The appeal judgement in Deutsche Bahn AG (C-583/13P): some reflections on the standard of the protection of the rights of defense in antitrust proceedings

Between March and July 2011, the European Commission issued three decisions pursuant to Art. 20(4) of Regulation 1/2003 in order to have access to the premises of Deutsche Bahn AG and of all its subsidiaries in the context of proceedings for violation of Art. 102 TFEU and Art. 54 EEA in the rail transportation sector. The agents found no opposition, nor resistance, and lawyers were always present. Subsequently, however, the interested German companies challenged the three decisions (including the measures ensuing therefrom) and requested that all copies of the documents made during the inspections be returned. Moreover, they filed a plea of illegality under Art 277 TFEU contesting the validity of Art. 20 of Regulation 1/2003. According to the applicants, the absence of a prior judicial authorization would conflict with Arts. 7 EUCFR and 8 ECHR, as well as with Arts. 47 CFR and 6 ECHR. In addition, Deutsche Bahn AG and its subsidiaries lamented a violation of their rights of defense on account of the excessively broad indication of the nature of the infringements, the relevant geographical market and duration of the alleged violations. Finally, the very choice to order an inspection was incompatible with the principle of proportionality.

The General Court disagreed (ECLI:EU:T:2013:404). It found that Art. 20(4) of Regulation 1/2003 is fully compatible with the case law on Art. 8 ECHR (para 67) and that the judicial review conducted under Art. 263 TFEU is in line with the requirements laid down in Art. 47 CFR and Art. 6 ECHR (para 112). Moreover, the indicia obtained during the first inspection had been acquired within the remit of the mandate of the agents and could be lawfully used for the purposes of issuing the second and third decisions (paras 123 to 164). The GC also found that the scope of the searches had been adequately delimitated and there were sufficiently ‘serious’ elements to suspect a violation of competition law (paras 173 to 184). Lastly, the decisions were not disproportionate insofar as the Commission enjoys a certain discretionary power in conducting the investigation and can therefore act independently of any action – judicial or administrative – taken at a national level or of the availability of less intrusive alternatives, such as a request for information under Art. 18 of Regulation 1/2003 (paras 206 to 216).

Last Thursday (18 June), in the appeal judgement, the Court of Justice confirmed that the absence of prior judicial authorization is compatible with Arts. 8 and 6 ECHR and, therefore, with Arts. 7 and 47 CFR. On the one hand, the specification of the subject-matter and purpose of the inspection, as well as the indication of the possible penalties and the option of bringing proceedings before the EU courts, are deemed to be sufficient guarantees against non-arbitrary intervention (paras 30 to 36). On the other hand, the post-inspection judicial review ensured by EU courts pursuant to Art. 263 TFEU respects the fundamental right to effective judicial protection (paras 41 to 48).

Notwithstanding the general compatibility of the EU system of control of anticompetitive practices with the ECHR, the Luxembourg judges opined – together with Advocate General Wahl – that in this instance the Commission overstepped the boundaries of its discretionary power. In truth, certain documents had been acquired having regard to another complaint that had meanwhile reached the competent offices and that was promptly communicated to the staff performing the inspection. The first inspection was therefore “vitiated by irregularity since the Commission’s agents, being previously in possession of information unrelated to the subject-matter of that inspection, proceeded to seize documents falling outside the scope of the inspection as circumscribed by the first contested decision” (para 66). As a result, the second and third inspection decisions were set aside for violation of the rights of the defense.

Against this background, I will formulate some brief considerations on whether the level of protection offered under EU law, and most notably under the EU Charter of Fundamental Rights (CFR), matches the ECHR standard. With specific reference to inspections ordered at the premises of the interested companies, the judgment in Deutsche Bahn is particularly telling since it explicitly mentions the recent Delta Perkany v. Czech Republic judgement (Appl. No 97/11, 2014), where the ECtHR found that failure to review the factual elements appraised by the national competition authority with a view to order dawn raids constitutes a violation of Art. 8 ECHR.

Business entities have been granted a number of privileges in the context of tax and antitrust proceeding, including the right to privacy. In Société Colas Est (Appl. No 37971/97, 2002), regarding inspections carried out by the French Competition Authority in the absence of a prior judicial authorization, the ECtHR considered that “the time has come to hold that in certain circumstances the rights guaranteed by Article 8 of the Convention may be construed as including the right to respect for a company’s registered office, branches or other business premises” (para 41). Nevertheless, when exercising their control, the Strasbourg judges have adopted a rather lenient approach with a view to ensure the effective functioning of national regulatory frameworks (Niemietz, Series No 251-B, 1992; Bernh Larsen,Appl. No 24117/08, 2013).

