Overview
Galp Energia España and Others v. European Commission (C-603/13 P) is a helpful reminder of how “unlimited” the EU General Court’s (GC’s) “unlimited jurisdiction” is in reviewing Article 101 and 102 TFEU decisions. In its January 21, 2016 judgment, the Court of Justice (CoJ) makes it clear that the GC’s powers are in fact limited, particularly when it comes to substituting its own assessment for that of the European Commission (EC).
The History:
On October 3, 2007, the EC adopted a decision in which it found that a number of companies participated in anti-competitive agreements and concerted practices relating to the Spanish bitumen (a product used to build and maintain roads) market. There were six components to the anticompetitive conduct that infringed Article 101(1) TFEU, including: (i) a “monitoring system,” which allowed the companies to monitor their market-sharing and customer-sharing arrangements and (ii) a “compensation system,” which was setup to correct deviations from the market-sharing and customer-sharing arrangements.
Galp Energia España S.A. staff members were among those who participated in the cartel. As a result, Galp Energia España S.A. and Petróleos de Portugal S.A. (a parent company) were held jointly and severally liable for a fine of €8,662,500. Another parent company, Galp Energia, SGPS, S.A., was jointly and severally liable for €6,435,000 of the €8,662,500.
The GC’s Case (T-462/07):
As companies that are the subject of an Article 101(1) TFEU decision are wont to do, Galp Energia España S.A., Petróleos de Portugal S.A., and Galp Energia, SGPS, S.A., (collectively Galp) filed an application with the GC challenging the EC’s decision. Among the claims, Galp argued that the EC had failed to demonstrate that Galp knew about the compensation system and that the establishment of a monitoring system was foreseeable.
The GC reviewed the contemporaneous evidence that the EC had pieced together during its investigation to link Galp to the monitoring and compensation systems. Applying the legal standard – presumption of innocence – the GC gave Galp the benefit of the doubt in reviewing each piece of evidence that the EC relied on in its decision and ultimately concluded that the EC had failed to make its case.
There was one smoking gun; but it was in the pleadings, not the decision. The European Commission relied on a December 6, 2007 statement by “Mr. V.C.,” a gentleman who was responsible for Galp’s bitumen sales, to prove that Galp knew about the compensation system and that it could reasonably have foreseen the existence of the monitoring system. Mr. V.C. had commented something to the effect that he “realized that there was some sort of compensation system.” However, as the GC rightly pointed out, the EC could not produce new inculpatory evidence, which was not in the contested decision to support the lawfulness of its decision. In the same vein, the GC could not rely on that evidence – Mr. V.C.’s statement – in order to find the decision lawful. Therefore, since the EC had not met the requisite legal standard with its evidence, there could be no finding against Galp on these two components of the cartel and it was therefore not liable for the monitoring and compensation systems.
So far, so good: the GC exercised its unlimited jurisdiction in a perfectly reasonable manner. The EC relied on certain evidence (but not Mr. V.C.’s statement) to connect Galp to two components of the cartel. The GC reviewed the evidence and compared its interpretation of the evidence to the EC’s interpretation of the evidence and concluded that the EC had not applied the correct legal standard - it had failed to presume that Galp was innocent. However, when it was time for the GC to look at the fine that the EC had imposed on Galp everything fell apart.
Galp had argued that the 10% reduction on the amount of the fine, which the EC had granted, was too low in light of the negligible nature of its involvement in the cartel (the case was under the old 1998 Fining Guidelines). Since, as the GC held, the EC had failed to connect Galp with the monitoring and compensation systems, the GC should have taken this fact into account when it assessed Galp’s fine. But, that is not what the GC did.
In convoluted prose, the GC stated that while it was impossible for it to take Mr. V.C.’s statement into account when it reviewed the legality of the decision, this did not mean that it had to ignore the statement altogether. Mr. V.C.’s statement showed that Galp was aware of the compensation system. Furthermore, Galp did not contest a paragraph in the EC’s decision, which stated that the compensation system could not have existed without a monitoring system, and Galp wrote in its application to the GC that the compensation system was an integral part of the monitoring system. Therefore, Galp was aware of the other cartel members’ participation in the compensation system and it could have also foreseen their participation in the monitoring system. This meant that if Mr. V.C.’s statement were taken into account, Galp could be held liable for the monitoring and compensation mechanisms.
