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Many companies today are finding themselves faced for the first time with EU administrative investigations and corresponding litigation before the European Courts. However, despite years of experience defending and litigating their rights in national courts, many companies are discovering, sometimes too late, that they do not have the necessary understanding of the unique EU administrative and litigation environment to maximize their chances of a successful litigation.
By Dr. Georg M. Berrisch
Dr. Georg M. Berrisch is a partner in the Brussels office of Baker Botts LLP and has litigated over 150 cases in the EU courts. The author would like to thank Daniel Vasbeck, associate in the Brussels office of Baker Botts for his research assistance.
The long arm of European Union (EU) law is affecting an ever larger group of companies in a growing number of fields. The most prominent ones are competition law, State aid, and international trade. In fact, no industry or commercial sector remains unaffected by EU law, whose impact is ever increasing.
As a result, many companies today are finding themselves faced for the first time with EU administrative investigations and corresponding litigation before the European Courts.
However, despite years of experience defending and litigating their rights in national courts, many companies are discovering, sometimes too late, that they do not have the necessary understanding of the unique EU administrative and litigation environment to maximize their chances of a successful litigation.
This article sets out twelve principles for successfully litigating against administrative EU measures, developed based on the author’s experience in some 180 cases before the General Court (GC) and the Court of Justice of the European Union (CJEU) over the past 25 years:
Following the twelve principles set out in this article obviously cannot guarantee positive results, but it will maximize the chance of winning and reduce the risk of losing a winnable case. Also, while some of the rules may sound obvious, there have been many cases where they have been ignored or insufficiently understood.
Finally, several other important issues arise in the context of EU litigation. They include the rules on legal standing; the types of acts that can be challenged by private parties; the possibilities for third party intervention; the scope of legal privilege; access to documents held by other parties; restrictions on the use of documents obtained in EU litigation outside the litigation; access by third parties to the submissions by the EU institutions and Member States under the transparency laws; etc. These issues are beyond the scope of this article.
The article is written from the perspective of an applicant seeking annulment of a decision of the European Commission (Commission) before the GC. However, the recommendations set out in the article apply, in principle and with some modifications, also to other types of actions, such as actions for damages, appeals to the CJEU, third party interventions and even references for preliminary rulings to the CJEU by national courts.
The prospects of successful litigation depend not only on the law and the content of the challenged act, but also on what the applicant did or failed to do during the administrative investigation. As will become apparent during the discussion of the following principles, by taking appropriate actions during the administrative investigation a company can significantly raise the bar for the Commission.
First, the substantive submissions of the company should be clear, succinct, and supported by all pertinent evidence. This will force the Commission to address and refute, in its decision, the arguments and evidence that the company presents (see below Principles 4 and 8). It will also allow the company to raise a broad range of arguments and evidence supporting its claims before the GC (see below Principle 7).
Second, the company should exercise its procedural rights (see below Principle 9). In particular, if the company believes that its procedural rights have been violated, for example because the Commission has failed to make available information or evidence that the company considers necessary for defending its interests, it is up to the company to complain to the Commission. The complaint should be as prompt and precise as possible. If the company considers that it enjoys procedural rights not provided for in the applicable legislation, for example access to the file, it should assert those rights, so that if it wishes to invoke a violation those rights in a subsequent litigation, it is not faced with an argument that it failed to claim these rights during the investigation.
Third, the company should not play games or attempt to set traps. In most instances, it is obvious to the GC whether a company made a genuine submission to the Commission during the investigation or instead tried to trap the Commission. If the GC concludes that a company attempted to trap the Commission, the company risks losing credibility, thereby harming its case (see below Principle 12).
In competition law cases, companies should raise potential breaches of their procedural rights during the investigation phase with the Commission and, where this is not successful, consider referring the matter to the Hearing Officer, where appropriate. Failure to do so may, in certain cases, have an adverse impact on the subsequent litigation. For example, in the Smart card chips cartel case, Infineon, one of the parties to the administrative proceedings, was granted a period of only five working days to submit its observations on the authenticity of an email. In its judgment of 15 December 2016 (currently under appeal), the GC agreed with Infineon that this was an extremely short period in view of the circumstances of the case. Nevertheless, the GC held that the Commission did not infringe Infineon’s rights of defense, arguing, among other reasons, that Infineon had not exercised its right to seek an extension of the time-limit from the Hearing Officer.
