Sequel to part 1 of 13th June 2017
Bye bye trade secrets?
In the new ARC, confidential information and trade secrets still enjoy special protection. The reason is clear: as soon as secret information is revealed, it becomes obvious and, as such, is no longer protected as confidential. The defendant that is sued for disclosure of information may therefore reply with a confidentiality objection against the request. But it does not stop short at objecting with confidentiality: the claimant may still apply for judicial review according to para 89b(6) ARC. In the course of this review – which will probably be modeled in camera similar to para 99(2) of the Rules of the Administrative Courts (“Verwaltungsgerichtsordnung”, VWGO) – the court decides, after having heard the parties, whether the information is indeed confidential. If this is the case, the court may still disclose the confidential information on a case-by-case basis and only if the interest in the disclosure of the information outweighs the interest in keeping the information secret. Whether these documents will be handed over to the claimant directly, whether the court may impose an obligation of secrecy on the lawyers vis-à-vis their clients – all of this is not explicitly spelled out in the new Act.
It is an interesting development that confidentiality is no longer of paramount importance in cartel damage claims and that rather it has to be balanced against the right to be heard. This theoretical reasoning has to pass the real-life test though. It is still unclear how courts will handle the unpredictable burden of an in camera intermediate proceeding. According to para 95(2) No. 1 of the Judicature Act (“Gerichtsverfassungsgesetz”, GVG), the Lower Regional Courts are still competent for the claims as stated in the regulation for the establishment of common cartel courts.
Willingness to cooperate will be privileged
Further to the previously stated safeguards, there are also absolute grounds for exclusion of certain information. Leniency statements, settlement submissions and citations of the former must not be handed over or disclosed to the opposing party. Furthermore, and that goes beyond the European directive, records of interrogations from the competition authorities are absolutely excluded from disclosure. Two aspects will need to be clarified in this regard: on the one hand, it needs to be clarified whether the absolute protection of records of interrogations is in line with the European directive, especially with its definition of voluntary statements. On the other hand, it needs to be clarified whether the absolute protection of leniency statements is consistent with settled EU case law.
And in case of non-compliance?
If a party that was ordered to disclose information does not comply with this order, the new Act provides for a separate damage claim according to para 33g(8) ARC. This claim requires that the claimant quantifies the loss that occurred due to the non-compliance with the disclosure order. But, wait a moment; wouldn’t this require that the injured party knew the damage that occurred due to the non-submission of the information? Isn’t it exactly this information that is still unclear? The damage claim requires that the party harmed by a culpable non-submission does have knowledge of the information that was not submitted. This information is inherently unclear, though. A typical catch-22 – its resolution promises to be highly interesting in practice.
One may also wonder why there is a separate damage claim in the first place. The new claims were planned to be substantive. Therefore they should be enforceable according to para 887 et seq ZPO. If this was the case, a damage claim for non-disclosure wouldn’t be necessary. Interestingly, para 89b (1, 2) ARC states that para 142 ZPO is to be applied for information claims respectively. If a party does not comply with a court order according to para 142 ZPO, this order is not enforceable. Rather, the information that was culpably not submitted will be adversely assessed when the judge assesses the evidence. Will it then be the solution that information claims that are filed independently from a damage claim can be enforced according to para 887 et seq ZPO, while the adverse evidence assessment applies for cases in which information is claimed in a pending cartel damage claim? Or does the damage claim block both theories? This ambiguity can only be removed by the competent courts.
Maybe not such a powerful tool at all
As can be seen, the new claims for information will not lead to an Anglo-American discovery status in Germany. Inter alia the aforementioned safeguards and the slowness of the proceedings prevent this development. Initially, a preliminary injunction for the disclosure of documents was included in the draft new Act. However, this envisaged injunctive procedure is now limited to the disclosure of the infringement decision only. Additionally, the injured parties’ incentive to claim for damages and/or for information could be adversely affected by a reimbursement claim for the production of information of the opposing party. This new claim allows the defendant to sue the initial claimant of the information for its expenses when producing the ordered information. The claim covers all expenses that the defendant of the information deemed necessary (eg costs for an e-search). The claim for reimbursement of costs was actually meant to protect third parties. Now, it seems that the subjective scale of the claim may reverse the well-meant entitlements. Facing the cost cudgel may actually prevent injured parties from seeking court orders for information at all.
Only judicial practice will therefore show how far the new claims resemble discovery and whether they may strengthen private enforcement as such.