15TH REPORT: AN EU COMPETITION COURT
Letter from Rt Hon Ian McCartney MP, Minister
for Trade, Investment and Foreign Affairs, Department of Trade
and Industry/Foreign and Commonwealth Office to the Chairman
Thank you for your letter dated 23 April and
the copy of the Select Committee's report An EU Competition
Court, I enclose the Government's response to that report.
We had originally hoped to discuss the proposals
with the European Commission, the European Court of Justice and
the Court of First Instance but unfortunately that has not proved
possible in the time available.
We will, of course, be happy to keep the Committee
informed as matters progress.
18 June 2007
GOVERNMENT RESPONSE
INTRODUCTION
1. The Government would like to thank the
EU Select Committee ("the Committee") for their helpful
report, the Confederation of British Industry (CBI) for their
proposal and the witnesses called before the Committee for their
constructive engagement on this subject.
2. The Government submitted written representations
to the Committee on 18 January and 19 February 2007. In these
responses it was argued that mergers were uniquely time sensitive
but doubted whether either a new Competition Court, or a specialist
Competition Chamber within the existing Court of First Instance
(CFI) would actually address the timing problem. We did not rule
out a Competition Court in the future but thought that before
fundamentally changing the structures, checks and balances of
the existing EU institutions we should first consider ways to
make the existing institutions work more effectively.
3. We note that the select Committee sees
the issue in similar terms. Therefore when commenting on the Committee's
recommendations our focus is on how they might best be taken forward
and what the UK might do to assist. Of course, to the extent that
amendments to the Court's Rules of Procedure are required, this
will be a matter for the CFI with ECJ agreement and ultimately
will be subject to Council approval. We believe that a number
of the Committee's proposals have considerable merit.
EXECUTIVE SUMMARY
4. The response is divided into two main
sections. The first deals with the need for a Competition Court
and concludes that while the appeals system for mergers is undermined
by the length of time it takes to resolve a case, options to streamline
the existing process should be explored before considering the
establishment of a Competition Court.
5. The second substantive section deals
with the recommendations made in the Committee's report on improvements
to case handling and procedures.
THE NEED
FOR A
COMPETITION COURT
6. The Government agrees that merger cases
are uniquely time sensitive and long delays in the appeal process
could prevent a merger taking place. We acknowledge the steps
the CFI have taken thus far to address these delays and welcome
the Committee's proposals to further reduce the time taken to
complete an appeal.
7. While every case is important to the
parties involved it should be recognised that only a small minority
of mergers are rejected by the Commission and go to appeal before
the CF1. It seems clear from the Committee's report that while
delays of longer than six months can kill off a merger, the nature
of the process, the necessary safeguards within the procedures
and the rights of third parties make this target, even with the
best endeavours of all parties, difficult to achieve.
8. It should also be recognised that time
is not the only issue. It is important to get these decisions
right and the proposed changes to the processes should not be
at the cost of rigour.
9. In their original proposal the CBI believed
that language and translation was a significant cause of delay.
The Government agrees with the Committee's view that a new court
would not resolve these problems and, as stated in the Government
response to the call for evidence, suspect the complexity of cases
and level of documentation are more likely to be significant causes
of delay than the language issue.
10. The Government also agrees with the
Committee's view that the creation of a separate judicial tribunal
would create a further level of appeal and, given the resources
of parties bringing these appeals, is likely to lead to further
delay.
11. ln their report, the Committee rejected
the idea of a separate CFI competition chamber but formed some
views on the composition of any future Competition Court should
it be necessary.
12. The Government does not disagree with
the Committee's view on this subject but if this proposal is to
be taken forward issues such as languages, appeals and qualifications
of judges will need to be closely examined. We must also consider
the resource implications and administration costs of any new
court.
13. The Government agrees that if a Competition
Court is set up in the future, a careful study of the implications
for the relative competences of the CFI, the new court, and the
ECJ should be carried out in advance before any decision is taken.
CHANGING CFI RULES
AND PRACTICE
The Committee proposed that consideration should
be given to allowing both courts, the ECJ and the CFI, some measure
of autonomy to set their own Rules (para 127).
14. Article 224 EC states that "The
Court of First Instance shall establish its Rules of Procedure
in agreement with the Court of Justice. Those Rules shall require
the approval of the Council, acting by a qualified majority."
