Case C-231/11 P and C-233/11 P European Commission v Siemens AG Österreich a.o. – Joint and several liability

The Court of Justice (“CoJ”) gave on 10 April 2014 its judgment on appeal in the gas insulated switchgear case C-231/11 P. The dispute concerns a cartel relating to the sale of gas insulated switchgear (“GIS”), a heavy electrical equipment which is used to control energy flow in electricity grids. The case commenced with a leniency application; the Commission then initiated its investigation, which was concluded with the imposition of a fine on several undertakings. Parent undertakings were found jointly and severally liable with their subsidiaries. The Commission decision was challenged before the General Court, which in its judgment in Cases T-122/07 to T-124/07 Siemens AG Österreich a.o v Commission found, inter alia, that the Commission failed to determine the exact amount, i.e. the shares of the fine to by paid by each of the undertakings (both parents and subsidiaries) imposed severally and jointly on them. The General Court even went on to determine itself these shares of the fine to be paid by each undertaking. Its judgment was cross-appealed by the Commission and the undertakings.

In its first ground of appeal, the Commission took issue with the General Court’s finding, that is it exclusively for the Commission, in exercising its powers to impose fines under Article 23(2) of Regulation No 1/2003, ‘to determine the respective shares of the various companies of the fines imposed on them jointly and severally, in so far as they formed part of the same undertaking, and that task cannot be left to the national courts’.

The CoJ started its reasoning by recalling the meaning of the notion “undertaking”, as EU competition law refers to the activities of undertakings: “The authors of the Treaties chose to use the concept of an undertaking to designate the perpetrator of an infringement of competition law, who is liable to be punished pursuant to Articles 81 EC and 82 EC, and not other concepts such as the concept of a company or firm or of a legal person, used, inter alia, in Article 48 EC […]” (paragraph 42 of the judgment). The concept of an undertaking covers any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed. That concept must be understood as covering an economic unit, even if, from a legal perspective, that unit is made up of a number of natural or legal persons

The CoJ then recalled that, in certain circumstances, a legal person who is not the perpetrator of an infringement of the competition rules may nevertheless be penalised for the unlawful conduct of another legal person, if both those persons form part of the same economic entity and thus constitute the undertaking that infringed Article [101 TFEU]. Thus, the conduct of a subsidiary may be imputed to the parent company in particular where, although having separate legal personality, that subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links between those two legal entities (see, inter alia, Commission v Stichting Administratiekantoor Portielje)

Where several persons may be held personally responsible for participation in an infringement committed by one and the same undertaking for the purposes of competition law, they must be regarded as jointly and severally liable for that infringement. The Commission will then determine the amount of the fine taking due account of the characteristics of the undertaking concerned, as constituted during the period in which the infringement was committed (see Article 23(2) of Regulation No 1/2003).

When determining how joint and several liability is to be imposed from an external perspective, the Commission is under an obligation to adhere to the principle that the penalty must be specific to the offender and the offence. This requires, in accordance with Article 23(3) of Regulation No 1/2003, the amount of the fine imposed to 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.

Which are the factors affecting the assessment of the gravity of the infringement? These factors include the conduct of each of the undertakings concerned, the role played by each of them in the establishment of the concerted agreements or practices, the profit which they were able to derive from those agreements or practices, their size, the value of the goods concerned and the threat that infringements of that type pose to the objectives of the European Union (Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P Dansk Rørindustri and Others v Commission [2005] ECR I‑5425, paragraph 242).

The CoJ continued making clear and important points regarding joint and several liability: It follows from Article 23(2) of Regulation No 1/2003 that the Commission is entitled to hold a number of companies jointly and severally liable for payment of a fine, since they formed part of the same undertaking. However, it is not possible to conclude on the basis of either the wording of that provision or the objective of the joint and several liability mechanism that that power to impose penalties extends, beyond the determination of joint and several liability from an external perspective, to the power to determine the shares to be paid by those held jointly and severally liable from the perspective of their internal relationship.

On the contrary, the objective of joint and several liability resides in the fact that it constitutes an additional legal device available to the Commission to strengthen the effectiveness of the action taken by it for the recovery of fines imposed for infringement of the competition rules. Such mechanism reduces for the Commission, as creditor of the debt represented by such fines, the risk of insolvency (see also, by analogy, Case C‑78/10 Berel and Others v Commission [2011] ECR I‑717, paragraph 48).

