Oliver Brüstle vs. Greenpeace: how to read the moral compass?

Bertrand Sautier

LLM, King’s College London; Phd candidate in IP Law, EDSJ Grenoble 

On the October 18th, 2011, the European Court of Justice (CJEU) issued a long-awaited judgment in the Oliver Brüstle vs Greenpeace[i] case. The Court had to answer several major questions concerning the patentability of stem cells and the definition of a human embryo[ii].

Based on morality grounds, the Court ruled that such invention was not patentable according to the EU Directive 98/44 on the legal protection of biotechnological inventions (Biotechnology Directive)[iii]. This decision raised a lot of concerns in the scientific and research fields, as it may have severe consequences on the stem cell industry. In order to understand this complicated matter, the background of the decision has to be clearly defined before looking at the case in itself.

What are Stem cells?

Stem cells are biological cells that can divide and differentiate into diverse specialized cell types and can self-renew to produce more stem cells. In mammals, there are two broad types of stem cells: embryonic stem cells, which are isolated from the inner cell mass of blastocysts, and adult stem cells, which are found in various tissues. Once an ovocyte has been fertilized with sperm, the development begins by the division of cells which all have the capacity to develop into a complete human being. Those cells called “totipotent cells”. They have the ability to subsequently divide, and can be artificially produced using cloning methods.

About five days after fertilization, the diversification process between the cells starts. Those cells are then called “pluripotent cells” and do not have the ability to develop into a complete human being anymore. These “pluripotent cells” are the stem cells use in the Oliver Brüstle[iv] invention, which was the subject of the case before CJEU. The removal of said cells may damage or destroy the blastocyst, which contains all the stem cells that later (after implantation in the uterus) turn into a human being.

Stem cells could be used to cure a lot of diseases relating to blindness, baldness, neurological diseases and cancers. The industry is currently making significant improvements in the creation of cures for those diseases.

What does the Mr Brüstle’s invention refer to?

Mr Brüstle filed a German patent in December 1997, which concerned isolated and purified neural precursor cells processed from embryonic stem cells and removed at the blastocyst stage. The application specified that the transplantation of such cells into the nervous system was a promising method of treatment of numerous neurological diseases, like Parkinson’s disease.

By nature, that type of cell exists only during the brain’s development phase, and the patent at issue sought to make it possible to resolve the technical problem of producing an almost unlimited quantity of isolated and purified precursor cells having neural properties, obtained from embryonic stem cells. As such, the invention did not refer to the use of a human embryo.

What rules apply to the stem cell industry?

Stem cell research involves the use of embryonic cells. Thus, the Directive 98/44 was created to determine the patentability of stem cell – based inventions. In Article 6(2)(c), the Directive excludes the patentability for an invention that “uses of human embryos for industrial or commercial purposes”. However, the Directive does not define the notion of a human embryo[v], or the exact meaning of an industrial or commercial purpose.

How did this case end up before the CJEU?

The patent was challenged in Germany by Greenpeace on the grounds of morality. The Bundespatentgericht (Federal Patent Court) ruled that the patent was invalid[vi] because it covered precursor cells obtained from human embryonic stem cells, processed for the production of those precursor cells. The defendant appealed against that judgment to the Bundesgerichtshof (Federal Court of Justice)[vii].

According to the Federal Court, as Article 6(2)(c) of the Directive 98/44 did not allow the Member States any discretion as regards to the fact that the processes and uses listed therein were not patentable[viii], the reference made in German law[ix] to assess the notion of human embryo was not a Union standard. Thus the concept of an embryo used in one Member State’s law cannot be interpreted differently from that of the corresponding concept in Article 6(2)(c) of the Directive. The problem is that no interpretation of such concept had been done by the CJEU in regard of the said directive.

As a result, on November 12th, 2009, the Bundesgerichtshof decided to refer to the CJEU in order to clarify this concept and to determine whether the human embryonic stem cells which served as base material for the patented processes constituted ‘embryos’ within the meaning of Article 6(2)(c).

Therefore, the Court of Justice had to determine the meaning of the term of “human embryos” in Article 6(2)(c) especially the stage of development required to qualify as an embryo. Furthermore, the expression “uses of human embryos for industrial or commercial purposes” in the Article 6(1) had to be defined. Finally, the other major question was to determine if the technical teaching had to be considered unpatentable even if it does not claim the destruction of a human embryo.

Precedents in the area of human embryo

Before the Brüstle case, the European Patent Organisation (EPO) had to consider similar questions in the Warf (Wisconsin Alumni Research Foundation) decision (G2/06) dated November 25th, 2008.

