forms part of ordre public communautaire, which itself is integrated in the notions of public policy of each national legal system.62 If an arbitral tribunal endorses in its final award a ‘hopeless’ agreement, the fact that there was a possibility under the applicable national procedural law for an indirect preliminary reference through national courts seems immaterial. A final issue remains to be treated at this point. Although the Court of Justice does not usually determine whether the preliminary reference is made in accordance with the national procedural rules, nor does it examine the reasons that the national judge had when referring, it nevertheless requires that the preliminary reference is based on a real dispute and on a pending case before the national court.63 The preliminary reference procedure is not an autonomous non-contentious procedure, whose rulings are of an advisory nature. Instead it was perceived as an incidental procedure, that renders rulings, which are preliminary to the final judgement to be rendered by the national court itself. Does the indirect nature of the particular preliminary reference, where the main proceedings are before the arbitrators, comply with the character of the Article 234 EC procedure as such?64 59

This is so as a result of the Eco Swiss ruling. See Liebscher, supra note 39, p. 85 and p. 93. 61 Eco Swiss, supra note 18, at I–3093, para. 40. 62 Eco Swiss, supra note 18, at I–3092, paras. 36–39. Compare S. Poillot-Peruzzetto (2000): ‘L’Ordre Public International en Droit Communautaire: À Propos de l’Arrêt de la Cour de Justice des Communautés du 1er Juin 1999 (Affaire Eco Swiss China Time Ltd.)’, 127 Journal de Droit International (Clunet) 299. See also Radicati di Brozolo, supra note 39, p. 684, who rightly submits that the 234 EC arguments used by the Court in Eco Swiss does not reduce its ordre public communautaire argumentation and, he goes on to say, these arguments could be thought of as obiter dicta. 63 E.g., Foglia v. Novello (II), supra note 26, at 3062, para. 14 et seq. 64 On this problem see the analysis of Lenaerts and Pittie, supra note 29, pp. 210–11. See also Hepting, supra note 27, p. 330; Bebr, supra note 35, p. 500; L. de Gryse (1994): ‘Quelques Propos sur l’Arbitrage en Matière des Brevets d’Invention’, in Jura Vigilantibus, Antoine Braun, les Droits Intellectuels, le Barreau, Bruxelles, p. 113. 60

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There is no doubt that even where the national court, in the context of ongoing arbitral proceedings, merely transmits the Community law question to the European Court of Justice, such preliminary references would be admissible, notwithstanding the fact that the referring judge is only faced with such a Community question in an indirect way. National courts in the exercise of their duties of supervision over arbitration proceedings and awards are not to be thought as mere intermediaries between arbitration and the European Court of Justice. Even where a national court intervenes only to address a Community law question, it becomes a Community court of its own, a juge communautaire de droit commun, dealing with a real and pending case of an adversary nature, which deserves to be referred to the European Court.65 In principle the national court enjoys discretion whether to address an Article 234 EC reference to the latter, even if the parties to the arbitration or the arbitral tribunal itself have— in their application or transmission of the case—expressly specified the necessity of a preliminary reference.66 The European Court will address its judgement to the referring court, since it was through the latter that it was seized with the issue and it will be up to the national court to make the preliminary ruling effective in the frame of its national law, by subsequently transmitting it to the arbitral tribunal. In any case, this ‘mediation’ of the national courts between arbitration and the European Court of Justice is nothing but a result of the Nordsee ruling which denied arbitrators direct access to itself.

IV. Assistance by the Commission An important mechanism, which is at the disposal of national courts dealing with EC antitrust issues, already under the current system of enforcement, is the facility to seek for the Commission’s assistance. The European Court of Justice has stressed in numerous cases the duty of the Commission to assist the national courts in this respect, a duty that emanates from

65

See Lenaerts and Pittie, supra note 29, p. 211. That the intervening national court does not loose its discretion to refer the EC law issue to the ECJ can be deducted from the language of the Nordsee ruling, according to which ‘it is for those national courts and tribunals to ascertain whether it is necessary for them to make a reference to the court under Article 177 of the Treaty in order to obtain the interpretation or assessment of the validity of provisions of Community law which they may need to apply when exercising such auxiliary or supervisory functions’ (Nordsee, supra note 17, at 1111, para. 15, emphasis added). In practice it will be extremely unlikely for the national court to deal with the Community law question itself without seizing the ECJ, as requested by the arbitrators or by the parties. This could happen only if the questions concerned are of a spurious or impertinent nature for the resolution of the dispute, or if the issue that has arisen evidently is acte clair. 66

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Article 10 EC.67 To this end the Commission has published a Notice68 that contains detailed provisions on this mechanism, although one has to admit that to date national courts have not made considerable use of the procedures enshrined therein.69 An express legislative provision in Article 15(1) of the proposed regulation on EC competition enforcement incorporates these principles therein and establishes a right for national courts to obtain from the Commission legal or economic information, or to ask for an opinion on questions relating to the application of Community competition rules. It is envisaged that a new Notice on co-operation will further develop the details of such a procedure while providing also for a deadline, within which the Commission must reply.70 In any case any opinion given by the Commission under this mechanism does not bind national courts. As is the case with Article 234 EC, neither Article 10 EC nor Article 15(1) of the proposed regulation can provide for a legal basis for a formal co-operation between the Commission and arbitrators in the sense of the former being bound to offer assistance on a specific competition-related issue to the latter. Arbitral tribunals are not judicial organs of the Member States, to which Article 10 EC is addressed.71 This means that on the one hand they are immune of any duty of co-operation stemming from this provision, but on the other hand Community institutions are not bound to co-operate with them, as is the case with national courts. Nevertheless, on an informal basis, arbitrators should be able to seek the Commission’s assistance, whenever a legal or factual problem arises in regard to a question of enforcement of EC competition law. Any disrespectful attitude of the Commission towards arbitration in this regard would run counter to the 67

In Case C–2/88 Criminal Proceedings against J.J. Zwartveld et al. [1990] ECR I–3365, at p. 3372, paras. 17–18, the ECJ stressed that the principle of sincere cooperation in Art. 10 EC is not one-sided, namely it does not impose duties only on Member States, but it covers also Community institutions, which have a duty to co-operate with Member State authorities, in particular, judicial authorities, which are responsible for ensuring that Community law is applied and respected in the national legal system. As far as EC competition law enforcement is concerned, in Case C–234/89 Stergios Delimitis v. Henninger Bräu AG [1991] ECR I–935, at I–994, para. 53 the Court reiterated this duty of co-operation on the part of the Commission by stating that national courts may address the former and seek economic and legal information. 68 Commission Notice on Cooperation between National Courts and the Commission in Applying Articles 85 and 86 of the EEC Treaty, OJ C39/5 [1993]. 69 In 1999 national courts used only in five cases the Notice on Co-operation in order to ask for assistance by the Commission of the European Communities (see XXIXth Report on Competition Policy — 1999 (Brussels, 2000), p. 17). 70 See the article-by-article Explanatory Memorandum preceding the text of the regulation proposal under Art. 15. The Commission reiterated this intention in its XXXth Report on Competition Policy — 2000, Brussels 2001, para. 57, p. 23. 71 According to the Commission’s Explanatory Memorandum (at p. 8) Art. 15(1) of the proposed regulation codifies ‘the existing obligation of the Commission, based on Article 10 of the Treaty, to cooperate with national courts’.

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long-established recognition of arbitration in all Member States as an alternative judicial forum. At the same time, it would not serve the Commission’s purpose to further the private enforcement of EC antitrust law, and it might alienate arbitrators, with the possible repercussion that the latter would rather suppress a difficult competition law issue, instead of running the risk to decide it wrongly themselves and consequently to expose their award to an annulment action. Finally, a negative approach towards such requests of assistance by arbitrators would not be in conformity with the Commission’s central role in the enforcement of the competition law regime of the Treaty.72 It is true that the Notice on co-operation ignores arbitrators,73 but this is natural, bearing in mind that it was basically a follow-up of the Court’s jurisprudence on the Commission’s duty to co-operate with national courts based on Article 10 EC.74 However, the soft law nature of such an instrument means that its mechanism could be used by analogy also by arbitrators.75 Indeed, there have been many indications that the Commission has been quite open in providing assistance to arbitrators applying EC competition law. It has been noted that the Commission has on occasions treated arbitral tribunals in the same way as national courts under the existing Notice on co-operation.76 As arbitrators will be applying Article 81(3) EC, which admittedly entails more elaborate competition-related economic and legal questions, and as arbitration will increasingly be seen more favourably by the Commission, the latter is expected to co-operate more wilfully with arbitral tribunals in appropriate cases. Whether the request of such information or assistance by the Commission is desirable, is, of course, only for the arbitrators to decide. However, it is a question of the law governing the arbitral process and of the arbitration clause itself, whether an arbitrator may use such a facility sua sponte. This is a sensitive issue, because the privity of the arbitral process recedes, and arbitrators will have to show extreme diligence. Indeed, according to one view arbitral tribunals should abstain from seizing the Commission, since the parties have submitted their dispute only to them and the applicability of Article 81 EC is still a question of law, which only they should deal with.77 Most likely, they could take such an

72

According to Art. 85 EC ‘the Commission shall ensure the application of the principles laid down in Articles 81 and 82’. 73 Arbitration is also not mentioned in the state aids co-operation Notice (Commission Notice on Cooperation between National Courts and the Commission in the State Aid Field, OJ [1995] C312/7). On the possible application of Art. 88(3) EC by arbitrators see Slot, supra note 32, p. 110 et seq.; Lenaerts and Pittie, supra note 29, p. 196. 74 See L. Idot (1996): ‘Arbitrage et Droit Communautaire’, in Revue de Droit des Affaires Internationales/International Business Law Journal 5, 561, p. 572. 75 See in that respect Slot, supra note 32, p. 112; Lenaerts and Pittie, supra note 29, p. 549 et seq.; Radicati di Brozolo, supra note 39, p. 676. 76 See Temple Lang, supra note 5, p. 418; De Gryse, supra note 64, p. 114; Simont, supra note 51, p. 550. 77 See Goffin, supra note 51, p. 333.

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initiative, if one of the parties has filed a complaint with the Commission, thus having brought the matter already to its attention, if both parties consent, or if the terms of reference of the arbitration allow that.78 In any case, specific consultations with and hearing of all parties seem to be necessary.79 Indirectly an arbitrator could enjoin the parties to supply him with certain legal or economic information or data, while stressing to them that they could request that information from the Commission.80 In the future it might even be desirable for the Commission to publish a Notice on co-operation with arbitral tribunals. Such a Notice could provide for a more structured dialogue between the Commission and arbitrators, while increasing the transparency of the whole system of co-operation. It would also raise the EC competition law awareness of arbitrators and of the parties to an arbitration, without encroaching on the flexibility and privity of the arbitral process. In any case the Commission would not be legally bound to provide such assistance to arbitral tribunals, although it is evident that it is to its interest to do so.81 This comes as a direct consequence of the non-applicability of Article 10 EC to arbitrators. Since the latter are not under any duty, as a question of EC law, as against the Community institutions, similarly the Commission should not be so bound. As for the kind of assistance that arbitrators could request, this would not be substantially different from that, which the courts may request.82 It covers factual information, for example questions on the identity of the undertakings concerned, or information whether a certain case is pending before the Commission, or whether the latter has reached a decision or a reasoned opinion in this matter. It may also refer to a legal issue of EC competition law, as well as to economic data, such as statistics, market characteristics, and economic analyses.

78

See Simont, supra note 51, p. 550 et seq., according to whom the arbitrators, who are contractually bound with the parties, could be personally liable, if they exposed them to proceedings (before the Commission) that can lead to fines. The same, according to the author, should be accepted even in case the agreement in question has already been notified to the Commission: the arbitrators should again avoid asking for the Commission’s assistance without the parties’ consent, because, since the Commission’s workload makes it uncertain whether notified agreements are ever examined, it would still be objectionable to ‘awaken sleeping dogs’! 79 See M. Blessing (2000): ‘Introduction to Arbitration—Swiss and International Perspectives’, in S. Berti, H. Honsell et al., eds., International Arbitration in Switzerland, An Introduction to and a Commentary on Articles 176–194 of the Swiss Private International Law Statute, Basel/The Hague/London/Boston, p. 235. 80 See Simont, supra note 51, p. 550. For such an indirect possibility for the Commission to assist national proceedings see para. 42 of the current Notice on cooperation, which states that the Commission may be seized indirectly to assist the course of a national proceeding, when parties have been ordered by the court concerned to provide certain information. 81 See Lenaerts and Pittie, supra note 29, p. 218. 82 See, e.g., para. 37 et seq. of the existing Notice on co-operation.

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In addition to such ways for arbitrators to seize the Commission, informal and indirect channels may equally be as effective. The Commission has declared that it ‘will remain open to discuss specific cases with the undertakings where appropriate; in particular, it will provide guidance regarding agreements, decisions or concerted practices that raise an unresolved genuinely new question of interpretation’.83 Such a channel is clearly open only to undertakings and not to arbitrators deciding a case. The latter should actually avoid such an informal venue because of the lack of any transparency of that procedure. If, however, a party to the arbitration proceedings were to contact the Commission on a specific issue, and if the Commission were finally to issue a reasoned opinion as a response to such communication, undoubtedly that opinion, although formally not binding on the arbitration proceedings, would carry such a degree of persuasiveness that the arbitral tribunal would welcome and certainly not ignore.

V. EXCURSUS: Non-EU Arbitral Tribunals Community competition law may arise in and may be applied by arbitral tribunals sitting not only in the territory of the European Union, but also in other extra-EU jurisdictions. What then happens with these ‘foreign’, i.e., non-EU arbitral tribunals? Can they seize the European Court of Justice or the Commission in order to be assisted in the application of EC antitrust? A certain issue, which might be difficult to determine is the ‘nationality’ of an arbitral tribunal. As has been rightly observed, that is a technical difficulty, with which Article 234 EC cannot cope with,84 and sometimes has been used as an argument against the admissibility of preliminary references by arbitrators altogether. The Court of Justice in numerous occasions of preliminary rulings has stressed the particular importance and objective of Article 234 EC, always using a geographical reference, namely that it is within the Community that divergences in judicial decisions on questions of Community law are to be prevented.85 There is hardly any doubt that a foreign arbitral tribunal, even if

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See the Explanatory Memorandum, p. 10. The Commission adds that in such cases it may issue reasoned opinions, without, however, the companies being entitled to obtain such opinions. A further clarification of this possibility will take place in the envisaged future Notice. 84 See Erauw, supra note 51, p. 127; Lenaerts and Pittie, supra note 29, p. 211. 85 E.g., Case 107/76 Hoffmann-La Roche v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH [1977] ECR 957, at 973, para. 5 (‘in the context of Article 177 . . . the particular objective of the third paragraph is to prevent a body of national case-law not in accord with the rules of Community law coming into existence in any Member State’ —emphasis added); Case 283/81 Srl CILFIT & Lanificio di Gavardo SpA v. Ministry of Health (I) [1982] ECR 3415, at 3428, para. 7 (‘Article 177 seeks to prevent the occurrence within the Community of divergences in judicial decisions on questions of Community law’ — emphasis added).

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Nordsee were reversed, cannot proceed to a preliminary reference to Luxembourg. The same goes for foreign (non-EU) courts that may be acting in support or supervision of those non-EU arbitral proceedings and awards. On the other hand, EU courts reviewing foreign (non-EU) arbitral awards can always seize the Court of Justice. Another possibility for a question of EC (competition) law, arising out of such arbitral proceedings, to reach the Court is when the parties to these extra-EU arbitral proceedings request the assistance of an EU national court outside the seat of the arbitration.86 That national court could conceivably proceed to a preliminary reference. Any other solution would mean that every foreign court or arbitral tribunal dealing with issues of Community law could seize the European Court of Justice under Article 234 EC. Indeed, thousands of cases are decided in all jurisdictions of the world, where foreign law arises as the principal or as an incidental issue in a dispute. Each judicial system has its own procedural and substantive rules to deal with such issues. In some jurisdictions foreign law is considered to be a factual, in others a legal parameter. Detailed rules of evidence address successfully or unsuccessfully the problem. To be sure, mistakes, even gross ones, in the application of foreign law do happen. But to suggest that such questions of foreign law should or could be forwarded to and decided by the courts of the state, whose law is at issue, is purely absurd. Therefore, arbitral tribunals sitting in non-EU countries, when faced with an issue of EC competition law, cannot hope under any circumstances to seize the European Court of Justice and will have to deal with the issue by themselves.87 Be it as it is as far as the Court of Justice is concerned, there is no reason why the Commission should not offer its assistance to such arbitral tribunals. In the first place, in today’s globalised commercial world it would be futile to distinguish between EU and non-EU arbitral tribunals, since it is quite often difficult to identify the ‘nationality’ of an arbitral tribunal. Secondly, if the main duty and concern of the European Commission is to ensure that the principles of Articles 81 and 82 EC are effectively applied and that the conditions of free and undistorted competition are fulfilled in the European Union, what is of importance is whether some anti-competitive agreements or practices affect the

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An example is a non-EU arbitral tribunal or the parties of that arbitration requesting an English court to grant certain provisional measures. According to s. 2(4)(b) of the 1996 Arbitration Act the English court has discretion to exercise such a power, if certain conditions are met. 87 On the possibility to request assistance from the Commission see infra. If an arbitral tribunal is sitting in a non-EU country, which is a signatory of the 1968 European Convention on Information on Foreign Law, it may theoretically request a court in that jurisdiction to transmit a question on foreign law, presumably also of EC competition law, the latter being part of EU countries’ national laws, to a ‘receiving agency’ in an EU Member State. However, there is no way that receiving agency could seize the ECJ.

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Common Market.88 EC competition law may be enforced extraterritorially against anticompetitive acts, as long as the latter are implemented or produce their effects inside the EU territory, no matter if they were concluded in or directed from a third country. By the same token, if there is an on-going arbitration outside the European Union, and if an issue arises pertaining to EC antitrust law, it would be rather contradictory for the Commission to deny access to its resources to such an arbitral tribunal. The Commission should entertain such a request without examining the nationality of the arbitrators and parties involved or the applicable law of the dispute (lex causae). The only concern must be whether there is a genuine dispute, which prima facie entails some conduct caught by the EC antitrust rules.

88 See A. Rigozzi (1996): ‘L’Art. 85 du Traité CE devant le Juge Civil Suisse: Les Contrats de Distribution à l’Égard de l’Art. 19 LDIP et la Nouvelle Loi Fédérale sur les Cartels’, Swiss Papers on European Integration, No. 2/96, Bern/Zürich, p. 57, who goes even further by suggesting that the Commission, in order to assure the effectiveness of EC competition enforcement, should also entertain requests of assistance by Swiss courts.

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Panel Four: Criminal Sanctions M Z—My assignment for this Workshop was to discuss whether the existing instruments for enforcing EC competition law—and, in particular, fines applicable to undertakings—should be supplemented with criminal sanctions for the individuals responsible for the breach of EC competition rules. Perhaps I should say from the very beginning that personally I am not in favour of introducing criminal sanctions, particularly imprisonment, in this area of Community law enforcement. Company managers do earn a lot of money, but this is hardly a sufficient reason for introducing sanctions that have serious consequence for the lives of people, not in the least in terms of their personal and professional reputation. At the same time, I understand that there is an objective need for more effective instruments in the enforcement of EC competition rules. When talking about the introduction of criminal sanctions, we should distinguish between imprisonment and fines levied on individuals. The latter type of sanction belongs to the sphere of administrative criminal law. This is part of a broader area of criminal law in which other types of sanctions are used, such as imprisonment. The main difference between administrative criminal law fines and imprisonment is that the former have less severe moral consequences for the sanctioned individual. This aspect should not be disregarded. In considering whether to use criminal sanctions in the enforcement of EC competition law, the first issue to be clarified is whether the EU has competencies in the area of criminal enforcement. In Germany, for instance, the general view is that competence to legislate in the area of criminal law is an expression of the sovereignty of the nation state. I believe that this interpretation is wrong; no legislative prerogatives are based directly upon the concept of national sovereignty. It is nevertheless true that the EC Treaty, which divides legislative competencies between the EU and its Member States, does not expressly give the Community the competence to legislate in this area. Notwithstanding this, I believe that any proposal to introduce criminal sanctions in the application of EC competition rules could be presented as a procedural corollary to the Community’s exercise of competence in the area of competition law enforcement. Of course, not everybody would agree on this point. For instance, the German government has argued before the ECJ1 that, because Art. 83(2)(a) EC nominates only fines as a sanction available in the enforcement of EC competition rules, it must be concluded that criminal sanctions are excluded from the instruments available to the Community for this task. However, Article 87 EC mentions fines only by way of example. This formulation does not exclude the possibility of introducing and using criminal sanctions. Another line of argument against the introduction of criminal sanctions is based on the principle of democratic legitimacy in the legislative process. As


1

Case C–240/90 Germany v. Commission [1992] ECR I–5367, at 5391 and 5392.

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the argument goes, the adoption of criminal legislation at the EU level would require the co-involvement of the European Parliament in the legislative process, but as the European Parliament does not have legislative powers in the area of competition law, the adoption of such legislation would be against the principle of legitimacy. In my view, this line of argumentation is not sustainable either. For instance, even the German Constitutional Court, in its Euro-sceptic judgment on the Treaty of Maastricht, confirmed the democratic legitimacy of legislation adopted by the Council. At any rate, this problem could be circumvented by relying on the harmonisation clause in Article 95 EC, which establishes a procedure that involves the European Parliament. In sum, I am convinced that the EU has the ability to legislate in the area of criminal law if it wishes to do so. An altogether different matter is whether the introduction of criminal sanctions for the enforcement of EC competition rules is advisable and justified. For instance, one would have to consider that the Commission does not currently perform prosecutorial functions, and these are indispensable in criminal law proceedings. Setting up specialised chambers of the European courts and introducing the institution of EU prosecutors specialised in criminal law proceedings would require a considerable investment. Decentralising the application of such sanctions is not a better solution, for two reasons: (1) criminal prosecutors in the Member States are not familiar with the application of EC competition law, and (2) in the current procedural framework, national courts will face considerable problems in establishing the facts relevant to EC competition law cases. On a more general level, the introduction of criminal sanctions into EC competition law enforcement is closely tied to political acceptance of the idea of creating a Community system of criminal law. In other words, if there are political reservations about adopting criminal provisions at the European level, then the idea of introducing criminal sanctions in the area of EC competition law should also be dismissed. Moreover, one should carefully consider all the possible implications and pre-requisites for introducing criminal sanctions in the application of EC competition law. Nobody should be sent to jail in unclear situations. The system should guarantee that the rights of the defendants are respected. This might even require the adoption of an EU Criminal Code. Last, but not least, the effectiveness of criminal sanctions is doubtful. For instance, is it cost-effective to set up a whole new system of specialised court chambers, prosecutors, etc.? To conclude, I am quite sceptical about the benefits of setting up a criminal law enforcement system at the European level, and I do not support the introduction of a severe criminal sanction such as imprisonment for individuals who infringe EC competition rules. An altogether different matter is the introduction of fines applicable to individuals. This kind of criminal sanctions does not have the same moral connotations as imprisonment, which is not to say that the former can be applied without adequate procedural guarantees for the prosecuted.

