Piercing the Corporate Veil: Parental Liability under Article 101

Transcription

1 International Business Law: Master Thesis Piercing the Corporate Veil: Parental Liability under Article 101 TFEU and the Right to a Fair Trial. Name : Christiaan L. Wasiela Student number : Words : Supervisor : dr. L.Y.M. Parret 0

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3 Table of Contents Chapter Subject Page List of Abbreviations 4 Introduction 5 1 Legal Framework The European Union Competition Law Article 101 of the TFEU The Fining Policy of the Commission Fundamental Rights in the EU Judicial Review The European Convention of Human Rights A Brief Introduction The Margin of Appreciation Doctrine 13 2 The Right to Fair Trial The European Union Article 47and 48 of the EU Charter The Use of Presumptions under EU Competition Law The Discretionary Powers of the Commission Unlimited Jurisdiction Reasoning The European Convention of Human Rights Article 6: the Right to a Fair Trial The Fourth Instance Doctrine Administrative Bodies and the Right to a Fair Trial The Omnibus of Article Article 6 in General First Paragraph Second Paragraph: the Presumption of Innocence Introduction The Use of Presumptions Standard of Proof Third Paragraph 32 2

4 3 Parental Liability The Rebuttable Presumption of Parental Liability The Rebuttable Presumption of Parental Liability: an Introduction Legal Rationale The Economic Unit The EU Courts Earlier Case Law Recent Judicial Developments 40 4 The Presumption of Parental Liability and the Right to a Fair Trial The Right to a Fair Trial under the EU and the Convention The Right to a Fair Trial: a Double Standard Classification of EU Competition Law Stringency of Application of Article The Requirements of the Right to a Fair Trial General Critique in the Light of the Right to a Fair Trial The Use of Presumptions The Influence of the Fourth Instance Doctrine Piercing the Corporate Veil under the Strasbourg Case Law The Use of the Rebuttable Presumption of Parental Liability Strict Liability Stringency Requirements to the Use of Presumptions Unlimited Jurisdiction and the Margin of Discretion The Reasoning of the Rebuttable Presumption of Parental Liability 55 5 Conclusion 58 Bibliography 61 3

5 List of Abbreviations 2006 Guidelines Guidelines on the Method of Setting Fines imposed pursuant to Article 23(2)(a) of Regulation 1/2003 [2006] OJ C210/2 CFI Court of First Instance (now the General Court) The Convention European Convention for the Protection of Human Rights and Fundamental Freedoms EU ECJ ECtHR EU Charter GC Strasbourg court TEU TFEU European Union Court of Justice of the European Union European Court of Human Rights Charter of Fundamental Rights of the European Union General Court European Court of Human Rights Treaty on European Union Treaty on the Functioning of the European Union 4

6 Introduction Are parents responsible for their children? For natural persons, this is a question which can have various answers depending on the circumstances. This is the same under company law, since this question can have a variety of answers as well, depending on the circumstances. Over the years a practice has developed in the EU which recently has received significant criticism in the legal doctrine. It is the practice of the Commission to prosecute parent companies for the competition infringements of their children, or their subsidiaries and the Commission does so with success, since parent companies have been found jointly and severally liable for the competition infringements of their subsidiaries, in total for well over one billion Euros, in the three years from 2004 to The behavior that the Commission prosecutes consists of the following; when the Commission finds a subsidiary to infringe Article 101 of the TFEU, and this subsidiary is wholly, or almost wholly owned by its parent company, then the Commission will automatically hold the parent company liable as well. In doing so, a presumption has evolved in EU competition law that such a parent company is liable for these infringements based upon the fact that it has hundred, or almost hundred percent ownership. The presumption of liability is rebuttable, however only very few companies manage to actually rebut it. 2 The newfound criticism on this practice comes from the fact that the EU is now about to accede to the European Convention of Human Rights and this means that EU organs, such as the Commission and courts will have to live up to the standards of the case law of the Strasbourg court. In the legal doctrine many authors, and even an EU Advocate-General, 3 have already pronounced that the practice of rebuttably presuming parental liability, could possibly infringe Article 6 of the Convention, which contains the right to a fair trial. The right to a fair trial is found in Article 6 of the 1 Briggs & Jordan 2007, p Atlee, Botteman & Joshua 2012, p See the Opinion of Advocate-General Bot in ECJ 26 October 2010, Joined Cases C 201/09 P and C 216/09 P, Jur. 2011, p (Arcelor Mittal Luxembourg SA v. Commission). 5