In many cases, the objectives of the litigation will be obvious – for instance having a negative decision quashed. However, often the reasoning underpinning the decision and the principles of law or policy at stake in the litigation are of equal or even greater importance. In that case, it may be important to steer the administrative proceeding and the litigation to the key questions of principle so that the decision can be effectively challenged on these points. Sometimes, this may even require omitting certain arguments in the application to the GC that, although promising, are likely to induce the GC to decide the case exclusively on procedural or technical grounds that have little or no long term interest for the company.
The company should also consider whether, in the interest of a quick decision, it is prepared to limit its challenge to a few well defined issues. This may even open the possibility for the case to be decided under the so-called “expedited procedure.” If granted, the expedited procedure normally leads to a judgment within 12 months instead of the normal two to four years.
The GC only reviews whether the Commission’s decision was lawful. The GC does not, in principle, review whether the decision was good or reasonable.
Applicants often forget this distinction. Instead of submitting arguments and evidence demonstrating that the decision was unlawful, applicants often make lengthy submissions dealing with the reasonableness of the decision, as if the case were still pending before the Commission. This is a missed opportunity. There are page limits for the application, and such arguments may take up space better used to set out the legal grounds upon which the GC can overturn the decision.
The need for applicants to focus on the legality of the decision does not mean that arguments addressing its reasonableness should never be made. If the GC is convinced that the decision was a “bad” decision, it is more likely to overturn the decision on legal grounds (see below Principle 12).
Apart from a few exceptions, the GC does not exercise full review. Specifically, the GC does not put itself in the shoes of the Commission nor does it redo the Commission’s investigation. Instead, the GC shows deference to the Commission and allows the Commission a wide margin of discretion, particularly as regards the assessment of complex economic or scientific matters.
According to a standard formula used by the GC, its review is limited to whether the relevant procedural rules have been observed, whether the facts on which the contested choices are based have been accurately stated, and whether there has been a “manifest error“ of assessment of the facts or a misuse of power.
In practical terms, this means that the GC carries out a full review of the interpretation of the law and the establishment of the facts by the Commission. However, with respect to the interpretation of the facts and the application of the law to the facts, the GC only reviews whether the Commission committed a manifest error. While it is important to keep this distinction in mind, it is also fair to say that the boundaries between the establishment and the interpretation of the facts and between the interpretation of the law and its application to the facts are not clearly defined. Moreover, there is no definition of what constitutes a manifest error of assessment. In practice, the manifest error test is one of plausibility. Thus, the GC checks whether, on the basis of the evidence on file, the Commission could reasonably have come to the conclusions set out in the decision.
In order to devise its litigation strategy, the applicant needs to determine who must prove what. In some cases, the answer is straightforward, but many cases raise complex issues.
The determination starts from the substantive rules that govern the administrative investigation and determine the conditions that must be met for the adoption of the challenged act. In most cases, the rules impose the burden on the Commission to prove its case. For example, in a cartel case the Commission must prove that the companies engaged in a cartel; in a State aid case, it must prove that the measure at issue constituted State aid.
However, it is also possible that the rules foresee a mixed burden or a shift of the burden under certain circumstances. The rules further determine the type and quality of evidence that the party who bears the burden must produce. In general, if the Commission has the burden, it must present clear and convincing evidence that (1) is factually accurate, reliable and consistent, (2) contains all the information which must be taken into account in order to assess a complex situation, and (3) is capable of substantiating the conclusions drawn from it. Importantly, the evidence relied upon by the Commission must also adequately refute any evidence submitted by the applicant during the investigation.
Before the GC, the applicant must prove that the Commission’s decision was unlawful. Thus, if the Commission had the burden of proof during the administrative investigation, the applicant must prove, before the GC, that the Commission failed to meet its burden but not that the Commission was wrong. If the applicant had the burden of proof during the administrative investigation, the applicant must prove to the GC that the Commission wrongly concluded in its decision that the applicant failed to meet its burden. It must also prove to the GC the facts that it asserted in the administrative investigation.