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I finally wanted to draw your attention to the potential conflict that may arise from the parallel application of sanctions to both undertakings and the responsible individuals. For instance, the owner would suffer a double punishment in the case of individually owned firms. However, this problem can be eliminated by applying only the higher of the two fines. As to the criteria for determining the amount of individual fines, Article 15 of Regulation 17/62 stipulates that, in fixing the amount of that undertakings will be fined, regard shall be given to the gravity and duration of the infringement. The same criteria can be applied for determining the amount of the individual fines. If the amount of the fines levied on individuals was to be determined exclusively with a view to maximising the preventive effects of the sanction, such an approach would enter into conflict with the principle of proportionality of justice specific to the area of criminal law.
W P.J. W—In my intervention I will explore the question of whether the existent sanctions, such as the fines applicable to undertakings that infringe EC competition rules, should be supplemented with criminal sanctions on the individuals responsible for the infringement. The question is addressed mainly from the perspective of the effectiveness of EC competition law enforcement. In addition, I will discuss whether the introduction of such sanctions is possible under the EC Treaty. The only sanctions currently available for the enforcement of EC competition rules are fines levied on undertakings. The modernisation project does not foresee any changes in this respect. The Commission has thus far avoided imposing a fine on an individual even in those cases where it could have done so because the individual constituted the undertaking. The range of sanction available in the enforcement of antitrust rules infringements is broader in the US, where the Sherman Act offers the legal basis for applying criminal sanctions to the individuals responsible for the antitrust infringement, including fines and imprisonment. It took some time before such sanctions were actually imposed, but an average of ten people per year are now sent to prison for infringement of the Sherman Act. Who actually commits antitrust infringements, and why? I think that, in general, there are two types of antitrust offences. The first type is where the antitrust infringement is committed in the interest of the firm, that is, in order to increase the firm’s profits. The second includes situations whereby, for example, notwithstanding a clear policy of the company against it, the manager of a branch registering losses nevertheless decides to infringe antitrust rules in order to preserve his/her position. It is important to distinguish between these two possibilities, because the most effective deterrents may be different in each case. Why does it make sense to impose antitrust sanctions on companies? There are at least two good reasons for it. The first is that such sanctions allow the antitrust authorities to exploit the companies’ ability to influence and control the behaviour of their managers. It is obvious that companies are the

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best-placed entities to ‘police’ the behaviour of their managers and prevent antitrust infringements. The second is related to what the economists call ‘moral hazard’. If antitrust sanctions were to apply only to the responsible individuals and not to the companies themselves, the latter might encourage their managers to breach antitrust rules because such actions would bring them only profit and no loss. Therefore, this debate is not about replacing the current sanctions applicable to companies with sanctions applicable to the responsible individuals, but about complementing the former with the latter. Relying on sanctions that are applicable only to companies is ineffective for two main reasons. One is that an effective deterrent effect of antitrust enforcement can be achieved only with very high fines. The other is that, in a number of circumstances, the fines applicable to companies do not guarantee adequate incentives for their managers. To illustrate my statement with respect to large fines, my written contribution gave the example of a price-fixing agreement in breach of Article 81 EC. I tried to calculate the level of the fine that would have to be applied so that the sanction would be effective as a deterrent. I assumed first, based on evidence available from some US studies, that a cartel would raise prices by 10 per cent on average. This does not mean that the profit of the cartel members will also rise by 10 per cent, as that would occur only in conditions of total price inelasticity. However, for the purposes of this inquiry, I assumed that there is price elasticity, so that the cartel members will increase by 5 per cent the profits derived from the products covered by their agreement. I also supposed that the price-fix would last for about five years. (If we look at real cartel cases, it is not unusual for a cartel to function for as long as five years before being discovered and sanctioned). Finally, I assumed a probability of about 16 per cent that the price-fixing agreement would be detected. (According to some estimates, the probability that a cartel be detected by the US antitrust authorities is somewhere between 12–17 per cent. Thus the assumption on this point is quite generous, as the EC competition authority has weaker enforcement powers than its US counterparts.) Based on such assumptions, a fine would be effective in deterring companies from entering into a price–fixing agreement only if it exceed 150 per cent of their annual turnover derived from the affected products. And this estimate does not even take into account aspects such as the interest gained by the cartel members on the extra profit derived, or psychological aspects such as the company managers believing that they will never be discovered. What is the level of fines today? This question is a bit difficult to answer because the Commission stopped calculating fines as a percentage of turnover a few years ago. It used this method in the past and, although such calculations were not made public, some judgments of the Court of First Instance would contain information on this point. It seems fines never exceeded 9 per cent of annual turnover. In the Cartonboard case,2 for example, the fine imposed by the Commission was about 1 per cent of the annual turnover. Fines may possibly 2

Commission Decision of 13 July 1994 Cartonboard cartel [1994] OJ L243/1.

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be higher now, but they are certainly not higher than 15 per cent of the annual turnover, except perhaps in cases such as Aminoacids,3 where there is an infringement of Article 81 EC by very large companies operating in very narrow product markets. However, in order to have effective enforcement, the current level of fines would have to multiply by 10. This is impossible for a variety of reasons, which I will now explain. First, Regulation 17/62 establishes a maximum ceiling of 10 per cent of the worldwide annual turnover for fines. Of course, this is not the same as the annual turnover for the product concerned, but it would usually still be a tight limitation unless the products concerned by the price fix were to represent less than 1/15th of the total turnover of the company. Secondly, companies do not have the ability to pay very high fines. Fines at the level of 150 per cent of the annual turnover for the product concerned would lead the majority of companies to insolvency. At any rate, the profits gained by companies from the price-fix would have been dissipated in wages, taxes, dividends, or whatever. Another way to look at the inability-to-pay problem is to check the ratio between the companies’ annual turnover and their assets. It is well known that the majority of companies have an annual turnover that is much higher than their assets. This means that, even if the companies were obliged to sell their assets in order to pay the fine, they would still not be able to raise a sum amounting to 150 per cent of their annual turnover. Thirdly, imposing high fines brings about social costs. Even if the fined companies are not made insolvent, there are social costs for their creditors, their workers and taxpayers. One would also have to consider the administrative costs related to the enforcement of high fines: even with the current level of fines, the Commission spends considerable time and resources in litigation in order to enforce the fines imposed. Fourthly, very high fines are incompatible with requirements of proportional justice. For instance, Article 49(3) of the EU Charter of Fundamental Rights establishes that sanctions should be proportional to the infringement of the law. To act as a disincentive, fines should be multiplied because of the low probability of detection. But it is unlikely that any court of law would consider such multiplication to be acceptable. Even in the US, antitrust fines cannot exceed an amount that is double the profit derived. Last but not least, fining companies large amounts does not solve of problem of a lack of incentives for the company managers to restrain from infringing competition rules. This is because, at the end of the day, companies do not have the ability to totally control the behaviour of their agents. Managers can always move to another company. Moreover, it is very costly for companies to exert very tight control over the behaviour of their managers. Companies may in practice also be management-controlled (which is certainly more common in Europe than in the US). In such cases, imposing high fines on the company does not really help, as they will eventually be paid by the shareholders. 3

Commission Decision of 7 June 2000 Amino acids [2000] OJ L152/24.

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To sum up, the most profitable types of antitrust infringements are those that are relatively easy to hide, such as price-fixing. A simple cost-benefit calculation will only encourage companies to infringe the law, unless there is a strong moral commitment to preserving competition values. Even in the case of less profitable antitrust infringements, the problems related to the lack of incentives for company managers (especially in management-controlled companies) would still subside. In such circumstances, one could even go as far as considering whether the enforcement of anti-cartel rules is no more than a waste of time and resources. The next step is to consider whether it is possible to increase the effectiveness of antitrust enforcement in the EU. Preserving a notification and prior administrative approval system would not help, and the most serious infringements of EC competition law (such as price-fixing agreements) are not brought to the attention of the Commission anyway. Private enforcement of EC antitrust rules may be a good solution for certain situations. For instance we might think that the involvement of the national courts in the application of EC competition rules will multiply the number of enforcers and reduce problems related to proportional justice. However, strengthening the private pillar of EC antitrust enforcement will not eliminate problems such as the inability of companies to pay large fines, the lack of incentives for managers to comply with the law, and so on. Another line of action would be to increase the rates of detection by, for example, introducing of leniency programs, allocating more resources to the cartel unit in DG Competition, and so on. For reasons that I mentioned before, I do not believe that such measures will bring about a sharp increase of the detection rate: price-fixing agreements are easy to hide and very drastic interventions by the enforcer would be unacceptable in democratic societies. All things considered, I believe that introducing sanctions against the individuals responsible for companies’ anti-competitive behaviour would be the only way to move ahead. First, the introduction of such sanctions would eliminate the problem of companies’ inability to pay excessively large fines, as the fines on companies could be supplemented with those levied on individuals. Secondly, it would solve the problem of companies’ inability to fully control their managers—and this is also a reason why companies sincerely wishing to respect EC competition rules should not oppose the introduction of such sanctions. Thirdly, sanctioning individuals helps company managers to resist employer pressure to infringe EC competition law. Personal sanctions strengthen each individual’s moral commitment to the rule of law. I am certainly not pleading to eliminate the existing sanctions against companies that infringe. I only argue that we should add sanctions against individuals to the existing corporate sanctions. Besides the arguments in support of this proposal that I have already outlined, I would add that the combination of the two types of sanctions will help reduce the risk of asset–shifting (that is, the shifting of assets from a company that is about to be sanctioned to its entrepreneurs so as to avoid payment). Moreover, the parallel applica-

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tion of the two kinds of sanctions reduces both the administrative and the social costs of enforcement. Administrative costs will be reduced if the two types of sanctions are applied as an outcome of a single enforcement procedure. Social costs will be reduced because neither of these types of sanctions would have to be excessively strong. Indeed, I believe that the negative side effects of sanctions increase more than proportionally with the severity of the sanction applied. Finally, as the US experience shows, the availability of both individual and corporate sanctions strengthens the position of the antitrust authority during investigations and puts it in a stronger position during settlement negotiations. Why imprisonment? Wouldn’t it be enough to just fine individuals? Here again, there are a number of reasons in favour of introducing imprisonment sanctions against culpable individuals. The first is, again, related to the impossibility of paying excessively high personal fines. Second, and very important, imprisonment would help to negate the indemnification phenomenon: for instance, if a company wants to push its managers into infringing competition rules, the possibility of being fined would not necessarily be a sufficient deterrent for the latter, as it is quite easy for the company to ‘reimburse’ the managers for the amount they paid as a fine. Even if the law forbade such a manoeuvre, there are ways in which it could be circumvented. Third, I believe that imprisonment is an extremely effective deterrent for this type of law infringement. While I do not believe in the effectiveness of putting purse-snatchers into prison, I think that imprisonment is a really effective deterrent for company managers. Finally, I think that prison sanctions have an advantage in terms of probability of prosecutional abuse. The advantage of imprisonment over fines is that, whereas the latter represents a source of revenue for the government, imprisonment actually implies costs for the state, so the natural reflex of the law enforcer will be to think twice before sending someone to prison. There are also issues of distributive justice to consider: if we do send people to prison for nonviolent property crimes, especially when they are of lower social status, why not apply an equal treatment to people of higher social status who commit a similar type of crime? In conclusion, should imprisonment sanctions be introduced? The answer is ‘yes’ and ‘no’. ‘Yes’ if we want enforcement to be more effective. ‘No’ if it is culturally unacceptable. In the US, price-fixing is considered to be equivalent to theft. In Europe, however, breaches of antitrust law are not considered to be so serious. This is at least in part due to historical reasons, as antitrust law was introduced in Europe only half a century ago. In any event, I believe that imprisonment sanctions should be introduced only for the most serious infringements of competition law. Price-fixing agreements (cartels) would be one such case, for reasons that I explained before (related to the difficulty of applying large fines and the low rates of detection). Imprisonment is an onerous sanction, and we want to be sure that we don’t send people to prison unless there are very good reasons to do so. I think that imprisonment sanctions would be justified for horizontal price-fixing, bid-rigging and

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market allocation schemes. I would not introduce imprisonment sanctions for vertical restraints, horizontal restraints other than the types mentioned before, or for violations of Article 82 EC. This is because the borderline between what is forbidden and what is not is not sufficiently clear-cut in these areas of antitrust law, and the rate of detection is higher anyway. I finally come to discuss the issue that was assigned to me for this workshop, namely the introduction of criminal sanctions in the enforcement of EC competition rules from the perspective of the European Convention of Human Rights. There are many definitions of what is actually ‘criminal law’. Professor Zuleeg gave us one earlier this morning. In my view, it is important to distinguish between the nature of criminal sanctions used in different national jurisdictions and the notion of criminal law as defined by Articles 6 and 7 of the European Convention on Human Rights. I find that there is a combination of elements to determine the ‘criminal law’ essence of a legal sanction. First, there is the ‘criminal intent’ requirement, to use the American legal jargon. Second, criminal sanctions involve a ‘moral stigma’ element, as Professor Zuleeg explained this morning. Third, there is a special correlation between the harm done and the penalty imposed: the objective of criminal law is not only to achieve proportional justice, but also mainly to prohibit a certain kind of behaviour (in other words, to make it disappear). As a result, there are also differences in terms of enforcement powers and procedural safeguards by comparison with other fields of law. Should the personal sanctions introduced in the enforcement of EC competition law be defined as ‘criminal’ in the national legislation (which is, however, not very homogenous at the level of the EC Member States)? We would probably do better to invent some common European notion of ‘criminal law’. The problem is that, for the moment, the EC Treaty uses the term ‘criminal’ without any further explanation. Everybody would agree that imprisonment is a criminal sanction, but what about personal fines and corporate fines? A good argument in favour of placing both types of fines within the ‘criminal’ law sphere can be made on the basis of the moral message they are intended to transmit. Although in Europe we tend to believe that this message is more difficult to transmit in the case of corporate fines, the US experience shows that this is a flawed perception. In my written contribution for this Workshop I cited a CEO explaining that, when his/her company receives a criminal fine, a special board meeting is being convened. This shows that the nature of the fine applied makes a real difference. A separate issue to be considered is that of whether the European Convention on Human Rights (ECHR) would be applicable in the case of individual sanctions for infringements of EC competition rules. I have always thought that the existing corporate fines have a criminal law nature, so that there would not be any major change of the enforcement system if we were to add personal sanctions such as fines or imprisonment. This does not mean, however, that the introduction of personal sanctions would make no difference under the ECHR, which establishes different requirements for different kinds of criminal sanctions.

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There are a few additional arguments in favour of introducing personal sanctions for infringements of EC competition law. First, in the 1998 Recommendations concerning effective action against hardcore cartels,4 the OECD encouraged its Members to introduce antitrust sanctions that are more effective in deterring firms and individuals from taking part in hard-core cartels. Secondly, some of the EC Member States already have personal antitrust sanctions. For example, the Spanish and Greek legislation foresee antitrust fines levied against individuals, while in France, Austria, Germany, Norway, and more recently in Ireland, the imprisonment sanction exists (at least on paper) for serious antitrust infringements such as bid-rigging. A third argument is related to the fact that, in a certain sense, Europe could be considered a free rider on the US antitrust enforcement system. The majority of the antitrust cases prosecuted nowadays by the US Department of Justice involve either relatively small companies or international cartels. In the latter case, it is quite obvious that the enforcement activity of the US antitrust authorities benefits Europe as well. Therefore, one could make a case for a fairer division of the enforcement burden between the US and the EU. I will conclude with a few additional considerations. First, would criminal sanctions have to be introduced under the Third Pillar? In my view, this would not be necessary. Article 29 EC makes it clear that the Community’s powers under the Third Pillar are without prejudice to those under the First Pillar. Therefore the existence of the Third Pillar does not affect debate about whether criminal sanctions can or cannot be introduced on the basis of Article 83 EC. Secondly, does the EC Treaty exclude the possibility of introducing criminal law sanctions in the enforcement of EC antitrust rules? Professor Zuleeg has argued convincingly this morning that this is not the case. Like Professor Zuleeg, I believe that the wording of Articles 81 and 82 EC does not preclude the introduction of personal sanctions. In turn, Article 83(1) EC empowers the Council to adopt the appropriate legislative measures giving effect to the principles set out in Articles 81 and 82 EC. Therefore the legislative powers conferred on the Council in this area are sufficiently wide. However, the difficult question is whether the wording of Article 83(2) EC also permits the introduction of criminal sanctions such as imprisonment. I was very glad to hear Professor Zuleeg argue that Article 83(2) EC is no obstacle in this respect. His argument relies on the fact that Article 83(2) EC lists only examples of the sanctions that can be stipulated by the Council. Does this mean that sanctions of a different nature can also be introduced? Personally, I think so, yet in the end this is a difficult problem of legal interpretation, and I admit that I do not feel entirely secure on this point. Thirdly, if criminal sanctions were to be introduced, could the Commission continue to play the roles of both prosecutor and judge, as it does today? This 4

OECD (1998): Recommendation of the Council Concerning Effective Action Against Hard Core Cartels, C(98)35/FINAL — available at http://www1.oecd.org/daf/clp/ Recommendations/Rec9com.htm.

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debate is not entirely new, as the fines applicable to undertakings in the enforcement of EC competition rules are considered to be of a criminal nature under Articles 6 and 7 of the European Convention of Human Rights (ECHR). The European Court of Human Rights in Strasbourg established that the application of criminal sanctions by an administrative authority does not cause problems under the ECHR if there is the possibility of full judicial review by an independent court. Does this possibility exist under the current enforcement system? The answer is ‘yes’ and ‘no’. In the original spirit of the Treaty, an appeal against a Commission decision before the European courts cannot be considered as a full judicial appeal, but rather as an administrative type of review, similar to that exercised by the French Conseil d’Etat, for example. However, it is true that the Court of First Instance has exercised a judicial type of review in several cartel cases. Could the current decision-making system be maintained after the introduction of individual sanctions? Fines on individuals would not create problems from this perspective, but imprisonment would. Article 5 ECHR lists a limited number of situations in which an individual can be deprived of his liberty. Imprisonment for infringements of EC antitrust law can be slotted into this list only on the condition that the sanction be decided by a court of law. To sum up, if the sanction of imprisonment were to be introduced, we would have to separate the functions of prosecutor and judge played by the Commission. How could this separation be done in practice? The most easy and straightforward way would be that the Commission become a prosecutor bringing its case before the Court of First Instance, just as the US Department of Justice does before US Federal Courts. This does not necessarily require an amendment of the Treaty. Article 83(d) EC empowers the Council, when adopting legislation giving effect to Articles 81 and 82 EC, to also decide upon the division of powers between the Commission and the European courts. Moreover, Article 229 EC stipulates that EC regulations can give unlimited jurisdiction to the European Court of Justice, including the imposition of a sanction by the court itself. M J H L—I profoundly disagree with Mr Wils’ line of argument. In essence, he said that sanctioning companies is not an adequate deterrent. In my opinion, this is a question of nuance: the main purpose of legal sanctions is to ensure compliance with the law, not deterrence. Mr Wils suggests that the introduction of criminal sanctions, including imprisonment, will enhance compliance with EC competition rules. His principal argument in support of such proposal is that the existing sanctions—that is, fines applicable to companies—are not effective enough. What is wrong with the existing sanctions? Mr Wils explains that the current level of the fines is not sufficiently high. At the same time, he says that companies would not have the ability to pay higher fines, otherwise they would go into insolvency. This is a perverse logic: it sounds to me like, having executed the criminal, he wants to punish him even more. Mr Wils’ second argument relies on the principle of proportional justice. In other words, if sending the company into insolvency is not enough, we would


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have to find a method by which to punish somebody else as well. In my view, this is not a good enough justification for imprisoning people. Nor do I agree with the argument that companies have a limited ability to discipline their agents. The reality is that most criminals believe they will never get caught anyway, so the problem is not the companies’ ability to control their agents. At any rate, it is not clear that criminal sanctions are a good incentive to comply with the law. For instance, there is no evidence that that the application of the death penalty in the US has actually reduced murder rates. Personally, I believe that the threat of a large antitrust fine is a much better incentive for the company to control its agents. In sum, while Mr Wils believes that imprisonment is a very effective deterrent, my view is that there is no solid proof that imprisonment is a good deterrent at all. The reality is, as Mr. Wils admitted, that the sanction of imprisonment would be difficult to put into practice. Precisely because it is such a horrendous sanction, every legal defence possible will be offered to and used by the accused, so as to make sure that there is the best chance of avoiding it. People breach competition rules in order to make more money, and the best deterrent is to take this money away by fining the company. Companies comply with EC competition rules when they are aware that they will be heavily fined if they don’t do so. There isn’t a scrap of evidence that sending an individual to prison once every decade or two will make any difference at all in this respect. The adoption of such sanctions would be just another piece of legislation to be honoured by being ignored. J L—I might upset Mr Justice Laddie by noting that the UK Department of Trade and Industry recently published a report5 pleading inter alia for the introduction of criminal sanctions, including imprisonment, to be applied to company managers infringing UK competition rules. Now, the question is, would criminal sanctions be practical in this area of law enforcement? Would they be difficult to obtain in court? Very frequently company managers are people with a wife and four children, and they are people who were never in trouble with the law before. It is not easy to send such individuals to prison. It should be taken into account that cartels are very often set up by managers of corporate divisions that have suffered losses, and who are put under severe pressure by their chief executives. Notwithstanding this, once the cartel is discovered, the companies will not hesitate to do away with these managers in order to reduce their own fine.




5 UK Department of Trade and Industry (2001): ‘Productivity and Enterprise: A World Class Competition Regime’ — available at http://www.dti.gov.uk/cp/ukcompref.htm. An Enterprise Bill incorporating these proposals was introduced to the House of Commons on Tuesday 26 March 2002.The Bill involves reforms to the UK merger and monopoly regimes, new enforcement duties for the Office of Fair Trading, and criminal penalties applicable to company managers engaged in the set-up of cartels. The Bill received the Royal Assent on 7 November 2002 as the Enterprise Act 2002. Sections 188–202 create and relate to a new criminal ‘cartel offence’.

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I am therefore somewhat hesitant about sanctions such as imprisonment. The effectiveness of administrative fines could, for instance, be enhanced by their addition to damages awarded to the affected competitors. Furthermore, one detail that has always struck my clients with naked horror is that corporate fines are not tax-deductible in the UK; so they actually cost the company more than the profits that were brought in through the antitrust infringement.
K S—In Germany we also had an ample debate over the introduction of criminal law sanctions in the enforcement of national competition provisions. It should be noted, however, that the difficult legal framework considerations pointed out by Professor Zuleeg and Mr Wils do not arise at the national level. In this sense, the German legislator has complete freedom to choose whether or not to introduce criminal sanctions in the enforcement of national competition law. At any rate, the outcome of this debate was negative. German politicians prefer to impose administrative fines rather than criminal law sanctions such as fines or imprisonment. There are several reasons for this. One is that, while administrative fines can be imposed cumulatively on both companies and individuals, criminal law sanctions are more difficult to award. Another reason is that the German criminal procedure is not suitable for the application of sanctions to companies. Last but not least, in Germany criminal law, enforcement must comply with the high standards of legal strictness established by the Constitution. It is considered doubtful whether the dynamic interpretation usually given to competition rules satisfies such requirements. Quite to the contrary, in my opinion, one of the characteristics of criminal law enforcement is the tendency to slow progress in the interpretation of legal provisions. I therefore believe that a system of administrative fines is more compatible with the characteristics and requirements of competition law enforcement at national and EC level alike.
C-D E—I think that, when we discuss the issue of precision in the criminal prosecution of competition law infringements, or in other words, of legal certainty in the enforcement process, we should distinguish between substantive law aspects and procedural matters. The latter include standards of proof, causality link, and so on.

