Contributed By Gide Loyrette Nouel
There has been a very significant development in private enforcement litigation in France, especially in the last two years following the implementation of Directive 2014/104/EU of 26 November 2014 into French law by an ordinance (Ordinance No. 2017-303) and a decree on 9 March 2017.
French courts have shown an apparent eagerness to attract this type of litigation from both French and foreign claimants. This can be observed in the specialisation of courts, particularly in Paris, and in the creation of an International Chamber at the Paris Commercial Tribunal and at the Paris Court of Appeal where pleadings may be conducted in English.
Another interesting point is the development of criminal investigations in competition law issues, which were not particularly common until recently. Several cases initiated in 2018 are currently in the hands of investigating judges, which raises various questions, such as a potential overlap between the activities of the criminal courts and of the French Competition Authority (FCA), the extent of their cooperation and their effect on leniency policy both in France and within the EU.
Article L. 420-6 of the French Commercial Code (FCC) provides that any natural person who fraudulently takes a personal and decisive part in the conception, organisation or implementation of an infringement to competition law may incur a maximum prison term of four years and a fine of EUR75,000.
Article L. 463-5 of the FCC authorises investigating judges and criminal courts to communicate to the FCA, at its request, documents contained in the criminal case file which are directly related to the facts being investigated by the FCA.
The FCA may also, pursuant to Article L.462-6 of the FCC, refer a case to the public prosecutor when it considers that the facts appear to be of a nature justifying the application of Article L. 420-6 of that code. However, the prosecutor decides what further action he or she intends to initiate further to this referral.
Ordinance No. 2017-303 was adopted on 9 March 2017. Its substantive provisions relating to liability, burden of proof, presumptions and various questions on the admissibility of evidence are applicable to claims in which the infringement occurred after the ordinance came into force –ie, 11 March 2017. As an exception, its procedural rules on disclosure and access to evidence are applicable to proceedings brought before the competent courts from 26 December 2014 onwards.
The ordinance is deemed to provide 'special rules'. Therefore, standard rules on liability and procedure remain in force for all issues not within its scope.
The standard provision applicable to private enforcement actions, whether follow-on or standalone, is Article 1240 of the French Civil Code on tortious liability, where the claimant must establish a 'fault' (ie, an infringement of competition law), damage and a direct causal link between the fault and the damage suffered.
Compared to the standard regime where the claimant must establish these three constituent elements, the ordinance alleviates the claimant’s burden of proof. It creates a non-rebuttable presumption of the existence of a fault for all claims based on final infringement decisions by the FCA (Article L. 481-2 of the FCC). Claimants also benefit from a rebuttable presumption that cartels cause harm (Article L 481-7 of the FCC).
Both follow-on and standalone proceedings are available under French law.
Claims for damages resulting from anti-competitive practices fall within the exclusive jurisdiction of specialised courts of the judiciary pursuant to Article L. 420-7 of the FCC, or administrative courts where the author or the victim of anti-competitive practice is a public person.
Eight commercial courts (for litigation involving businesses) and eight high first instance courts (for litigation involving private individuals) are specialised in dealing with competition law litigation:
On appeal, the Paris Court of Appeal has exclusive jurisdiction.
In addition, specific chambers have been appointed at the Paris Commercial Tribunal and at the Paris Court of Appeal to deal with competition law litigation.
The Tribunal and the Court have also set up international chambers competent for disputes affecting international trade. Before these chambers, pleadings may be conducted in English.
For proceedings that fall within the scope of Ordinance No. 2017-303, final decisions of the FCA (ie, those that can no longer be overruled through ordinary appeal procedures) are binding and irrefutably establish the existence of a fault (Article L. 481-2 paragraph 1 of the FCC).
The Ministry of Justice provided guidance in a circulaire (soft legal instrument) dated 23 March 2017 to assist the courts and the parties in private enforcement litigation. The circulaire indicates that Article L. 481-2 of the FCC is applicable to infringement decisions including settlement decisions before the FCA and injunction decisions. Decisions that identify competition concerns, such as interim measures proceedings, or commitment decisions may serve as prima facie evidence.