Based on the same rules as Article 6(2)(c) from the Directive[x], the EPO stated that any invention that would involve the destruction of a human embryo was non patentable[xi], but also that the patentability of inventions involving stem cells was not excluded in and of itself.

Many expected the Advocate General to take a position similar to that taken by the EPO in Brüstle case. Clearly, there was no doubt that the Mr. Brüstle application was going to be destroyed on the same basis.

Opinion of the Advocate General

The Advocate General Yves Bot gave a broad definition of a human embryo, stating that “totipotent cells carrying within them the capacity to evolve into a complete human being must be legally classified as human embryos and must therefore be excluded from patentability” [xii].

Similarly, he considered that “the blastocyst stage of development, reached around five days after fertilisation, must also be classified as an embryo, since, the principle of human dignity, to which the directive refers, is a principle which must be applied not only to an existing human person, to a child who has been born, but also to the human body from the first stage in its development, i.e. from fertilisation.”

What did the Court rule? 

Following the General Advocate opinion, the Court gave a very broad interpretation on what should be considered as a human embryo, and therefore would be unpatentable.

Indeed, the Court ruled that “any human ovum after fertilisation, any non-fertilised human ovum into which the cell nucleus from a mature human cell has been transplanted, and any non-fertilised human ovum whose division and further development have been stimulated by parthenogenesis constitute a ‘human embryo’”.

Whit such a definition, regarding the Article 6(2)(c) a stem cell obtained at a blastocyt stage may be considered as a human embryo. As a result, it belongs to each national jurisdiction to determine if a blastocyt constitutes an embryo.[xiii]

Regarding the assessment of the Article 6(2)(c) the Court stated that “the exclusion from patentability concerning the use of human embryos for industrial or commercial purposes set out in Article 6(2)(c) of Directive 98/44 also covers the use of human embryos for purposes of scientific research, only use for therapeutic or diagnostic purposes which are applied to the human embryo and are useful to it being patentable.”

Given this definition, the application of said Article to the Mr. Brüstle patent application (which did not claim the use of human embryos) led to the application being excluded from patentability: “Article 6(2)(c) of Directive 98/44 excludes an invention from patentability where the technical teaching which is the subject-matter of the patent application requires the prior destruction of human embryos or their use as base material, whatever the stage at which that takes place and even if the description of the technical teaching claimed does not refer to the use of human embryos.”

As this decision is taken through the eye of patent law and does not refer to the statute of a human embryo as such[xiv], its consequences remain uncertain.

Thus, the fact that the Court used a moral compass[xv] to determine whether this invention was patentable or not is probably the most discussed point. Human dignity is a very difficult notion to define, and the assessment of such concept may recover important differences between national and European Courts[xvi]. However, it is difficult to tell where the moral compass should be held, especially if it may stop medical research. Using an extreme analogy, could the application of human dignity lead to the refusal to patent a mobile device invention because of the use of slave labour in mine precious metals?[xvii] Of course, the commercial use of rare metals is not contrary to human dignity as such but in the end, the mining of said materials in bad conditions may affect human dignity.

What consequences on the stem cell industry?

The first consequence concerns all granted patents for which inventions involve the destruction of a human embryo, as defined by the Court. They are now deemed to be immoral and thus not patentable.

Therefore, even if such patents still remain in force, they are no longer enforceable before a court. As a result, the value of those assets has dropped to almost nothing.

As the decision has a binding effect on the national courts of the EU Member States, national patent courts will apply this decision strictly. The EPO will probably change its practice to conform to this decision[xviii], as the implementation of this decision does not involve any modification in the European Patent Convention. This is something that has to be commended. The collaboration between the EPO and the CJEU[xix] and the absence of differences in the assessment of the rules is something that will probably be helpful to the construction of the future unitary patent system.

Regarding the economic consequences, a lot of concerns have been raised by the stem cells industry. Whereas Greenpeace and few religious groups welcomed this decision, many scientific organisations now believe that this could be the end of the European stem cell industry[xx].

Even if this decision does not prevent from maintaining research activities in this litigious field of technology, the business model of this industry is based on its ability to raise funds. This activity is very costly, and the best way to attracts investors until today has been to get intellectual property protection. Now if investors cannot obtain patent protection for such inventions in Europe, are they still going to invest in European stem cell companies?

In opposition to this argument, researches made in Europe can still be patented in other countries such as the USA but the fear is that European stem cells companies will be driven out of Europe to the USA, mostly for cost reasons.

