On 10 November 2022, the European Court of Justice (CJEU) issued a preliminary ruling[1] on the interpretation of the disclosure obligation under the EU directive that harmonised national rules governing actions for damages for breaches of competition law in EU member states and the UK (the Damages Directive).[2]
The preliminary reference to the CJEU arose out of damages claims in Barcelona,[3] which followed on from the European Commission’s 2016 Trucks decision that several truck manufacturers unlawfully coordinated prices in breach of Article 101 TFEU.[4] The claimants requested evidence from the defendants to help them to quantify any overcharge arising from the infringement. The defendant truck manufacturers argued that complying with the disclosure request would require them to create new documents that contained the relevant data.
The question before the CJEU was whether “Article 5(1)[5] of [the Damages Directive should] be interpreted as meaning that the disclosure of relevant evidence refers exclusively to existing documents in the control of the defendant or a third party” or whether it should “also include the disclosure of documents that must be created ex novo by the party to whom the request for information is made by compiling or classifying information, knowledge or data held by it?” (emphasis added).[6]
The CJEU found that a party’s obligation to disclose “relevant evidence” under the Damages Directive can in principle extend to the creation of new documents. However, a party would be required to do so only if it would be necessary and proportionate.[7] The CJEU’s reasoning was as follows:
- Meaning of evidence: Evidence is defined in Article 2(13) of the Damages Directive as “all types of means of proof admissible before the national court seized, in particular documents and all other objects containing information, irrespective of the medium on which the information is stored”. The CJEU observed that the definition itself does not distinguish between existing and new evidence. And it considered that Article 5(3)(b) of the Damages Directive – which requires national courts to consider whether the scope and cost of disclosure is proportionate – “presupposes … that the cost of disclosing evidence may, where appropriate, significantly exceed that corresponding to the mere transmission of physical media.”[8] It inferred from this that “evidence” must extend beyond existing documents.
- Purpose of the Damages Directive: The CJEU noted that the Damages Directive was intended to facilitate private enforcement of competition damages claims, recognising that public enforcement of competition law alone cannot prevent and remedy anti-competitive conduct. To achieve this objective, the CJEU considered that the Damages Directive must give claimants the tools necessary to litigate, including to remedy the information asymmetry that exists: unlike a claimant, “by definition, the infringer knows what it has done”, or has been accused of doing, “and knows what evidence may have been used […] to demonstrate its participation in anticompetitive conduct.”[9] Since disclosure of “unprocessed, pre-existing and possibly very numerous documents” can be impractical for claimants, the exclusion of the possibility of new documents having to be disclosed would risk private enforcement becoming more difficult and less effectual.[10]
- Importance of proportionality: Under Article 5(3) of the Damages Directive, disclosure must be proportionate. As such, although the Damages Directive does not exclude the possibility of new documents having to be disclosed, national courts must assess whether such a request would impose a disproportionate burden. The CJEU did not opine on what specific requests might be disproportionate in this context, but it made two observations that may be instructive. First, it held that the Damages Directive cannot reverse the burden of proof and require the “defendants to [demonstrate] the existence and scope of damage suffered”.[11] And second, it indicated that courts must take into account the “appropriateness […] of the workload and cost” associated with creating new documents in light of “all the circumstances of the case”, including (i) whether disclosure is justified by the facts of the case, (ii) the likelihood of relevance, (iii) confidentiality considerations, and (iv) the period of time in respect of which disclosure is sought.[12]
Observations
The CJEU’s ruling suggests that defendants to competition damages claims that are within scope of the Damages Directive[13] could, in principle, face a significant disclosure burden. Future cases will test the extent of the burden in practice and the referring Barcelona court will likely give the first indication after taking account of the proportionality of the claimants’ disclosure request.
The CJEU’s expansive interpretation of disclosure under the Damages Directive contrasts, notably, with the position under the English civil procedure rules, pursuant to which disclosure is expressly restricted to documents that exist or have existed.[14] A party is required to conduct reasonable and proportionate searches for documents that are or have been in their control, which means physical possession, or the right to possession or inspection.[15] Parties to English civil litigation are not, therefore, required under English procedural rules to create and disclose new documents.
While the UK’s Damages Directive Implementing Act came into force pre-Brexit, it did not include any language along the lines of Article 5(1) on disclosure;[16] the UK government deemed that a ‘light-touch’ approach to implementation was required given the UK’s already developed body of rules on disclosure.[17] The CJEU’s recent ruling would, therefore, appear to make the scope of disclosure a point of post-Brexit divergence between the EU and UK legal systems.
Nevertheless, there may be circumstances in which the CJEU’s more expansive view of disclosure could impact English proceedings because English disclosure encompasses documents that are created or come within a party’s control at any time before the proceedings are concluded.[18] As a result, if parties are litigating parallel claims in multiple jurisdictions, any documents created for proceedings before an EU member state could become disclosable in UK proceedings.
[1] Judgment of 10 November 2022 in Case C‑163/21, ECLI:EU:C:2022:863 (the Preliminary Ruling).
[2] Directive 2014/104/EU 26 November 2014. The Damages Directive was implemented into UK law on 9 March 2017 pursuant to the Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 (the Damages Directive Implementing Act).
[3] Juzgado de lo Mercantil no 7 de Barcelona (Commercial Court No 7, Barcelona, Spain).
[4] Commission decision of 19 July 2016 in Case AT.39824 – Trucks.
[5] Article 5(1): Member States shall ensure that in proceedings relating to an action for damages in the Union, upon request of a claimant who has presented a reasoned justification containing reasonably available facts and evidence sufficient to support the plausibility of its claim for damages, national courts are able to order the defendant or a third party to disclose relevant evidence which lies in their control, subject to the conditions set out in this Chapter. Member States shall ensure that national courts are able, upon request of the defendant, to order the claimant or a third party to disclose relevant evidence.
[6] Paragraph 26 of the Preliminary Ruling.
[7] Articles 5(2)-(3) of the Damages Directive provide that disclosure must be relevant, necessary and proportionate.
[8] Paragraph 53 of the Preliminary Ruling.
[9] Paragraph 59 of the Preliminary Ruling.
[10] Paragraph 61 of the Preliminary Ruling.
[11] Paragraph 66 of the Preliminary Ruling.
[12] Paragraph 68 of the Preliminary Ruling.
[13] Whether claims are temporally and substantively in scope of the Damages Directive depends on the national legislation implementing the Damages Directive. In the UK, the Damages Directive applies to all competition damages claims arising out of a breach of EU and/or UK law that relate to loss suffered on or after 9 March 2017, which was the implementation date in the UK.
[14] Civil Procedure Rules (CPR), rule 31.2(“A party discloses a document by stating that the document exists or has existed”).
[16] See Damages Directive Implementation Act, Schedule 1, Part 6 Disclosure. Indeed, the relevant sections on disclosure restrict the disclosure that can be ordered in UK proceedings, including preventing disclosure of settlement and leniency submissions, as well as the CMA’s and European Commission’s investigation materials before the relevant investigation is closed.
[17] See Competition Policy – Damages for breaches of competition law – government response to consultation, December 2016 (with respect to disclosure, “the government considers that it only needs to amend the court rules to ensure that the proportionality requirements of the Directive are effectively reflected in the UK regime, whereas the other provisions are already provided for in national law.”)
[18] CPR, rule 31.11 (“Any duty of disclosure continues until the proceedings are concluded [and, therefore, if] documents to which the duty extends come to a party’s notice at any time during the proceedings, he must immediately notify every other party”).