On 26 May 2017, the Spanish Government enacted the Royal Decree 9/2017 (the Royal Decree) implementing into Spanish law certain European Directives, amongst them, the Directive 2014/104/EU on actions for damages for infringements of competition law (the Damages Directive).
The Royal Decree has made important amendments of the Spanish Competition Act (Ley 15/2007, de 3 de julio, de Defensa de la Competencia or SCA) and of the Spanish Civil Procedure Act (Ley de Enjuiciamiento Civil or CPA) which will be summarized hereunder, in a non-exhaustive manner.
Responsibility of infringers
As a matter of principle, it is laid down that each of the infringers of Articles 1 and 2 of the SCA and 101 and 102 of the TFEU (hereinafter, a Competition Law Infringement) are bound to compensate for the damage in full. It is noteworthy that the Royal Decree establishes the liability of the parent company for a Competition Law Infringement committed by its subsidiary (except when the parent company did not have the ability to exercise decisive influence over the conduct of the subsidiary). This provision, in contrast to the Damages Directive which was silent on such matters, is considered to have a significant potential impact due to the establishment of the presumption (iuris tantum) of liability of the parent company for the damages caused by its subsidiaries (new Article 71 SCA).
When the infringement is carried out through the joint behaviour of several companies or an association or group of them, the responsibility of the infringers will be joint and several. As a consequence, any injured party may claim full compensation from any of them until it has been fully compensated (new Article 73.1 SCA). The infringer who has fully compensated the injured party may recover a contribution from the rest of the infringers for an amount to be determined in the light of their relative responsibility for the harm caused by the Competition Law Infringement.
The Royal-Decree foresees a reduced liability regime for small or medium-sized enterprises (SME), where certain conditions are met, and for the infringers which have been granted immunity from fines under a leniency programme. As regards the latter, they will only be jointly and severally liable to their (direct and indirect) purchasers or suppliers. In relation to other injured parties, leniency beneficiaries will only be liable on a subsidiary basis, that is, in cases where the injured parties were not able to obtain full compensation from the other infringers (new Articles 73.2 and 73.3 SCA).
It is also noteworthy that the reduced liability regime laid down in the Royal Decree is limited to the infringer having been granted immunity from fines under a leniency programme, but not to those who have obtained a reduction on the amount of the fine imposed. This provision may have a potential deterrent effect on the applications for reductions on the amount of fines under leniency programmes by infringers.
Right to full compensation from the infringer and burden of proof
The Royal Decree sets forth the right of injured parties to obtain full compensation for the harm suffered as a consequence of a Competition Law Infringement. The right to full compensation shall cover the right to compensation for actual loss and for loss of profit, plus the payment of interest (new Article 72 SCA).
However, full compensation shall not lead to overcompensation, whether by means of punitive, multiple or other types of damages. To ensure the full effectiveness of the right to full compensation as laid down in the Royal Decree, certain rules aimed at avoiding overcompensation are laid down (new Article 78 SCA), including, amongst others, the right of the infringer to invoke as a defence against a claim for damages the fact that the claimant passed on the whole or part of the overcharge resulting from a Competition Law Infringement (passing-on defence).
The burden of proof of the harm suffered and its quantification shall be borne by the claimant. However, for Competition Law Infringements consisting of a cartel, a presumption (“iuris tantum”) is laid down by virtue of which it is considered that cartel infringements cause damages (new Article 76 SCA). With regard to indirect injured parties, a presumption (“iuris tantum”) is also set forth by means of which it is considered that the overcharge was passed on to them by direct injured parties (that is, their suppliers) provided that the following conditions are proved: (i) a Competition Law Infringement is committed; (ii) the existence of an overcharge as a consequence of such Competition Law Infringement; and (iii) that the indirect purchaser acquired the goods or services from other direct injured parties (new Article 79.2).
Limitation period for bringing an action for damages
Before the enactment of the Royal Decree, the limitation period for bringing actions for damages was limited to a short period of one year (pursuant to Articles 1902 and 1968 of the Spanish Civil Code). However, the Royal Decree extends the duration of that period up to five years. Such period shall start running as from the date when the Competition Law Infringement has ceased and the injured party knows, or can reasonably be expected to know: (i) the behaviour and whether it constitutes a Competition Law Infringement; (ii) whether the Competition Law Infringement caused harm to it; and (iii) the identity of the infringer.
Furthermore, the limitation period shall be interrupted if a competition authority (not necessarily the Spanish Competition Authority) takes action for the purpose of an investigation until the earliest one year after the infringement decision has become final or after the proceedings are otherwise terminated (new Article 74 SCA).
Legal effects of final decisions declaring a competition law infringement issued by a competition authority
In the case where a Competition Law Infringement is declared by a final decision issued by the Spanish Competition Authority (the CNMC) or by a Spanish court, such decision shall be deemed binding on the Spanish court before which the action for damages has been brought.
However, in the case where the Competition Law Infringement is declared in a final decision issued by Competition Authorities or by National Courts from other Member States, such decision shall establish just a mere presumption (“iuris tantum”) of the existence of the Competition Law Infringement (new Article 75 SCA).
