Examination of Witnesses (Questions 60-79)
Mr Onno Brouwer and Mr Georg Berrisch
29 NOVEMBER 2006
Q60 Chairman: There is a real problem,
is there, that you have experienced yourselves?
Mr Berrisch: Yes, I think everybody who has
practised before the Community courts, in particular the Court
of First Instance recently, has experienced a problem of delays
where cases take too long. It is not a problem unique to merger
control cases or to competition cases, but in other areas as well.
The consequences may be graver for some merger cases than for
other cases, but you have other areas where the consequences are
probably as bad as in merger cases.
Q61 Chairman: Like what?
Mr Berrisch: You could take, for example, trade
cases, dumping cases, where I am particularly active, and if you
have a measure adopted by the Community which effectively means
that you can no longer import your products into the Community
because the duties are so high and it takes four years to get
this reviewed by the Court, this definitely is a serious problem.
In state aid, if you have an investment decision where the Commission
says that the aid which you have applied for is not allowed and
then it takes four years to get that decision reviewed, that is
a problem because in four years' time you may no longer wish to
pursue that investment.
Q62 Chairman: That is at the heart of
the problem with mergers and acquisitions because if you do not
decide them quite rapidly and finally, the very passage of time
destroys the subject matter of the dispute and makes it impossible
to go ahead. We were told, I think, last week by the CBI that,
since 1995, 19 of these merger acquisition proposals have been
blocked, 10 of which were appealed, four successfully, but none
of the 19 went ahead, not even the four which were successfully
appealed. That would accord with your own experience, would it?
Mr Berrisch: To answer your question, I have
not followed the statistics and could not say whether or not—
Q63 Chairman: But you are not surprised
by those statistics?
Mr Berrisch: I am not surprised by them.
Q64 Lord Lester of Herne Hill: Just going
back to the question of whether it is sensible for us to be carrying
out this inquiry at all, is it not right that the delay in the
procedures before the Court of Justice have very serious impacts
across the entire range of work done by that Court? To give you
one example of social policy, if you have, say, a labour agreement
that is alleged to be discriminatory against women, everything
depends upon which workers are where under that agreement and
you are seeking to find out whether it is discriminatory and it
takes several years to get the answer from Luxembourg, that creates
enormous problems for employers and workers, so what is so special
about this particular area that justifies focusing upon it rather
than the general problem of delay?
Mr Brouwer: If I may say, I think that is a
very important question because it touches upon the length of
the proceedings before the Court of Justice and, in particular,
in preliminary ruling procedures where national courts refer.
I think the CCBE is very happy that actually there are now proposals
out to have a fast-track preliminary ruling procedure, which is
currently under debate, in order to give a quick answer in those
areas where a quick answer is needed, as also in immigration asylum
questions, but your example is of course very clear. We can say
that the CCBE is very much in favour of that kind of proposal
to provide the judicial protection to the citizen.
Q65 Chairman: Can one also perhaps say
that competition is at the very heart of the whole being of the
Community? Whether a merger and acquisition goes ahead, I think,
is critically important, firstly, because it might be a way of
advancing competition and making Europe more competitive, but
also, if not, it might stifle competition. It is an issue which
is very much a bedrock issue from the Community's standpoint.
Is that a fair comment as to why there is some special need for
urgency perhaps in merger and acquisition cases?
Mr Berrisch: I think, my Lord Chairman, that
is a fair comment. If I may add, there is also a distinction between
the cases you alluded to before in the area of social security
and non-discrimination. Merger cases and many other competition
cases tend to be very fact-intensive, whereas in the other cases
normally, yes, they are fact-intensive, but the Court of Justice
actually would not even look at the facts, but only at the questions
of law posed to it, so the reasons that cause delay are very different.
And the way the Court deals with these cases, and has to deal
with these cases, is very different.
Q66 Lord Norton of Louth: I think you
have probably sensed the question I was going to tease out, which
is the reasons for the delay, the extent to which it was clearly
a question of volume of casework, the extent to which it was actually
procedure and the extent to which it actually depended on the
subject matter of the case.