7 Convention, however also in the EU it is found, in the EU Charter. 4 Whether or not the rebuttable presumption of parental liability actually infringes the right to a fair trial, will be the subject of this thesis. The central research question for this thesis will therefore be the following: Does the rebuttable presumption of liability of parent companies for Article 101 infringements of their wholly owned, or almost wholly owned subsidiaries infringe their right to a fair trial? This thesis will continue as follows, the first Chapter will discuss the two legal frameworks that are applicable, namely, the European Convention of Human Rights and the EU. The second Chapter will discuss the right to a fair trial and how it is expressed in EU law and the Convention. This necessarily will become a broad chapter since the right to a fair trial consists of several independent rights and requirements, such as the presumption of innocence. The third Chapter will contain an exploration on the doctrine of parental liability, this will include an assessment of its history and topics such as its current development and its legal rationale. In the fourth Chapter the results of the foregoing Chapters will be analyzed and in the fifth Chapter there will be a conclusion. 4 See Article 52 (3) of the EU Charter. 6

8 Chapter 1 Legal Framework The assessment whether or not the rebuttable presumption of parental liability infringes the right to a fair trial, revolves around two legal frameworks, the first legal framework is that of the EU, with at its center Article 101, and the second legal framework is that of the European Convention of Human Rights itself. In the first Section of this Chapter the framework of the EU will be discussed and in the second Section that of the Convention will be discussed. 1.1 The European Union This Section will discuss the legal framework that exists around Article 101 of the TFEU. In the first place a short introduction into competition law will be given, in the second place Article 101 itself will be discussed, in the third part the fining policy of the Commission will be discussed in more detail, in the fourth part fundamental rights applicable in the EU will receive attention. In the last part judicial review will be handled Competition Law The rebuttable presumption of parental liability falls under EU competition law, EU competition law consists of rules that are aimed at maximizing consumer welfare through protecting competition. A concern of competition law is that companies with sufficient market power have the ability to harm consumer welfare through harming competition. 5 When companies fix prices or abuse a dominant position this behavior can exclude competitors, it can dampen innovation, consumers will then pay a higher price and in general the economy at large will be damaged. 6 Cartels have therefore been named the cancers of the economy and even the supreme evil of anti-trust, 7 that is why competition law is a vital part of EU law, because it discourages such behavior. 8 5 Whish 2009, p Fox 2009, p Monti 2007, p Fox 2009, p. 5. 7

9 1.1.2 Article 101 of the TFEU Effective competition implies that the market consists of competitors that act independently of one another, this means that agreements between competitors, decisions by associations of undertakings or concerted practices can infringe such effective competition. Article 101 is aimed at excluding cartelization from the market, through prohibiting any form of collusion. 9 While Article 101 prohibits cartelization or collusion, its sister article, Article 102 prohibits the abuse of a dominant position of a single firm. Under Article 102 a parent company and a subsidiary can also infringe competition law through abusing a collective dominant position, 10 however this is different to Article 101 and will therefore not be discussed here. Article 101 of the TFEU reads; 1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: a) directly or indirectly fix purchase or selling prices or any other trading conditions; b) limit or control production, markets, technical development, or investment; c) share markets or sources of supply; d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. Through Article 101 a significant amount of case law has emerged, which covers various aspects, only the relevant aspects will be dealt with in this thesis. Article 101 is aimed at prohibiting cooperation between independent undertakings, as this restricts or distorts competition. The application of Article 101 is therefore very broad, cooperation between undertakings, through all sorts of communication, is caught. 11 Case law of the ECJ has shown that the 9 Kerse & Khan 2005, p Office for Competition and Consumers Protection 2003, p Whish 2009, p

10 prohibition of Article 101 goes well beyond the classic notion of price fixing and covers a wide array of commercial activities, such as franchising and intellectual property licensing. 12 The infringement itself needs to be proven with evidence that is sufficiently precise and consistent and which gives grounds for a firm conviction that the alleged infringement took place. 13 It is not satisfactory if another plausible explanation can be given for the infringement, nevertheless it would go too far to state that the Commission needs to prove beyond reasonable doubt that an infringement took place. 14 After it has been established that an infringement of Article 101 has taken place it will then be possible to ascertain which company is liable for it, this is also were the rebuttable presumption of parental liability comes into play. The term undertaking is essential here, since Article 101 only prohibits cooperation between undertakings, nevertheless none of the Treaties define what an undertaking is. 15 In its case law the ECJ has stated that the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. 16 An undertaking can consist of several legal or natural persons, 17 Article 101 (1) will therefore not apply to agreements between two or more legal persons that together form a single economic entity, the most basic example of a single economic entity is the relation between a parent company and its subsidiary. The economic unit will be discussed in more detail in Chapter The Fining Policy of the Commission A general overview will be given in this subsection on the fining policy of the EU. The role of the Commission will be discussed here and the specific legal framework on which the Commission s power to fine is based. The Commission is described by the ECJ as the Guardian of the Treaty, it is thus the executive arm of the EU. 18 Article 103 TFEU grants the Commission together with the Council and the European 12 Kerse & Khan 2005, p CFI 6 July 2000, Case T-62/98, Jur. 2000, p. II (Volkswagen v. Commission), 43, Kerse & Khan 2005, p. 478 and Lenearts 2007, p Kerse & Khan 2005, p Whish 2009, p ECJ 23 April 1991, C-41/90, Jur. 1991, p. I (Höfner and Fritz Elser v. Macrotron GmbH), 21, see also Whish 2009, p Briggs & Jordan 2007, p Kerse & Khan 2005, p

