Modernization of European Court Competition Law - Assignment Example

Modernisation of EC Competition Law The following work will evaluate the effect of Regulation 2003 on the applicability of Articles 81 and 82 EC. Furthermore, the role of lawyers in the current EU régime will be assessed, specifically the disadvantages experienced by in – house lawyers. On account of the abolition of the notice requirement, considerable time and resources are saved. However, this requires self – assessment by undertakings, which could sometimes be in breach of competition rules. The consequence could be liability for breach of competition rules at a later date, and this is a drawback in the new procedures for the market participants. Regulation 1/2003 abolished the exemption monopoly of the Commission. It established a new enforcement system that introduced a legal exception system. It directly applies the provisions of Article 81(3). Therefore, any restrictive agreement would become valid and enforceable provided it fulfils the conditions of exception laid down by the Article 81(3) (Benini, 2003). Such restrictive agreement would be treated as valid from its inception. It can be enforced before national courts of the Member States. In other words, if a restrictive agreement fails to fulfil the exception conditions contained in the Article 81(3), it would be deemed to be null and void from its formation (Benini, 2003). As such, this new system established by the Regulation improves the effectiveness in implementing and enforcing the competition rules and conditions of the EU. The new system engendered by this Regulation, benefits companies by reducing the cumbersome procedure of notification of agreements to the Commission. Consequently, the Commission will be in a position to concentrate its enforcement mechanisms on the most serious offences and infringements. With this new position, the Commission can effectively regulate the activities of cartels. The Commission will no longer have to focus on a plethora of notifications and related matters (Benini, 2003). In this manner, the new system enables the NCAs, like the Office of Fair Trading, to directly apply the competition rules of the EU. The Commission forgoes its monopoly for the application of the exception rules to the restrictive agreements. This monopoly had restricted the national courts, while dealing with matters pertaining to competition. In the absence of such monopoly, the national courts will be in a position to fully adjudicate cases relating to competition (Benini, 2003). These reforms encourage companies to sue against restrictive agreements that attempt to affect trade between Member States. As such, the NCAs and national courts are required to directly apply competition rules to such anti-competition agreements (Benini, 2003). This is a highly welcome development, because the domestic courts can deal with most of the competition rules violation cases; thereby, saving a considerable amount of time reducing the work – load of the Commission. In this manner, the new system of enforcement introduced by the Regulation integrates the factors that contribute to the well-being of the internal market. The EC antitrust rules are aimed at achieving this objective. The new system and the reform provide several other safeguards to ensure the application of the rules and conditions in all the Member States. It also ensures the active participation of NCAs and domestic courts in matters relating to competition in the internal market. On the whole, these measures will not result in the re-nationalisation of EC competition law (Benini, 2003). Regulation 1/2003 wrought a sea change in the previous competition regime established under Regulation 17/62. This new competition régime came into force in May 2004, and it is applicable to even the new entrants to the EU. The NCAs and the Commission would act in a networked fashion to ensure the proper application of EC competition rules throughout the Community (Commission on Competition, 2008). The decisions made by the NCAs will fall under the jurisdiction of the national courts. In addition, the National courts will decide as to whether the exemption, contained in the Article 81(3) EC, is to be applied. This role had previously been enacted by the Commission (Commission on Competition, 2008). The outcome will be availability of more time for the Commission, which it can employ in dealing with extremely complicated matters. As such, Regulation 1/2003 has brought about certain modifications in the application of Article 81 (3) EC with regard to the competition in the common market. Article 1(2) of this Regulation states that even though Article 81(1) EC prohibits agreements, concerted activities and decisions of associations that have an anticompetitive nature; these shall prevail if they satisfy the conditions laid down in Article 81(3) EC (Gniechwitz, 2004). Furthermore, there is no necessity to obtain a prior Commission decision in this context. This has effectively supplanted the erstwhile requirement to notify and obtain an exemption from the Commission with a legal exception system that merely