In cases relating to the application of Article 101 TFEU, the burden of proof is mixed (or shared): it is for the Commission to prove that the relevant conduct constitutes an infringement of Article 101(1) TFEU; however, where an undertaking claims that its conduct benefits from an exemption under Article 101(3) TFEU, and is therefore not anticompetitive, it is for the undertaking to demonstrate that the corresponding conditions are fulfilled.
Moreover, there are a number of examples relating to the application of Article 101 TFEU in which a shift or apportionment of the burden of proof is operated, for example: (i) Where the Commission proves that an undertaking participated in a meeting having an anticompetitive object, this creates a presumption that the undertaking’s participation in the meeting was unlawful. The undertaking can then rebut this presumption by presenting evidence that it publicly distanced itself from the discussions at the meeting. (ii) Subject to proof of the contrary, which the undertaking concerned must adduce, it is presumed that undertakings participating in a concerted action and remaining active on the market take account of the information exchanged with their competitors in determining their conduct on that market. (iii) Where the Commission’s reasoning is based on the supposition that the facts established cannot be explained otherwise than by concerted action between undertakings (i.e. where it is based on a mere finding of parallel market conduct, but not on specific evidence demonstrating collusion), it is sufficient for the undertakings to prove circumstances which cast the facts established by the Commission in a different light and thus allow another explanation of the facts to be substituted for the one adopted by the Commission. (iv) Regarding 101(3) TFEU, even though it is for the undertaking claiming the benefit of this exemption to prove that the corresponding conditions are fulfilled, by means of convincing arguments and evidence, the Commission must adequately examine those arguments and that evidence. In certain cases, those arguments and that evidence may require the Commission to provide an explanation or justification, thus shifting the burden back to the Commission.
The GC reviews the decision by assessing the decision’s operative part and its reasoning. It is crucial that the applicant argues on the basis of what is actually stated in these sections of the decision. In particular, any claim that the Commission committed a manifest error of appraisal or failed to meet its burden of proof must be based on a detailed analysis and rebuttal of the reasoning set out in the decision. For example, if the Commission bases its decision on several alternative grounds, the applicant must challenge each of these grounds in its application.
While the GC allows the Commission wide discretion with respect to the assessment of complex economic or scientific matters, the GC will not tolerate logical gaps and flaws or contradictions in the Commission’s reasoning. Therefore, exposing these flaws should be a priority of any applicant. The GC will also review whether the Commission’s evidence and reasoning meets the burden discussed above under Principle 5.
In the Airfreight cartel case, the GC annulled the Commission’s decision, finding that there was an inconsistency between the grounds of the decision (describing a single cartel, in which all of the relevant carriers participated) and its operative part (describing four different infringements, involving different periods, routes and carriers). The GC held that those contradictions prevented the applicants from understanding the Commission’s reasoning, and the GC from reviewing the legality of the decision.
The proceedings before the GC are party driven. It is for the applicant to decide what order to request and what pleas to make.
The GC cannot grant orders not requested and, with very limited exception, cannot raise pleas on its own motion. Where an applicant requests multiple orders (for example, in competition law cases, the annulment of the contested decision and a reduction of the fine imposed), it is important to consider how to structure them, i.e. whether they are presented as forms of order of equal rank or whether one of them is only raised in the alternative. In certain cases, it may be dangerous to seek both a main order and an alternative order since, in the event that the main order is granted, the GC will not rule on the alternative order, even where doing so would have been in the interest of the applicant.
Moreover, the applicant is forced to decide what order to request and what claims, or pleas, to make at a very early stage in the Court proceedings and without the benefit of any feedback from the GC. In fact, the rules of procedure require that the applicant set out in its application all pleas in law and put forward all supporting factual and legal arguments and all relevant evidence. The applicant is barred from modifying the order requested and raising new pleas in law or submitting new evidence at a later stage during the proceedings, unless the pleas in law or evidence relate to facts of which the applicant could not have been aware at the time, or responds to arguments raised by other parties before the GC. The only exception to the bar on new pleas are those pleas which the GC can raise on its own motion, notably a violation of the principle of good administration (see Principle 9 below) and insufficient reasoning (see Principle 10 below).
