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Dr. Ralf Sauer, LL.M. (Yale), Legal Service, European Commission

73th Lunch Talk of the GCLC Joint and several liability for cartel fines : Lessons from Siemens Austria and Gigaset. Dr. Ralf Sauer, LL.M. (Yale), Legal Service, European Commission. Disclaimer. Strictly personal views

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Dr. Ralf Sauer, LL.M. (Yale), Legal Service, European Commission

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  1. 73th Lunch Talk ofthe GCLCJoint andseveralliabilityforcartelfines: Lessonsfrom Siemens Austria and Gigaset Dr. Ralf Sauer, LL.M. (Yale), Legal Service, European Commission

  2. Disclaimer Strictly personal views Commission not competent to determine liability shares (same for Commission staff)

  3. Overviewofthepresentation I) Development of the debate at EU level II) The question of competence: Siemens Austria III) Factors for determining liability shares

  4. Development oftheDebate (1) Joined Cases T-122/07 to T-124/07, Siemens AG Österreich • Gas-insulatedswitchgear (GIS) cartel - litigation • Schneider Electric (parent) vs. SEHV/Magrini (formersubsidiaries) beforetheTribunal de Commerce de Grenoble • Nat'ljudge: incompetentbecauseof lack offindings in COM decision • Lateintroduction in proceedings (cf. §§ 30, 198; see also AG Opinion, § 115): Nopleain theapplication • Oral argumentand COM Observations post-hearing

  5. Development oftheDebate (2) The GC judgment in Siemens AG Österreich • Decisionproduces "internaleffect" betweenco-debtors (§ 156); exclusive COM competencetodetermineinternalshares; not forthenat'lcourts (§ 157) • Withoutcontraryindication, decisiondistributesliability "in equalmeasure" (§§ 158, 159) • Liabilityshares in decisiondirectbasisforrecoveryclaim(§°158) • Exerciseofunltd. jd: equalshares(§§ 245, 247, 262, 263) • Obiter dicta; no explicit reflection in operative part

  6. Development oftheDebate (3) Case C-231/11 P, Siemens AG Österreich • COM appeal • Opinion of AG Mengozzi (19.9.2013) • ECJ Judgment (10.4.2014) Case C-451/13, Gigaset • Reference bythe Bundesgerichtshof • Submissions • Withdrawal

  7. Development oftheDebate (4) Joined Cases T-117/07 and T-121/07, ArevaandAlstom v COM • Decisiondrops SO objectionagainsttwosubsidiaries • Adverseeffect on parentcompany: lossofco-debtors (§ 257) • Requiresexerciseofrightsofdefence (§ 258)

  8. Distribution ofCompetences (1) COM appeal in Case C-231/11 P, Siemens AG Österreich; Observations in Case C-451/13, Gigaset • Lack ofcompetenceunderArticle 23(2) of Reg. 1/2003 (andhencenoobligationtomakefindings) • EU competitionrulesrelatetotheundertaking • Article 23(2) of Reg 1/2003: fines(= externalrelationship), not liabilityshares/recourse (= internalrelationship) • Eachentityconstitutingpartoftheundertakingisliableforentirefine: noneedtodetermineinternalshares in ordertoenforceArticles 101, 102 TFEU • Parallel totheliabilityofmembersof an association, Article 23(4) andrecital 30 of Reg 1/2003: national law

  9. Distribution ofCompetences (2) • Parental liability: exercise of decisive influence does not require direct participation or any kind of fault/knowledge (hence, any factors relating to the infringment as such not relevant for external liability as part of undertaking) • COM discretion in determining the entities held liable as part of the undertaking: need to include all entities bearing internal responsibility? Need to justify other solutions? Reduction of fine in case of mistake? • Practical implications: resources, longer admin/court procedures (Article 41 of the Charter); more litigation • National courts better placed: experience with JSL, corporate law and liability clauses; focused debate in case of conflict

  10. Distribution ofCompetences (3) The ECJ judgment in Siemens AG Österreich • Objectof EU competitionlaw = undertaking (§§ 42, 43) • Rules/principles not also appliedtotheentitiesconstitutingtheundertaking (§§ 44, 55, 56): e.g. power toimposesanctions (§ 58); principlethatpenalty must bespecifictotheoffender/offence (§ 56) • Nat'lcourts: competencetodetermineshares "in a mannerconsistentwith EU law, byapplyingthe national lawtothedispute" (§ 62) • COM/EU courts: no power todetermineliabilityshares (§§ 66, 68, 74); but dutyofcooperationby COM tocontribute relevant information (§ 63) (which?) • Nodefaultrule in EU lawimposingequalshares (§§ 69, 70)

  11. Factorsfordeterminingliabilityshares (1) Why relevant? • "unfettered discretion"/"complete freedom" to recover fine from any of the co-debtors, up to the whole amount of the JLS (T-40/06, Trioplast, § 165; T-217/06, Arkema France, § 276) • Accountingofficermaydecidetosplit (e.g. equalshares) • In caseoflitigation: accountingofficertypicallyasksforspecialdeclarationwhenamountissplit • No link tothepotentially different allocationofinternalliabilityshares

