On 2 March 201116, the President of the General Court ordered interim measures in a dispute between 1. garantovaná a.s. (“garantovaná”), a Slovak investment company listed on the stock exchange of Bratislava, and the European Commission.
The case goes back to July 2009 when the European Commission imposed a fine of EUR 19.6 million on garantovaná, jointly and severally with Novácke chemické závody (NCHZ), for their having exercised decisive influence over the business policy of NCHZ. NCHZ was a direct participant in the cartel which was at the origin of the fine17.
On 2 October 2009 garantovaná introduced an action for annulment of the decision that imposed the multi-million euro fine, while garantovaná applied for suspension of operation of the contested decision on 13 October 2009. Two factual elements play a significant role in this case: First, it is crucial that NCHZ filed a petition for the commencement of insolvency proceedings on 16 September 2009 and was subsequently declared insolvent by judgment of the district court of Trenčín (Slovakia) of 29 September 2009. Therefore, garantovaná would be left to pay the whole amount of the fine should it not be able to acquire a bank guarantee pending its action for annulment of the decision of the Commission. Second, garantovaná is solely an investment company. As a consequence, if garantovaná is not dispensed from the obligation to provide a bank guarantee and is at the same time neither in a position to pay for the fine nor to acquire a bank guarantee, garantovaná will have to file for insolvency. For investment companies, as opposed to manufacturing companies, this means that all of the activities will cease permanently.
The President of the General Court followed the normal sequence of relevant issues to be considered in interlocutory proceedings. This means that he first judged whether garantovaná’s claims in the main proceedings (the action for annulment of the decision imposing the fine) were, at first sight, sufficiently pertinent and serious to justify interim measures (“prima facie case”). Then the President considered whether it was strictly necessary to grant interim relief in order to prevent serious and irreparable harm to garantovaná (“urgency requirement”). Finally, although there is no legal requirement, the President weighed different interests involved in the granting or refusal of interim measures (“balance of interests”).
As far as the prima facie case is concerned, the President referred to garantovaná’s sixth plea in the main proceedings relating to the Commission’s manifest error in dismissing garantovaná’s inability- to-pay request under paragraph 35 of the Fining Guidelines18. According to the President, the question whether the Commission sufficiently motivated its decision to reject the inability-to-pay request merits a thorough examination (especially since the decision was taken during the financial and economical crisis). In addition, it is a question of principle whether the Commission is able to rule out an inability-to-pay request on the basis of an applicant’s informing of its intention to sell its assets and to terminate its activities. Therefore, the President holds that garantovaná’s complaints appear, at first sight, to be sufficiently pertinent and serious to establish a prima facie case justifying the interim measures sought.
In relation to the urgency requirement, the President recalled that the applicant should demonstrate the necessity of the interim measure to prevent serious and irreparable damage. Regarding the suspension of the provision of a bank guarantee, the General Court reminds that this is only possible if the applicant demonstrates that it is either objectively impossible for the company to provide the bank guarantee or that the provision of the guarantee would imperil its existence. As garantovaná did not put forward that its existence might be imperilled, the President has to consider whether the evidence provided by garantovaná proves to the required legal standard that it was objectively impossible for it to provide a bank guarantee.
Garantovaná produced a number of documents in support of its assertion that it was objectively impossible for it to provide a bank guarantee since it did not have sufficient assets. These documents concerned its financial situation and included a report prepared by an independent financial expert analysing those documents and a number of letters from banks refusing its request for a bank guarantee.
According to the President, these documents contained specific and precise information, supported by detailed and current documents, thereby providing a true overall picture of its financial situation. However, consideration of garantovaná’s assets alone was not sufficient. It was also necessary to consider the steps taken by the applicant in attempting to obtain the bank guarantee. Garantovaná provided copies of five letters from various banks that refused its application for a bank guarantee. Despite certain objections from the Commission, the General Court concluded that the applications for a bank guarantee must be regarded as serious. Therefore, the refusal of the banks to provide garantovaná with a bank guarantee serves to establish that it was objectively impossible for garantovaná to provide such a guarantee.
