Recent developments in the confidentiality of cartel immunity materials Two recent key decisions — one from Europe and the other from Australia — provide fresh guidance about the circumstances in which materials provided under a cartel leniency regime may be disclosed.  While it is too soon to determine the precise impact that these cases will have on the level of protection that immunity applicants can expect (each offers both positives and negatives for applicants), it is clear that they reinforce the need for prospective immunity applicants to carefully consider their options before approaching regulators.  This is especially so where the alleged cartel activity crosses national boundaries.

Like the cartel activity that precedes it, an application for immunity represents a calculated risk.  The benefits of immunity from prosecution in one jurisdiction must be weighed against the risk that sensitive information will be made available to customers seeking damages, or that the information the applicant provides will be used to prosecute it elsewhere.  In an increasingly integrated global economy, these risks are very real.

Australian Developments

The Federal Court of Australia’s recent decision in ACCC v Prysmian Cavi E Sistemi Energia SRL [2011] FCA 938 (‘Prysmian’) suggests that Australian courts are unlikely to consider that the risk of foreign prosecution is a sufficient basis for restricting access to immunity materials.  Indeed in Prysmian, the Court went further and refused to accept that the risk of foreign prosecution was even relevant to its decision about whether it should order the ACCC to hand over its immunity files.

In Prysmian, the ACCC was ultimately compelled to hand over its immunity files to the defendants in a cartel prosecution, despite the ACCC’s arguments that doing so was contrary to the public interest as it would deter future immunity applicants from coming forward.  Justice Lander held that, on the facts of this case, the public interest in ensuring the defendants could adequately prepare their case to challenge service outweighed the ACCC’s interest in shielding its whistleblowers.

However, the risk that this decision presents for immunity applicants — and conversely, the opportunities it presents for those who seek access to immunity materials — is constrained by the fact that the ACCC had itself put the immunity materials in issue by relying on them indirectly under oath to rebut the defendants’ application to set aside service.  In those circumstances, the decision is really about preventing the ACCC from having its cake and eating it too.  Absent an early interlocutory skirmish which forces the ACCC to show its evidentiary hand early in the proceeding, Prysmian may have limited application (especially where, as here, the ACCC accepted that it would always have to disclose the immunity materials to the defendants at some stage of the proceedings, but that the question was only one of timing).

Prysmian offers additional comfort for immunity applicants.  In the course of refusing to make special confidentiality orders over the immunity materials, Justice Lander concluded that the established Home Office v Harman [1983] 1 AC 280 principle — which prevents litigants from using materials obtained under the court’s compulsive processes for any purpose unconnected with the proceedings — applied.  Accordingly, unauthorised disclosure of the materials to a foreign regulator, or their use in separate damages proceedings would be punishable as contempt of court.  This gives immunity applicants a degree of protection.  Justice Lander concluded that it did not matter that the defendants had not yet formally submitted to the Australian jurisdiction (as they were foreign companies applying to set aside service), the Harman principle still applied; though as the Court recognised, there might be some practical difficulties in sanctioning a non-resident, though this would be true whether they had submitted to the jurisdiction or not.

European Developments

Competition regulators’ efforts to protect immunity materials were also recently dealt a blow in Europe.  In Pfleiderer AG v Bundeskartellamt [2011] C-360/09 (‘Pfleiderer’), the European Court of Justice allowed a German Court to compel the German competition regulator to open its leniency file to a damages claimant.  In doing so, the European Court concluded that European law does not require the interests of immunity applicants (and hence, the interest in encouraging public enforcement) to automatically trump the interests of damages claimants.  Rather, the Court recognised that both public and private enforcement serve the Union’s competition purposes, and that national courts must weigh these competing interests (in light of each case’s specific facts) when deciding whether to grant access to immunity materials under national law. 

At this stage, it is difficult to predict how this balancing act will play out.  Rather unhelpfully, in a thin judgment, the European Court provided scant guidance about what specific factors need to be considered and what weight they should be given.  Accordingly, further litigation is almost certainly required to clarify Pfleiderer’s effect.  Yet, by expressly recognising the importance of effective private enforcement, the European Court’s decision does suggest that a blanket ban on accessing immunity materials is now problematic in Europe, and may be open to challenge.  But equally, where national law gives an automatic right of access to an immunity file (as German law does), it could ultimately be argued that this too is suspect as does not allow the Court to consider the public interest in encouraging immunity applicants.  In this way, the Pfleiderer may not be all bad news for immunity applicants.

Where to Next?

As these cases demonstrate, prospective immunity applicants cannot automatically assume that materials they provide to a competition regulator will remain confidential.  Ultimately, this is the price of the immunity they seek.  Nevertheless, certain options do remain which can minimise some of the flow-on effects of access to these immunity materials, especially in connection with their release to foreign regulators.

In relation to this, legislative developments in Australia — namely the recent insertion of the new, and as yet untested, section 157B of the Competition and Consumer Act 2010 — could increase the protection of immunity files, and so reduce some of the risk associated with seeking immunity.  Section 157B establishes new criteria that a Court must consider when deciding whether to force the ACCC to hand over protected cartel information.  Though these criteria are weighted towards non-disclosure and expressly require the Court to consider the need to protect the immunity applicant, the interests of the administration of justice remain in play.  This factor formed a significant part of the Prysmian decision (namely in the context of ensuring that the defendants had access to the materials needed to prepare their case).  Accordingly, depending on how courts approach section 157B, this may mean that the protection section 157B affords is not as expansive as promised.  Only time, and its friend litigation, will tell.