Final decisions issued by another national competition authority (NCA) constitute evidence in support of the existence of a fault but are not binding (Article L. 481-2 paragraph 2 of the FCC).
Article L. 481-2 paragraph 3 states that national courts may not decide cases in a way that runs counter to a decision adopted by the European Commission.
An NCA can be involved in damages actions using the amicus curiae instrument. Article 15 of Regulation No 1/2003 allows any NCA and the European Commission, at the request of a national judge or on their own initiative, to submit their observations in cases where the application of competition law is involved. Such observations are however not binding on courts.
Between 2006 and 2008, the European Commission, through the amicus curiae instrument, intervened before national judges in competition disputes at least 18 times. More than half of these interventions took place before courts of last resort.
According to the general principle of tortious liability under French law, the burden of proof rests on the claimant.
The standard provision applicable to private enforcement actions, whether follow-on or standalone, is Article 1240 of the FCC on tortious liability, where the claimant must establish a 'fault' (ie, an infringement of competition law), damage and a direct causal link between the fault and the damage suffered.
However, for claims relating to infringements occurring after 11 March 2017, as discussed in 2.1 Legal Basis for a Claim above, Ordinance No. 2017-303 alleviates the claimant’s burden of proof. It creates a non-rebuttable presumption of fault for all claims based on final infringement decisions by the FCA (Article L. 481-2 of the FCC). Claimants also benefit from a rebuttable presumption that cartels cause harm (Article L. 481-7 of the FCC).
In the same way, with regard to the 'pass-on' defense, Article L. 481-4 of the FCC provides that the direct or indirect purchaser is deemed not to have passed on the additional cost to its direct contractors, unless proof to the contrary is provided by the defendant, the author of the anticompetitive practice. Hence, the burden of proof for the pass-on defense rests on the defendant.
Claims can be brought by direct and indirect purchasers, pursuant to Article L.481-5 of the FCC which refers to both types of purchasers.
The indirect purchaser, whether of goods or services, shall be deemed to have provided proof it incurred overcharges where it can prove that:
The defendant may however demonstrate that such additional cost was not passed on to the indirect buyer or that it was only partially passed on by its previous contractor.
The duration of proceedings will vary depending on the complexity of the case (procedural issues, stays of proceedings, communication of documents, expert opinions on the amount of damages, etc).
A stay of proceedings is often requested by defendants in private enforcement litigations pending the outcome of a parallel investigation by a competition authority and/or an appeal court.
On the basis of Article 377 and seq. of the French Civil Procedure Code (FCPC), a judge may, depending on the circumstances of the case, decide to recess the progress of the proceeding for a given period or until the occurrence of an event that he or she specifies.
The grounds for a stay are the incidence a public enforcement decision can have on the judgment to come in the compensation claim and the need to guarantee the proper administration of justice.
On such grounds, French judges often grant stays of proceedings until the competent competition authority issues a final decision. The stay can be extended at the request of any party pending the decision of appeal courts as long as the judge is satisfied that the conditions set out above are fulfilled.
The 'Hamon law' No. 2014-344 of 17 March 2014 introduced a new form of collective action under French law in the event of damage resulting from various infringements (and notably from anti-competitive practices) under a regulated regime open only to individual consumers.
This collective action may only be initiated after a final decision has been issued by the "competent national or European Union authorities or courts" establishing the infringement and within a limitation period of five years from the final decision (Articles L. 623-24 and L. 623-25 of the French Consumer Code).
The action allows consumers who consider themselves victims of similar kinds of damage caused by one or more professionals, for which they would not bring an action before the courts because of the low amount of potential compensation or because they are unaware of existing actions and procedures, to have their rights collectively recognised.
Consumers must be in a similar legal situation with regard to the identified breach. However, the damage suffered need not be identical. Consumers must have expressed their unequivocal willingness to participate in the collective action (opt-in system).
Only consumers, defined as natural persons acting for non-professional purposes, can seek compensation for their loss through collective action.
A collective action can be brought on behalf of both direct and indirect purchasers.
So far, this new set of rules has been more often used in consumer law proceedings (wrongful information provided to consumers especially in the e-commerce, life-insurance, car or housing businesses, etc.) than in competition law matters.
