Memorandum by Allen & Overy
1. NEED FOR
ACTION AT
UNION LEVEL
In your experience, is there a need for an EU
Competition Court distinct from the Court of First Instance (CFI)?
In what sorts of cases would a Competition Court be useful?
Yes, there is a need for action at European
Union level. The main reason is the need to reduce the duration
of judicial review in competition law proceedings. Excessive duration
goes to the heart of effectiveness of judicial review in competition
law and therefore this is not simply a procedural point but one
of principle. Duration of proceedings which is not in line with
business requirements has a dissuasive effect on access to judicial
review. This results in a reduced intensity of judicial control
of administrative action and, in the long term, has negative impact
of the soundness of the system of antitrust enforcement as a whole.
This need is particularly acute in the context
of merger control but it also affects other areas of competition
law. Experience so far shows that the shortest possible duration
of judicial review of an ECMR merger decision is seven months
(achieved in the EdP/ENI case) which increases to nine months
by adding the two month period for appeal. [1]This
period is excessively long in the context of mergers which have
already been through approximately eight months of regulatory
scrutiny under the ECMR procedure.
In addition the duration of the EdP/ENI judicial
review is very much the exception rather than the rule. The average
duration of review of merger control proceedings to date (including
appeal periods) is approximately 32 months (although a number
of different considerations play a role in the behaviour of litigants
in merger control proceedings and this results in a great disparity
in duration of proceedings ranging from approximately seven to
48 months). Even in cases where expedited procedure is used a
case may last as long as 24 months[2]
(although a duration of nine to 12 months is more likely if the
applicants are the merging parties).
A reduction in duration of judicial proceedings
would improve access to judicial review of administrative action,
which is a an essential component of a healthy system. We believe
that more frequent judicial review (or even the possibility of
such judicial review) will act as a permanent stimulus for the
Commission to strengthen its decisional practice further.
It should be noted, however, that there would
be a cost to business arising from this (which may also represent
a cost to society): greater access to judicial review in a legal
context where, unlike in the US, third parties (including competitors)
have locus standi to challenge merger decisions will increase
litigiousness. This will mean, in turn, that even in the context
of clearance decisions, companies will want to include condition
precedents in a much greater proportion of cases in order to cover
the risk of judicial review. Companies may often chose to wait
until the expiry of the appeal waiting periods before completing.
It would in our view be important to avoid creating
a situation where competitors to the merging parties are able
to use judicial review as a spoiling tactic to challenge merger
clearance decisions. Our experience in the UK is that, following
the institutional changes brought about by the Enterprise Act
2002, the UK merger control regime facilitates such challenges
(an unintended consequence of legislative change). The danger
under the UK system is that a competitor, having failed to persuade
the Office of Fair Trading (OFT) to refer a merger for in-depth
review to the Competition Commission can effectively have another
"bite at the cherry" before the Competition Appeal Tribuunal
(CAT), using the cloak of judicial review as a disguise for what
is ultimately an appeal on the merits (ie whether the OFT was
right or wrong to conclude that the merger would not result in
a substantial lessening of competition). It would be regrettable
if this design fault were to be introduced into the EU merger
control system.
It also needs to be borne in mind that a side
effect of a more readily available system of judicial review of
merger decisions will be an indirect (and not publicly visible)
delay in the timetable for such transactions to allow companies
to assess the risk of possible third party challenge. This is
something that, in our experience, at the moment is not realistic
to consider in relation to ECMR proceedings that have an appeal
period of two months and 10 days and such a long overall duration.
2. REFORM OF
THE CFI
Would reform of the rules and procedures of the
CFI be preferable to the establishment of a new court? If so,
what changes should be made?
Some of the objectives set out above in theory
could also be achieved in theory with a reform of the rules and
procedures of the CFI. The most realistic option would be the
introduction of one or more specialist chambers. To a certain
extent, CFI competition cases are allocated to judges who have
developed expertise in this area. However, the system cannot be
improved further without giving rise to substantial inefficiencies
in the internal CFI case allocation system and a negative impact
on the overall operation of the CFI.
In addition we do not believe that one specialist
chamber would suffice for the entire case load of EU competition
cases. Further, we do not believe that reserving two chambers
to competition matters would be sustainable for the CFI.
An essential component of a judicial reform
of the handling of competition cases would be the adoption of
a procedural framework allowing active case management and providing
sufficient flexibility to adapt to the peculiarity of the case
(in terms of language, and the need for expedited procedures).
We doubt whether this can realistically be achieved without spinning
off jurisdiction over competition cases into a separate judicial
panel.
3. JURISDICTION
OF THE
COMPETITION COURT
The CBI has proposed that the Competition Court
be established as a "judicial panel" under Article 225a
of the EC Treaty. Do you support that proposal? If so, what "competition"
jurisdiction should it have?
Does the problem of delays only affect merger
cases? If so, should the jurisdiction be confined to merger cases?
On balance we support the proposal as part of
wider process of reform. The establishment of a competition judicial
panel (Competition Court) would have the following benefits:
(1) consolidation and enhancement of judicial
expertise in this area of law;
(2) adoption of a more flexible procedural
framework that allows for greater consideration of the individual
circumstances of each case (eg time sensitiveness, language and
length of pleadings); and
(3) improvement in the overall access to
and, therefore, effectiveness of judicial review in EU competition
law.
