Follow on Actions in Europe: The New Directive

09 October 2013 by James Farnell

On Wednesday 25th September, Kroll Ontrack had its annual Brussels event at the Steigenberger Grandhotel which this year focussed on the topic of civil damages claims for anti-competitive behaviour, and the European Commission’s draft proposal on this subject.  The Directive was always going to attract significant attention given the presence of one of the Commission’s more controversial proposals to introduce an obligation of ‘disclosure’ on parties involved in Follow on Actions.  This is a step which in many of Europe’s jurisdictions is a completely novel concept and in some jurisdictions may even be considered as an unwelcome one…

As one of the European companies most active in Follow on Actions on the Claimant side, Deutsche Bahn’s Christopher Rother, Head of Competition, sat alongside Associate Dr Alex Petrasincu of Cleary Gottlieb Steen & Hamilton LLP, himself heavily involved in defending companies against such actions.  Dr Hanz Zenger, economist at Charles River Associates brought his significant experience of economic insights having previously worked at the Commission in the Chief Economists office, and Daniel Kavan, Head of Consulting at Kroll Ontrack, was able to shed some light on the practical and technical understanding involved in assimilating and collecting electronic evidence in such actions.

Needless to say the discussion focused mainly on the more controversial aspects of the Directive which included the introduction of an obligation of disclosure, but also a discussion around the ‘passing on defence’, the way the Directive deals with issues of proof and quantification of harm, and finally access to documents and technological solutions .  Mr Rother was also able to give an interesting insight into the activity of his department as a whole, and how Deutsche Bahn organises itself to conduct actions on the scale that it does.  To listen to the discussion in full, please view the video below (which includes Dr Petrasincu’s slides introducing the key elements of the Draft Directive):

The difficulties surrounding the adoption of the Directive in its current form were highlighted by the arguments advanced by both Mr Rother and Dr Petrasincu.  Whilst the disclosure obligations introduced in the Directive were intended to address the asymmetry of information that exists for claimants wishing to bring a civil action against a defendant found to have engaged in anti-competitive practices, an obligation of disclosure is one that is alien to most EU member states.  Due to the drafting of Article 5, which deals with the definition of documents to be disclosed by claimants (requires that the claimant has presented “reasonably available facts and evidence showing plausible grounds for suspecting he has suffered harm caused by the defendant’s infringement of competition law) Dr Petrasincu suggested that there was a considerable risk that this section could attract fishing expeditions, the cost of which would have to be met by defendants.  Given the additional burdens these issues could cause defendants, Dr Petrasincu submitted that there was a real risk the Directive in its current form might actually serve as a deterrent to self-reporting anti-competitive behaviour to the Competition Authorities.    Indeed, current fines levied by the Commission and National Competition Authorities seem to be high enough without many of the same documents then being made available to future claimants.  As Dr Zenger stated, from the economic perspective there seems to be conflict here between deterrence and compensation.  As it stands, the leniency procedure is needed for anti-competitive practices to be brought to light, but a defendant certainly won’t be interested in “digging his own grave”.

There is no immediate effect flowing from the proposed Directive as it won’t be adopted until at least 2015.  The Council of Ministers first has to adopt the Directive, and as Dr Petrasincu stated it is unlikely to be adopted in its current form.  Once this is agreed, Member States will then have another two years to implement it.  We will be watching developments with interest.