Ironically, the main goal of the Directive 98/44 was to enhance and protect biotech investments in Europe. As written in paragraph (2) of said directive:

“In the field of genetic engineering, research and development require a considerable amount of high-risk investment and therefore only adequate legal protection can make them profitable.”

As the application of the Directive now involves the absence of protection by the patent system, it is hard to understand how the research industry in this area will keep on growing.

[i] Case C-34/10 Brüstle [2011] ECR I-0000.

[ii] J.Sándor, M.Varju, ‘Patenting stem cells in Europe: The challenge of multiplicity in European Union law’ (2012) 49 Common Market Law Review, Issue 3, pp. 1007–1037

[iii] Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions. OJ 1998 L 213, p. 13.

[iv] Prof. Dr. Oliver Brüstle is a neuropathologist and a renowned expert in stem cell research. He serves as Professor of Reconstructive Neurobiology at the University of Bonn Medical Center.

[v] Specifically, the Directive does not define the development stage when a human embryo is considered to be created.

[vi] The decision was based on the immorality of the invention (“sittendwidrig”).

[vii]Judgment of the Court (Grand Chamber) para 20 CJUE, not yet published.

[viii] See Case C-377/98 Netherlands v Parliament and Council [2001], para 39, and Case C-456/03 Commission v Italy [2005], para 78.

[ix] See Section 2(2) of the German Patent Act. <http://www.wipo.int/wipolex/en/text.jsp?file_id=238776>

[x] In July 1998, the EPO, which is not an EU organisation, made a modification of the European Patent Convention in order to include a similar version of the Biotechnology Directive.

[xi] As long as the invention implies the use of human embryo to a ‘commercial or industrial purpose’

[xii] Press Release No 18/11, March 10, 2011.

[xiii] The Court stated that it is for the referring court to ascertain, in the light of scientific developments, whether a stem cell obtained from a human embryo at the blastocyst stage constitutes a ‘human embryo’ within the meaning of Article 6(2)(c) of Directive 98/44. Para 38 of Brüstle case.

[xiv]  The Court stated that: “As regards the meaning to be given to the concept of ‘human embryo’ set out in Article 6(2)(c) of the Directive, it should be pointed out that, although, the definition of human embryo is a very sensitive social issue in many Member States, marked by their multiple traditions and value systems, the Court is not called upon, by the present order for reference, to broach questions of a medical or ethical nature, but must restrict itself to a legal interpretation of the relevant provisions of the Directive”. Para 30 of Brüstle case.

[xv] The Court used the concept of human dignity as a legal motivation: “The context and aim of the Directive thus show that the European Union legislature intended to exclude any possibility of patentability where respect for human dignity could thereby be affected. It follows that the concept of ‘human embryo’ within the meaning of Article 6(2)(c) of the Directive must be understood in a wide sense” Para 34 of Brüstle case.

[xvi] For example, in the Commune de Morsang-sur-Orge case dated October 27th 1995 and dealing with dwarf tossing in nightclubs, the French Conseil d’Etat ruled that the respect of human dignity would be legally sufficient to make dwarf tossing illegal, even with personal consent. Contrary to this the ECHR, in the KA and AD Vs Belgium case dated February 17th 2005, ruled that human dignity would not be sufficient to prohibit extremely violent sexual act as long as personal consent was given.

[xvii] As suggested by Dr Philip Webber on the IPKat blog. See Brüstle: what will happen next? (27/10/11) <http://ipkitten.blogspot.fr>

[xviii] Even if formally the EPO does not have to conform with the CJEU decisions.

[xix] The CJEU made several references to the WARF case, unlike the Advocate General.

[xx] See for example a statement made on December 7th 2011 by the Alliance of German Scientific Organizations. <http://www.idw-online.de/pages/en/news455110>

CJEU’s role in reducing discriminatory treatment: construing domestic law in tandem with EU law

Ishita Das

3rd year B.B.A (Hons.), LL.B. (Hons.), National Law University, Jodhpur

 

Abstract: The recent decision of the Court of Justice of the European Union (CJEU) in Commission v Austria (Austria Case) raises interesting substantive issues. It starkly illustrates the scope of conflict between domestic legislation and European Union (EU) law. The CJEU condemned Austria for resorting to unjustified restrictive measures of limiting the deductibility of donations for income tax purposes exclusively to donations made to research and teaching institutions established in Austria. Another case which highlights this conflict is the Meilicke II Case, which evolved from the Meilicke I Case, where the CJEU held that a Member State must accord equivalency in treatment between resident and non-resident companies with regard to payment of dividends to the residents.

