Brussels Brief - February, 2011

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KEY DEVELOPMENTS

Parental Liability – Another Piece in the Puzzle

General Química v Commission

In recent years, the highest courts in the European Union have consistently held that parent companies may be held liable for infringements of competition law committed by their subsidiaries – even if the parent did not participate in the infringement. Not only may a parent company be found liable for such infringements, liability is automatically imputed to the parent if the subsidiary is wholly owned. And, while EU courts have ruled that a parent company faced the presumption of liability for the conduct of its wholly owned subsidiary can rebut the presumption, no case exists in which a parent company has actually done so.

This has led to an understandable concern that the so-called “rebuttable” presumption of liability for parents of wholly owned subsidiaries was, in fact, irrebutable. A decision issued on 21 January 2011 by the European Court of Justice (ECJ), however, has helped to clarify the issue. In particular, the ECJ clarified that, even though a parent company may be presumed to be liable for the conduct of its wholly-owned subsidiary (whether directly or indirectly held), the parent company may also adduce evidence to rebut this presumption. This decision, styled Case C-90/09, General Química and Others v. Commission, [2011] ECR I-0000, involved an appeal against a fine imputed to a parent company for the conduct of its subsidiaries in the European Commission’s decision in the Rubber Chemicals cartel case. (See Case COMP/F/38.443, Rubber Chemicals, Commission Decision of 21 December 2005). In particular, the parent, (Repsol YPF SA), its direct, wholly-owned subsidiary (Repsol Química SA “Repsol Química”)) and an indirect wholly owned subsidiary (General Química) argued that imputing liability to a parent company/-ies for the conduct of Repsol-Indirect Sub in effect introduced a strict liability regime, which is contrary to the principle of personal responsibility.

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Published In: Antitrust & Trade Regulation Updates, Business Organization Updates, Civil Procedure Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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