On 10 November 2017, the General Court (GC) partially annulled the European Commission's 2015 decision to fine UK-based broker ICAP close to EUR 15 million for "facilitating" various infringements relating to Yen interest rate derivatives (YIRDs). The GC's judgment provides a useful overview of the current state of EU case law on (i) "by object" infringements; (ii) the role of facilitators in cartel cases; (iii) "complex single and continuous infringements"; (iv) the presumption of innocence; and (v) the Commission's duty to state reasons when setting the level of a fine.
By way of background, the Commission's YIRD investigation resulted in a "hybrid" scenario in which all parties, except for ICAP, chose to settle. In December 2013, the Commission adopted a settlement decision which resulted in fines for 8 financial institutions for their involvement in 7 bilateral cartels. The cartels consisted of discussions between the banks' traders aimed at influencing the Japanese Yen (JPY) LIBOR and Euroyen TIBOR reference interest rates. These reference rates, in turn, were reflected in the pricing of Japanese Yen interest rate derivatives. No appeals were lodged against the settlement decision.
After ICAP notified the Commission of its intention to discontinue the settlement procedure, the Commission continued its investigation under the "regular" procedure. Subsequently, on 4 February 2015, the Commission adopted a decision holding ICAP liable for playing a facilitating role in 6 of the bilateral cartels mentioned above. In particular, the Commission claimed that ICAP disseminated misleading information and attempted to influence the panel of banks that set the JPY reference interest rates.
By object infringements and liability of cartel facilitators
On appeal, the GC dismissed ICAP's pleas concerning the "by object" nature of the infringement and the relevant standard of proof for establishing its liability as a facilitator. The GC held that each infringement contained evidence of coordination between the banks and exchanges of forward-looking confidential information that could affect pricing. In accordance with existing case law, the GC held that the Commission was entitled to qualify the infringements as by object restrictions.
The GC reiterated that companies that are not active on the market(s) affected by the infringement can be held liable as facilitators. To that effect, the GC held that the Commission should demonstrate whether the company intended to contribute to the common objectives of the participants and was or should have been aware of the actual or planned conduct put into effect by the other undertakings. For most of the infringements concerned, the GC found that the Commission had adduced enough evidence to prove ICAP's awareness of the cartels. For one infringement (the UBS/RBS 2008 infringement), however, the GC held that the underlying evidence was inconclusive. The GC annulled the Commission's decision insofar as ICAP was held liable for facilitating that cartel.
Duration, presumption of innocence and fine calculation
The GC also upheld ICAP's pleas relating to the duration of its participation in three other cartels. After reviewing the documentary evidence in detail, the GC found that the Commission was unable to hold ICAP liable for the entire duration of each of those cartels. In this case, the GC held that since JPY LIBOR rates are set on a daily basis "the effects of manipulating those rates are limited in time and that the manipulation needs to be repeated in order for those effects to continue". Therefore, the Commission could not "assume" that ICAP was continuously involved for the full duration of each cartel without proof that ICAP participated by adopting "positive measures" on a daily basis or "at least sufficiently limited in time".
In addition, the GC found that the Commission infringed the presumption of ICAP's innocence by taking a position on ICAP's involvement in the 2013 settlement decision, i.e. before the Commission concluded its investigation into ICAP under the regular procedure in 2015. This finding, however, could not lead to annulment of the settlement decision since ICAP was not an addressee of that decision. At the same time, the GC essentially held that its review of ICAP's other pleas was sufficient to address the possible impact of a lack of impartiality in the contested decision.
With respect to the fine, the GC held that the Commission's decision provided insufficient detail on the methodology it had applied to determine the level of the fine. In particular, according to the GC, the decision did "not provide the minimum information which might have made it possible to understand and ascertain the relevance and weighting of the factors taken into consideration by the Commission in the determination of the basic amount of the fines". On that basis, the GC annulled the fine imposed on ICAP.
This judgment shows that the EU courts will continue to scrutinize the Commission's assessment of the facts and law in detail, while placing particular importance on the parties' (procedural) rights of defence. In so-called "hybrid cases" in particular, the GC highlights that settlement decisions should not pre-judge the outcome of the Commission's investigation into non-settling parties.
On the other hand, the ICAP judgment confirms that a third party can be held liable for playing a facilitating role in cartels, even if it was not active on the market concerned by the infringement [see our November 2015 Newsletter for an article on the AC-Treuhand case]. The GC also confirmed that conduct can be classified as a "by object" infringement, even if it does not relate directly to prices. Moreover, where the conduct is classified as a complex single and continuous (or repeated) infringement, the Commission is not required to prove that each constituent category of conduct qualifies as a "by object" restriction.