M S—A very brief remark: it is true that the first thing American clients would ask of a European lawyer is whether the sanction of imprisonment for breaches of antitrust law exists in Europe and whether it is applied. This means that imprisonment must clearly have some deterrent effect. At the same time, I have the impression that what really is important in the US antitrust enforcement system is not the availability of criminal sanctions per se, but rather the follow-up to the discovery and sanction of an antitrust infringement, such as consumer class actions, shareholder lawsuits, issues of company image, and so on.




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I therefore think that there is still a lot to be done before starting a discussion on the introduction of criminal sanctions in the enforcement of EC antitrust rules, starting from the application of administrative fines. For example, the EU could tackle the problem of the tax deductibility of antitrust fines that was mentioned by Jeremy Lever earlier. In certain EC Member States it is still possible to deduct administrative fines from the taxable income. Another step is to facilitate damage actions, consumer actions, and shareholders lawsuits.
W  G—A preliminary point: I was under the impression that Article 280 EC very clearly limits the Community’s jurisdiction with respect to the administration of criminal justice. This is why I always thought that criminal law enforcement is a matter for the Third Pillar, and not of the First Pillar. Next, a question for Mr Wils: as far as I understand, your proposal implies a choice between two methods of enforcement: one involving the application of criminal sanctions (possibly including imprisonment) to both corporations and their managers, and the other combining the existing administrative sanctions with those derived from the private enforcement of EC competition rules before national courts, such as damages imposed on corporations and individuals, civil liability sanctions such as the disqualification of managers, and so on. When you compare these two alternatives with each another, is it in accordance with the proportionality principle to opt for the former to the detriment of the latter? In other words, do you consider that the benefits of criminal sanctions for the enforcement of EC competition rules are greater than those brought about by combining administrative sanctions with civil litigation?

C B —First, one brief remark: two individuals involved in a construction cartel case were actually sentenced to prison in Austria last week, albeit on probation and with short sentences. My first point is related to an issue raised by Professor Schmidt: it is well known that switching from non-criminal to criminal liability raises the procedural stakes of enforcement, so to speak. This fact is used as an argument against the introduction of criminal sanctions in the area of antitrust enforcement. However, I am not sure that this argument is convincing. I remember that the same argument was invoked when Switzerland discussed whether insider trading and money laundering should become criminal offences. The measure was eventually adopted, and nobody could argue that the enforcement system was weakened by it. Next, a question for Mr Wils: how does the Commission handle the issue of interests in cases where the Court of First Instance decides that an antitrust fine imposed by the former is either too high or unjustified? I am particularly referring to situations in which the fine has not yet been paid, but a bank guarantee has been provided. Who eventually gets these interests? Finally, a question for Professor Jones: in the US, who decides which prison antitrust offenders will be sent to? The question is not without practical relevance, as you might understand.




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C A. J—In reply to Professor Baudenbacher: as a general rule, US antitrust offenders would go to federal prisons that do not contain violent offenders. I would also add a couple of points in support of Mr Wils’ proposals. Contrary to Justice Laddie, I agree with almost everything Mr Wils said. I think that one should not approach the issue of deterrence by relating it to the effectiveness of the death penalty. Rather, I agree with Professor Siragusa: if US clients always inquire about the possibility of being sent to prison for an antitrust infringement in Europe, this should tell us something about the deterrence potential of this sanction, at least from a psychological point of view. I also agree with Professor Siragusa that it is not only the availability of criminal sanctions, but also the potential of ‘follow-up’ civil litigation based on the criminal findings, that will make the real difference. Private lawsuits often follow the government’s actions in the US antitrust enforcement system, sometimes even using the fact that the government prosecuted in order to establish prima facie civil liability. Particularly after the Microsoft judgment6 the number of such ‘follow-up’ private lawsuits has notably increased. I think that complementing corporate fines with individual fines and the potential of follow-up civil litigation would already be a great improvement in the European context, even if this might not have as great a deterrent effect as introducing imprisonment as a penalty. I must say, however, that companies do not fix prices. It is their employees who do so, and Jeremy Lever is quite right to say that companies will not hesitate to jettison their employees once the illegal agreement is unveiled. That is why personal sanctions would not be completely effective unless coupled with corporate sanctions. As to the level of corporate fines, the US has never had fines based on turnover. Moreover, the level of corporate fines has always been rather low. The maximum fine currently applicable under the Sherman Act fine is of $10 million USD, and this maximum was introduced only in 1990. Until 1955, the maximum level of fines applied on the basis of the Sherman Act was $5,000 USD. Summing up, I think that there are convincing arguments in favour of introducing personal sanctions for the most serious types of infringements of the EC competition rules, such as hard-core cartels, price-fixing, and so on. This would send a clear message to the businesses community about the drive of the EC competition enforcement system.

C E M—First of all, I wanted to congratulate Mr Wils for his marvellous paper. It was enormously interesting, very stimulating, and exactly the kind of heresy that this annual event has a reputation for. Since heresy can eventually be turned into legal doctrine by the EC courts, it is important to begin with good heresy. I will continue with a couple of points related to Mr Wils’ argument.




6 United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (findings of fact); 87 F. Supp. 2d 30 (D.D.C. 2000) (conclusions of law).

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First point: following the Frankovich decision,7 a clear link was established between the obligation to respect Community law (in this particular case, the obligation of the EC Member States to respect Community law) and the Community’s right to apply financial sanctions if there is a failure to respect that obligation. Thus, what Mr Wils proposes fits perfectly well with the Francovich doctrine. At any rate, Community law sometimes imposes quite savage penalties on the morally innocent—I refer particularly to the sanctions applicable in the area of customs law—so there is further reason for applying justified individual sanctions in the area of competition law. Second point: Mr Wils’ paper assumes a high number of undetected gross infringements of EC competition rules. Of course, no one can be entirely sure about these things, but I have the feeling that the Commission is often inclined to overestimate the dimensions of undetected illegal activities of the kind. It is true, for example, that participants at meetings of trade associations often tell each other things that should not be told. However, I believe that the majority of such ‘initiatives’ fail because they are too risky. At any rate, whether your assumption in this respect is correct or not, the validity of your conclusions about the deterrent effect of imprisonment sanctions remains unquestionable. Those of us who have practised on both sides of the Atlantic will all be able to confirm that there is a notable reaction when European company executives are warned about imprisonment sanctions for antitrust infringements in the US. This clearly has an immense effect on the attitudes and behaviour of company executives. Last point: Mr Wils acknowledged the problems that arise concerning the proposal to introduce criminal law sanctions in the enforcement of EC competition rules under the ECHR. In relation to this, I wanted to add that it is already time for the Commission to act in order to reconcile contradictions in the application of the existing sanctions. Some companies are fined far too little, and others too much, in relation to the particular infringement they are liable for. Y D —I very much agree with Justice Hugh Laddie: I am horrified by the proposal to introduce the sanction of imprisonment for infringements of EC competition rules. I do not think that our societies are prepared for that. Furthermore, it would not be advisable from a political perspective to link the image of the European Union with that of severe sanctions such as imprisonment. Besides, I think that this proposal opens a Pandora’s box from a legal point of view, because the application of criminal sanctions is part of a criminal law enforcement system that functions as a whole. As one cannot apply criminal sanctions outside this global system, there are a lot of difficulties to be taken into consideration, such as the scale of the punishment, the link between having several offences and several levels of punishment, probation, preventive detention, and so on. For instance, once a prosecutor starts an investigation, the




7

Joined Cases C–6/90 and C–9/90, [1991] ECR I–5357.

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suspects might be able to be put under preventive arrest, but this is not the same in every EC Member State. The same observation applies to a number of other procedural details, such as amnesty under the law of one Member State. In the US, this situation is much clearer because the application of antitrust sanctions is ‘integrated’ into the criminal law enforcement system. J B —I must first state my impression that the topic discussed in this session is not really related to the modernisation project or to private enforcement of EC antitrust rules. To the contrary, we are discussing about the strongest form of public enforcement that one can think of! Having said this, I agree with Mr Wils: the current system of sanctions in the application of EC competition rules does not have a sufficient deterrent effect. Yet, I wonder whether it is appropriate to establish a Community criminal law enforcement system starting with this area of law. One can think of more appropriate areas of EC law to begin with, such as agriculture (consider the BSE scandal), or fraud, and so on. Criminal law enforcement is very much linked to people’s basic perceptions about justice; I do not refer only to lawyers here, but to the community in general. If the Community wants to create its own criminal law enforcement system, the issue must be well thought of en ensemble. For instance, I remember that some years ago Madame Delmas-Marty from the University of Paris conducted a research project seeking to develop some general provisions and principles of European Criminal Law.8 I think that would be the proper way to start, and not by fragments. Finally, I also have an objection to the introduction of criminal sanctions: if company executives that participated in the creation of a cartel are sent to prison, why shouldn’t those practising conscious parallel behaviour receive a similar treatment? As we all know, conscious parallel behaviour is not sanctioned by Article 81 EC, but the assessment of the same behaviour changes dramatically if there is some evidence of concerted action or co-ordination.




A W—My experience as a legal practitioner is that criminal sanctions are an extremely effective deterrent. In two of the five cartel cases I worked on, the companies involved decided to collaborate with the European Commission mainly because the cartel was unveiled in the United States, and they were therefore at risk of suffering criminal sanctions. The Seamless Steel Tube cartel9 is even more telling in this respect: the minutes of one of the cartel’s meetings contained a special provision excluding the United States from the coverage of the agreement, precisely because of the threat of imprisonment




8 Mireille Delmas-Marty, Chris van den Wyngaert, Bart de Smet, Guy Stessens, eds. (1998): Corpus juris: houdende strafbepalingen ter bescherming van de financiële belangen van de Europese Unie: portant dispositions pénales pour la protection des intérêts financiers de l’Union européenne, Intersentia, Antwerpen. 9 Commission Decision of 8 December 1999—see Commission Press Release IP/99/957 of 8.12.1999.

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sanctions in that jurisdiction. Finally, in the two really important cartel cases on this side of the Atlantic that I worked on—Cartonboard10 and Cement11 —I noticed that the very large fines the Commission imposed on the companies involved did not even affect the price of their shares on the stock market. On a different note, wouldn’t it be better to approach the introduction of criminal sanctions as a matter of harmonisation of national laws rather than as a Community-imposed policy? I totally agree with Mr Derains: criminal sanctions are part of a complete law enforcement system, so perhaps the Community would do better to avail itself of existing and de lege ferenda instruments at the national level. Finally, one observation: I think that one reason that the United States’ antitrust enforcement system is effective is because it allows for plea-bargaining. As far as I know, this possibility does not exist in the continental European criminal law systems.
B H —Following up on the comments made by Professors Basedow and Schmidt, I wanted to point out that there are constitutional limits on the kinds of offences that can be subjected to criminal sanctions in the US. At present only clear-cut, classic price-fixing agreements are subject to criminal prosecution. My next point concerns the debate about the deterrent potential of imprisonment sanctions. I often have European clients, and one of the first questions they will ask me about US antitrust law is related to the possibility of running into an imprisonment sanction. I would not know for sure whether this is due to the moral connotation attached to criminal law sanctions in general, or to imprisonment only. At any rate, it is not imperative that you completely criminalise antitrust offences in Europe. There is a broad spectrum of in-between solutions. For example, the introduction of personal fines would reinforce cartel enforcement in the EU, for the simple reason that in this way the Commission would become able to distinguish between companies and their employees, a distinction that is frequently essential in cartel cases. In practical terms, this would allow the investigator more room for manoeuvre between the interests of companies and those of their employees. It is hardly necessary to mention that, in order to avoid conflicts of interest, the same legal counsel should not represent the companies and their employees.
L I—I fully agree with Mario Siragusa’s previous remarks. Take the French example: until the 1986 reform, the French system allowed for the imposition of criminal sanctions on those who infringed national competition law. Yet the system was totally ineffective, mainly because of the total lack of what we call a ‘competition culture’. In 1986, when criminal sanctions were 10 11

Commission Decision 94/601 (Cartonboard) OJ L243/1 of 1994. Commission Decision 94/815 of 30 November 1994, OJ L343/1 of 13.12.1994.

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suppressed, everybody agreed that this measure was justified. It is interesting to note that this reform, commonly known as the dépénalisation du droit de la concurrence, eliminated the application of criminal sanctions. However, Article 17 of the French Competition law—which was the legal basis on which criminal sanctions could be applied—was preserved for historical reasons. After the reform, a debate emerged in academic circles about whether this provision could, or could not, be applied, this time in relation to infringements of EC competition law only. To the best of my knowledge, there is no jurisprudence on this issue. Finally, the French competition law was recently amended and there are two new elements that are worth mentioning. First, the level of fines was increased, and they are now calculated on the basis of the worldwide turnover of the fined companies. Secondly, the amendment introduced a kind of leniency program, which I find difficult to apply in the French context (but I would not want to go into further details at this point). D D—I wanted to express a few personal comments. First of all, I am not entirely convinced by Professor Zuleeg’s argument that we should be careful about affecting the freedom and reputation of individuals who, at the end of the day, have acted only in the interest of the company’s shareholders. I personally believe that it is worthwhile and justified to enforce sanctions that ensure compliance with the competition rules. Thus, the question is which methods of enforcing these rules are more effective. I was very impressed by Mr Wils’ presentation, although I am not entirely convinced by some of his arguments. First, he made elaborate assumptions about the effectiveness of fines. In the end, that boils down to a multiplication exercise, and I am not sure that simple multiplication can determine whether the current system of fines is effective enough. Secondly, what we heard today about the possible effectiveness of criminal sanctions is very ‘impressionistic’, so to speak, based on participants’ personal experiences. We would need to look at all the circumstances that influence the imposition of criminal sanctions in a given legal system, including, but not limited to, the psychological impact of criminal sanctions. Thirdly, I do not think it is very realistic to believe that, by separating the Commission’s roles of prosecutor and decision-maker, we could enforce EC antitrust law more effectively. I believe that the effect of such measure would be rather the contrary of what is desired, because we would face a division and duplication of the enforcement work.




W W—I think that Professor Hawk has already answered Professor Schmidt’s concern about the question of legal certainty. Of course, like the United States, the EU has constitutional limits on the kinds of offences that can be subject to criminal sanctions. I would like to restate that my proposal was to introduce criminal sanctions only for hard-core infringements of the EC competition rules, such as horizontal price–fixing agreements, bidrigging agreements, and market allocation schemes. One can of course discuss




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the criteria for selecting the kinds of infringements to which criminal sanctions might be applied, but I do not think that this discussion should be elevated beyond the level of national criminal law enforcement systems. Professor Ehlermann’s point is very important we must indeed distinguish between the substantive and procedural law requirements necessary for ensuring legal certainty in the application of criminal sanctions. I am not in the slightest bit disturbed if this means that the Commission would have to better ‘prove its case’, so to speak. The other side of the coin is that the Commission’s enforcement powers would have to be increased, especially if we ask it to achieve standards of proof similar to those practised by the US Department of Justice. I thank Professor Van Gerven for bringing Article 280(4) EC into this debate. I must confess that this point had slipped my mind, yet I do not think that it ultimately undermines my argument. Article 280(4) EC contains a very specific limitation, related to the protection of the Community’s financial interests. If the Treaty were to exclude criminal law from the competencies of the Community, what would be the logic of having such a specific limiting provision? From this perspective, Article 280(4) EC should be read along with Article 29 EC, which establishes that the existence of the Third Pillar does not affect the Community’s powers under the First Pillar. Nevertheless, I admit that this is the kind of legal situation in which matters are not so clear-cut and one can defend opposing views. The proportionality argument is very interesting: why not use the whole ‘battery’ of civil sanctions, instead of introducing criminal sanctions as well? I would entirely agree with this reasoning if I were confident that the former are effective deterrents (which I am not, for reasons that I have already explained). One concern is the inability of companies’ to pay hefty fines. Another is the ‘indemnification problem’, which undermines the effectiveness of personal fines. I believe that my proposals do already take the requirements of the ECHR seriously. Furthermore, I was among the first commentators to argue that the Commission’s competition law enforcement procedures fall under the scope of Article 6 ECHR. As to Professor Basedow’s question (‘why start an European criminal law system by introducing criminal sanctions in the application of EC competition rules?’), my answer is that I believe that the area of competition law enforcement has an important and unique trait. Moreover, this is the only area of Community policy that is directly administered by the Commission.
M Z—I would also support the view that the limitation in Article 280(4) EC is not relevant to the area of competition law enforcement. As a final comment, I remind you that I am in favour of introducing personal administrative fines; what I am opposed to is the introduction of criminal sanctions. Why should imprisonment of individuals be more effective than personal fines?

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C-D E—I was very impressed by this debate, and thank you all for your contributions. Personally, I am convinced that that the current fining policy of the Commission is not effective enough, and we must therefore explore possibilities that would enable us to combine the current system of personal administrative fines with private enforcement (involving, as a minimum, fines that will be levied on the responsible individuals). Yet I am not entirely sure whether we should go as far as discussing imprisonment, at least at this stage.

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I Wouter P.J. Wils* Does the Effective Enforcement of Articles 81 and 82 EC Require Not Only Fines on Undertakings, But also Individual Penalties, and in Particular Imprisonment?

I. Introduction This paper addresses whether the effective enforcement of the prohibitions laid down in Articles 81 and 82 EC requires that the existing fines imposed on undertakings be supplemented with individual penalties (fines and/or imprisonment) imposed on the responsible decision-makers or actors within the undertakings.

1. The current situation under EC law Article 81 EC provides that agreements ‘between undertakings’, decisions ‘by associations of undertakings’ and concerted practices that restrict competition without redeeming virtue ‘shall be prohibited’. Similarly, Article 82 EC provides that any abuse ‘by one or more undertakings’ of a dominant position ‘shall be prohibited’. Article 83 EC empowers the Council, acting by qualified majority on a proposal from the Commission and after consulting the European Parliament, to lay down ‘the appropriate regulations or directives to give effect to the principles set out in Articles 81 and 82’. Article 83(2) EC further specifies that these regulations or directives ‘shall be designed in particular: (a) to ensure compliance with the prohibitions laid down in Article 81(1) and in Article 82 by making provision for fines’. The Treaty does not state who is to be liable to pay such fines. Since 1962, the enforcement of Articles 81 and 82 has been governed by Regulation No. 17/62,1 adopted by the Council on the basis of Article 83 EC (then Article 87 of the EEC Treaty). Article 15(2) of Regulation No. 17/62 empowers the Commission to impose ‘on undertakings or associations of * Member of the Legal Service of the European Commission, lecturer in European law and economics at Utrecht University. All views expressed are strictly personal to the author, who is indebted to Giuseppe Dari Mattiacci, Eric Gippini Fournier, Alberto Heimler, Richard Lyal, Eugenio de March, Giuliano Marenco, Kirti Mehta, Kamiel Mortelmans, Marian Richardson, Allan Rosas and Anthony Whelan for their various helpful comments and contributions. The author can be contacted at Wouter.Wils@cec. eu.int. 1 Council Regulation No. 17 of 6 February 1962 implementing Articles 85 and 86 of the Treaty, OJ L 13/204 [1962] (Special English Edition 1959–62, p. 87).

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undertakings’ fines not exceeding 10 per cent of the turnover in the preceding business year of each of the undertakings participating in the violation where, intentionally or negligently, they infringe Article 81 or Article 82 EC. The Commission’s recent proposal for a new Council Regulation replacing Regulation No. 17/622 does not include any change in this respect, its Article 22(2) echoing Article 15(2) of Regulation No. 17/62. Neither the Treaty nor Regulation No. 17/62 contain any definition of the term ‘undertaking’. The Court of Justice has held that ‘in competition law, the term ‘undertaking’ must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal.3 In practice the Commission does not simply impose fines on undertakings thus defined as economic units. For reasons of enforceability, it rather addresses its decisions concerning fines to entities possessing legal personality—typically companies—to which the violation committed by the undertaking is imputed.4 As to the choice of the person(s) to whom a violation is to be imputed, the general rule formulated by the Community Courts is that ‘when […] a violation is found to have been committed, it is necessary to identify the natural or legal person who was responsible for the operation of the undertaking at the time when the violation was committed, so that it can answer for it’.5 If the undertaking found to have committed a violation is an unincorporated business (a single trader, with or without employees, who has not incorporated his business; or a professional exercising his profession alone and unincorpo2

Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC)No 3975/87 (‘Regulation implementing Articles 81 and 82 of the Treaty’), OJ C365E/284 [2000]. For a detailed discussion of this proposal, see W.P.J. Wils, ‘The Modernisation of the Enforcement of Articles 81 and 82 EC: A Legal and Economic Analysis of the Commission’s Proposal for a New Council Regulation Replacing Regulation No. 17’, paper presented at the Fordham Corporate Law Institute 27th Annual Conference on International Antitrust Law & Policy (New York, 19–20 October 2000), forthcoming in B. Hawk, ed.: 2000 Fordham Corporate Law Institute. 3 Judgment of 12 July 1985 in Case 170/83 Hydrotherm v. Compact [1985] ECR 3016 para. 11. For a detailed analysis of the notion of undertaking and the relationship between undertaking and legal or natural person, see W.P.J. Wils, ‘The undertaking as subject of EC competition law and the imputation of violations to natural or legal persons’ (2000) 25 European Law Review 99, at 100–108. 4 See Opinion of Judge Vesterdorf, acting as Advocate-General, in Case T–1/89 Rhône-Poulenc v. Commission [1991] ECR II–869 at 916, Judgment of the Court of First Instance of 20 April 1999 in Joined Cases T–305/94, T–306/94, T–307/94, T–313/94, T–314/94, T–315/94, T–316/94, T–318/94, T–325/94, T–328/94, T–329/94 and T–335/94 Limburgse Vinyl Maatschappij a.o. v. Commission [1999] ECR II–945 para. 978, and W.P.J. Wils, supra note 3, at 108–109. 5 Judgment of the Court of First Instance of 17 December 1991 in Case T–6/89 Enichem Anic. Commission [1991] ECR II–1695, para. 236, and Judgment of the Court of Justice of 16 November 2000 in Case C–279/98 P Cascades v. Commission (not yet reported) para. 78; for more details, see W.P.J. Wils, supra note 3, at 109–16.

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rated; or several natural persons operating a single business without any employment relationship between them and without any form of legal person), the Commission would necessarily have to address its decision imposing a fine to the natural person or persons operating the business. However, in the approximately one hundred decisions in which the Commission has imposed fines under Regulation No. 17/62, this situation has never occurred: all fines have so far been imposed on companies or other legal persons. Indeed, the undertakings found to have committed violations of Article 81 or 82 EC invariably coincided with either a single company or other legal person, which was the obvious addressee of the fining decision, or consisted of a group of companies, in which case fines were imposed on one or more of the companies in the group.6 It can thus be concluded that, under EC law, the only penalties for violation of the antitrust rules that are imposed in practice are fines on companies or other legal persons.7

2. The situation in the United States The situation is clearly different in the United States, where fines on corporations are combined with individual fines and imprisonment. Section 1 of the Sherman Act8 provides that ‘every person who shall make any contract or engage in any combination or conspiracy’ in restraint of trade: ‘shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by a fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments’.