Therefore, these cases are prominent examples of the difficulty that the CJEU faces in ensuring that the operation of the domestic law is in consonance with the EU law. Following the decision in the Austria Case, the Austrian Ministry of Finance has issued guidance providing that deductibility of donations must be interpreted in light of that decision, which is reflective of the CJEU’s ability to further the free flow of capital within the EU, in accordance with the EU law, thereby reducing discriminatory treatment and red tapeism.

 

The European Commission, distressed that Austria indulged in discriminatory treatment by exclusively authorising the deduction from tax of gifts to research and teaching institutions established in Austria, brought an action against the Republic of Austria [hereafter “Austria”] before the Court of Justice of the European Union [hereinafter “CJEU”].[i]

It contended that Austria had failed to fulfill its obligations under Article 56 of the Treaty establishing the European Community [hereinafter “EC”][ii] and Article 40 of the Agreement on the European Economic Area of 2 May 1992 [hereinafter “the EEA Agreement”].[iii]

The conflict between the EEA Agreement and the national law

The EEA Agreement

Article 40 of the EEA Agreement essentially provides that there shall be no restrictions between the contracting parties on the movement of capital and it further lays down that there shall be no discrimination based on the nationality or on the place of residence of the parties or on the place where such capital is invested.

Therefore, the provision, if viewed in a two-fold manner, comprises the following:

(1) Prohibition of restriction on the movement of capital;

(2) Prohibition of discrimination on the basis of nationality, place of residence or place of investment of capital.

Austrian National Law

Paragraph 4 of the Law on income tax (Einkommensteuergesetz) of 7 July 1998[iv] [hereinafter “the EStG”] provides that operating expenses are to be deducted from profits. Paragraph 4a(1)  in the version of the Law on tax reform of 2009[v] [hereinafter “the amended EStG”] lists gifts which are deemed to be operating expenses, which includes gifts for carrying out research or teaching activities in establishments for Austrian learning or concerned with the Austrian economy.

The Conflict

The Commission argued that Austria, by authorising the deduction from tax of gifts to research and teaching institutions whose seat were in Austria, to the exclusion of gifts to comparable institutions in other Member States of the European Union [hereinafter “EU”], contravened Article 40 of the EEA Agreement and Article 56 EC by restricting the free movement of capital. It further contended that Paragraph 4a(1) of the amended EStG drew distinctions purely on the basis of geographic criteria in relation to the seat of the recipient of the gifts.

Austria, albeit conceding that Paragraph 4a(1) of the amended EStG distinguishes between some institutions in Austria and those established in other Member States to a certain extent, argued that the provision does not effectuate restriction of movement of capital.

It made two major submissions:

Firstly, it submitted that the research and teaching institutions listed under the provision are not “objectively comparable”[vi] with similar institutions established in other Member States as only the former are subject to the influence of the official authorities of Austria.

Secondly, it asserted that even if restriction of free movement of capital is shown to exist, it is justified by reasons of ‘public interest’. It stated that in the furtherance of its endeavour to maintain and support the position of Austria as a centre of culture and learning, its actions can be sustained. The institutions listed under the disputed provision in the amended EStG encourage the cause of promoting public interest by providing their services and therefore the gifts can take the place of payment of taxes.

The CJEU’s role in settling the conflicting position

The CJEU looked into the arguments of both parties and came to the conclusion that Austria had violated its obligations under Article 56 EC and Article 40 of the EEA Agreement, as Paragraph 4a(1) of the amended EStG limited the deductibility of gifts for income tax purposes to those made exclusively to institutions which were established in Austria, resulting in restriction of the free movement of capital. Its actions cannot be justified on the grounds of ‘public interest’.[vii]

The CJEU said that though direct taxation falls within the competence of the Member States, they must nevertheless exercise their competence in consistence with European Union Law.[viii] The Court also discussed that the reason which a State adopts to justify its action, must be aligned to the achievement of the objective of the legislation and should not exceed the necessity of fulfilling the same.[ix]

In the Meilicke II Case[x], there was a reference for a preliminary ruling from the Germany, concerning the interpretation of Articles 56 EC and 58 EC[xi]. In this case, there was a conflict between the European Community law and the domestic law as in the Austria Case. This case involved the distribution of dividends by a company established in one Member State to a taxable person in another Member State. The Court in the Meilicke I Case[xii] had held that the tax credit applied to dividends received from capital companies fully taxable for corporation tax purposes in Germany or in another Member State. Discussing this judgment, the Court in the Meilicke II Case held that “where a Member State has a system for preventing or mitigating a series of charges to tax or economic double taxation for dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way”.[xiii]

Reaction to the CJEU’s decision

The Austrian Ministry of Finance issued guidance[xiv] on application of the Austria Case decision on 2 August 2011[xv]  with a view to expedite the delivery of justice. The prompt action of the Ministry should lay down a benchmark for the other States to incorporate the decisions of the CJEU.