The pleas in law advanced before the GC will not only determine the scope of the proceedings before the GC itself, but also the scope of any subsequent appeal proceedings before the CJEU, as such appeals may not involve pleas in law not already raised before the GC. In practice, an applicant will therefore exhaust its legal pleas at the first instance of judicial review, while the appeal proceedings will be confined to a review of the GC’s findings of law on the pleas argued before the GC. This is yet another reason for applicants to carefully select the pleas in law relied on before the GC.
The choice of what pleas to put forward is a difficult one. While it is unhelpful to raise pleas that have no or little chance of success, failure to raise a plea in the application inevitably results in an absolute bar. There are several instances in which several parties challenged the same decision and some were unsuccessful because they failed to request an order or raise pleas that others have raised. In practice, the decision can only be made on a case-by-case basis. Having in place a red team that puts itself in the shoes of the Commission seeking to defend the decision may sometimes help to vet the application and the choice of orders sought and pleas raised.
Irrespective of these tactical considerations, it is important to ensure that the pleas, if successful, will lead to the annulment of the contested decision. As noted above, it is not uncommon for the Commission to base its decision on several pillars of alternative or supplemental reasoning in order to protect itself in subsequent litigation. In such a situation, the pleas must challenge all pillars in order to have the decision overturned. If the GC finds that the Commission made a mistake but concludes that, notwithstanding this mistake, the Commission’s reasoning in other respects supports the decision, the GC will not quash the decision.
Also in the Airfreight cartel case, British Airways had, unlike the other carriers challenging the Commission’s decision, only sought the partial annulment of the decision. In its judgment of 16 December 2015, the GC annulled the decision entirely as far as it concerned those other carriers. However, in relation to British Airways, based on the principle that the EU judicature may not rule ultra petita, the GC annulled the decision only within the limits defined by the form of order set out in British Airways’s application for annulment (that judgment is currently under appeal).
In two judgments delivered in January and February 2017, Gascogne and Kendrion (currently under appeal), the GC ordered the EU to pay damages to the applicants for excessively long court proceedings. The GC considered, in particular, that the applicants were entitled to receive compensation for higher bank guarantee fees they had paid in the period from 16 March 2010 to 16 November 2011. However, the applicants had requested damages only from 30 May 2011 (Gascogne) or from 26 August 2010 (Kendrion). If the applicants’ heads of claim had covered the full period referred to by the GC, the compensation awarded would have been higher.
In CISAC, the Commission had found that CISAC and 24 European collecting societies had infringed Article 101 TFEU by engaging into membership clauses, exclusivity clauses and a concerted practice. 21 collecting societies introduced actions for annulment of the Commission’s decision (two societies did not challenge the decision; one society’s action was found to be inadmissible). In judgments dated 12 April 2013, the GC partly annulled the decision in so far as it concerned 20 of the 21 collecting societies, on the ground that the Commission had not proved the existence of the concerted practice to the requisite standard. The action of one collecting society, however (Stim), was entirely dismissed. While Stim had put forward other pleas in law in its application, it had not raised the lack of proof of the concerted practice – it had only done so at the stage of the hearing before the GC: the GC found that this constituted a new plea in law, and was therefore inadmissible.
Written evidence, in particular the documents exchanged during the administrative investigation, is the most important evidence relied upon by the GC. It is very unusual for the GC to call witnesses, and cross examination of witnesses does not exist in proceedings before the GC.
In principle, an applicant can only rely on documents that were known to the Commission at the time of the decision. Thus, documents unknown to the Commission constitute inadmissible evidence, unless the applicant can show that the Commission was unaware of the documents because it failed to conduct a proper investigation.
Importantly, the GC will not receive the complete administrative file from the Commission. Instead, the applicant must submit to the GC those documents of the administrative file on which the applicant wants to rely, which, in complex cases, imposes a heavy burden on the applicant.