Aside from this specific form of collective action, associations and syndicates gathering economic operators together (such as farmers, manufacturers, distributors, hotel managers, etc.) can claim for the compensation of the 'collective interest' of a given profession or business sector (which is not the same as the cumulative individual interests of their members). This is known under French law as an “action syndicale” based on Article L. 2132-3 of the French Labour Code and Article L. 490-10 of the FCC.
Article L. 623-1 of the French Consumer Code provides that only nationally representative consumer associations authorised by public authorities may bring a collective action against one or more professionals. In this respect, consumers are not parties to the proceedings in the procedural sense.
In France, the associations which are legally authorised to bring collective actions are the following:
Article L.623-22 of the FCC provides that only the applicant association may take part in a mediation in order to obtain compensation for the individual losses suffered by the consumers that it represents.
The agreement resulting from the mediation must be submitted to the judge for approval (Article L. 623-22 of the French Consumer Code). This certification will ensure that the agreement is in accordance with the interests of the parties and will make it enforceable.
Before French high first instance tribunals and commercial tribunals, a pre-trial judge is designated to guarantee the fairness of the proceedings, specifically regarding the timely exchange of pleadings and the production of documents, when applicable.
Pre-trial judges are also competent to rule on various procedural issues but they cannot issue summary judgments on the merits of a case. All claims are answered by the tribunal or the court within the final ruling on the merits.
In international disputes, the relevant jurisdiction is determined pursuant to EU international private law or French international private law depending on the foreign State or states involved.
The relevant rules of EU international private law can be found in Regulation No. 1215/2012 of 12 December 2012 (Brussels I Recast Regulation). A defendant domiciled in an EU member state may be sued in the courts of that state (Article 4). It may only be sued in the courts of another member state under certain conditions.
In matters relating to tort (delict or quasi-délit), the general rule is that the courts of the place where the harmful event occurred have jurisdiction (Article 7 §2). This covers both the place where the event giving rise to the damage occurred, and the place where the damage was suffered. For instance, each of the victims of a cartel may claim compensation for their loss before before the courts of the place in which the cartel was definitively concluded, or the place in which one agreement in particular was concluded which is identifiable as the sole causal event giving rise to the loss allegedly suffered, or before the courts of the place where its own registered office is located (ECJ, Cartel Damage Claims (CDC) Hydrogen Peroxide SA contre Akzo Nobel NV, 21 May 2015, C-352/13).
Where the defendant is not domiciled in a member state, French courts will apply French international private law. Under French law, in matters relating to tort (delict or quasi-délit), the alleged victim shall bring its claim before the courts of the country where the defendant is domiciled or before the courts of the places where the harmful event occurred or where the loss was suffered (Article 46 of the FCPC).
Under French law, the law applicable to contractual obligations is determined in accordance with the provisions of Regulation No. 593/2008 of 17 June 2008 (Rome I Regulation), and the law applicable to non-contractual obligations is determined pursuant to the provisions of Regulation No. 864/2007 of 11 July 2007 (Rome II Regulation). Whether an obligation is contractual or non-contractual (ie, tortious) must be assessed from an EU law perspective, in light of the rulings of the European Court of Justice.
From a general perspective, the law applicable to a non-contractual obligation arising out of a tort is the law of the country in which the damage occurred (Article 4 §1 Rome II Regulation), unless the alleged liable person and the alleged victim both have their habitual residence in the same country at the time when the damage occurs (in which case the law of that country shall apply, Article 4 §2) or unless the tort is manifestly more closely connected with another country (Article 4 §3). This set of rules also applies in the specific case of an act of unfair competition affecting exclusively the interests of a specific competitor (Article 6 §2).
Specific rules apply to other unfair competition acts and acts restricting free competition. Under Article 6 of the Rome II Regulation, the law applicable to a non-contractual obligation arising out of an act of unfair competition is the law of the country where competitive relations or the interests of consumers are, or are likely to be, affected (Article 6 §1). The law applicable to a non-contractual obligation arising out of a restriction of competition is the law of the country in which the market is, or is likely to be, affected (Article 6 §3(a)). Where several markets may be affected, the law of the court of the defendant may also apply, under certain conditions (Article6 §3(b)).
