In a judgment of 29 March 2017, the district court in Arnhem has awarded € 68 million in damages and interests to TenneT, the national electricity grid operator in the Netherlands, as claimant in a cartel damages claim procedure against the Swiss engineering company ABB. The procedure was initiated by TenneT following the 2007 decision of the European Commission in the gas insulated switchgear cartel, and related to its purchase of switchgear equipment from ABB in 1993. The court’s judgment is interesting for various reasons.
Firstly, the district court rejects ABB’s confidentiality claim in respect of its profit margins which were mentioned in a report submitted to the court by ABB in its defence. Thereto, the court refers not only to the fact that the public character of court hearings and court decisions is a fundamental principle of Dutch law, but also highlights the fact that the general public has paid the majority of the overcharge, if any, via the electricity tariffs. The general public has an interest to learn the facts in order to assess if it has suffered any damages, especially in view of ABB’s passing-on defence.
The calculation of the overcharge
In respect of the possible price overcharge, the court accepts the approach of TenneT which consists of a comparison between an offer made by ABB for a certain work in 1999, during the cartel period, and an offer made by ABB for exactly the same work in 2005, after the cartel period. This results in an overcharge of 58% (€ 23.1 million). The court dismisses ABB’s arguments to the contrary, and in particular ABB’s approach which consists of a comparison between the profit margin realised with the 1993 project, the profit margin which ABB expected to realise with its offer in 1999 and the actual profit margin realised in 2005. According to the court, these internal figures are not relevant for the calculation of TenneT’s damages. The court adds that TenneT’s damages in principle consist of the difference between the price paid by TenneT in 1993 and the price TenneT could have been offered and could have accepted in a competitive market. The court finds that, as this case must be based on a hypothesis – how much would have been paid if there had not been a cartel? – the damages cannot be calculated precisely and must therefore be estimated. If ABB had wanted to dispute TenneT’s calculation of damages, it should have made a calculation of a realistic and competitive price, taking account of the costs of raw material and production costs, comparing these costs with the costs of other parties and investigating the extent to which these costs (also the costs of competitors) were affected by the cartel agreements and imputable inefficiencies in a non-competitive market.
The court also dismisses ABB’s passing-on defence. The court refers to an earlier judgment of the Supreme Court in this case, in which the Supreme Court decided that this case must be assessed in accordance with Dutch law, with due observance of the EU principles of equivalence and effectiveness, and that Dutch law must be interpreted in such a manner that the outcome is compatible with the EU Damages Directive. The court derives from the judgment of the Supreme Court that a passing-on defence can be accepted if (1) it is clearly demonstrated that the overcharge paid by the claimant to the cartelist has been passed on to the claimant’s customers and (2) there is such a link between the overcharge and the passing-on of this overcharge by the claimant to its customers that the part that was passed-on must reasonably be considered as damage of those customers and does therefore not constitute damage of the claimant.
The court finds that, in the present case, it needs to be assessed if the causal link between the overcharge and the passing-on justifies in all reasonableness that the amount which was passed-on in the regulated electricity prices for consumers, is deducted from the damages which ABB needs to pay to TenneT. This assessment must be made in accordance with the principles of equivalence, effectiveness and the intent of the Directive.
According to the court, only end consumers can claim an overcharge from ABB if the passing-on defence is accepted. The chance that they will actually do so, is negligible because the possible compensation for individual end customers does not outweigh the costs that may be expected from legal procedures. The court also takes account of the fact that TenneT is a 100% subsidiary of the Dutch State and that any damages awarded to TenneT will be for the benefit of the Dutch end consumers, either via an amendment of the tariffs or via a distribution of profits to the Dutch State. Therefore, the payment of damages to TenneT is fully in line with the principle of effectiveness.
Somewhat surprisingly, the court adds that one cannot fully neglect the fact that ABB participated in a cartel but, unlike the other cartel participants, received an immunity from fines in return for its cooperation. A fine would have been ten times the amount of damages that ABB now has to pay.
The court concludes that, in view of these circumstances, in all reasonableness the overcharge that was passed-on does not need to be deducted from the damages which ABB must pay to TenneT.