European Union: Jurisdiction In Follow-On Damages Claims AG Jääskinen's Opinion In The Hydrogen Peroxide Case

1. Introduction

1.1 AG Jääskinen's Opinion on the Hydrogen Peroxide case¹ was delivered on 11 December 2014.  The case relates to a reference for a preliminary ruling made by Dortmund Regional Court in the context of the hydrogen peroxide cartel concerning the interpretation of the Brussels Regulation².  CDC Hydrogen Peroxide SA ("CDC") brought a follow-on damage claim in March 2006 against six chemical companies which participated in an EEA-wide hydrogen peroxide cartel.  The German Defendant, Degussa AG quickly settled with CDC and therefore the claims against it were withdrawn.  The issue which then arose was whether the Dortmund Regional Court had jurisdiction in respect of the claims against the non-German domiciled defendants under the Brussels Regulation even though the anchor defendant was no longer a party to the proceedings.  The matter was subsequently referred to the Court of Justice of the European Union ("CJEU"). The questions put forward by the Dortmund Regional Court were the following:

• First, the Regional Court asked the CJEU whether it is possible in cartel damages claims for a claim to be brought in one jurisdiction against cartelists from a number of different Member States provided one of them is domiciled in the jurisdiction ("the anchor defendant"), relying on Article 6(1) of the Brussels Regulation that it is expedient to try follow-on damage claims together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
• The Court's second question was: a)  whether Article 5(3) of the Brussels Regulation can also apply in follow-on cartel damages claims, according to which a person domiciled in one EU Member State may be sued in matters relating to tort in the place where the harmful event occurred, and if so; b) whether it can be interpreted as meaning that in damages actions against defendants domiciled in a number of EU Member States the harmful event occurred in relation to each defendant and in relation to all heads of damage claimed or the overall loss in those Member States in which cartel agreements were concluded and implemented and the harm suffered by direct or indirect purchasers
• Finally, the court asked whether the requirement of effective enforcement of Article 101 TFEU might preclude the application of Article 23(1) Brussels Regulation, according to which arbitration and jurisdiction clauses are exclusive, and consequently prevail over Articles 5(3) and 6(1) of the Brussels Regulation. This was of importance as some of the supply contracts between the cartelists and their customers contained such arbitration clauses.

1.2 AG Jääskinen stressed the importance of this case as it is the first time the CJEU is asked to rule directly on the interaction between primary EU legislation (Article 101 TFEU) and secondary EU legislation (Brussels Regulation) in the context of a competition law infringement. In addition, the AG pointed out that the Brussels Regulation is not fully geared towards ensuring the private enforcement of EU competition rules and invited the EU legislature to incorporate in the Brussels Regulation more suitable jurisdictional rules in respect of cross-border disputes such as the one at hand.

2. Summary of the AG Opinion

First Question: Applicability of Article 6(1) of the Brussels Regulation in cartel damages claims and whether the withdrawal of the claims as against the anchor defendant might affect the jurisdiction of the Court in relation to the claims against the non-domiciled defendants:

2.1 The rule of special jurisdiction laid down in Article 6(1) of the Brussels Regulation provides that a person may, where he is one of a number of defendants, be sued in the courts of the place where any one of them is domiciled, provided the claims "are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings". 

2.2 The AG made reference to the Court of Justice's settled case-law that the rules of special jurisdiction such as this which derogate from the principle stated in Article 2 of the Brussels Regulation that jurisdiction shall be based on the defendant's domicile, must be strictly interpreted and cannot be given an interpretation going beyond the cases expressly envisaged by that Regulation (see cases Freeport³, Glaxosmithkline and Laboratoires Glaxosmithkline⁴ and Painer⁵).

2.3 The AG pointed out that CDC's claim relates to a single and continuous infringement of the EU competition rules which was fined by the European Commission and that the cartelists are jointly and severally liable for the entire harm caused by the cartel irrespective of their own individual contribution. Considering that there may be wide variations in national rules governing the apportionment of liability betweens cartelists, the AG stressed the risk of having conflicting decisions by which each of the cartelists might be ordered to pay different amounts of damages if courts in different Member States were to rule separately.  The AG therefore took the view that Article 6(1) of the Brussels Regulation should apply in cartel damages claims (reflecting the approach which has been adopted by claimants in a number of claims to date).