Conclusion

Austria engaged in favourable discrimination by providing exclusivity to those institutions established in Austria. Non-discrimination is a universally recognized principle which has been incorporated in the EC and the EEA Agreement. Austria’s regime of tax deduction is not aligned to the scheme of the European Union law where the Member States are discouraged from constituting a means of arbitrary discrimination or a disguised restriction on the free movement of capital.[xvi]

The CJEU plays an important role in not only curbing the discriminatory treatment meted out to the other Member States by a particular State, but also checks the rampant red-tapeism which exists in the social hierarchy and bureaucracy of various member states by interpreting their domestic laws in line with the EU law.

[i] Case C-10/10 European Commission v. Republic of Austria [2010] OJ C 63 [hereafter “Austria Case”].

[ii] Article 56 EC has been replaced from 1 December 2009, by Article 63 of the Provisions of the Treaty on the Functioning of the European Union [hereinafter “TFEU”].

[iii] Agreement on the European Economic Area of 2 May 1992 [1994] OJ L 1, p. 3.

[iv] Law on income tax (Einkommensteuergesetz) of 7 July, 1998 BGBI. 400/1988.

[v] Law on tax reform of 2009 BGBI. I, 26/2009.

[vi] Austria Case, p 17.

[vii] It is settled case-law that the need to prevent the reduction of tax revenues is not an overriding reason in the public interest capable of justifying a restriction on the freedom provided under the Treaty; See Case C-318/07 Persche [2009] ECR I-359, p 46.

[viii] Case C-72/09 Etablissements Rimbaud [2010] ECR I-0000, p 23.

[ix] See Case C-386/04 Centro di Musicologia Walter Stauffer [2006] ECR I-8203, p 32 and Persche, p 41.

[x] Case C-262/09 Wienand Meilicke, Heidi Christa Weyde, Marina Stöffler v Finanzamt Bonn-Innenstadt [2009] OJ C 267.

[xi] Articles 56 EC and 58 EC have been replaced, from 1 December 2009, by Articles 63 TFEU and 65 TFEU.

[xii] Case C-292/04 Meilicke and Others [2007] ECR I-1835.

[xiii] See Case C-315/02 Lenz [2004] ECR I-7063, p 27 to 49; Case C-319/02 Manninen [2004] ECR I‑7477, p 29 to 55, and Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I-11673, p 55.

[xiv] The guidance provides that the Austria Case ruling should apply to all open cases, stipulating that the domestic legislation on the deduction of donations must be interpreted in the light of the CJEU decision and should be applied in a compatible way with EU law.

[xv] See Ernst & Young T Magazine, “Ministry of Finance issues guidance on application of ECJ decision Commission v. Austria (C-10/10)”, 7 September 2011:  <http://tmagazine.ey.com/news/ministry-of-finance-issues-guidance-on-application-of-ecj-decision-commission-v-austria-c-1010 > Accessed 25 April, 2012.

[xvi] Article 58(3) EC.

Implementing EU Law after the Charter of Fundamental Rights

Emily Hancox

LLM Researcher, European University Institute

 

It was established in the 1980s, in the landmark case of Wachauf, that Member States when implementing EU law are bound to respect EU fundamental rights.[i] The Court of Justice of the European Union (‘the Court’) did not stop here and later held that Member States were also to respect EU fundamental rights when derogating from EU law[ii] and potentially when acting ‘within the scope of EU law.’[iii] The aim of this post is to consider what it means to ‘implement’ EU law and whether this has changed since the EU Charter of Fundamental Rights (‘the Charter’) became legally binding.[iv] The focus, in particular, will be on the case of N.S[v]. and the exercise by Member States of optional clauses in EU secondary legislation. To begin with this post will consider the meaning of implementing EU law and the problems with this concept after the Charter entered into force. It shall then discuss the case of N.S. and its implications for the meaning of implementing EU law.

