Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Cartel victims may sue in courts where one participant is domiciled, says EU Court of Justice Advocate General, (Dec 11, 2014)

By Linda O’Brien, J.D., LL.M.

Niilo Jaaskinen, Advocate General for the Court of Justice of the European Union, has issued an opinion, stating that victims of an illegal cartel may claim compensation for their loss in the courts where one of the cartel participants is domiciled (Hydrogen Peroxide SA v. Evonik Degussa GmbH, Case C-352/13). In the context of a complex cartel extending throughout the European Union (EU), a jurisdictional rule based on the place where the harm occurred is inoperative, according to an announcement of the opinion released today.

European Council Regulation No. 44/2001 on jurisdiction provides that persons domiciled in a Member State must, as a rule, be sued in the courts of that Member State. Nevertheless, when there are several defendants, a person may also be sued in the courts for the place where any one of them is domiciled, provided 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 in different Member States. The regulation also provides that in matters relating to tort, delict or quasi-delict, a person domiciled in a Member State may be sued in the courts for the place where the harmful event occurred or may occur, even if that court is in another Member State. Moreover, parties are allowed to determine which court of a Member State is to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship. Subject to a few exceptions, that jurisdiction is to be exclusive and prevail over what is otherwise provided for in the regulation.

According to the Advocate General opinion, the dispute in the proceedings follows a May 2006 decision in which the European Commission (EC) decided that several companies supplying hydrogen peroxide and sodium perborate had participated in a cartel in violation of EU competition rules and some of the companies were ordered to pay fines.

In March 2009, Hydrogen Peroxide SA (CDC) brought an action for damages before the Landgericht Dortmund (Regional Court, Dortmund, Germany) against six of the companies fined by the EC. As they were established in various Member States, CDC stated in its application that the German courts had jurisdiction to rule in respect of all the defendants because one of them, Evonik Degussa GmbH, had its registered office in Germany.

In September 2009, CDC withdrew its action against Evonik Degussa, following an out-of-court settlement. The other defendant companies in the action brought by CDC challenge the international jurisdiction of the German court. They argue that the supply contracts concluded with the companies having suffered injury contained jurisdiction and arbitration clauses designating the court having jurisdiction in the event of disputes arising from those contracts.

The Advocate General observed, first, that under the specific jurisdiction rule governing in matters relating to tort, delict or quasi-delict, the court where the harmful event occurred is to have exclusive jurisdiction, this concept referring both to the place of the causal event giving rise to the alleged damage and to the place where that damage occurred. That rule, the purpose of which is to limit the number of concurrent proceedings and to identify the court having a particularly close link with the dispute, nevertheless cannot properly be applied in an action for damages in arising from an infringement of the competition rules such as that in the main proceedings. The cartel at issue is a special case because it has existed for a long time and has restricted competition throughout Union territory, with a highly complex structure and has given rise to a series of agreements and collusive practices, resulting in both the participants and the victims of the alleged damage being spread over a large number of Member States. The Advocate General accordingly takes the view that the rule is inoperative in the present case.

Secondly, the Advocate General observes that, in its decision on the cartel at issue, the Commission found that it was a single, continuous infringement of the EU competition law rules and that the conduct in which the participants had engaged could be attributed to each of them as co-perpetrators, irrespective of their own individual contribution. The Advocate General adds that since there may be wide variations in national rules governing the apportionment of liability between cartel members, there is in the present case a real risk that each of the participants in the same unlawful cartel might be ordered to pay different amounts of damages if courts in different Member States were to rule separately. In the context of such a risk, the Regulation allows proceedings to be brought before a single court against several defendants established in different Member States.

Similarly, the Advocate General considers that the fact that the applicant withdrew its action against the only co-defendant domiciled in the jurisdiction of the court seised does not in itself affect jurisdiction of that court to hear the proceedings brought against the other co-defendants. However, the provision in the Regulation that allows several defendants to be sued before a single court must not be applied abusively. That would be the case here if it were to be established that CDC and Evonik Degussa had deliberately delayed the formal conclusion of their out-of-court settlement until after proceedings had been instituted, with the sole aim of establishing jurisdiction in Germany for the other cartel participants.

Thirdly, in the Advocate General’s view, jurisdiction or arbitration clauses included in commercial contracts can be applied to disputes involving compensation for damage resulting from an unlawful cartel agreement only where the victim consented specifically to those clauses, in full knowledge of the cartel and the damage caused thereby. However, clauses conferring jurisdiction on a court outside the EU and arbitration clauses can be relied on as against provisions of the regulation only in so far as compliance with EU competition law is fully guaranteed before that court or arbitration body, the Advocate General concludes.

Companies: Hydrogen Peroxide SA; Evonik Degussa GmbH

News: Antitrust