Memorandum by the Working Group of the
Antitrust Committee of the International Bar Association
1. EXECUTIVE
SUMMARY
1.1 The Working Group has carefully considered
the CBI's Brief and fully supports the underlying premise that
reviews of merger cases must be timely (whilst allowing sufficient
time for proper consideration of the issues) if they are to be
effective. [37]
1.2 The Working Group agrees that there
is a need for action at EU level, but, on balance, it considers
that the objectives of the proposed reforms are best achieved
by the creation of specialist merger chambers within the Court
of First Instance ("CFI"), with their own recommended
working practices. This solution is comparatively simple, and
carries both legal and practical advantages over the creation
of a separate competition court.
— The formation of a competition court
under Article 225a EC could create an additional level of review,
as its decisions would be potentially appealable both to the CFI
and to the Court of Justice ("ECJ"). This risks extending
the overall appeal timetable, rather than reducing it. Creating
merger chambers within the CFI would not create this concern.
— The creation of merger chambers can
be unilaterally determined by the CFI. By contrast, a separate
competition court would require unanimous Council approval, could
take significant time and cost to set up and would be difficult
to achieve as a practical matter.
1.3 The Working Group suggests that, in
combination with the creation of merger chambers, there are a
number of practical steps that can be taken by the CFI on its
own initiative that would allow for the existing expedited procedure
to function more effectively as a fast-track appeal process suitable
for mergers appeals.
2. A NEED FOR
CAREFUL REFORM
AT UNION
LEVEL
2.1 The Working Group accepts that the current
structure and procedure for reviewing merger appeals can, and
should, be improved. We agree that appeals of Commission merger
decisions (whether cleared or prohibited) need to be determined
quickly because of the time critical nature of mergers and the
fact that such cases are rarely suitable for interim relief. [38]In
many cases, appeals take too long to be of practical benefit to
the parties involved. However, the appeal process must remain
thorough and properly resourced if it is to retain user credibility
and serve as a meaningful guarantor of the quality of Commission
decision-making.
3. ANALYSIS OF
THE MERITS
OF A
EUROPEAN COURT
(AS A
CFI PANEL)
3.1 The Working Group considers that—on
balance—the benefits that would be achieved by the creation
of a judicial panel under Article 225a EC as a distinct "competition
court" risk being outweighed by material disadvantages.
Creation of a further layer of review
3.2 Under Article 225a EC, decisions of
judicial panels remain appealable to the CFI and, thereafter,
potentially also to the ECJ. It would be expected that many panel
decisions would in fact be appealed (particularly given the Commission's
interest in defending its detailed, second phase practice and
procedure), which potentially calls for a specialisation within
the CFI to hear such appeals. Following such an appeal to the
CFI, we would expect that many merger cases would, in fact, meet
the criteria of exceptionality and significance for further appeal
to the ECJ. It might in any event be considered undesirable to
remove the superior court from the review of merger decisions
raising important issues. Creating an extra layer of review would
fragment the judicial system and risks adding further delay to
the overall process, thereby frustrating the core aim of the reform.
[39]
Need for extra resources
3.3 Unless panel judges were taken from
the CFI, a separate panel would require additional, specialist
resources. Obtaining such resources, as a practical matter, would
not necessarily be straightforward.
Requirement for political agreement
3.4 Creating a new judicial panel requires
unanimous Council approval. [40]Achieving
political agreement on the reform of the European judicial system
is inherently difficult and is unlikely to be considered a priority.
3.5 Instead, the Working Group suggests
consideration of an alternative proposal, comprising two elements:
the creation of specialist merger chambers within the CFI and
the refinement of the CFI's existing expedited procedure.
4. ALTERNATIVE
STRUCTURAL REFORM:
THE CREATION
OF MERGER
CHAMBERS
4.1 The Working Group considers that most
of the advantages of a separate competition court can be achieved
more simply, and without the concerns identified above, by the
creation of merger chambers within the CFI. Such a move could
be achieved unilaterally, without Council intervention, and poses
less risk of divergent treatment between merger cases and the
remainder of EC law than might be entailed by a wholly distinct
competition panel under Article 225a EC. The key features of the
Working Group's proposals (which could be expanded upon if the
Select Committee requires) are set out below.
Creation of specialist merger chambers
4.2 The CFI's Procedural Rules already allow
the Court to set up chambers of three and five judges, to decide
which judges shall be attached to them and to lay down the criteria
by which cases are allocated among the chambers. [41]This
facility should be exploited to allow for all merger cases to
be allocated to particular chambers, comprising at least some
judges with competition expertise, which have the ability to process
them quickly. This would lead to the development of a "competition
culture" within these chambers, whilst preserving flexibility
in terms of overall case allocation.
Specialist expertise
4.3 The Working Group considers that there
is a benefit in having judges within a particular chamber who
become experienced at dealing with issues arising in merger cases;
this should lead to increased predictability in case-handling.