Any alternative to this will require Treaty change. The Courts
do already have some autonomy to set their own Rules. They are
able to adopt Practice Directions, relating in particular to the
preparation and conduct of the hearings before them and to the
lodging of written statements of case (Articles 125 of the ECJ
Rules of Procedure and 150 of the CFI Rules of Procedure) and
do so regularly. It is considered that these powers are sufficient
for the Court to introduce improvements in case management and
improve administrative practices.
15. The Government has generally been supportive
of initiatives giving the Courts a certain measure of autonomy
in order for them to work more efficiently. However, the Government
believe it is desirable that Member States maintain a degree of
control over the Rules of Procedure.
The report suggests that recent experience shows
that there are opportunities available in the current Rules of
Procedure which might be better exploited. Firmer case management
by Judges could lead to significant time savings (paras 138, 148).
16. The Government supports this view. It
seems clear from the EDP case,[1]
and others, that pro-active case management and, crucially, the
cooperation of the parties to the case, leads to significant time
savings. This is complicated where a third party intervenes, but
again, strong case management at the earliest opportunity will
assist.
17. Examples of changes to case management
procedures could include, inter alia:
— The possibility for the Court, on
a case by case basis and by application of the parties, to decide
to conduct their internal deliberations in the language of the
case, rather than in French;
— Prioritising time-sensitive competition
cases;
— Working with the parties to try
to conduct initial processes within statutory time limits.
The CCBE (Conseil des Barreaux Europeens—Council
of Bars and Law Societies of Europe) suggested that a party should
be able to launch an appeal on the basis of a summary application
which would be supplemented with detailed pleadings and evidence
shortly thereafter (para 141).
18. ln principle this is an interesting
idea but it is unclear how it would work in practice and what
the savings would be. It would allow the Judge-Rapporteur to case
manage at a very early stage, perhaps producing a timetable, but
it may not be equitable for any time limits for interventions
to begin when the summary application is lodged because there
may be insufficient information and evidence to take an informed
view on whether an intervention would be necessary. Any interventions
would therefore have to wait until the detailed pleadings and
evidence were submitted. That being the case it is difficult to
see what is gained by such a proposition but we would be interested
to canvas the opinion of the Commission and CFI on the subject.
The Committee state that they see no reason
why, in an age of virtually instantaneous communication, there
remains a need for the additional 10 days delai de route
when lodging an appeal against a Commission decision (para 143).
19. The Government believes that, despite
this seeming anomaly, this is a case where rather than saving
a few days, the greater good is served by thorough examination,
the entry of informed and detailed pleadings and, as in paragraph
9, reaching the correct decision.
20. On a different timing point, we do note
that the current Rules of Procedure state that despite accepting
service by e-mail and facsimile the Court also requires hard copies
to be lodged within 10 days, which inevitably introduces delay
in that as we understand it, the Court does not usually progress
the case until those copies are lodged. We suggest that the CFI
accept full service electronically, which it is already empowered
to do under Article 43(7) of its Rules of Procedure.
It has been suggested that where a third party
challenges a Commission merger decision the merging parties, as
interveners, should have the right to request an accelerated procedure
so that the case can be decided quickly (Para 149).
21. The Government supports this proposal.
There is widespread acceptance that it is not necessarily in the
interests of every party to the case to get a speedy resolution
and that some parties use the length of proceedings tactically
for their own benefit regardless of the merits of their case.
The Government acknowledges there may be genuine legal concerns
over a full examination of the issues and confidentiality considerations
but anything that would prevent a party or intervener taking advantage
of the process for their own ends should be investigated. This
proposal would allow the merging parties, as interveners, to request
expedition when a third party challenges a merger but does not
apply for expedition. It would then be for a Judge to decide whether
the case can be expedited or not and parties would have to justify
their position to the court. Currently under the Rules of Procedure,
the CFI may, on application by the applicant or defendant, decide
to use the expedited procedure, but there is no mechanism for
an intervener to apply.
The Committee suggest judgments might include
shorter summaries of the arguments of the parties. This could
reduce CFl's workload: there would be less to translate (para
151).
22. We believe this proposal is entirely
a matter for the CFI, it would not be appropriate for the Government
to comment. However a clear rationale for decisions will be important,
if this could be accomplished succinctly the UK would have no
objection.
The Committee's report proposes that the Court
should be given the discretion, in merger cases, to take the final
decision itself where, for example, there has been no substantial
alteration in the circumstances nor other factor apparently requiring
a fresh investigation (para 161).