Mr Brouwer: My Lord Chairman, I think that the
point we were just discussing as to whether competition law is
special in a sense, whether there is a more acute problem, I think
that our view on that is that yes, particularly in merger cases,
there is an acute need for a swift procedure, but I do think it
is right to say that there are also other areas of Community law,
as has been pointed out, where I think speed is also of the essence.
We have touched upon a few examples a moment ago and another example
is also transparency cases where in fact the Court of First Instance
has allowed for a fast-track procedure in access to documents
cases because if a citizen has asked for access to a document
and you only get it one year or two years later, that defeats
the purpose of the procedure, so I think there are other areas
of Community law where it is certainly as important, but I do
think it is fair to say that for merger cases and for appeals
in merger cases, and we are done talking about the Court of First
Instance, it is certainly an area where an accelerated procedure
is very much needed and then you go into the question of what
causes the delay.
Q67 Lord Jay of Ewelme: I just wanted
to pursue Lord Lester's question, and it is all very much in the
same direction, but narrowing the question down a bit to within
competition law. It is clear, I think, from the evidence that
we have had that delays on merger cases can have a fairly direct
and important effect on the commercial interests of the parties
involved because delay may influence the decision whether or not
a merger goes ahead. Are there other areas within competition
law where delays can have the same kind of effect on the operations
of companies? I thought from what you were saying, Mr Berrisch,
earlier on that you were arguing that, as far as state aids were
concerned, a delay in a decision on state aids could also have
an impact on the direct commercial interests of companies. It
is that sort of area on which I would welcome your views.
Mr Berrisch: May I illustrate that by an example
and I probably have to declare an interest because I am involved
in that particular case I am talking about, which is the Microsoft
case. Where you have a Commission decision which orders a company
to refrain from a certain behaviour or which could affect future
conduct, in this case it has a profound impact on the launch of
a new product. What could be integrated into a new operating system
for example depends probably, to a certain extent, on whether
the Commission's decision of 2004 will be upheld or not. This
is just one example. You may have other examples where certain
conduct is prohibited or where the Commission in an Article 82
case (abuse of dominant position) orders the company to pursue
a certain conduct. That can have a profound impact on how that
company, but other companies as well which might find themselves
in a dominant position, pursues its business.
Q68 Chairman: In none of those cases,
except the state aid one that you instanced before, does the passage
of time mean that there is simply no remaining dispute worth resolving.
In other words, it does not destroy the subject matter of the
dispute. There may be delay and it may have enormous financial
implications and considerable time before, say, Microsoft adapt
a product but, there it is, a decision ultimately is needed and
will dictate how they conduct themselves in future. But if you
delay a merger decision it does not matter what the result is
because it is too late to affect it. Is that a difference?
Mr Berrisch: That can be a significant difference,
but I think these are cases where still you have something regulated
for the future, and where maybe you can also imagine that the
launch of the product is stopped and overtaken by another product,
and your product will never see the market because you could not
launch it.
Q69 Lord Lester of Herne Hill: I was
going to say would these examples make sense: a ban on tobacco
advertising challenged as being unreasonable interference with
commercial speech; or excessive regulation, so it is alleged,
of broadcast television; whether a European piece of legislation
is or is not compatible? Can these kinds of decisions not blight
an entire business while a decision is being taken on them? It
is true, I suppose, that in those cases there is no-one with a
particular interest in delaying the determination of an issue
whereas in a merger and acquisition case there may well be a party
with a vested interest in delay, commercially speaking. Would
that be right? There are two points I made: one the blighting
of the business caused by delay; and the other is the particular
problem with mergers and acquisitions, where two merchants may
disagree as to whether it is a good idea for it to be speeded
up or slowed down.
Mr Brouwer: I think what is very important from
what you indicate is that there are other areas, other examples
of where an accelerated procedure or a quick answer may be very
necessary.
Q70 Chairman: Perhaps we might turn more
specifically to some of our other areas of questionning. The first
question is, generally how much delay is down to the problems
of language and translation? Is it possible to put this in clear
terms or does it vary case-by-case? What proportion is it of the
overall delay? How do you see it?