We would therefore suggest that each merger chamber should contain
at least one judge with competition expertise. However, experience
from other jurisdictions suggests that a mixture of specialist
and non-specialist judges is wholly suitable. [42]In
order to ensure that the review of merger cases remains fully
convergent with the remainder of EC law, we would suggest that
judges should sit in the merger chambers by rotation. The precise
details of the basis on which judges were appointed to the chambers
would clearly need to be considered further. However, the Advocates
General (where appointed) and Referendaires to these chambers
should be competition experts, preferably with experience in merger
cases. They might potentially be senior officials seconded from
a National Competition Authority.
Language of the merger chambers
4.4 Although the internal, working language
of the CFI has conventionally been French, there is no reason
why this practice needs to be followed within the merger chambers.
Indeed, in Tetra Laval, [43]the
CFI operated internally in English. The formal CFI Rules of Procedure
allow for the translation of documentation, but do not require
it. [44]The
chambers should be encouraged to work in whatever language is
most administratively convenient in each case, and not to insist
upon unnecessary translations. Where translations are necessary
in a particular case, parties should be encouraged to submit certified
translations to the Court (as would be the case in normal litigation[45]).
Flexibility of work allocation
4.5 The Working Group is aware of some objections
that have been raised to the idea of separate chambers. Essentially,
they can be reduced to a concern that many of the translation
delays caused by the need to operate in several languages cannot
be overcome (though that would be true also of a separate court)
and that there would be a risk that resources devoted to the chambers
might be under-utilised during periods of low merger activity.
It is also argued that dividing into chambers does not increase
the resources available, whereas a separate court would, as with
the Civil Service Tribunal, have to be accompanied by extra judges.
While we recognise that the EU judicial structure faces challenges
that do not confront monolingual jurisdictions, we believe that
current working practices should be questioned more rigorously
and the underlying assumption that case handling should always
be at the mercy of translation should be challenged. Other measures
to improve productivity should also be looked into. Dividing resources
among separate chambers will always pose an administrative challenge
to ensure that resources are utilised efficiently, but as long
as the system is sufficiently flexible to permit the "designated"
chambers to handle other cases when appropriate, that challenge
also could be overcome.
5. REFINEMENT
OF THE
EXPEDITED PROCEDURE
FOR USE
IN MERGER
CHAMBERS
5.1 The Working Group considers that the
existing expedited procedure already provides a suitable basis
for review of merger control decisions if combined with the creation
of specialist merger chambers within the CFI.
— The expedited procedure has succeeded
in delivering judgments within approximately seven months (ie
in Schneider[46]
and EDP[47])
from the date of the application to appeal—this is close
to the CBI's "target" timeline of six months. [48]
— When evaluating the acceptability
of the time taken under the expedited procedure, it must be remembered
that the CFI normally hears challenges to second phase Commission
decisions. Such appeals often necessitate a detailed analysis
of the evidence relied on by the Commission in its Phase II review,
which takes time. To draw comparisons with the review timetable
of other courts in relation to first phase decisions is therefore
misleading. [49]
— A comparative analysis of the time
taken for appeal of merger control decisions in other jurisdictions
suggests that the EC expedited procedure is relatively swift.
Although certain jurisdictions (such as Sweden) do succeed in
achieving merger appeals within timescales of three months, this
is unusual. Typical appeal lengths in Italy, Germany, France and
the Netherlands are significantly above seven months (and can
extend well beyond a year).
5.2 The Working Group has considered how
the expedited procedure could be further improved for use in merger
chambers to achieve a timetable closer to that envisaged by the
CBI.
5.3 Given the timetable laid down by the
expedited procedure, the Working Group considers that there is
only one change to the formal time-limits in the expedited procedure
which would have a material benefit, namely to reduce the time-limit
for bringing an appeal from two months to one month. Such a change
would bring the EC procedure in line with that in other jurisdictions,
such as the UK and Germany (some jurisdictions have even shorter
timetables, such as Australia, Poland and Sweden). However, such
a change would not impact on the actual time taken before the
CFI itself and, given that it would require the amendment of Article
230 EC, it might be that, although desirable, it is not practically
realisable at this time.
New rules for the new chambers
5.4 We suggest that the new chambers adopt
a number of working rules (by use of a practice direction[50])
to expedite case management.
— Potential appellants should be strongly
encouraged to inform the Court and other parties as early as possible
of a potential application and to submit their applications well
within the two month deadline. There should be clear guidance
to appellants that—if the Court is to grant requests for
the expedited procedure—it will expect applications to be
signalled well within the two month deadline. This should facilitate
early preparation on the issues by the Court and other parties
and prompt scheduling of hearings for directions.
— All parties should be required to
co-operate actively throughout the process (including providing
the Court with early access to the Commission's file and other
key documents). This would entail early service of documents on
other parties, compliance with Court requests for fewer and shorter
pleadings and active case management in timetables and scheduling
hearings.
