Sumal implications: effective enforcement of European competition law or undesirable forum shopping?

The Netherlands have long been known as a preferred forum within the European Union for follow-on cartel damage claims, partly due to their claimant-friendly approach. However, recent rulings indicate a possible development where Dutch courts are becoming more cautious in accepting jurisdiction over foreign defendants and are grappling with the question of whether every entity within an undertaking can serve as an appropriate anchor defendant. This is evident from a recent judgment of the Amsterdam District Court in a cartel damage claim concerning the foreign exchange market (Forex). The need for more clarity is also reflected in three (intended) preliminary references to the Court of Justice of the European Union (CJEU) on this subject.

Article 8(1) Brussels I Recast

Because follow-on damages claims are usually cross-border in nature, Article 8(1) Brussels I Recast (hereinafter: Article 8(1)) is usually invoked when seeking jurisdiction. This Article stipulates that a defendant may be summoned in the court of another defendant’s domicile in a Member State, provided that the claims have such a close connection that there is a risk of ‘irreconcilable judgments’ if those claims are adjudicated separately.

According to the case law of the CJEU, it is for the national court to assess, taking into account all relevant elements of the case, whether there is such a close connection between the claims that they justify joint treatment. The existence of a close connection requires that the factual and legal situation of both claims are the same. In CDC v Akzo, the CJEU determined that this is the case when different undertakings have participated in a single continuous infringement of competition law for which they can be held jointly liable.

It is the existence of this sufficiently close connection that the Dutch courts find challenging in various recent cases when determining whether it has jurisdiction over foreign co-defendants through the anchor defendant.

Sumal

Last year, the CJEU clarified the legal framework regarding the attribution of liability of entities within the same economic unit in the seminal Sumal judgment. It ruled that an entity – which is not an addressee of an infringement decision – can, under certain conditions, be liable for the infringing behaviour of another entity within the same undertaking. This attribution of liability can be either upward (from subsidiary to parent company) or downward (from parent company to subsidiary). However, the CJEU explicitly emphasises that not every subsidiary within a group is automatically liable when the parent company is fined in a Commission infringement decision. The liability of the non-fined subsidiary also requires a concrete link between the subsidiary’s economic activity and the the infringement for which the parent company was held to be responsible. This means that (in principle) it must be demonstrated that the infringement for which the parent company is liable pertains to the same products sold by the subsidiary.

Sumal allows cartel participants (parent companies) to be summoned in the jurisdiction of one of their subsidiaries, even if a particular subsidiary is not an addressee of the Commission decision. As a result, claimants can search for an entity within the liable undertaking that is located in their preferred forum to create jurisdiction over all parties potentially responsible for the specific infringement of competition law under Article 8(1). The cases to be discussed below show that claimants are indeed trying to do so, but the Dutch courts are particularly inclined to play along and establish jurisdiction not eager to allow it.

Forex

A recent judgment of the Amsterdam District Court concerning the Forex cartel illustrates this phenomenon. The Commission found that a number of banks had participated in a cartel on the foreign exchange market. The claimants chose to bring claims against the fined entities (the banks) before the court in the jurisdiction where a Dutch subsidiary of one of them was located. Unlike the other defendants, this subsidiary (Natwest Markets NV) was not an addressee of the Commission decision. The fact that the case was brought precisely in the jurisdiction where this non-addressed subsidiary is located, gives the impression – according to the Amsterdam District Court – that the subsidiary is being summoned solely to create jurisdiction in the Netherlands with respect to the foreign defendants (para. 6.20).

