Taking stock – the implementation of the European Damages Directive

Almost exactly four years after the implementation deadline, the European Commission (the “EC”) has published a short report[1] on 14 December 2020 on the implementation of its Directive 2014/104 (the “Damages Directive”)[2] across the European Union (the “EU”). The primary aim of the Damages Directive was to facilitate effective redress for individuals and businesses that have suffered harm as a result of anticompetitive conduct. Accordingly, the effective and consistent implementation of the Damages Directive across the EU is an important step towards achieving that aim.

While all Member-States have by now implemented the Damages Directive, 21 of the 28[3] Member-States had failed to transpose the measures into national law by the implementation deadline of 27 December 2016. It took until January 2019 and the EC pursuing infringement proceedings against a number of Member-States for the Damages Directive to finally be implemented in all Member-States. While consistent application is the goal of the EC, national rules on the temporal application of the Damages Directive vary considerably; in some jurisdictions, the Damages Directive does not apply unless the anti-competitive conduct commenced on or after the date of its implementation into domestic law. Consequently, there is still only a limited pool of data on the application of the Damages Directive in individual Member States in actual practice. The EC intends to publish a further report in due course when more data is available.

What is clear is that following the adoption of the Damages Directive, antitrust damages actions have become more widespread in the EU. From 2014 to 2019, there was approximately a fivefold increase in the number of cases from 50 to 239,[4] and there were damages claims filed in thirteen Member-States.[5] These numbers are certain to have increased during 2020.

In parallel, national courts have referred an increasing number of questions to the Court of Justice of the European Union (“CJEU”) on the interpretation of points of law relevant to antitrust damages actions. The EC reports that, since the Damages Directive’s implementation deadline, there have been six preliminary rulings on such issues and several more are currently pending before the CJEU. Although the Damages Directive itself was not specifically at issue in those six cases,[6] the references sparked debate about the interpretation of the Damages Directive and private enforcement more generally.

One of the first cases before the CJEU after the Damages Directive’s implementation deadline was Cogeco Communications.[7] The case was filed in Portugal on 27 February 2015, before the deadline for implementation of the Damages Directive into national law.[8] At that point in time, the Portuguese limitation period for antitrust damages claims was three years from the date that the injured party was aware of its right to compensation. There was no suspension of the limitation period during the investigation of a competition authority (as there is now under the Damages Directive). Although the Damages Directive did not apply to the case, the CJEU held that the Portuguese limitation rules in question were not compatible with Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) or the EU principle of effectiveness. The Court was concerned that such a short limitation period could quite easily expire before a final infringement decision was adopted by the competition authority, potentially precluding the injured party from bringing an action based on such a decision.

The CJEU concluded: “Article 102 TFEU and the principle of effectiveness must be interpreted as precluding national legislation which, first, provides that the limitation period in respect of actions for damages is three years and starts to run from the date on which the injured party was aware of its right to compensation, even if unaware of the identity of the person liable and, secondly, does not include any possibility of suspending or interrupting that period during proceedings before the national competition authority.”

The CJEU also considered the Damages Directive when addressing the issue of who within a corporate group is liable for an infringement of Article 101(1) TFEU in Skanska Industrial Solutions and Others.[9] The case concerned certain companies that had participated in an asphalt cartel in Finland which were subsequently dissolved and their economic activities continued by new owners. The CJEU was asked to determine whether those companies that continued the economic activities of the cartel participants were liable to compensate the victims of the cartel for the damage caused by their predecessors. The CJEU concluded that the EU law concept of “undertaking” applied to the question of corporate liability for a breach of EU antitrust rules. It ruled that the owners of the new companies had assumed liability for the damage caused by the dissolved companies that had participated in the cartel “as they have, as legal persons, ensured that those companies were able to continue their economic activities” (paragraph 50). Although the Damages Directive did not apply to the case, the ruling is consistent with Article 11(1) of the Damages Directive, which provides that those responsible for damage caused by an infringement of EU antitrust law are the “undertakings” that committed the infringement.

In Otis and Others,[10] while the Damages Directive did not (again) apply, Advocate General Kokott specifically addressed it in her Opinion.[11] The case concerned a public authority’s claim for damages against members of the elevators and escalators cartel. The public body had granted loans to construction companies that bought cartelized elevators and escalators. The public body claimed damages on the basis that, absent the cartel, it could have invested its funds more profitably. The CJEU was asked by the Austrian court to rule on whether the alleged harm suffered by the public authority was too remote. The CJEU concluded that no-one can be excluded a priori from claiming damages for losses caused by anticompetitive conduct on the basis of national rules. Advocate General Kokott noted that the Damages Directive is not intended to “restrict the group of persons entitled to antitrust damages to direct and indirect operators on a market affected by a cartel or to market participants in general”. On the contrary, Article 3 expressly stipulates that Member States have an obligation to ensure that “any natural or legal person who has suffered harm caused by an infringement of competition law is able to claim and to obtain full compensation for that harm” (paragraph 96).

A number of requests for preliminary rulings on provisions of national law implementing the Damages Directive itself are currently pending before the CJEU. In June 2020,[12] a Spanish court asked the CJEU to give guidance on the interpretation of Article 22, which provides that substantive provisions of national law implementing the Damages Directive should not apply to damages claims filed before the end of the transposition period. The Spanish court seeks guidance on which provisions are to be considered “substantive” (and cannot apply retroactively) as opposed to “procedural” (which can); and, in particular, whether Article 17, which concerns the quantification of loss (including the rebuttable presumption that cartels cause harm), is a “substantive” provision or not.

