Memorandum by Sir David Edward QC[1]
INTRODUCTION AND
SUMMARY
1.1 The CFI was set up in 1989 for the purpose
of dealing with "actions requiring close examination of complex
facts"—ie staff cases and challenges to Commission
decisions under Articles 81 and 82. In general, the CFI deals
with competition cases as fast and effectively as is consistent
with the current constraints of procedure and language. A number
of the judges are recognised experts in this field. In that sense,
an EU competition court already exists. It is a good principle
that "entities are not to be multiplied without necessity".[2]
1.2 The scope of a specialist competition
court's jurisdiction would not be easy to define. In Luxembourg,
"competition cases" do not come neatly packaged and
labelled. The UK Competition Appeal Tribunal, operating within
the statutory framework of a single Member State, is not a safe
analogy.
13 DECEMBER 2006
1.3 The ECJ and CFI are required to work
within tight budgetary and procedural constraints—notably
the language regime. Some of these constraints can be removed
or modified only by unanimous decision of the Member States (in
IGC or in Council) which would be difficult, if not impossible,
to achieve. The same constraints would apply to a new competition
court.
1.4 The problem of delay does not arise
exclusively (or even mainly) in the EU court system. The antecedent
investigation and decision-making process before the Commission
is itself a source of delay and uncertainty.[3]
A full analysis of the causes of delay and possible solutions
would need to cover this aspect as well—notably, the question
whether the functions of investigation and decision-making should
continue to be combined in the hands of the Commission.
1.5 The case for greater speed and certainty
in mergers and acquisitions is much stronger than the case for
a specialist competition court.[4]
Some suggestions are made below (the relevant paragraphs are marked
with an asterisk). Their adoption would go some way towards attenuating
the existing problems. There is no single panacea.
1.6 The time has come to recognise that
the ECJ and CFI are competent to regulate their own procedure
without detailed political control. This would enable more pro-active
case-management and perhaps some degree of experimentation with
different procedural solutions.
1.7 The discussion of a competition court
prompts two questions that go well beyond the scope of this inquiry.
The EU judicial system already comprises 57 Judges (rising to
61 with accession of Romania and Bulgaria), 8 Advocates General
and 3 Registrars. A specialist competition court would not be
cost-free in terms of additional salaries, staff, etc.
— If such funds are available, might
they not be better applied towards improving the system in other
ways?
— Should not consideration of this
issue be part of a more thorough-going review of the EU judicial
architecture? The way in which competition cases are dealt with
is not the only problem facing the EU court system.
MERGERS AND
ACQUISITIONS
The case for reform
2.1 The main focus of the CBI paper is on
the time taken to deal with cases involving mergers and acquisitions
("concentrations between undertakings").[5]
In this respect, I believe that the CBI's concern is justified,
and some steps could and should be taken to meet it. I deal with
this issue first.
2.2 The Merger Regulation 139/2004 (preamble,
para 4) recognises the importance of mergers for the competitiveness
of European industry. This is a crucial consideration that the
Member States and the EU institutions cannot afford to ignore.
What matters to the companies concerned is not only speed but
finality. It must be predictable (within reasonable limits) for
those entering negotiations whether and if so when their deal
can go ahead without further possibility of challenge.
2.3 Merger decisions differ from the general
run of competition decisions under Articles 81 and 82, which are
concerned with findings of past infringement and fines. It is
true that decisions relating to past conduct (and orders to prevent
its repetition) have implications for business decisions as regards
the future. But the problem of delay and uncertainty, though important,
is not as acute as in the case of mergers.
2.4 It is therefore legitimate to treat
mergers as a special case, calling for special treatment.
*2.5 Under the special regime of Regulation
139/2004, the Commission and the authorities of the Member States
have to work to tight time limits that do not apply to other competition
cases. Nevertheless, the practical effect of these time limits
is not entirely clear.
* Data might usefully be sought as to the relative
length (in practice) of proceedings before the Commission (including
pre-notification discussions) and proceedings before the Court.[6]
2.6 Under the fast track procedure before
the CFI, it seems to be generally accepted that cases are dealt
with as fast as is humanly possible within the constraints of
the existing procedural and linguistic regime. Nevertheless, the
time taken is not predictable. The question is whether it could
be shortened and made more predictable by appropriate procedural
reforms.
The constraints
3.1 There are some unavoidable constraints.
Many of them would apply equally to a specialist competition court.
3.2 Article 230 EC requires that acts of
the Commission be subject to judicial review in the Court of Justice.