The court also concluded that there was no ‘close connection’ between the claims against the Dutch anchor defendant on the one hand and the foreign co-defendants on the other. Although the court assesses this on the basis of Article 7(1) of the Dutch Code of Civil Procedure, it notes that there is no substantial difference between the meaning of this Article and Article 8(1) Brussels I Recast. (para. 6.14) According to the court, the legal and factual situation of the claims is not the same because (i) Natwest Markets NV is not an addressee of the Commission decision and (ii) also otherwise nothing about its involvement in the cartel conduct had been stated or shown. According to the court, Natwest Markets NV’s liability, unlike that of the banks addressed in the Commission decision, is not a factual or legal given, but depends on the assessment based on the Sumal judgment, noting that the precise scope of this judgment is not yet entirely clear (para. 6.24). The court concludes that because the parties’ legal and factual situation is not the same, there cannot be a close connection between the claims. For this reason, it does not assume jurisdiction over the foreign co-defendants.

In light of the Sumal ruling, the court seems to have skipped a step by not assessing whether there is a concrete link between the economic activity of the subsidiary and the infringement for which its parent company has been held liable. The court concludes that there is no close connection between the claims solely based on the fact that the liability of Natwest Markets NV is yet to be determined while that of the other addressee defendants is already established. It is noteworthy that in this case, the court did not make use of the possibility to refer preliminary questions, as the court apparently felt that the scope of the Sumal judgment was unclear.

Amsterdam Court of Appeal and Supreme Court request clarification

In other very recent cases, courts also seem to have difficulties with interpreting the close connection requirement of Article 8(1) and the implications of the Sumal judgment.

In the Heineken/MTB case, a similar jurisdictional issue arises, but in this particular situation, the court encountered difficulties in attributing upward liability, from the infringer to its parent company. In this case, Heineken is held liable for the anti-competitive conduct of its Greek subsidiary Athenian Brewery (AB) as established in an infringement decision by the Greek competition authority. The claim against Heineken is based on the argument that Heineken and AB formed a single undertaking during the period of infringement because, as the parent company, Heineken is presumed to have exercised decisive influence over the economic activity in question. According to the claimants, this establishes the required close connection between the claims. Heineken appealed to the Supreme Court (Hoge Raad), which announced its intention to refer preliminary questions to the CJEU inter alia regarding how the competition law presumption of decisive influence affects the assessment of the close connection requirement under Article 8(1).

In addition, the Amsterdam Court of Appeal intends to refer preliminary questions to the CJEU regarding the interpretation of Article 8(1) in two follow-on cartel damages claims i.e. in (i) corrugated cardboard sheets and packaging and in (ii) power cables. In both cases, the anchor defendant is a local subsidiary and not an addressee of the Commission decision. However, following the line of reasoning established in the Sumal case, the question arises as to whether this subsidiary can be held liable for the cartel infringement solely because it is part of the same undertaking as the entities to which the cartel fine was imposed. The Court of Appeal intends to present identical questions to the CJEU in both cases, which partially overlap with the questions raised by the Supreme Court in the MTB/Heineken case. Specifically, the Amsterdam Court of Appeal aims to inquire whether there can be a close connection between claims made by designated cartel participants and the anchor defendant, that is neither an addressee of the infringement decision nor an actual participant in the cartel but can be held liable as part of the undertaking (either upwards or downwards). The court also intends to ask whether it is relevant in this regard that (a) the anchor defendant and co-defendants belong to the same undertaking, (b) the co-defendants are actual participants in the cartel, and (c) the claimants have directly or indirectly purchased or received products from the co-defendant. Additionally, the court seeks clarification on the extent to which it should assess the potential liability of the anchor defendant during preliminary jurisdictional proceedings.

Conclusion

These cases and the questions raised by the courts underline the need for clarification regarding the ‘close connection’ requirement of Article 8(1) in light of the Sumal judgment. The anticipated preliminary ruling, in which the CJEU is expected to bundle the various questions, will be another important ruling in the realm of preliminary references in private enforcement cases. It will undoubtedly have significant implications for the private enforcement of European competition law, including the potential for forum shopping. Furthermore, the judgment will clarify whether the Dutch court was correct in rejecting its jurisdiction over the foreign defendants in the Forex case.