It can be expected that rulings on the operation and interpretation of the Damages Directive will continue to increase in the light of the growing number of damages claims being commenced across the EU, and will give important guidance on the interpretation of its provisions.

As regards the implementation of the main rules of the Damages Directive:

  • General scope of application: The Damages Directive only applies to damages actions relating to infringements of European antitrust law or national antitrust law that is applied in parallel. Certain Member States’ national rules have extended this to include the right to claim compensation in respect of purely national antitrust infringements.
  • The right to full compensation: Article 3 of the Damages Directive provides that victims of anticompetitive conduct are entitled to compensation for actual loss and for loss of profit, plus interest, resulting from that conduct. This principle of full compensation has generally been recognized across all Member States.
  • Defendant or third-party disclosure: Article 5 of the Damages Directive requires Member States to empower national courts to order disclosure in private proceedings to the extent that such disclosure is proportionate. This is an important development in many jurisdictions in which disclosure is normally very limited. The EC reports that all Member States have introduced disclosure rules on the basis of Article 5, albeit in varying forms to fit the structure of their legal systems.
  • Competition authority disclosure: Article 6 of the Damages Directive introduces rules governing requests for access to certain parts of the relevant competition authority’s file, simultaneously limiting and, in some cases prohibiting, disclosure of certain categories of documents. The EC records that these provisions have generally been implemented in a uniform way, although there is some suggestion that they may be being interpreted narrowly by national courts in certain jurisdictions.[13]
  • Use of disclosed documents: Articles 7 and 8 of the Damages Directive set limits on the use of documents disclosed pursuant to the Damages Directive. Such limits have been implemented relatively uniformly across Member States.
  • The effect of infringement decisions: Article 9 of the Damages Directive stipulates that when there is a “final” finding of an infringement of competition law by a national competition authority, it is irrefutable for the purposes of a damages action, and constitutes at least prima facie evidence of an infringement of competition law in the national courts of other Member States. These provisions have been implemented in the majority of Member States. Austria and Germany have gone a step further by treating infringement findings in other Member States as binding in their own national courts.
  • Limitation periods: Article 10 of the Damages Directive sets a minimum limitation period of five years in respect of antitrust damages claims (which period is suspended during an investigation by a competition authority), thereby significantly extending the relevant limitation period in several Member States, and giving victims more time to prepare and bring their actions. Article 10(2) specifies the criteria to be satisfied before limitation starts to run.
  • Pass-on: Articles 12 to 15 of the Damages Directive address the legal test for establishing that an overcharge has been passed on by direct purchasers to indirect purchasers in full or in part. The EC reports that these provisions have for the most part been implemented consistently across Member-States.
  • Quantification of harm: Article 17 of the Damages Directive stipulates that national courts must be given powers to estimate the harm suffered by claimants, and establishes a rebuttable presumption that cartels cause harm. The Damages Directive does not prescribe a presumed percentage of overcharge, although three Member States have set their own (10% in Hungary and Latvia and 20% in Romania).

Overall, the EC draws the positive conclusion that the Damages Directive has for the most part been implemented consistently across the European Union, and that the rights of victims of anticompetitive conduct have been strengthened as a result. In order properly to assess the effect of the Damages Directive, however, it will be necessary to monitor the application of national implementing legislation in the years to come.

Footnotes

[1] EC report dated 14 November 2020: COMMISSION STAFF WORKING DOCUMENT on the implementation of Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union

[2] Directive 2014/104 EC of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.

[3] Following the withdrawal of the United Kingdom from the EU on 31 January 2020, there are now 27 Member States.

[4] Jean-François Laborde, Cartel damages actions in Europe: How courts have assessed cartel overcharges (2019 ed.), November 2019, Concurrences N° 4-2019, Art. N° 92227, page 4: records that the number of such actions increased from around 50 in 2014 to 239 in 2019 (calculated by the date of first judgment).

[5] Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hungary, Italy, the Netherlands, Poland, Spain, plus the United Kingdom.

[6] Due to the temporal application of the Damages Directive in the relevant Member-State.

[7] Case C-637/17 – Cogeco Communications, ECLI:EU:C:2019:263.

[8] The Damages Directive was not, in fact, implemented into Portuguese law until 5 June 2018, Law no. 23/2018, of 5 June (Law), and only entered into force 60 days after this date.

[9] C-724/17 – Skanska Industrial Solutions and Others, ECLI:EU:C:2019:204.

[10] C-435/18 – Otis and Others, ECLI:EU:C:2019:1069.

[11] Case C-435/18 – Otis and Others, Opinion of Advocate General Kokott, dated 29 July 2019.

[12] C-267/20 – Volvo and DAF TrucksOJ C 320, 28.9.2020, p. 8.

[13] Paris Court of Appeal, 25 October 2019, RG 19/05356; Cour de Cassation, Ch. Com, 8 July 2020, n° 19-25.065: the French Supreme court referred to Articles 5 and 6 of the Damages Directive and rejected the Court of Appeal’s decision to order the disclosure of certain documents from the Commission’s file on the basis that the Court of Appeal had failed to assess whether such disclosure was proportionate. Interestingly, some of the documents requested in these French proceedings were disclosed in related English proceedings  The District Court of Munich (Landgericht München) 27 March 2020, case no.: 37 O 18471/18 has taken a strict approach to disclosure and refused a request for disclosure of documents from the Defendant evidencing purchases of trucks where the Claimant’s versions of the documents had been destroyed on the basis that this went beyond the purpose of the Damages Directive.   .

*Lesley Hannah is a Partner and Anna Stellardi is an Associate in the London office.