As a result, the President held that garantovaná had produced conclusive evidence tending to show that it does not have sufficient assets to provide a bank guarantee, and the requests for bank guarantees were sufficiently serious.
Next, the President considered whether garantovaná belonged to the “J&T”-group by having regard (as laid down in settled case-law) to the group of companies to which it belongs and, in particular, to the resources available to that group as a whole19 when assessing the ability of a company to furnish a bank guarantee.
The President stated that it cannot allow the mere suspicions on personal and financial links between garantovaná and the J&T-group that was put forth by Commission to prevail. The President of the Court recognised that the financial information is complex and that certain links exist between these compa-nies, which may in some circumstances give rise to a degree of influence. However, that influence does not seem to amount to a link equating to membership of a group or a network within the meaning of the relevant case-law concerning interim measures. The President concluded that garantovaná is not the subsidiary of a parent company, and it does not belong to a larger group or a network or have a major shareholder whose resources should be taken into account in the assessment of whether its financial situation is such that it is objectively impossible for it to provide a bank guarantee.
Finally, the President then turned to the Commission’s argument that garantovaná’s financial situation was wholly of its own making and reveals a lack of diligence with respect to the payment of the fine. It stated that only 10 days before the date of the contested decision, garantovaná decided to invest the bulk of its last-remaining assets in long-term loans. In addition, three loan agreements entered into by its subsidiary, G1, through its subsidiary Bounty, were concluded a few days before the date of the contested decision. The President noted that the chronology of events, particularly the investments made at a time close to the adoption of the contested decision, was unfortunate. According to the President, however, there was no proof of misappropriation with a view to deliberately tying up assets in order to avoid payment of the fine. The loan agreements were concluded before notification of the contested decision and before the amount of the fine was known. In addition, garantovaná’s business is capital-intensive investment. Therefore, it cannot be required to stop making investments and cannot be criticised for carrying on its business during the administrative procedure instigated by the Commission.
The Commission also argued that garantovaná failed to act with due diligence when it omitted to make provision for EUR 19.6 million. The President rejected this argument. The applicant cannot be criticised for having limited that provision to an amount representing a maximum of 10% of its turnover for the year 2008. Garantovaná acted reasonably in taking the 2008 figure as its basis when estimating the amount of the fine.
In summary, the President held that it cannot be asserted that garantovaná failed to act diligently. The adverse effects of enforcing the contested decision while the main proceedings are still pending, thus results not from a lack of diligence on the part of the garantovaná, but from the effects produced by the decision itself.
For all these reasons, the President concluded that garantovaná had established to the required legal standard that it is objectively impossible for it to provide, in its current financial situation, a bank guarantee in order to avoid immediate payment of the fine imposed on it by the Commission.
Regarding the balance of interests, the President had to balance three interests against each other: On one side, garantovana’s interest of remaining in business, and garantovana’s shareholders’ interests of not loosing the total value of their investment as a consequence of garantovaná becoming insolvent. On the other side, the interest of the Commission in not permitting addressees of fines to become an “empty shell” by imposing the duty to provide a bank guarantee. As to garantovaná’s interest in avoiding the immediate payment of the debt, as required by Article 278 TFEU, the President highlighted garantovaná’s activity as an investment company. If, notwithstanding garantovaná’s objective impossibility to provide a bank guarantee, it is not granted a dispensation, garantovaná will have no other choice than to pay for the full amount of the fine. Since garantovaná does not currently have sufficient funds to do so, there would be no other choice than to file for insolvency. In that regard the President acknowledges that in some cases a filing for insolvency does not necessarily imply that an undertaking’s economic activities come to an and, as many insolvency regimes permit to the extent possible activities to continue during insolvency proceedings. As regards investment companies, however, this is different: insolvency means end of business. According to the President, garantovaná has indeed an interest in being granted a dispensation of the provision of a bank guarantee. However, the President also agrees that the Commission has a (financial) interest in preventing addressees of its decisions to divest themselves of their assets, thereby leaving behind no more than an empty shell. Therefore, in his actual order, the President took this imminent risk into account and attached conditions to the suspension of the decision of the Commission