23. This proposal would alter the jurisdiction
of the CFI and would require the agreement of the Council. In
the abstract, the concept that a Court which overturns a Commission
decision and sends it back for the Commission to do it again,
even when there is no fresh evidence or change of circumstances,
seems bureaucratic and cumbersome. It would seem logical for the
CFI to take the decision itself leaving the avenue of appeal on
points of law only to the ECJ. We note the idea is supported by
the CBI, Business Europe and the Commission itself but we should
not change the jurisdiction of the CFI without serious consideration
of the mechanics, resources and wider implications. Again, the
agreement of the Council (acting unanimously as this proposition
would require a modification of the Statute of the Court) would
make this a medium-term proposal.
24. This proposal also highlights important
constitutional law issues concerning the separation of judicial
and executive functions. In the past the ECJ has been very cautious
about maintaining this separation, it may be that the CFl is likely
to take much the same line.
25. Careful consideration should be given
as to whether this proposal sets a precedent for state aid cases
and incrementally other Article 230 cases against the Commission.
26. There is also a view in some quarters
that, as the CFI has frequently reduced anti-cartel fines imposed
by the Commission it may be better for the Court to actually set
the fine as is the case elsewhere, eg US and France, but this
would logically mean that every cartel case must go to the Court
which is contrary to the aim of reducing workload and speeding
up cases.
INTRODUCTION OF
PLEA-BARGAINING
IN CARTEL
CASES
The Committee considers this proposal by the
Commission constructive but have a concern that the rights of
the parties concerned should be fully respected, but if the practical
effect is to remove time-consuming cases from the Court's list
then it would be welcomed (para 164).
27. The introduction of effective plea-bargaining
or "settlement" procedures in the context of cartel
(and indeed non-cartel) cases may go some way to reducing the
number of cases appealed to the CFI. That said, there are already
mechanisms allowing settlement at an early stage, ie during the
investigation of the case by the Commission.[2]
Moreover, settlement of cartel cases raises sensitive issues and
the use of such a mechanism for resolving competition cases, will
need to be carefully considered. For example, as well as raising
rights of defence issues (as the Committee has rightly pointed
out), settlements could also have significant impact on:
— Deterrence. Settlements are likely
to result in the Commission agreeing to reduce financial penalties;
and,
— Leniency. Undertakings may be less
likely to apply for leniency if they believe that, if their infringing
conduct were discovered, a reduction in financial penalties would
be available through settlement.
28. These and other important questions
continue to be the subject of emerging debate and thinking in
enforcement circles throughout the EU. While relevant to the debate,
therefore, the impact of settlements on the CFI's workload is
but one of many factors which will need to be considered further.
29. There is a need to reflect further on
the legislation that has to be amended in order to introduce a
plea-bargaining procedure. This will determine the feasibility
of such a reform.
TRANSFERRING TRADE
MARK CASES
The report notes that the transfer of trade
mark cases could lead to a marked decrease in the CFl's workload.
The Lords encourage the Commission to give urgent consideration
to this suggestion (para 173).
30. The UK is the second largest user of
the Community trade mark system, and in many cases the brand recognition
and consumer confidence embodied in a trade mark will be the most
valuable asset a company owns. A Community Trade Mark Court must
be capable of delivering legal clarity both to enable businesses
to promote their goods and services and to enable consumers to
make an informed choice between competing brands.
31. Trade mark cases should not be allocated
to a judicial panel solely to lighten the load of the CFI, and
any decision to create a judicial panel should be taken on the
basis of the benefits it will give to industry and consumers.
The Government would support a Commission review to determine
whether a specialist trade mark court attached to the CFI can
improve the quality, timeliness, and certainty of judgments delivered
by the Court, through efficient and affordable procedures. The
review would have to take account of similar concerns raised with
respect to a Competition Court, in particular as to whether such
a system would add an extra appeal layer, and with it complexity,
uncertainty and delay.
NEXT STEPS
Over the coming weeks we will explore the viability
of these and other options with the European Commission, the ECJ
and the CFI, and discuss the best way to progress. We will be
happy to keep the Committee informed on progress.
1 Case T-87/05 EDP v Commission (2005). Back
2
Article 85 paragraph 1 ...the Commission shall investigate cases
of suspected infringement of these principles [ie agreements,
associations and concerted practices in Article 81 TEC and abuse
of a dominant position in Article 82]. If it finds that there
has been an infringement, it shall propose appropriate measures
to bring it to an end. Article 85 paragraph 2 "If the infringement
is not brought to an end, the Commission shall record such infringement
of the principles in a reasoned decision...". Back
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