Similarly, Section 2 of the Sherman Act provides that: ‘every person who shall monopolise, or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade […], shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by a fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments’.9 6

In Pre-Insulated Pipes, one of the undertakings was controlled and managed by a natural person, Dr W. Henss, but the Commission appears to have made an effort (for reasons unexplained) to avoid imposing the fine on him, identifying instead a collection of six companies which it held jointly and severally liable for the fine; see recitals 157–60 and Article 3(d) of the Decision of 21 October 1998, Pre-Insulated Pipe Cartel, OJ L24/1 [1999]. 7 As to the situation under national law in the Member States, see infra text accompanying notes 145 to 149. 8 15 USC. § 1. 9 An alternative, possibly higher fine can be imposed under 18 USC. § 3571, subsection d, which provides that ‘if any person derives pecuniary gain from the offence, or if the offence results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process’.

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The criminal liability of individuals for fines and imprisonment can be traced to the original 1890 version of the Sherman Act, albeit initially with (at least nominally) a lower maximum fine and a shorter maximum jail term (one year). More than half of the states also have criminal antitrust statutes that provide for jail sentences, and many of these statutes predate the federal Sherman Act.10 However, it was not until 1959 that prison sentences were imposed on businessmen for price-fixing without acts or threats of violence.11 During the 1990s, the US Department of Justice successfully prosecuted an average of more than 35 individuals each year. During 1990–1999, the average fine imposed on convicted individuals was almost $90,000. At the same time, 132 individuals were sentenced to actual prison terms averaging almost nine months, and 154 were sentenced to periods of confinement in a halfway house or community treatment centre averaging four months.12

3. Outline of this paper The purpose of this paper is to determine whether the current choice under EC law (only to impose fines on undertakings) is the optimal approach, or whether effective enforcement of the antitrust prohibitions rather requires that these corporate sanctions be supplemented with individual penalties (fines and/or imprisonment), in line with the American example. As a starting point for the analysis, I first examine the factual questions regarding who commits antitrust violations, what the likely motives are, and how this behaviour can be influenced. The next section explains why corporate sanctions are an important instrument for enforcing the antitrust prohibitions. The following two sections investigate the drawbacks of exclusive reliance on corporate sanctions, and the arguments in favour of combining corporate sanctions with individual penalties. The sixth section makes the case for imprisonment as the only clearly effective individual sanction. The last section briefly discusses a number of further issues, including the legal question of the civil or criminal nature of antitrust sanctions, and the legal and institutional implications of introducing individual penalties, in particular imprisonment, in EC antitrust law. 10 K.G. Dau-Schmidt (1983): ‘Sentencing Antitrust Offenders: Reconciling Economic Theory with Legal Theory’, 9 William Mitchell Law Review 75, at pp. 75–76. 11 J.C. Gallo, K.G. Dau-Schmidt, J.L. Craycraft and C.J. Parker (1994): ‘Criminal Penalties Under the Sherman Act: A Study of Law and Economics’, 16 Research in Law and Economics 25, at 40. 12 ‘Antitrust Deterrence in the United States and Japan’, remarks by S.M. Chemtob, Special Counsel at the US Department of Justice, at a Conference on Competition Policy in the Global Trading System, Washington DC, 23 June 2000, at 7–8; for more statistics, see J.C. Gallo, K. Dau-Schmidt, J.L. Craycraft and C.J. Parker (2000): ‘Department of Justice Antitrust Enforcement, 1955–1997: An Empirical Study’, 17 Review of Industrial Organisation 75, with regular updates at http://academic. wsc.edu/socialsci/parkerc/doj.html.

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II. Who commits antitrust violations, why do they do it, and how can their behaviour be influenced? 1. Who really commits antitrust violations? Legally speaking, the answer to the question who can commit violations of the prohibitions laid down in Articles 81 and 82 EC is clear: only ‘undertakings’ can commit such violations, undertakings being economic units usually corresponding either with a single company or a group of companies. In order to design an effective enforcement system, it is important to gain some understanding about who really commits, initiates, executes, or contributes to, the act or the acts that are deemed to form the undertaking’s violation. Companies or undertakings are abstract entities. Whenever prohibited acts—such as participation in a price-fixing meeting with competitors—are attributed to a firm, they have necessarily been carried out by individuals within the firm. This is not to say that the firm is a mere fiction. On the contrary, it constitutes an economic and sociological reality that substantially determines the incentive structure and the cultural climate in which individuals act. It might be useful to distinguish two types of situations in which individuals are involved in an undertaking’s violation:13 • the prohibited acts are committed, ordered, encouraged, tolerated or condoned by the entrepreneurs or top managers or senior people who can be said to form the directing mind of the firm; and • the acts are committed solely by other individuals within the firm, typically by middle management.

2. Why do they do it? In the first of the two situations distinguished just above, the violation is committed by those people who determine the firm’s strategy and policy. Unless explainable by ignorance of, or ambiguity in the law, the violation can be assumed to be motivated by disregard for the law, in pursuit of corporate gain.14 13

Compare with G. Des Rosiers (1997): ‘Hear No Evil, See No Evil, Speak No Evil? The Effects of Guideline Sentencing on the Behaviour of Corporations and Their Insiders’, 18 Research in Law and Economics 65, at 75 and 101. 14 I thus assume that the senior people who are involved in the violation in the first type of situation pursue no other interest than the firm’s interest. This seems obvious in the case of an entrepreneur. Effective control by shareholders or stock option plans also makes this assumption realistic for many hired top managers. In those cases, however, where there would be a real divergence of interest between the top manager and the shareholders of the firm, the top manager should be considered as one of the ‘other individuals’ of the second type, possibly acting against the shareholders’ wishes, with the shareholders having the possibility to shape the incentive structure he faces, including the power to replace him. A situation of the first type would then arise whenever the shareholders ordered, encouraged or condoned the violation.

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In the second situation, the violation does not necessarily reflect the pursuit of the firm’s best interests. A middle manager might, with a view to increasing his prospects for promotion or incentive payments, or possibly for other reasons such as helping out a personal friend in a competing company, engage in price-fixing against the policy of the firm. However, the firm or its senior people, can strongly influence the likelihood of this happening.15 First, a firm’s culture will be more or less conducive to antitrust violations.16 Particularly important is the consistently ethical behaviour of top management, as they serve as role models to others in the corporate hierarchy.17 Secondly, personnel practices also play an important role. Apart from training, the evaluation and rewards system is of particular importance. If price levels or profits are the sole basis of evaluation, and managers are hard pressed, this might result in incentives or pressure to break the law that are strong enough to mute the message otherwise conveyed by the organisation’s instructions to its personnel.18 Indeed, junior managers might perceive such company-induced pressure as conveying top management’s real intent.19 Thirdly, the more that pricing decisions are decentralised, the greater the risk of violations against company policy. Finally, corporate legal staff who have direct contact with operating managers can fulfil an important preventive role.20 In the first half of the 1980s, Feinberg conducted a survey of legal opinion in Brussels concerning, among others, the extent to which (i) ignorance of the law, (ii) ambiguity in the law, (iii) failure of subordinates to believe that management really wanted to comply, and (iv) disregard for the law, in pursuit of corporate gain, were the source of horizontal price-fixing or market-allocation violations. The fourth factor emerged as the most important source of violations. A clear majority of the respondents also considered that internal management communication problems (the third factor) were at least to some extent a source of violations, whereas half the respondents made the same judgement about ignorance of the law, and less than one third about ambiguity in the law.21 15

The following four factors are taken from J. Sonnenfeld and P.R. Lawrence (1978): ‘Why do companies succumb to price-fixing?’, Harvard Business Review 145; see also A.R. Beckenstein and H.L. Gabel (1985): ‘The Economics of Antitrust Compliance’, 52 Southern Economic Journal, 673. 16 On the role of an undertaking’s culture, with a case study of Archer Daniels Midland and the lysine cartel, see J.M. Conley and W.M. O’Barr (1997): ‘Crime and Custom in Corporate Society: A Cultural Perspective on Corporate Misconduct’, 60 Law and Contemporary Problems 5. 17 J. Sonnenfeld and P.R. Lawrence, supra note 15, at 152. 18 See also D.A. DeMott (1997): ‘Organizational Incentives to Care About the Law’, 60 Law and Contemporary Problems 39 at 45, and S.H. Elsen (1997): ‘Commentary’, 60 Law and Contemporary Problems 87. 19 J. Sonnenfeld and P.R. Lawrence, supra note 15, at 150. 20 Idem, at 151–52 and 154–55. 21 R.M. Feinberg (1985): ‘The Enforcement and Effects of European Competition Policy: Results of a Survey of Legal Opinion’, 23 Journal of Common Market Studies 373 at 380. Unfortunately, a more recent study is not available. As EC antitrust enforcement has become more prominent over the last two decades, ignorance of the law may be less important a factor today than 20 years ago.

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3. How can their behaviour be influenced? The preceding analysis as to who really commits antitrust violations, and for what motives, points to a number of ways in which legislators and enforcement authorities may try to influence the behaviour of the individuals concerned so as to reduce the incidence of antitrust violations. To the extent that violations could be explained through ignorance of the law, authorities can react by disseminating information about the law22 through brochures, speeches, and the like. The prosecution and punishment of violations will also tend to reduce ignorance in two ways. On the one hand, information is thus disseminated, due to reporting by the press.23 On the other hand, the threat of punishment can create incentives for people to learn about the law. To the extent that violations result from the pursuit of corporate gain in disregard of the law, deterrence would appear to be the most obvious response. The calculus of what behaviour is in the firm’s best interest can be altered by the threat of fines (and/or damages) imposed on firms that commit violations. Another possibility is to threaten the senior people who determine the firm’s policy with individual penalties, thereby creating a personal interest for these individuals to avoid violations. To the extent that violations result from managers pursuing their own interests against the firm’s policy, deterrence could also be the answer. The threat of the imposition of individual penalties on the manager concerned can alter his calculation of whether the violation is in his personal interest. The other possibility is again to threaten the firm with fines (and/or damages) in case of violation, as this will create an incentive for the firm to try to prevent managers from committing violations. Irrespective of whether the individuals involved in the undertaking’s violation act in the firm’s best interests or instead pursue their own best interests, deterrence is not the only conceivable instrument to reduce the likelihood of the violation taking place. Indeed, corporate managers are not necessarily just maximisers of profits for themselves and their principals. They might feel a moral 22 To the extent that ambiguity in the law is a source of violations, the obviously desirable solution is to remove ambiguities. To the extent that this not possible because of inherent uncertainties, in particular the need to adapt to changing circumstances which are difficult to predict, penalties should not be imposed in areas of uncertainty, as long as the law has not been clarified; see infra text accompanying note 129 and W.P.J. Wils (1995): ‘EC Competition Fines: To Deter or Not to Deter’, 15 Yearbook of European Law 17 at 34–35. 23 For example, when in May 1999 Roche and BASF were fined, and Roche’s head of marketing for vitamins world-wide was fined and jailed in the US, for rigging the price of vitamins, the European edition of the Financial Times carried a five-column article on its first page (21 May 1999), a three-column and a six-column article the following day (22–23 May 1999, pp. 4 and 24), as well as a ‘Comment’ in the next edition (24 May 1999, p. 13). The jailing of a second former Roche executive three months later led to two more articles (20 August 1999).

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responsibility to live within the law regardless of whether they are likely to be caught, and this normative commitment could trump their interest calculus.24 Indeed, psychological research suggests that normative commitment is generally an important factor explaining compliance with the law.25 To reduce the number of antitrust violations, authorities may thus try to find other ways (apart from deterrence) to increase business people’s normative commitment to the antitrust rules.26

III. The case for corporate sanctions Corporate sanctions (fines and/or damages imposed on undertakings or companies) are a useful instrument to deter antitrust violations for two reasons: they exploit the firm’s ability to influence the behaviour of its agents, and they remove the moral hazard problems that would exist if only individual actors were punished.27

24 C.D. Stone (1991): ‘Sentencing the corporation’, 71 Boston University Law Review 383 at 389. 25 See T.R. Tyler (1990): Why People Obey the Law, Yale University Press. 26 See generally K.G. Dau-Schmidt (1990): ‘An Economic Analysis of the Criminal Law as a Preference-Shaping Policy’, Duke Law Journal 1; C.R. Sunstein (1966): ‘On the Expressive Function of the Law’ 144 University of Pennsylvania Law Review 2021; D.M. Kahan (1997): ‘Social Influence, Social Meaning, and Deterrence’, 83 Virginia Law Review 349; N.K. Katyal (1997): ‘Deterrence’s Difficulty’, 95 Michigan Law Review 2385, G.E. Lynch (1997): ‘The Role of Criminal Law in Policing Corporate Misconduct’, 60 Law and Contemporary Problems 23; D.M. Kahan (1998): ‘Social Meaning and the Economic Analysis of Crime’, 27 Journal of Legal Studies 609, and K.G. Dau-Schmidt (1998): ‘Preference shaping by the law’, in P. Newman (ed.), The New Palgrave Dictionary of Economics and the Law, London, Macmillan, 84. 27 In general two more reasons could be given for imposing liability on an undertaking or company for its agents’ harmful acts; see V.S. Khanna (1996): ‘Corporate Criminal Liability: What Purpose Does It Serve?’, 109 Harvard Law Review 1477 at 1495–1496 and R.H. Kraakman (1998): ‘Third-party liability’, in P. Newman (ed.), The New Palgrave Dictionary of Economics and the Law, London, Macmillan, 583 at 584. First, the individual wrongdoers may be judgement-proof, that is, lacking sufficient assets to compensate the harm done and/or to pay the minimum financial penalty required for effective deterrence. This problem is not, however, directly relevant for the purposes of this paper, as I focus only on deterrence not on compensation, and as I will argue (infra text accompanying notes 31 to 43 and 46 to 56) that in the antitrust context undertakings or companies also risk being judgment-proof, the better solution to preserve deterrence thus being imprisonment. Secondly, thanks to corporate liability the cost of harm is internalised, with the result that the firms’ costs of production will reflect the true economic costs and the level of production will approach the optimal level. This consideration is not directly relevant in the present context either, since our focus is on hard-core antitrust violations which one should seek to prohibit rather than to price (on the latter distinction, see also infra text accompanying note 132).

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1. Exploiting the firm’s ability to influence the behaviour of its agents By not directly punishing the individuals within the firm who commit the prohibited acts, but instead focussing on the firm, the authorities enlist the help of the firm in preventing or deterring the individuals’ misconduct. Indeed, if it is sufficiently high, the threat of the corporate sanction will induce the undertaking or company to try to make its agents respect the law. This shifting of the enforcement function from the authorities to the firm can be efficient because firms generally have a relatively good capacity to influence the behaviour of their agents.28 A number of factors can account for firms’ power to influence their agents’ behaviour. First, firms select their agents through hiring and task-assignment. Secondly, firms set demands and rewards that define the incentive structure within which their agents act. Thirdly, firms can and do influence their agents’ personal ethical commitment to the law through their internal culture. Fourth, firms monitor their agents’ behaviour, detect possible misconduct, and identify the individuals responsible at lesser cost than public authorities. Finally, they can relatively easily discipline their agents in case of violation.

2. Avoiding moral hazard If firms were not responsible for the antitrust violations committed by their agents, serious moral hazard problems would result. Given that the firm normally benefits from the antitrust violations committed by its agents, it would have an incentive to encourage violations. Even if they risk individual penalties (fines or imprisonment), the firm’s agents may be willing to take the risk if they expect to be sufficiently rewarded in terms of salary and promotion (or avoidance of demotion or dismissal). Assigning liability to the firm tends to remove the incentive for both the firm and its agents to commit antitrust violations on behalf of the firm.29 Firms are instead encouraged to strive for clarity in the messages conveyed to their agents concerning the behaviour they expect from them.30

28

T. S. Ulen (1997): ‘The Economic Case for Corporate Criminal Sanctioning’, in W.S. Lofquist, M.A. Cohen and G.A. Rabe, eds., Debating Corporate Crime, Anderson, 117 at 133, R.H. Kraakman, supra note 27 at 584, D.A. DeMott, supra note 18 at 45–51, and J.D. Cox (1997): ‘Private Litigation and the Deterrence of Corporate Misconduct’, 60 Law and Contemporary Problems 1, at 8–9. 29 T.S. Ulen, supra note 28 at 133, and J.C. Coffee (1981): ‘’No Soul to Damn: No Body to Kick’: an Unscandalized Inquiry into the Problem of Corporate Punishment’, 79 Michigan Law Review 387 at 410. 30 D.A. DeMott, supra note 18 at 47.

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IV. The case against exclusive reliance on corporate sanctions As explained in the preceding section, the possibility of exploiting firms’ abilities to police their agents’ behaviour and the avoidance of moral hazard problems justify the use of corporate sanctions (fines and/or damages imposed on undertakings or companies) as instruments to deter antitrust violations. However, exclusive reliance on corporate sanctions is unlikely to result in antitrust violations being effectively deterred, for two (sets of) reasons explained hereafter. First, effective deterrence would require impossibly or unacceptably high fines. Secondly, for a number of reasons, the liability of undertakings or companies to the imposition of fines for antitrust violations may not be translated adequately into incentives for the individual decision-makers or actors to abstain from committing violations.

1. The fines needed for effective deterrence are impossibly high The first problem with exclusive reliance on corporate sanctions to deter antitrust violations is that the level of fines required to achieve effective deterrence would be problematically high. I first investigate the question as to the level at which fines must be set in order to deter effectively. I subsequently examine why this fine level is problematic.

1.1. What level of fines is required to achieve effective deterrence? In order to deter undertakings from engaging in antitrust violations, fines should be set at such a level that the expected fine exceeds the gain to be obtained from the violation. The expected fine is that imposed if the violation is detected and punished, multiplied by the probability of detection and punishment.31 The gain, which the firm obtains from the violation, divided by the J. Bentham, An Introduction to the Principles of Morals and Legislation, first published in 1781; modern edition: Promotheus, Amherst, 1988, chapter XIV, Rule 1 (‘The value of the punishment must not be less in any case than what is sufficient to outweigh that of the profit of the offence.’) and Rule 7 (‘To enable the value of the punishment to outweigh that of the profit of the offence, it must be increased, in point of magnitude, in proportion as it falls short in points of certainty.’). For instance if the fine is 500 and the probability of detection and punishment is 20% or 1/5, the expected fine is 500
(1/5)100. For simplicity reasons I will assume that undertakings are risk-neutral — a realistic assumption for large, public-owned companies. The probability of detection and punishment, which enters into an undertaking’s calculations, is subjective, that is, the (possibly inaccurate) perceived likelihood of detection and punishment. For simplicity reasons again, I will assume that this subjective probability equals the objective probability. The cognitive psychology literature suggests that people tend to be optimistic about their likelihood of escaping bad events; see N.D. Weinstein (1989): ‘Optimistic Biases About Personal Risks’, 246 Science 1232. If such optimism bias also exists with respect to the probability of detection and punishment of antitrust violations, my calculations underestimate the level of fines needed for effective deterrence. 31

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probability of being fined, thus constitutes a floor below which fines will generally not deter.32 a. An estimate of the minimum fine required for effective deterrence Taking the paradigmatic case of a price cartel: the gain which the cartel members obtain from the violation depends on their turnover in the products concerned by the violation, the price increase caused by the cartel, the price elasticity of the demand which the cartel members face, and the life span of the cartel. I am not aware of any European studies as to the average or normal gain from price-fixing. In the United States, the figure of 10 per cent of the selling price appears to be widely accepted as an estimate of the average price increase from price-fixing. This figure appears to have its origin in information compiled from a series of road-building bid-rigging cases prosecuted by the Department of Justice in the 1980s that suggested that the conspiracies increased prices by at least 10 per cent.33 The US Sentencing Commission relied on this estimate when drafting its Sentencing Guidelines,34 and it appears to be generally accepted in the literature.35 It does not seem exceptional for a cartel to last five years. In the recent Cartonboard, Greek ferries and Amino acids cases, for instance, the Commission found price-fixing agreements lasting approximately that long or even for longer periods.36 In the US, the average life span of price-fixing arrangements has been estimated to be somewhat over six years.37 Assuming zero price elasticity, the gain from a price cartel that achieves a price increase of 10 per cent and lasts five years, would be in the order of 50 per cent of the annual turnover in the products concerned by the violation. However, normally price elasticity will not be zero: the price increase caused by the cartel will depress demand for the cartel members’ products. Thus a price increase of 10 per cent will lead to an increase in profits of less than 10 per cent of turnover. Assuming that the price increase of 10 per cent leads to an increase in profits of 5 per cent of turnover, the gain from the price cartel lasting 5 years would be within the order of 25 per cent of the annual turnover in the products concerned by the violation. 32 For instance, if the gain from the violation is 100 and the probability of detection and punishment 20% or 1/5, fines below 100/(1/5) 500 will generally not deter. 33 S. M. Chemtob, supra note 12 at 4 note 5, and G.J. Werden and M.J. Simon (1987): ‘Why price fixers should go to prison’, The Antitrust Bulletin 917 at 925 note 24. 34 Federal Sentencing Guidelines Manual, 1999 Edition, § 2R1.1, Application Note 3 at 231. 35 J.C. Gallo a.o., supra note 11 at 58 and note 93 at 67–68; see also L.M. Froeb, R.A. Koyak and G.J. Werden (1993): ‘What is the effect of bid-rigging on prices?’, 42 Economics Letters 419, finding that a fairly typical bid-rigging scheme had raised prices by over 20% for over 4 years. 36 Decision of 13 July 1994 Cartonboard cartel [1994] OJ L 243/1, Decision of 9 December 1998 Greek ferries [1999] OJ L109/24, and Decision of 7 June 2000 Amino acids, [2001] OJ L 152/24. 37 G.J. Werden and M.J. Simon, supra note 33 at 925.

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Estimating the probability of detection and punishment of a price-fixing cartel is difficult, as there is no way to observe violations, which are usually undetected. Again, no European studies appear to be available on this issue. Using a statistical birth and death model on a sample of 184 price-fixing cases for the period 1961 to 1988, Bryant and Eckard have estimated the probability of successful government prosecution of a price-fixing conspiracy in the United States to be, at most, between 13 and 17 per cent.38 Given the weaker investigating powers of the European enforcement authorities when compared with their American counterparts, the probability of detection and punishment is likely to be lower in Europe than in the United States. An estimate of a 16 per cent probability of detection and punishment is thus likely to be optimistic. Assuming a 10 per cent price increase, and a resulting increase in profits of 5 per cent of turnover, a five-year duration and a 16 per cent probability of detection and punishment, the floor below which fines will generally not deter pricefixing would be within the order of 150 per cent of the annual turnover from the products concerned by the violation.39 b. Comparison with the current level of fines Before 1998, the Commission often calculated fines for antitrust violations as a percentage of each undertaking’s annual turnover in the products concerned by the violation.40 The Commission did not indicate in its decisions what percentage figure was used, but for a number of decisions this information became public at the stage of the appeal before the Court of First Instance.41 The percentage figures appear to have ranged from 2 to 9 per cent. Since 1998, the Commission applies a new method for setting fines, which is no longer based on turnover percentages.42 Even if the level of fines had increased since, they would in general still be unlikely to exceed 15 per cent of

38 P.G. Bryant and E.W. Eckhard (1991): ‘Price-fixing: The Probability of Getting Caught’, Review of Economics and Statistics 531. 39 The figure would be even higher if one were to take into account the fact that fines are only paid several years after the gain from the violation is obtained. Indeed, in my calculations I assume a zero interest rate. With a more realistic higher interest rate, the minimum fine necessary to achieve deterrence would be even higher. 40 W.P.J. Wils (1998): ‘The Commission’s New Method for Calculating Fines in Antitrust Cases’, 23 European Law Review 252 at 254. 41 See the Judgments of the Court of First Instance of 6 April 1995 in Case T–141/89 Tréfileurope v. Commission [1995] ECR II–856 para. 180, of 14 May 1998 in Case T–327/94 SCA Holding v. Commission [1998] ECR II–1373 paras 130 and 170, and of 15 March 2000 in Joined Cases T–25/95 a.o. Cimenteries CBR a.o. v. Commission [2000] ECR II–508, para. 5025. 42 Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No. 17/62 and Article 65(5) of the ECSC Treaty, [1998] OJ C 9/3; see W.P.J. Wils, supra note 40.

