House of Lords - European Union

Select Committee on European Union Written Evidence

Memorandum by the Department of Trade and Industry

1. INTRODUCTION

1.1 This call for evidence relates to an enquiry into the need for establishing a judicial panel under Article 225a of the EC Treaty ("the Treaty") to hear competition cases (the "EU Competition Court"). We have also explored the possibility of establishing a competition chamber of the CFI and changes to the CFI case handling and administration procedures.

1.2 This submission addresses all questions raised by the sub-committee with the exception of question 6. Question 6 seeks views on the future role of the CFI but is predicated on the removal of competition cases from its current caseload. At this stage the DTI does not believe consideration should be given to these cases being removed from the CFI until the nature of the delays is better understood and other, lighter-touch, options have been explored.

1.3 Questions 1, 3, 4 and 5 are directly related and have been addressed together for the sake of continuity. Question 2 concerns suggested changes to the CFI case-handling mechanism and administrative procedures and has been dealt with separately.

2. EXECUTIVE SUMMARY

The following are the main points raised in this submission:

— DTI believes that the review of Commission decisions, in merger cases, is uniquely time-dependent.

— The establishment of an EU Competition Court or Competition Chamber within the CFI is, on the face of it, attractive but there appear to be significant organisational and procedural difficulties with these proposals.

— It is not clear that these proposals will achieve the desired aim.

— The ultimate goal of the CBI proposal is to speed up the review of merger cases. Efforts to achieve this should first be made by changes to the case management and administration systems of the existing CFI. These can be done at a lower cost and without changing the existing structure of the court or institutional balance of the EU. DTI's recommendations are listed at 7.2.

3. NEED FOR ACTION AT UNION LEVEL, JURISDICTION, COMPOSITION AND APPEALS (QUESTIONS 1, 3, 4 AND 5)

Is there a problem with the current regime and if so, to what scale?

3.1 The following extracts from a press report demonstrate the diversity of views of specialist law firms. [29]Freshfields Bruckhaus Deringer, are quoted as saying "The current regime for court review of EC mergers is largely ineffective because it is very difficult, if not impossible, to get a successful appeal through the CFI within a timescale that will permit the merger to complete." However, other practitioners in the same report, while welcoming anything that can speed up the review of Commission decisions, are not convinced the proposals would have any real effect. A partner at Lovells, is quoted as saying "It's not clear to me that having a separate competition court would solve the timing issue. The CFI already uses very flexible procedures and has shown its willingness to innovate in this area. If a merger case involves only a few questions of law, it can be decided very quickly. But the reality is that most merger cases involve a number of heavy factual issues, and those issues inevitably take time to process. This same reality would face any new specialist court."

3.2 However the question posed is an interesting one because in the competition field, merger cases are time-dependent in ways that other cases are not. In some cases there have been timing problems but research shows this is patchy and dependent on a number of issues eg the complexity of the case. The importance of a full in-depth examination of the issues and the concept of "a day in court" should not be understated.

3.3 The CBI claim that even under expedited (fast-track) procedures, cases have taken nearly two years to resolve. This length of time even if the appeal is successful can terminally effect merger plans, however, not all cases take this long and some are resolved much faster. The figure of two years relates to one case in particular and runs from the time the appeal was lodged to the decision rather than the length of the hearing. This was further complicated by the fact that the appeal was lodged by a third-party and involved complex issues of confidentiality which had to be addressed. The statistics suggest a more nuanced story.

3.4 In terms of numbers, competition cases before the CFI have remained fairly steady. The figures in Table 1 are drawn from the CFI's own statistics[30] and show the total number of cases received each year and the amount of these cases which are competition cases.

Table 1

Year	Total Cases	Competition Cases
2003	466	43
2004	536	36
2005	469	40

3.5 Since the fast-track procedures were introduced in 2005 there have been 19 applications for expedition in the field of merger control, 16 of these have been granted. As at 31 December 2005, merger cases on their own have represented 66 per cent of the cases dealt with by way of an expedited procedure. [31]

3.6 While acknowledging that the CFI has speeded up procedures with the use of fast-track, the CBI is aiming to speed them up even more with a target of enabling a decision to be made within six months. On average, as at December 2005 the CFI takes approximately 7½ months to determine a case by way of an expedited procedure (this has now risen to nine months[32], partly because the Impala[33] case took nearly two years). This would indicate that scope for improvement is marginal. It can be quicker, eg in Tideland Signal v Commission[34] (a public procurement case with less complicated issues) the CFI adjudicated on the application in only 10 weeks. This is, however, not the best comparator because it is not a merger case. In EDP v Commission[35] (a merger case) the CFI dismissed the application in seven months.

