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ECJ Interprets Rules of Jurisdiction for Cartel Damages Claims

CDC Hydrogen Peroxide: Jurisdiction in follow-on Damages Claims The European Court of Justice ("ECJ") has recently handed down a landmark judgment in the Hydrogen Peroxide case, confirming that cartel victims may jointly sue cartelists for damages in an EU Member State where only one of the cartelists is domiciled. Moreover, the Court held that cartel victims may choose to bring their damages actions at the courts of either the Member State where the cartel agreement was concluded, or of the Member State where they are domiciled. The judgment creates a favourable jurisdictional regime for follow-on damages claims, which together with the newly adopted EU Damages Directive, may result in an increased number of damages claims in the European Union.

Background

The case stems from a reference for a preliminary ruling made by a German Court regarding the interpretation of the Brussels Regulation in the context of a complex and lengthy cartel.

In March 2009, CDC Hydrogen Peroxide SA ("CDC") brought a follow-on damages claim in Germany against six chemical companies, which have been sanctioned by the European Commission for oper-ating an EEA wide cartel in the production of hydrogen peroxide. As the cartelists were established in various Member States, CDC sought to establish the German court's jurisdiction in respect of all the defendants by reason of one of them, Evonik Degussa, being a German domiciled company (the "anchor defendant"). In September 2009, CDC withdrew its action against the anchor defendant following an out-of-court settlement.

The issue which then arose was whether the German court maintained international jurisdiction in respect of the non German domiciled defendants, in circumstances where the anchor defendant was no longer a party to the proceedings and in light of jurisdictional clauses in supply contracts between the remaining defendants and the claimants, conferring jurisdiction to the courts of Member States, other than Germany.

The German Court referred the following three questions to the ECJ, essentially asking the Court to interpret how the jurisdictional provisions of the Brussels Regulation should apply in the context of a complex follow-on cartel damages claim.

The questions referred and the Court's ruling

First Question: One jurisdiction against multiple defendants

Can Article 6(1) of the Brussels Regulation be used to bring a follow-on damages claim against multiple defendants domiciled in different Member States in the court of the Member State where the anchor defendant is domiciled? If so, does that court maintain jurisdiction against the non domiciled defendants, in the event the anchor defendant is dropped from the claim?

The Court confirmed that Article 6(1) may apply in follow-on cartel damages claims. Therefore it is, in principle, permissible for claimants to establish a centralised jurisdiction against multiple defendants. The Court considered that a centralised jurisdiction is appropriate in order to avoid the risk of irreconcilable judgments, which would otherwise arise if a victim brought damages actions in several Member States.

Moreover, the Court held that withdrawal of the claim against the only domiciled cartelist does not affect the international jurisdiction of the court seised in respect of the remaining non domiciled cartelists. However, it emphasised that this provision must not be applied abusively. That would be the case here if it were to be established that the parties purposefully delayed the formal conclusion of an out-of-court settlement until proceedings had been instituted, for the sole purpose of securing the jurisdiction of the court seised as against the other cartelists.

Second Question: Place where the harmful event occurred

Is it possible to bring a damages claim at "the place where the harmful event occurred", as per Article 5(3) of the Brussels Regulation?

The ECJ confirmed that "the place where the harmful event occurred" encompasses both the place where the damage occurred and the place of the event giving rise to the damage. Importantly, the Court clarified that in the context of a cartel damages claim, where the loss consists in additional costs as a result of artificially inflated prices (the so called overcharge), the place where the damage occurred must be identified separately for each victim and is located at that victim's registered office. The victim can therefore choose to bring an action at the courts of either the Member State where the cartel agreement was concluded or the Member State where the victim is domiciled.

It should be pointed out that the Court did not follow the opinion of the Advocate General in connection with this question. Advocate General Jääskinen had advised that Article 5(3) should remain inop-erable in cases involving complex cartel arrangements affecting the market of multiple Member States. In such cases the jurisdiction of the court should be based on Articles 2(1) and 6(1) of the Brussels Regulation so that the cartelists can be sued in the courts of the Member State where any of them is domiciled. Had the Court excluded Article 5(3) as a basis for jurisdiction, it would have significantly restricted the ability of cartel victims to pursue their claims at the courts of the most favourable jurisdictions.

Third Question: Arbitration and jurisdiction clauses

Should jurisdiction clauses in supply contracts between the cartelists and the alleged victims be taken into account in establishing jurisdiction for a cartel damages claim?

The Court held that contractual jurisdiction clauses do not extend to disputes arising from tortious liability, unless the victim was fully aware of the cartel arrangements and the loss it suffered. In practice, claimants are unlikely to have such knowledge given the secretive nature of cartel arrangements.

Conclusion

This is the first time that the ECJ has provided guidance on the application of the Brussels Regulation in competition law damages claims. Given the particular importance of jurisdiction for follow-on dam-ages claims, the judgment is a milestone in private enforcement. On a practical level, a centralised jurisdiction is likely to facilitate litigation throughout Europe, since cartel victims can choose the most claimant-friendly jurisdiction in which to bring their claim. On a political level, the judgment endorses the European Commission's efforts to introduce an effective redress regime for competition damages in Europe. Together with the Damages Directive, the judgment will be likely to facilitate of cartel damages claims in the European Union.