— Appellants seeking the benefit of
the expedited procedure should be reminded that they must conduct
litigation in a commensurate manner. Failure to comply with any
such working rules should jeopardise the continued use of the
expedited procedure in that case (although the case would remain
within the merger chamber).
— For its part, the Court should aim
to crystallise issues—particularly in the lead up to hearings
between parties—by providing issues statements at strategic
points in the case.
Tighter enforcement of existing expedited procedural
requirements
5.5 The Rules of Procedure and the CFI's
Practice Directions already provide for constraints on the number
and volume of parties' submissions. [51]The
CFI should ensure that these directions are complied with and
should be reluctant to grant derogations from them. When parties
in expedited cases consistently fail to meet these requirements
(as occurred in Impala—SONY/BMG[52]),
the CFI should be swifter to remove the benefits of the expedited
procedure.
5.6 These changes carry the advantage that
they do not require many additional resources, do not create additional
layers of appeal, and do not require Council intervention.
6. FUTURE ROLE
OF THE
CFI
6.1 The Working Group's proposals have the
practical advantage of not requiring substantial additional resources
for a new competition court, but focus upon a reorganisation of
existing resources. Given the creation of the Civil Service Tribunal
following the Treaty of Nice, it may well be that the CFI would
in fact already have additional resources available necessary
to assume a further role. In any event, the Working Group sees
its suggestion for the creation of specialist merger chambers
as consistent with the evolving nature of the CFI's structure
and priorities as envisaged by the Treaty of Nice.
2 November 2006
37 The Working Group has focused in this response on
the treatment of merger cases, as it considers that these cases
in particular justify a short timescale for review. Back
38
The Working Group has considered (in response to the House of
Lords' third question) whether reform should encompass all competition
cases, or be limited to merger cases. The Working Group finds
it hard to identify a coherent justification for why other (non-transactional)
competition cases (such as appeals of Article 81 EC decisions)
should be regarded as more time critical than other commercial
litigation before the European Courts, and therefore suggests
limiting the proposed reforms, at least initially, to merger cases. Back
39
Limiting appeals of decisions of a judicial panel to an appeal
to the ECJ only would require an amendment to Article 225a EC. Back
40
The creation of a judicial panel requires unanimous Council approval
either (i) following a proposal from the Commission and after
consulting the European Parliament and the Court of Justice or
(ii) at the request of the Court of Justice and after consulting
the European Parliament and the Commission (Article 225a EC). Back
41
Articles 10 and 12, Rules of Procedure of the CFI, respectively. Back
42
Cases before the Australian and Canadian Competition Tribunals
are heard by a Federal Court Judge, an economist and an experienced
business person. In the UK, the Competition Appeal Tribunal ("CAT")
sits with three people, of whom only one need be a competition
specialist. Back
43
Case T-5/02 Tetra Laval BV v Commission. Back
44
Articles 35 and 36 of the Rules of Procedure of the CFI. Back
45
For example, in the UK Court of Appeal, evidence in a foreign
language should be translated; the translation should be agreed,
failing which each party should prepare a proposed translation
(CPR PD 52, 15.4.4(d)). Back
46
Case T-77/02 Schneider Electric SA v Commission (counting
from Schneider Electric SA's abridged application, rather than
its original application which the CFI refused to treat under
the expedited procedure). Back
47
Case T-87/05 EDP-Energias de Portugal SA v Commission. Back
48
It is relevant to note that other jurisdictions are able to achieve
judicial review of agency merger decisions in less time than the
CFI. For example, in the US, where the antitrust agencies cannot
prohibit a merger absent a court order, the agencies must initiate
an action in federal court (not a specialist court) for an injunction
prohibiting the merger. Discovery is attenuated because the agency
has already had the benefit of the Hart-Scott-Rodino second request
review. The case involves a full trial on the merits in which
the agency bears the burden of proof. Live witness testimony (including
economists and business witnesses) and documents are presented.
US merger cases in court are typically resolved within about three
to four months, see, eg FTC v Staples (less than three
months), FTC v Heinz (trial court decision in three months),
FTC v Arch Coal (four months) and US v Oracle (seven
months). The Australian Competition Tribunal is required to reach
a decision in any application for review of a merger clearance
within 30 business days or, if the matter is complex, within an
additional 60 business days. Back
49
In the UK, the duration of appeals before the CAT has ranged from
two weeks to four and a half months. However, the CAT has not
yet reviewed a full second phase decision. In fact, we consider
that the CAT might well require six months or more to hear an
appeal of a second phase (Competition Commission) case. Back
50
Article 150 of the Rules of Procedure of the CFI. Back
51
Title 2, Chapter 3a of the CFI Rules of Procedure and Section
VI of the Practice Direction OJ 2002 L87/48. Back
52
Case T-464/04 Independent Music Publishers and Labels Association
(Impala) v Commission. Back
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