11 Parliament the power to lay down Regulations and Directives that give effect to Article 101. Article 103 (2) (a) states in particular that regulations and directives shall be made for fines and periodic payments, this has led to Regulation 1/2003 which contains procedural rules that guarantee Article 101 s effectiveness. Regulation 1/2003 provides the Commission with a legal enforcement procedure, this means it can investigate and take decisions in order to stop infringements 19 and those decisions can eventually lead to a fine. Article 23 of Regulation 1/2003 states that undertakings can be fined ten percent of their total turnover when they infringe Article 101, Article 23 also states that the infringement can be committed intentionally or negligently, and this distinction shows that at least some degree of culpability is required, which implies that a mere accident will go unpunished. Nonetheless, findings that an infringement has occurred due to negligence have been rare. 20 When setting a fine, Article 22 (3) of Regulation 1/2003 only requires that the Commission regards the gravity and the duration of the infringement. Regulation 1/2003 itself does not impose an obligation for the Commission to publish its fining policy. However, under former Regulation 17/62 the CFI stressed that it was desirable, that the Commission made its method for fining clearer and more transparent, and this eventually led to the 1998 and 2006 Guidelines. 21 The Guidelines bind the Commission through creating legitimate expectations as to the approach the Commission will take, 22 corrections can still be made for the individual circumstances of the case and the Commission has a margin of discretion in determining the fine Fundamental Rights in the EU Fundamental or human rights have always had an important relationship with the EU, this is shown through Article 2 and 6 of the TEU. Most prominently Article 6 of the TEU states that the Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, 19 Kerse & Khan 2005, p Idem, p Gerardin 2011, p. 7 and CFI 6 April 1995, Case T-148/89, Jur. 1995, p. II (Tréfilunion SA v. Commission), Kerse & Khan 2005, p Gerardin 2011, p. 7 and Kerse & Khan 2005, p

12 and the rule of law, principles which are common to the Member States. This is underlined by the preamble which states that the EU member states have an attachment to the principles of liberty, democracy and respect for human rights and fundamental freedoms and of the rule of law. 24 One of the first cases in which the ECJ recognized fundamental rights was the Internationale Handelsgesellschaft decision of 1970, here the ECJ stated that respect for fundamental rights forms an integral part of the general principles of law protected by the Court of Justice. 25 The importance of fundamental rights has also been underlined by the emergence of the EU Charter as well. The EU Charter was meant to be a restatement of rights already applicable under other EU instruments or EU case law. 26 Since the entry into force of the Lisbon Treaty the EU Charter has obtained the same value as the EU treaties, see Article 6 (1) of the TEU, and is therefore binding on EU organs. 27 Most rights that correspond to those of the Convention are also found in the EU Charter, Article 52 (3) of the EU Charter states that the rights that correspond to the Convention, the meaning and scope of those rights shall be the same as those laid down by the said Convention, moreover it states that this shall not prevent Union law providing more extensive protection. Article 52 (3) clearly shows the relation between the right to a fair trial under the EU and under the Convention, the protection of the EU must be equivalent or more extensive. Nonetheless, it must be mentioned that the corresponding rights between the two treaties are not exactly the same, not the least because they are explained differently between the two courts, the ECJ and the Strasbourg court, and this has led to some subtle but real divergences between the Convention and the EU acquis. 28 Nevertheless, the Strasbourg court and the ECJ have a mutual beneficial relationship, wherein both courts cite each other, even though the ECJ has cited the Strasbourg court more than vice versa. 29 The ECJ started citing the Strasbourg court as early as in 1974 in the Nold decision, here the ECJ stated 24 Andreangeli 2012, p ECJ 17 December 1970, Case 11/70, Jur. 1970, p (Internationale Handelsgesellschaft v. Einfuhr- und Vorratstelle für Getreide und Futtermittel), Kerse & Khan 2005, p Wils 2011, p Forrester 2011, p Douglas-Scott 2006, p