The limitation period applicable to actions for compensation in connection with anti-competitive practices is five years (Article L. 482-1 of the FCC), which is identical to ordinary civil law actions (Article 2224 of the French Civil Code).
The period begins to run from the day on which the victim knows or ought to have known (Article L. 482-1 of the FCC) the existence of an infringement, the fact that such infringement caused him or her harm; and the identity of at least one infringing party.
In the event the contemplated action concerns a continuous infringement, the limitation period does not run until the practice has ceased (Article L. 482-1 of the FCC).
All the standard provisions of the French Civil Code relating to the postponement, suspension and interruption of the limitation period are applicable to these actions unless other special rules should be taken into account.
Furthermore, acts of competition authorities (the FCA, other NCAs or the European Commission) aimed at investigating, detecting or punishing anti-competitive practices also interrupt the limitation period of private litigation until the issuance of a final decision from the relevant competition authority (Article L. 462-7 of the FCC).
Courts apply the provisions of the FCPC (Article 145 ; Articles 132–142) to disclosure requests, the production of documents filed for or in connection with private enforcement litigation (Article L 483-1 of the FCC).
For each request for disclosure, a judge must balance the legitimate interest of the claimant and the need to guarantee the protection of confidential information (Article L. 483-1 paragraph 2 of the FCC).
Several categories of documents are distinguished (Articles L. 483-2 to L. 483-11 of the FCC) such as business secrets, privileged documents and certain categories of evidence submitted or held by the FCA.
Fines of up to EUR10,000 may be imposed in case of failure or refusal to comply with the court’s order of disclosure or if the evidence is destroyed (Article R 483-14 of the FCC)
Article 145 of the FCPC allows for 'in futurum disclosure' measures. This provision authorises a party to seek an ex parte judicial order to force the opposing party to produce documents and information which are considered as useful for its lawsuit. The judge may order a set of measures such as a bailiff’s inspection, hearing of individuals or the disclosure of evidence by third parties.
According to the Law of 31 December 1971, in all matters, whether in the field of counsel or defense, written advice addressed by a lawyer (subject to such lawyer being an outside counsel) to or intended for his or her client, correspondence exchanged between the client and his or her lawyer, between the lawyer and his or her colleagues, with the exception for the latter of those marked "official", are covered by professional secrecy.
A judge cannot order the disclosure of the “written statement or the transcription of oral statements” by leniency applicants and undertakings involved in a settlement procedure before a competition authority (Article L. 483-5 of the FCC). The text extends this protection to “parts of a document drawn up in the course of the investigations and which would include a transcription or literal citation of these statements.”
Third-party statements may be requested by a judge or the parties and provided in writing or orally (Articles 199 et seq. of the FCPC). Judges can ask questions after the witness has submitted his or her report (Article 213 of the FCPC).
Cross-examination is not usually performed in French courts, except in the International Chamber of the Paris Court of Appeal, where the parties may be allowed to rely on various common law procedural rules under the control of the judge.
Summons to appear in front of a judge are mandatory. Defaulting witnesses who, without legitimate reason, refuse to testify or to take the oath may be fined a maximum of EUR10,000 (Article 207 of the FCPC).
It is common practice for economic experts to be consulted to determine the existence and extent of possible damage suffered by the claimant or caused to the market.
The parties can, of their own volition, submit expert reports. Furthermore, an expert report can be ordered by the court when the judge is not supplied with sufficient material to determine the matter (Articles 263 of the FCPC).
When a judge orders an expert report, he or she must determine the scope of the issue assigned to the expert and specify the period during which the expert will work on it. (Article 265 of the FCPC).
Usually, only one person will be appointed as an expert, unless the judge deems it appropriate to appoint more than one (Article 264 of the FCPC).
If the expert opinion does not require written explanation, the judge may allow the expert to present it orally at the hearing; it will be recorded in the minutes. The drafting of the minutes may, however, be replaced by a reference in the judgement if the matter is judged in a court of final resort (Article 282 of the FCPC).
