Not your ’concern’ – Who is Responsible for Whom?

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In recent years, the so-called "Trucks" case has received relatively high publicity, with the European Commission in 2016 fining 6 groups of truck manufacturers for breaches of competition rules and imposing significant fines on all but one of them. Following the Commission's decision, tens of thousands of damage claims have been filed against the offending companies, mainly in Europe but also around the world, by victims who bought the vehicles affected by the infringement.

Given that the majority of the cases were not brought in the countries where the companies concerned are based, the courts in charge of the cases had and still have to examine their jurisdiction in the first instance. For litigation in Europe, the question of jurisdiction in the countries concerned is governed by Article 7(2) of Regulation (EU) No 1215/2012 ("the Regulation"). It is precisely along the lines of the case at hand that the Court of Justice of the European Union has interpreted this jurisdictional rule in several preliminary ruling cases brought before it in recent years, where the decisive issue has been the proximity of the "place where the damage occurred" to the forum country. In the light of the objective of proximity and predictability of the rules of jurisdiction and the objective of consistency between the forum and the applicable law, the interpretation followed by the CJEU's interpretation suggests that a relatively close connection must exist between the place where the damage occurred and the forum, otherwise applying the jurisdictional rule would be meaningless.

In Hungary, a mayor Hungarian energy company has also filed lawsuits against the manufacturers concerned before the Metropolitan Court of Budapest in a rather innovative argument and construction. The clament, as the parent company, has not previously procured vehicles in its own right, but a number of its subsidiaries (Hungarian, Austrian, Croatian, etc.) have. The claims of these subsidiaries are asserted by the clament as its own claims in the lawsuits, applying the so-called economic unity concept developed in competition law, claiming that the alleged damages suffered by its subsidiaries as a result of the infringement should in fact be considered as damages suffered by the clament, by a kind of inverse interpretation of the economic unity doctrine. This idea is not entirely unfounded in that, also under the aegis of the Lorries case, the CJEU held in Case C-882/19 that the concept of economic unit can be interpreted in the context that the damage caused by an infringement committed by the parent company can be claimed against its subsidiary, which is part of the same economic unit, even if the subsidiary did not commit an infringement. The clament's argument in fact reverses this approach on the side of the claimants and also submits that this interpretation can be properly applied in the context of the examination of jurisdiction: the fact that the clament is established in Budapest as the seat of the parent company establishes the jurisdiction of the Metropolitan Court of Budapest under Article 7(2) of the Regulation to enforce claims for alleged damage suffered by subsidiaries.

The clament's argument thus presents a 'reverse economic entity' approach, where the parent company would enforce alleged damages suffered by its subsidiaries, even though the clament itself is not directly entitled to these claims. In addition to raising questions of substantive law and litigation legitimacy, this argument primarily put to the test the applicability of the rules of jurisdiction by the courts in the case at hand.

For this reason, the courts of first and second instance decided to terminate the proceedings for lack of jurisdiction of the Hungarian courts, essentially finding that Hungary could not be identified as the place where the alleged damage claimed in the action occurred, and thus Article 7(2) of the Regulation was not applicable. However, in one of the cases, the Curia asked the CJEU for a preliminary ruling on the interpretation of the rule of jurisdiction on the following two questions:

Where a parent company brings an action for damages for anticompetitive conduct of an undertaking only to recover damages from its subsidiaries for the anticompetitive conduct, does the seat of the parent company as the place where the event giving rise to the damage occurred within the meaning of Article 7(2) of Regulation [1215/2012] confer jurisdiction on the court

For the purposes of applying Article 7(e)(2) of Regulation [1215/2012], is it relevant that at the time of each of the acquisitions at issue in the case, not all of the subsidiaries were part of the parent company's group of undertakings?

In its judgment in Case C-425/22, the CJEU answered the first question in the negative, and thus did not rebut the clament's argument on the interpretation of the jurisdictional rules. In that judgment, the CJEU held that

Article 7(2) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as follows:

the concept of "the place where the damage occurred" does not extend to the seat of a parent company which brings an action for damages for damage caused by the anti-competitive conduct of a third party in breach of Article 101 TFEU solely to its subsidiaries, even if it is claimed that that parent company and those subsidiaries form a single economic unit.

Consequently, the Curia, by its order in one of the cases concerned, upheld the final termination order(s) on the basis of the above judgment of the CJEU. 

The second question, in the constellation described in the first question, was intended to examine a further, even more distant level of "distance" between the place of the damage and the place of the forum, namely whether jurisdiction could be established even if the economic entity did not exist at the time the damage occurred. However, as the first question was answered in the negative, the second question was ultimately considered irrelevant.

So for the time being, the question remains open whether the reverse economic entity argument put forward by the clament in the lawsuits is legally correct, whether a parent company is entitled to claim alleged damages from its subsidiaries for competition law infringements without any further legal action. In any event, it would be difficult to argue that the argument is quite innovative and that its adoption would open up serious prospects in the field of follow-on damages actions. 

My own view is that even if the CJEU had answered the first question in the affirmative, the alleged damage would, under the facts of the second question, have been very remote from the ultimate claimant (and the country of the forum) from the point of view of the jurisdictional rule, and therefore the court would most probably not have ventured so far in its expansive interpretation. That said, it would have been interesting to see whether the court would have attached any significance to the circumstance indicated in the question. Indeed, in the cases in question, there were a number of claims arising from vehicle purchases made by the subsidiary concerned before the clament had acquired control over it. Therefore, the question arises, in the context of the now substantive position of the injured party, whether - following the clament reverse economic entity doctrine - the former controlling company would not be entitled to enforce these claims rather than the former parent company and thus quasi-parent company? 

Pictures: DW, Getty Images