13 that the Convention and other international treaties, of which EU member states are party, were guidelines which should be followed within the framework of Community law. 30 The EU Charter is relevant for competition infringements as well since it is a framework of fundamental rights against which Commission decisions can be reviewed Judicial Review Judicial review obviously is the most relevant aspect of the right to a fair trial, without it there would be no trial at all. EU law states that after a company has been fined by the Commission, this fine is open to full judicial review. Article 263 of the TFEU grants legal persons the right to institute proceedings when they are fined, while Article 261 of the TFEU gives the EU courts unlimited jurisdiction over these fines. Of the two EU courts it is the GC that assesses the facts, both in first and in last instance. 31 The distinction between the ECJ and the GC is that an appeal at the ECJ can only be brought based upon points of law. If the appeal is well founded the ECJ shall quash the decision of the GC. 32 Through Article 281 of the TFEU more aspects of the EU courts are laid down in the Statute of the Court of Justice. 1.2 The European Convention of Human Rights In this Section a general introduction on the Convention will be given first, after which the interpretation and the margin of appreciation will be discussed in more detail A Brief Introduction The European Convention of Human Rights has been adopted in 1950 and it has been drafted by the Council of Europe, it eventually came into force in The Convention is a response to past and current events in Europe, 33 most notably the Second World War, and contains civil and political rights. 30 ECJ 14 May 1974, Case 4-73, Jur. 1974, p. 491 (Nold, Kohlen- und Baustoffgroßhandlung v. Commission), 12 and 13 and Craig & de Búrca 2008, p See Article 58 of the Statute of the Court of Justice and Lenearts 2007, p Article 58 and 61 of the Statute of the Court of Justice. 33 Harris, O Boyle & Warwick 2009, p. 1 and 2. 12

14 Article 34 of the Convention states that the Strasbourg court may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim, inter alia this means legal persons are protected by the Convention. 34 After accession of the EU to the Convention it will be possible to bring claims at the Strasbourg court when one claims to be a victim of Commission decisions, nonetheless, Article 35 of the Convention does require that all domestic remedies have been exhausted first. The Strasbourg court s judgments are essentially declaratory, this means that the court will not specify the action that must be taken by the state to comply with its judgments, even though recently the Strasbourg court seems to change its position on this issue The Margin of Appreciation Doctrine The margin of appreciation doctrine, is essential for the interpretation of the Convention. The doctrine implies that a member state can have a certain margin in the appreciation of a Convention s right when they take judicial, legislative or administrative action. 36 This is not the same for all the rights guaranteed by the Convention, look at the prohibition of torture for example, there no margin of appreciation is allowed. Inter alia the margin of appreciation can have a significant impact on the end result when assessing whether or not certain doctrines or legislative acts of member states are allowed under the Convention. The margin of appreciation takes a central role in the Strasbourg case law even though it cannot be found in the Convention itself, or in the travaux préparatoires. 37 The Handyside decision is one of the earlier and most well-known cases wherein it was pronounced; in this case it was in the light of Article 10 (2) of the Convention, the Freedom of Expression. In this decision the Strasbourg court decided that, the margin of appreciation goes hand in hand with a European supervision. Such supervision concerns both the aim of the measure challenged and its "necessity"; it covers not only the basic 34 Bronckers & Valery 200, p Harris, O Boyle & Warbrick 2009, p Idem, p Greer 2007, p

15 legislation but also the decision applying it, even one given by an independent court, 38 this decision therefore indicates that the power of appreciation does have its limits. This margin of appreciation is thus always under the Strasbourg court s supervision, when the Strasbourg court ruled specifically on competition issues in Market Intern it stated that states have a certain margin of appreciation in assessing the existence and extent of the necessity of an interference, it continued that a margin of appreciation is essential in commercial matters and, in particular, in an area as complex and fluctuating as that of unfair competition. 39 The Strasbourg court continued by stating that it will confine itself to a review whether the measures taken by the competition authorities were justifiable in principle and proportionate. Moreover, the court stated that a complete re-examination of each and every case on the facts and circumstances is not desired. 40 The margin of appreciation that is allowed can vary between certain activities, in a nutshell noncommercial activities enjoy a more intense protection from the Strasbourg court. 41 It is not entirely clear how this difference in judicial review is justified, however Andreangeli explains this through the distinction between commercial and political speech, political speech falls under the freedom of expression which lays at the very foundation of the Convention. Compared to that, commercial rights, like economic freedom, are more relative rights. An infringement of the political right to use the freedom of expression could damage the democratic process and therefore deserves to be extensively scrutinized. Because economic freedoms have less effect on the democratic processes than other fundamental rights of the Convention they enjoy less extensive scrutiny from the Strasbourg court, also because they are further away from the fundamental, or hard core values of the Convention. 42 Because of the aforementioned competition authorities have a wider margin of appreciation than other domestic authorities that govern more hard core values of the Convention. This is also proven by the Market Intern decision, where the Strasbourg court held that statements made for competition 38 ECtHR 7 December 1976, no. 5493/72, Series A 1976, no. 24 (Handyside v. the United Kingdom), ECtHR 20 November 1989, no /83, Series A 1998, no. 165 (Market Intern Verlag GmbH and Klaus Beermann v. Germany), Idem, Andreangeli 2010, p Idem, p. 232 and Andreangeli 2012, p

