On 12 June 2017, a new Belgian law transposing the European Directive regarding actions for damages for infringements of competition law was published. This new law intends to facilitate actions for compensation of harm suffered due to an antitrust infringement.
The new law introduces shifts in the burden of proof, wider options for disclosure of evidence, joint and several liability of infringers, rules on suspension of the limitation period and incentives for consensual dispute resolution.
1. THE INTENTION OF THE BELGIAN LEGISLATOR
The Belgian legislator endorses the considerations set out in the European Directive regarding actions for damages for infringements of competition law (the Damages Directive): to ensure maximum effectiveness of competition rules, both private enforcement by injured parties and public enforcement by competition authorities are required.
However, before the transposition of the Damages Directive, only a minority of damages actions before Belgian courts related to anti-competitive behaviour. This is generally attributed to a high burden of proof for the wrongdoing, harm and causal link, the hurdles to obtain evidence, and uncertainties with regard to limitation periods or the quantification of harm.
The new law has introduced procedural and substantive rules in the Code of Economic Law to facilitate such actions for antitrust damages. These rules will also apply to class actions.
In this Alert we take you through the key changes of the new law.
2. THE RULES FACILITATING PRIVATE ENFORCEMENT
2.1 Summary of key provisions:
Demonstrating infringement and harm
Final decision of BCA/review courts finding infringement of competition law = irrefutable evidence of infringement
Final decision of competition authority of another Member State finding infringement of competition law = prima facie evidence of infringement
Rebuttable presumption that cartel infringements cause harm
Quantification of harm
Right to full compensation
Quantification by courts with possibility to request assistance from BCA
No over-compensation: no punitive damages, passing-on defence available
Indirect purchasers can claim (rebuttable presumption of harm)
Disclosure of evidence
Possible disclosure by BCA
Conditions of proportionality and subsidiarity
Rules on protection of confidential information
Protection of evidence in file of competition authority: introduction of black, grey and white list:
Limits on use of evidence and penalties
Joint and several liability
Principle: joint and several liability of all infringers
Exception: immunity recipients and certain SMEs (only liable for harm to their own customers), but back-stop where claimant otherwise unable to obtain full compensation
Recourse action available, but limited against immunity recipient and settling infringer
5 years after the infringement of competition law has ceased and claimant knows (or should reasonably know) of infringement, harm and identity of infringer
20 years after the event giving rise to the harm
Consensual dispute resolution encouraged
2.2 Demonstrating infringement, harm and causal link
Where an infringement of competition law has already been established by a competition authority, the new law seeks to (i) alleviate the burden of proof of the victim of an infringement, (ii) ensure a uniform and coherent application of competition law, and (iii) increase procedural economy in actions for damages.
Instead of having to demonstrate the infringement, a victim can merely refer to a final decision of the Belgian Competition Authority (BCA) to demonstrate (for the purpose of its action for damages) that an infringement of competition law has been committed. A final infringement decision of the BCA or the Brussels court of appeal will automatically constitute irrefutable proof before Belgian courts that the infringement occurred. For the purpose of actions for damages before Belgian courts, the final infringement decisions of the BCA thus obtain the same binding character as infringement decisions of the European Commission. Final infringement decisions from other Member States will be treated as prima facie evidence of the infringement.
The new law also eases the burden of proof of the victim at the level of the harm. Instead of having to prove that the harm suffered was caused by the infringement, a victim can now shift the burden of proof to the defendant. The new law introduces a (rebuttable) presumption that cartel infringements lead to harm. The new Belgian law does not go so far as to quantify the harm presumed.
2.3 Quantification of harm
The new law confirms that both direct and indirect customers of an infringer should be able to seek full compensation for harm – actual loss and lost profits plus interest – suffered. Indirect purchasers are those at the next and subsequent levels of the supply chain to those buying directly from the infringer.