  12. Factorsfordeterminingliabilityshares (2) Source of legal principles (ECJ, C-231/11 P, Siemens AG Österreich) • Neither Reg. 1/2003 nor EU law in generalcontainrulesforinternalallocationofdebt (§ 61); neverthelessdetermination "in a mannerconsistentwith EU law" (§ 62) • COM decisionas legal framework (co-debtors, JSL) (§ 63); but does not havetodetermineliabilityshares (§ 66) • COM information? (§ 63) • Contractualarrangement(§ 62) • National law (§§ 62, 70), in particulartakingintoaccountdegreeofresponsibility/fault

  13. Factorsfordeterminingliabilityshares (3) Bundesgerichtshof (Judgmentof 18.12.2014, KZR 15/12 Calciumcarbid) • Contractualarrangement: eventacitly, even after JSL hasarisen (whensubsidiaryissold) • Case-specific, overallassessmentofthe relevant facts • In particular, individual shareofresponsibilityandthe "facts relevant forthedeterminationofthefine" • Type ofinvolvement: directparticipation (intentional) vs. lack ofsufficientoversight (negligent) • Share in relevant turnover

  14. Factorsfordeterminingliabilityshares (4) • Economicbenefit (ifproven; not mereincrease in valueoftheparticipation): forreasonsofdeterrence; not decisive on itsown • Overall turnover/financialmeansofeachentity (deterrence) • 10% cap/ITP/proportionality: appliedtothe individual liabilityshares (cf. associationofundertakings) • Effectiveenforcementofcompetitionlaw: mayjustify not toacceptliabilitysharesofzero • Default rule: equalshares • Nobadfaithexclusionofrecourse: e.g. (failureto) challengeof COM decision; "overpayment" withoutprioropportunityforco-debtorstopay/provideguarantee

  15. Factorsfordeterminingliabilityshares (5) • Criteriaandlimits • Nodirectguidancefromprimaryorsecondary Union law– different object (e.g. principleof personal responsibility); but possiblyindirectguidance • Effet utile/deterrence: securedbyfineagainsttheundertaking/JSL; paymentby/enforcementagainstoneco-debtorsufficient (ECJ, Siemens Austria, §§ 59,60; AG Opinion, § 56) • Conceptoftheundertaking: eachpartas "legal embodiment" (AG Kokott) andas such co-responsible – nozeroshare? • Parental liability: responsibilitytoensure proper conduct; economicbenefitfrom potential profits (seenextslide)

  16. Factorsfordeterminingliabilityshares(6) • Case T-77/08, The Dow Chemical Company, § 101 Moreover, the Court considers that as a result of the parent company’s power of supervision, the parent company has a responsibility to ensure that its subsidiary complies with the competition rules. An undertaking which has the possibility of exercising decisive influence over the business strategy of its subsidiary may therefore be presumed, in the absence of proof to the contrary, to have the possibility of establishing a policy aimed at compliance with competition law and to take all necessary and appropriate measures to supervise the subsidiary’s commercial management. Mere failure to do so by the shareholder with a power of supervision over such matters cannot in any event be accepted as a ground on which he can decline his liability. Accordingly, since any gains resulting from illegal activities accrue to the shareholders, it is only fair that that those who have the power of supervision should assume liability for the illegal business activities of their subsidiaries. • Case T-103/08 Versalisand ENI, § 70 • AG Sharpston, C-50/12 P, Kendrion, § 80

  17. Factorsfordeterminingliabilityshares(7) • No direct application of 10% cap (C-408/12 P, YKK, § 59); EU law does not rule out insolvency; Article 23(4), 5th subpara, not applicable • Deterrence uplift: for the parent alone? • COM decision: factual findings, e.g. reporting lines, mgmt overlaps, direct participation/instructions by parent • National law • Contractual arrangement (internally; with the acquirer) • Individual responsibility (causation, fault): European Group of Tort Law, Principles of European Tort Law, Rule 9:102; Study Group on a European Civil Code/Research Group on EC Private Law, Draft Common Frame of Reference, Art. III-4:106

  18. Factorsfordeterminingliabilityshares(8) • Directparticipationofthesubsidiary • Parent company: directparticipation? Instructions? Knowledge? • Parent company: lack ofcare (organisation, supervision) – presumption? • Violation ofinstructions/complianceprogrambysubsidiary • Economicbenefit (T-77/08, Dow Chemical, § 101) • Default rule: European Group of Tort Law, Principlesof European Tort Law, Rule9:102 • Noobjectionfrom EU lawperspective (ECJ, Siemens Österreich, § 71) • Only last resortfollowingcase-specificfactualassessment • Split byheadsorsplitparent/subsidiaries?

  19. Manythanksforyourattention

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