16 purposes enjoy less protection under the freedom of expression than other information that does fall into the nucleus of that right. 43 This Chapter has dealt with the two legal frameworks which are applicable when assessing the rebuttable presumption of parental liability of the EU fining policy. The issues dealt with are important for the assessment of presumptions under the right to a fair trial. The next Chapter will continue with the right to a fair trial under the EU and the Convention. 43 ECtHR 20 November 1989, no /83, Series A 1998, no. 165 (Market Intern Verlag GmbH and Klaus Beermann v. Germany),

17 Chapter 2 The Right to Fair Trial This chapter will discuss the principle of due process, also known as the right to fair trial. This right is guaranteed through the protection of Article 6 of the Convention, and it is also guaranteed by the EU itself, albeit in a different manner. The principle of due process, and especially the manner in which it is applicable, is of importance for anyone defending himself against the state, and therefore also for companies which are fined based upon the rebuttable presumption of parental liability, therefore, this Chapter will discuss how the right to a fair trial works as legal protection against these fines. In the first Section the relevant aspects of the right to a fair trial applicable under the EU will be discussed, and in the second Section the Convention s right to a fair trial will be discussed. 2.1 The European Union The relevant aspects of due process in the EU will be explored in this Section. In the first part Article 47 and 48 of the EU Charter will be discussed, in the second subsection the use of presumptions in EU competition law will be discussed, the discretionary powers of the Commission will be discussed in general in the third subsection. In the fourth part the jurisdiction of the EU courts over Commission decisions will follow, and in the last subsection the requirement of sufficient legal reasoning will be discussed Article 47 and 48 of the EU Charter Since the emergence of the EU Charter the EU has its own specific guarantees on the right to a fair trial, these guarantees are contained in Article 47 and 48 of the EU Charter. Article 47 of the EU Charter contains the right to an effective remedy and to a fair trial, and it faithfully echoes Article 6 of the Convention. 44 Article 48 of the EU Charter contains the right to be presumed innocent which 44 Kerse & Khan 2005, p

18 mirrors Article 6 (2). These rights are applicable against all the EU organs, since the EU Charter has become of the same value as the other EU treaties The Use of Presumptions under EU Competition Law Presumptions play an essential role in the catching of competition infringements, since in the EU, most competition infringements are through their nature caught through presumptions, which are derived from circumstantial evidence, 46 the use of presumptions in general will be discussed here. Article 2 of Regulation 1/2003 states that the burden of proving an infringement of Article 81(1) or of Article 82 of the Treaty shall rest on the party or the authority alleging the infringement. It is therefore the Commission that has the burden of proving that all material requirements of Article 101 are met. 47 After the burden of proof has been met it is the company in question that will have to defend itself against the allegation. Article 101 infringements can be proven through using presumptions, the rebuttable presumption of parental liability on the other hand presumes liability for the infringement after it has been established. In his Opinion on the Sugar Cartel case Advocate-General Mayras stated that the criminal nature of competition fines does not exclude the use of presumptions nor should this imply that the principle of in dubio pro reo should prevail, the accused should not merely be granted the benefit of the doubt simply because of the use of presumptions. 48 The rebuttable presumption of parental liability is a clear expression of this thought. Nevertheless, Advocate-General Vesterdorf has stated that there must be a sufficient basis for the decision, and any reasonable doubt must be for the benefit of the applicants according to the principle in dubio pro reo, 49 this doubt, which benefits the accused, is closely linked to the presumption of innocence. 50 This means that on the one hand the burden of proof is on the Commission, but on the other hand the factual evidence that the Commission provides may be of such a kind as to require the other party to provide an explanation or justification, failing which it is permissible to conclude that the burden of 45 Wils 2011, p Castillo de la Torre 2009, p Kerse & Khan 2005, p. 299 and Opinion of Advocate-General Mayras of 16 and 17 June 1975, Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Jur. 1975, p (Suiker Unie and Others v. Commission), p Opinion of Advocate-General Vesterdorf of 10 July 1991, T-l/89, Jur. 1991, p. II (Rhône-Poulenc v. Commission), p. II Lenearts 2007, p