The judge may, at any time, on his or her own initiative or at the request of the parties, increase or restrict the scope of the investigative measures he or she has organised and amend the terms of the assignment given to the expert (Article 236 of the FCPC).
The expert must take into consideration the findings or claims of the parties, and, where they are written, will attach them to his or her opinion if the parties so request. The expert must state in his or her opinion the decision he or she has taken in regard to these findings or claims (Article 276 of the FCPC).
Article L. 481-3 of the FCC provides a non-exhaustive list of the types of damage for which victims of competition infringements may seek compensation as follows:
Damages awarded by French courts are compensatory in nature: they correspond to the full damage suffered by the victim but are limited to this amount (eg, the amount necessary to place the victim in the position in which it would have been in the absence of the infringement).
In that regard, compensation for damages is paid as a nominal amount, increased by the payment of either the statutory (legal) interest rate, or a compensatory one (eg, the weighted average cost of capital (WACC)).
French law does not provide for any additional damages such as punitive damages.
According to Article L. 481-4 of the FCC recently introduced into French law by Ordinance No. 2017-303, the direct or indirect buyer is deemed not to have passed on the overcharge to its direct clients. In other words, the new regime applicable to private enforcement litigation provides for rebuttable presumptions regarding passing on, with the burden of rebutting the presumption lying on defendants.
It should be noted that this presumption counts amongst the substantive provisions of the ordinance, which are not applicable retroactively.
For all the claims falling outside the scope of the ordinance, one should refer to previous case law on this specific question.
In this regard, the French Supreme Court ruled in 2010 that no compensation is due if the claimant has passed on its loss to its clients and that the burden of proof of the absence of passing on lies on the claimant. (French Supreme Court, 15 June 2010, n°09-15.816)
In other words, the claimant requesting the reparation of harm must prove that it actually suffered such harm, and thus must provide evidence that it did not pass on the overcharge allegedly causing such harm.
Indeed, under French law, and as discussed above in 7.1 Assessment of Damages, damages awarded are compensatory in nature, which means that they must correspond to the full damage suffered by the victim but only the damage actually suffered. Under this general principle, claimants can only recover the amounts actually lost and not the amounts passed on.
According to Article L. 481-8 of the FCC, damages awarded shall be assessed on the day of the decision, taking into account the passage of time. This is consistent with the general principle applicable under French law according to which damages are assessed at the time of the judgment.
Claimants are automatically entitled to statutory interests, but only as from the ruling (Article 1231-7 of the French Civil Code). The applicable interest rates are published on the Banque de France's website.
A French court has discretion to award interest from an earlier date in order to fully compensate for the damage suffered. Such interest is known as 'compensating interest' related to the unavailability of capital during the period of the infringement (ie, the amount of damages). Unlike statutory interest which is granted by law, compensating interests is granted subject to the claimant evidencing a specific loss due to the unavailability of capital. Compensating interest may be based either on the rate of statutory interest, possibly increased by a co-efficient decided by the courts, or on the WACC.
Additionally, although interests granted do not automatically produce compound interest, the claimant can make such request.
Ordinance No. 2017-303 created, by law, a principle of joint and several liability between undertakings found to have breached competition law.
For all the claims falling outside the scope of the ordinance, the general standards of French tort law, and in particular of Article 1240 of the French Civil Code are applicable. On these grounds, French courts are likely to find that co-authors of a breach of competition law are liable in solidum towards victims of anti-competitive practices. French law distinguishes joint and several liability (responsabilité solidaire), which can only be based on legal or conventional provisions (Article 1310 of the French Civil Code), from in solidum liability which may only be ordered by courts in the absence of a legal textual basis.
Under the new regime of joint and several liability introduced by Ordinance No. 2017-303, leniency applicants benefiting from a total exemption from fines are only required to compensate the harm caused to their direct or indirect contracting parties. They may still be liable to other victims if such victims are unable to obtain full compensation from the other infringers (Article L. 481-11 of the French Commercial Code).
Under French law, contribution proceedings against a third party may be brought by means of a writ of summons, an intervention forcée, (Article 331 of the French Civil Procedure Code).
The right to initiate requests for bringing contribution is not reserved to the parties; the judge may invite them to question all the interested parties whose presence seems necessary to resolve the dispute (Article 332 of the FCPC).
