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The CJEU rejects the parent company's right to claim damages suffered by its subsidiaries in other countries before the courts of its registered office

European Union - 
Diego Vicente, Rubén Magallares and Antonio Fabregat, Garrigues Dispute Resolution: Litigation and Arbitration Department

A judgment of the CJEU concludes that, in claims for damages caused by infringement of competition law, it is not possible to rely on the principle of economic unity to interpret the forum of the "place where the harmful event occurred" as being the place where the parent company has its registered office when the affected parties are subsidiaries located in other Member States.

On 4 July 2024, the Court of Justice of the European Union (CJEU) handed down a judgment in which it ruled on two questions referred for a preliminary ruling by the Supreme Court of Hungary (Kúria) in Case C-425/22, concerning an action for damages brought by a Hungarian company (MOL) against Mercedes-Benz Group AG, arising from the European Commission's decision of 19 July 2016 (File AT.39824, Trucks).

The CJEU rules that the concept of 'place where the harmful event occurred' provided for in Article 7(2) of Regulation No. 1215/2012 (Brussels I Bis) for conferring international jurisdiction on the courts of a Member State to hear actions in tort, delict or quasi-delict (including tort actions), does not include the registered office of the parent company bringing an action for damages suffered exclusively by its subsidiaries in another Member State as a result of the anti-competitive conduct of a third party, even if it is alleged that that parent company and those subsidiaries form part of the same economic unit.

Brief summary of the dispute from which the preliminary questions arise

The proceedings which gave rise to the two questions referred for a preliminary ruling and to which the judgment of the CJEU of 4 July 2024 provided an answer concerned the private pursuit of a follow-on action arising from the European Commission (EC) decision of 19 July 2016 (Case AT.39824 - Trucks), which sanctioned Mercedes-Benz Group and four other international truck manufacturers for a single and continuous infringement of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the European Economic Area (EEA) Agreement during the period 1997 to 2011:

  • MOL, the plaintiff company, is a commercial company domiciled in Hungary, holding a controlling interest in various subsidiary companies domiciled, in turn, in different Member States (Hungary, Croatia, Italy, Austria and Slovakia).
  • These subsidiaries acquired from the Mercedes-Benz Group (by means of leasing) a total of 71 trucks during the period covered by the conduct sanctioned by the EC decision.
  • As a result, MOL brought an action against the Mercedes-Benz Group in Hungary (the place of its registered office), claiming the alleged damage in the form of additional costs which its subsidiaries allegedly incurred in the acquisition of those trucks as a result of the anti-competitive conduct.
  • In seeking to justify jurisdiction, MOL argued that the "place where the harmful event occurred" - within the meaning of Article 7(2) of the Brussels I Bis Regulation in order to confer international jurisdiction on the courts of a State in respect of actions in tort or delict - should be deemed to be the place of the registered office of the applicant parent company, even though the damage in the form of overcharging had been suffered exclusively by the subsidiaries of that company located in States other than the State in which the registered office of the parent company is situated.
  • In the applicant's view, this was in application - in this case to the active side of the procedural relationship - of the doctrine of economic unity already established by the CJEU (inter alia in the judgments of the CJEU of 27 April 2017 in Case C-515-15 Akzo Nobel and of 6 October 2021 in Case C-882/19 Sumal) in order to determine liability for an infringement of competition law on the passive side of the procedural relationship. In this way, it was claimed by the plaintiff that if a parent company and its subsidiary form an economic unit (the former having a decisive influence on the latter, so that the latter does not behave autonomously), this could serve as a basis for assessing the international jurisdiction of the courts of the state where the parent company has its registered office (Hungary) under Article 7(2) of the Brussels I Bis Regulation, regardless of whether the subsidiaries that directly suffered the damage are not domiciled in that country but in other member states.

In that context, the Hungarian Supreme Court - after having upheld at first and second instance the plea of lack of jurisdiction raised by Mercedes-Benz Group, on the grounds that Article 7(2) of the Brussels I Bis Regulation could not be the basis for the jurisdiction of the court before which the dispute was brought - decided to refer two questions for a preliminary ruling, essentially asking the CJEU whether the theory of economic unity could be validly invoked in the opposite direction (i.e. in the sense of considering the plaintiff in a claim for compensation for damage resulting from an anti-competitive infringement as an economic unit taken as a whole) and, specifically, for the purpose of determining the place where the damage resulting from the anti-competitive infringement has materialized.

Specifically, the questions referred for a preliminary ruling were as follows:

  • (1)   Where a parent company brings an action for damages in respect of the [anticompetitive] conduct of another company in order to obtain compensation for the damage suffered as a result of that conduct solely by its subsidiaries, does the registered office of the parent company determine the forum of jurisdiction, as the place where the harmful event occurred for the purposes of Article 7(2) of [Regulation No 1215/2012]?
  • (2)   Is the fact that, at the time of the purchases at issue in the proceedings, not all the subsidiaries belonged to the parent company’s group of companies relevant for the purposes of the application of Article 7(2) of [Regulation No 1215/2012]?”