Whilst the problem of delay is most acute in
relation to mergers we do not think that it would be desirable
to have a judicial panel dealing with merger cases only; the jurisdiction
of a Competition Court should extend to all competition law matters
(subject to a procedural framework that enables the Competition
Court to give higher priority to cases that are more time sensitive
such as mergers).
In our view State aid cases should initially
be excluded from the jurisdiction of a Competition Court as they
involve, by definition, a ruling on the role of Member States
which should remain subject to full review by the CFI and to standard
appeal on point of law to the ECJ to ensure unity and consistency
within the EU legal system.
Key features of the procedural framework of
a Competition Court should include the ability to:
(1) issue case management directions;
(2) schedule hearings promptly;
(3) encourage early submissions; and
(4) be strict on length of submissions.
A reduction of the appeal periods for at least
merger cases would also be desirable although we recognise that
it is not realistic to expect a Treaty modification in this respect.
4. COMPOSITION
OF THE
COMPETITION COURT
Article 225a TEC requires the members of judicial
panels to be chosen "from persons whose independence is beyond
doubt and who possess the ability required for appointment to
judicial office". What qualifications should the judges have?
How should they be appointed? Is there a case for national competition
judges being seconded ad hoc to the Competition Court?
If Article 225a excludes the appointment of, for
example, economists and accountants, how could their assistance
be obtained? Is there a case for their appointment as "assistant
rapporteurs" as envisaged for scientists/technologists in
the proposed EU Patent Court?
In our view the members of a Competition Court
should be appointed from persons with experience in competition
law or, at least, other areas of law affecting business and consumers.
The appointment should be for a fixed period of six years (renewable
once only). A regular change in the members of the Competition
Court would avoid the risk inherent in any specialist court of
developing an excessively one-sided view of legal issues presented
to it.
Judges could of course be appointed from national
judiciaries (including on a long-term secondment basis), particularly
from those jurisdictions that have courts specialised in competition
law or with a strong competition law focus. Appointment or secondments
of less than three years should be avoided to ensure consistency.
We do not believe that it would be necessary
to appoint assistant rapporteurs amongst economists and accountants.
Judges in this area of law benefit from a general understanding
of economic issues but do not require scientific/technological
support that may be required in the context of patents. Judges
would have access to the parties' submissions and should exercise
their judgement in evaluating evidence, including expert evidence,
of an economic nature. It should remain incumbent on the litigants
to present economic evidence in a form that a specialist judge
should be able to rule upon.
5. APPEALS FROM
THE COMPETITION
COURT
Article 225a TEC provides that decisions given
by judicial panels may be subject to a right of appeal on points
of law or, when provided for in the decision establishing the
panel, a right of appeal also on matters of fact, before the CFI.
Decisions of the CFI would "exceptionally" be subject
to review by the Court of Justice (Article 225(2)). What should
be the jurisdiction of the CFI to hear appeals from the Competition
Court? Should there be a specialised chamber of the CFI to hear
appeals?
If a Competition Court is established, in our
view any further review by the CFI should be limited to points
of law. The Competition Court should be given discretion to give
leave to appeal a particular decision also on matters of fact.
Review by the ECJ should be limited to cases
giving rise to a serious risk to the unity and consistency of
Community law. The Protocol on the Statute of Justice[3]
provides that where the First Advocate-General considers there
is a serious risk to the unity or consistency of Community law,
he may propose that the ECJ review a decision of the CFI; this
could be extended to decisions of the Competition Court.
A further level of appeal within the judicial
review process should be avoided. Article 225(3) of the EC Treaty
provides an appropriate safeguard in that respect as it enables
the CFI to choose to refer a case to the ECJ at the very outset
of proceedings where it considers that the case requires a decision
of principle likely to affect the unity or consistency of Community
law.
6. FUTURE ROLE
OF THE
CFI
Should the CFI, freed of the burden of hearing
competition cases at first instance, be given the jurisdiction
to hear preliminary references from national courts applying Community
competition law (Article 225(3) TEC)? Should cases like Courage
Ltd v Crehan go to the CFI or the ECJ?
An important element of any possible reform
would be the "delegation" by the ECJ to the CFI of jurisdiction
to hear Article 234 preliminary rulings on the interpretation
of Community law. Given the decentralised national application
of EC competition law this is an important function in this area
of law. This jurisdiction, together with appeals from an EU Competition
Court would consolidate, and not dilute, the expertise of the
CFI and, at the same time, free up resources at the ECJ level.
This would assist in enabling the ECJ to fulfil
its institutional role of supreme court within the EU legal system.
In the appropriate cases this would not deprive the ECJ of jurisdiction
on an area of law that is a key constitutional component of the
EU.
3 November 2006
1 Case T-87/05, EDP-Energias De Portugal SA v Commission,
Judgment of 21 September 2005, nyr. Back
2
Case T-464/04, Impala v Commission, Judgment of 13 July
2006, nyr. Back
3
Article 62 Protocol on the Statute of Court of Justice. Back
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