In a nutshell, the CJEU held that orders to disclose relevant evidence do not refer solely to existing documents, but also cover “documents that must be created ex novo by the party to whom the request for information is made by compiling or classifying information, knowledge or data held by it.”
Below we provide some insight into the CJEU’s reasoning and the effects that the Preliminary Ruling will have on antitrust litigation in the EU.
The Main Proceedings
The defendants in the main proceedings were truck manufacturers who, according to a decision issued by the European Commission under Art. 101 TFEU, participated in a cartel involving collusion on pricing and gross price increases.
The applicants, on the other hand, purchased trucks capable of falling within the scope of the infringement. As such, the applicants made a claim seeking damages before the Juzgado de lo Mercantil n. 7 de Barcelona (the “Referring Court”) and applied for access to the evidence in possession of the defendants. According to the applicants, they needed that evidence to calculate the artificial price increase deriving from the collusion. The defendants argued that some of the requested documents had to be drafted on an ad hoc basis by compiling and classifying data according to parameters specified by the applicants. In the defendants’ view, an order imposing such a burden would violate the principle of proportionality.
The Referring Court was inclined to entertain the defendants’ position. Nevertheless, it acknowledged that some arguments to the contrary also might be well founded, and therefore it referred the following matter to the CJEU: “Must Article 5(1) of [the EU Damages Directive] be interpreted as meaning that the disclosure of relevant evidence refers exclusively to existing documents in the control of the defendant or a third party or, in contrast, can Article 5(1) also include the disclosure of documents that must be created ex novo by the party to whom the request for information is made by compiling or classifying information, knowledge or data held by it?”
The Preliminary Ruling
Art. 5(1) of the EU Damages Directive introduced an obligation for Member States to allow national courts to order defendants or third parties in proceedings relating to claims for damages to disclose the relevant evidence under their control. Pursuant to the provision at issue, such disclosure orders may be issued “upon request of a claimant who has presented a reasoned justification containing reasonably available facts and evidence sufficient to support the plausibility of its claim for damages […]. Member States shall ensure that national courts are able, upon request of the defendant, to order the claimant or a third party to disclose relevant evidence.”
The CJEU first clarifies that the rationale behind Art. 5 is to reduce the kind of information asymmetry that are typically inherent to competition law litigation and to guarantee equality of arms. Such information asymmetry is generally not limited to the content of a specific document. Indeed, claimants may not even know that a specific piece of evidence exists.
Procedural nature of Art. 5(1)
As a threshold matter, the CJEU had to establish whether Art. 5(1) of the EU Damages Directive was a substantive or a non-substantive provision in order to determine its temporal applicability. The CJEU held that Art. 5(1) is a non-substantive provision because it does not “affect the legal situation of those parties, in that that provision does not relate to the constituent elements of non-contractual civil liability.”
Rather, the provision confers on national courts the power to adopt a peculiar procedural measure in order to establish the facts relied upon by the parties. The CJEU therefore concluded that, in accordance with Art. 22(2) of the EU Damages Directive, Art. 5(1) applies to actions for damages brought after December 26, 2014, including the one at issue in the main proceedings, regardless of the timing of the alleged infringement.
The scope of disclosure orders under Art. 5(1)
Regarding the scope of disclosure orders under the EU Damages Directive, the CJEU first analyzed the wording of Art. 5(1) and concluded that the reference to evidence “in the control of” seems to cover only pre-existing evidence. On the other hand, the context and the purpose of the provision suggest otherwise. In particular, the definition of evidence under the EU Damages Directive is broader than the notion of pre-existing evidence.
Furthermore, the CJEU highpoints that the words “in the control of” appear in the first sentence of Art. 5(1), which states whereas the second sentence refers only to “relevant evidence.” According to the CJEU, the change in wording reflects the rationale behind the provision, which, as said, is to strengthen private enforcement and remedy information asymmetry. Indeed, receiving “unprocessed, pre-existing and possibly very numerous documents” is insufficient to compensate for information asymmetry and could create obstacles to the private enforcement of EU competition rules. The CJEU therefore concludes that Art. 5(1) “must […] be applied effectively,” and potentially extends to documents created ex novo.
The strict scrutiny for proportionality of requests for disclosure
At the same time, the CJEU acknowledges that defendants in follow-on claims need to be protected from information fishing, which would place a disproportionate burden on them. In this context, the Preliminary Ruling stresses that national courts need to conduct rigorous examination of disclosure requests under Art. 5(2) and (3) of the EU Damages Directive.
Art. 5(2) of the EU Damages Directive requires claimants to specify single “items of evidence or relevant categories of evidence circumscribed as precisely and as narrowly as possible.” Recital 16 clarifies that requests for disclosure aiming to obtain a category of evidence should identify the relevant category by “reference to common features of its constitutive elements such as the nature, object or content of the documents the disclosure of which is requested, the time during which they were drawn up, or other criteria, provided that the evidence falling within the category is relevant.”
Moreover, disclosure orders are limited “to that which is proportionate,” in that national courts need to weigh up the legitimate interests of all parties concerned. Specifically, Art. 5(3) stipulates that national courts shall consider (a) the factual basis of the claim, (b) the scope and cost of disclosure, and (c) whether the requested evidence contains confidential information.
The CJEU therefore ruled that the first subparagraph of Article 5(1) of the EU Damages Directive “must be interpreted as meaning that the reference therein to the disclosure of relevant evidence in the control of the defendant or a third party also covers those documents which the party to whom the request to disclose evidence is addressed must create ex novo by compiling or classifying information, knowledge or data in its possession, subject to strict compliance with Article 5(2) and (3) of that directive, which requires the national courts seised to restrict the disclosure of evidence to that which is relevant, proportionate and necessary, taking into account the legitimate interests and fundamental rights of that party.”
The Preliminary Ruling is in line with other CJEU precedents that highlight the importance of private enforcement in combatting anticompetitive conduct. To this end, it construes Art. 5(1) of the EU Damages Directive as broadly as possible in order to remedy information asymmetries, while stressing the need for rigorous scrutiny of the extent of the requests for disclosure under Art. 5(2) and (3). In conclusion, the Preliminary Ruling is undoubtedly an important step in the pursuit of the EU competition policy, as it will facilitate follow-on damages actions.
However, the CJEU also leaves significant discretionary power to national judges to delineate the extent of the burden imposed upon defendants to compensate for information asymmetry with claimants seeking damages. As a result, defendants in such proceedings must be aware of the cost that may be involved in meeting the burden of proof, which can include creating ad hoc evidence to help plaintiffs navigate and understand all information about the dispute under the defendants’ control.