4. WHAT ARE THE REASONS FOR THE DELAY AND WHY THIS DISCREPANCY?

4.1 Views sought by DTI in 2005 indicated that a major cause of delay was the issue of translation. Cases are heard in the language of the claim but deliberated and the decision written in French. This is then translated into all Member States (MSs) languages before publication, this can take several months in even relatively straight-forward cases. The issue of language is one which cannot be avoided. The CBI proposal would allow any Judicial Panel from the CFI to set their own language regime and on first sight seems attractive but achieving MSs agreement on this will be extremely difficult.

4.2 Leaving aside the issues of language and translation, it appears the single major factor contributing to the length of the appeal is the complexity of the case and the documents provided to the CFI. Complexity and the related issue of the time to translate lengthy documents appear to be the reason one case can take seven months and another two years. The signs are that the issues of documentation and complexity are likely to get worse. The recent ruling in the Impala case where the CFI criticised the rigour and evidence base of the Commission's original decision is likely to lead to more documentation provided to the court for examination and a more rigorous Commission approach is more likely to lead to even greater complexity in the appeal pleadings.

4.3 Cases are allocated to judges in the order received. Cases that are urgent, straightforward or have wider implications are not prioritised under the current case administration process unless fast track is used (Art 77(a)).

5. WIDER IMPLICATIONS

5.1 The CBI proposal is limited to merger cases. There does not appear to be a sufficient number of such cases for a tribunal or specialist chamber to be cost effective. The House of Lords' call for evidence suggests extending the jurisdiction to cover a wider range of cases and if a specialist chamber or tribunal were to be set up, this would seem sensible. Separating merger control cases from other competition cases might in any case be undesirable as it could lead over time to different interpretation of similar principles of competition law. However there are wider implications to this option.

5.2 The establishment of a specialist judicial panel or a competition chamber within the CFI to hear competition cases would be a significant institutional change with potentially far-reaching implications for competition law, both EU and national, and for Community law generally. Before embarking on such a course it would be useful to explore other options which will not involve such a fundamental structural change.

5.3 The establishment of this court raises a number of issues which are covered in detail by other correspondents to the committee, particularly the Office of Fair Trading. From a DTI perspective the most fundamental of the issues is the potential detachment of competition law from wider EU law. Commonly, competition cases also involve non-competition issues eg free movement. Additionally, State aid cases often give rise to economic competition-related questions and may do so increasingly as the economic approach to State aid becomes more entrenched in Commission decision-making. It seems undesirable to us that competition expertise be lost amongst judges making decisions in State aid cases. Nor, ideally, should judges ruling in competition cases lack exposure to free movement issues in other contexts.

5.4 The establishment of a subsidiary court to the CFI puts an additional layer into the legal framework. Even if cases could be heard within six months in this court, it is likely that further appeals would be made to the CFI and in certain circumstances to the ECJ, thereby actually lengthening the process.

6. WOULD A SUBSIDIARY TRIBUNAL ADDRESS THESE PROBLEMS?

6.1 The CBI claim the CFI has the power to set up a subsidiary tribunal under the Nice Treaty and this tribunal could hear competition cases. This tribunal could set its own rules and language regime and employ specialist competition judges. The situation is not quite so straightforward.

6.2 It is the Council rather than the CFI that has power to set up a tribunal under Art 225(a). A judicial panel/tribunal's rules of procedure (including their language regime) are established by agreement with the ECJ and require the approval of the Council (by qualified majority). At first sight this proposal is attractive but it is not clear where the judges would come from, at what rate they would be paid, whether in an environment of budget restraint such additional expense on judiciary is justified by caseload, whether putting in an extra legal layer would speed up appeals, whether MSs would agree to the change in language regime or whether—even if the above were all resolved satisfactorily—it would actually speed up the case flow.

6.3 Judiciary

I. These judges would either have to be especially recruited or seconded from national competition courts. They would have to be paid less than a CFI Judge (who would hear any subsequent appeal) but more than a DG on whose decision they would be hearing the appeal. It is far from clear whether that rate would encourage applicants of sufficient experience and caliber. Moreover, judges are appointed by Council on the basis of one per Member State (by convention). Clearly there is no need for another 27 judges but this would require Council to agree to only some countries having more than one judge. Agreement on this is likely to be elusive and the issue could be linked into the debate on the roles and number of European Commissioners and turn into a major row, if raised.

II. Further difficulty may be present in that the judges themselves are unlikely to favour a competition chamber because it would create a two-tier approach to EU law where competition would be sidelined rather than integrated in the wider legal issues.

6.4 Process

I. Appeals from the special tribunal would be heard at the CFI. Therefore even if the new process takes less than six months, it is perfectly possible that if the decision is upheld at the tribunal it is appealed to the CFI (particularly in a case like Impala where the applicant was not one of the parties to the merger) in which case there would appear to be no benefit to having the tribunal in terms of speed of the overall decision. The undertakings involved in these sorts of cases typically have ample resources for litigation. If the grounds of appeal were not restricted it is likely that in most cases, an appeal would be brought, adding to the delay. This could be balanced by limiting the scope of appeal. The advice of competition law experts should be sought on options for doing this. In certain circumstances cases can be appealed again from the CFI to the ECJ.

