European Court of Justice sets broad rules for jurisdiction over damages actions in competition cases

On 21 May 2015, the Court of Justice of the European Union (“ECJ”) issued a judgment in Case C-352/13, CDC v. Akzo Nobel and Others, resolving questions on the three main bases for jurisdiction over private actions for damages arising from competition law infringements.

In 2009, Cartel Damage Claims (“CDC”), a so-called litigation funding vehicle – an entity to which many claimants assign their claims for a fee and which then pursues the claims in its own name – initiated an action for damages in Germany against the addressees of the European Commission’s 2006 Hydrogen Peroxide cartel decision.  Shortly after filing its lawsuit, CDC settled its claims against the only German defendant, Evonik Degussa, resulting in actions pending in German court against exclusively non-German defendants.  These remaining defendants challenged the jurisdiction of the German court, which then issued a preliminary reference to the ECJ on the interpretation of Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Brussels I Regulation”).

First, the ECJ addressed the validity of jurisdiction under rules on the joinder of related claims.  Under Article 6(1) of the Brussels I Regulation (now Article 8(1) of the Brussels I bis Regulation), defendants may be sued in the court where any one of them is located if the claims against them are so closely connected to those against the so-called ‘anchor defendant’ that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.  

While this requirement can be met only where the defendants share the same situation of fact and law, the ECJ held that all addressees of a Commission decision finding a single and continuous infringement indeed share such a situation.  Furthermore, the Court held that the fact that relevant Member State tort rules differ presents a risk of irreconcilable judgments. The findings of the Court effectively mean that claimants can sue all EU-domiciled addressees of a Commission decision finding a single and continuous infringement in the home jurisdiction of any one of these addressees.

Defendants had alleged that CDC and Evonik Degussa had in fact reached their settlement prior to the filing of the action and concealed the settlement in order to establish jurisdiction in Germany.  The ECJ noted that, because jurisdiction is established at the time the action is filed, the subsequent withdrawal of the claim against the anchor defendant does not affect the propriety of that jurisdiction.  However, jurisdiction could be improper if there is “firm evidence to support the conclusion” that the conditions for jurisdiction were “artificially fulfilled” or prolonged.  While the defendants’ allegations described such a situation, the ECJ considered that it was for the national court involved to determine whether firm evidence supported these allegations.

Second, the ECJ addressed jurisdiction under rules governing claims in tort.  Article 5(3) of the Brussels I Regulation (now Article 7(2) of the Brussels I bis Regulation) provides for jurisdiction over actions in tort, delict, or quasi-delict where the harmful event occurred or may occur.  Past case law has interpreted this to mean both: (i) where the damage occurred; and (ii) where the event giving rise to it occurred. In the present case, the ECJ was called upon to define these terms in the context of cartels.  

The ECJ ruled that the place of the causal event giving rise to damage is where the cartel was definitively concluded, if there is a single such place.  However, this conclusion would not apply where a number of agreements comprise the cartel, unless a single particular agreement can be identified as the sole causal event giving rise to the loss inflicted on the claimant.  At the same time, jurisdiction on that basis would be proper only over parties to that particular agreement.

The ECJ then ruled that the place where the damage occurred must be identified for each victim individually and is located, in general, at that victim’s registered office.  While this rule provides for potential jurisdiction over a defendant in a vast number of courts, a company such as CDC, which aggregates others’ claims, must bring separate actions in the jurisdictions of the home offices of each claimant whose claim it had acquired.

Third, the ECJ addressed in what circumstances a choice of jurisdiction agreement applies to damages actions for a competition law infringement under Article 23(1) of the Brussels I Regulation (now Article 25(1) of the Brussels I bis Regulation).  

The ECJ ruled that clauses abstractly referring to all disputes arising from contractual relationships should not be interpreted as extending to tortious liability from participation in an unlawful cartel.  However, the Court limited the extent of this rule.  Some Member State courts and Advocate General Jääskinen had called into question whether a commercial contract clause can be applied at all to a cartel kept secret from one of the parties without undermining the effectiveness of Article 101 TFEU (see VBB on Competition Law, Volume 2014, No. 12, available at www.vbb.com).  The Court held that a national court should indeed enforce a jurisdictional clause in this situation if the clause refers to disputes in connection with liability incurred as a result of an infringement of competition law.

The rulings of the ECJ settle longstanding and recurring questions on national courts’ jurisdiction over private enforcement actions, and the findings of the Court should remain unchanged under the recast Brussels I bis Regulation.  Taken together, they may result in defendants facing more damages actions in jurisdictions other than their domicile, although the judgment also limits the ability of litigation funding vehicles to effectively aggregate claims and makes it easier for parties to designate a particular forum for potential competition law damages actions.