Supreme Court answers the question in which context a passing-on defence should be assessed under Dutch law
22 July 2016
By judgment of 8 July 2016 (ECLI:NL:HR:2016:1483) regarding a damages claim of TenneT against ABB in relation to the Gas Insulated Switchgear cartel, the Supreme Court decided on the question whether a passing-on defence in a cartel damages case should be assessed in the context of the extent to which a claimant suffered loss because of the competition law infringement, or as a deduction of benefits pursuant to article 6:100 of the Dutch Civil Code (DCC). An informal English translation of the Supreme Court's considerations can be found here.
There is a clear increase in the number of claims submitted to Dutch courts for compensation of harm caused by infringements of EU competition law. Pursuant to EU law anyone who suffered harm due to an EU competition law infringement may claim damages. Such harm can i.a. result from the difference between the actual price paid and the price that would otherwise have been paid in the absence of the infringement - the so-called overcharge. An overcharge-claim is often warded off by a passing-on defence: the claimant passed-on the whole or part of the overcharge to its purchasers.
Pursuant to the Dutch law - as well as Directive 2014/104/EU on antitrust damages actions (Directive) - a claimant must be able to obtain full compensation. Overcompensation must however be avoided. It is therefore considered to be appropriate to allow defendants to invoke a passing-on defence against an overcharge-claim as the actual loss which has been passed-on the claimant's purchasers does not - or no longer - constitute harm for which the claimant needs to be compensated.
The principle that also under Dutch law defendants can ward off an overcharge claim by invoking a passing-on defence, was recently confirmed by the legislator in the Explanatory Memorandum to the legislative proposal ‘Act Implementing the Directive on the Private Enforcement of Competition Law’ and is not disputed anymore. However, it was still unclear whether such a defence should be qualified:
a) as an argument applied to the concept of loss in which the scope of the loss is determined through a comparison of the actual reality with the situation that presumably would have existed had the infringement not taken place (a quantum defence) (articles 6:95-6:97 of the DCC); or
b) as a defence that the quantum of damages after being determined, should be deducted with the benefits gained by the claimant because of the overcharge (article 6:100 of the DCC).
The Supreme Court addressed this issue in its judgment of 8 July 2016 in a matter pertaining to the Gas Insulated Switchgear cartel damages claim of TenneT against ABB.
In brief, the Supreme Court ruled that a passing-on defence can be qualified either way. According to the Supreme Court a passing-on defence comes down to the argument that the scope of an injured party's right to compensation resulting from a competition law infringement is reduced in proportion to the amount of the loss the injured party has passed-on. This argument can be applied both to the concept of loss in which the scope of the loss is determined through a comparison of the actual reality with the situation that presumably would have existed had the injurious act not have taken place (Article 6:95-6:97 of the DCC), and to the deduction of benefits (Article 6:100 of the DCC). In both approaches the benefits gained by the injured party in connection with the injurious act must be factored into the damages awarded, insofar as this is reasonable.
If the concept of benefit deduction is applied, the first requirement is that a condicio sine qua non relationship exists between the violation of standards and the alleged benefits, such that, considering all circumstances of the case, a benefit was gained by the claimant, which it would not have gained otherwise if the standards had not been violated. Once the condicio sine qua non relationship is established, it should then be determined whether it is reasonable that those benefits will be taken into account in the determination of damages. Where in previous judgements the Supreme Court employed a rather strict standard to determine whether a benefit gained by the claimant, would be eligible for deduction, the Supreme Court is now coming back from this.
The obligation to furnish facts and the burden of proof are not decisive in the choice of which of the approaches to use, given that the court can use the same rules in both approaches. As regards the existence and the scope of the loss suffered, the normal rules of evidence apply though, but by virtue of Article 6:97 of the DCC the court is also able to quantify the loss in a manner consistent with the nature of that loss or to estimate the loss if it cannot be accurately assessed. This gives sufficient room, as is also the case in the approach defined in Article 6:100 of the DCC, to place not only the obligation to furnish facts but also the burden of proof with regard to the facts underlying the passing-on defence on the liable party.
Ultimately, what is relevant in both approaches is that in comparing the actual situation with the situation that presumably would have existed had the standards not been violated, an assessment must be made of which losses and which benefits are related to the event for which the debtor is liable in such a way that they can reasonably be attributed to the debtor as a result of this event.
Finally the Supreme Court ruled that although the Directive did not cover the present case in a temporal sense and the assessment framework was therefore formed by Dutch law – with due observance of the general principle of equality and the principle of effectiveness – it is sagacious to interpret that law such that the outcomes are compatible with the Directive and the aforementioned legislative proposal.