II. There is however scope for the CFI to speed up its process by making changes to the existing case management procedures. Improved case management would be welcomed by all interested parties, and some progress has already been made.

III. Currently, all CFI judges sit in chambers, each chamber now has at least one competition specialist—this was not the case previously. Cases are allocated to each chamber in the order received but competition cases are directed to the competition specialist within that chamber. The case is then read in detail by the specialist (acting as a kind of rapporteur) who will advise the other two allocated judges.

IV. Another recent innovation in this area is the allocation of three referendaires[36] to each judge.

6.5 Language

I. Acceptance of a reduced translation requirement would require Council agreement and this is unlikely in the short or medium term.

II. The issue of language may be addressed by the CBI proposal insofar as the tribunal can set its own language regime (the CBI believe the lingua franca of Competition is English and that the tribunal should hold its proceedings in this language) but it seems inconceivable that a language regime can be imposed by the CFI/tribunal which is not acceptable to MSs. In any event, appeals from the tribunal to the CFI, although heard in the language of the case, would be deliberated in French and this would require the translation of all original documents.

III. There is also a degree of confusion between the language of the case (documents, pleadings, evidence etc) and the internal (administrative) language of the court—which is French. A case can be filed in any EU official language, the Commission will respond in the same language. As discussed elsewhere, parties can ask the court to conduct the hearing in their own language. Once the case has been heard, the deliberations between the three judges are conducted in the internal language (French), this is also used in communication between the judges and the referendaires.

IV. The court can, on a case-by-case basis, decide to conduct these deliberations in another language. Logically, if the three judges have the capacity to read detailed argument and hear evidence in English, it makes sense that the deliberations are carried out in English because it makes reference to the documentation much easier. This option does not appear to be widely advertised, or used.

6.6 Complexity and detail

I. Setting up a specialist tribunal or competition chamber will not change the nature of the case presented for hearing. Documentation will, depending on the case, remain substantial and argument complex.

II. In cases where a third party intervenes, a full in-depth discussion of the issues and the opportunity for a day in court will remain a consideration for parties. The issue of legal delaying tactics by third parties would not change with the introduction of a new forum.

7. REFORM OF THE CFI (QUESTION 2)

7.1 In the call for evidence the House of Lords sub-committee suggested, as an alternative to the tribunal proposal, a dedicated competition chamber. This would be preferable to the tribunal proposal because it would not add an additional judicial layer but still suffers from the same difficulties in terms of detachment of competition law, a two-tier judicial system and complexity of the case described in 5.3, 6.3 and 6.6 above.

7.2 The DTI believes that a significant improvement in the length of time an appeals case takes can be achieved by making changes to the administration and processes of the existing CFI. These changes will not require full-scale institutional reforms (which are likely to be slow and costly).

7.3 The CFI can, of its own volition, reform its own administrative procedures and has done so in the past. The fast track procedure, as introduced by the CFI, has improved the speed with which some merger cases are handled. Previously, resolution within 7½ months would not have been likely. The DTI recommends that the CFI makes greater use of this power by implementing the following reforms:

— Currently, appeals should be registered within two months of the Commission decision. This seems unnecessarily long considering the parties know the issues well and interested third parties will have been following the case. Consideration should be given to reducing the timeframe to one month. We are aware that there may be some concerns about third parties having sufficient time to decide whether to intervene or not but experience in the UK CAT has shown that tight timescales can be met and certainly focus the mind of the participants on the significant aspects of their appeal. Similarly the timeframe for the Commission to respond could be reduced. The estimated saving would be around six weeks.

in its consideration of it

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— At the moment, unless decided otherwise, cases are deliberated and written in French, translated, and then proof-read. We suggest that decisions should be provided at the earliest opportunity in the language of the parties involved in the case, perhaps by making a public announcement or by issuing decision with summary reasons with the full reasons following later. Further translations into the remaining official languages can follow in due course but it need not delay the promulgation of the decision to the parties to the case. It is estimated that this would reduce the timescale by a further month.

— All cases could be subject to a short pre-hearing review before a judge (or case management conference conducted by referendaires) with fast-track the default process of the court unless the parties successfully argue otherwise at the pre-hearing review (PHR).

— Impose case management discipline across the whole competition waterfront, including antitrust and State aid cases.

— Rather than being handled sequentially, cases could be prioritised following the PHR if fast-track is not selected. Speedier review by the CFI for all merger and antitrust cases could provide greater transparency and consistency of Anti-Trust and EC Merger Control Regulations decisions.

— Greater resources could be put into translation. If the default process was fast-track any money saved could be used in this area.

January 2007