In this post I will discuss the interaction between the new Directive on private enforcement, the Brussels I and Rome II regulations and the doctrines elaborated by the CJEU on so-called extraterritorial jurisdiction. A global cartel affecting trade between the Member States is subject to the parallel application of EU and national antitrust rules including criminal law in certain member states. Hence the damages can be regarded as a consequence of distinct infringements of both national and supranational antitrust law. The very purpose of the new Directive is to ensure the application of a single instrument in the same procedure for the same illegal conduct caught by the prohibitions in Article 101 TFEU and corresponding national law rules. Click here for a list of important aspects clarified by the proposal.
In principle anybody can raise a claim for damages against any of the cartelists asking for full compensation – although the leniency applicant may enjoy a privileged treatment in relation to the matter of joint and several liability. The existence of harm is presupposed, though the causality remains a question for the court to determine according to the applicable national law. A strict approach to causality will increase the chances of adopting a consistent line of judgements. The problem remains that the courts have to apply different laws embodying different versions of the causality theory. Furthermore, they won’t always be allowed under the applicable law to take into consideration or to prioritize the issue of consistency and to avoid under-/overcompensation of harm.
The rules enshrined in the private enforcement directive should ideally be in tune with the harmonized rules of private international law as established by the Brussels I (Regulation no 1215/2012) and Rome II (Regulation no 864/2007). The jurisdiction of European national courts is not universal, but connected with the EU-domicile of the defendants. The only significant exception for the field of competition law is the jurisdiction over consumer contracts, since the consumer’s domicile is a relevant connecting factor in this case. (More details here).
We can imagine several distinct situations of private enforcement against global cartels:
1) The plaintiff and the defendant are domiciled in the same member state
According to article 4(1), a plaintiff, “A” can sue a defendant, “D1” before the court of their common domicile for the entire injury that “A” suffered as a result of the cartel infringement. The applicable law will be the law of the member state in which both of them have their domicile, provided that the market of that member state has been actually or potentially affected by the cartel. However knowing that a cartel is formed by several members often domiciled in different parts of the EU, it may happen that another injured party, “B” has already applied according to the rule in article 4(1) before the court of a member state where another cartel infringer, “D2” has its domicile. According to article 30 of the Brussels I, the other national courts seized may either stay the proceedings initiated subsequently or deny jurisdiction. The plaintiff, “A” may nevertheless use the article 8(1) and sue the defendant, “D1” before the court first seized.
2) The plaintiff and the defendant are domiciled in different member states
The plaintiff may sue before the court of defendant’s domicile for the whole injury suffered or can choose to sue for a portion of the total injury according to the rules of special jurisdiction in article 7(2) or (3). The lis pendens rule in article 30 applies as well. If each national market is treated as a special jurisdiction in the meaning of article 7, the judgments that deal with a portion of the harm may conflict with the results of proceedings kept in the country of a defendant’s domicile according to the general rule in article 4(1) / article 8(1), normally concerned with the entire harm caused to a plaintiff on the internal market. The coordination between the judgments may be difficult, it would be preferable to use the main rule that allows judgments concerning the whole harm produced on the internal market and make available the device of class actions. The Directive on private enforcement does not require the member states to set in place collective redress mechanisms. However the Commission has issued recommendations on collective redress applicable to the enforcement of rights derived from Articles 101 and 102 TFEU.
3) The plaintiff is a consumer / an association of consumers
An individual consumer as a weak contractual party has been granted the privileges stipulated by Articles 17-18; for matters of tort, the applicable law for determining the relevant jurisdiction remains article 7(2) (Henkel, para. 36). The question of nullity of an agreement pursuant to Article 101(2) TFEU may be related to the issue of whether the nullity can be raised as a defence to a claim for payment in connection with a consumer contract, which is a contractual matter. There is an obvious connection between the matter of performance in respect of anticompetitive clauses and subsequent actions in restitution and/or compensation. The CJEU tries nevertheless to avoid the multiplication of the bases of jurisdiction in one and the same type of case (Peters, para. 17).
4) The defendant is not domiciled in the EU
If the defendant is not domiciled in the EU, a European national court may have jurisdiction according to:
i. Article 6 – (PIL of the member state in question)
ii. Article 7(5), 17(2) – activities of an extended arm
As I discussed in my previous post, there are two theories used by the Commission to bring actions against a non-resident cartelist.
Single economic entity
The plaintiff who has suffered damages produced by one of these extended arms may sue the defendant before the Court where the branch or agency has its domicile. Has the plaintiff been engaged in multiple transactions with several agencies, he would have no choice than to sue the defendant before each of the competent courts for the corresponding portion of the harm according to article 7(5) of the new Brussels I Regulation.
Implementation of the cartel in the EU (Wood Pulp)
The Commission has jurisdiction to open proceedings and prosecute a non-resident for an illegal agreement which has a substantial and foreseeable impact on the trade between member states.
Such a possibility is not offered to a private enforcer, but a plaintiff may sue according to 4(1) or 8(1) and obtain an award of damages covering the entire harm and can require full compensation from any of the EU domiciled cartelists. The private law regimes across Europe commonly allow that a person who has been held liable for an infringement on a joint and several liability basis and actually paid damages to the plaintiff shall be able to obtain contribution from the co-infringers.
When the national courts don’t have jurisdiction to deal with actions against a cartelist domiciled abroad, but they do issue a judgment that concerns all the infringers according to the rule on joint and several liability, may the EU-domiciled payer of damages apply for contribution against a non-EU domiciled co-infringer?
Acknowledging that U.S. tort law does not follow the contribution rule in relation to joint and several liability in cartel cases (Texas Indus., Inc. v. Radcliff Materials, Inc. – 451 U.S. 630 (1981)) and that certain states in the U.S. moved away from the joint and several liability towards a test of contributory liability, the actual outcome of a claim for contribution remains very uncertain.
Institute of Competition Law