Written by Simon Harms and Stephen C. Tupper

On 25 October 2011, the Court of Justice of the European Union (the “CJEU”) handed down two judgments annulling fines first imposed on Solvay SA by the European Commission (the “Commission”) in 1990. Fingers crossed, these judgments conclude one of the longer-running sagas before the European courts.

Background

For the benefit of younger readers, an abridged account of Solvay’s unfortunate encounters with the Commission and the European judicature over the last 21 years is set out below:

• in December 1990, the Commission issued two decisions imposing fines on Solvay of: (i) €20 million for abuse of dominance in the soda ash market; and (ii) €3 million for collusive market-sharing in the same market (the “1990 Decisions”). Solvay appealed the 1990 Decisions;
• in June 1995, the General Court of the European Union (the “General Court”) annulled the 1990 Decisions because the Commission had failed to adhere to its own rules of procedure when adopting them. The Commission appealed both judgments of the General Court;
• in April 2000, the CJEU dismissed the Commission’s appeals against the judgments annulling the 1990 Decisions;
• in December 2000, the Commission adopted two decisions which were in substance identical to the 1990 Decisions (the “2000 Decisions”). Solvay appealed, inter alia, on the basis that the Commission had failed to comply with key procedural rules by: (i) not granting Solvay access to the Commission’s file; and (ii) not allowing Solvay to be heard before adopting the 2000 Decisions;
• in December 2009, the General Court largely upheld the 2000 Decisions but reduced the fines imposed on Solvay because it considered that the Commission had miscalculated the duration of one infringement and erroneously classified Solvay as a repeat offender; and
• in October 2011, the CJEU annulled the 2009 judgments of the General Court and both 2000 Decisions. It also ordered the Commission to pay Solvay’s costs at first instance and on appeal. In addition, the Commission
  will have to repay the fines imposed together with interest thereon.

The CJEU’s reasoning

As was the case in 1995 – when the General Court annulled the 1990 Decisions – the reason why the CJEU annulled the 2000 Decisions were procedural flaws in the Commission’s handling of the cases in the run-up to issuing the 2000 Decisions.

Whilst in 1990 the Commission had not complied with its rules of procedure by failing to “authenticate” (i.e., in essence, sign) the 1990 Decisions before notifying them to Solvay, in its most recent judgments the CJEU held that when the Commission issued the 2000 Decisions it failed: (i) to grant Solvay access to the Commission’s file; and (ii) to schedule a hearing at which Solvay could have presented its case. The CJEU considered these breaches of Solvay’s rights of defence so grave so as to merit annulment of both 2000 Decisions.

As regards access to file, the CJEU held that the Commission’s failure to grant access could not be remedied by the mere fact that access was provided during the appeal proceedings. A review of a Commission decision by the General Court is limited to the pleas in law put forward – it does not re-enact the Commission’s investigation. Refusing access to the Commission’s file before a fining decision is issued may, therefore, deprive the company under investigation of opportunities to defend itself.

In the Solvay cases, most of the arguments under this heading centred on the fact that the Commission had – presumably during one of its many office moves between 1990 and 2003 – lost five binders of documents which may have contained useful information for Solvay’s defence.

Overturning the General Court’s ruling, the CJEU held that where access to the Commission’s file is only granted during court proceedings, the party alleging breach of its rights of defence “[…] has to show, not that if it had had access to the non-disclosed documents, the Commission decision would have been different in content, but only that those documents could have been useful for its defence.”

Turning to the specific question of the missing five binders, the CJEU held that:

“[…] the matter at issue in the present case is not that of a few missing documents, the content of which could have been reconstructed from other sources, but of whole sub-files which have been lost and which, if the suppositions of the Commission […] were correct, could have contained essential documents relating to the procedure before the Commission which may have been relevant to Solvay’s defence.”

On that basis, the CJEU held that Solvay’s rights of defence had been breached by the Commission’s failure to grant Solvay access to the Commission’s file.

As regards Solvay’s second head of claim, the court found that the Commission should – following access to file – have provided Solvay with an opportunity to attend a hearing. The CJEU confirmed that the Commission is not required to organise such a hearing when re-adopting decisions annulled exclusively as a result of a purely procedural error (such as a failure to authenticate a decision). However, in the present cases, the issue of the hearing could not be separated from the Commission’s failure to grant access to the Commission’s file. In effect, the CJEU held that the original 1990 Decisions were not only flawed due to the Commission’s failure to authenticate them but also because the Commission had failed to provide Solvay with access to the potentially exculpatory documents in its file (in accordance with the then applicable more limited disclosure rules).

Conclusion

Firstly, the Solvay cases serve as a vivid reminder of the urgent need to reform and speed up proceedings before the European courts. It cannot be in anybody’s interest that parties need to wait the best part of a decade for an appeal decision to be handed down. That reform process is now underway and it is hoped that such long delays can be avoided in the future.

The Commission has been quick to point out that these cases concerned decisions which are very old and based in part on Commission rules of procedure which have since been amended and upgraded on a number of occasions. There is some truth in that. Clearly, certain things have changed and it is hoped that the Commission will not repeat some of its past mistakes. For instance, these days the Commission uses electronic back-ups and stores all original documents at its registry. In addition, the arrangements for granting parties comprehensive access to the file which did not even exist in 1990 have now been in place for a considerable amount of time and the Commission is well aware of its obligations.

More generally, the CJEU’s recent judgments do, however, demonstrate that appeals on procedural grounds against Commission decisions can be worthwhile – and worth the wait – in particular where they focus on infringements of the fined party’s rights of defence. If the European courts did ever give the Commission the benefit of the doubt when it came to procedural flaws, which according to popular mythology it did, this certainly no longer appears to be the case. On the contrary, the Solvay judgments demonstrate the willingness of the CJEU in particular to bring the Commission to task when it fails to comply with key procedural safeguards or, in the CJEU’s words: “[t]he rights of the defence are fundamental rights forming an integral part of the general principles of the law whose observance the Court ensures.” However, given the immense backlog of cases pending before both the General Court and the CJEU, just don’t expect “swift justice” in this respect.