Mr Berrisch: My Lord Chairman, I think it is
very difficult to really quantify what delay is caused by the
language issue and what delay is caused by other procedural rules
that apply and so on and so forth. That is difficult to quantify.
I have heard from people working at the court that it now takes
almost six months for a judgment to get out after the oral hearing,
and of that time probably the time needed for the judges to agree
on what the result should be may be a few weeks. The rest is caused
by translation issues, by the need to ensure that the judgments
are internally consistent, that the judgments use the right terminology
that is used in other judgments of the court so that you do not
have contradictions; so that process of getting the judgment ready
for delivery takes probably four months.
Q71 Chairman: Is that really true in
the fast track? Are the very fast-track merger and acquisition
cases not prioritised now?
Mr Berrisch: I do not think in these cases that
it would be true that it would take so long, but in normal cases
very serious delay is caused after the oral hearing.
Q72 Chairman: We are going to come back
now and focus more on the merger and acquisition problem, which
is really the focus of our inquiry. As to that, do you think post-judicial
agreement translation delays are significant—the actual
process of getting an agreed judgment? I suppose you have got
to do it in all the 23 languages?
Mr Berrisch: My Lord Chairman, I do not think
all these judgments come out immediately in all languages. That
is certainly no longer the case.
Q73 Chairman: I see, just to get it out
in the court's language then?
Mr Berrisch: That depends on the language of
procedure, what language has been used, and also in what language
the judgment has been drafted. When we discussed this earlier,
it is true that one can probably achieve a significant time gain
by just deciding to prioritise to get the judgment out in the
language of procedure, and of course also in the language in which
the judgment was drafted because this version is ready, and then
focus on other translations afterwards. I think that could save
a lot of time.
Q74 Chairman: Do you agree with what
Mr Temple Lang and Mr O'Donoghue say in non-merger competition
cases, that really it is the Commission rather than the CFI that
needs to be re-organised and that is where the main delays are?
Mr Brouwer: I think our view is that one would
need to look at both because we think procedures can be made more
efficient within the Commission, but we must realise that DG Comp
is trying to deal with these very large and complex cases with
relatively few resources. It is not easy for DG Comp.
Q75 Chairman: You are speaking of the
Commission?
Mr Brouwer: DG Competition is basically rather
understaffed so I think that is an issue in itself. And of course
the case law has also had as an effect that the Commission is
more cautious. A number of decisions have been annulled and the
Commission has now installed certain internal proceedings, which
we think are very helpful, such as peer review and checks and
balances, and has a very diligent process within the Commission,
so we do think the Commission needs time to take a proper decision.
I think maybe some gains can be obtained but we must realise that
DG Competition may need more resources.
Q76 Chairman: But for merger and acquisition
cases you think the main improvement should lie at the court process
rather than at the prior Commission process?
Mr Brouwer: We think one should look at both.
Q77 Chairman: We are only looking at
the former.
Mr Brouwer: You are only looking at the Court
of First Instance.
Mr Berrisch: If I may add one thing to that.
Of course, under the merger regulation the Commission is working
under pretty tight deadlines, and it is probably unrealistic to
assume that if you have a complex phase two merger investigation—and
these are the cases we are talking about—you can speed up
the process more at the Commission than is currently done. You
may gain a few weeks, but you are not going to gain really critical
time there at the Commission. Thus by definition, the focus has
to be on what can be done on the court side once the merger is
prohibited.
Q78 Chairman: Just so I understand, stage
two is where there are discussions between the companies concerned
and the Commission as to whether there are not various conditions
under which this could be an acceptable deal? Is that it?
Mr Berrisch: The difference between stage two
and stage one is that stage two involves the in-depth investigation
once the Commission has identified at the end of the first stage
that the concentration could give rise to competition concerns.
So after phase one, which I think is now one month or 25 working
days, the Commission will either clear the merger—if the
Commission does not do anything the merger is cleared—or
the Commission will take a decision "we will go into an in-depth
investigation because we think the merger raises concerns".
Q79 Chairman: Does that stage two also
include any process of trying to negotiate conditions under which
it might go ahead?
Mr Berrisch: Absolutely.
Chairman: I see. Lord Lester?
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