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the annual turnover in the products concerned by the violation.43 This would mean that the actual level of fines would generally be some 10 times lower than the minimum level required for fines effectively to deter.

1.2. Why actual fines cannot be raised to the level required for effective deterrence If the actual level of fines is generally some ten times lower than the minimum level required for effective deterrence, would not the obvious solution be to raise fines to that level? The answer is ‘no’. Raising the general level of fines ten-fold, to the level of 150 per cent of the annual turnover in the products concerned by the violation, is impossible or unacceptable, for various reasons (as explained in detail hereafter). First, and least importantly, such higher fines are regularly likely to breach the ceiling laid down in Regulation No. 17/62. Secondly, such higher fines are often likely to exceed the undertakings’ ability to pay, with the result of incomplete deterrence and costly side effects. Moreover, even in cases where the much higher fines needed would not exceed the undertakings’ ability to pay, their imposition and collection is likely to be costly. Finally, any attempt to impose the kind of fines required for effective deterrence is likely to raise fundamental objections of proportional justice. a. The level of fines required for effective deterrence would regularly breach the ceiling laid down in Regulation No. 17/62 Article 15(2) of Regulation No. 17/62 provides that the Commission may only impose fines ‘not exceeding 10 per cent of the turnover in the preceding business year of each of the undertakings participating in the violation’. Even if the turnover referred to here is the total turnover,44 (annot merely the turnover in the products concerned by the violation), it is clear that fines within the order of 150 per cent of the undertaking’s annual turnover in the products concerned by the violation are likely to regularly exceed the ceiling of 10 per cent of the total annual turnover of the undertaking concerned. Indeed, this will be the case in all instances, except those in which the violation concerns only a small proportion (less than one fifteenth) of the products sold by the undertaking. This problem is, however, not a fundamental one, as the Council could raise the ceiling laid down in Regulation No. 17/62.45 43 Fines corresponding to substantially higher percentages of the turnover in the products concerned by the violation can occur in cases of large companies committing very serious infringements which affect only a small part of the products sold by these undertakings; see for example the Decision of the Commission of 7 June 2000, Amino Acids, supra note 36. 44 Judgment of the Court of Justice of 7 June 1983 in Joined Cases 100-103/80 Musique Diffusion Française v. Commission [1983] ECR 1908, para. 119. 45 In its recent proposal to the Council for a new regulation replacing Regulation No. 17, supra note 2, the Commission did not propose that the ceiling be raised. In its comments on the White Paper preceding the Commission’s proposal, the OECD Competition

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b. The level of fines required for effective deterrence would often exceed the undertakings’ ability to pay A more fundamental problem is that fines within the order of 150 per cent of the annual turnover in the products concerned by the violation are often likely to exceed the undertakings’ ability to pay. The fact that the firms who have engaged in a price-fixing cartel have profited financially from the violation offers no guarantee that they will also be able to pay the minimum fine required for effective deterrence. Indeed, in the estimated average case of a price cartel leading to extra profits of 5 per cent of turnover during five years, with a probability of detection and punishment of 16 per cent, the cartel members would each have gained over the whole duration of the cartel 25 per cent of their annual turnover in the products concerned by the violation. Even if they had retained these profits until the fine was imposed, these would only pay for one sixth of the fine of 150 per cent on the annual turnover in the products concerned. It is more likely however that these profits would not have been retained, but rather have been paid out in taxes, dividends, salaries and wages.46 Even liquidating the assets of the firms concerned is often unlikely to generate enough revenue to pay the fine required for effective deterrence. Indeed, many companies’ annual turnover exceeds their assets. A fine of 150 per cent of annual turnover in the products concerned by the violation could thus only be paid out of the assets of large, diversified companies, or companies with very high asset-to-sales ratios.47 In an empirical study based on a sample of 386 firms convicted of price-fixing in the US between 1955 and 1993, Craycraft, Craycraft and Gallo estimated that 58 per cent of the firms would not have been able to survive the imposition of an optimal fine without becoming technically insolvent.48 Because of data restrictions, the firms in their sample were the larger firms, which means that their result may very well underestimate the extent of the inability to pay problem.49 As indicated above,50 the fines that are actually imposed by the Commission at present are much lower than the fines required for effective deterrence. But Law and Policy Division had however suggested an increase; see W.P.J. Wils, supra note 2 note 137. 46 G.J. Werden and M.J. Simon, supra note 3 at 928 note 35, referring to empirical estimates that unions are able to capture most of the monopoly profits earned by US manufacturing firms. 47 Idem at 928–29. 48 C. Craycraft, J.L. Craycraft and J.C. Gallo (1997): ‘Antitrust Sanctions and a Firm’s Ability to Pay’, 12 Review of Industrial Organization 171. It should be noted that they calculate the optimal fine not on the basis of gain obtained from the violation, as is done in the present paper, but rather on the basis of the harm done; on the choice between harm-based and gain-based sanctions, see W.P.J. Wils, supra note 22 at 28–30; see also G.J. Werden and M.J. Simon, supra note 33 at 932–34, and infra text accompanying note 132 on the distinction between pricing and punishing. 49 C. Craycraft, J.L. Craycraft and J.C. Gallo, supra note 48, at 180 note 12. 50 Text accompanying notes 40 to 43.

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even with these lower fines, inability to pay appears to be an issue at least in some cases. The Commission’s guidelines on the method of setting fines mentions the undertaking’s ‘real ability to pay in a specific social context’ as a factor to be taken into account in setting the amount of the fine.51 In a number of decisions, the Commission appears to have taken into account the undertakings’ bad financial situation in setting the amount of the fines.52 In the United States, it has also been reported that the Department of Justice often finds the inability to pay a serious problem, and that lower fines are routinely recommended as a consequence.53 c. The consequences of the inability to pay Imagine that the Commission would decide as a matter of general policy to raise the level of fines to the minimum level generally required for effective deterrence. What would really happen, given that such fines would very often exceed the undertakings’ ability to pay? If such high fines were really imposed, many of the companies concerned would be forced into insolvency. However, this would entail undesirable social costs, because—in the absence of perfect markets—it would hurt not only managers and shareholders (on whom the insolvency may be considered to have a desirable deterrent effect), but also all other stake-holders in the firm: employees, suppliers, customers, creditors and tax authorities.54 Because of the social costs of insolvency, it is more likely that the high fines will not be imposed; instead, lower fines — corresponding to the firms’ ability to pay — are more likely. Indeed, as indicated above,55 both the European Commission and the US Department of Justice do take into account ability to pay when setting the amount of fines. Yet this means that the fines really imposed thus end up being lower than those required as deterrents.56 d. Even below the level of inability to pay, the imposition of high fines is costly Even if they remain below the level of inability to pay, the imposition of high fines is likely to be costly. High fines can have undesirable side effects. In the absence of perfect markets, high fines imposed on companies will have affect all 51

Supra note 42 at para. 5(b). See examples cited in W.P.J. Wils, supra note 22 at 39. 53 G.J. Werden and M.J. Simon, supra note 33 at 927. 54 R.H. Kraakman (1984): ‘Corporate Liability Strategies and the Costs of Legal Controls’, 93 The Yale Law Journal 857 at 882. 55 Text accompanying notes 51 to 53. 56 It should be noted that even if the social costs of bankruptcy were disregarded and companies were penalised into bankruptcy, effective deterrence is not at all guaranteed. Indeed, the firm’s inability to pay the fine means that its shareholders can externalise part of the fine risk, as their liability is limited to their shareholding. The managers’ exposure is similarly limited by the ease with which they can find alternative employment. If the probability of detection and punishment is sufficiently low, shareholders and managers may thus decide to run the risk of their firm being fined into bankruptcy. 52

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the firm’s stakeholders. Bondholders and other creditors will also suffer a diminution in the value of their securities. Employees might suffer from costcutting campaigns induced by the need to pay the fine. Tax receipts will be reduced. Finally, consumers might end up suffering too. Indeed, if the firm competes in a product market characterised by imperfect competition (as will often be the case), the fine may be partly recovered from the consumers in the form of higher prices.57 High fines are also likely to be administratively costly to collect. Even with the level of fines currently imposed by the Commission, there is increasingly frequent litigation related to the actual collection of the fine.58 e. The fines required for effective deterrence are likely to raise fundamental objections of proportional justice The utilitarian conception of punishment, which justifies fines being set at the level required for optimal deterrence, competes for the allegiance of the legal system with the retributive view of punishment. Under the latter view, punishment is not justified by its future consequence of deterring harmful conduct, but rather on the ground that it is morally fitting that a person who does wrong should suffer in proportion to his wrongdoing.59 The law generally reflects a mixture of both conceptions. This is visible in the European Court of Justice’s affirmation that the fines provided for in Regulation No. 17/62 ‘have as their object to punish illegal conduct as well as to prevent it being repeated’.60 The retributive view imposes a constraint in the form of the principle of proportionality of penalties. This principle has been restated most recently in Article 49(3) of the Charter of Fundamental Rights of the European Union, which provides that ‘the severity of penalties must not be disproportionate to the criminal offence’.61

57

J.C. Coffee, supra note 29 at 401–402. An extreme but telling example is the case of DSR-Senator Lines, a company on which the Commission imposed a fine of 13,750,000 Euro by decision of 16 September 1998 (OJ 1999 L95/1). After unsuccessfully requesting the stay of the collection of the fine before the Court of First instance and the European Court of Justice (Order of 21 July 1999 in Case T–191/98 R DSR-Senator Lines v. Commission [1999] ECR II–2533 and Order of 14 December 1999 in Case C–364/99 P(R) DSR-Senator Lines v. Commission [1999] ECR I–8733), the company brought an appeal before the European Court of Human Rights, which is still pending (Case n° 56672/00); see (2000) 21 Human Rights Law Journal 112. In the meantime, the fine has not yet been paid. 59 J. Rawls (1955): ‘Two Concepts of Rules’, 64 Philosophical Review 3 at 4–5. 60 Judgment of 15 July 1970 in Case 41/69 ACF Chemiefarma [1970] ECR 661 para. 173 (author’s translation of the French ‘ont pour but de réprimer des comportements illicites aussi bien que d’en prévenir le renouvellement’). Similarly, the Commission has stated that ‘the purpose of fines is twofold: to impose a pecuniary sanction on the undertaking for the violation and prevent a repetition of the offence, and to make the prohibition in the Treaty more effective’ (Thirteenth Report on Competition Policy 1983 at para. 62). 61 OJ C364/1 [2000] at 20. 58

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Raising fines for antitrust violations to the level required for effective deterrence risks conflicting with this requirement of proportional justice, because of the relatively low probability of detection and punishment. As explained above,62 effective deterrence requires that fines exceed the undertaking’s gain from the violation by a multiple inversely related to the probability of detection and punishment. Under the estimations made above for the average price cartel,63 the cartel members’ gain was estimated to equal 25 per cent of their annual turnover in the products concerned by the violation. Because of the estimated probability of punishment of 16 per cent, this figure needs to be multiplied by six to reach 150 per cent of the annual turnover in the products concerned as the minimum fine generally required for effective deterrence. Regardless of how necessary it is to achieve effective deterrence, such a large multiplication risks being unacceptable from a proportional justice perspective.64

2. Corporate sanctions do not always guarantee adequate incentives for responsible individuals within the firm As explained above,65 the logic of fining undertakings or companies for antitrust violations is that the threat of the corporate sanction, if sufficiently high, will induce the undertaking or company to try to make its agents respect the law. This shifting of the enforcement function from the authorities to the firm is efficient because the firm generally has a relatively good ability to influence the behaviour of its agents. However, in a number of circumstances the firm may not, in reality, be capable of adequately controlling the behaviour of its agents, with the result that exclusive reliance on corporate sanctions will not lead to effective deterrence. As 62

Supra text accompanying notes 31 and 32. Supra text accompanying notes 33 to 39. 64 See E. David (2000): ‘La détermination du montant des amendes sanctionnant les infractions complexes: régime commun ou régime particulier?’, 36 Revue trimestrielle de droit européen 511 at 526–27, and J. Waldfogel (1993): ‘Criminal Sentences as Endogenous Taxes: Are They ‘Just’ or ‘Efficient’?’, 36 Journal of Law & Economics 139. The maximum of twice the gross gain in 18 USC. § 3571, supra note 9, may reflect the limit of what is considered acceptable from a proportional justice perspective. See further also C.R. Sunstein, D. Schkade and D. Kahneman (2000): ‘Do People Want Optimal Deterrence?’, 29 Journal of Legal Studies 237, providing empirical evidence that people reject law-enforcement policies that increase or decrease penalties because of the probability of detection. J. S. Parker (1989): ‘Criminal Sentencing Policy for Organizations: The Unifying Approach of Optimal Penalties’, 26 American Criminal Law Review 513 at 563–66, defends the view that there is no real conflict between deterrence and proportionality, because the probability of detection would reflect a second dimension of harm directly related to the offender’s culpability. By choosing an offence with a lower probability of detection, the offender would deserve a higher penalty. 65 Supra text accompanying note 28. 63

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explained below, this situation can arise because firms may not be able to impose sufficiently serious sanctions on their agents. It can also arise when firms are management-controlled. Finally, the managers responsible for the violation may have left the firm by the time the violation is detected.

2.1. Firms often have only a limited ability to discipline their agents Firms may not be able to deter their agents from committing violations because of their limited ability to impose sanctions on their employees.66 Consider the case of a middle-rank manager who, with a view to improving the dismal financial results of his division and thus increasing his prospects of either promotion or incentive payments, or of avoiding demotion or dismissal, risks engaging in price-fixing contrary to the sincere policy of the firm. Depending on the probability of detection, the likelihood and the seriousness of the adverse consequences for the manager of not improving his financial results, and the manager’s capacity to improve them without resorting to price-fixing, the firm might not be able to deter the manager from engaging in the violation. Indeed, if the worst sanction that the firm can inflict on him when discovered is firing him, but if the probability of detection is not high, the manager might perceive this as a lower risk than the risk of the adverse consequences (including possibly being fired), if he does not engage in the violation. Without the possibility of threatening greater sanctions than dismissal (the effect of which may moreover be limited by alternative employment opportunities), the firm’s only alternative is to spend resources on monitoring, inspections, and the like, so as to achieve a sufficiently high probability of detection. However, this might be very costly, not only in real terms, but also in that it may injure morale by sowing seeds of unnecessary distrust.67 The firm might also be hurt by its efforts to detect and punish violations committed by its agents, to the extent that this results in the violation becoming public and in the firm itself subsequently being punished for it.68 Because of these costs and risks, firms might prefer not to monitor their agents’ behaviour too closely, notwithstanding the threat of corporate sanctions. 66

See A.M. Polinsky and S. Shavell (1993): ‘Should Employees Be Subject to Fines and Imprisonment Given the Existence of Corporate Liability?’, 13 International Review of Law and Economics 239. 67 S. Calkins (1997): ‘Corporate Compliance and the Antitrust Agencies’ Bi-Modal Penalties’, 60 Law and Contemporary Problems 127 at 142; see also A.R. Beckenstein and H.L. Gabel, supra note 15. 68 See generally J. Arlen (1994): ‘The Potentially Perverse Effects of Corporate Criminal Liability’, 23 Journal of Legal Studies 833, J. Arlen and R. Kraakman (1997): ‘Controlling Corporate Misconduct: An Analysis of Corporate Liability Regimes’, 72 New York University Law Review 687, and J. Arlen (1998): ‘Corporate crime and its control’, in P. Newman, ed., The New Palgrave Dictionary of Economics and the Law, London, Macmillan 492. A well-designed leniency policy could mitigate this problem, however.

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In his survey of legal opinion in Brussels in the first half of the 1980s, Feinberg asked whether companies tend to penalise employees involved in antitrust violations. Of the 21 respondents, none agreed or strongly agreed, whereas 12 disagreed and two strongly disagreed, with the seven others neither agreeing nor disagreeing.69 Of course, it is not certain whether this absence of internal discipline is due to the problems discussed in this subsection, or to those discussed in the following subsections, or simply to the fact that corporate sanctions are not sufficiently high motivated to deter. Whichever (combination) of these factors provides the explanation, it does clearly suggest that the existing method of deterring EC antitrust violations is inadequate.70

2.2. Firms may be management-controlled Some firms with widely dispersed shareholders may be effectively controlled by their senior management. If these senior managers engage in antitrust violations to secure personal benefits, only imposing fines on the undertaking is unlikely to be effective. The fine will have a relatively small financial impact on each of the shareholders which, because of their small stakes, might not have sufficient incentive to try to control the managers’ behaviour.71

2.3. Managers may have left the firm by the time their violation is detected There is often a considerable time interval between the commission of an antitrust offence and its detection, whereas employed managers can be quite mobile. If the manager responsible for a violation has left the firm by the time the violation is detected, imposing a fine on the firm can be ineffective as there is often little a company can do to a former employee.72 From an ex ante perspective, for a manager contemplating a violation, the possibility that he may have left the firm by the time the violation is detected will reduce the impact of any threat of disciplinary action by the firm.

69

R.M. Feinberg, supra note 21 at 379. One may object that the Commission imposes higher fines today that at the time of Feinberg’s survey. I am not entirely sure that fines have indeed increased: nominal figures certainly have, but these figures should be corrected for inflation. In an earlier article, supra note 22 at 20, I found that real fines in the 1989–93 period were no higher than they had been on average over the entire 1969–93 period. 71 See R.D. Blair (1985): ‘A suggestion for improved antitrust enforcement’, The Antitrust Bulletin 433 at 436–37, S. Calkins, supra note 67 at 165, and R.H. Kraakman, supra note 27 at 585. The problem can be reinforced by share ownership changing between the time the violation is committed and the time it is detected; see W.P.J. Wils, supra note 3 at 115. 72 S. Calkins, supra note 67 at 142. 70

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3. Consequences and possible solutions 3.1. Consequences The above analysis leads to quite disturbing conclusions as to the possibility of effectively deterring antitrust violations when fines on undertakings are the only instrument available, as is currently the case under EC law. For some categories of violations, which are relatively unprofitable and/or easy to detect, fines may be high enough, or could be raised so as to become high enough to make these violations unattractive from the undertakings’ perspective. Yet even then, the imposition of fines on the undertakings concerned might not lead to effective deterrence because the undertakings might have a limited ability to control the behaviour of their managers. However, for the more profitable types of violations (which will generally also be the more harmful ones) or those that are relatively difficult to detect (such as price cartels), it would appear that fines cannot systematically be raised to the level required to make these violations unattractive to the undertakings concerned. I am perfectly willing to believe that a number of undertakings abstain from committing violations because of their (or their shareholders’ or managers’) strong moral commitment to EC antitrust law. But such moral commitment is bound to be continuously and seriously put to the test. If the threat of fines imposed on undertakings or companies cannot effectively deter price-fixing and other antitrust violations of comparable profitability and ease of concealment, the question should be raised whether Europe would not be better off if the Commission stopped spending resources on detecting and punishing such violations. It could be argued that the answer is ‘yes’. Not only would the Commission save resources, so too would the Court of First Instance and the European Court of Justice, and (arguably much more significantly) the companies targeted by the Commission’s investigations. The social costs linked to the imposition of fines on undertakings73 could also be avoided.74 On the other hand, the Commission’s current enforcement activity 73

See supra text accompanying note 57. The current situation, characterised by the imposition of fines which, given their frequency and size, are not sufficient to deter firms from entering into price cartels, but are not negligible either, may actually facilitate price-fixing. Indeed, for a price cartel to be successful, some mechanism is needed to detect and punish cheating. Punishing cheating is however normally costly, not only to the cheater but also to the other cartel members inflicting the punishment. Once cheating has been detected, it may thus be more advantageous for the cartel members to renegotiate the agreement rather than inflicting the punishment. The renegotiations risk however leaving evidence, which may facilitate the detection and punishment of the cartel by the competition authority. As the benefit from re-negotiations (being the avoidance of costly punishment of the cheating which has taken place) is much lower than the benefit from entering into the price cartel at the outset, fines which do not deter the creation of the cartel may however deter renegotiations, thereby facilitating the punishment of cheating and thus facilitating successful price-fixing; see B. McCutcheon (1997): ‘Do Meetings in Smoke-Filled Rooms Facilitate Collusion?’ 105 Journal of Political Economy 330. 74

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could be justified to the extent that it contributes to the normative commitments to antitrust rules of business people.

3.2. Possible solutions If price-fixing and other antitrust violations of comparable profitability and ease of concealment cannot effectively be deterred with fines on undertakings, what could be done to ensure effective deterrence? a. Maintaining a notification and prior approval system is of no use Legal rules such as the prohibitions laid down in Articles 81 and 82 EC can be enforced either ex post through deterrence or ex ante through pre-screening.75 If, at least for price cartels, ex post enforcement through deterrence with fines on undertakings does not work, should one not try instead ex ante enforcement? Regulation No. 17/62 provides for a notification system that allows some degree of ex ante enforcement. However, the Commission has proposed the abolition of this system, and has instead suggested relying entirely on ex post enforcement through deterrence.76 Should one not rather keep and strengthen the notification system, so as to have an alternative for failing ex post enforcement through deterrence? The answer is ‘no’. A notification system can never solve the problem that price cartels and other violations of comparable profitability and ease of concealment are difficult to deter, because the same ease of concealment will make any obligation to submit to pre-screening equally unworkable.77 The notification system under Regulation No. 17/62 has never made any contribution to the fight against hard-core cartel violations, of which the Commission is never notified of. To the contrary, it has been counterproductive, in that it has led the Commission to spend a substantial part of its inevitably limited antitrust enforcement resources dealing with notifications that usually raise only minor (if any) competition concerns. b. Encouraging private enforcement does not help much One might wonder whether private enforcement can provide a solution to the problem of price-fixing and similar violations not being deterred. The answer is ‘not really’. Indeed, the above analysis applies not only to fines imposed on undertakings by public authorities but also to private damage suits against undertakings or companies. Adding damages to fines may have the advantage of reducing the problem of high fines being unacceptable from a proportional 75

For a detailed analysis and comparison of the two methods, see W.P.J. Wils (1999): ‘Notification, clearance and exemption in EC competition law: an economic analysis’, 24 European Law Review 139 at 142–150, and W.P.J. Wils, supra note 2 at 9–41. 76 Supra note 2. 77 W.P.J. Wils, supra note 75 at 148 and W.P.J. Wils, supra note 2 at 19.