It is also possible for an applicant to submit expert opinions to the GC, including economic evidence. This includes opinions prepared after the adoption of the decision, provided these opinions aim to show that the Commission made a manifest error of assessing the evidence before it, as opposed to introducing new evidence that was unknown to the Commission when it took its decision.
Finally, the evidence submitted must be properly referenced and support arguments set out in the application. Thus, the applicant must set out in the application itself all the key arguments and precisely identify the supporting evidence, including the specific location of such evidence when it is contained in lengthy documents. Delegating substantive pleadings entirely to the annexes is inadmissible. Similarly, even though it may be tempting for applicants to mention certain arguments only summarily in the application and cross-refer instead to the annexes for a more detailed presentation in order to save space, this is a dangerous tactic which is likely to lead the GC to declare such arguments inadmissible.
In the Synthetic rubber (BR/ESBR) cartel case, Versalis raised before the GC a plea in law contesting the existence of the cartel. As part of that plea in law, Versalis raised, inter alia, a complaint against a section of the Commission’s decision headed “Cartel meetings”. The application had specified that “[O] n account of the strictly limited number of pages with which this application has to comply, the applicant will […] reserve its specific observations on the part headed ‘Cartel meetings’ for [certain annexes to the application]”. The GC ruled that the main points of fact and law of that argument were set out only in annexes to the application and therefore declared the argument inadmissible. The CJEU confirmed this ruling on appeal.
In European Dynamics Luxembourg SA e.a. v European Union Intellectual Property Office, the applicant had claimed that the EUIPO had made manifest errors of assessment in the evaluation of the tenders but had, in essence, only provided a summary description in the application, while referring to a more detailed analysis of those errors in an annex to the application. The GC declared two of the arguments inadmissible, because they were not advanced at all, or not set out in an intelligible manner, in the application as such.
In order to balance the Commission’s wide discretion on substance, the GC insists that the Commission strictly complies with its procedural obligations, notably that it respects the principle of good administration and the rights of defense.
The principle of good administration requires the Commission to carefully and impartially examine all relevant aspects or a case. Typical examples of violations by the Commission of this duty are the unjustified rejection of evidence received during an investigation or the failure to investigate relevant aspects of the case which were brought to its attention. It is often helpful to allege a violation of the principle of good administration in connection with, or as an alternative to, the allegation of a manifest error, in particular as the boundaries between these two allegations are often blurred. Importantly, the GC can raise the violation of the principle of good administration on its own motion.
The obligation to respect the rights of defense requires the Commission to inform the parties about all relevant aspects of the case and give them the opportunity to comment. In order to succeed with a plea of the violation of the rights of defense, an applicant first must show that the Commission disregarded a procedural obligation, for example because it granted insufficient access to the file.
Such procedural violations, however, will only result in the annulment of the contested decision if the applicant can also demonstrate that, because of the Commission’s disregard of its procedural obligation, the applicant was unable to fully defend its interests.
In practice, this requires the applicant to convince the GC that there was a chance that, absent the procedural error, the applicant could have better defended its interests. In addition, the applicant must show that it complained about all known procedural violations in due time during the investigation and fully complied with its own procedural obligations, for example to timely request access to the file.
While these procedural pleas are often attractive, an applicant should be aware that success on procedural grounds alone can be short-lived. If the Court annuls a decision, for example, because of a violation of the rights of defense or the principle of good administration, the Commission can re-open the investigation.
Nothing prevents the Commission from adopting a new decision which – while remedying the procedural defect – comes to the same conclusions as the one set aside by the GC. Therefore, the applicant normally should raise the procedural arguments in connection with substantive arguments, and request that the Court, in the interest of judicial economy, decide on the substantive arguments, even if it could quash the contested decision solely for procedural reasons.
Example of violation of the rights of defense: In 2013, the Commission blocked the proposed acquisition of TNT by UPS as incompatible with the internal market. Four years later, the GC annulled the Commission’s decision on the ground that the Commission had infringed UPS’s rights of defense by failing to provide it with the final version of its econometric model. However, the GC did not rule on any of UPS’s substantive claims and, in particular, did not hold that the use of the Commission’s econometric model rendered the decision unlawful. The judgment is of little practical value for UPS. Because it does not establish that the Commission was wrong in prohibiting the planned acquisition, it cannot even serve as a basis for a claim for damages.