19 proof has been discharged. An example of evidence of such a kind is the proof that the company participated in meetings with other companies, it is then the company that needs to prove that the participation was without an anti-competitive intent. 51 If the Commission has met the burden of proof, it is the company that needs to show that the conditions for defense are met, so that the Commission will need to resort to other evidence The Discretionary Powers of the Commission The margin of discretion that is granted to the Commission is important to explore because it can have a significant effect on the right to a fair trial, since discretionary powers are not fully reviewable, and a fair trial requires that a court can review every aspect of the rebuttable presumption of parental liability. It is therefore important to ascertain how far the discretionary powers of the Commission reach. The margin of discretion, which is granted by the EU courts, has been frequently stated, most notably in the Deutsche Bahn decision where the CFI stated that it should be pointed out that fines constitute an instrument of the Commission's competition policy and that that institution must therefore be allowed a margin of discretion when fixing their amount. 52 It must be mentioned that in this decision, the margin of discretion only amounts to fixing the amount of the fine and not to other aspects of the procedure. In another decision the ECJ has also stated that when an assessment of complex technical evaluations is involved, the Commission must have a power of appraisal in order to be able to fulfil its tasks, however it continued that, respect for the rights guaranteed by the Community legal order in administrative procedures is of even more fundamental importance. 53 A margin of discretion is therefore only allowed when there is a strict enforcement of the procedural rules. 54 It remains the task of the Commission to evaluate the substance, and it is for the EU courts to counterbalance this with a strict enforcement of procedural rules ECJ 7 January 2004, Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P, Jur. 2004, p. I (Aalborg Portland and Others v. Commission), 78, 79 and CFI 21 October 1997, Case T-229/94, Jur. 1997, p. II (Deutsche Bahn AG v. Commission), 127, see also Kerse & Khan 2005, p ECJ 21 November 1991, Case C-269/90, Jur. 1991, p. I (Technische Universitat München v. Commission), 13 and Schwarze 2004, p Idem, p

20 To make it easier for companies to understand Commission s decisions, the Commission has provided the 2006 Guidelines which give insight in the fining methodology of the Commission, even though, as Gerardin points out, their practice remains rather vague, especially on the starting point of a fine and its aggravating factors. 56 Even though the Guidelines are a non-binding document, the ECJ has stated that the Guidelines put a limit on the exercise of its discretion and cannot depart from those rules under pain of being found, where appropriate, to be in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. 57 This means that Guidelines to a certain extent do impose legal effects. 58 Because of the Commission s discretionary powers are not fully reviewable, the EU courts are not keen on replacing a Commission s decision with their own, therefore great weight is given to the compliance of the procedural guarantees, especially whether the facts were accurately stated and whether there could have been a misuse of power or a manifest error. 59 In the Microsoft decision of 2007 the CFI elaborated fully upon the manifest error doctrine, in this decision, which was on Article 102, the CFI stated that their judicial review would be limited to checking whether the relevant rules on procedure and on stating reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or a misuse of powers. The CFI then continued, Likewise, in so far as the Commission s decision is the result of complex technical appraisals, those appraisals are in principle subject to only limited review by the Court, which means that the [EU] Courts cannot substitute their own assessment of matters of fact for the Commission s. It seems therefore the Commission is granted considerable leeway, however the CFI continued that the Community Courts recognise that the Commission has a margin of appreciation in economic or technical matters, that does not mean that they must decline to review the Commission's interpretation of economic or technical data. The Community Courts must not only establish whether the evidence put forward is factually accurate, reliable and consistent but must also determine whether that evidence contains all the relevant data that must be taken into 56 Gerardin 2011, p. 7, 10 and ECJ 28 June 2005, Joined Cases C-189/02 P, C-202/02 P, C-205/02 P TO C-208/02 P and C-213/02 P, Jur. 2005, p. I (Dansk Rørindustri and Others v. Commission), Gerardin 2011, p Schwarze 2004, p

21 consideration in appraising a complex situation and whether it is capable of substantiating the conclusions drawn from it. 60 Wils explains that the use of the definition of manifest error gives a wrong impression of the intensity of the judicial review that the EU courts undertake, the level of judicial review actually is quite exhaustive, as the assessment of the CFI in the Microsoft case proves. 61 Like other EU organs the Commission is also bound by the general legal principles of EU law and the fundamental rights guaranteed by the EU. This also means that the Commission is bound by the principle of equal treatment and the principle of proportionality. 62 These rules and principles constrain the Commission s discretionary powers Unlimited Jurisdiction The use of unlimited jurisdiction and the discretionary powers of the Commission are interrelated topics, and according to Article 261 of the TFEU the EU courts have, when assessing Commission decisions, unlimited jurisdiction. Nevertheless, the intensity to which the GC is going to review an applicant s case also depends on which grounds of annulment the applicants at first instance relied upon and in particular how substantiated their submissions were, that is, with what facts and arguments they supported their individual complaints. The facts and the evidence brought by the parties will form the basis for the court s decision. 63 The right to appeal is limited to points of law only, this means that an appeal based merely on the amount of a fine is bound to be rejected, unless it is based upon an error of law. 64 The ECJ will not overturn findings of fact of the GC either, the ECJ has stated that the GC has exclusive jurisdiction to find the facts, except where a substantive inaccuracy in its findings is attributable to the documents submitted to it, it continued that it will not appraise those facts except where the clear sense of the evidence has been distorted, the GC therefore also has a margin of discretion granted by the ECJ CFI 17 September 2007, Case T-201/04, Jur. 2007, p. II (Microsoft v. Commission), 87 and Wils 2009, p Opinion of Advocate-General Kokott in ECJ 12 January 2012, Joined Cases C 628/10 P and C 14/11 P, Jur. 2012, p (Alliance One International Inc. and Others v. Commission), Idem, Kerse & Khan 2005, p ECJ 11 April 2002, C-481/01 P(R), Jur. 2002, p I (NDC Health Corporation and Others v. Commission), 54 and Kerse & Khan 2005, p