2.4 With regard to the withdrawal of the claim against Degussa AG (the anchor defendant), AG Jääskinen considered this to be irrelevant for the jurisdiction of the Dortmund Regional Court.  In circumstances where the claim was withdrawn after the service of the claim form to the non-German defendants and the out-of-court settlement between CDC and Degusa AG had not been intentionally delayed with the purpose of establishing jurisdiction, the AG concluded that the Dortmund Regional Court had jurisdiction in respect of the non-German domiciled defendants.

2.5 The AG considered his opinion to be in line with CJEU jurisprudence in Reisch Montage⁶ where the question raised was whether the claimant could still rely upon Article 6(1) of the Brussels Regulation in circumstances where a claim against the anchor defendant was barred by a provision of domestic law which rendered the claim inadmissible at the time it was brought.  The provision in question was a rule of Austrian bankruptcy law that barred the commencement or pursuit of certain claims after the commencement of bankruptcy proceedings. The CJEU held that Article 6(1) of the Brussels Regulation must be interpreted as meaning that, in a situation such as that in the main proceedings, that provision may be relied on in the context of an action brought in a Member State against a defendant domiciled in that State and a co-defendant domiciled in another Member State even when that action is regarded under a national provision as inadmissible from the time it is brought in relation to the first defendant.  The AG also made reference to the CJEU judgment in Freeport⁷, where the Court expressly identified the bringing of the action as the reference point for determining whether claims are connected.

2.6 A similar point was raised recently in the context of the follow-on damages claims⁸ brought by European railway companies before the Competition Appeal Tribunal in London ("CAT") in relation to the carbon and graphite products cartel.  Following the anchor defendant's successful strike out application on grounds of its individual limitation position, the non-UK domiciled claimants sought to rely on Article 6(1) of the Brussels Regulation, as interpreted in Reisch Montage⁹, as the basis for the CAT's jurisdiction to hear their claims against the non-UK domiciled defendants.  The CAT did not rule on this issue as the case settled shortly before the Case Management Conference.

Second Question: Applicability of Article 5(3) of the Brussels Regulations in cartel damages claim and whether claimant can bring a claim where the harm has occurred

2.7 The AG referred to CJEU's earlier jurisprudence that the expression 'place where the harmful event occurred or may occur' in Article 5(3) of the Brussels Regulation is intended to cover both the place where the damage occurred and the place of the causal event giving rise to the damage, so that the defendant may be sued, at the option of the applicant, in the courts for either of those two places.  In the context of a cartel, this could be the place where the cartelists held their meetings to fix prices, or any of the places in which those price increases were implemented by each cartelist and passed on to their direct and indirect purchasers.  However in cases such as this where the cartel agreements were concluded and implemented in various Member States restricting competition throughout the Union for a long time and having a highly complex structure and secretive nature, the AG took the view that it is not possible to identify in a clear manner the Court which has "a particularly close link" with the dispute to invoke the jurisdiction of Article 5(3) such that it is objectively best placed to determine whether the elements that establish liability exist. He therefore indicated his view that in these circumstances, the application of Article 5(3) should not be available. 

2.8 AG Jääskinen took the view that in complex cartel cases the jurisdiction of the Court should be based on Articles 2(1) and 6(1) of the Brussels Regulation so that the cartelists can be sued in the courts of the Member State where any of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.  Article 5(3) was, in his view, intended to be a limited derogation from these provisions and should be accordingly restricted for the protection of the Defendant, and to avoid multiplicity of proceedings and potentially differing outcomes. 

2.9 This view differs significantly from the way the English Courts have recently interpreted Article 5(3) of the Brussels Regulation in the context of damages claims.  In the case Deutsche Bahn AG & Others v Morgan Advanced Materials plc¹⁰, the CAT accepted jurisdiction under Article 5(3) in relation to the claims of the UK claimants against the non-UK domiciled defendants on the basis that the UK claimants had made direct purchases of the cartelised products in the UK and thus the damage had occurred in the UK within the scope of Article 5(3) and fell within its jurisdiction. 