The time limit within which a decision must be challenged is set
at two months from its date. The right to challenge is open to
any person "directly and individually concerned" by
the decision. These rights can be curtailed only by amendment
of the Treaty.
3.3 The scope of judicial review is likewise
prescribed by Article 230. It excludes anything in the nature
of a "retrial" of questions of fact or economic assessment.
The CFI does investigate, as a question of law, whether there
is an evidential basis for the findings of the Commission and
whether those findings are sufficient to justify the decision.
More extensive retrial of issues of fact and economic assessment,
whether before the CFI or a specialist tribunal, would add substantially
to the time taken. There is an inherent tension between demands
for greater speed and demands for greater in-depth review.
3.4 The Member States and Institutions are
entitled to intervene in all cases before the CFI (Article 53,
applying Article 40, of the Statute of the Court). This right
of intervention could be removed only by amendment of the Statute
which requires unanimity in Council (Article 245 EC). Intervention
by private parties is subject to the leave of the Court, but the
right to apply to intervene, which itself consumes time, cannot
be removed.
3.5 The linguistic regime is established
by Article 29 of the ECJ Rules of Procedure and Article 35 of
the CFI Rules. Exceptionally, the linguistic rules can be amended
only by unanimity (Article 64 of the Statute). My impression is
that any formal change to the language regime would be hotly resisted
and, given the need for unanimity, any attempt to change would
almost certainly be unsuccessful.
3.6 That is not to say that nothing can
or should be done to alleviate the consequences of the language
regime in merger cases (or competition cases generally). Contrary
to popular mythology, French is not the "official" language
of the Court, and I and other judges have had personal experience
of processing cases in languages other than French. But it is
important to understand what the practical constraints are:
3.6.1 In general, it makes for efficiency
and speed if the judges work together in a single language. That
language need not be French but judges are generally selected
on the basis that they will be able (or will learn) to work in
French.
3.6.2 It cannot be assumed that all judges
will be comfortable working in English or German, or that merger
and acquisition cases will come from Member States whose language
is one that can be read without translation by all the judges
concerned. Given that the Member States are free to nominate as
judges whomsoever they please, it would not necessarily be easy
to constitute Chambers specialised by language as well as by subject
matter expertise.
3.6.3 In a challenge to a Commission decision,
it is the applicant that chooses the language of the case, and
parties can agree on the language to be used. To that extent,
parties are in a position to determine the "working language"
of the case. But the Member States are always entitled to submit
their observations in their own language, so the need for translation
cannot be excluded by agreement of the parties.
3.6.4 It is open to the court dealing with
a case not to require translation of documents. But pre-selection
of documents to be translated does not necessarily save time,
since the reporting judge has to become sufficiently familiar
with the case to make the decision, and it may subsequently turn
out that a crucial document has been overlooked.
3.6.5 Parties are already free to submit
their own translations of documents. My experience is that such
translations are liable to be inaccurate or misleading. In some
cases documents have had to be retranslated causing additional
delay. At the very least, the accuracy of the translations has
to be checked by the Court translators.
3.6.6 At present, the language divisions
of the Court are arranged so that the French division concentrates
mainly on translation of documents for internal use while the
other divisions concentrate mainly on translation of judgments
from the working language into the other official languages. If
a significant number of cases had to be processed in different
working languages for different divisions of the court, this would
entail reorganisation of the language divisions, probably at additional
cost.
3.6.7 As the CBI recognises, the Court has
to recruit translators, particularly of English mother-tongue,
in a highly competitive market. The budgetary authority has consistently,
in my experience, underestimated the problems. Because of constraints
of budget and manpower, priority is given to translation of documents
for Article 234 references since they involve a stay of national
proceedings. Fast-track procedures inevitably affect other priorities.
3.6.8 The Court's power to charge parties
for the cost of translation is limited to (i) ordering a party
to "refund avoidable costs", or (ii) charging for translation
work carried out at the request of a party (ECJ Rule 72, CFI Rule
90). I have never known the first of these powers to be invoked
since the Court would have to pronounce a reasoned order showing
the precise amount of the costs incurred and that those costs
were "avoidable".
The causes of delay and possible remedies
4.1 In my experience, the most significant
cause of delay, particularly in competition cases, is the length
of written pleadings and the lodging of large quantities of documents.
Even if the pleadings and documents do not have to be translated,
the sheer volume of paper affects efficient case-management by
the Judge Rapporteur (and Advocate General if there is one).
