Where To Bring Damages Claims In EU Int’l Cartel Cases?

by Zelle LLP

Competition Law360 - February 28, 2014

As Europe continues to open its door to private damages actions, questions arise as to where to bring claims against international cartelists. In this article, we provide a simplified overview of the highly complex set of rules governing jurisdiction in Europe and the implications of these jurisdictional rules in international private antitrust enforcement.

The Rise of Private Antitrust Enforcement in Europe

In recent years, shifts in policy and certain key decisions by European Union courts and the member state courts have begun opening a pathway to increased private antitrust enforcement. Significant decisions have already cemented claimants’ right to sue,[1] while pending decisions would substantially broaden the scope of civil redress. One current example is the awaited EU Court of Justice decision in the elevators cartel case on whether or not cartel members should be liable for noncartelist umbrella pricing. The recent advocate general opinion urges the ECJ to adopt her view that cartel members should be liable for damages caused by “umbrella pricing” — noting that: “The Court’s judgment in this case will without doubt be groundbreaking in the context of the further development of European competition law and, in particular, its private enforcement.”[2]

The changes in European antitrust enforcement are also occurring at the legislative level. Last year, the European Commission and the U.K. government each separately consulted on legislative changes that would impact the way that private enforcement of competition law based claims would operate in the EU and the U.K. While both sets of proposed changes are not identical, each has the express goal and the potential to enhance the effectiveness of private competition enforcement. Decisions on whether to approve the proposed legislative changes are expected later this year.

While civil redress gains momentum in Europe, each day could signal a significant development that would increase the filing of private damages claims against members of international cartels. Thus, we ask the question: Where in Europe can claimants bring private damages actions?

Establishing Jurisdiction in an EU Member State Court

In Europe, private antitrust claims are often brought against a defendant who was an addressee of an EC cartel decision. The issue of whether a member state’s court has jurisdiction to hear an antitrust damages claim against any of the cartelists will primarily be determined by the Brussels I Regulation.[3]

Under Article 2(1) of the Brussels I Regulation, a defendant in a competition law claim may be sued in the courts of the Member States in which it is domiciled. Art. 24 trumps this general rule by providing that where a defendant “enters appearance” the courts of that country shall have jurisdiction. It is important to distinguish Art. 24 from the common law “consent by appearance.” At common law, in order to avoid submitting, a defendant must limit its involvement to a jurisdiction challenge only and avoid engaging with the merits of the claim. By contrast, under Art. 24, if a defendant has raised its jurisdiction objection at the first opportunity, subsequent engagement with the merits does not automatically amount to a submission.[4]

Absent voluntary submission, the parties’ choice of court agreement prevails. Jurisdiction clauses may be important in direct-purchaser actions, where the corporate claimant purchased price-fixed products from cartelist suppliers on standard terms and conditions. Those terms and conditions often contain jurisdiction clauses. An exclusive jurisdiction agreement binds the parties to bring proceedings in the chosen jurisdiction and precludes application of the other rules of jurisdiction in the Brussels I Regulation.

Given the broad wording of Art. 23 (“any disputes which have arisen or which may arise in connection with a particular legal relationship”), the cartelist supplier may argue that the jurisdiction clause is sufficiently broad to encompass claims based on a tort claim which relates to the performance of a contract, whether anti-competitive or not.[5]

Provided no jurisdiction agreement exists or such agreement does not encompass the antitrust claims, the most important exceptions to the general rule of Art. 2 are contained in Art. 5(3) (matters relating to tort) and Art. 6(1) (multiple defendants) of the Brussels I Regulation. Under Art. 5(3), a defendant domiciled in a member state may be sued in another member state, “in the courts for the place where the harmful event occurred or may occur.”

Most private antitrust claims will fall within the scope of this provision, such as a claim based on conspiracy or breach of statutory duty. The expression “the place where the harmful event occurred” has an autonomous meaning, not dependent on national law. The ECJ has given it two possible meanings: (1) the place where the damage occurred, or (2) the place of the event giving rising to the damage.[6] Therefore, the cartelist may be sued, at the option of the claimant, at either of those places.

The existing Art. 5(3) cases largely dealt with tortious conduct other than anti-competitive infringement. These cases nonetheless shed light on some general principles in determining the basis for jurisdiction in antitrust damages actions. In identifying the place where damage occurred, the focus must be upon the place where the harmful effects were directly produced. Indirect or consequential losses are to be ignored.[7]

In addition, if damage resulting from the defendant’s acts occurred in more than one place, the courts of each place will have jurisdiction, but only to the extent of the damage occurring there.[8] In the context of a cartel action, the damage is likely to occur where the victim commits to purchase the products at issue — i.e., the place where the claimant made payments (whether to the defendant or otherwise) or where it entered into purchase agreements may be significant for identifying the place of damage.

