Malta: AG Szpunar Opines On The Procedural Limitations To The Single Economic Entity Doctrine

On 11 January 2024, in 'AB Volvo v Transsaqui SL', AG Szpunar handed down his opinion ("AG Szpunar's Opinion") on the applicability (or rather the lack thereof) of the single economic entity doctrine in relation to procedural matters. In sum, AG Szpunar's Opinion calls for a dividing line between the rules on allocation of liability as established under EU competition law, and those governing the service of judicial documents in civil matters under Regulation 1393/2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matter (the "Regulation").

Background

During 2008, Transsaqui SL ("Transsaqui") purchased two Volvo Trucks from AB Volvo ("Volvo Sweden"). In 2016, the European Commission (the "Commission") adopted a decision addressed to several truck manufacturers, including Volvo Sweden. The Commission found the truck manufacturers guilty of participating in a cartel to fix pricing and such conduct is considered illegal under EU antitrust rules (the "Cartel").

Following the Commission's decision, Transsaqui brought an action against Volvo Sweden before the Spanish commercial court (the ''Commercial Court"), arguing that because of Volvo Sweden's participation in the Cartel, Transsaqui ended up overpaying for the trucks that it purchased in 2008. Despite Volvo Sweden's registered address being located in Gothenburg Sweden, Transsaqui indicated Volvo's address in Spain ("Volvo Spain") as the address for the service of summons for the purposes of lodging a defence. Subsequently, Volvo Spain refused to accept service on the basis that the address for service to be used should have been the Swedish address. Transsaqui argued that refusal to accept service was tantamount to bad faith and given that the Volvo Sweden (which was the addressee of the Commission's decision) held the entirety of the share capital of Volvo Spain, Volvo Spain was bound to accept service. In Transsaqui's view, the two entities formed part of the same group of companies and thus, constituted a single undertaking.

The Commercial Court held that that service was properly affected and following Volvo Spain's failure to enter an appearance in the proceedings, it gave judgement in favour of Transsaqui's claims, ordering Volvo Spain to pay the damages requested.

What followed was a series of 'toing and froing' between Volvo Spain and the Commercial Court on the question as to whether Transsaqui's service of summons at Volvo Group Espana's address was lawful. At the heart of their argument, Volvo Sweden argued that although Volvo Sweden and Volvo Spain may form part of the same group of companies, they each had a separate legal personality and were not authorised to accept services of summons on behalf of each other. Furthermore, the service of summons was not carried out in line with the requirements stemming from the Regulation.

Aggrieved by the Commercial Court's judgement, Volvo Sweden filed an action before the Spanish Supreme Court (the "Referring Court"), in the hope that the Commercial Court's judgement is set aside. The Referring Court decided to stay proceedings and avail itself of the preliminary reference procedure, to solicit the European Court of Justice's (the "ECJ") interpretation on whether it is permissible under Article 101 TFEU read in conjunction with Article 47 of the Charter, to have legal documents addressed to a parent company, validly served on the parent's subsidiary, which is incorporated in a different Member State than its parent. Rehashed in more simple terms, the Referring Court essentially asked the ECJ whether actions for damages against parents can be lawfully served locally on its subsidiary.

Service under Regulation No 1393/2007

In addressing the matter at hand, AG Szpunar primarily referred to the Regulation. Under the Regulation, a defendant who is domiciled in a different Member State from where the damage took place, must be served in the Member State of domicile. Applying this premise to the present case, AG Szpunar noted that Volvo Sweden was domiciled in Sweden and it in turn had not designated Volvo Spain as it authorised representative.

Based on the above, AG Szpunar held that Transsaqui should have followed the proper channels as outlined under the Regulation to be able to serve the documents correctly. AG Szpunar further argued that the right for defendants to be sued personally is an important safeguard in ensuring that they can prepare sufficiently for their defence. In view of the rules emanating from the Regulation, a subsidiary cannot be required to accept service of documents intended to institute proceedings against its parent company, which is located in another Member State.

The relationship between Regulation 1393/2007 and Article 101 TFEU

At issue was also the question as to whether the Regulation applies to claims for compensation for damages caused by an infringement of competition law. Transsaqui's views where that this should be answered in the affirmative, arguing that Article 101 TFEU and Article 47 of the Charter cannot call into question the application of the Regulation, even where liability under competition law arises.

Basing itself on Sumal (as further discussed below), Transsaqui argued that the concept of the single economic entity doctrine, as developed along the years within the realm of EU competition law should be extended to matters of a procedural nature.

In brief, and as developed through extensive ECJ jurisprudence, the single economic entity doctrine arises where natural or legal persons engaged in a single economic activity would, due to their closely linked ties, constitute one undertaking. In practical terms, a parent company and a subsidiary company may form one and the same undertaking, notwithstanding the fact that they may have a separate legal personality under the realm of corporate law. In considering whether companies form part of a single undertaking, one would need to consider whether the parent company is able of exercising decisive influence over its subsidiary. The single undertaking doctrine can, under certain circumstances and as developed in Sumal, allow a party to seek payment of damages from a subsidiary company of a parent company which was itself liable for the competition law infringement.

In essence, Transsaqui's argument rested on applying the single economic entity doctrine to the present case, arguing that since an applicant may seek damages owed from a parent, through its subsidiary, by way of analogy, an applicant may also validly serve that subsidiary with documents intended for its parent. In Volvo's views, the effects of Sumal should not be limited to substantive matters but should percolate into procedural issues as well.

AG Szpunar did not take kindly to Transsaqui's arguments, arguing that Article 101 TFEU and Article 47 of the Charter may not cast aside the procedure established under this Regulation. In this respect, AG Szpunar argued that in Sumal the principle of subsidiary-parent liability was seen from a substantive angle rather than a procedural one. AG Szpunar further argued that while the concept of a single undertaking as further developed in Sumal may be beneficial for victims of competition law infringements, such doctrine should not be extended to procedural aspects. In AG's Szpunar's views, doing so would only cause ambiguity as to the method of service which, is a fundamental aspect of the right of defence in civil proceedings.

In sum, AG Szpunar is of the view that claimants cannot serve proceedings on a domestic subsidiary of a defendant parent company which is domiciled in another Member State.

Concluding Remarks

Given recent case law by the ECJ, it will be interesting to see whether AG Szpunar's Opinion will be adopted or otherwise.

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