4.2 In part, the length of pleadings and
the volume of documents can be attributed to the rule that all
pleas must be stated at the outset and all documents relied on
must be produced with the pleadings (ECJ Rule 37 and 42, CFI Rules
43 and 48). Lawyers are naturally reluctant, particularly in this
litigious age, to be accused later of failure to advance a stateable
argument or to lodge a necessary document.
*4.3 Some relaxation of this rule at the
discretion of the Court would make it easier to impose a mandatory
limit on the length of pleadings and/or to permit the later lodging
of documents. But it would be important to avoid a time-consuming
procedural ping-pong in which new points are introduced spasmodically
(in writing or orally) requiring the other party to be given the
time to reply. This would call for effective case management.
*4.4 Some arguments advanced in the written
pleadings are, to say the least, far-fetched. Under existing practice
CFI judgments set out all the arguments advanced and give reasons
for their acceptance or rejection. It has been suggested that
the CFI might use greater economy in this respect.[7]
I agree. I cannot recall any case in which a party has successfully
appealed to the ECJ on the ground that the CFI has failed to reply
to a bad argument.
*4.5 An argument can be rejected by reasoned
order before the oral hearing, so limiting the scope of the hearing.
I have done this as Rapporteur in an appeal to the ECJ. But a
reasoned order takes time in drafting, deliberation, translation
(if necessary) and notification, so that the time saved may not
be significant.
*4.6 It has been suggested that parties
might be faced with a choice between an expedited hearing on a
limited number of arguments and a fuller hearing on every possible
argument.[8]
This seems to me to be sensible provided that no-one has an interest
in preventing the merger by delaying the hearing.
4.7 Proceedings before the Court are free
of charge, except for the limited power mentioned above (para
3.6.8). It is unusual nowadays that no court fees should be charged,
though it may well be inevitable in the case of Article 234 references.
*4.8 If corporations challenging Commission
decisions were required to contribute appropriately towards the
cost, this would help the Court to overcome its budgetary constraints.
It might, less certainly,[9]
be a disincentive to bringing proceedings without merit.
*4.8 I also believe it would help if the
Court were able to mulct parties for time-wasting, unnecessary
translation and documentary overload in a more "broad axe",
discretionary way (a form of wasted costs order). (I should say,
however, that, when I suggested this to some colleagues in the
ECJ, I was assured that Member States would object to giving the
Court any such power.)
4.9 I am opposed to any suggestion that
mandatory time limits should be imposed on the CFI. The time taken
will depend on many factors, some of which have been discussed
above, and no-one seems to suggest that the CFI could work faster
than it presently does within existing constraints.
*4.10 I believe there is merit in the suggestion
that the CFI should have the power, when it annuls a Commission
decision, to "substitute" a new decision. [10]This
is a feature of German administrative procedure. Such a power
could contribute significantly to finality as well as speed. Since
mergers are the subject of a special Regulation, I am reasonably
confident that the Regulation could be amended so as to grant
such a power without impinging on the requirements of the Treaty
or the Statute. (An analogous power is granted by Article 61 of
the Statute where the ECJ annuls a decision of the CFI.)
A specialist competition court?
5.1 Some discussion of a Competition Court
misunderstands the place of competition law in the context of
EU law as a whole. Jean Monnet is reputed to have said that "The
whole Treaty is about competition". Articles 81 and 82 form
part of a wider Chapter that includes the rules relating to public
undertakings, services of general economic interest, revenue producing
monopolies and, especially, state aids. That Chapter is in turn
integrally related to the rules on free movement and other policies.
EU competition law is not a self-standing legal discipline to
the same extent as US antitrust law or even UK competition law
which has its own statutory framework.
5.2 So, while it is true that in reviewing
Commission decisions under Articles 81 and 82, or the Merger Regulation
the CFI is performing a function analogous to that of the UK Competition
Appeal Tribunal, the analogy is not complete.
5.3 References from national courts under
Article 234 EC relatively rarely pose questions that are confined
to the competition rules in a narrow sense. More frequently, they
pose questions about the competition rules combined with other
questions about free movement, state aids, transport, social or
industrial policy, etc.
5.4 Courage v Crehan, to which reference
is made in the call for evidence, was not just about "competition
law". The primary issue was a more fundamental "constitutional"
one: Does Community law require a national court to set aside
a rule of national law that precludes a party to a contract from
pleading the unlawfulness of that contract as a basis for seeking
damages from the other party?