New concept of cartel
The Royal Decree includes important modifications on the concept of a cartel as provided in the Fourth Additional Provision of the SCA. Amongst them, the most important one is the elimination of the requirement consisting of the secret nature of the cartel. This element was not required at European level and it has led to controversy when analysing whether specific conduct qualified as a cartel. In addition, a new and express reference to “concerted practices”, as one of the conducts which could be considered a cartel, is also included.
Access to sources of evidence
The Royal Decree has included a new section (Section 1st bis) within the Chapter of the CPA devoted to general provisions on evidence, with the aim of regulating the access to the so-called “sources of evidence” exclusively for those proceedings in which actions for damages arising from Competition Law Infringements are brought.
Firstly, it must be highlighted that neither the Damages Directive nor the Royal Decree establish an unlimited right of the claimant to request the production or disclosure of documents that are considered useful for the purposes of sustaining its claim.
Thus, the amendment does not, in any event, provide for a “discovery” or “disclosure” procedure, since the right to request production or disclosure of evidence (addressed to third parties or the counterparty) shall be limited to very precise and narrow categories of documents (excluding statements made within the frame of a leniency programme and settlement submissions before a competition authority in an administrative procedure).
In addition, national courts shall only order the disclosure of documents where the request is deemed proportionate. In the assessment of such proportionality, it is necessary for the claimant to provide preliminary evidence that there are facts and proofs that sustain the claim and that there is justification for the request. In their turn, national courts shall assess the cost and scope of the disclosure (in order to avoid so-called “fishing expeditions” or non-specific, generic and random requests) and the existence of confidential information included within the source of evidence to be disclosed.
On the other hand, the applicant shall justify: (i) that the sources of evidence for which disclosure is requested are necessary for the decision on the process where the action for damages has been or is going to be brought; and (ii) the lack of means to have access to the relevant sources of evidence by itself, without the assistance of the court. Additionally, the court may subject the enforcement of the order of disclosure to the posting of a bond by the applicant, in order to secure the payment of potential expenses arising from that enforcement and the compensation for the damages caused to the counterparty.
The new regulation pays particular attention to the protection of confidentiality of the requested information. The court shall adopt any necessary measure in order to protect such confidentiality, e.g., holding in-camera hearings, ordering experts to prepare summaries by compiling the information in an aggregated manner, or restricting the individuals authorised to have access to the evidence. It is noteworthy that paragraph 3 of Article 283 bis b) of the CPA sets forth that the court shall ensure the effectiveness of the rules governing attorney-client privilege, as well as the rules on the secrecy.
The request for disclosure of the source of evidence can be submitted before the action for damages is brought, jointly with the claim filed by the claimant or during the course of the proceedings. The competent court to hear the request will be the one with jurisdiction to try the action for damages, if the claim has not been filed yet, and the court assigned with the case or already trying the action for damages, if the claim has already been submitted. In the case that the request for disclosure takes place before the procedure begins, the claimant shall present facts and proofs which are reasonably available, and which are sufficient to justify the feasibility of the action for damages. The applicant shall have to file the brief of claim within 20 days as from the date on which the disclosure takes place. Otherwise, the court shall revoke the disclosure order, impose the legal costs of the procedure on the applicant and hold the applicant liable for any damages caused.
Regarding the proceedings, once the request for disclosure has been received by the court, the party from which disclosure is sought and, where applicable, the defendant or the future defendant will be served with the request. Then, the court will summon the parties to an oral hearing to be held within 10 days as from the date of the request. At that hearing the parties may make statements they deem appropriate and rely on any available means of evidence, which shall be admitted and carried out if they are considered convenient and useful by the court. The court shall decide on the request within a term of five days as from the date when the oral hearing ends.
Finally, the Royal Decree provides for certain obligations on the party from which the disclosure is sought. In the case where that party destroys or hides the relevant sources of evidence, or makes access to them impossible, the court may impose periodic fines amounting from Euro 600 to Euro 60,000 per day of delay in complying with the order, without prejudice to the criminal liability which it may incur. On the other hand, the claimant may also request from the court certain measures aimed at mitigating the lack of the relevant means or sources of evidence, including that the facts to which those means or sources supposedly refer are deemed to have been admitted or the tacit acceptance by the defendant of the claims already brought or even those to be brought by the plaintiff. Another measure aimed at deterring obstructive practices by the defendant consists of the possibility for the applicant to request the court impose on the counterparty the legal costs of both the procedure for access to the sources of evidence and of the main proceedings, regardless of its result. As it can be seen, the Royal Decree provides for extremely severe consequences.
Correspondingly, the Royal Decree lays down measures that may be adopted against an applicant who breaches its obligations on confidentiality or use of disclosed or produced evidence. The most noteworthy is the possibility for the court to declare the full or partial dismissal of the actions made, or exceptions opposed, in the main proceedings by the party that fails to fulfil those obligations.
Entry into force and non-retroactive effects
The amendments of the SCA and CPA by Royal Decree did enter into force on the same day of their publication in the Spanish Official Gazette, i.e., on 27 May 2017.
However, it must be noted that the amendments of the SCA will not apply retroactively. Moreover, the modifications of the CPA will be exclusively applicable to those procedures initiated after the date of entry into force of the Royal Decree.