The court can request assistance from the BCA to determine the quantum of the harm. It remains to be seen how keen the BCA will be to involve itself in disputes between private parties.
While the new law expressly acknowledges the principle of full compensation, it also contains provisions to ensure that there is no over-compensation. For example, the new law recognises the defendant's right to invoke a passing-on defence. This means that the defendant could demonstrate that the victim has reduced its actual loss, by passing on (in whole or in part) the over-charge to subsequent customers. Such passing-on defence can obviously not be invoked against end customers.
Taking into account their high burden of proof, the new law foresees a (rebuttable) presumption for indirect purchasers that an over-charge is deemed to have been passed on if the indirect purchaser can demonstrate that (i) the defendant has committed an infringement of competition law, (ii) the infringement has resulted in an over-charge for the direct purchaser, and (iii) the indirect purchaser has purchased the object of the infringement.
2.4 Disclosure of evidence
The obstacle in actions for damages for infringements of competition law is often the information asymmetry between the parties. The evidence of the factual elements that are required to calculate the damage, or to demonstrate the passing on of over-charge, will often be in the possession of the adversary or a third party (e.g. the competition authority).
Accordingly, the new law introduces wider possibilities for parties to request disclosure of items or categories of evidence (any medium) from the other party or a third party. Disclosure can only be ordered to the extent the requesting party has circumscribed the evidence as narrowly and precisely as possible on the basis of reasonably available facts and evidence presented in a "reasoned justification" (still no "fishing expedition"). Moreover, the request must be proportionate, taking into account, for example, the scope and cost of the disclosure, or the existence of confidential information. The court can order the parties to take specific measures to protect confidential information (e.g. redaction, non-confidential expert summary, holding the hearing behind closed doors or placing limits on the group of people who can see the evidence).
In addition, the new law provides specific rules on the disclosure of evidence included in the file of a competition authority. The competition authority will only be ordered to disclose this evidence if no other (third) party can reasonably do so (principle of subsidiarity). The new law introduced three categories of evidence:
- Black list – Absolute protection is provided for leniency statements and settlement submissions. A court can never order disclosure of this evidence to claimants – to do otherwise could jeopardise the effectiveness of "essential" public enforcement instruments, leniency and settlement programmes. Companies would be discouraged from voluntarily approaching antitrust authorities for fear that documents confessing anti-competitive conduct could be used against them in court. However, the absolute protection no longer covers the entire leniency application (including all supporting documents submitted by the leniency applicant), but only the leniency statement as such.
- Grey list – Temporary protection is provided for (i) information specifically prepared by parties for the purpose of the antitrust investigation (e.g. replies to the authority's requests for information and witness statements), (ii) information the competition authority has created during its investigation and sent to the parties (e.g. statement of objections), and (iii) settlement submissions that have been withdrawn. These documents can only be disclosed after the competition authority has closed its proceedings.
- White list – Documents falling outside the above two categories can be disclosed to claimants at any time (subject to the protection of confidential information). The disclosed evidence may only be used for the damages claim by the party that obtained the disclosure and its legal successors, including any person that acquired the claim.
These protections also apply to the extent that parties to the investigation obtained copies of the information on the black or grey list during the "access to file" process. Claimants cannot therefore circumvent the ban on disclosure by seeking to obtain these materials directly from the defendants.
The court can impose penalties if a party, a third party or their legal representative (a) fails or refuses to comply with the disclosure order of the court, (b) destructs relevant evidence, (c) fails or refuses to comply with the obligations imposed by the court order protecting confidential information, or (d) breaches the limits on the use of evidence. In addition to the existing option to impose penalty payments or award damages, the new law allows the court to impose fines between EUR 1,000 and EUR 10,000,000 or to draw the conclusions the court finds appropriate (e.g. deem an item of discussion to be established, reject a claim or defence, or order the payment of legal costs).
2.5 Joint and several liability
The general principle is that companies that have infringed competition law should be jointly and severally liable for the harm caused.