The CJEU's decision

In the judgment under analysis, dated 4 July 2024, the CJEU adopted the position already expressed by the Advocate General (N. Emiliou) in his Opinion of February 2024

Specifically, with regard to the first of the questions, the CJEU begins by recalling that European case law has reiterated that the expression "place where the harmful event occurred" in the terms of Article 7.2 of the Brussels I Bis Regulation allows claimants to bring their action before the courts of: (i) the place where the damage actually occurred or (ii) the place where the causal event giving rise to that damage occurred (judgment of 15 July 2021, Volvo and Others, C30/20, EU:C:2021:604, paragraph 29 and case law cited).

Consequently, the CJEU considers (paragraph 31) that, a priori, international jurisdiction, by reason of the place of materialization of the damage at issue in the main proceedings, would lie: (i) either with the court of the State where the trucks were purchased by MOL's subsidiaries; or (ii) in the case of purchases made by those subsidiaries in different places, with the court of the State of the registered office of those subsidiaries.

On the basis of those considerations, the CJEU analyses the applicant's argument, which consists of maintaining - as mentioned above - that, although it is true that it did not directly purchase the trucks at issue, nor did it therefore suffer any direct damage as a result of the anti-competitive conduct sanctioned by the European Commission, the concept of 'place where the damage occurred [...]” must be interpreted in the light of the concept of 'economic unit' used in competition law for the purposes of determining liability for an infringement of competition law; the concept of economic unit cannot be given a different meaning depending on whether the undertaking concerned is the plaintiff or the defendant in the dispute.

And the conclusion it reaches - in line with the Advocate General's Opinion, paragraphs 71 to 73 - is that such an argument cannot be accepted, since it finds no support in the previous case-law of the CJEU and is contrary to "the objectives of proximity and predictability of the rules governing jurisdiction, and of consistency between the forum and the applicable law". Specifically:

  • The CJEU considers (paragraph 38), that in relation to the objectives of proximity and predictability of the competition rules, it follows from its own case-law that (a) the courts of the Member State in which the affected market is located are best placed to examine actions for damages, and (b) that an operator engaging in anti-competitive practices may reasonably expect to be sued before the courts of the place in which those practices have distorted the rules of fair competition.
  • In addition, the Court recalls (paragraph 39) that the rules of international jurisdiction must be based on the principle that jurisdiction is generally based on the defendant's domicile (Article 4 of the Brussels I Bis Regulation).
  • Furthermore, the CJEU considers that the determination of jurisdiction based on the fact that the place where the damage occurred is located in the market that was affected is in accordance with the requirements of consistency between the forum and the applicable law laid down in the Brussels I bis Regulation, in so far as the law applicable to actions for damages arising from unlawful competition is that of the State in which the market is, or may be, affected.
  • Finally, the CJUE adds that all this is not an obstacle in any way for potential victims (in this case, MOL's subsidiaries) from claiming compensation for the damage resulting from the infringements found by the European Commission, either before the court of the place where they acquired the cartelized goods, or before the court of the place where the subsidiaries' registered office is located, in the case of purchases made in several places.
  • Or, to put it another way: that the application of the principle of economic unity is not necessary to guarantee the right of victims to claim damages potentially suffered as a result of anti-competitive conduct.

Consequently, the CJEU concludes in paragraph 44 that “the objectives of proximity and predictability of the rules governing jurisdiction and consistency between the forum and the applicable law, and the unhindered possibility of claiming damages for the harm arising from an infringement of competition law affecting a member of the economic unit, preclude a reverse application of the concept of ‘economic unit’ for the determination of the place where the damage occurred, for the purposes of Article 7(2) of Regulation 1215/2012.

And, therefore, it resolves the preliminary question indicating that Article 7.2 of the Brussels I Bis Regulation must be interpreted in the sense that “the concept of the ‘place where the harmful event occurred’ […] does not cover the registered office of a parent company bringing an action for damages for harm suffered solely by its subsidiaries on account of anticompetitive conduct of a third party […], even if it is claimed that that parent company and those subsidiaries form part of the same economic unit”.

Finally, given the answer to this first preliminary question, the CJEU concludes that there is no need to answer the second preliminary question (since it was based on the premise that the aforementioned Article 7.2 of the Brussels I Bis Regulation could be interpreted in the sense that the concept of economic unit determines that the place where the harmful event has occurred could refer to the registered office of the parent company that exercises an action for compensation for damages suffered by its subsidiaries due to an anti-competitive conduct).