Anomalies in Spanish national law regarding enforcement of EU competition law
Historically the Spanish Supreme Court has been reluctant to enforce EU and Spanish Antitrust rules in private enforcement actions. This wariness has been highlighted in several landmark cases, such as the Campsa decision of 30 December 1993, the UIP Decision of 4 November 1999 and the Nissan Decision of 30 November 1999. The Campsa decision, in particular, restricted the private enforcement of articles 81 and 82 of the EU Treaty for many years stating that Spanish courts lacked - as a matter of principle - jurisdiction to enforce EU antitrust rules. However, in June 2000 and March 2001, in the cases of DISA and Petronor, the Supreme Court altered its position to support private enforcement of breaches of the EU competition law (dated 2 June 2000 and 15 March 2001, respectively).
The reluctance of the Spanish Supreme Court to enforce Spanish Antitrust rules is attributable to the Act No. 16/1989, of Competition Law (“CL”). Under the CL, only the Spanish Antitrust Authority (Tribunal de Defensa de la Competencia) - and not the Spanish courts - have jurisdiction to enforce breaches of Spanish competition rules:
“Compensation for damages, based on the illegal nature of the acts prohibited by this Act, may be requested by the injured parties once there is a firm administrative and if needs be, jurisdictional ruling. The substantive and procedural regime, applicable to the compensation for damages, shall be as proscribed in the civil legislation.” (CL, article 13.2, our underlining for emphasis)
However, EU Regulation No. 1/2003 emphasises the authority of the Spanish Courts to deal with an action based upon the infringement of articles 81 and 82 EU. To facilitate the enforcement of this EU Regulation, Act 8/2003 was passed on 9 July 2003. This modified the Organic Act 6/1985 of the Judiciary Power dated 1 July 1985 and, as regards competition matters, recognised the competence of the newly created Spanish “commercial courts” to apply articles 81 and 82 EU. Despite this change the new commercial courts are not apparently empowered to enforce antitrust provisions of the relevant national law, the CL.
In addition, several problems have emerged as regards matters of jurisdiction and procedure. For instance, how should the court respond during legal proceedings concerning a contractual issue if the defendant files a counterclaim regarding an infraction of articles 81 or 82? In Spain the authority to deal with contractual matters is still ascribed to the civil courts not to the newly created commercial courts.
Another potential problem relates to the “amicus curiae” provision within EU Regulation No. 1/2003, which allows the Spanish Antitrust Authority to take part in legal proceedings dealing with articles 81 and 82 EU. The principle of amicus curiae, although well known in common law jurisdictions, does not currently exist under Spanish Law.
It is, however, highly likely that a new Spanish Competition Act will be proposed and passed in the near future. The preliminary draft disclosed so far amends the current position and encourages private enforcement of Antitrust rules by deleting article 13.2 of the CL. However, the position on several important matters remains unclear, namely, some of the procedural problems that have arisen during legal proceedings dealing with antitrust matters. It is expected that the new Act will also amend the Spanish Civil Procedural Act where relevant.
As a result of the changes made in 2003 to the Organic Act of the Judicial Power, “commercial courts” are now enforcing EU competition law. A large proportion of the proceedings so far have related to the distribution of fuel in Spain.
As an example, the recent court decision regarding the attempt by Gas Natural, Spain’s largest gas supplier, to buy Spain’s largest electric utility, Endesa, is instructive. The judgment in this case was widely recognised as unusual and significant, if it is viewed as a precedent when Spanish judges interpret the Antitrust rules in the future.
Spanish private enforcement in action in 2006
In September 2005, Gas Natural filed a takeover bid for Endesa’s traded shares with the Spanish Securities Regulator (Comisión Nacional del Mercado de Valores). In accordance with the relevant provisions of the CL the procedure for regulating a merger was initiated. Spain’s Energy Authority (Comisión Nacional de la Energía) and the Spanish Competition Authority issued their respective opinions and decisions as required. The merger procedure completed on 3 February 2006 when the Government’s conditional approval was granted.
At the time of the announcement of the takeover, Gas Natural agreed to sell certain Endesa assets to the Spanish electric utility, Iberdrola.
The takeover offer was not accepted by Endesa and court proceedings were subsequently initiated by the parties. Endesa brought actions before the Commercial Court No. 3 of Madrid on the basis of article 81 EU. The electric utility filed an injunction asking for interim relief to be applied and claiming that the agreement between the defendants [ Gas Natural and Iberdrola] was null and void. Endesa maintained that the takeover bid and the asset sale agreement were a result of a previous agreement between the defendants to share out Endesa’s assets, an agreement that was prohibited by article 81 EU.
Court Order on the Interim relief claim (21 March 2006)
The judge noted that Gas Natural would not have embarked upon such a significant and complex transaction if the collaborative agreement to transfer certain assets to Iberdrola had not clearly been in place in advance.
As anti-competitive behavior had preceded the takeover, the court ordered that the agreement between Gas Natural and Iberdrola and the takeover itself be suspended. The judge required Endesa to file a bond amounting to 5 per cent of the value of the proposed takeover (€1.000 million).
The legal basis of this decision could cause problems in the future as agreements that predate a merger or takeover bid are not just common, but are an essential tool of corporate finance. In European law, particularly since the approval of the Regulation on the control of concentrations between undertakings, the competition problems that may result from a merger are analysed during the assessment of the merger and not in a separate investigation regarding anti-competitive behavior. According to generally agreed European practice, agreements that relate to the takeover or merger are approved when the merger itself is approved. Otherwise, the risk of having to undo completed corporate transactions, as occurred in the case of Endesa, is too great.
In conclusion, this recent decision of the Spanish courts should make all participants in this area of practice in Spain think carefully as regards the need for provisions in the proposed Competition Act to prevent the Spanish courts from selective, and possibly inconsistent, application of the procedures regarding mergers and anti-competitive behaviour when dealing with a competition law matter.
On 25 August the Cabinet approved the preliminary draft and sent it to the Parliament.