The need for a prior judicial authorization when ordering searches at the premises of undertakings was further addressed in Ravon (Appl. No 18497/03, 2008) Primagaz (Appl. No 29613/08, 2010), Canal Plus (Appl. No 29408/08, 2010) and Société Metallurgique Liotard Frers (Appl. No 29598/08, 2011). The findings of the ECtHR in these well-known judgments can be synthesized as follows: a) searches must be well founded and the parties must be assisted by adequate guarantees and b) prior judicial authorization can avoid arbitrary measures, but in any event decisions must be reviewable, in fact and in law, by a court within the meaning of Art. 6 ECHR.

On the other hand, since Hoechst (ECLI:EU:C:1989:337) the inviolability of the home has been recognized as a general principle of EU law, now expressed in Art. 7 CFR, but, precisely on the basis of the case law of the ECtHR, theCourt of Justiceadmits that interference by a public authority can go further for professional or commercial premises or activities than cases concerning individuals (Roquette Frères, ECLI:EU:C:2002:603, para 29).

In this regard, suffice it here to recall that pursuant to Art. 20(4) of Regulation No 1/2003 the decision ordering an inspection is binding upon the undertakings concerned and failure to collaborate with the agents of the Commission is sanctioned with penalties. As clarified by the General Court in France Telecom (ECLI:EU:T:2007:81), the decision shall specify the essential characteristics of the supposed infringement, the grounds for proceeding, what is being sought and the matters to which the inspection is to relate, as well as the powers conferred on the investigators (para 52).

In case of opposition, the local authorities must offer their assistance, which may however, depending on domestic law, require judicial authorization. Should that be the case (i.e. there is opposition and national rules prescribe authorization from a judicial authority), Art. 20(8) attentively circumscribes the remit of the competent courts. To be sure, the latter can only verify the authenticity of the decision and its non-arbitrary nature. To that end, the national judge may ask the Commission for detailed explanations “on the seriousness of the suspected infringement and on the nature of the involvement of the undertaking concerned”, but cannot “question the necessity for the inspection”.

On the other hand, decisions adopted pursuant to Art. 20(4) of Regulation No 1/2003 can be autonomously challenged before the EU courts under Art. 263 TFEU. An annulment would prevent the Commission from using the acquired evidence (Roquette Frères, para 49). However, it should be remembered that the courts’ review will in principle be confined to the grounds of annulment listed in Art. 263(2) TFEU: namely, lack of competence, infringement of an essential procedural requirement or of the Treaty (or of any rule related to its application) and, finally, misuse of powers. As a result, inasmuch as the Commission does not overstep or fall short of the formal requirements set out in Regulation No 1/2003, the validity of its decisions will be made safe.

From theory to practice: dawn raid authorization decisions have seldom been annulled. One isolated example is Nexans France (ECLI:EU:T:2012:596), where the General Court accepted that the Commission had failed to demonstrate on what grounds it had decided to order an inspection covering “all electric cables” and accordingly invalidated the investigative measure insofar as it concerned “electric cables other than high voltage underwater and underground cables” (para 94). On that same occasion, however, the Court also confirmed that in ascertaining the non-arbitrary nature of the relevant decision it must “satisfy itself that there exist reasonable grounds for suspecting an infringement of the competition rules by the undertaking concerned” (para 43). This is somewhat disquieting, considering the findings of the ECtHR in Delta Pekarny.

In this regard, it is important to underline that in Deutsche Bahn, the Court of Justice relied on the Chalkor (ECLI:EU:C:2011:815) and CB (ECLI:EU:C:2014:2204) precedents to conclude that: “the review provided for by the Treaties means that the European Union courts carry out an in-depth review of the law and of the facts on the basis of the evidence adduced by the applicant” (para 34). These references, however, are questionable: while the former case concerned a decision imposing fines pursuant to Art. 23 of Regulation No 1/2003, the latter regarded a final decision on the basis of Art. 7 of that Regulation. In these cases the scrutiny conducted by the EU Courts is admittedly more pervasive with respect to the review conducted in relation to Art. 20(4) decisions.

And yet, in contrast with the General Court, the Court of Justice took the view that the inspection decision infringed the obligation to state reasons and the rights of defense of the undertaking by reason of the fact that, prior to the first inspection being carried out, the investigators had been informed there was an additional complaint about Deutsche Bahn. Accordingly, the subject-matter of the search “also had to include the particulars of that additional complaint” (paras 63 and 64).

