European Union: EU General Court Orders EU To Pay Damages For Excessively Long Court Proceedings For First Time

Last Updated: 27 February 2017
Article by Martin Favart

On 10 January 2017, the General Court ("GC") issued a judgment in which it ordered the European Union to pay Gascogne and Gascogne Sack Deutschland ("Gascogne") a total of about € 57,000 in damages for the excessive duration of previous proceedings before the GC in connection with the Industrial Bags cartel case.

In 2006, Gascogne lodged an appeal before the GC seeking the annulment of a decision adopted by the European Commission in relation to the Industrial Bags cartel case. The GC delivered its judgment in November 2011 (see VBB on Competition Law, Volume 2011, No. 11, available at www.vbb.com) and, on further appeal, the Court of Justice of the European Union ("ECJ") in November 2013 (see VBB on Competition Law, Volume 2013, No. 11, available at www.vbb.com). While both the GC and, ultimately, the ECJ dismissed the action brought by Gascogne in its entirety, the ECJ nevertheless took the view that the duration of the proceedings before the GC, namely five years and nine months, was excessive and in breach of Article 47 of the Charter of Fundamental Rights (right to be heard within a reasonable time). Such a breach, the ECJ suggested, was sufficiently serious to give rise to liability on the part of the EU for the damages arising from it. Following this judgment, Gascogne lodged the present action before the GC seeking € 3.9 million in damages against the EU.

In its judgment, the GC noted that the non-contractual liability of the EU may be incurred provided three cumulative conditions are met, namely: (i) the conduct of the institution must be unlawful; (ii) actual damage must have been suffered; and (iii) there must be a causal link between the unlawful conduct and the alleged damage.

With respect to the first condition (i.e., unlawful conduct), the GC found that the right to adjudication within a reasonable time, as enshrined in the Charter of Fundamental Rights, was breached as a result of the excessive duration of the proceedings before the same GC. The proceedings lasted for more than five years and nine months, and that duration could not be justified by any specific circumstances of that case. Specifically, the GC considered that, in the case of proceedings concerning infringement of competition rules, the requirements of legal certainty and effective competition in the internal market are of considerable importance for the applicant, for its competitors and for third parties. As a matter of principle, the GC considers that a period of 15 months between the end of the written part of the procedure and the opening of the oral part of the procedure before the GC is an appropriate period. However, in case of the parallel treatment of related cases, that period could be extended by a period of around one month per additional related case. In the present case, the parallel treatment of 12 actions for annulment brought before the GC against the Commission's cartel decision could justify an increase of 11 months in the length of the proceeding. Therefore, a period of 26 months (that is, 15 months plus 11 months) between the end of the written phase of the procedure and the opening of the oral part of the procedure would have been appropriate. Considering that a period of 46 months actually passed between these two procedural phases, well in excess of the recommended 26 months, the GC found that the duration of the proceedings before the GC was unlawfully excessive by 20 months.

With respect to the second condition (i.e., actual damage suffered), the GC recalled that the party seeking to establish the liability of the EU has the burden of adducing conclusive evidence as to the existence and the extent of the damage alleged. In this case, Gascogne alleged it had suffered loss because of the interest it had paid on the fine imposed by the 2005 Commission decision (i.e., 3.56%) as well as on the cost incurred from the bank guarantee provided to secure the payment of the fine during the court proceedings. With respect to the alleged damage resulting from the interest paid on the fine, the GC found that Gascogne had not established that it had suffered actual loss during the period of 20 months exceeding the reasonable delay of the GC proceedings given that, during that same period, Gascogne benefited from having the amount of that fine at its disposal (which it could have for example invested). In contrast, with respect to the bank guarantee, the GC found that Gascogne had in fact suffered a loss which it should be compensated for.

With respect to the third condition (i.e., causal link), the GC ruled that a causal link existed between the damage suffered by Gascogne due to the excessive length of the proceedings and the additional amount it had to incur owing to bank guarantee costs. As a result, the GC awarded Gascogne damages amounting to around € 47,000.

Finally, Gascogne alleged it also suffered non-material harm because it was placed in a situation of uncertainty which went beyond the degree of uncertainty usually caused by litigation. That state of prolonged uncertainty impacted Gascogne's planning and management decisions, which it estimated at over € 500,000. The GC accepted this claim, but substantially reduced the damage award on that count to € 5,000 for each company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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