On 28 March 2019 in Case Cogeco C‑637/17 the CJEU provided guidance on the application ratione temporis of the EU Damages Directive 2014/104/EU (Directive) and stressed the importance of the principle of effectiveness for damages actions for breaches of EU competition law. The CJEU confirmed that a case-by-case analysis is required in order to assess whether the Directive is applicable. This will notably depend on its temporal application and the qualification of national rules as substantive or procedural in nature. Though, even if the Directive does not apply, national provisions must comply with the principle of effectiveness. The CJEU concludes that a three-year limitation period, that starts to run before the injured party is able to ascertain the identity of the infringer and that cannot be suspended or interrupted during proceedings before the competition authority, renders the exercise of the right to claim compensation practically impossible or excessively difficult.
Factual background of the Cogeco case
The facts took place in the Portuguese market of premium sports TV channels. The corporation Cogeco Communications Inc. (Cogeco) was a shareholder of the Portuguese company Cabovisão-Televisão Por Cabo SA (Cabovisão) between 2006 and 2012. On 30 July 2009, Cabovisão filed a complaint with the Portuguese Competition Authority against, amongst others, Sport TV Portugal SA (hereafter Sport TV). By decision of 14 June 2013, the Competition Authority imposed a fine on Sport TV as it held that it had abused its dominant position on the market at issue.
On 27 February 2015, Cogeco brought an action for damages against, amongst others, Sport TV. The defendants argued that this claim for compensation was time-barred. Indeed, the applicable article 498 of the Portuguese Civil Code provides that such a right to compensation expires after a period of three years from the date on which the injured party became aware of his right. This remains true even if the injured party did not know the identity of the person liable or the full extent of the damage, and regardless of any proceedings before the national competition authority.
The District Court of Lisbon decided to stay the proceedings and to request a preliminary ruling from the CJEU. The Court confirmed that the damages action at issue was brought before the expiry of the deadline to transpose the Directive. Furthermore, at the time of filing, the Directive had not yet been transposed into the Portuguese legal order. The District Court asked several preliminary questions that can be summarized, in essence, as follows: (1) is the Directive applicable in the case at hand? (2) Are the applicable Portuguese rules on limitation periods compatible with EU law and its principles?
Applicability of the EU Damages Directive requires a case-by-case analysis
The reason why the applicability of the Directive is relevant is to be found in article 10 thereof. This provision ensures that limitation periods for bringing damages actions are at least five years. Those periods can only begin to run when the infringement has ceased and when the claimant knows or can be reasonably expected to know (1) of the behaviour and the fact that it constitutes a competition law infringement, (2) of the fact that this infringement caused him harm, and (3) the identity of the infringer. Furthermore, the article introduces rules on the suspension or interruption of the limitation period when a competition authority takes investigative actions.
The applicability in time of the Directive depends on its article 22. This article creates a distinction between the temporal application of the substantive and procedural provisions. Whilst the first may not apply retroactively, the latter may not apply to actions for damages that were brought before 26 December 2014.
The CJEU does not address whether the provisions on the limitation periods are of a substantive or procedural nature. Instead, it concludes that the Directive does not apply in the case at hand, regardless of that distinction. Firstly, as the damages action was brought before the transposition of the Directive in the Portuguese legal order, the new provisions on limitation periods would definitely not apply if they were considered to be substantive (given the prohibition of retroactivity). Secondly, the same holds true if those provisions are considered procedural. The CJEU notes that the Member States enjoyed a measure of discretion when transposing the procedural provisions of the Directive. They could choose whether the corresponding national rules would apply to actions for damages brought after 26 December 2014 or only to such actions brought after the transposition of the Directive into the national legal order. If the national legislator would choose the second option, which Portugal did, then the expiry of the deadline of the transposition period, i.e. 27 December 2016, would serve as ultimatum. As the claim at hand was filed on 27 February 2015, this deadline was not exceeded.