Depending on the case, a judge may order a wide range of interim or final measures, such as resuming business relations or granting access to essential facilities. Injunctions are often backed up by a daily penalty (astreinte). Such measures are available when the case is decided on the merits or through summary proceedings (référé).
In all cases of urgency, the president of the tribunal may order in a summary procedure all measures that do not encounter any serious challenge or which the existence of the dispute justifies (Articles 808 and 872 of the FCPC).
In certain circumstances, the president may, even where confronted with a serious challenge, order in a summary procedure such protective measures as are required to restore the parties to their previous state. This is done either to avoid imminent damages or to abate a manifestly illegal nuisance. In cases where the existence of the obligation is not seriously challenged, the president may award an interim payment to the creditor or order the mandatory performance of the obligation even where it is an obligation to do a specific thing (Articles 809 and 873 of the FCPC).
These are 'regular' summary proceedings, enabling a preliminary decision to be issued within a few weeks or months. However, the judge will not rule on the merits of the case but will only order interim measures.
In cases of extreme emergency an expedited proceeding can be requested, whereby the judge sets a binding hearing date within a few days of receipt of the claimant’s request, which can even be scheduled on holidays or non-working days (Article 485 of the French Civil Procedure Code). In this situation, a preliminary decision may be issued within a few days.
In all cases, both parties are heard at a final hearing, during which they must develop their arguments.
The summary procedure orders are provisionally enforceable. The judge may, however, make that provisional enforcement subject to the granting of a guarantee in the form of real or personal property, sufficient to cover all restitutions and damages (Articles 489 and 517 to 522 of the FCPC).
The parties may, on their own initiative or upon a judge's request, use methods of alternative dispute resolution, such as conciliation (Article 128 of the FCPC) or mediation (Article 131-1 of the FCPC. This is a voluntary process, which cannot be imposed by a judge.
Ordinance No. 2017-303 anticipated the recourse to alternative modes of resolution and their effect on compensation from joint and several co-debtors.
Victims who have settled a dispute with one co-debtor may only claim compensation from the other co-debtors not party to that settlement, and such compensation should not include the amount attributable to the co-debtor party to the settlement (Article L. 481-13 of the FCC).
In addition, while ruling on contribution claims between co-debtors, courts must take into account the amounts already paid to victims following previous settlements (Article L. 483-14 of the FCC).
In France, although third-party funding is not prohibited, it is not governed by any specific regulation. Ruling on a funding contract in the context of an international arbitration case, the Court of Appeal of Versailles indicated that "a contract for the funding of trials is "suis generis" and unknown in most Member States of the Union save countries with a Germanic legal culture" (CA Versailles, 1 June 2006, n°05/01038). On 21 February 2017, the Paris Bar Council issued a resolution on the practice of third-party funding in international arbitration, setting out basic principles applicable to such cases.
Costs pertaining to proceedings, processes and enforcement procedures include inter alia: fees, taxes, government royalties, cost of translation, allowance for witnesses and expert fees. These legal costs are usually borne by the losing party, unless the judge, by a reasoned decision, imposes the whole or part of it on another party (Articles 695 and 696 of the FCPC).
Attorneys' fees are not included in the legal costs. A judge may however order the losing party to pay for additional sums which are not part of the legal costs, taking into consideration the rules of equity and the financial condition of this party (Article 700 of the FCPC).
Orders to deposit funds as security to cover costs are rarely granted. They usually only concern expert fees.
According to Article R. 420-3 of the FCC, the Paris Court of Appeal has exclusive jurisdiction to rule on appeals against decisions rendered on private enforcement competition cases.
In September 2016, Chamber 5-4 of the Paris Court of Appeal specialised in hearing appeals against first instance judgments on private enforcement antitrust cases. In addition, in 2018, an international chamber was created within the Court of Appeal allowing the parties to plead in English.
The decisions of the Paris Court of Appeal are themselves subject to appeal to the Supreme Court (Cour de cassation), which is not a third level of jurisdiction as it does not rule on the merits of a case, but instead is only required to decide whether the rules of law have been correctly applied.