2.10 The Opinion delivered on Article 5(3) is, in the context of cartel damages actions, a very restrictive view which will significantly inhibit and discourage claimants to obtain redress at the time when this is being actively encouraged by the European Commission through the adoption of the Damages Directive¹¹.  The result would be that a group of claimants who have suffered loss as a result of the cartel through purchases in their own country, perhaps as indirect purchasers or direct purchasers through agents of the cartelists, may not be able to obtain compensation in that country.  Whilst it is true that the application of Article 5(3) may mean cartelists would be exposed to potential claims in a wider number of jurisdictions, this is the  consequence of the nature of cartel activity and arises as a result of the decision to conspire with suppliers across a number of member states and then implement those agreements in a way which affects direct and indirect purchasers across Europe and in some cases beyond.  It would not seem appropriate, and contrary to the principles of fair compensation under the Damages Directive, if a large group of purchasers affected by purchasers from an agent of the cartelist in that country were forced to have to bring a claim in another member state.  This is likely, in particular, to restrict claims by SMEs and consumers.  Claimants should therefore be given the possibility to rely on Article 5(3) and use evidence relating to purchases made in that member state against the cartelists before the courts of that member state.  In line with the objective of Article 5(3), this is arguably the court which is best placed to consider the evidence available as to whether the elements of the tort are met.  Whilst a claimant who made purchases in more than one jurisdiction, may need to rely on Article 2 or Article 6(1) to cover all instances of damages in a particular case, this should not prevent claimants from being able to rely on Article 5(3) in an appropriate case.  Furthermore, it is not contrary to the objectives of the Brussels Regulation for a claimant to seek jurisdiction on more than one basis.  In particular, in a case such as Deutsche Bahn referred to above, a Court may find itself having jurisdiction over the defendants on more than one basis, and may even have jurisdiction over part of a claim while there is a dispute concerning its jurisdiction over another part. Both CDC and the European Commission supported the application of Article 5(3) of the Brussels Regulation in damages claims.

Third Question: Validity of jurisdiction or arbitration clauses in contracts which have been overcharged:

2.11 In relation to the third question, AG stated that jurisdiction and arbitration clauses included in commercial contracts can be binding in follow-on damages claims if the injured party consented specifically to those clauses, having full knowledge of the cartel and the loss it has suffered.  AG emphasised that clauses conferring jurisdiction on a non-EU court or an arbitration body outside the EU, can only be relied upon if the full compliance with EU competition rules is guaranteed.

2.12 Due to the secretive nature of cartels, a claimant is unlikely to have such knowledge, however potential claimants should be aware in renewing supply contracts after an infringement finding has been identified that a jurisdiction clause could then be interpreted to determine where a damages claim could be brought if they were deemed to have sufficient knowledge of the cartel at that point. 

3 Conclusion

3.1 Jurisdiction is of particular importance in follow-on damages claims and, in particular, the realisation of a practical right to compensation in line with the aims of the Damages Directive.  The CJEU ruling in Hydrogen Peroxide case is going to be one of the CJEU's most awaited judgments this year, especially as the Damages Directive does not deal with the issue of jurisdiction. The CJEU has been called to shed light on one of the many hurdles claimants in competition damages actions have to overcome.

3.2 Whilst the confirmation on the application of Article 6(1) to cartel damages claims is welcomed as a logical application of the purpose of Article 6(1), the proposed exclusion of Article 5(3) as a basis for jurisdiction would restrict the ability of claimants, particularly SME and consumers, to have an effective means of redress which is not excessively difficult.  This runs counter to the principles of the Damages Directive and the proposed collective action provisions in Schedule 8 of the Consumer Rights Bill in the UK, intended to facilitate consumer redress in competition actions.  If this position is maintained, it is unfortunate that it was not apparent at the time of the Damages Directive, or it may have been a point which could have been considered by the European Commission for inclusion in the Damages Directive.

3.3 Finally, it should be pointed out that the Advocate General's Opinion is not binding on the Court of Justice. The role of the Advocates General is to provide an impartial and independent view in the cases assigned to them, typically involving new areas of law.  It is therefore possible for there to be a difference between the content of an Advocate General's opinion and the subsequent judgment of the Court of Justice.

1 C-352/13 CDC Cartel Damage Claims Hydrogen Peroxide SA v Evonik Degussa GmbH and Others

2 Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

3 C-98/06 Freeport plc v Olle Arnoldsson [2007] ECR I-8319

4 C‑462/06 Glaxosmithkline and Laboratoires Glaxosmithkline v Jean-Pierre Rouard [2008] ECR I-3965

5 C-145/10 Eva-Maria Painer v Standard VerlagsGmbH and Others [2011] ECR I-12533

6 C-103/05 Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2006] ECR I-6827

7 See footnote 3 above

8 Case No. 1173/5/7/10 Deutsche Bahn AG & Ors v Morgan Advance Materials PLC & Ors ( non-UK Claims)

9 See footnote 6 above

10 [2013] CAT 18

11 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (O.J. L349/1 of 5 December 2014)

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