Application of Jurisdiction Clauses to Competition Damages Actions Depends on Cause of Action
The European Court of Justice (ECJ) recently ruled that a jurisdiction clause does not need to refer expressly to disputes arising from a breach of competition law where damages are claimed based on Art. 102 TFEU (i.e., for abuse of a dominant position). This contrasts with the ECJ’s position in follow-on cartel damages claims (under Art. 101 TFEU), where a jurisdiction clause must specifically refer to disputes concerning an infringement of competition law.
When a private claim is made in relation to an alleged infringement of competition law, the claimant may be able to sue in a number of different jurisdictions. It might be thought that one way for the allegedly infringing company to limit forum-shopping by claimants would be to include a jurisdiction or arbitration clause in its agreements. Such jurisdiction or arbitration clauses are quite standard and are included, for good reason, in most commercial contracts. They can benefit both parties by enhancing predictability and allowing the parties to choose a dispute-resolution forum with which they are familiar and comfortable. Jurisdiction clauses are therefore given special protection by Article 23(1) of the Brussels Regulation (now Article 25 of Brussels Recast), the EU legislation that regulates the division of jurisdiction between the courts of EU Member States.
Yet the ECJ in Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV and Others (CDC) ruled that Article 23(1) “must be interpreted as allowing, in the case of actions for damages for an infringement of Article 101 TFEU [relating to anticompetitive agreements] . . . account to be taken of jurisdiction clauses contained in contracts for the supply of goods . . . provided that those clauses refer to disputes concerning liability incurred as a result of an infringement of competition law” (emphasis added). Needless to say, it is unlikely that many jurisdiction clauses will refer to the possibility of competition law infringement. As a result, claimants in cartel follow-on claims will likely be able to ignore jurisdiction clauses to which they signed up, thus potentially multiplying the number of jurisdictions in which alleged infringers will have to defend themselves and increasing the risk of forum-shopping.
The eBizcuss Case
In another judgment rendered on 24 October 2018 in Apple and Others v MJA(known as the eBizcuss case), the ECJ reached a different conclusion in relation to Article 102 TFEU, which relates to abuse of a dominant position:
eBizcuss was a former authorised distributor of Apple products in France. In 2012 eBizcuss lodged a damages claim before the Paris Commercial Court against Apple. eBizcuss claimed that certain discriminatory practices on the part of Apple had caused eBizcuss to incur significant financial damage and that Apple’s practices were abusive within the meaning of Article 102 TFEU.
Apple and eBizcuss had inserted a jurisdiction clause in their distribution contract. The jurisdiction clause stipulated that the Irish courts were to have jurisdiction in the event of any dispute arising out of the contract. In light of this clause, the Paris Commercial Court declined jurisdiction. On appeal, the Paris Court of Appeal upheld the Paris Commercial Court’s rejection of the case on the basis that the French courts lacked jurisdiction.
However, the Court of Cassation and the Versailles Court of Appeal took a different view and referred the case back to the Paris Commercial Court. On further appeal by Apple to the Court of Cassation, the latter stayed proceedings and asked the ECJ for clarification of Article 23 of the Brussels Regulation.
The ECJ held that Article 23 of the Brussels Regulation does not exclude the invocation of a jurisdiction clause in an action for damages based on Article 102 TFEU merely because that clause does not expressly refer to disputes relating to liability resulting from an infringement of competition law. The ECJ’s ruling in eBizcuss therefore stands in contrast to the position taken in CDC in the context of a follow-on cartel damages action based on Article 101 TFEU. In support of its contrasting position, the ECJ held that “while the anti-competitive conduct covered by Article 101 TFEU, namely an unlawful cartel, is in principle not directly linked to the contractual relationship between a member of that cartel and a third party affected by the cartel, the anticompetitive conduct covered by Article 102 TFEU, namely the abuse of a dominant position, can materialise in contractual relations that an undertaking in a dominant position establishes and by means of contractual terms”.
With its judgment in the eBizcuss case, the ECJ added another piece to the puzzle in clarifying how Art. 23(1) of the Brussels Regulation (now Art. 25 of Brussels Recast) is to be interpreted in the context of the applicability of jurisdiction clauses in competition law damages actions based on Art. 102 TFEU (i.e., for abuse of a dominant position). The eBizcuss judgment repeats the ECJ’s finding in CDC that choice of jurisdiction clauses are enforceable only in actions “directly linked to the contractual relationship” in the context of which the jurisdiction clauses have been concluded. Not surprisingly, the Court considers that actions based on Art. 102 TFEU are more likely to be directly linked to such a contractual relationship than damages actions for breach of Art. 101 TFEU.
One piece of the puzzle that remains to be identified is whether arbitration (as opposed to jurisdiction) clauses should be considered binding in relation to damages claims based on Arts. 101 and 102 TFEU. The ECJ missed the opportunity to address that issue at the time of the CDC judgment in 2015. By contrast, the Advocate General in CDC opined:
- That an arbitration clause is not in itself inapplicable in the context of a competition law damages action
- That, however, in the case of a clandestine cartel, claimants would likely have had insufficient knowledge of an infringing agreement and its unlawful nature to give consent to an arbitration clause covering claims arising from an illicit agreement
- That, in such circumstances, the invocation of an arbitration clause should be precluded
It remains to be seen whether the ECJ will follow that approach, which would strike a blow against arbitration in Europe.