In November 2005, the Commission held that 16 companies had participated in an illegal cartel in the plastic industrial bags market (Case COMP/38354, OJ 2007 L282/41). The infringement mainly concerned the fixing of prices and the establishment of common price calculation models, the sharing of markets, the allocation of sales quotas, the assignment of customers, deals and orders and lastly, the exchange of individualised information in Belgium, Germany, Spain, France, Luxembourg and the Netherlands. In total, the fines imposed against all 16 companies were in excess of €290 million.
In early 2006, the cartel participants lodged appeals with the General Court against the Commission’s decision and the fines imposed. Those appeals have for the most part been dismissed by the General Court. However, it took the General Court a surprisingly long time to do so. Although the General Court dealt with two appeals in September 2010, the vast majority were not determined until November 2011. That delay has added an interesting twist to the proceedings, and ultimately resulted in satellite litigation.
Three of the cartel participants, Kendrion NV, Groupe Gascogne and Gascogne Sack Deutschland, appealed to the European Court of Justice (ECJ) against the General Court’s decision to dismiss their appeals. Each argued on appeal (and in Kendrion’s case, also at first instance) that the length of the General Court proceedings amounted to a breach of their right to have their cases heard within a reasonable time. That breach, they said, justified annulling the Commission’s decision and/or reducing the fine imposed to take account of the adverse consequences of that delay.
On 26 November 2013, the ECJ dismissed each of those appeals in their entirety.
However, despite dismissing the appeals, the ECJ found that the delay in the various proceedings could not be justified by the particular circumstances of the cases, and that the procedure in the General Court had breached Article 47 of the Charter in that the General Court had failed to comply with the requirement that it adjudicate within a reasonable time.
Unfortunately for the cartel participants (though fortunately for the Commission), the ECJ’s findings of breach by the General Court did not lead to the ECJ overturning the Commission’s decision or reducing the fines (those fines accordingly stand). Instead, the ECJ has said that the breach by the General Court was a sufficiently serious breach of law that may give rise to liability on the part of the European Union for the damages arising from it.
The ECJ said, however, that the ECJ was not the appropriate forum for determining those damages claims, instead the disgruntled cartel participants should make an application for damages to the General Court itself, albeit sitting in a different composition from that which heard the appeals and whose procedure is criticised.
The ECJ also helpfully set out the principles on which the General Court should decide the claims for damages for its breach (though as noted above, in respect of delay, it went on to make its own findings on the facts that the General Court had not observed the reasonable time principle):
Has the General Court observed the reasonable time principle?
This is to be assessed in the light of the circumstances specific to each case, such as the complexity of the case and the dilatory conduct of the parties (though that list is not exhaustive). In examining those criteria, in cases concerning infringement of competition rules, the General Court must bear in mind the “considerable importance” of the fundamental requirement for legal certainty on which economic operators must be able to rely and the aim of ensuring that competition is not distorted in the internal market.
Have the parties concerned actually suffered harm because their right to effective legal protection has been breached?
The actual existence of the harm alleged and the causal connection between that harm and the excessive length of the legal proceedings in dispute is to be assessed by examining the evidence submitted for that purpose. When making that assessment, the General Court is to take into consideration the general principles applicable in the legal systems of the Member States for actions based on similar breaches. The Court is also to look at whether it is possible to identify, in addition to any material loss, any other type of harm sustained by the party affected by the excessive period, which should, where appropriate, be suitably compensated.
These are not the first cases in which the ECJ has confirmed that a party can bring a damages action against the European Union for excessive delay in proceedings before the European Union Courts. However, before now, no party has sought to actually bring such an action. In July 2014, Kendrion became the first to do so.
In its application (subsequently printed in the Official Journal on 4 August 2014), Kendrion asserts that the ECJ has already ruled that the conditions for a sufficiently serious breach of a rule of law that is intended to confer rights on individuals has been met, and accordingly it is entitled to damages of some €13.3 million, plus interest and costs of the proceedings. Kendrion’s damages are allegedly made up of (1) “material” damage, being interest on the Commission’s fine plus costs of a bank guarantee lodged for payment of the fine with interest; and (2) compensation for “non-material” damage equating to 10% of the fine for each year (or proportion thereof) that the proceedings exceeded a reasonable period, alternatively, fair compensation for non-material damages amounting to 5% of the fine.
Although Kendrion is the first, in light of the ECJ’s recent decisions, is very unlikely that it will be the last. Indeed, it would be surprising if the other cartel participants were not already preparing to serve similar suits. Groupe Gascogne and Gascogne Sack Deutschland are the obvious contenders given they, like Kendrion, already have the benefit of the ECJ’s finding in their particular circumstances that the General Court failed to observe the reasonable time principle. The other cartel participants, however, are not precluded from bringing their own actions, they would simply have the additional hurdle of establishing that a breach of their rights had occurred – but with the benefit of the prior ECJ decisions in very similar cases, one would not expect that hurdle to prove prohibitively high.