The General Court of the EU orders the EU to pay more than EUR 50,000 in damages to Gascogne as a result of the excessive length of the proceedings before the General Court (Judgment of the General Court of the EU of 10 January 2017 in in Case T-577/14 Gascogne Sack Deutschland and Gascogne v European Union)
In its judgment of 10 January 2017, a chamber of the General Court of the EU ruled on the excessive length of proceedings in Cases T-72/06 and T-79/06 that took place before another chamber of the General Court of the EU .
Such proceedings started as a result of the actions brought by Gascogne Sack Deutschland and Gascogne on 23 February 2006 seeking the annulment of a Commission decision concerning a fine for the companies’ participation in a cartel in the industrial plastic bags sector . The actions for annulment were dismissed by the General Court of the EU on 16 November 2011 .
On appeal, the Court of Justice of the EU upheld the judgments of the General Court and the fines totalling EUR13 .2 million imposed on the two companies . However, the Court of Justice of the EU suggested that the companies could bring actions for damages before the General Court of the EU as a result of the excessive length of the proceedings that had taken place before the very same Court .
Encouraged by this judgment, Gascogne Sack Deutschland and Gascogne resorted to the General Court of the EU claiming close to EUR 4 million in damages for material harm and non-material harm caused by the lengthy proceedings .
At the outset of its judgment, the General Court of the EU emphasized that non-contractual liability of the EU can be established when three cumulative conditions are fulfilled .
First, the institutions’ conduct must be unlawful . In this regard the General Court of the EU found that there had been a breach of the right to adjudication within a reasonable period established in the Charter of Fundamental Rights of the European Union (article 47, second paragraph) due to the excessive length of the proceedings. The proceedings lasted for more than 5 years and 9 months and their specific circumstances could not justify such delay. In Competition Law cases, the General Court acknowledged that the appropriate length of proceedings is a period of 15 months between the end of the written phase of the procedure and the opening of the oral phase. In the present case, a period of 46 months separated those two phases .
However, the General Court of the EU noted that the existence of parallel related cases may justify an increase in the length of the proceedings, by a period of 1 month per additional related case, i .e . an increase of 11 months in this case . Therefore, a period of 26 months between the end of the written phase of the procedure and the opening of the oral one was, in its view, appropriate in order to deal with the cases at issue . Consequently, the 46 month period between both phases only showed an unjustified period of inactivity of 20 months in each of the two abovementioned cases .
The second condition requires that an actual damage must have been suffered . In this respect, the General Court of the EU concluded that Gascogne suffered actual and certain material harm given the losses it suffered due to the costs that it had to pay in relation to the bank guarantee provided to the Commission . The companies also argued that they had suffered material harm resulting from the payment, for a longer period than necessary, of statutory interest on the amount of the Commission’s fine imposed and that they had been deprived of the possibility of finding an investor earlier . Theseargumentswere nevertheless dismissedby theCourt due to an allegedlackofevidence .
Third, the non-contractual liability of the EU requires the existence of a causal link between the conduct and the claimed damage . This condition was found to be met by the General Court due to the fact that, if the proceedings in Cases T-72/06 and T-79/06 had not lasted more than the reasonable period for adjudication, Gascogne would not have had to pay bank guarantee costs during the period corresponding to that excess .
As for non-material harm, the General Court acknowledged that Gascogne Sack Deutschland and Gascogne suffered this type of harm due to the excessive length of the proceedings . Precisely, the Court considered that the situation of uncertainty, which went beyond the degree of uncertainty usually caused by litigation, had had an impact on the decisions and on the management of those companies .
Based on the fulfilment of the abovementioned three conditions, the General Court of the EU decided to award Gascogne damages amounting to EUR 47,064 .339 as compensation for the material harm (i .e . the payment of additional bank guarantee costs) and EUR 5,000 as compensation for the non-material harm .
Finally, the General Court of the EU held that the damages must be increased by compensatory interest, from 4 August 2014 until 10 January 2017 (that is, from the date the action for damages was brought before the General Court of the EU to the date of the delivery of the judgment), at the annual rate of inflation reported by Eurostat for the period concerned in France (where Gascogne is established) . Additionally, late payment interest must be added to both the damages of EUR 47,064 .33 and EUR 5,000 awarded to each of the two companies, from the delivery of the judgment, until the damages are paid in full, at the rate set by the European Central Bank for its main refinancing operations, increased by two percentage points .
Although, at first glance, this precedent may appear encouraging for other companies that are experiencing lengthy judicial proceedings, the reality is that the compensation ordered by the General Court of the EU remains clearly insufficient to justify time and costs incurred by the companies .
It should be noted that the material harm claimed by Gascogne derived from real costs incurred which were, prima facie, adequately documented by the companies -(i) EUR 1,193,467 for the payment of additional legal interests on the amount of the fine imposed by the Commission beyond the reasonable delay and (ii) EUR 187,571 for the bank guarantee payments beyond the reasonable delay .
Furthermore, Gascogne claimed (i) the lost profit or losses suffered due to the situation of uncertainty −such as being deprived from the possibility of finding an investor earlier−, which it estimated in EUR 2,000,000; and, (ii) EUR 500,000 for non-material damages for the reputation of the company, the uncertainty that affected the planning of the decisions, the problems concerning the management of the companies and the anxiety and inconveniences suffered by the management board of the company and employees .
The General Court acknowledged the existence of actual and certain harm, however, it only awarded EUR 47,064 .339 compensation for material harm resulting from part of the payments for the bank guarantee, which is an insignificant amount as compared to the amount of actual costs incurred by Gascogne .
At the same time, while the General Court acknowledged that Gascogne suffered non-material harm due to the effects of uncertainty of the case on the management of the company, it only ordered the EU to pay compensation totalling EUR 5,000 for each of the companies, which compared to the claim brought by Gascogne also represents a minimal amount, that would most likely not cover the moral damage claimed .
Interestingly, there are, at least, four other cases currently pending in which damages are sought on the basis of lengthy proceedings .