So, is the current EU regulatory framework compatible with Delta Pekarny? The answer lies in the details of the case. In this sense, two circumstances are worthy of consideration: on the one side, no specific remedy against the inspection decision ordered by the Czech Competition Authority was in concreto available to the parties (para 89); on the other side, ex post judicial review of the final decision (on the infringement of domestic competition law) did not tackle factual elements such as suitability, duration, and scope of the inspection (para 91). Hence, although from a formal viewpoint the answer to our question should be positive, in practice it is debatable whether the EU Courts actually verify whether inspections are ‘strictly’ proportional to the legitimate aim pursued. Nonetheless, taking into consideration the recent Nexans France and Deutsche Bahn precedents, an evolution towards a more severe scrutiny of Art. 20(4) decisions can be detected.

By and large, the EU standard of protection offered can be considered to satisfy that ensured under the Convention. This can also be inferred from Delta Pekarny, that extensively refers to Regulation 1/2003 and the procedural guarantees enshrined therein, distinguishing the judicial review offered to undertakings pursuant to Art. 20(4) from that allowed under Czech law. However, a lot depends on the practice of the EU courts.

Unfortunately, Opinion 2/13 has put the accession process on hold for an indefinite period. Thus, at present, the degree to which the rights of defense of undertakings involved EU antitrust proceedings comply with the ECHR largely depends, firstly, on whether the Strasbourg Court will strengthen the protection of corporate businesses – which does not appear to be the case – and, secondly, on how rigorously the ECtHR will apply to competition cases the doctrine of equivalent protection elaborated in M & Co (13258/87, 1990) and developed in Bosphorus (Appl. No 45036/98, 2005),Michaud (Appl. No. 12323/11, 2012) and Povse (Appl. No 3890/11, 2013).

Be that as it may, even in the absence of an external control the Court of Justice must guarantee the effectiveness of Art. 52(3) CFR (“In so far as this Charter contains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, the meaning and scope of those rights shall be the same as those laid down by the said Convention”). Hence, the question is not really how to secure compliance with the ECHR, but whether, and to what extent, the binding force attributed to the Charter is likely to enhance the degree of protection it guarantees through recourse to Art. 52(3) CFR. In particular, it is suggested that the Court should rely on the last part of the provision (“This provision shall not prevent Union law providing more extensive protection”), read in conjunction with Art. 47 CFR, and adopt a more restrictive approach when reviewing Art. 20(4) decisions.

To conclude, one last remark concerning the viability – as opposed to the validity – of the solution envisaged in Art. 20(8). As previously indicated, the need for prior judicial authorization depends on national legislation and, where foreseen, it is limited to verifying the non-arbitrary nature of the investigative measures. The final formulation of the provision marks the rejection of a system based on a prior centralized judicial review “entrusted to one of the Community Courts”. This solution was advocated by the Commission in its White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the Treaty of 1999 (which subsequently led to the adoption of Regulation No 1/2003), but, perhaps unfortunately, never materialized in positive law. A revision of the norm in the near future is admittedly improbable but not necessarily unrealistic. Indeed, it should not go unnoticed that a growing number of Member States (currently 17/28) opt for (some form of) prior judicial authorization.

In fact, a number of national Courts, even in competition cases, have abandoned a minimalistic view of fundamental rights applied to business corporations. On 18 February 2015, for example, the Brussels Court of Appeal held that antitrust dawn raids carried out by the Belgian Competition Authority at the premises of travel agents were illegal as they had not been subject to prior authorization from an independent judge. In its view, Art. 15 of the Belgian Constitution affirms the inviolability of the home without discriminating between private homes and offices, or between legal persons and natural ones. That provision, read together with Art. 8 ECHR, must be understood as subjecting inspections to a judicial authorization. Any derogation from this principle should be exceptional and justified by reasons related to the infringement at stake. Although Art. 23 of the 1999 competition law represented an exception to this principle, the exception was considered to go beyond what was strictly necessary to reach the goal pursued by the law. Interestingly, the Court dismissed the argument that, under Arts. 6 and 8 ECHR (as well as under EU law) the absence of a prior judicial authorization could be remedied by an effective a posteriori judicial review noting that: “on this issue, the rights and freedoms guaranteed at the national level go further than what is required by the ECHR”.

The signaled trend implies that when ordering a dawn raid (and fearing opposition on the part of the undertakings concerned) the Commission will progressively be obliged to seek and obtain permission in advance, with possible negative repercussions on the effectiveness of the investigation. By consequence, almost paradoxically, in the future a more extensive protection of the rights of defense of undertakings in EU antitrust proceedings could very well be triggered not by a genuine concern for fundamental rights protection, but by the need to guarantee the efficiency of the system of control over anticompetitive practices.