The European Court of Justice (ECJ) handed down its judgment on 13 July 2006, on questions referred from an Italian court in relation to damages claims arising from agreements between foreign and Italian insurance companies to exchange information. The ECJ held inter alia
that it is for national law to lay down the rules governing damages actions, to designate which courts have jurisdiction and to prescribe the procedural rules governing individuals’ rights derived from EC law. In each case the rules applied must ensure the effectiveness
of the enforceability of EC law and equivalence
of enforcement of EC and domestic law.
In its decision of July 2000, the Italian Competition Authority held that insurance companies including Lloyd Adriatico Assicurazioni SpA, Fondiaria Sai SpA and Assitalia SpA had implemented an unlawful agreement for the purpose of exchanging information in the insurance sector. This had made it possible for the insurance companies to coordinate and fix the prices of civil liability auto insurance premiums which resulted in users being charged increases in premiums which were not justified by market conditions and which users had no choice but to accept.
A number of individuals brought actions against the insurance companies in the Italian courts to claim damages for their losses incurred through the increase in premiums which resulted from the unlawful exchanges of information. The Italian court referred five questions to the ECJ, namely:
- whether Article 81 renders void an agreement such as the one in this case having in regard in particular to the fact that undertakings from several member states took part in the agreement or concerted practice?
- whether Article 81 entitles third parties who have a relevant legal interest to rely on the invalidity of the agreement or practice prohibited under Article 81 to claim damages for the harm suffered where there is a causal relationship between the agreement and the harm?
- whether Article 81 precludes the application of a national provision (as is the case in Italy) under which a claim for damages for infringements of EC and national competition law must be made by third parties before a different court to that which usually has jurisdiction for claims of a similar value thus increasing the costs and time in doing so?
- whether Article 81 is to be interpreted as meaning, for the purposes of the limitation period for bringing an action for damages for infringements of national and EC competition law, that time beings to run from the day the agreement or practice was adopted or the day it came to an end?
- whether Article 81 can be interpreted to mean for a national court to award punitive damages to an injured third party where the damages awarded under national law are lower than the advantage gained by the infringing party and so making the compensable amount higher than the advantage gained by the infringing party to deter the adoption of anti-competitive agreements or practices?
The ECJ first ruled that the questions were admissible, dismissing the insurance companies’ submissions that the summary of the factual and legal context underlying the questions was inadequate and Article 81 was not applicable since the agreements in question did not affect trade between member states.
In relation to the reference questions the ECJ held that:
- It is clear that in order for EC competition law to apply to an arrangement or practice, it must be capable of affecting trade between member states. The mere fact that participants in a national arrangement include undertakings from other member states is important but not decisive. Equally the fact that an arrangement or practice is limited to the marketing of products in a single member state does not mean it cannot have an effect on trade between member states, as where it extends over the whole territory of a member state it has the effect of reinforcing the partitioning of markets on a national basis. It is for the national court to determine whether in the light of the characteristics of the national market at issue there is a sufficient degree of probability that trade is affected between member states.
- Since an agreement which breaches Article 81 is void, this principle can be relied upon by anyone and a void agreement cannot be invoked against third parties. Equally any individual can rely on a breach of Article 81 before a national court and can claim compensation for harm suffered where there is a causal relationship between that harm and an anti-competitive agreement or practice. Otherwise the effectiveness and practical effect of the prohibition in Article 81 would be put at risk. It is for the national law of the member states to designate the courts having jurisdiction and to lay down the rules governing such actions provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not make the exercise of these EC rights practically impossible or excessively difficult (principle of effectiveness).
- Applying the above, it is up to the national court to designate the courts and tribunals who have jurisdiction to hear actions for damages based on infringements of EC competition law provided that the principles of equivalence and effectiveness are observed.
- It is for the national court to determine whether a national rule under which the limitation period begins to run from the day on which the agreement or practice was adopted, makes it practically impossible or excessively difficult to seek compensation for the harm caused by the prohibited agreement or practice. This could be the case especially where that limitation period is short.
- In accordance with the principle of equivalence it must be possible to award punitive damages for breaches of EC competition law if such damages can be awarded for breaches of national competition law. It also follows from the principle of effectiveness that injured persons must be able to seek compensation not only for actual loss but also for loss of profit plus interest. Total exclusion of damages for loss of profit cannot be accepted in the case of breaches of EC law, since especially in the context of economic or commercial litigation, such a total exclusion would make reparation of damage practically impossible.
The ECJ’s judgment makes it clear that national law and national courts will determine the procedures under which claims for damages for breaches of EC competition law will be heard and that this should be equivalent to the procedures applied for breaches of national competition law. The ECJ’s judgment also provides that such claims may include damages for lost profits.
Source: ECJ judgment of 13 July in the joined cases C 295/04 Vincenzo Manfredi v Lloyd Adriatico Assicurazioni SpA, C 296/04 Antonio Cannito v Fondiaria Sai Assicurazioni SpA, C 297/04 Nicolò Tricarico v Assitalia Assicurazioni SpA and C 298/04 Pasqualina Murgolo v Assitalia Assicurazioni SpA which can be found at: