On 26 November 2013, the European Union’s top court, the European Court of Justice, gave a seminal ruling establishing the principle that a claim for damages for losses incurred as a result of excessively long judicial review proceedings before the General Court must be brought in a separate action before the General Court itself.

Introduction

On 26 November 2013, the European Union’s top court, the European Court of Justice (ECJ), gave a seminal ruling establishing the principle that a claim for damages for losses incurred as a result of excessively long judicial review proceedings before the European Union’s court of first instance (the General Court) must be brought in a separate action before the General Court itself. Allowing the General Court to decide on whether it acted too dilatorily, may raise eyebrows in practitioner circles and amongst potential damages claimants alike.

The ECJ decided to distance itself from the stance it had taken in a previous judgment, Baustahlgewebe v Commission (Case C-185/95 P), where it took it upon itself to simply reduce the fine to reflect the excessive length of proceedings before the lower instance court. The ECJ’s 26 November ruling instead implies that parties seeking compensation for losses incurred as a result of excessively long proceedings will have to invest more money and time in preparing a separate action before the General Court.

Background

In 2005, the European Commission (Commission) levied fines exceeding €290 million on 16 firms for operating a cartel in the industrial bags sector (Industrial Bags Case COMP/38354). The majority of the addressees of the Commission decision lodged an appeal before the General Court seeking to have the Commission’s decision annulled or to have their respective fines annulled or reduced. Nearly six years later, in judgments handed down on 16 November 2011, the General Court ruled on the actions, dismissing those brought by Kendrion NV (Case T-54/06), Groupe Gascogne SA (Case T-72/06) and Sachsa Verpackung GmbH (now Gascogne Sack Deutschland GmbH) (Case T-79/06).

The General Court took five years and nine months to decide to uphold the Commission’s findings, considerably longer than the average 24.8 months currently required for the General Court to examine and rule on a Commission decision. In Case T-54/06, during the course of the proceedings, Kendrion NV raised the slow nature of the General Court’s proceedings before the General Court itself. The General Court stated simply “The legality of [the] decision may be considered only in the light of the facts and circumstances at the disposal of the Commission at the date of the adoption”. The General Court therefore rejected as ineffective the ground of appeal which alleged that the Court had failed to observe the principle that it must adjudicate within a reasonable time, on the ground that only the legality of the decision fell within its review jurisdiction.

Not satisfied with this response, Kedrion NV, along with Groupe Gascogne SA and Gascogne Sack Deutschland GmbH complained to the ECJ that the General Court had taken far too long to deal with the proceedings. As a result, the companies claimed, the ECJ should set aside the judgment or at least annul/reduce the fine. The companies complained, inter alia, that the General Court had not acted promptly enough in examining the Commission’s decision. The parties argued that their fundamental rights had been breached and that the excessive length of proceedings had led to financial loss.

The ECJ Judgment

On 26 November 2013, the ECJ handed down judgments in Cases C-40/12 P, C-50/12 P and Case C-58/12. The ECJ broadly agreed that the General Court had taken far too long to adjudicate the parties’ appeals. In setting out its decision, the ECJ made the following points:

  • A failure to adjudicate within a reasonable time must, as a procedural irregularity constituting a breach of a fundamental right, give rise to an entitlement of the party concerned to an effective remedy granting appropriate relief.
  • Where the excessive length of the proceedings does not prejudice the outcome of proceedings, failure to deliver judgment within a reasonable time cannot lead to the setting aside of the judgment under appeal.
  • Failure to adjudicate within a reasonable timeframe when examining a legal action brought against a Commission decision imposing a fine on a company for infringing EU competition law cannot lead to the annulment, in whole or in part, of the fine imposed by that decision.
  • A claim for compensation for the damage caused by the failure of the General Court to adjudicate within a reasonable timeframe may not be made directly to the ECJ. It must be brought before the General Court itself (sitting in a different composition from that which heard the dispute giving rise to the procedure being criticised) which must assess the actual existence of the harm and the causal link between the excessive length of proceedings and the harm.
  • As regards the criteria for assessing whether or not the General Court has acted within a reasonable timeframe, factors such as, but not limited to, the complexity of the case and the conduct of the parties should be considered.
  • The General Court must take into consideration the general principles applicable in the legal systems of the Member States for actions based on similar breaches. In that context, the General Court must, in particular, ascertain whether or not it is possible to identify, in addition to any material loss, any other type of harm sustained by the party affected by the excessive period, which should, where appropriate be compensated.

Applying these factors, the ECJ held that five years and nine months was excessive for the proceedings before the General Court. The ECJ observed that this time reflected long periods of inactivity by the Court. The length of proceedings could not be justified by any of the circumstances underpinning the appeals such as the complexity of the dispute, the conduct of the parties or supervening procedural matters.

As such, the ECJ ruled that that the proceedings before the General Court breached the second paragraph of Article 47 of the Charter of Fundamental Rights of the European Union: “[E]veryone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law”. As such, the claimants are permitted to bring a damages claim before the General Court, seeking compensation for losses incurred. The ECJ did not, however, take any action with respect to the merits of the parties’ appeals, which sought to overturn the General Court’s ruling.

Comments

The judgments handed down by the ECJ warrant a number of comments. The ECJ’s ruling that the General Court acted too dilatorily in the current set of proceedings is clearly positive, in view of the nearly six years of delay to resolve them. On the other hand, the ECJ’s ruling implies that the parties will obtain no immediate relief. Rather, to recover the losses incurred as a result of the delay, they will need to invest more resources in preparing a separate action before the General Court, with no guarantee as to the timeframe in which the General Court will resolve the proceedings.

Furthermore, issues of impartiality arise given that it will be the General Court itself that decides whether or not it failed to deal with proceedings within a reasonable time. The risk of institutional bias may, however, be mitigated by the fact that the action for damages must be assessed by a fresh panel of judges and there is much truth in the aphorism “Not only must justice be done, it must also be seen to be done.”

There is certainly scope for arguing that the ECJ should have perhaps considered Baustahlgewebe more carefully. In Baustahlgewebe, the ECJ itself reduced the fine by ECU 50,000 for reasons of procedural economy and to ensure that the claimant was granted an immediate and effective remedy. Certainly, such an act would lead to greater administrative efficiency.

It will be interesting to see whether or not the parties decide to lodge new proceedings before the General Court and, if they do, how quickly the General Court will resolve the claims.