requires compliance with the provision of Article 81(3) EC (Gniechwitz, 2004). Clients will initially, have to face greater ambiguity on account of the Modernisation régime. This is on account of the far – reaching changes that will be implemented. In addition, such uncertainty may be to a greater extent that what had been first anticipated. The expectation is that on the whole, Modernisation will result in greater distribution of the administrative powers of the EC (Power, 2003). Article 18(4) of Regulation 1/2003 specifies the entities that have to provide information to the Commission. To this end it states that such persons are the owners or their representatives, in the context of undertakings. When it comes to companies, firms or associations that do not have a legal personality, the persons authorized by law or by their constitution have to provide information (COUNCIL REGULATION (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, 4 January 2003). The new Regulation has increased the responsibility of lawyers, in respect of assessing agreements between undertakings. They have to ensure that the competition rules are not violated by these agreements. The perception that a lawyer is expected to further the administration of justice and the fact that the rules of professional discipline vary considerably, in some Member States, in respect of lawyers who are in a relationship of employment, necessitates the grant of privilege to only external lawyers (Hilti AG v. Commission, 1990). The Court of First Instance held in Hilti that external legal advice, employed in an internally circulated report by an undertaking, was privileged (Hilti AG v. Commission, 1990). However, in John Deere the Commission subjected the advice of the in – house lawyers to the undertaking and concluded that there had been an infringement of Article 81 EC by the undertaking (John Deere, 1985). In respect of legal privilege, which is a Community notion, the ECJ ruled that it was conditional. For any written communication between a lawyer and his client, to benefit from such legal privilege, the lawyer should be independent and not in the employment of the client. In addition, the latter should be eligible to practise in a Member State, and the purpose of the documents should be to ensure the defence rights of the client. This latter condition was understood by the ECJ in a broad sense in AM&S, wherein certain evidence was permitted to be withheld (AM&S Europe v Commission, 1982). The objectives of professional privilege are to prevent a person’s right to defence from suffering irreparable damage; and to ensure that no person is denied the right to freely consult a lawyer. The latter right has great significance, for is presupposes that the client need not fear that the information, which he divulges to his lawyer will not be disclosed to a third party. Thus the diminution of this professional privilege to a guarantee that the information divulged to a lawyer by a person, will not be employed to his detriment, does serious injury to that right. It is to be borne in mind that even the temporary disclosure of confidential information could result in irreparable damage to the litigant. In the AKZO Nobel case, the in – house lawyers submitted that they should also be provided with the legal privilege that was bestowed upon external lawyers. Their contention was that the White Paper’s recommendation for a non – notification régime would increase dependence on legal advice. Consequently, such extension would ensure better compliance with the rules relating to competition. To this the Commission contended that the question of professional privilege arose chiefly in the application of Article 81(1) and Article 82 EC (Akzo Nobel Chemicals Ltd v. Commission, 2004). This argument of the in – house lawyers was deemed worthy of merit by the Court of First Instance’s President. In addition, he accepted that the confidentiality of written communications between such lawyers and their employers had to be thoroughly scrutinized. As a mark of his concern for this issue, he preserved the confidentiality of such documents in AKZO Nobel (EU Law Update, 2007). In the AM&S case, the Court retained the competence to determine whether a document was protected. An undertaking that seeks to obtain a protected status for some of its documents has to furnish adequate proof in this regard to the inspectors. However, it is not required to reveal the contents of such documents. In the event of any misgivings by the inspectors, regarding such documents, the Commission can resort to Article 20(4) of Regulation 1/2003, in order to compel the undertaking to either furnish the document or to provide additional evidence to establish its protected status. Relief can be sought against such Commission decisions under Article 230 EC Treaty; hence, the final arbiter is the Court (Akzo Nobel Chemicals Ltd v. Commission, 2004). It is wrong to assume that in – house lawyers collude with their employers, in order to circumvent the law; because there no corroborating evidence has come forward in this context. As such, in 4 decades of case law, not a single