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justice perspective.78 Yet all the other problems subsist. Be fines or damages, the amount of corporate sanctions required for effective deterrence is equally likely to exceed the undertakings’ ability to pay, and whenever fines on undertakings are ineffective because undertakings have a limited ability to discipline their agents, damage suits against undertakings will be equally ineffective. c. Increasing the probability of detection cannot solve the problem on its own To the extent that corporate sanctions are ineffective because of firms’ limited ability to discipline their agents, increasing the probability of detection and punishment is not going to make a difference. However, the probability of detection and punishment is a crucial factor in explaining the problems of fines required for effective deterrence exceeding undertakings’ ability to pay as well as raising proportional justice objections.79 If all or nearly all violations could be detected and punished, these problems might disappear. There is certainly some scope for reinforcing the Commission’s (and/or the national competition authorities’) resources devoted to investigating hard-core antitrust violations, for strengthening the authorities’ investigating powers, and for perfecting leniency programs,80 so as to raise the probability of detection and punishment. However, raising this probability close to the level of certainty would be unacceptably costly in terms of enforcement resources and the impact on civil liberties, given the inherent difficulty of detecting low-visibility violations such as price-fixing.

V. The case for combining corporate sanctions with individual penalties As explained hereafter, adding individual penalties may provide the solution to the problem of corporate sanctions being unable to bring about effective deterrence. The threat of individual sanctions may provide effective supplementary incentives to refrain from committing antitrust violations. Moreover, individual penalties are more capable of strengthening people’s moral commitment to the law. Individual penalties should however not be used exclusively, but only in combination with corporate sanctions.

78

See supra text accompanying notes 59 to 64. See supra text accompanying notes 46 and 62. 80 Given that the existing sanctions are too low to deter price-fixing and comparable hard-core violations, leniency programs may actually be counterproductive today, in that they may provide cartel members with an otherwise missing credible threat to punish cheaters; see G. Spagnolo (2000): ‘Self-Defeating Antitrust Laws: How Leniency Programs Solve Bertrand’s Paradox and Enforce Collusion in Auctions’, Fondazione Eni Enrico Mattei, Milan, Working Paper No. 52/2000. 79

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1. Adding individual penalties could provide the solution to the problem of corporate sanctions being unable to bring about effective deterrence As explained above,81 exclusive reliance on corporate sanctions makes effective deterrence unattainable for two sets of reasons. First, the level of fines that would be needed for effective deterrence is impossibly high. The fines required would very often exceed the undertakings’ ability to pay, and even below that level their imposition would entail substantial social costs. Moreover, the fines required for effective deterrence are likely to raise fundamental objections of proportional justice. Secondly, corporate sanctions do not always guarantee adequate incentives for the responsible individuals within the firm, because firms have often only a limited ability to discipline their agents, firms may be management controlled, and managers may have left the firm by the time their violation is detected. These problems could be solved by combining corporate sanctions with individual penalties imposed on the responsible decision-makers or actors within the firm.

1.1. Adding individual penalties could solve the problems of impossibly high fines In all those instances where, given the size of the benefits from the violation and the difficulty of detection, the highest fines (or damages) which the undertaking is able to pay are not high enough to make the violation unattractive to the firm, deterrence can be strengthened be adding the threat of individual penalties for the responsible decision-makers or actors within the firm. The possibility of raising deterrence by threatening individuals with fines may again be limited by the individuals’ ability to pay, but the use of prison sanctions allows this limit to be overcome. By reducing the need for very high corporate fines, the use of individual penalties also allows the social costs linked to the imposition of high fines on undertakings or companies82 to be reduced. The imposition of individual sanctions will also have a social cost, consisting primarily in the side effects on innocent family members of the individuals concerned, the administrative cost of imprisonment, and the loss of productive employment of the imprisoned individuals. It would however appear reasonable to assume that these costs, like the social costs of corporate sanctions, increase more than proportionally with the size of the sanction.83 By combining both types of sanctions, the need for very high sanctions of any type is reduced, and so arguably is the overall social cost of imposing the sanctions. 81 82 83

Text accompanying notes 31 to 72. Supra text accompanying note 57. Compare with G.J. Werden and M.J. Simon, supra note 33 at 929 and 936.

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Finally, since the addition of individual penalties for responsible decisionmakers or actors within the firm reduces the need for very high corporate fines, the proportional justice problem linked to such very high fines84 is also reduced.

1.2. Adding individual penalties solves the problems of firms being unable to control their agents When firms are unable to control the behaviour of their agents, because of their limited ability to impose sanctions on their employees and because of the high cost of intensive monitoring, the threat of the authorities directly imposing penalties on the managers responsible for the antitrust violations can ensure effective deterrence and solve the firms’ problems. The authorities can threaten more serious sanctions than the firm, because of possible greater effectiveness in collecting monetary sanctions and above all because of the possibility of imprisonment, thus allowing effective deterrence to be achieved. The addition of the threat of individual penalties should be welcomed by all firms genuinely committed to avoiding antitrust violations, as it facilitates the task of controlling their agents’ behaviour. The threat of individual penalties can also solve the specific problems of failing deterrence in the case of management-controlled firms and in the case of managers having left the firm at the time the violation is detected.85

2. Individual penalties ensure necessary resistance to corporate pressure to break the law As explained above, the addition of the threat of individual penalties for managers involved in antitrust violations helps those firms that are genuinely committed to avoiding such violations, as it facilitates their task of ensuring compliance. Individual penalties are also useful for the situation where firms rather want to push their agents into committing antitrust violations. As already mentioned,86 corporate sanctions tend to remove the incentive to encourage violations that firms may have given the fact that they normally benefit from antitrust violations committed by their agents. Yet because corporate sanctions cannot be raised sufficiently high to make violations such as price-fixing unattractive for the firm,87 corporate sanctions are not sufficient to remove firms’ perverse incentives entirely. Individual penalties can bridge the gap by providing an 84 85 86 87

Supra text accompanying notes 59 to 64. Supra text accompanying notes 71 and 72. Text accompanying notes 29 and 30. Supra text accompanying notes 31 to 64.

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incentive for managers to resist any pressures to fix prices. Their resistance will, at the very least, make price-fixing more costly for companies.88

3. Individual penalties can strengthen people’s moral commitment to the law As indicated above,89 corporate managers are not necessarily just profit-maximisers for themselves and their firm. They might feel a moral responsibility to live within the boundaries of the law whether or not they are likely to be caught, and this normative commitment could trump their interest calculus. To reduce the number of antitrust violations, authorities may thus, apart from organising deterrence, try to find ways to increase business people’s normative commitment to the antitrust rules. Individual penalties, in particular those of a criminal law nature,90 can be a tool by which to educate society by inculcating social norms. Criminal law and criminal punishment can play a significant role in bolstering people’s moral incentives, through the reinforcement of society’s moral standards and the imposition of stigma on those who violate them. The message of punishment is not only addressed to the amoral man, whose calculations deterrence attempts to influence. It also reinforces the sense of justice and automatic compliance of the law-abiding, by providing respect for the good actors and shame for the bad.91 While corporate sanctions, especially those of a criminal law nature, can also have some educational function,92 they are unlikely to communicate as strong a message as individual penalties. Indeed, to hold a company liable for the culpable acts of its executives, separates the punishment from the act and thus weakens the signal of the seriousness of the offence.93

4. Individual penalties should only be used in combination with corporate sanctions There are at least six reasons why individual penalties for antitrust violations should be used in combination with corporate sanctions, rather than in isolation. The first two reasons correspond with the two advantages of corporate 88

See G.J. Werden and M.J. Simon, supra note 33 at 931, R.D. Blair, supra note 71 at 437–38, and J.C. Coffee, supra note 29 at 410. 89 Text accompanying notes 24 to 26. 90 See infra text accompanying notes 130 to 137. 91 G.E. Lynch, supra note 26 at 46–47 and 52. 92 See infra text accompanying notes 133 to 137. 93 K.G. Dau-Schmidt, supra note 10 at 100.

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sanctions discussed above.94 In the absence of corporate sanctions, firms would have an incentive to encourage violations by their agents, whereas the threat of corporate sanctions gives them some incentive to control their agents’ behaviour. The resulting partial shift (reason two) of the enforcement function from the authorities to the firm is efficient because firms generally have a relatively good ability to influence the behaviour of their agents. The third reason is that, in particular in the case of entrepreneurs, liability for fines of both individual and company removes the possibility of avoiding the collection of fines by shifting assets between the one and the other.95 The fourth reason relates to economies in enforcement costs, as both the company and the individual defendants can be prosecuted on the basis of the same evidence and possibly also in the same trial or the same administrative proceedings.96 The fifth reason—already discussed above97 —is that the use of sanctions against both firms and managers reduces the need for extremely high sanctions of either kind, and thereby the attendant cost to innocent parties of the side effects of punishment.98 Finally, the threat of penalties for both company and individuals significantly increases the potential for plea-bargaining, as all defendants have an incentive to implicate each other in return for immunity or a reduced sanction. As an investigation proceeds, top managers’ expected costs of personal sanctions increase, whereas the likely benefits of loyalty to the firm decline. The attraction of exchanging information for lenient personal treatment will rise accordingly.99 Indeed, the additional threat of individual liability may be an important factor explaining the success of the US Department of Justice’s leniency program compared to its European equivalent.100

VI. The case for imprisonment If effective deterrence of price-fixing and similar antitrust offences requires corporate sanctions to be supplemented with individual penalties on responsible decision-makers or actors within the firm, what can be said about the type of individual penalty, which should be used? Should prison sanctions be used, or only fines? 94

Supra text accompanying notes 27 to 30. G.J. Werden and M.J. Simon, supra note 33 at 930, and C. Craycraft, J.L. Craycraft and J.C. Gallo, supra note 48 at 172 note 2. 96 J.C. Coffee, supra note 29 at 387, note 6, and R.H. Kraakman, supra note 54 at 886. 97 Text accompanying notes 82 and 83. 98 See also R.H. Kraakman, supra note 54 at 886. 99 R.H. Kraakman, supra note 54 at 886, and J.C. Coffee, supra note 29 at 387 note 6. 100 Compare with OECD Working Paper ‘Using Leniency to Crack Hard Core Cartels’, 16 November 2000, at 3–4. 95

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In his well-known article on the economics of crime and punishment of 1968, Becker made the point that, from an economic perspective, fines should be used whenever feasible.101 The main reason for preferring fines over imprisonment is that fines are merely transfer payments, while imprisonment uses resources in the form of buildings, guards, and the offenders’ own time.102 It may be added that imprisonment does not serve the same vital incapacitating purpose for business offenders that it does for certain classes of violent criminals, whose isolation may be required for the public safety.103 The logic of lex talionis could also be said to recommend fines as a metaphorically apt punishment of property crimes.104 However, as explained hereafter, fines appear unlikely to guarantee effective deterrence, at least with respect to price-fixing and other antitrust offences of comparable profitability and difficulty of detection, because the level of fines required for effective deterrence may be impossibly high and because of the problem of indemnification. On the other hand, there is ample evidence that the threat of imprisonment constitutes a very effective deterrent for antitrust offences. Imprisonment is also uniquely effective in strengthening people’s moral commitment to the law. Concerns relating to the risk of prosecutorial abuse and distributive justice could also militate in favour of the use of imprisonment. Finally, alternative sanctions, such as mere publicity or disqualification orders, are not equally effective. If we really want to strongly deter price-fixing and similar antitrust offences, there appears to be no viable alternative to the introduction of prison sanctions.

1. The fines needed for effective deterrence may again be impossibly high As explained above, one of the main problems with exclusive reliance on corporate sanctions to deter antitrust offences is that the level of fines (or damages) required for effective deterrence, given the benefits from the offence and the difficulty of detection, are impossibly high.105 A similar problem may arise with 101 G.S. Becker (1968): ‘Crime and Punishment: An Economic Approach’, 76 Journal of Political Economy 169 at 193 (the italics are Becker’s). 102 Idem; see also W. Breit and K.G. Elzinga (1973): ‘Antitrust Penalties and Attitudes Toward Risk: An Economic Analysis’, 86 Harvard Law Review 693 at 695, R.A. Posner (1976): Antitrust Law: An Economic Perspective, University of Chicago Press at 225, and R.A. Posner (1980): ‘Optimal Sentences for White-Collar Criminals’, 17 American Criminal Law Review 409 at 410. 103 G.E. Lynch, supra note 26 at 32; see also C. B. Renfrew (1977): ‘The Paper Label Sentences: An Evaluation’, 86 The Yale Law Journal 590 at 592. 104 G.E. Lynch, supra note 26 at 32; see also J. Bentham, supra note 31, Chapter XV, Sections VII to X, arguing that there is an advantage in punishments being analogous to the offence so as to render them more easily present in the mind of the potential offender and more exemplary. 105 Supra text accompanying notes 46 to 53 and 59 to 64.

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regard to individual fines (or damages). If the probability of detection and punishment is (optimistically) assumed to be 16 per cent,106 the fine required for effective deterrence will have to be at least six-fold the gain that the manager obtains from the violation. Such fines risk exceeding the individuals’ ability to pay, as well as raising proportional justice objections.

2. The problem of indemnification The second and most compelling reason why individual fines (or damages) are unlikely to be effective is that firms can relatively easily indemnify their agents for any threat of fines or any fines effectively imposed, thus taking away the deterrent effect of the penalty on the individuals concerned. As explained above, one of the main reasons for supplementing corporate sanctions with individual penalties is that they provide an incentive for the managers to resist any pressure to commit antitrust offences in the interest of the firm.107 This strategy will fail, however, if the individual penalties take the form of fines, since the firm can relatively easily compensate the manager in advance for taking the risk and/or indemnify him ex post when he has to pay the fine. The crucial advantage of imprisonment is that it is impossible to shift the penalty ex post, and also more difficult to arrange for a premium to compensate the risk in advance.108

3. Imprisonment is a very effective deterrent for antitrust violations There is ample evidence, based in particular on the American experience, that imprisonment is a particularly potent deterrent for potential antitrust offenders. To use Liman’s words: ‘For the purse snatcher, a term in the penitentiary may be little more unsettling than basic training in the army. To the businessman, however, prison is the inferno, and conventional risk-reward analysis breaks down when the risk is jail. The threat of imprisonment, therefore, remains the most meaningful deterrent to antitrust violations’.109 106

Supra text accompanying note 38. Supra text accompanying notes 86 to 88. 108 See G.J. Werden and M.J. Simon, supra note 33 at 931, R.D. Blair, supra note 71 at 440–41, R.H. Kraakman, supra note 54 at 876–79, and C.D. Stone (1980): ‘The Place of Enterprise Liability in the Control of Corporate Conduct’, 90 The Yale Law Journal 1 at 45–65. 109 A.L. Liman (1977): ‘The Paper Label Sentences: Critique’, 86 The Yale Law Journal 619 at 630–31; in the same sense: D.I. Baker and B.A. Reeves (1977): ‘The Paper Label Sentences: Critique’, 86 The Yale Law Journal 619 at 621, and M.B. Mukasey (1997): ‘Comment on Lynch’, 60 Law and Contemporary Problems 71; see also the survey results of R.M. Feinberg, supra note 21 at 376–77. 107

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The fact that imprisonment is such an effective deterrent means that rather short terms of imprisonment are likely to be sufficient for effective deterrence,110 with the result that the social costs of imprisonment111 can be kept relatively low.

4. Prison sanctions carry a uniquely strong moral message As explained above, criminal punishment does not only create deterrence, but also educates the public about basic standards of behaviour and reinforces the sense of justice and the automatic compliance of the law-abiding.112 Imprisonment is by far the most expressive sanction. Prison sanctions not only send a special message not conveyed by fines, they also send it more effectively, as prison sentences for businessmen are much more newsworthy than fines and will thus receive more publicity and be more noted by other businessmen.113

5. Further arguments in favour of imprisonment Two further reasons could be advanced in favour of using imprisonment as a sanction for antitrust violations. The first reason relates to the risk of prosecutorial abuse. Whenever an enforcement authority is entrusted with strong discretionary enforcement powers, there is some risk of these powers being abused to further the authority’s own interests. Fines might present greater risks for abuse than imprisonment. The reason for this is that fines are a source of public revenue, whereas prison sanctions, on the contrary, consume public resources.114 The second reason relates to distributive justice. It could be argued on grounds of equity, as well as in view of the need to uphold confidence in the law, that imprisonment, being society’s most onerous and stigmatic punishment, should not be withheld from those with economic power and social status, when it is regularly applied to the poor and powerless, often for equally non-violent offences, such as non-violent larceny, burglary or counterfeiting.115 110 This fact is strongly illustrated by the case of John T. Main, one of the defendants in the case of United States v. McDonough Co., who committed suicide rather than serve his 90 days prison term; see G.J. Werden and M.J. Simon, supra note 33 at 936 and R.D. Blair, supra note 71 at 440. 111 Supra text in between notes 82 and 83 and accompanying note 102. 112 Supra text accompanying notes 90 to 93. 113 G.J. Werden and M.J. Simon, supra note 33 at 934, G.E. Lynch, supra note 26 at 47 and 49, and D.M. Kahan, ‘Social Influence, Social Meaning, and Deterrence’, supra note 26 at 383–84; see also the example of the Financial Times’ coverage of the jail sentences in the Vitamins case, supra note 23. 114 See D. Friedman (1999): ‘Why not hang them all: the virtues of inefficient punishment’, 107 Journal of Political Economy 259, and G.E. Lynch, supra note 26 at 53. 115 D.I. Baker and B.A. Reeves, supra note 109 at 620–21 and G.E. Lynch, supra note 26 at 32.

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6. No alternative sanctions can replace imprisonment Fines (or damages, the deterrent effects of the one or the other being identical) and imprisonment do not exhaust the whole range of individual sanctions one could imagine. Could any other sanction than imprisonment be comparably effective? One possibility would be merely to create adverse publicity for the individuals responsible for the undertaking’s antitrust violation, for instance by mentioning their name and describing their role in detail in the decision finding the undertaking’s violation, and giving publicity to that decision.116 As indicated above,117 the adverse publicity linked to a prison sentence contributes to the effectiveness of the latter sanction. Yet publicity on its own is unlikely to have a comparably strong effect. For the managers concerned it may be unpleasant, but probably not so much that their firm could not indemnify them for it. It does not carry much of a moral message for the managers concerned or for others, as no personal offence is found; there is merely publicity of a role played in the firm’s infringement. Another alternative sanction could be disqualification orders, for instance barring the individuals concerned from holding corporate directorships.118 To the extent that they carry a moral message, disqualification orders may be useful as an additional sanction. I do not believe, however, that they are a viable substitute for imprisonment. Indeed, the effectiveness of disqualification orders is limited because of the possibilities of indemnification or circumvention.119 An individual who is barred from serving as a director in his company could be hired by the same firm as a consultant and/or be fully financially compensated for any loss in income.120

7. Conclusion The introduction of prison sanctions for the individuals responsible for their undertakings’ antitrust violations would generally appear to be the only way to achieve effective deterrence of price cartels and other antitrust violations of 116

See also J.C. Coffee, supra note 29 at 429–34, and C.B. Renfrew, supra note 103. Text accompanying notes 109 to 113. 118 This possibility was recently suggested by J. Joshua in ‘A trustworthy antitrust policy’, Financial Times, 14 February 2001, p. 15. 119 On the problem of indemnification, see supra text accompanying notes 107 and 108. 120 Attempts to prevent such circumvention or indemnification are likely to be costly in terms of enforcement and/or in terms of loss of the individual’s productive resources. Indeed, to the extent that the sanction really hurts the individual, in that it forces him to settle for a less profitable occupation, it may equally harm society which forgoes the benefit of the individual’s productive resources being fully used (otherwise than in committing antitrust violations of course). As disqualification orders would have to be for a long time period to have any effect, their economic cost thus risks being higher than that of imprisonment, which can be limited to relatively short periods. 117

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comparable profitability and ease of concealment. The answer to the question in the title of this paper is thus ‘yes’.121 Does it follow that such prison sanctions should indeed be introduced into EC law? Not necessarily. This only follows if one believes that the prohibition of price cartels and comparable antitrust violations is worth the effort of fully enforcing it. The majority opinion in Europe may very well disagree. In the United States, antitrust has a long tradition and its values enjoy a very wide consensus.122 Price-fixing is considered to be immoral, like theft. On the contrary, antitrust has no similar status in European history or culture. Before World War II, cartels were a widespread and highly esteemed institution throughout Europe.123 After World War II, Germany was the first country to introduce a comprehensive, modern antitrust law, in what Galbraith described as ‘one of the major economic reforms pressed by the United States on the new German State’.124 Most 121

With the possible qualification that imprisonment may not be necessary to enforce Article 82 EC; see infra text accompanying notes 127 to 129. 122 In the words of Reich, ‘antitrust is popular with the public’ and ‘has a compelling ideologic attraction’, ‘the ideal of competition continuing to receive broad support from a wide spectrum of American public opinion’; R.B. Reich (1980): ‘The Antitrust Industry’, 68 Georgetown Law Journal 1035 at 1054 and note 1. 123 H.G. Schröter (1996): ‘Cartelization and Decartelization in Europe, 1870–1995: Rise and Decline of an Economic Institution’, 25 Journal of European Economic History 129 at 137, who also writes at 140 that Yugoslavia was the only European country where cartels were prohibited at that time. An early precedent of the cartel prohibition existed in French revolutionary law. Article 7 of the Law of 2–17 March 1791 (décret d’Allarde) declared the principle of freedom of commerce and industry, against the restrictions on freedom of enterprise contained in the corporatist regulations of the Ancien Régime. The décret d’Allarde was followed by the loi Le Chapelier of 14–15 June 1791 and by Article 419 of the Napoleonic Penal Code (abrogated by the Ordonnace n° 86–1243 of 1 December 1986, the current French competition act), which, in its original form of 1810, punished ‘tous ceux qui (…), par réunion ou coalition entre les principaux détenteurs d’une même marchandise ou denrée, tendant à ne la pas vendre ou à ne la vendre qu’à un certain prix, (…), auront opéré la hausse ou la baisse du prix des denrées ou marchandises (…) au-dessus ou au-dessous des prix qu’aurait déterminés la concurrence naturelle et libre du commerce’. The practice of this provision’s (non-)application did however not live up to the promise. In Germany, the Reichsgericht (Supreme Court) held in 1890 that tradesmen were permitted to regulate the market by means of ‘self-help on a cooperative basis’. A Cartel Ordonnace was enacted in Germany in 1923, but it did not prohibit cartels, its starting point being their lawfulness; see K.W. Nörr (1995): ‘Law and Market Organization: The Historical Experience in Germany From 1900 to the Law Against Restraints of Competition (1957)’, 151 Journal of Institutional and Theoretical Economics— Zeitschrift für die gesamte Staatswissenschaft 5. 124 J.K. Galbraith (1995): The World Economy Since the Wars, Mandarin at 53; see also J. Davidow (1990): ‘The worldwide influence of US antitrust’, Antitrust Bulletin 603. As D.J. Gerber (1998): Law and Competition in Twentieth Century Europe, Oxford, Clarendon Press has pointed out, competition law as it took shape in Europe reflected also ideas developed by European thinkers. This does however not contradict the finding that American pressure was essential to overcome the very strong establishment opposition in Europe, including in Germany; see V. R. Berghahn (1986): The Americanization of West German Industry 1945–1973, Berg 1986.