Now, the GC could not substitute an entirely new statement of reasons for the EC’s erroneous statement. But, the GC reasoned, its unlimited jurisdiction “authorises it to vary the contested measure, by taking into account all of the factual circumstances relied upon by the parties.” So, although there was nothing in the case-file or the decision that established that Galp actually participated in these two components of the cartel, the GC considered that, on the basis of the evidence produced before it, it could nonetheless use Galp’s awareness of the monitoring and compensation systems when it determined the appropriate amount of the fine. On that basis, the GC only reduced the fine by an additional 4%.
The CoJ Reins in the Unlimited Jurisdiction
Unsurprisingly, Galp filed an appeal with the CoJ. Among other things, the GC’s interpretation of its unlimited jurisdiction needed some reining in. The claim was that the GC exceeded the bounds of its unlimited jurisdiction. In particular, when re-calculating the fine, the GC should have ignored the inculpatory evidence that the EC relied on for the first time in its pleadings before the GC.
The CoJ brought some reason – and restraint – to the situation. In doing so, it looked at Article 263 TFEU, and Article 261 TFEU, and Article 31 of Regulation 1/2003, which are related.
- Article 263:The Court of Justice of the European Union shall review […] acts of the Commission other than recommendations and opinions, intended to produce legal effects vis-à-vis third parties (e.g., the addressees of an Article 101 TFEU decision).
The CoJ pointed out that the case law supports the view that the scope of the judicial review that Article 263 TFEU provides extends to all of the elements of an Article 101 TFEU decision. The decisions are subject to in-depth review in law and in fact by the GC, in light of the appellants’ pleas and taking into account all of the evidence submitted by the latter. It does not matter if that evidence was presented prior to or after the decision was taken. It does not matter if that evidence was submitted previously in the context of the administrative procedure or, for the first time, in the context of the proceedings before the GC, in so far as it is relevant to the review of the legality of the Commission decision. However, the EU Courts may not substitute their own reasoning for that of the author of the contested act when they are reviewing the legality of the act.
- Article 261 TFEU: Council Regulations, e.g., Regulation 1/2003, may give the Court of Justice unlimited jurisdiction with regard to the penalties provided for in such regulations.
- Article 31 of Regulation 1/2003:The Court of Justice shall have unlimited jurisdiction to review decisions whereby the Commission has fixed a fine or periodic penalty payment. It may cancel, reduce, or increase the fine or periodic penalty payment imposed.
The CoJ then explained that pursuant to Article 261 TFEU and Article 31 of Regulation 1/2003, in addition to being able to review the legality of the penalty (pursuant to Article 263 TFEU), the GC is, however, empowered to substitute its own assessment for that of the European Commission in relation to the determination of the amount of that penalty. That said, the scope of this unlimited jurisdiction is strictly limited to determining the amount of the fine, unlike the review of the legality provided by Art 263 TFEU.
The CoJ found that, the GC had exceeded its unlimited jurisdiction when it had ruled that (i) Galp could be held liable for the monitoring and compensation systems under Article 101 TFEU and (ii) it was necessary to take that fact into account when fixing the amount of the fine. The CoJ thus set aside the GC’s judgment and recalculated the fine. In doing so, the CoJ held that the fine could not take into account any awareness Galp may have had of the monitoring and compensation systems. As a result, Galp was only liable for four of the six components of the cartel, and this needed to be captured by the fine. The CoJ replaced the GC’s additional 4% reduction with a 10% reduction, which gave Galp a total reduction of 20% for its limited involvement in the cartel.
What Does This Mean?
When the GC is reviewing the legality of a decision, it cannot substitute its reasoning for that of the EC. It can only look at what the EC has done and conclude whether or not it was lawful. In this case, the EC did not apply the correct legal standard when it reviewed the evidence that it relied on to draft its decision. When the GC is reviewing the amount of an Article 101 TFEU fine, only then can it step into the shoes of the EC. In view of the consequences drawn from the GC’s unlimited review of the substantive elements upon which the fine was based, the GC gets to replace the EC’s penalty assessment with its own. While this may seem like a nuanced point, it is nonetheless an important one. The EC imposes significant fines for Article 101 TFEU infringements. Therefore, it should be held accountable for its work. It is the GC’s job to do just that: assess the legal soundness of the EC’s work, not do its work for it.