Thus, the Directive’s provisions on limitations periods do not apply to the case at hand. Unfortunately, the CJEU does not provide any clarification as to whether those rules are to be considered substantive or procedural. This seems to be a choice left open to the Member States. Consequently, one must carefully study the relevant national provisions in order to assess whether the new rules on limitation periods (or any other new rules) are applicable. This depends on their qualification by the national legislator as substantive or procedural and on the accompanying provisions on the entering into force of the national rules.
Limitation period not compatible with the EU law principle of effectiveness
In order to assess whether the relevant Portuguese provisions on limitation periods are compatible with EU law, the CJEU continues its reasoning from previous case law. In its judgment of 14 March 2019 (Skanska case, C-724/17), the CJEU followed the opinion of AG Wahl by stressing that actions for damages are an integral part of the enforcement system of the EU competition rules (see previous blog posts, aquí. y aquí.). Those rules are intended to sanction anticompetitive behaviour and to deter undertakings from engaging in such conduct. Therefore, damages actions strengthen the working of the EU competition rules, discourage anticompetitive practices and contribute significantly to the maintenance of the effective competition in the EU (e.g. Donau Chemie, C-536/11, par. 23 y Kone, C-557/12, par. 23).
Although claims for compensation are thus an integral part of the enforcement system of the EU competition rules, they in the first place depend on the applicable national (mostly tort) law. This is especially true if the Directive does not apply, such as in the case at hand. However, it is established case law of the CJEU that, in the absence of EU rules governing the matter, all applicable national rules must be in line with the EU law principles of effectiveness and equivalence (e.g. Manfredi, C-295/04 – C-298/04, par. 64 y Pfleiderer, C-360/09, par. 24). In practice, in particular the principle of effectiveness plays an important role. It requires that the applicable national rules to actions for safeguarding rights, which individuals derive from the direct effect of EU law, must not make it practically impossible or excessively difficult to exercise the rights conferred by EU law (e.g. Courage v Crehan, C-453/99, par. 29). This is stressed again in Cogeco.
In order to assess whether the national rules at issue do not jeopardise the effective application of articles 101-102 TFEU (Kone, C-557/12, par. 26), both AG Kokott (par. 81) and the CJEU (par. 45) in Cogeco point out that all elements of those rules must be taken into consideration (e.g. length and starting point of limitation periods, suspension during investigation proceedings by competition authorities). Furthermore, according to the CJEU this assessment must take into account “the specificities of competition law cases and in particular of the fact that the bringing of actions for damages on account of infringements of EU competition laws requires, in principle, a complex factual and economic analysis”. In this view, the CJEU formulates a threefold conclusion: firstly, short limitation periods that start to run before the injured party is able to ascertain the identity of the infringer may render the exercise of the right to claim compensation practically impossible or excessively difficult. Secondly, the same holds true for short limitation periods that cannot be suspended or interrupted for the duration of proceedings following which a final decision is made by the national competition authority or by a review court. Thirdly, it follows that a limitation period such as the one set forth by article 498 of the Portuguese Civil Code is incompatible with the principle of effectiveness. As a consequence, following from established CJEU case law, the respective national provision must not be applied. From the Cogeco judgment it becomes clear that the reasoning applies regardless of whether the effectiveness of a subjective or objective limitation period is in question. Both must comply with the EU law principle of effectiveness.
Conclusion: principle of effectiveness as guardian of effective private enforcement
The Cogeco judgment by the CJEU confirms that even when the Directive does not yet apply to a damages action for a competition law infringement (which is to be assessed on a case-by-case basis), the applicable national rules that govern the exercise of the right to claim compensation must be in line with the requirements following from the EU law principle of effectiveness. This holds true for all kinds of such national rules. Regarding limitation periods, this means that a short limitation period, e.g. three years, that starts to run from the date on which the injured party became aware of its right to compensation, even if unaware of the identity of the person liable, runs counter to the principle of effectiveness. The same principle precludes short limitation periods that do not include any possibility of suspending or interrupting the period during proceedings before the national competition authority. Thus, the principle of effectiveness serves in practice as a guardian of the effective enforcement of EU competition law, regardless of the applicability of the Directive.
by Michiel Verhulst (KU Leuven)