In September 2011, the European Court of Justice (“ECJ”) set aside the judgment of the General Court and the decision of the European Commission (“EC”) in so far as the EC imputed to Elf Aquitaine participation by its subsidiary, Arkema.

In 2005 the EC imposed fines on several companies including a fine of EUR 45 million on Elf Aquitaine and Arkema in respect of a cartel involving monochloroacetic acid.  The EC also imposed a fine of EUR 13.5 million on Arkema due to its participation in an earlier cartel.

After the General Court rejected appeals by Elf Aquitaine and Arkema they appealed to the ECJ.  While the ECJ dismissed Arkema’s appeal, finding that the EC did not breach the principle of proportionality when calculating its fines, Elf Aquitaine’s appeal was successful and the findings of infringement and fines were set aside.

The ECJ ruled that where a parent company is to be held liable for the conduct of its subsidiary, the EC’s decision must contain a detailed statement of reasons justifying the imputability of the infringement to the parent company.  The ECJ found that the EC had not given sufficiently reasoned answers to Elf Aquitaine’s arguments that Arkema independently determined its conduct.  Instead, the EC’s statement of reasons included mere assertions and negations and were not detailed.  Such mere assertions and negations did not enable Elf Aquitaine to ascertain the matters justifying the measure adopted and did not enable the court to exercise its powers of judicial review.

This decision is particularly interesting because of its relevance to Australian companies with parent companies in Europe.  However, we anticipate that the EC will now be careful to provide sufficiently detailed answers to parent companies’ arguments in the future.