Prior to the Charter, implementing EU law referred to an ‘agency situation’: the EU confers a power onto a Member State to introduce EU secondary legislation into national law. Implementing was the giving of ‘hands and feet’ to EU law in order for it to become effective.[vi] This included the application or execution of a regulation,[vii] the transposition of a directive,[viii] and the application of a directive through an executive act.[ix] The existence of Member State discretion was also not considered fatal to the ‘agency’ relationship. This is evident in Wachauf where the Member State had the option under Regulation 1371/84 whether or not to grant compensation to the individual. This notion of implementing, as an agency situation, shall be used throughout this post as a benchmark against which to measure changes in the concept.

The Charter has called into question this established meaning of implementing EU law. This is due to the complex interplay between the Charter and the Explanations relating to the Charter[x] which are to be given ‘due regard.’[xi] Article 51(1) of the Charter states that fundamental rights are binding on Member States “only when they are implementing Union law.” This would place a clear limit on the scope of EU fundamental rights, if it was not for the Explanations. These state that “it follows unambiguously from the case-law of the Court of Justice” that Member States are bound by fundamental rights “when they act within the scope of EU law.” This introduces a difficult conflict between two alternatives. The first option is to ignore the explicit wording of the Charter and follow the Explanations, attributing to implementing EU law the meaning of ‘within the scope of EU law.’[xii] This would dramatically alter the meaning of the concept. The second option is to rely on the express wording of the Charter and take this as a limit to the scope of fundamental rights.[xiii]

N.S. is one of the first cases to discuss what is meant by implementing EU law after the Charter. In N.S., the appellant was Afghan national who claimed asylum in the United Kingdom, but had been arrested in Greece whilst traveling there. The United Kingdom had successfully requested that Greece take responsibility for the applicant’s claim under the Common European Asylum System. Upon hearing of his transfer the appellant appealed and requested that the Secretary of State exercise her option to accept responsibility for his claim on the basis that transfer to Greece would violate his fundamental rights under European Union law amongst other provisions. The option concerned was contained in Article 3 of Regulation No 343/2003 which provides:

“1. Member States shall examine the application of any third-country national who applies at the border or in their territory to any one of them for asylum. The application shall be examined by a single Member State, which shall be the one which the criteria set out in Chapter III indicate is responsible.

“2. By way of derogation from paragraph 1, each Member State may examine an application for asylum lodged with it by a third-country national, even if such examination is not its responsibility under the criteria laid down in this Regulation. In such an event, that Member State shall become the Member State responsible within the meaning of this Regulation and shall assume the obligations associated with that responsibility…”

The question referred asked whether the exercise of this discretion was ‘implementing’ EU law under Article 51(1) of the Charter. The Court confirmed that it was.[xiv] Several Member States had tried to argue that the option in Article 3(2) was a ‘sovereignty clause’ and thus outside the scope of EU law. The Court rejected this reasoning, holding that the option is “an integral part of the Common European Asylum System”[xv] and that its exercise “gives rise to specific consequences provided for by that regulation.”[xvi] The provision thus “forms part of the mechanisms for determining the Member State responsible for an asylum application provided for under that regulation and, therefore merely an element of the Common European Asylum System.”[xvii] There are several implications which flow from this judgment.

The first point to note is that ‘implementing’ is not equated with ‘within the scope of EU law’ in this case. A dramatic shift in meaning cannot thus be identified yet. This development cannot be categorically ruled out in the future but a better test case, where a Member States seeks to restrict a fundamental freedom, would be necessary. There is, however, a clear attempt by the Court and the Advocate General to fit the case within an ‘agency situation’. Advocate General Trestenjak clearly aligns the meaning of ‘implementing’ with its pre-Charter meaning when stating that “in the light of the Wachauf case-law,” it is “a national implementing measure.” Similarly, the Court stressed that the decision is an element of the Common Asylum System, giving rise to the specific rights and duties of this system. Emphasising the extent of integration with the system is arguably a method of demonstrating that the Member State is applying a provision of EU law. If the meaning of ‘implementing’ EU law was much broader than before then there would be no such need to stress the relationship between this situation and the existing case law.

