The Commission has published its green paper and the more detailed working paper on facilitating damages actions and is inviting comments by 21 April 2006. This consultation focuses on private enforcement (i.e. bringing civil damages actions before national courts) and in particular damages actions rather than other private actions such as actions for an injunction or nullity of a contract.
This forms part of the Commission’s overall aim to strengthen competition law enforcement and complements the public enforcement (i.e. making infringement decisions and imposing fines) carried out by the Commission and other national competition authorities (NCAs). As Neelie Kroes, the Competition Commissioner, said in a recent speech “the diligent work of the Commission and Member States in applying the Treaty is no substitute for the vigilance of individuals in protecting their rights”. Damages actions have the advantage of both acting as a deterrent as well as compensating those who have suffered loss. The latter cannot be achieved though public enforcement. It is worth noting that whilst taking US practice into account, the Commission has emphasised that it seeks to foster a competition rather than litigation culture and does not want to encourage spurious claims.
There have been very few successful actions for damages for either national or EU competition law breaches across the member states. Therefore the Commission has identified key obstacles to a more efficient system as well as options to improve damages actions. The Commission seeks to encourage both “follow-on” actions, where a claimant seeks damages on the basis of an EC competition infringement decision, and “stand-alone” actions, where the claimant independently seeks to prove a competition law breach, and in each seeks damages.Access to evidence and disclosure of documents
A key issue for claimants is gaining access to evidence especially where this evidence is held by the infringing party. This is particularly acute for stand-alone actions. The Commission considers whether there should be special rules on disclosure for competition law damages actions and suggests that disclosure could be ordered by the court where the claimant has presented the facts and reasonably available evidence in support of its case. Currently the UK is almost alone in requiring pre-trial disclosure of documentary evidence whilst some courts in other member states have a limited ability to order disclosure. The Commission is also considering whether sanctions for destruction of evidence and obligations to preserve evidence should be imposed.
In relation to follow-on actions the Commission or NCA may well hold relevant evidence on the infringement as a result of its own investigation. The Commission suggests that access to documents that have been submitted to the authorities should be arranged between the parties to minimise the administrative burden on the authorities. However the Commission would make an exception for leniency application in cartel cases so that those who do cooperate with the Commission are not put in a worse position than those who do not. A similar issue is also being considered in the Commission’s recent consultation on amendments to its 2002 leniency notice. It is proposed that applicants make oral corporate statements, to which addressees of the statement of objections would be given restricted access for the purposes only of administrative and judicial proceedings for the application of Article 81.
The Paper also considers whether national courts should have access to documents held by the Commission but does not consider the same issue for documents held by the NCAs.Burden of proof and the issue of fault
The Commission suggests that the burden of proof for claimants might be alleviated if infringement decisions by NCAs were binding on national courts. This is currently the case for infringement decisions of the Commission (Article 16 of Regulation 1/2003). The burden of proof in favour of the claimant could be reversed or even lowered to balance the asymmetry of information existing between the claimant and defendant.
Again the existence of the infringement in follow-on cases might be enough to prove fault, however in some jurisdictions there is also a requirement to prove intention or negligence. The Paper also queries whether the defendant can argue excusable error and whether this should limit the damages payable.Damages and the passing on defence
Damages could be awarded so as to: compensate the claimant for loss suffered; recover the illegal gain made by the infringer; or punish the infringer (the latter possibly being set out in an option for double damages). The Commission is also consulting on whether interest should be awarded from the date of the infringement or date of injury.
The Commission also questions whether the court should follow an equitable approach currently used in the courts of some member states for damages to be proved or whether damages should be quantified by complex economic models requiring extensive evidence. Issues such as the required standard of proof must be resolved. The Commission is also considering the benefits of introducing split proceedings for liability and for quantum.
Another issue is whether the defendant can raise the “passing on defence” in situations where the claimants have mitigated their losses by passing on the overcharge they have themselves paid. If this is not taken into account the defendant risks paying double damages to both the direct and indirect purchasers but this is arguably better than not compensating those who have suffered loss. In some member states the passing-on issue forms part of the loss assessment rather than being a defence per se. Consequently allowing this defence can also affect whether an indirect purchaser has standing due to the difficulty in proving the extent of damages and a link with the infringing behaviour.Collective actions, costs rules, experts and limitation periods
The Commission also wants to consider ways in which consumer interests can be protected by facilitating consumer actions by consumer associations and whether there should be special provision for collective action by groups of purchasers.
Cost rules and court appointed experts can also facilitate access to courts for civil claims. The Commission has suggested that unsuccessful claimants be ordered to pay costs only if they acted unreasonably by bringing the case. Limitation periods could also be suspended when proceedings are instituted by the Commission or an NCA.Jurisdiction and applicable law
Whilst choice of jurisdiction is clearly set out in Regulation 44/2001, the Commission is consulting on whether special provision needs to be made to clarify the applicable law. For issues such as proving causation of loss and quantifying damages, as opposed to substantive EC competition law, on the one hand and purely procedural rules on the other. This could be either by reference to the place where the damage occurs, the law of the forum or by giving the claimant a choice of laws where the territory of more than one state is affected by the infringing behaviour.
In any event, recent practice in the UK suggests that cases will often settle once proceedings have started. For example, in the UK the Department of Health brought civil proceedings against several pharmaceutical companies claiming damages arising from price-fixing and restricting the supply of certain generic drugs. The actions against three of the companies have settled, without admission of liability, after the companies agreed to pay compensation ranging from £4 – 13.5 million.Source: European Commission Green Paper and Working Paper published 20th December 2005 found at: