13 May 2016

European Court of Justice rules on cartel damages claims and arbitration and jurisdiction clauses

Introduction

Arbitration clauses contained in commercial contracts typically derogate the jurisdiction of the otherwise competent state courts by providing that the parties to the contract will arbitrate all disputes which arise under or in connection with the contract. Similarly, jurisdiction clauses typically limit all disputes which arise under or in connection with the contract to the courts of one jurisdiction. The answer to the question of whether such clauses would also cover cartel damages claims of one party against the other party is often unclear, but becomes increasingly important given the growing number of private enforcement activities resulting from cartel infringements.

In its decision of 21 May 2015, the European Court of Justice (the “ECJ”) found that disputes concerning cartel damages claims between cartel members and the cartel’s victims are generally not covered by any jurisdiction clause contained in supply agreements unless the cartel’s victim has consented thereto[1].  This follows the rationale that cartel claims have their basis not in the sales contract between the cartelist and its customer, but in the infringement of competition law. Unfortunately, the ECJ did not expressly decide on arbitration clauses, but - presumably - the same reasoning would apply.

The Decision

The proceeding that gave rise to the ECJ claim was brought by a special purpose vehicle formed by European pulp and paper processers to seek damages from a group of multinational chemical companies that the European Commission had ruled to be operating a cartel for hydrogen peroxide and sodium perborate. The original action was filed with the Regional Court of Dortmund (Germany) since one of the defending cartel members had its registered office in Dortmund. After the action against that German cartel member settled, the other cartel members challenged the Regional Court's jurisdiction before the ECJ on the basis of jurisdiction clauses in their contracts with the pulp and paper processers, some of which included arbitration provisions.

To respond to the challenge, the Regional Court of Dortmund referred several questions concerning the interpretation of the Brussels I Regulation [2] to the ECJ for a preliminary ruling. One of these questions was whether the application of jurisdiction and arbitration clauses in supply agreements with respect to cartel damages claims would be contrary to the principle of effective enforcement of EU competition law if this had the effect of excluding jurisdiction of a court with international jurisdiction under the Brussels I Regulation, such as the Regional Court of Dortmund in the present case.

With regard to this question, the ECJ ruled that such jurisdiction clauses are, in principle, valid and binding and that their application would not be contrary to the principle of effective enforcement of EU competition law since the system of legal remedies in each Member State together with the preliminary ruling procedure before the ECJ affords a sufficient guarantee in that respect. However, the ECJ expressly stated that disputes concerning damages resulting from cartel infringements can be governed by such a clause only if the harmed party can be deemed to have consented to it. In the ECJ’s view, this requires that the jurisdiction clause specifically refers to claims for liability resulting from competition law infringements as only in these circumstances the harmed party can be deemed to have been in a position to “reasonably foresee a cartel damages action when it agreed to the jurisdiction clause”. 

It is not entirely clear why the ECJ - despite the more general question of the Regional Court of Dortmund - did refer to jurisdiction clauses only but did not explicitly rule on arbitration clauses. However, the most likely reason is that arbitration does not fall within the scope of application of the Brussels I Regulation[3].  Rather, interpreting the scope of arbitration clauses falls within the sole competence of the national courts of the Member States based on their relevant national laws.

Conclusion

While the ECJ’s decision in most cases gives precedence to litigation over arbitration in the context of cartel damages disputes, it does not exclude the possibility of submitting cartel damages claims to arbitration if the arbitration clauses expressly so provide.


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[1]ECJ decision of 21 May 2015 – file no. C-352/13.

[2]Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters. As of 10 January 2015, the Brussels I Regulation has been replaced by the Brussels Ia Regulation (Regulation No. 1215/2012). However, the terms of the provisions at issue have not been changed.

[3]See Article 1(2)(d).

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