However, the new law foresees two exceptions:
- the immunity recipient, and
- SMEs with a market share below 5% (at any time during the infringement), if the application of the normal rules of liability would irretrievably jeopardise its economic viability and cause its assets to lose all their value and on the condition that the SME was not a leader or coercer of the infringement and it is not a repeat offender.
The reasoning behind the first exception is to preserve the effectiveness of leniency regimes. Immunity recipients are less likely to appeal an infringement decision, meaning that their proceedings are made "final" long before those of infringers who appeal the decision. They are therefore often primary and preferred targets of damages actions. The new law does not want this to discourage potential immunity applicants from coming forward and blowing the whistle.
These two categories of infringers should only have to pay damages for the harm caused to their own (direct or indirect) customers. However, if the claimant would be unable to obtain full compensation from the other infringers (for example because all of them went bankrupt), the immunity recipient or SME will still be fully liable.
An infringer may recover a contribution from any other infringer in a recourse action. The amount of such contribution shall be determined in the light of the relative responsibility for the harm caused by the infringement.
Again, the new law foresees two exceptions:
- the contribution of the immunity recipient will be limited to the amount of the harm it caused to its own direct or indirect customers, and
- the non-settling infringers shall not be permitted to recover contribution for the remaining claim from the settling co-infringer.
In the event of a settlement, the remaining claim of the settling injured party shall be exercised only against non-settling co-infringers. However, to the extent that no full compensation could have been obtained from the non-settling infringers, the settling claimant can still exercise the remaining claim against the settling co infringer. This possibility can be excluded in the consensual settlement.
2.6 Limitation period
Victims of antitrust infringements will be given at least five years to bring an action for damages. This limitation period starts to run after the infringement ends, and after victims become aware of the infringement, the harm, and the identity of the infringer. Where an antitrust authority opens an investigation, the limitation period is interrupted until a final infringement decision is taken or until the investigations or proceedings before the competition authority have otherwise been terminated. The limitation period is suspended during the consensual dispute resolution (e.g. mediation; arbitration is excluded). This suspension only applies to those parties that were involved or represented in the consensual dispute resolution.
The existing absolute limitation period for extra-contractual liability of 20 years still applies. It starts to run as of the event giving rise to the harm.
By setting this period, it is hoped injured parties will be given a reasonable opportunity to seek compensation for their loss, but without compromising legal certainty for potential defendants.
2.7 Consensual dispute resolution is encouraged
Recognising that victims of anti-competitive conduct may be equally compensated through out-of-court settlement (often faster and at less cost), the new law incentivises and increases the effectiveness of consensual dispute resolution mechanisms.
For example, the limitation period is suspended (see above) and pending actions for damages can be stayed (for maximum of two years) during the consensual dispute resolution.
The new law also clarifies the effect of partial consensual settlements on subsequent actions for damages, setting out how the remaining claim should be determined, against whom it can be made, and how settling and non-settling co-infringers should contribute (see above). It is also specified that where an infringer has paid compensation as a result of a consensual settlement, a competition authority may take this into account as a mitigating factor when deciding on the fine for that infringer.
3. WHAT NEXT?
With some delay (the deadline was 27 December 2016), the new Belgian law dated 6 June 2017 transposed the Damages Directive. This new law will come into force ten days after its publication, on 22 June 2017.
However, the new law foresees a transitionary measure: its procedural provisions will not apply to actions for antitrust damages that were introduced before 26 December 2014. This provision creates uncertainty, as it fails to clarify the application of substantive provisions and which provisions in the new law qualify as procedural provisions.
Whether or not the new law will succeed in its goal to facilitate actions for antitrust damages will depend on how the Belgian courts will apply the new tools.
At a European level, the European Commission will review the Damages Directive and the application of its (transposed) provisions, and might propose further legislative action by 27 December 2020.
To read the new Belgian law on antitrust damages actions, click here.