22 In its case law the ECJ has linked the protection of fundamental rights to a correct administrative procedure, however, only the infringement of an essential procedural rule will be ground for annulment, through Article 263 of the TFEU. 66 What actually is essential depends on a case-by-case analysis Reasoning The reasoning of decisions is an important facet of the right to a fair trial, Article 296 of the TFEU states that the Commission, when issuing a decision, shall state the reasons on which they are based and shall refer to any proposals or opinions. This is an essential requirement for Commission decisions, and therefore infringement of this Article can lead to annulment of the decision in question. 68 Moreover, the Commission is obliged to state its decision in a concise but clear and relevant manner, the principal issues of law and of fact upon which it is based and which are necessary in order that the reasoning which has led the Commission to its Decision may be understood. 69 Contradictions in the reasoning will therefore infringe Article 296 of the TFEU. 70 The duty of the Commission to give a reasoned decision is an important right of the defense, this duty does not only include the wording, but also the duty to state all the legal rules which are applicable and the context in which the decision is made, albeit the reasoning does not have to address all the relevant facts and points of law. 71 In the Dyestuffs decision a parent company complained that the Commission did not give sufficient reasons for its alleged jurisdiction over the parent, the ECJ then stated that the Commission is not bound to include in its decisions all the arguments which it might later use in response to submissions of illegality which might be raised against its measures. 72 The length and detail required will also depend on the nature of the circumstances, the facts of the case, the type of the decision and also its novelty Schwarze 2004, p Idem, p Lenearts 2007, p ECJ 4 August 1963, Case 24/62, Jur. 1963, p. 63, p Kerse & Khan 2005, p Schwarze 2004, p ECJ 14 July 1972, C 48/69, Jur. 1972, p. 621 (Imperial Chemical Industries v. Commission or Dyestuffs), Kerse & Khan 2005, p

23 The right to a fair trial in the EU has now been handled, as stated before, this right is also enshrined in the Convention, and this is what the next Section will discuss. 2.2 The European Convention of Human Rights This Section will discuss the right to a fair trial from the perspective of Article 6 of the Convention, the first subsection will introduce the Article itself, the second subsection will discuss the fourth instance doctrine, the third subsection will explore the distinction between administrative bodies and courts and the fourth and last subsection will discuss the relevant rights that Article 6 contains, in the context of EU competition law Article 6: the Right to a Fair Trial The right to a fair trial has been laid down in Article 6 of the Convention, it contains procedural guarantees which need to ensure that the trial is fair, it are these requirements that must be fulfilled when the rebuttable presumption of parental liability of Article 101 of the TFEU is applied, Article 6 itself reads: 1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgement shall be pronounced publicly by the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. 2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. 3. Everyone charged with a criminal offence has the following minimum rights: a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; b) to have adequate time and the facilities for the preparation of his defence; c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require; d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court. 22

24 As can be seen from the Article itself, the right to a fair trial has more than one relevant aspect, it is an omnibus provision. 74 It also needs to be noted that due to Article 6 all member states of the Convention have already needed to amend and improve their legislation in order to meet the requirements of Article There are two aspects of parental liability that impede the application of the right to a fair trial and that need to be mentioned. In the first place, not all of the Convention s rights are applicable to their full extent to companies, look for example at the prohibition of torture of Article 3 of the Convention. This same accounts for the right to a fair trial, which cannot be applied in the same manner to legal persons as to natural persons, this is a difference that has to be taken into account. In the second place, competition law does not fall under classic criminal law. 76 These implications also mean that Article 6 is not transplantable in its most stringent character to companies, 77 this will be discussed in more detail in Chapter The Fourth Instance Doctrine The fourth instance doctrine is a doctrine applicable when the Strasbourg court assesses Article 6 infringements, it is important to bear this doctrine in mind before assessing any proceeding under Article 6 of the Convention 78 and therefore also before reviewing the rebuttable presumption of parental liability. The Strasbourg court does not see itself as being a court of fourth instance, this means that it is not its function to deal with errors of fact or law allegedly committed by a national court, unless and in so far as they may have infringed rights and freedoms protected by the Convention. 79 This means that Article 6 only protects the procedure of a trial and not whether the outcome is fair. 80 According to 74 White, Ovey & Jacobs 2006, p Idem, p ECtHR 23 November 2006, no /01, RJ&D ECHR 2006, XIV (Jussila v. Finland), Scordamaglia 2010, p White, Ovey & Jacobs 2006, p ECtHR 21 January 1999, no /96, RJ&D ECHR 1999, I (Garcia Ruiz v. Spain), 28, see also Harris, O Boyle & Warbrick 2009, p. 14 and Harris, O Boyle & Warbrick 2009, p. 14 and

