Introduction Facts Decision Comment

Introduction

Many court procedural issues are likely to stem from competition law enforcement. One of these concerns the jurisdiction of private and public enforcement of claims over competition matters.

Like many other national laws, French law strictly separates the two proceedings:

  • On the one hand, the Ministry of Economy has the power to ensure public enforcement of competition laws.
  • On the other hand, private parties have the right to settle competition law infringement though litigation.

A recent Supreme Court judgment(1) answered the question of whether a party that is summoned by the Ministry of Economy before a French court over a competition law infringement is entitled to contend, by way of defence, that the court in question has no jurisdiction over the claim.

Facts

The Ministry of Economy filed a claim before the Paris Commercial Court in order to annul several provisions of a supply contract entered into between Apple and Orange.(2) Its action was founded on Section L 442-6, III of the Commercial Code, which allows the ministry to request the nullification of a commercial contract which appears to be substantially and economically unbalanced.

Being suspected of competition law infringement, Apple argued, as the defendant, that the Paris Commercial Court had no jurisdiction and that the arbitration clause set out in its supply contract with Orange should be enforced.

The Paris Court of Appeals rejected Apple's request, considering that the ministry duly submitted its claim before the competent court.

On appeal by Apple, the dispute was brought before the Supreme Court. Apple raised several arguments, mainly requesting the application of the competence-competence doctrine, which grants an arbitral tribunal power to determine its own jurisdiction over a substantive claim in dispute. According to Apple, the French courts should have declined jurisdiction insofar as there were no clear reasons not to enforce the arbitration clause.

Decision

The Supreme Court rejected all of Apple's arguments and confirmed the judgment held by the Paris Court of Appeals. First, the Supreme Court ruled that the ministry was entitled to bring such action on the basis of Section L 442-6, III of the Commercial Code, which allows the ministry to request a court to stop and ban activities and practices that constitute an infringement of competition laws. The Supreme Court then went on to recognise that the ministry has an autonomous right to submit actions only before a French court, as it is empowered as a "guardian of the economic public order". According to the Supreme Court, the appeal court had determined a clear reason not to apply the arbitration clause, since the ministry never executed nor agreed to be bound by the supply contract.

Comment

The rule issued by this judgment helps to determine the courts jurisdiction over competition claims in France.

Section L 442-6 of the Commercial Code lists several behaviours and practices that are prohibited insofar as they are considered "restrictive competitive practices". Among them, it is prohibited to trade "a partner to obligations that create a significant imbalance in the rights and obligations of the parties" (Section L 442-6, I, 2°).

Should a company be damaged by a restrictive competitive practice, it can enforce its claim before some specialised commercial courts in France.(3)

The reason behind listing the restrictive competitive practices is to give an equal right to the Public Prosecutor Office and the Ministry of Economy to request before national commercial courts that, among other things:

  • any practices damaging private parties be ended;
  • blameworthy contract provisions be annulled; and
  • a maximum €5 million fine be imposed on a company.

Thus, restrictive competitive practices can result in private and public enforcement of claims.

This feature creates a potential conflict, as the Supreme Court admits the full arbitrability of private enforcement of restrictive competitive practice-related claims,(4) even if they are not strictly related to a breach of contract.(5) As such, doctrine suggests that the ministry's action could, in theory, be submitted to arbitration.

The judgment at hand provides a clear rule of law: competition claims between private parties remain freely arbitrated, but actions by the ministry cannot be submitted, in any case, to arbitration. This is understandable since the ministry seeks to enforce competition laws and fine sentencing. Moreover, as the ministry was not party to the contract, French statutory laws avoid the enforceability of the arbitration clause against it.(6)

However, issues related to the risk of ministry proceedings before a court overlapping with private arbitral proceedings remain unsolved. In future, French courts will have to determine whether either the arbitral tribunal or the national judge will stay the proceedings and wait for the decision. This will minimise the potential risk of having conflicting rulings between the arbitral award and the court judgment, should they adjudicate on the same matter.

For further information on this topic please contact Nicolas Contis or Leonardo Pinto at Kalliopé by telephone (+33 1 44 70 64 70) or email (ncontis@kalliope-law.com or lpinto@kalliope-law.com). The Kalliopé website can be accessed at www.kalliope-law.com.

Endnotes

(1) Supreme Court, 1st Civil Chamber, July 6 2016, 15-21811.

(2) One of the most important French companies operating in telecoms services.

(3) See Section D 442-3 of the Commercial Code, which lists the courts specialised in private enforcement of competition claims.

(4) Supreme Court, 1st Civil Section, October 21 2015, 14-25080.

(5) Supreme Court, 1st Civil Section, July 8 2010, 09-67013.

(6) See Section 1199 of the Civil Code.

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