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other European countries modernised their antitrust laws only in the 1980s or 1990s. The competition provisions in the ECSC Treaty of 1951, and subsequently in the EEC Treaty of 1957, were thus far ahead of general acceptance. The Mémoires of Jean Monnet provide evidence as to how closely the insertion of the competition provisions in the ECSC Treaty was linked to the American de-cartelisation policy in Germany. Articles 65 and 66 of the ECSC Treaty were drafted by Robert Bowie, at the time a Harvard professor working with the US High Commissioner in occupied Germany. ‘It was a fundamental innovation in Europe, and the important antitrust legislation which governs the common market finds its origin in these few lines’.125 Interestingly, the novelty of antitrust is illustrated by an earlier passage in Monnet’s Mémoires, concerning his childhood, where he rather approvingly mentions how a price cartel regulated the cognac trade his family worked in.126 Although the situation has certainly evolved, the standing of antitrust values in European opinion today is still not comparable to their position in American culture. Full deterrence might thus still not be desired.

VII. Some further issues 1. For which types of violations of Articles 81 and 82 EC should prison sanctions apply? The above demonstration that fines on undertakings should be supplemented with individual sanctions, in particular imprisonment, so as to achieve effective deterrence, was based on the paradigmatic case of a price cartel.127 These conclusions only apply to the types of violations of Articles 81 and 82 EC that are comparable to price cartels as to their profitability and ease of concealment. For the types of infringements that are difficult to hide, or that are not very profitable anyway for the undertakings committing them, corporate sanctions or corporate sanctions combined with individual fines, could be sufficient to achieve effective deterrence. Secondly, because imprisonment is a much more onerous punishment than fines, the costs of imposing it erroneously are all the greater. These costs include not only the suffering of those unjustly punished, but also the risk-bearing cost to those risking unjustified punishment, the risk of lawful behaviour being 125

J. Monnet (1976): Mémoires, Fayard, at 413; see also D. Spierenburg and R. Poidevin (1994): The History of the High Authority of the European Coal and Steel Community, Weidenfeld and Nicholson at 26–28; R.R. Bowie (1989): ‘Réflexions sur Jean Monnet’, in Témoignages à la mémoire de Jean Monnet, Fondation Jean Monnet, Centre de recherches européennes, Lausanne, at 81–82. 126 J. Monnet, supra note 125 at 42–43. 127 Supra text accompanying notes 33 to 39 and following.

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undesirably deterred, as well as possible negative effects on other people’s normative commitment to the law.128 Prison sanctions should therefore only be imposed in case of clear-cut violations. Alternatively one could conclude that imprisonment should only lie for wilful violations of the law, where there is evidence that the individuals knew that they were violating the law or acted with flagrant disregard for the law, with wilfulness being presumed in cases of clearcut violations.129 Applying these two sets of criteria, I believe that imprisonment is certainly indicated for horizontal, naked price-fixing, bid-rigging and market allocation schemes. As to all other types of antitrust violations—including vertical restraints, other horizontal agreements and violations of Article 82 EC—my guess is that they are usually easier to detect, as the victims of the violation will very often be aware of it, and that the risk of undesirably chilling unlawful behaviour is much more substantial as the borderline between anti-competitive and pro-competitive behaviour is often less obvious. For those other types of violations, fines on undertakings, or fines on undertakings combined with individual fines, may suffice.

2. The criminal law nature of antitrust penalties Up to this point I have almost entirely avoided the use of the word ‘criminal’.130 Instead I have discussed the relative merits of corporate fines, individual fines and imprisonment as penalties for antitrust violations. Indeed, I believe that these categories are more clearly defined and more fundamental than the notion of criminal sanctions. Nevertheless, the question of whether antitrust penalties are, or should be, criminal rather than civil or administrative merits analysis, given that it reflects a distinction used in most if not all legal systems. In the absence of a readily-available definition of criminal law, at least in EC or EU law, the first of the following three sub-sections tries to identify what constitute the distinguishing characteristics of criminal law, as generally understood in various legal systems. The next sub-section addresses the normative question whether antitrust penalties should be criminal, to the extent that there is a choice. The third sub-section deals with the distinct question, which is positive rather than normative, of whether the antitrust penalties existing today under EC law, as well as individual penalties which may in future be introduced, are criminal within the meaning of Articles 6 and 7 and Protocol 7 of the European Convention on Human Rights.

128 See also R.H. Kraakman, supra note 54 at 865 and 887, and R.D. Blair, supra note 71 at 444 note 32. 129 See D.I. Baker and B.A. Reeves, supra note 109, at 623–24. 130 With the exception of the text accompanying notes 90 to 93 and 112.

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2.1. The distinguishing characteristics of criminal law Article 15(4) of Regulation No. 17/62 provides that decisions by which the Commission imposes fines on undertakings pursuant to that regulation ‘shall not be of a criminal law nature’. This provision was carried over without change in Article 22(5) of the Commission’s recent proposal for a new Council Regulation replacing Regulation No. 17.131 The EU Treaty has a Title VI concerning ‘Provisions on police and judicial co-operation in criminal matters’. Article 30 (a) EU provides that common action in the field of police co-operation shall include operational co-operation in relation to the prevention, detection and investigation of ‘criminal offences’. EC or EU law does not, however, contain any definition of what is criminal. Looking across legal systems, criminal law—as opposed to public law enforcement of a civil or administrative nature—appears to have the following distinguishing characteristics. First, it appears that criminal law has a monopoly on the use of imprisonment. Whereas fines can be either criminal or civil or administrative, imprisonment appears to be essentially a criminal sanction. The possibility of a prison sanction does not seem to be a necessary condition for a prohibited act or an enforcement procedure to be criminal, but a sufficient condition. Secondly, the commission of a criminal offence usually requires that the prohibited act be committed with a guilty state of mind (criminal intent). Thirdly, the imposition of criminal sanctions carries, and is designed to carry, a stigma effect. Criminal enforcement has a stronger message-sending role or expressive function than civil or administrative enforcement. Fourthly, in criminal law there appears to be a less strict relationship, if any, between the size of the penalty and the size of the harm caused than in the setting of civil sanctions. This appears to reflect the idea that criminal law does not seek to price certain behaviour (by making the actor bear the external costs of his behaviour) but rather to prohibit it (unconditionally, that is, irrespective of the actual size of the external costs).132 Fifthly, under criminal law, enforcement authorities tend to have stronger information-gathering powers. Finally, criminal procedures tend to have stronger procedural protections, designed to avoid false convictions. These six characteristics are clearly interrelated. The use of imprisonment and the stigma effect create the stronger need for procedural protections to avoid false convictions. These stronger procedural protections in turn create the need for stronger investigative powers so as to avoid enforcement becoming ineffective. On the other hand, the message-sending role of criminal enforcement explains the requirement of a guilty state of mind (as this shows the need for wrong valuations to be repudiated) as well as the absence of a strict relationship between punishment and actual harm, reflecting the desire to deter the criminal behaviour unconditionally rather than merely to price it. 131

Supra note 2, and W.P.J. Wils, supra note 2 at 85. See R. Cooter (1984): ‘Prices and sanctions’, 84 Columbia Law Review 1523 and J.C. Coffee (1992): ‘Paradigms lost: the blurring of the criminal and civil law models— and what can be done about it’, 101 The Yale Law Journal 1875. 132

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2.2. Should antitrust penalties be of criminal law nature? I have been arguing in this paper that effective deterrence of price cartels and other antitrust violations of comparable profitability and ease of concealment generally requires the introduction of prison sanctions for the responsible individual decision-makers or actors within firms. If such prison sanctions were to be introduced, they would necessarily be of a criminal nature (like all prison sanctions). Less obvious is the answer to the question whether antitrust fines—be they fines on undertakings or fines on individuals—should be of a criminal nature. When (corporate or individual) fines are to be combined with prison sanctions, enforcement-cost savings and prosecutorial convenience may militate in favour of also giving fines a criminal character, to the extent that this allows both types of sanctions to be imposed in the same proceedings.133 Another possible reason for wanting fines to be criminal is that criminal fines carry a stronger moral message, and may thus be helpful in bolstering people’s moral commitment to the antitrust rules.134 Whereas this consideration is certainly relevant for individual fines, it is less clear whether it makes sense for fines imposed on undertakings or companies. Firms do not have a sense of shame in the same way as individuals. They may suffer a reputation loss, in the form of the reluctance of others (such as customers and workers) to deal with the firm in the future. The question is, however, whether such reputation loss is greater in case of criminal conviction than in case of a civil or administrative fine being imposed.135 Criminal conviction of a company may also have a rub-off effect on its top management.136 Some anecdotal evidence seems to suggest that in one way or another the criminal nature of a corporate fine may indeed make a real difference. For instance, Calkins reports on an American CEO saying that ‘if his company pays a moderate civil fine, it is five minutes at a regular board of directors’ meeting; were that same fine a felony, there is a special board meeting’.137

2.3. The separate issue of the applicability of the European Convention on Human Rights The normative question whether antitrust penalties should be of a criminal nature, as generally understood across legal systems, should be distinguished from the positive question whether proceedings based on Regulation No. 17/62 or the draft Regulation,138 leading or possibly leading to the imposition of fines 133

See also supra text accompanying note 96. Supra text accompanying notes 89 to 93. 135 V.S. Khanna, supra note 27 at 1508–1509. 136 Idem, at 1509–1510. 137 S. Calkins, supra note 67 at 145 (providing some more evidence); see also G.E. Lynch, supra note 26 at 50–52. 138 Supra note 2. 134

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on undertakings, relate to ‘the determination of a criminal charge’ within the meaning of Article 6 of the European Convention of Human Rights. In answering this question, the provision in Article 15(4) of Regulation No. 17/62, repeated in Article 22(5) of the draft Regulation, is not decisive. Indeed, according to the case law of the European Court of Human Rights, the indications furnished by domestic law as to the criminal nature of the offence ‘have only a relative value’, the notion of ‘criminal’ as conceived of under Article 6 ECHR being ‘autonomous’.139 For Article 6 to apply by virtue of the words ‘criminal charge’, ‘it suffices that the offence in question should by its nature be ‘criminal’ from the point of view of the Convention’, because it relates to ‘a general rule, whose purpose is both deterrent and punitive’, ‘or should have made the person concerned liable to a sanction which, in its nature and degree of severity, belongs in general to the ‘criminal’ sphere’.140 As I have argued in detail elsewhere,141 it appears difficult, if not impossible, to deny that the application of the criteria set out in the case law of the European Court of Human Rights leads to the conclusion that proceedings based on Regulation No. 17/62 or the proposed new regulation, leading to decisions in which the Commission finds violation of Articles 81 or 82 EC, orders their termination and imposes fines relate to ‘the determination of a criminal charge’ within the meaning of Article 6 ECHR.142 Even without individual penalties, EC antitrust proceedings are thus already ‘criminal’ within the meaning of Article 6 ECHR.143

3. Some legal and contextual elements supporting the introduction of individual penalties in EC antitrust law The following legal and contextual elements tend to support the introduction of individual penalties, in particular imprisonment, in EC antitrust law: 139

Öztürk v. Germany A/73 (1984) paras 52 and 50. Lutz v. Germany A/123 (1987) para. 55 et Bendenoun v. France A/284 (1994) para. 47. 141 W. Wils (1996): ‘La compatibilité des procédures communautaires en matière de concurrence avec la Convention européenne des droits de l’homme’, 32 Cahiers de droit européen 329. 142 See also K. Lenaerts and J. Vanhamme (1997): ‘Procedural Rights of Private Parties in the Community Administrative Process’, 34 Common Market Law Review 531 at 557, Opinion of Judge Vesterdorf acting as Advocate-General in Case T–1/89 RhônePoulenc v. Commission [1991] ECR II–867 at 885, Opinion of Advocate-General Léger in Case C–185/95 P Baustahlgewebe v. Commission [1998] ECR I–8422 para. 31, and Judgment of the Court of Justice of 8 July 1999 in Case C–199/92 P Hüls v. Commission [1999] ECR I–4383 paras 149–50. 143 This does not mean however that such introduction of individual penalties, in particular imprisonment, would be without implications as to the compatibility of current EC antitrust proceedings with Article 6 ECHR, as Article 6 ECHR may very well impose different requirements depending on the type of sanctions used; see infra text accompanying notes 154 to 157. 140

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3.1. The OECD Recommendation concerning effective action against hard-core cartels On 27–28 April 1998, the OECD Council adopted a Recommendation concerning effective action against hard-core cartels.144 Under its section I.A.a), it recommends that: ‘Member States should ensure that their competition laws effectively halt and deter hard core cartels. In particular, their laws should provide for effective sanctions, of a kind and at a level adequate to deter firms and individuals from participating in such cartel’.

The Recommendation is not legally binding, all the less on the EC which is not a Member State of the OECD. It would however be somewhat embarrassing for the EU if its competition law did not live up to OECD standards.

3.2. The competition laws of the EU Member States and Norway In five Member States of the EU, national law provides for individual penalties for violation of national antitrust prohibitions, which are comparable to the prohibitions laid down in Articles 81 and 82 EC.145 Whereas fines are the only type of individual penalties provided for in Spain and Greece,146 prison sanctions can be imposed in France, Ireland and Austria.147 Prison sanctions can also be imposed for violations of national competition law in Norway, the Community’s main partner under the European Economic Area Agreement.148 Finally, individual penalties, including imprisonment, can be imposed in the specific case of bid-rigging under German law.149

3.3. Europe’s free ride on American enforcement efforts In recent years a number of European executives of European companies have been imprisoned in the United States for their role in international cartels.150 As 144

C(98)35/FINAL. In Luxembourg, national competition law also provides for individual penalties, including imprisonment, but Luxembourg competition law is not comparable in substance to Articles 81 and 82 EC, because it is not based on the prohibition principle. Sanctions only lie for violations of termination orders, not directly for violations of the substantive rules. 146 Article 10 of the Spanish Competition Act No. 16 of 17 July 1989, and Article 29 of the Greek Act No. 703 of 26 September 1977 on Control of Monopolies and Oligopolies and the Protection of Free Competition. 147 Article 17 of the French Ordonnace No. 86–1243 of 1 December 1986 relative à la liberté des prix et de la concurrence (imprisonment up to 4 years), Sections 3(1)(b)(ii) and 4(a) of the Irish Competition (Amendment) Act 1996 (up to 2 years), and Section 129(1) of the Austrian Cartel Act 1988 (up to 3 years). 148 Section 6-6 of the Norwegian Act No. 65 of 11 June 1993 relating to Competition in Commercial Activity (imprisonment up to 6 years). 149 Section 298 of the German Criminal Code (imprisonment up to 5 years). 150 For instance in the Vitamin case, two German citizens and residents were jailed in the United States; see supra note 23. 145

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the cartels covered not only the United States but also Europe, and given that such prison sentences are likely to raise awareness among European businesspeople concerning antitrust law more generally, it could be argued that Europe is currently taking a free ride on American enforcement efforts. Introducing individual penalties in EC law may contribute to a more equitable burden sharing across the Atlantic.

4. Some legal and institutional implications of introducing individual penalties in EC antitrust law The introduction of individual penalties, in particular imprisonment, in EC antitrust law would have the following legal and institutional implications.

4.1. Would criminal sanctions have to be introduced under the Third Pillar? Given that the EU Treaty contains, in its Title VI, provisions on police and judicial cooperation in criminal matters, the question could arise whether the introduction of individual penalties, in particular imprisonment, into European antitrust law would have to be done under the provisions of that Title. The answer is ‘no’. As the very first words of Article 29 EU make clear, the Union’s powers under this Title are ‘without prejudice to the powers of the European Community’. Therefore, the existence of the Third Pillar does not affect the possibility or impossibility of introducing criminal sanctions in EC antitrust law on the basis of Article 83 EC.

4.2. Does the EC Treaty contain an inherent limitation excluding criminal law and criminal sanctions from its scope of application? The EC Treaty does not include any (reference to) criminal law provisions. Does this mean that criminal law and criminal sanctions are excluded from the scope of application of the Treaty? The legal answer is ‘no’. Article 5 EC provides that ‘the Community shall act within the limits of the powers conferred to it by this Treaty and of the objectives assigned to it therein’. This principle of conferred powers does not preclude the adoption of criminal law measures under the EC Treaty, as long as the requirements of a legal basis are fulfilled. There exists no domaine réservé of the Member States and no inalienable attributes of sovereignty.151 It is a political 151

M. Zuleeg (1999): ‘Enforcement of Community law: administrative and criminal sanctions in a European setting’, in J.A.E. Vervaele, ed., Compliance and Enforcement of European Community Law Kluwer Law International, 349 at 352; see also H.E. Sevenster (1992): ‘Criminal Law and EC Law’, 29 Common Market Law Review 29 and M. Delmas-Marty (1998): ‘The European Union and Penal Law’, 4 European Law

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reality, however, that Member states have traditionally been opposed to any criminal law initiatives within the Community framework.152

4.3. Does the wording of Articles 81 and 82 EC preclude individual penalties? Given that Articles 81 EC prohibits agreements ‘between undertakings’ and Article 82 EC abuse of a dominant position ‘by one or more undertakings’, one could ask the question whether these Treaty provisions would have to be changed so as to allow penalties for individual decision-makers or actors within undertakings. I do not think this would be necessary. Article 83(1) EC empowers the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, to lay down ‘the appropriate regulations or directives to give effect to the principles set out in Articles 81 and 82’. This wide mandate to the Council could also cover the introduction of individual penalties.

4.4. Does the explicit reference to fines in Article 83(2)(a) EC preclude prison sanctions? More problematic is the explicit reference to fines in Article 83(2)(a) EC, which provides that the regulations or directives referred to in Article 83(1) ‘shall be designed in particular: (a) to ensure compliance with the prohibition laid down in Article 81(1) and in Article 82 by making provision for fines and periodic penalty payments’. It is clear that the authors of the Treaty thought that compliance with the antitrust prohibitions would be induced by the threat of financial penalties, not imprisonment. However, one could argue, on the basis of a teleological interpretation, that, if the Council were to come to the view that prison sanctions are necessary for effective deterrence, the reference to fines in Article 83(2)(a) EC would not prevent it from adding such sanctions, given the wide mandate in Article 83(1) EC to lay down any ‘appropriate regulations or directives to give effect to the principles set out in Articles 81 and 82’. If it were concluded that Article 83 EC does not provide a sufficient legal basis for introducing prison sanctions, the solution would be to use Article 308 EC, which empowers the Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament, to take the Journal 87, and Judgments of the Court of Justice of 11 November 1981 in Case 203/80 Casati [1981] ECR 2595 para. 27 and of 2 February 1989 in Case 186/87 Cowan v. Trésor public [1989] ECR 195 para. 19. 152 See also J.A.E. Vervaele (1996): ‘Community investigative procedures and enforcement of sanctions’, in M. Delmas-Marty (ed.), What Kind of Criminal Policy for Europe?, Kluwer Law International, London, 209 at 245.

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appropriate measures whenever action by the Community proves necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and the Treaty has not provided the necessary powers.

4.5. Could the Commission continue to be both prosecutor and judge? Under Regulation No. 17–62, the Commission not only investigates violations of Articles 81 and 82 EC, but also has the power to take itself the decisions finding violations and imposing fines on undertakings for these violations. The draft Regulation does not provide for any change in this respect.153 If individual penalties—particularly prison sanctions were to be introduced—the question will arise whether the powers of investigation and of decision should not be separated, the latter being left to an independent judge. Article 6(1) ECHR provides that ‘in the determination of […] any criminal charge against him, everyone is entitled to a fair and public hearing […] by an independent and impartial tribunal […]’. The fact that the Commission, because it combines the functions of prosecutor and judge, cannot be qualified as an independent and impartial tribunal, does not make the current system incompatible with Article 6(1) ECHR. Indeed, the European Court of Human Rights has ruled that, for reasons of efficiency, the prosecution and punishment of offences which are of criminal law nature within the wider meaning of Article 6 ECHR can be entrusted to administrative authorities, provided that the persons concerned are enabled to take any decision made before a judicial body that has full jurisdiction and does provide the full guarantees of Article 6(1) ECHR.154 The latter condition is currently satisfied because the addressees of Commission decisions imposing fines can bring an action for annulment before the Court of First Instance, which manifestly provides the full guarantees of Article 6(1) ECHR and which undertakes a comprehensive review of the Commission’s decisions.155 The introduction of individual fines would not appear to make a difference in this respect. Indeed, the relevant case law of the European Court of Human Rights concerned fines imposed on individuals.156 However, given that imprisonment is a much more onerous and stigmatic sanction than fines and that it is necessarily of a criminal law nature, the case law of the European Court of Human Rights allowing the combination of the functions of prosecutor and judge in first instance can in all likelihood not be carried over to the case where prison sanctions are imposed.157 153

Supra note 2. Öztürk and Bendenoun judgments, supra notes 139 and 140 at para. 56 and para. 46 respectively. 155 W.P.J. Wils, supra note 141 at 337–38 and K. Lenaerts and J. Vanhamme, supra note 142 at 559–62. 156 Supra note 154. 157 Compare with De Cubber v. Belgium A/86 (1984) paras. 31–32 and Findley v. United Kingdom A/110 (1997) para. 79. 154

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The need for a judicial decision would also appear to follow from Article 5(1) ECHR, which provides that no one shall be deprived of his or her liberty except in the cases listed in Article 5(1)(a) to (f). Of these six cases, the only one which could cover the imprisonment of antitrust offenders would be the one in Article 5(1)(a), being ‘the lawful detention of a person after conviction by a competent court’. The introduction of prison sanctions under EC antitrust law would thus appear to require the separation of the powers of investigation and decision currently held in common by the Commission, and the transfer of the latter power to an independent judicial body, such as the Court of First Instance. The Commission would then act as a prosecutor before the Court of First Instance, just as the US Department of Justice acts as a prosecutor before a federal court. In discussions separate from the possible introduction of prison sanctions, a number of commentators have argued for such separation and transfer, on grounds of efficiency (the current system requiring the Court of First Instance basically to do the entire Commission’s work all over again), improvement of the rights of defence, and/or enhancement of the legitimacy of EC antitrust law.158 Would such transfer of the decisional power from the Commission to the Court of First Instance require a modification of the EC Treaty? I believe not. As mentioned above, Article 83(1) EC gives an wide mandate to the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, to lay down ‘the appropriate regulations or directives to give effect to the principles set out in Articles 81 and 82’. Article 83(2) EC adds that the Council’s regulations and directives ‘shall be designed in particular: (d) to define the respective functions of the Commission and of the Court of Justice applying the provisions laid down [under Article 83(1)]’. Moreover, Article 229 EC provides that regulations adopted by the Council may give the European Court of Justice ‘unlimited jurisdiction with regard to the penalties provided for in such regulations’. That such ‘unlimited jurisdiction’ can take the form not only of an unlimited review of a Commission decision, but also of imposition of penalties directly by the Community Courts, is apparent from the German language version of Article 229 EC which talks about giving the Court a competence ‘which includes the 158

F. Montag (1996): ‘The Case for a Radical Reform of the Violation Procedure under Regulation 17’, 8 European Competition Law Review 42; F. Montag (1999): ‘The Case for a Reform of Regulation 17/62: Problems and Possible Solutions from a Practitioner’s Point of View’, in B. Hawk, ed., 1999 Fordham Corporate Law Institute 157, D. Waelbroeck and D. Fosselard (1994): ‘Should the Decision-Making Power in EC Antitrust Procedures Be Left to An Independent Judge? The Impact of the European Convention of Human Rights on EC Antitrust Procedures’, 14 Yearbook of European Law 111, J.F. Winterscheid (1993): ‘Confidentiality and rights of access to documents submitted to the Unites States antitrust agencies’, in P.J. Slot and A. McDonnell, eds., Procedure and Enforcement in E.C. and U.S. Competition Law, London, Sweet & Maxwell 177 at pp. 187–89, and J. Joshua, supra note 118.