A second point relates to whether the exercise of all options in secondary legislation will come within implementing EU law as defined by the Court in N.S. The Court in N.S. seems to rely on several specific factors related to the option that brings it within the meaning of implementing. To demonstrate the potential effect of this a contrast may be drawn with Chakroun[xviii] which commentators have referred to as an instance of derogating from EU law.[xix] Chakroun concerned the implementation into national law of a provision in Directive 2003/86 which governed the conditions for the exercise of the right to family reunification for third-country nationals who are lawfully resident in the territory of a Member State. Under the Directive authorisation of family reunification was the general rule,[xx] however, there was also the option for the Member State to require evidence of the sponsor’s resources. The Court held that the exercise of this option must be interpreted strictly and should be interpreted in the light of fundamental rights.[xxi] The situation in Chakroun differs slightly from that of N.S. in that the option is to limit an individual right to family reunification granted by Directive 2003/86. It may be on this basis that Chakroun has been considered a derogating situation since in cases such as N.S. and Wachauf the options are to allocate responsibility and increase protection through the grant of compensation. It was never made explicit whether the situation Chakroun was considered implementing under Article 51(1) of the Charter. The facts arose before the Charter came into force and so it is possible that the Charter was not determinative in this case. If so, then it is possible that after N.S. an optional provision which does not give rise to specific consequences and is not an ‘integral part’ of the field it operates in but instead limits an EU right may not be considered ‘implementing’ under Article 51(1).

This post has tried to summarise the uncertainties surrounding the meaning of implementing EU after the Charter entered into force and whether it still refers to an agency situation. It then considered the case of N.S. which explicitly considers the meaning of implementing EU law. It may be concluded that N.S. does not suggest a radical change in the meaning of ‘implementing’ EU law. A test case where the Member State attempts to derogate from the fundamental freedoms would be necessary in order to fully assess this, but the Court clearly tries to fit the situation in the Wachauf-line of case law. It remains to be seen however whether the decision in N.S. now introduces a distinction between the exercise of optional clauses to limit individual rights and other optional clauses. The case of Chakroun was not clearly decided under the Charter and so there is the need for another similar case to arise in order to test this proposition.

[i] 5/88 Wachauf [1989] ECR 2609 at para 19

[ii] C-368/95 Vereinigte Familiapress Zeitungsverlags-und Vertriebs GmbH v Heinrich Bauer Verlag [1997] ECR I-3689 C-260/89 Elliniki Radiophonia Tileorassi [1993] ECR I-2925

[iii] C-309/96 Annibaldi [1997] ECR I-7493

[iv] Article 6(1) TEU 1992

[v] Joined cases C-411/10 and C-493/10 NS and others Judgment of the Court (Grand Chamber) of 21 December 2011 nyr

[vi] L.F.M. Besselink, ‘The member States, the national Constitutions and the scope of the Charter’ 1 8 Maastricht Journal 68

[vii] Joined Cases 201/85 and 202/85 Klensch and Others [1986] ECR 3477 C-384/05 Piek [2007] ECR I-289 Wachauf

[viii] Joined Cases C-20/00 and C-46/00 Booker Aquaculture [2003] ECR I-7411

[ix] Case C-28/05 Dokter [2006] ECR I-5431

[x] C 303/17 Explanations Relating to the Charter of Fundamental Rights OJ (2007/C 303/02)

[xi] Article 52(7) Charter of Fundamental Rights

[xii]See the Opinion of Advocate General Bot in Case C-108/10 Ivana Scattolon v Ministero dell’Istruzione, dell’Università e della Ricerca [2011] ECR I-00000

[xiii] See Francis G. Jacobs, ‘Human rights in the European Union: the role of the Court of Justice’ [2001] European Law Review 331

[xiv] Ibid para 69

[xv] Ibid at para 65

[xvi] Ibid at para 67

[xvii] Ibid at para 68

[xviii] C-578/08 Rhimou Chakroun v Minister van Buitenlandse Zaken [2010] ECR I-01839

[xix] Filippo Fontanelli, ‘The European Union s Charter of Fundamental Rights Two Years Later’ (2012) Perspectives on Federalism, Vol 3, No 3, 2011 Catherine Barnard, ‘The EU Charter of Fundamental Rights: Happy 10th Birthday?’ 24 EUSA Review 5

[xx] Ibid para 43

[xxi] Ibid paras 43-44

 

 

Developments in the case law of the CJEU (2010-2011): Human Rights and the Scope of EU Law

Eleni Frantziou, LLM 

LLM, College of Europe; LLB, King’s College London

Stagiaire, Chambers of Judge Schiemann, Court of Justice of the European Union

 

Introduction

The solemn proclamation of the Charter of Fundamental Rights a decade ago sparked an interesting debate on whether the European Union was or could be an organisation that respected and protected fundamental rights in its own right[i]. In that regard, von Bogdandy had influentially argued that

“the human rights jurisprudence is the least “autonomous” part of the supranational legal order. […] Major changes in Union law must occur if it is to change into a legal order that places human rights or the citizen at its center.”[ii].

