The English Unblocking of the French “Blocking Statute": Companies are Ordered to Disclose Information that Claimants Requested in Follow-On Civil Cases

November 8, 2013

The United Kingdom is typically recognized as a Member State that has an active judiciary in follow-on damages actions for antitrust violations.  A recent judgment by the Court of Appeal concerning appeals lodged by French-based companies against lower court rulings in Secretary of State for Health and Others v Servier Laboratories and Others (Servier) and National Grid Electricity Transmissions PLC v ABB Limited and Others (Alstom) sets aside the French blocking statute and compels them to produce incriminating evidence.

A.  Background

The French Blocking Statute:  Under French law, natural/legal persons cannot inter alia disclose economic, commercial, industrial, financial, or technical information with a view to establishing evidence in a foreign judicial or administrative proceeding or in relation to it.  The penalty is up to six months in prison and/or a fine of € 90,000 for legal entities (€ 18,000 for individuals).  The French Blocking Statute has only been used once, in 2007.

Servier:  The European Commission (EC) opened an investigation concerning Servier, a French company, in July 2009.  It was alleged that Servier had engaged in anti-competitive arrangements with generic drug manufacturers to delay their entry into the market for perindopril, a cardio-vascular medicine.  The UK’s Secretary of State for Health and others filed a damages action in 2011 alleging inter alia that Servier infringed EU competition law.  In July 2012, the EC sent Servier a Statement of Objections alleging that the undertaking had infringed Articles 101 and 102 TFEU. 

While the main court proceedings in the UK were stayed pending the outcome of the EC’s investigation and any follow-on litigation in the EU Court of Justice (COJ), Judge Henderson nevertheless decided to allow certain discovery to continue.  Servier was ordered to answer parts of the claimants’ request for further information even though to do so may mean that Servier violates the French Blocking Statute.  Unsurprisingly, Servier appealed.  While its appeal was pending, Servier also contacted the French authorities seeking reassurance that, if it did provide the information required by the English order, it would not be persecuted for violating the French Blocking Statute.  The French authorities were unaccommodating with Servier.

Alstom:  The EC issued a cartel decision in 2007 finding that a number of undertakings active in the gas insulated switchgear market infringed Article 101 TFEU and fined them more than € 750 million.  National Grid filed a follow-on civil action in the UK alleging that it had suffered substantial losses as a result of paying overcharges to the cartel members.  The trial date has been fixed for June 2014 on the basis that all of the applications and appeals before the COJ and General Court, which may affect the trial, will be wrapped up by then.

In the meantime, National Grid requested certain information from the defendants, including the French defendants.  The latter objected, relying on the French Blocking Statute.  Rather than getting into a huge debate, they requested that Judge Roth in the UK make a request for the direct taking of evidence pursuant to EU’s Regulation 1206/2001 on cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters.  Generally speaking, Regulation 1206/2001 covers court-to-court requests such as witness testimonies.  Judge Roth was accommodating – he issued the necessary orders.  The French authorities responded by denying the request, apparently stating (although it is not entirely clear to anyone – including the judges hearing the appeals) that Regulation 1206/2001 does not apply to instances where a party is applying for disclosure of evidence held by another party in a legal proceeding.  Similarly to Judge Henderson, after due consideration, Judge Roth ultimately issued an order requiring the French defendants to turn over the requested information – French Blocking Statute be damned.  As a result, the defendants lodged an appeal.

B. The Appeals

Both Judge Henderson and Judge Roth took great care in writing their judgments that led to the appeals in question.  They reviewed EU, English, and French case-law.  But in the end, it came down to the fact that inter alia: (i) it was highly unlikely that the French defendants would be prosecuted for violating the French Blocking Statute; (ii) Regulation 1206/2001 apparently was not the right mechanism to use, or at least the French authorities did not think so in Alstom’s and others’ instance; and (ii) ultimately, the actions were under the laws of England and Wales and so those laws took precedence.  The presiding judges agreed with Judges Henderson and Roth and reiterated the additional point that France is a Member State and that as such any attempt by the French government to use the French Blocking Statute to trump EU law is extremely unlikely.  France has a duty to cooperate (Article 4.3 TFEU), as well as an obligation to respect the principle of non-discrimination (Article 18 TFEU) and EU competition law and its associated jurisprudence (Articles 101 and 102 TFEU).  Therefore, the UK High Court should proceed with their orders requiring the defendants to provide the claimants with the requested information.

C. Moving Foward

Increasingly, the world is becoming smaller.  Cartels and other anti-competitive behavior do not respect geo-political lines.  As a result, a company may find itself before numerous competition authorities around the world for the same reason.  Wrestling with so many jurisdictions may be daunting.  In addition, in the EU, there is a push for more follow-on civil actions.  Companies may therefore also need to manage the expanded risk of civil proceedings under numerous jurisdictions.  As the companies in Servier and Alstom found out, it may be difficult to reconcile obligations in various jurisdictions, including their own.  Arguably, in these cases, the French Blocking Statute was not as big of an issue as the defendants would have liked the court to believe (e.g., only one person has been prosecuted under it).  But, that is not to say that in the future defendants may not run into serious problems.  At that point, especially if civil actions finally take-off the way the EC would like them to, the Member States and the EC may need to find a way to deal with multi-jurisdictional issues arising in follow-on actions.  A point, arguably, the draft Directive on Antitrust Damages Actions fails to adequately address.