5.5 In short, EU competition law is not
an isolated "specialist" subject and "competition
questions" do not come to Luxembourg in neatly parcelled
and labelled packages. In this respect, competition cases are
different from staff cases and patent cases (even if there is
an overlap between intellectual property rights and free movement).
5.6 I am therefore sceptical about the need
for, or the desirability of creating, a specialist competition
court. I also believe (though this can be no more than a hunch)
that, if such a court were to be created as a judicial panel subordinate
to the CFI, appeals from the panel to the CFI would be more numerous
than appeals under the existing system from the CFI to the ECJ.
*5.7 On the other hand, it seems to me to
be logical that, as the scope of the CFI's jurisdiction expands,
its Chambers should become more specialised. Within that context,
judges who have substantial knowledge and experience of competition
law could be assigned to Chambers dealing with competition cases
without it being necessary to define precisely what does, or does
not, constitute a "competition case".
5.8 As regards the possibility of devolving
"competition references" under Article 234 to the CFI
(point 6 of the Call for evidence), Article 225(3) EC provides
for devolution "in specific areas laid down by the Statute".
For the reasons given above (paras 5.3 and 5.4), clear definition
would be essential to avoid uncertainty as to which court (ECJ
or CFI) is competent to deal with a reference. Uncertainty would
add significantly to the time taken to process the reference.
*5.9 In my opinion, it would be possible,
as a first step, to assign to the CFI references where the questions
posed by the national court are confined exclusively to questions
concerning the interpretation and/or application of Articles 81
and/or 82. I would favour that solution for the following reason.
5.10 A reference whose subject matter is
exclusively confined to interpretation or application of Article
81 or 82, is likely to arise in the context of a dispute between
private undertakings. It is likely (though not certain) that the
issue will turn on the particular facts and circumstances of that
dispute, and will be analogous to the issues arising in actions
to annul Commission decisions, already devolved to the CFI. If,
exceptionally, such a reference were to raise questions of general
importance, the First Advocate General could propose that the
ECJ should review the decision of the CFI on the ground that "there
is a serious risk of the unity or consistency of Community law
being affected" (Article 62 of the Statute). This seems to
me to represent a rational and workable division of labour between
the ECJ and the CFI.
Generally
6.1 In my opinion, it is no longer reasonable
that the EU Courts should remain in a procedural straitjacket
at the mercy of the Member States and the political institutions.
Not a dot or comma of the Rules of Procedure can be changed without
the approval (albeit by qualified majority) [11]of
the Council. What this means in practice is that changes require
the approval of civil servants in the Ministries of Justice of
25 (soon 27) Member States. Their attitude to any proposed change
tends (euphemistically) to be "cautious" particularly
where they think the interests of the Member States as litigants
or interveners may be affected. The provisions of the Statute
are even more difficult to change.
6.2 The scope for pro-active case-management
by the Court is extremely limited. For example, the Council was
persuaded, with some difficulty, to empower the CFI to adopt "measures
of organisation of procedure" (Article 64 of the CFI Rules).
But these are limited in scope and the court may have to invite
comments from the parties before adopting them.
*6.3 The need for Member State approval
of Rules of Procedure is not unusual in the case of international
courts and tribunals. But the Luxembourg courts now have a case
load and range of work similar to those of busy national courts.
In my opinion, they have earned the right to exercise a reasonable
degree of control over their own procedure.
*6.4 Some of the constraints discussed above
could not be avoided, but the Luxembourg courts should be able,
on their own initiative, to test out new procedural methods and
expedients that would go some way towards achieving greater speed
and efficiency.
6.5 Greater budgetary autonomy would be
even better, but that goes well beyond the scope of this Inquiry.
November 2006
1 Judge of the CFI 1989-92, and of the ECJ 1992-2004. Back
2
"Occam's razor", much undervalued in modern legislative
and administrative practice. Back
3
See the submission by John Temple Lang and Robert O'Donoghue ("Temple
Lang and O'Donoghue") with almost all of which I agree (para
1.3). Back
4
I should put on record that the CBI have consulted me about their
proposals, and this coincides with the advice I have given them. Back
5
In what follows, I refer only to "mergers" for the sake
of brevity. Back
6
Note in this connection Temple Lang and O'Donoghue at para 1.3. Back
7
Temple Lang and O'Donoghue, para 2.10. Back
8
Temple Lang and O'Donoghue, para 2.7. Back
9
TempleLang and O'Donoghue, para 2.7. Back
10
Temple Lang and O'Donoghue, para 2.14. Back
11
Except for the language regime, see para. 3.5 above. Back
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