Examples of procedural infringements leading to the re-adoption of a decision: In the Carbonless paper cartel case, the CJEU held that Bolloré’s rights of defense had been infringed, because it was not clear from the wording of the statement of objections that the Commission intended to hold it liable on account of its own involvement in the cartel and not only in its capacity of parent company of a cartel participant. Following the CJEU’s judgment, the Commission issued a new statement of objections correcting that procedural defect and then readopted the decision, imposing the same fine as in the original decision, except for a reduction to take into account Bolloré’s cooperation.
Every Commission decision, and indeed every act adopted by any EU institution, must be supported by a clear and unequivocal description of the reasoning followed by the institution. The purpose of this obligation is to make the persons concerned aware of the reasons for the measure and, thus enable them to defend their rights on appeal to the EU Courts, and to allow the EU Courts to exercise their jurisdiction.
Importantly, an allegation of insufficient reasoning cannot be used to challenge the substance of the Commission’s decision, because the obligation to state reasons is a procedural, and hence a merely formal, obligation, which must be distinguished from the Commission’s substantive obligation to correctly apply the law. Thus, in assessing whether the Commission provided sufficient reasoning, it does not matter whether the reasoning is correct or convincing; it only matters whether the reasoning sufficiently explains the Commission’s thinking.
A plea of insufficient reasoning can be raised by the GC on its own motion. However, for the reasons discussed under Principle 9, the success of such a plea can be short-lived because the Commission can remedy the insufficient reasoning in a new decision with the same conclusion accompanied by a more robust rationale.
In the Airfreight cartel case, the GC annulled the Commission’s decision on the ground that it contained internal inconsistencies between its operative parts and its reasoning. This success proved to be short-lived, as the Commission re-adopted a decision and re-imposed fines. Based on the Commission’s press release, it appears that the operative part of the new decision does not differ materially from the operative part of the old decision.
The fundamental difference between the GC and a national court is that the GC is composed of judges from 28 different countries, who speak different languages and come from different legal traditions. Applicants need to bear this in mind when writing their brief or presenting oral arguments.
Even if briefs are submitted in English, a language spoken by many judges, it is not guaranteed that the judges will work with the English original of the brief. In fact, it is very likely that all or some will work with the French translation because French is the Court’s sole internal working language. Briefs should therefore be written in a clear, simple, and precise language in order to avoid translation errors. The same is true for the oral submissions at the hearing, where it is common that at least some of the judges listen to the presentations through simultaneous translation. However, even judges who do not need simultaneous translations may, as non-native speakers, have difficulty following a speech that uses too much jargon or is presented too quickly.
By the same token, national legal concepts that are very familiar to the national judge may require additional explanation for judges coming from other jurisdictions. Indeed, it can happen that a case with, for instance, a strong French background, is decided by a chamber composed of three judges from Bulgaria, Finland, and Spain. Also, certain practices on how to present evidence in national courts are unknown at the GC. For example, the presentation of an affidavit by the party, which is common in English Courts, is neither necessary nor helpful at the GC.
Finally, every applicant should bear in mind that judges are, after all, human beings. While they seek to decide the cases objectively, the human factor can play an important role, particularly in close cases. For example, it is important to convince the judge that something is wrong with the Commission’s decision in order to persuade him or her to find a manifest error or a violation of the principle of good administration. It can therefore be useful to address in the pleadings issues that, while legally irrelevant, provide helpful background information. However, this must be done with caution, because hammering too much on legally irrelevant arguments will annoy the GC.
Also, hyperbole or personal attacks against the Commission or individual Commission officials is unhelpful. A firm, clear, and rather sober brief writing is much more effective. Finally, clearly unfounded or, worse, misleading legal or factual arguments should be avoided at all cost. Almost certainly, they will be exposed by the other side or the Court itself, resulting in a loss of the applicant’s credibility and reputation, which can significantly harm its case.
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