The CoJ’s Ruling in the CDC Case: Where to Seek Damages for Victims of Cross-Border Cartels?

June 5, 2015

The EU Court of Justice (CoJ) recently issued its judgment in the Cartel Damages Claims (CDC) Hydrogen Peroxide SA case (C-352/13).  The judgment clarifies the applicable jurisdictional rules in cross-border actions for damages relating to antitrust infringements.  

Regulation 44/2001 on jurisdiction in civil and commercial matters (also known as Brussels 1 Regulation) states that the general rule is that the jurisdiction for bringing a civil, or commercial, claim is the court where the defendant is domiciled (article 2).  However, in certain cases, an applicant may deviate from this general rule and file its application in a different jurisdiction.  The alternative jurisdictions are: 

  • The court of any other defendant’s domicile (the “anchor defendant”), if the claims are so closely connected that it is expedient to hear and determine them together in order to avoid the risk of creating irreconcilable judgments because of separate proceedings (article 6.1); 
  • The court of the place where the harmful event occurred or may occur (article 5.3); 
  • The court the parties have designated to settle any disputes that have arisen or that may arise in connection with a particular legal relationship (article 23).  In this case, the applicant must bring its claim to this court unless the parties have agreed otherwise. 

Regulation 1215/2012, which recently recast Regulation 44/2011, does not modify these rules. 

In CDC, the CoJ looks at each of the above alternatives in the context of a cross border follow-on damages claim.  

Factual Background 

On May 3, 2006, the European Commission (EC) issued a decision fining seven companies who supply hydrogen peroxide and sodium perborate for their participation in an EU-wide cartel between 1994 and 2000.  Subsequently, a number of the cartel members’ customers transferred their rights to damages suffered as a result of the cartel to CDC, a claims vehicle established in Belgium. 

CDC brought an action for damages before the Landgericht Dortmund (Germany) against six of the companies.  According to CDC, the German court had jurisdiction over all the defendants because one of them, Evonik Degussa, had its registered office in Germany.  After filing its application, CDC and Evonik Degussa reached an out-of-court settlement.  As a result, CDC withdrew its claim against Evonik Degussa.  Hence, the remaining defendants – none of which have a registered office in Germany – challenged the jurisdiction of the German court. 

Against this background, the German court referred several questions to the CoJ, asking how the alternative means of selecting a jurisdiction applied in this case. 

Centralization of Jurisdiction in the Case of Several Defendants (article 6.1) 

In cases where there are several defendants, Article 6.1 of Regulation 44/2001 allows an applicant to bring a claim before the court of any of the defendants if: (i) the claims are closely connected and (ii) there is a risk of irreconcilable judgments because of separate proceedings.

In the case at hand, the CoJ found that both conditions were fulfilled, because: 

  • The claims were closely connected.  In this regard, it did not matter that the defendants had participated in the cartel in varying ways, in terms of place and time.  They all participated to the same single and continuous infringement, which was established by an EC decision.  Therefore, the CDC’s claims were closely linked.  Absent the EC decision establishing the single and continuous infringement, it is doubtful whether this condition would have been fulfilled; 
  • There was a risk of divergence in the outcome of the dispute.  This is because the requirements for holding the participants in an unlawful cartel liable in tort may differ among the various national laws. 

Further, the Court ruled that, in principle, the withdrawal of the action against the anchor defendant does not affect the German court’s jurisdiction over the matter.  It can rule on the claims brought against the other co-defendants even though they are not domiciled in Germany.  However, this rule must not be abused.  For example, if CDC and Evonik Degussa had concluded a settlement and concealed it with the sole purpose of securing jurisdiction of the German court, then the latter would not have had jurisdiction. 

Jurisdiction on the Basis of the Place where the Harmful Event Occurred (article 5.3) 

Article 5.3 of Regulation 44/2001 and its subsequent case-law provide that the applicant may bring proceedings where: (i) the event giving rise to the damage took place or (ii) the damage occurred. 

According to the CoJ, in the context of CDC’s action for damages, this provision must be interpreted as follows: 

  • The place of the event giving rise to the damage is the place where the cartel was concluded.  However, in this case the hydrogen peroxide and sodium perborate cartel was characterized by a series of collusive agreements that were concluded at different times in different Member States.  As a result, it is impossible to identify a single place where the cartel was concluded.  Therefore, it was held that this criteria could not apply in this case; 
  • The place where the damage occurred is the place where the loss arose, i.e. the place where the victim has its registered office.  However, the jurisdiction of the court seized on this ground is limited to the loss suffered by the victim whose registered office is located in its jurisdiction.  Therefore, to use this alternative, CDC would have to file a separate application for each customer it represented in the jurisdiction where that customer’s registered office is located. 

Jurisdiction on the Basis of a Jurisdiction Clause (article 23) 

Finally, the German court asked whether its jurisdiction could be validly excluded by certain jurisdiction clauses inserted in the supply contracts concluded between the defendants and the victims, which assign jurisdiction to the court of another Member State. 

According to article 23 and its subsequent EU case-law, a court may be bound by a jurisdiction clause in a contract between the parties who subsequently have a dispute, provided that the dispute falls within the scope of that clause. 

In this regard, the CoJ highlighted that: 

  • A clause that refers to all disputes arising from a contractual relationship does not cover a dispute relating to an action for damages arising from a cartel.  This is because the cartel was not reasonably foreseeable at the time the jurisdiction clause was agreed upon.  Therefore, such clauses cannot exclude the jurisdiction of the court seized of an action for damages resulting from a cartel; 
  • A clause that explicitly refers to disputes relating to the participation of one of the parties to a cartel can exclude the jurisdiction of the court seized of an action for damages resulting from a cartel – provided that it designates the court of another Member State. 

Conclusion and Take-Aways 

As most antitrust infringements are cross-border, jurisdiction is the first battlefield when seeking compensation for damages resulting from a cartel. However, the recent Damages Directive does not address this issue at all.  Hence, the CoJ judgment is welcomed as it provides guidance to cartel victims as to where they may file their claims for damages.  

While applicants generally rely on the general jurisdictional rule – the court where the defendant is domiciled – the clarification from the CoJ in CDC may give them more confidence in using the flexibility provided by article 6.1.  However, we do not foresee applicants relying more heavily on article 5.3, which allows applications to be filed in the jurisdiction:  (i) where the cartel took place; or (ii) where the damage occurred.  Regarding (i), the EC decisions almost always focus on cartels that have a cross-border dimension.  Therefore, it would be difficult to bring follow-on action that identifies one specific location as the place where the cartel was concluded. Regarding (ii), due to the cost of civil litigation, there is a trend towards the consolidation of claims.  Under article 5.3, all applicants would have to have their registered offices within the jurisdiction of one court.  Since the general policy from a cost perspective is “the more, the merrier,” applicants are unlikely to explore this avenue to establish jurisdiction. 

Finally, as for designating a jurisdiction in contracts, it would be bold of parties to contracts to foresee infringing EU competition law.  Therefore, we do not anticipate parties relying on article 23 to resolve procedural issues of jurisdiction.