Joined Cases C-247/11 P and C-253/11 P Areva: Competition fines, parent and subsidiary and joint and several liability

The Court of Justice has handed down three judgments relating to fines imposed on a number of undertakings involved in the gas insulated switchgear cartel. There’s an interesting and distinct point in each judgment so we’ll write about them separately.

First off will be the judgment in Joined Cases C-247/11 P and C-253/11 P Areva EU:C:2014:257. That judgment contains some interesting points about what constitutes an “undertaking” and the concept of joint and several liability of a parent company for fines for infringements of competition law committed by a subsidiary in the event of succession of companies and transfer of subsidiaries between parents. 

First, though, some background to the gas insulated switchgear cases (gas insulated switchgear is used to control energy flow in electricity grids in case you are wondering).

The Commission adopted a decision in 2007 (Decision C (2006) 6762 final of 24 January 2007) imposing fines totalling €750.71 on 20 companies involved in a gas insulated switchgear cartel. Alstom individually was fined €11 475 000 and it was also fined € 53 550 000 for which it was jointly and severally liable with Areva T&D SA. Areva T&D SA was fined € 53 550 000 for which it was jointly and severally liable with Alstom and, in addition, it was fined € 25 500 000 for which it was jointly and severally liable with Areva, Areva T&D Holding and Areva T&D AG. The set up was complicated but it comes down to this: Alstom was the ultimate parent company and had a series of subsidiaries in the gas insulated switchgear business which became Alstom T&D SA. Then in 2004 Alstom transferred its gas insulated switchgear business to two subsidiaries in the Areva group, Areva T&D SA and by Areva T&D AG, of which Areva was the ultimate parent. 

The companies challenged that decision in the General Court which handed down a series of judgments in 2011.

In its judgment in Joined Cases T-117/07 and T-121/07 Areva and others v Commission EU:T:2011:69 the General Court reduced the fines somewhat so that Alstom was fined € 10 327 500 individually and the amount of € 53 550 000 initially imposed was reduced to EUR 48 195 000, for which it was jointly and severally liable with Areva T&D SA. In respect of EUR 20 400 000 of the amount owed by Areva T&D SA, it is jointly and severally liable together with Areva T&D AG, Areva, SA, and Areva T&D Holding SA

Areva and Alstom then appealed the judgment of the General Court to the Court of Justice on a number of grounds. The ground of appeal that is interesting  – and indeed successful – is that the Commission and the General Court had imposed a de facto joint and several liability on the parent companies Areva and Alstom. Why ? Because Areva and Alstom, as successive parents, were made jointly and severally liable for the infringement committed by the subsidiaries of Alstom even before those activities were transferred in 2004 to the subsidiaries of Areva.

The Court of Justice upheld that ground of appeal.

It held that when the Commission imposes a fine on the various persons comprising the undertaking who may be required to pay the whole of the fine imposed on the undertaking, the Commission must adhere to the principle that penalties must be specific to the offender and the offence, which requires, in accordance with Article 23(3) of Regulation No 1/2003, that the amount of the fine to be paid jointly and severally must be determined by reference to the gravity of the infringement for which the undertaking concerned is held individually responsible and the duration of the infringement.

The Court of Justice found that while the Commission and the General Court did does establish a formal link of joint and several liability between the successive parent companies, Alstom and Areva, it is clear that the method chosen by the Commission and confirmed by the General Court to establish joint and several liability as between Areva T & D SA, as subsidiary, and those parent companies, which consisted in incorporating the amount of the fine for which Areva and the Areva group companies to which that subsidiary belonged were jointly and severally liable, in the fine for which Alstom and that subsidiary were jointly and severally liable, is nevertheless likely in reality to produce the same effects as those arising under such a link. 

As a result, such a definition of joint and several liability is at odds with the principle that the penalty must be specific to the offender and the offence. That definition enables the Commission to require one of the parent companies to pay a fine punishing infringements for which, for another part of the infringement period, an undertaking of which it has never formed part is responsible, namely, in the present case, the undertaking to which the other parent company belongs, not a fine based on the share of joint and several liability attributable to the undertaking of which it formed part at the time the infringement was committed by that undertaking.

The Court recalls that the joint and several liability mechanism enables the Commission to reduce the risk that one of the companies forming part of the same undertaking will be insolvent, which forms part of the objectives of ensuring that the Commission operates effectively and of deterrence when dealing with infringements of the competition rules. But added that the mechanism of joint and several liability cannot be used to force one company to bear the risk of the insolvency of another company where those companies have never formed part of the same undertaking.

Consequently, when the Commission intends to make a subsidiary that has committed an infringement jointly and severally liable with each of the parent companies with which it has, in succession, formed a separate undertaking during the infringement period, that principle requires that the Commission to fix separately, for each of the undertakings involved, the amount of the fine for which the companies forming part of the undertaking are jointly and severally liable, according to the gravity of the infringement for which each of the undertakings concerned is individually responsible and the duration of that infringement.

The Court also held that in the present case, the liability of Areva and Alstom, as parent companies, for the infringement committed is wholly derived from the liability of a subsidiary which belonged to those companies in succession (Case C‑286/11 P Commission v Tomkins [2013] ECR, paragraphs 43 and 49). Accordingly, the total amount which the parent companies may be required to pay cannot be greater than the amount which that subsidiary must pay.

Finally, the Court of Justice determined the amount of the fines itself in the light of those principles:  it imposed a fine of €27 795 000 on Alstom jointly and severally with its subsidiaries and a fine of €20 400 000 on Areva jointly and severally with its subsidiary.

(Disclosure: Xavier represented the Commission in the early stages of the proceedings in the General Court before moving to his present position).

 

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