The determination, in the context of the internal relationship of those held jointly and severally liable for payment of a fine, of the shares each of them is required to pay does not pursue that objective, said the CoJ. That is a contentious issue, to be resolved at a later stage, and, in principle, the Commission no longer has any interest in the matter, where the fine has been paid in full by one or more of those held liable.

Moreover, neither Regulation No 1/2003 nor EU law in general contain rules for the resolution of such a dispute, which concerns the internal allocation of the debt for the payment of which the companies concerned are held jointly and severally liable (see, by analogy, Berel and Others v Commission, paragraphs 42 and 43).

Who will determine the internal allocation of the fine? The CoJ stated that it is for the national courts to determine the shares of the fine, in a manner consistent with EU law, by applying the national law applicable to the dispute.

In that context, the duty to cooperate in good faith with the judicial authorities of the Member States, by which the Commission is bound under Article 4 TEU, applies in actions for indemnity before the national courts and tribunals, notwithstanding the fact that such actions are, in principle, to be decided on the basis of the national law applicable. First, the Commission’s decision establishing joint and several liability for payment of a fine, in that it identifies the entities held so liable and determines the maximum amount that may be claimed from each of those entities by the Commission, lays down the legal framework within which a ruling must be given on those actions. Second, the Commission may have information that may be relevant for the purpose of determining the shares of those held jointly and severally liable.

On the basis of the above statements, the CoJ found that the General Court had erred on several points:

First, in finding that it is exclusively for the Commission, in exercising its power to impose fines under Article 23(2) of Regulation No 1/2003, to determine the respective shares of the various companies of the fines imposed on them jointly and severally, in so far as they formed part of the same undertaking, and [that] that task cannot be left to the national courts.

Second, in formulating, at paragraphs 153 to 159 of the judgment under appeal, certain principles relating to the internal relationship of those held jointly and severally liable. Thus, according to the CoJ (i) the principle that the penalty must be specific to the offender and the offence relates only to the undertaking per se, not the natural or legal persons forming part of the undertaking; (ii) it is for the national courts and tribunals to determine, in a manner consistent with EU law, the respective shares of the entities held jointly and severally liable for payment of a fine by applying the national law applicable to the dispute; the concept of joint and several liability for the payment of fines is an autonomous concept which must be interpreted by reference to the objectives and system of competition law of which it forms part and, where necessary, to the general principles deriving from the national legal systems as a whole, and, second, that even though the nature of the payment obligation on the companies fined jointly and severally by the Commission as a result of an infringement of EU competition law differs from that of joint debtors of a private-law obligation, it is appropriate to seek guidance, in particular, in the rules on joint and several obligations; (iii) EU law does not lay down such a rule imposing liability in equal shares that is applicable by default, since the shares to be paid by those held jointly and severally liable for payment of a fine must, subject to compliance with EU law, be determined in accordance with national law.

Finally, the CoJ found that the judgment under appeal is also vitiated by an error of law, in so far as the General Court determines, in the exercise of the unlimited jurisdiction conferred on it, in accordance with Article 261 TFEU, by Article 31 of Regulation No 1/2003, the share of the fine to be borne by each company forming part of the undertaking in question for the infringement period concerned.

Since, the power to impose penalties available to the Commission under Article 23(2) of Regulation No 1/2003 does not include the power to determine how the fine imposed is to be allocated as between those held jointly and severally liable from the perspective of their internal relationship, once the fine has been paid in full and the Commission subsequently has no further interest in the matter, so the General Court does not have any such power of allocation when exercising the unlimited jurisdiction conferred on it by Article 31 of that regulation to cancel, reduce or increase such a fine.

Given that, according to settled case-law, the unlimited jurisdiction enjoyed by the General Court enables it to substitute its own assessment for that of the Commission (see, inter alia, Case C‑679/11 P Alliance One International v Commission [2013] ECR, paragraph 104 and the case-law cited), it follows that that jurisdiction cannot be said to extend to carrying out assessments falling outside the Commission’s power to impose penalties.

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