25 Loucaides the Strasbourg court has diverted from the fourth instance doctrine only once in an exceptional case in 2000, and even then it was highly criticized for overstepping its competence. 81 The Strasbourg court therefore does not have the jurisdiction under Article 6 to reopen national legal proceedings or to replace the conclusions of national courts with its own findings of fact, or with its own application of national law. 82 Therefore, if all procedural requirements are satisfied the Strasbourg court cannot interfere in a trial and will be very reluctant to do so. 83 This means that there is no substantial review on the fairness of a judicial determination, the actual end result. It must be noted that the Strasbourg court does not uphold this doctrine for other rights, such as the prohibition of torture, here the Strasbourg court does substitute its own findings for that of national court if it disagrees with their findings. 84 The Strasbourg court does require that there is the possibility of full judicial review, even in mere administrative procedures, and this judicial review should cover fact as well as law. 85 The right to appeal does not cover a review of fact and law, only a review on points of law is sufficient here. 86 Related to the fourth instance doctrine is the notion that the Strasbourg court does not see it as its task to rule in abstracto whether legislation is compatible with the Convention, 87 the Strasbourg court will therefore assess in each individual case whether or not there is a violation of one of the rights of the Convention Administrative Bodies and the Right to a Fair Trial Administrative bodies are distinct to courts under the right to a fair trial of the Convention and this also means those administrative bodies do not have to meet all the requirements of Article The Strasbourg court has decided that demands of flexibility and efficiency are fully compatible with the Convention, and this justifies the prior intervention of an administrative body in a procedure. 81 Loucaides 2007, p White, Ovey & Jacobs 2005, p Loucaides 2003, p. 30, 32 and Idem, p Harris, O Boyle & Warbrick 2009, p. 228, see also ECtHR 23 June 1981, no. 6878/75 and 7238/75, Series A 1981, no. 43 (Le Compte, van Leuven and de Meyre v. Belgium), Harris, O Boyle & Warbrick 2009, p ECtHR 20 October 1997, no /92, D&R 1997, VI (Radio ABC v. Austria), 37 and ECtHR 25 March 1983, no. 5947/72; 6205/73; 7052/75; 7061/75; 7107/75; 7113/75; 7136/75, Series A 1983, no. 61 (Silver and Others v. the United Kingdom), Spronken 1989, p. 501 and ECtHR 7 October 1988, no /83, Series A 1998, no. 141-A (Salabiaku v. France), ECtHR 23 June 1981, no. 6878/75 and 7238/75, Series A 1981, no. 43 (Le Compte, van Leuven and de Meyre v. Belgium),

26 Therefore the suspect should always be able to bring any such decision affecting him before a court that affords the safeguards of Article In the Janosevic decision the Strasbourg elaborated upon this issue and stated that tax authorities are administrative bodies which cannot be considered to satisfy the requirements of Article 6 1 of the Convention. The Court considers, however, that Contracting States must be free to empower tax authorities to impose sanctions like tax surcharges even if they come to large amounts. Such a system is not incompatible with Article 6 1 so long as the taxpayer can bring any such decision affecting him before a judicial body that has full jurisdiction, including the power to quash in all respects, on questions of fact and law, the challenged decision. 91 The consequence that can be derived from these cases, is that outside of hard core criminal cases, fines can be imposed by an administrative body, as long as there is the possibility of appeal to a judicial body which has full judicial power. 92 Chapter 4 will show that EU competition law falls outside hard core criminal law The Omnibus of Article 6 The right to a fair trial is a right that contains a variety of other rights, such as the presumption of innocence and the right of equality of arms, therefore the case law of the Strasbourg court on Article 6 is extensive and is key to understanding the significance and reach of Article 6 on its various aspects. Even though Article 6 has a more stringent character in hard core criminal cases there are still a lot of rights that are applicable under both hard core criminal and under non-hard core criminal law, such as the right the right to a fair hearing. 93 of these various rights the relevant ones will be explored below. 90 ECtHR 24 February 1994, no /86, Series A 1994, no. 284 (Bendenoun v. France), 46, ECtHR 5 January 2010, no /04 (Impar LTD v. Lithuania), 34 and 91 ECtHR 23 July 2002, no /97, RJ&D ECHR 2002, VII (Janosevic v. Sweden), Wils 2009, p. 16 and Harris, O Boyle & Warbrick 2009, p. 235 and