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power of unlimited control of judgment and the power to modify or impose such penalties’.159

4.6. Would a Community prison have to be built? If prison sanctions were to be introduced in EC antitrust law, would a Community prison then have to be built? Not necessarily. The execution of the prison sanctions imposed by the Court of First Instance could be left to the Member States.160 This is no doubt less costly than setting up a special Community prison.

159

Emphasis added; my translation from ‘eine Zuständigkeit […] welcher die Befugnis zu unbeschränkter Ermessensnachprüfung und zur Änderung oder Verhängung solcher Maßnahmen umfaßt’. That the Commission would prosecute undertakings before the Court appears also to have been the understanding of the Spaak Report preceding the adoption of the EEC Treaty; see Comité intergouvernemental créé par la Conférence de Messine, Rapport des Chefs de Délégation aux Ministres des Affaires Etrangères, Mae 120f/56 corrigé (Bruxelles, 21 avril 1956), at 56: ‘Pour l’application concrète, il conviendra d’établir une procédure qui évite autant que possible une multiplication de procès devant la Cour. A cette fin, la Commission européenne constituerait un comité consultatif des ententes et discriminations qui l’aiderait dans une tâche de conciliation et d’arbitrage. A défaut d’une solution acceptée par les parties à l’expiration d’un délai qui pourrait être de deux mois, les Etats ou la Commission européenne elle-même pourraient introduire une plainte devant la Cour. Dans tous les cas, l’affaire sera instruite par la Commission européenne’. 160 It could either be provided that every Member State should take care of the execution of prison sanctions imposed on its nationals or residents, with some additional rule for individuals of third-country citizenship and residence. Alternatively, the task could be given to one Member State, for instance the Member State hosting the Community Courts.

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II Manfred Zuleeg* Criminal Sanctions to Be Imposed on Individuals As Enforcement Instruments in European Competition Law

I. Introduction 1. The current state of the law The EC Treaty contains competition rules that apply to undertakings. Article 81 EC applies to cartels and other anti-competitive agreements between undertakings. Article 82 EC is concerned with the abuse of dominant position, and Article 83 EC empowers the Council to adopt regulations or directives that give effect to the principles set out in Articles 81 and 82 EC. The regulations and directives issued by the Council on the basis of Article 83 EC are particularly designed to ensure compliance with the prohibitions laid down in Articles 81 and 82. They foresee sanctions such as fines and periodic penalty payments that will be payable by undertakings engaged in anti-competitive behaviour. The Preamble of Regulation No. 17/62 indicates that non-compliance with the Treaty provisions on competition, and of the obligations imposed on undertakings and associations of undertakings under the same Regulation, will be sanctioned by means of fines and periodic penalty payments. In particular, Article 15 of Regulation 17/62 enables the Commission to impose fines on undertakings or associations of undertakings that intentionally or negligently infringe EC competition rules. However, the possibility of imposing fines is not extended to the individuals responsible for the anti-competitive behaviour of the undertakings.1 Furthermore, only the legal protection of rights arising from EC competition rules is guaranteed to undertakings (and associations of undertakings) by the European Court of Justice and the Court of First Instance. The legal doctrine classifies fines as sanctions against administrative wrongdoings or regulatory offences. The application of fines presupposes determining the legal responsibility of persons or legal entities, as in the enforcement of criminal law. Nevertheless, Article 15(4) of Regulation No. 17/62 provides that, when used in the enforcement of EC competition law, fines are not of criminal law nature and do not entail a moral reprimand, as criminal sanctions do. Moreover, administrative bodies impose the fines, rather than the judiciary. * Professor of Law, Johann Wolfgang Göethe University, Frankfurt am Main, Germany. 1 Wils (2000, 108–16).

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However, the severity of fines as sanctions calls for the adoption of legal safeguards similar to those available in the field of criminal law. From this perspective, fines could be assimilated with criminal law sanctions when applied in the field of competition.2 Consequently, some legal authors associate them with criminal law enforcement. Nevertheless, a distinction needs to be made between ‘administrative criminal law’ and ‘criminal law’ in the narrow sense.3 The latter is not mentioned in the ambit of enforcement instruments of EC competition law.

2. The objectives of inquiry This contribution discusses whether, and under what conditions, it is possible and advisable for EC law to complement the existing fines on undertakings by providing for the imposition of sanctions on individuals responsible for anticompetitive behaviour. There are a variety of issues to be examined in relation to the introduction of criminal law sanctions in the enforcement of EC competition law. These include the revision of the existing procedural guarantees, the re-distribution of enforcement responsibilities between specialised administrative authorities and courts, and whether and to what extent the introduction of EC criminal sanctions would require the harmonisation of national legal systems. The criminal sanctions imposed on the individuals responsible for the anticompetitive behaviour of undertakings could be limited to fines. However, criminal sanctions could even include imprisonment in cases involving particularly egregious and serious violations of EC competition law. The latter kind of sanctions already exist in relation to the enforcement of national competition law in some of the EC Member States, as well as in the US. Whether such sanctions are of an administrative or criminal law nature when applied to individuals responsible for competition law infringements is a problem of legal qualification that has significant implications in terms of the safeguards available in the competition law enforcement process and also with respect to the decision-making process itself. Not in the least, the introduction of criminal law sanctions applicable to the individuals responsible for the anti-competitive behaviour of undertakings raises a question about whether the existing distribution of responsibilities between the Commission and the Court of First Instance (and the European Court of Justice) can be maintained. Other issues to be discussed in the same context are: the division of competencies between the Commission and national criminal law enforcement authorities, whether a harmonisation of national legal systems with respect to the types of criminal sanctions used in the enforcement of competition law should be envisaged and, on a more general level, whether stricter public enforcement policies require a review of the existing procedural guarantees. 2 3

Kadelbach (1996, 82); Tiedemann (1993, 27); Zuleeg (1999, 350). Sieber (1996, 72–79).

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II. Arguments against the introduction of criminal law sanctions in the enforcement of EC competition rules 1. The legal arguments 1.1. Treaty provisions concerning the distribution of competencies between the EC and the Member States Hereafter, the concept of ‘criminal law’ is used in the narrow sense, which refers exclusively to individuals who are morally reprimanded if found guilty of a breach of such rules.4 The principal legal argument against the introduction of criminal sanctions in the enforcement of EC competition rules is that the EC is not empowered to legislate in the domain of criminal law. Whether the EC is empowered to legislate in the domain of criminal law needs to be established on the basis of the EC Treaty. There are a number of provisions in the EC Treaty that exclude the possibility that European institutions could legislate in certain areas. Article 295 EC, for example, prevents the European legislature from interfering with the systems of ownership in the Member States. However, such an explicit restriction does not exist with respect to criminal law in general. The fundamental rule concerning the distribution of competencies between the EC and its Member States is contained in Article 5(1) EC. This reads as follows: ‘The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein’. Admittedly, the EC Treaty does not directly give the EC the power to legislate in the area of criminal law.5 However, this omission does not necessarily have to be interpreted as deriving from principles of sovereignty of the Member States. The sovereignty of Member States does not necessarily imply a limitation of the EC’s legislative powers. Instead, other Treaty provisions offer the basis for the EC to legislate in the area of criminal law in relation to the enforcement of EC competition rules. Article 83 EC empowers the EC to legislate for ensuring compliance with the competition rules laid out in Articles 81 and 82 EC. Criminal sanctions can be included among the instruments chosen to encourage compliance. Therefore, if no other legal objections (apart from the one mentioned above) are formulated, the requirements of Article 5(1) EC are fulfilled.6

4 See the Opinion delivered by Advocate-General Francis G. Jacob in Case C–240/90 Germany v. Commission [1992] ECR I–5404, at 5408. 5 Case 203/80 Casati [1981] ECR 2595, at 2618. 6 Tiedemann (1993, 23); Zuleeg (1993, 763).

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1.2. Treaty provisions concerning competition and criminal law sanctions In a case before the European Court of Justice, a former German government claimed that fines and periodic penalty payments are the only coercive means at the disposal of the EC.7 This assertion was based on Article 83(2)(a) EC. Although the European Court of Justice did not deal with this argument in its judgment, the Advocate-General’s opinion rebutted it.8 Indeed, Article 83(2)(a) EC stipulates that the Community can impose compliance with its competition rules by means of fines, whereas criminal sanctions are not explicitly mentioned in this paragraph. However, this provision mentions fines only by means of example, as can be deduced from the introductory phrase of Article 83 EC that indicates that implementation rules may in particular be established by means of regulations or directives. Therefore, Article 83(2)(a) EC does not exclude criminal law sanctions from the range of enforcement instruments available in the EC legal system. Several legal authors claim that severe sanctions such as those of a criminal nature, can be adopted in EC law only through a legislative procedure coinvolving the European Parliament.9 According to these authors, parliamentary co-involvement in the adoption of criminal law provisions should be a requirement in the Member States and also at EC level. A decision of the Council would thus be insufficient for establishing EC sanctions in the form of criminal laws. The foundations of this line of argument are not acceptable. It is common knowledge that the Council is empowered by the EC Treaty to legislate in certain areas without the co-involvement of the European Parliament, and this by no means deprives the acts in question of democratic legitimacy. Even the Bundesverfassungsgericht (Federal Constitutional Court of Germany), in its restrictive judgment concerning the Treaty of Maastricht, accepted that the Council is a legitimate legislative body in the Community legal order.10 The endeavour of introducing criminal sanctions in the enforcement of EC competition law should not be abandoned only because of the abovementioned dogma, no matter how widely upheld. If, because the European Parliament exerts only a consultative function under this procedure, Article 83 EC were not to be considered sufficient legal basis for the introduction of criminal law sanctions in the area of EC competition law enforcement, Article 95 EC could be used to complement Article 83 EC.11 Indeed, in so far as sanctions for the infringement of EC competition rules are intended to support the accomplishment of the Internal Market, an approximation of laws in this

7 8 9 10 11

Case C–240/90 Germany v. Commission [1992] ECR I–5367, at 5391 and 5392. See above, at 5413 to 5414. Sieber (1996, 78) with further references. BVerfGE 89 (1993), 155, at 185, 186. Sieber (1996, 79); Zuleeg (1993, 766–67).

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domain is justified. Article 95 EC, in connection with Article 251 EC, establishes a co-decision procedure involving both the European Parliament and the Council. The requirements of parliamentary participation and democratic legitimacy would thus be fulfilled. Another argument against the introduction of criminal law sanctions in the area of EC competition law enforcement is that Articles 81 and 82 EC are addressed to undertakings, whereas criminal law sanctions apply exclusively to individuals. However, this objection should not prevent the introduction of criminal law sanctions as a tool for EC competition law enforcement.12 The application of EC law entails implicit enforcement powers. Sanctions on persons representing undertakings are closely linked to the rules applicable to the undertakings themselves. Therefore Article 83 EC would be a sufficient legal basis for the adoption of such sanctions. Alternatively, Article 95 EC could be used as a complementary legal base, as this provision covers not only undertakings but also individuals. The European legislature is free to choose among the possibilities mentioned above.

1.3. Institutional aspects EC competition rules are currently implemented mainly by the Commission and the European courts. Only the Commission can apply Article 82(3) EC Treaty, and the European courts ensure the protection of rights arising from EC competition rules. The introduction of criminal law sanctions for the enforcement of EC competition rules would find the European courts unequipped with the legal safeguards necessary for performing their task. In addition, the application of criminal law sanctions presupposes the existence of an EC public body endowed with the means to prosecute of crimes. The current structure of the EC legal system does not foresee such means, which could be introduced only by amending the Treaty. However, amendment of the Treaty will not be indispensable in a decentralised enforcement system in which the application of criminal sanctions for the infringement of EC competition rules could be assumed by the EC Member States’ courts. A Council directive would be sufficient to entrust national courts with this task.13 Moreover, neither the Commission nor the national competition authorities of the EC Member States would have to be entrusted with criminal prosecution tasks. It is by now a common conviction in the Member States that criminal prosecution should be placed in the hands of judges, acting upon accusations formulated by official prosecutors. Private actions based on criminal provisions are, as a general rule, admitted only in cases of minor importance. 12 Vervaele (1999, 161); Case 186/87 Cowan v. Trésor public [1989] ECR 195, at 221–22. 13 In this sense, see the Opinion delivered by Advocate-General Jacobs in Case C–240/90 Germany v. Commission [1992] ECR I–5404, at 5408.

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2. Other objections to the introduction of criminal law sanctions in the enforcement of EC competition law In addition to the legal and institutional aspects discussed above, an important argument against the introduction of criminal sanctions in the enforcement of EC competition law is one of a political nature. Law-making is a political activity, and the people involved in it are not legally bound to produce a predetermined outcome. The attempt to transpose criminal law sanctions to the level of EC law could fail, if only for the reason that the Member States still perceive criminal law to be a prerogative of state sovereignty. However, this perception has faded over the last few years, and the premises of criminal law enforcement in the EC Member States could themselves be influenced by the adoption of criminal law provisions at the EC level. Another argument against the introduction of criminal law sanctions, which needs to be taken more seriously than the former, is related to the fact that criminal sanctions contain an ethical reprimand for the incriminated person and behaviour. For this reason, the desire to deter infringements of the law is not a sufficient justification for prosecuting as criminals all persons who infringe the law. Unfettered competition between undertakings is not the kind of public value that needs to be protected by the instruments of criminal law. The organisers of this workshop launched the debate on the introduction of criminal law sanctions in the enforcement of EC competition law by offering the premise that such sanctions could be justified only in cases of serious infringements of the EC competition provisions. This confirms the idea that undistorted competition in the internal market is not the kind of social value to be protected by enforcement instruments belonging to the sphere of criminal law. Moreover, the ‘exceptional cases’ in which criminal sanctions would be justified for penalising infringements of EC competition law are not easy to determine. In addition, certain infringements of competition rules are notoriously difficult to prove. Under the current enforcement system, the task of identifying and proving a breach of EC competition rules falls mainly on the Commission, whose refusal to date to consider the introduction of criminal law sanctions in the enforcement of EC competition rules seems to be justified from this perspective. Another objection to the introduction of criminal sanctions in the enforcement of EC competition law derives from the common belief that criminal sanctions should be used only as a subsidiary device of law enforcement. The consequences of criminal sanctions are severe, especially in the case of imprisonment. Given the complexity of EC competition rules, and the legal uncertainty surrounding its enforcement, it could be argued that it is sometimes difficult for those responsible for managing undertakings to determine whether their actions are likely to be in breach of EC competition rules. The managers of undertakings are under immense pressure: supervisory boards and shareholders demand full effort to fulfil the objectives of the companies, even if this implies a high risk. And yet, if a manager were to be sentenced to prison for breach of EC competition rules, his professional and private existence would

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be affected without a real prospect of a substantive amelioration in terms of compliance with EC competition law. One should not forget that, while the criminal law creates categories of crimes, it must also be designed to avoid the tendency to over-incriminate.14 From this perspective, the principle of proportionality laid down in Article 5(3) EC would appear to exclude the introduction of criminal sanctions in the enforcement of EC competition rules. Instead, the European legislature should first consider whether the degree of compliance with EC competition law could be improved by extending existing administrative sanctions on undertakings to the individuals responsible for anti-competitive behaviour. If that were to be the case, the incisive weapons of criminal law would not be necessary.

3. The doubtful effectiveness of criminal law sanctions Leaving aside the above-described arguments against the introduction of criminal law sanctions in the enforcement of EC competition law, one should also consider the doubtful effectiveness of criminal sanctions in light of the problems that arise in their application. In order to discover whether an employee has committed a criminal offence, one must verify the attributions and conduct of several other employees of the same undertaking. The internal organisation of undertakings is often quite opaque. There is no administrative body, either at the EC level or in the Member States, that is both familiar with EC competition law and able to assume such intricate investigative tasks. In these circumstances, it remains the role of prosecutors and judges in the Member States to clarify factual situations and assess then according to EC competition rules. This is a time-consuming task, susceptible to mistakes, and not very likely to be concluded successfully. The courts of the Member States are therefore likely to be inclined to shift the burden of enforcement to the European Court of Justice (via requests for preliminary rulings), thus burdening the already strained resources of the European court even further. Another consequence of the introduction of criminal law sanctions in the enforcement of EC competition law is that the Commission would be prevented from intervening as amicus curiae in cases before the courts of the Member States until a formal charge is formulated. Perhaps the Commission would therefore see itself as being limited, in many cases, to intervene as amicus curiae until it is already too late in the proceedings. The assignment of the amicus curiae role in cases where there is a possibility of applying criminal law sanctions would be too much of a burden for the Commission anyway, taking into account the expected high number of such cases. These are serious reasons for the EC to be warned against the introduction of criminal sanctions as a tool of EC competition law enforcement. 14

Hassemer, 1993, 127.

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4. Conditions to be observed at the introduction of criminal law sanctions in the enforcement of EC competition rules If it is nevertheless decided that criminal sanctions should be introduced to aid EC competition law enforcement, a number of conditions would have to be observed. First, as indicated above, the adoption of a Council directive would be necessary to oblige the Member States to establish a system of criminal law enforcement to protect competition in the Internal Market. The Member States would have to transpose the content of this directive into their national law. Secondly, the national law thus created would have to be interpreted and applied in light of the EC law and jurisprudence. Thirdly, the Commission would have to be limit its interventions before national courts to the role of amicus curiae. As an essentially administrative body, the Commission cannot be entrusted with criminal prosecutions. Fourthly, a number of legal safeguards specific to criminal law enforcement (several of which are inherent to the European legal order) would have to be observed. The fundamental rights enshrined in the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) are incorporated by Article 6(2) EC into the Community legal order. Other fundamental rights developed in the jurisprudence of the European Court of Justice are binding on the EC and Member State authorities dealing with criminal law enforcement. EC law is equally rich with other relevant legal principles including, in particular, the principles of proportionality and legitimate expectation. Finally, it remains to be considered whether the introduction of criminal sanctions for the enforcement of EC competition law would require a certain degree of harmonisation of the criminal law procedures, and harmonisation of part of the substantive criminal law in the Member States.

III. Administrative criminal law sanctions An alternative to introducing criminal law sanctions per se in the enforcement of EC competition rules would be to extend the existing administrative criminal sanctions applicable to undertakings to the individuals responsible for their anti-competitive behaviour. In the remainder of this section, we briefly discuss the feasibility of this alternative, its advantages, and the legal safeguards that would have to be adopted.

1. Competencies and institutions EC competition law already foresees the possibility of applying criminal sanctions, though only criminal sanctions of an administrative nature that are just

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applicable to undertakings. The question is whether it would possible and advisable to extend the existing administrative criminal sanctions—in the form of fines—to the individuals responsible for the anti-competitive behaviour of undertakings. As administrative criminal law sanctions, fines are usually imposed by administrative bodies that are empowered to investigate the facts of the case and enforce the law. The only institution so far responsible for the imposition of fines in the field of EC competition law has been the Commission. It is recommended that this competence also be transposed to the competition authorities of the Member States, inter alia as a modality to decrease the workload of the currently under-staffed Commission. The workload of the European courts would also be relieved, as this would allow criminal courts in the Member States to assume judicial review of decisions by domestic administrative bodies. The difficulties that national courts face in tackling cases belonging to this complex area of law would be diminished by the preliminary investigative work performed by the administration. Of additional assistance to the national courts is the possibility of using the preliminary reference procedure under Article 234 EC. At any rate, the necessity that national courts appeal to the preliminary ruling procedure would be diminished if the administration were to perform a preparatory investigation function. In addition, the national competition authorities (as specialised agencies) can also provide the national courts with the legal expertise necessary in competition cases.

2. Advantages to be derived from extending fines to the individuals responsible for anti-competitive behaviour In contrast to criminal sanctions, fines are not associated with an ethical reprimand of guilty persons. They are, however, instruments of both special and general prevention: their primary deterrence function is directed at the person(s) infringing the law, though their general deterrence effect concerns those persons who might consider infringing the law in the future. There is no doubt that the likelihood of having to pay a fine is a sufficient deterrent. Exposing not only the undertakings themselves, but also the people responsible for the undertakings, to such a sanction supports the objective of preserving undistorted competition in the internal market. The people responsible for undertakings will thus strive harder to act correctly than they do in the current situation whereby only the undertakings are affected the fines.

3. Legal safeguards The legal safeguards that are available to individuals in the course of criminal prosecution should also apply with respect to administrative criminal proceedings

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against individuals. The European Court of Human Rights classified administrative sanctions with effects similar to those of criminal law sanctions as being ‘criminal’ in nature.15 The implications of this categorisation are that the legal safeguards destined to uphold human rights in the enforcement of the criminal law are also applicable with respect to administrative criminal sanctions. The legal responsibility of the staff of the undertakings is concurrent with the legal responsibility of the undertakings in the area of competition law. This is established in the legal orders of the Member States, as was documented in Walt Wilhelm.16 Correspondingly, there is no legal obstacle against parallel prosecutions of undertakings and their staff. The legal safeguard against double condemnation for the same infringement of the law is not relevant in this context as the undertakings and their staff members are different entities. But the notion of an undertaking must be understood here in a wider sense, as comprising each unit that exerts an economic activity (irrespective of its legal form and the way its activities are financed).17 Hence, an individually owned firm and a partnership without a distinct legal personality are undertakings in the sense of EC competition law, and may be fined as such. The question that arises is whether, if individual responsibility is established, the owner(s) of such undertakings may also be fined as individual persons in the case of a breach of EC competition rules. In such cases, the person concerned would indeed be punished twice. One way out of this dilemma would be to determine two distinct fines (one applicable to the undertaking and one applicable to the individual), and apply only the higher of the two. Article 15(2) of Regulation No. 17/62 states that, when determining the amount an offender should be fined, regard shall be given to both the gravity and the duration of the infringement to be sanctioned. These factors condition ‘the degree of the punishment’ to be applied and may also be transposed to the sanctions applicable to individuals. However, if the European legislature were to prefer to determine the amount of fines to be applied for breach of EC competition rules exclusively according to considerations of maximising the deterrent effect of the sanction, then the culpability factor would not be adequately taken into account. Such premises would not conform to the exigency of ensuring adequate and proportional punishment for each case of misconduct.

15 ECHR, 8 June 1976, Engel, Ser. A, vol. 22; 21 February 1984 Öztürk, Ser. A, vol 73; 25 August 1987 Lutz, Ser. A, vol. 123; 7 October 1988 Salabiaku, Yearbook of the European Convention of Human Rights, 1988, 160 at 161; Lenaerts and Vanhamme (1997, 556); Wils (1996, 331); Opinion of Judge Vesterdorf acting as Advocate-General in Case T–1/89 Rhône — Poulenc v. Commission [1991] ECR II–867, at 885; Opinion of Advocate-General Léger in Case C–185/95 P Baustahlgewerbe v. Commission [1998] ECR I–8422, at 8431; Case C–199/92 P Hüls v. Commission [1999] ECR I–4287, at 4383–4383. 16 Case 14/68 Walt Wilhelm et al. [1969] ECR 1, at 2. 17 Case C–41/90 Höfner and Elser v. Macrotron [1991] ECR I–1979, at 2016.

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