As for the second basis for jurisdiction under Art. 5(3), it has been suggested that courts will be more likely to focus on the place of the acts implementing the infringing agreement, rather than the place of its formation, in identifying the place of the event giving rise to damage.[9]

The worldwide nature of cartel activities often makes separate litigation in each of the affected countries under Art. 5(3) susceptible to a significant risk of inconsistent rulings. Art. 6(1) of the Brussels I Regulation offers an alternative to overcome the potential limitations of Art. 5(3). Under Art. 6(1), if a person (natural or legal) domiciled in a member state is one of a number of defendants, he may also be sued “in the courts for the place where any one of them is domiciled, provided that the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.” As such, when multiple defendants are addressees of the EC cartel decision, claims may be brought in any country where one of the defendants is domiciled so long as the claims are sufficiently connected. If applicable, the corporate claimant may seek to identify an English “anchor defendant” against which there is a viable cause of action, so that other foreign cartelists can then be brought in on the basis that the claims against them are “closely connected” for the purposes of Art. 6(1). If the English company knowingly participated in the price-fixing conspiracy, then it will be the anchor defendant. It may also be possible to sue an English subsidiary on the basis that although it is not directly involved in the infringement, it implemented the cartel by selling the products at inflated prices (albeit without knowledge of the cartel) to downstream customers, but this is an unsettled issue of English law.[10]

If a cartelist is not domiciled in a member state, the question of jurisdiction over the non-EU defendant is determined by the domestic rules of jurisdiction applied by the member state court that seized the dispute.[11] In the case of an English court, the court under its traditional jurisdiction rules may have power to assume jurisdiction by giving permission for process to be served on the defendant out of the jurisdiction.[12]

This power arises where, notwithstanding the fact that the defendant is foreign, the events or subject matter of the dispute are connected with England. The claimant must also show a reasonable prospect of success on merits.[13] Under the English traditional rules of jurisdiction, a claimant may be able to join all cartelists in an English court using an English company as a jurisdiction hook. The English court will likely authorize service out of the jurisdiction upon a non-EU cartelist if: (1) there is a real basis to sue the English company; and (2) the claim against the non-EU cartelist is brought on the basis of its participation in the same price-fixing scheme complained of as against the English company.[14]

Practical Effects of EU Jurisdictional Law

As just shown, selecting the appropriate European forum to bring a private damages action is a highly complex decision, which begs the follow-up question: Where in Europe are claimants actually filing competition claims?

That answer is much simpler. Most private damages actions are filed in the U.K., the Netherlands and Germany. In these three member states, the courts have taken an exceptionally broad, and policy-based, approach to taking jurisdiction in cartel damages cases. These forums are also favorable to plaintiffs, as they may provide for opportunities to get disclosure (as in the U.K.), and offer other procedural advantages, such as collective action mechanisms.

Other member states, such as Italy, are disfavored forums for claimants due to the significant delays inherent in most Italian courts. Indeed, some defendants have taken advantage of this situation by filing noninfringement declaratory actions before the Italian courts, thereby effectively staying related proceedings subsequently instigated by claimants before other European courts.

According to the lis pendens rule of Art. 27 of the Brussels I Regulation, when proceedings involving the same cause of action and the same parties are brought in the courts of different member states, any courts other than the court first seized shall stay its proceedings until the court first seized establishes whether it has jurisdiction.[15]

If that court finds it has jurisdiction, then other courts must respect this and decline to deal with the dispute. Such use of the lis pendens rule as a defense tactic for the purpose of sinking the claims on the merits, while avoiding jurisdiction in alternate (and more efficient) EU member state courts, has become known as the “Italian torpedo.”

As private antitrust enforcement in Europe likely expands, the jurisdictional issues outlined in this article will continue to arise and develop in price-fixing and other global competition cases brought in EU member state courts. Keeping apprised of these developments and understanding their implications will be highly relevant to practitioners involved in international antitrust matters.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] E.g., Joint Cases 295/04 to 298/04, Manfredi v. Lloyd Adriatico Assicurazioni SpA [2006] ECR I-6619 at [44]-[45].

[2] Case C-557/12, KONE AG and Others, Opinion of Advocate General Kokott of 30 Jan 2014.

[3] Council Regulation (EC) No 44/2001 of 22 December 2000 on the Recognition and Enforcement of Judgments in Civil and Commercial Matters (OJ 2001 L12/1).

[4] Harada v. Turner [2003] EWCA Civ 1695 at [31] and [32].

[5] Jürgen Basedow, Jurisdiction and Choice of Law in the Private Enforcement of EC Competition Law, PRIVATE ENFORCEMENT OF EC COMPETITION LAW, 232 (Kluwer, 2007).

[6] See, e.g., Case 21/76, Bier v. Mines de potasse dÁlsace [1976] ECR I-1735 at [11].

[7] See, e.g., Case 220/88, Dumez France v. Hessische Landesbank [1990] ECR I-0049; Case 364/93, Marinari v. Lloyds Bank [1995] ECR I-02719; Case 168/02, Kronhofer v. Maier [2004] ECR I-6009.

[8] See Case 68/93, Shevill v. Presse Alliance [1995] ECR I-415.

[9] Compare Case 89/85, Ahlström v Commission, [1988] ECR 5193, §16 (suggesting that either the formation or the implementation of the agreement may be considered as the event giving rise to the damage).

[10] See, e.g., Cooper Tire v. Dow Deutschland [2010] EWCA Civ 864 at [37]-[44]; KME Yorkshire Ltd & ors v. Toshiba Carrier UK Ltd & ors [2012] EWCA Civ 1190 at [22]-[30]. [11] Regulation (EC) No 44/2001, Art. 4 (1) (“If the defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State shall, subject to Articles 22 and 23, be determined by the law of that Member State”).

[12] Civil Procedure Rules r 6.36.

[13] Civil Procedure Rules r 6.37.

[14] Civil Procedure Rules r. 6.36; Practice Direction 6B, para. 3.1(3)(b).

[15] Regulation (EC) No 44/2001, Art. 27.


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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