instance of such malpractice has come to the fore. There was only one such case of collusion between a lawyer and a cartel, however, this lawyer was not in the employ of the cartel (Murphy, 2004). As a matter of fact, in – house lawyers had invariably advised their employers to abstain from infringing the law. In addition, on many an occasion, it had been noticed that such lawyers were better placed to ensure compliance with the law, in comparison to outside lawyers. With the advent of Regulation 1/2003, the onus for complying with the law was placed, to a much greater extent, on undertakings. Consequently, the role of in – house counsel in ensuring compliance with law increased immensely. Hence, it would be in the interests of all parties concerned to accord similar protection to these in – house counsel as the external counsel. This will improve conformity with the law and certainty; and bring about awareness, understanding and appreciation of EC competition rules in the corporate structure. On account of Regulation 1/2003, Articles 81 and 82 EC, which regulate cartels and abuse of dominant position by undertakings, have become directly and totally applicable. Due to the implementation of this Regulation, the European Commission no longer holds exclusive jurisdiction over Articles 81 and 82, and most importantly over the Article 81(3) exemption provision (Depoorter & Parisi). The process of modernisation is poised to bring in basic changes to competition in the EU. Assessment regarding the success or failure of international competition has at best remained inconclusive. This process of modernisation has brought about a decentralisation of power in the EU. This decentralisation has been done with great care, and it has been ensured that the level playing field has not been unnecessarily disturbed. Therefore, devolution has been combined with convergence, to some extent in the EU (Europa, 2004). To surmise, the introduction of Regulation 1/2003 resulted in several changes. One of the major changes was the abolishment of the notice requirement. This has reduced the time consumed in disputes, due to procedural delays. However, this has placed clients in a disadvantageous position; because of the ambiguity generated due to their having to indulge in self assessment, in respect of their trade agreements. In addition, the prominence of lawyers has increased significantly, as agreements have to be drafted in compliance with the EC competition rules. The responsibility for ensuring that an agreement does not violate EC Law now rests squarely on the clients. Hence, if the agreements are not in compliance with the treaty articles, then the clients are at risk of becoming liable. Moreover, such decentralisation will reduce the burden on the Commission, as most of the work will be transferred to the national courts. List of References Akzo Nobel Chemicals Ltd v. Commission, T–125/03 R and T–253/03 R, 4 CMLR 744 (2004). AM&S Europe v Commission, 155/79 ECR 1575 (ECJ 1982). Benini, F. (2003, April 1). Modernization of Antitrust procedures. Retrieved January 14, 2009, from Seminar on EU competition Law and Maritime Transport: http://ec.europa.eu/competition/speeches/text/sp2003_008_en.pdf Commission on Competition. (2008, October 23). EC Regulation 1/2003: views on its functioning. Retrieved January 14, 2009, from International Chamber of Commerce: http://www.iccwbo.org/uploadedFiles/ICC/policy/competition/Statements/EC%20Regulation%201%202003(1).pdf COUNCIL REGULATION (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty. (4 January 2003). Official Journal of the European Communities , L 1/14. Depoorter, B., & Parisi, F. (n.d.). The Modernization of European Antitrust Enforcement: The Economics of Regulatory Competition. GEO. MASON LAW REVIEW , Vol. 13:2; Page 312-313. EU Law Update. (2007, September 17). AKZO: CFI Denies In-House Counsel Legal Privilege, But Clarifies Procedure and Recognizes Privilege for Certain Compliance Audits. Retrieved January 14, 2009, from CLEARLY GOTTLIEB: http://www.ecla.org/documents/CGSH%20Alert%20-%20AKZO%20vs%20Commission%20case.pdf Europa. (2004, March 30). Commission finalises modernisation of the EU antitrust enforcement rules . Retrieved January 12, 2009, from Press releases RAPID: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/04/411&format=HTML&aged=1&language=EN&guiLanguage=en Gniechwitz, C. (2004). Commission Regulation (EC) No 2790/1999 – The European Commission’s Block Exemption for Vertical Agreements. Retrieved Janurary 10, 2009, from Macquarie Business Law Journal: http://www.austlii.edu.au/au/journals/MqBLJ/2004/4.html Hilti AG v. Commission, T–30/89A, 4 CMLR 602 (Court of First Instance 1990). John Deere, 2 CMLR 554 (1985). Murphy, G. (2004, January). CFI Signals Possible Extension of Professional Privilege to In-house Lawyers. Retrieved January 14, 2009, from http://www.globalcompetitionforum.org/regions/n_america/canada/LPP%20and%20Akzo%20edit%201.0%20(changes%20integrated)2.pdf Power, V. (2003). Representing clients after the modernisation of EC competition law. International Company and Commercial Law Review , 335 – 342. Read More