On 18 June 2015, the European Court of Justice (the “ECJ”) found that dawn raids conducted by the European Commission (the “Commission”) on Deutsche Bahn in 2011 were partially illegal.

The case relates to multiple dawn raids conducted by the Commission between March and July 2011 based on suspicions that Deutsche Bahn Energie GmbH, a subsidiary of Deutsche Bahn AG which supplies electricity for traction trains in Germany, was giving preferential treatment to the group's rail-freight arm. The raids were carried out by the Commission officials under Article 20 of Regulation 1/20031 (under a Commission decision) in three separate locations in Berlin, Frankfurt and Mainz without a prior warrant from the national courts. Subsequently, Deutsche Bahn initiated an action against the Commission in the General Court. It claimed that these dawn raids infringed its fundamental rights to the inviolability of private premises as these dawn raids were carried out without a proper prior judicial authorisation. Deutsche Bahn also argued that the Commission’s decision was too broad in scope and that the inspectors conducted searches for documents which were not within the scope of the Commission’s decision.

Judgment of the General Court

In September 2013, the General Court rejected all the appeals of Deutsche Bahn and held that dawn raids may be conducted solely on the basis of the Commission’s decisions without any prior judicial authorisation. The General Court found that the Commission’s decision to carry out the three dawn raids at Deutsche Bahn’s premises sufficiently took into account the company’s rights and the company had an adequate ability to challenge the raids before a court.

The General Court also rejected Deutsche Bahn’s pleas in relation to the disproportionately wide nature of the scope of the Commission’s decision and subsequent search by the Commission officials for documents which were outside the scope of this decision. The General Court noted that the Commission can carry out an exhaustive search of certain offices and files, in spite of the fact that there is no clear connection (but only a suggestion of it) that information about the matter under an investigation can be found there. Deutsche Bahn had appealed against the exhaustive search of the office of one of its employees who was responsible for the legal overview of DB Schenker Rail Deutschland in Mainz. Deutsche Bahn argued that the Commission reviewed documents that were clearly unrelated to the supply of electromotive power, and as a result the Commission discovered documents regarding one of Deutsche Bahn’s subsidiaries called Deutsche Umschlaggesellschaft Schiene-Strasse (“DUSS”) and the potentially anti-competitive model for the use of the infrastructure administered by companies within the Deutsche Bahn group and the provision of rail-linked services. According to Deutsche Bahn these documents were clearly unrelated to the first inspection decision. These documents then went on to form the basis for the launch of the second and third inspections. Deutsche Bahn had also argued against the conduct of the Commission officials prior to the raids, as before the first inspection, the Commission asked a complainant to confirm if its complaint against DUSS was still valid. Moreover, the 32 Commission officials were notified about the existence of this complaint a short time before the inspection. Deutsche Bahn contended that this showed that the Commission intended to search for information on DUSS during the first inspection. However, the General Court ruled that the interaction between the Commission and the complainant did not prove that the search carried out by the Commission was illegal.

Advocate General’s Opinion

On 15 November 2013, Deutsche Bahn lodged an appeal with the European Court of Justice (ECJ) on the grounds that the General Court misapplied rules on fundamental rights in that it was disproportionate for the Commission to conduct a dawn raid without a prior court order, and inability of a company to challenge the conduct of a raid until after the investigation is concluded denies the company a right to effective judicial review. It also appealed against the seizure of documents by the Commission that were out of scope.

Advocate General Wahl delivered his opinion on 12 February 2015 and he stated that the ex-post judicial review mechanism as provided by the EU ant-trust regime offers an adequate level of protection of fundamental rights. Therefore, he agreed with the General Court that there was no requirement for a prior judicial authorisation for a dawn raid by the Commission.

However, Advocate General Wahl agreed with Deutsche Bahn’s arguments that the use of documents found during the first inspection (i.e. documents related to DUSS) as a basis for the second and third inspections amounted to an irregularity which affected Deutsche Bahn’s rights of defence. The Advocate General took special note of the fact that the Commission officials had been specifically informed about the other complaint against DUSS prior to the raid. According to the Advocate General, the only possible explanation for giving the Commission staff information concerning an unrelated infringement by DUSS was to make sure that the Commission officials kept an eye out for evidence in relation to the other complaint. In his view, the Commission either deliberately or negligently did not follow the rules laid down in Regulation 1/2003. He re-iterated that the Commission should not use dawn raids to conduct “fishing expeditions”.

Judgment of the ECJ

The ECJ rejected Deutsche Bahn’s arguments that a prior authorisation issued by the national courts was necessary for the Commission’s dawn raids to be compliant with fundamental rights. The ECJ considered that there were adequate safeguards, for instance the restricted nature of the Commission’s powers under Regulation 1/2003, or the requirement on the Commission to seek authorisation from a judicial authority where the undertaking concerned opposes an inspection. Moreover, the ECJ considered the ex-post mechanism for legal recourse to be sufficient for these purposes.

The ECJ, however, agreed with the Advocate General and Deutsche Bahn in relation to fishing expeditions by the Commission. The ECJ held that it is fundamental that the Commission must state in its decision the reasons for its inspection by specifying the subject matter and purpose of the investigation; and that the information obtained during an investigation must not be used for any other purpose than that indicated in the Commission’s decision or warrant. Moreover, according to the ECJ, the information about the separate complaint against DUSS was entirely unrelated to the subject matter of the first inspection decision. The ECJ found that the Commission should have included the conduct related to DUSS in the Commission’s decision as its officials were informed about this prior to the raid. According to the Court, the first inspection was vitiated with irregularity because the Commission’s officials, armed with information unrelated to the subject-matter of the decision, seized documents that were not within the scope of the inspection. The ECJ finally held that this meant that the legality of the second and third inspection decisions was affected, given the importance and circumstances in which the information related to DUSS was gathered by the Commission officials.

Comment

Dawn raids are an important and powerful weapon in the Commission’s armoury to investigate suspected anti-competitive conduct in the EU. It is equally important for the companies that are potentially subject to such raids to be aware of their rights, as well as the limits of the Commission’s powers.

The ECJ’s decision is to be welcomed as it clarifies the important requirement for the Commission to define clearly in its decision the scope of its investigation, and to ensure that the evidence it searches for and takes away can properly be considered to fall within that well-defined scope.

As the Advocate General remarked, the Commission’s powers are “so extensive, the discretion so ample, and the decision-making subject to so few (judicial or administrative) prior controls” 2, that the Commission must not be allowed to conduct fishing expeditions when executing a dawn raid.