The two years following the entry into force of the Lisbon Treaty witnessed a number of judicial developments in EU law. It will be argued that the seeds have now been sown for the Union to move away from its ‘market values’ construction towards a more complete constitutional system, where fundamental rights play an active role.

By drawing on three main themes, starting from equality in section II and moving to citizenship and the right to family life (section III) and immigration (section IV), this paper seeks to demonstrate how the Court’s case law in 2010-2011 has extended the scope of EU law to encompass the autonomous protection of fundamental rights. In other words, it will attempt to evaluate to what extent fundamental rights have become part of the Union’s own “constitutional charter”[iii] in the post-Lisbon era.

Equality

The principle of equality – the ‘holy grail’ of EU fundamental rights case law – was given an interesting twist in one of the first eye-catching cases of 2010, Kücükdeveci v Swedex[iv].  The case concerned discrimination on grounds of age. Ms. Kücükdeveci had been dismissed by Swedex, a private company, on a month’s notice after ten years of service. Although the German Civil Code (GCC) would normally have provided for four months’ notice before dismissal, periods of employment before the age of 25 were excluded from this calculation (622(2)GCC). Ms. Kücükdeveci claimed discrimination on grounds of age, contrary to Article 1 of the Framework Equality Directive[v].  It is elementary EU law that directives do not enjoy horizontal direct effect[vi]. Nevertheless, in sweeping constitutional terms, the CJEU proclaimed:

“it is the general principle of European Union law prohibiting all discrimination on grounds of age, as given expression in Directive 2000/78, which must be the basis of the examination of whether European Union law precludes national legislation such as that at issue in the main proceedings.”[vii]

As  Advocate General Bot remarked, the Court was faced with the question of “whether the designation of rights guaranteed by directives as fundamental rights does or does not strengthen the right to rely on them in proceedings between private parties.”[viii] The case suggests that the Court is eager to assume a wider jurisdiction where the Union’s constitutional commitments as regards the protection of fundamental rights are concerned, even in situations which would have otherwise fallen outside the scope of EU law[ix]. Thus, Kücükdeveci extends the scope of application of EU law at least to secondary legislation which is rooted in the general principles jurisprudence and reaffirms the primacy of the ‘Union standard’ in the field of fundamental rights[x]. The implications are striking.  As Peers persuasively puts it:

“it would be absurd to privilege one particular aspect of the right to non-discrimination over other aspects of that right, other social rights, or other human rights, and so the principle should logically apply whenever any general principle of EU law, as regards human rights protection, is sufficiently connected to the application of an EU Directive. The rationale for privileging human rights as a whole over other rules and principles as regards their legal effect is simply that […] human rights have primacy in the hierarchy of the primary law of the European Union.”[xi]

Indeed, the ‘Kücükdeveci effect’, as one commentator called it[xii], has not (yet) come to an end. The Court has reaffirmed its validity in a recent case decided by the Grand Chamber[xiii]. Finally, its Advocates General have made a strong case for the constitutionalisation of the ruling insofar as it calls for the effective use of new Treaty provisions and the Charter[xiv].

Citizenship and the right to family life

In March 2011, the Court rendered one of the most controversial judgments in its recent history, Zambrano[xv]. The Court was faced with the situation of a Colombian asylum seeker who had been refused refugee status as well as a permanent work permit in Belgium. Two of his children were Belgian nationals, therefore enjoying Union citizenship. Mr Zambrano argued that the refusal of his work permit would force him to emigrate, which, in turn, would deprive his children of effective use of their EU citizenship and violate their fundamental rights, contrary to Articles 18, 20 and 21 TFEU[xvi] and Articles 7, 21 and 24 of the Charter[xvii].  The Court agreed:

“article 20 TFEU precludes national measures which have the effect of depriving citizens of the Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union (see, to that effect, Rottmann, paragraph 42[xviii]). A refusal to grant a right of residence to a third country national with dependent minor children in the Member State where those children are nationals and reside, and also a refusal to grant such a person a work permit, has such an effect”[xix].

Thus, the Court reaffirmed that “citizenship of the Union is intended to be the fundamental status of nationals of the Member States”[xx]. In addition, the citizenship rights of Mr. Zambrano’s children were found to be potent enough to keep their parents in the Union even though the citizens themselves had never exercised their free movement rights. Thus, the Court essentially decided that citizenship of the Union is capable, in and of itself, under certain circumstances, of founding (and winning) a claim before the Court.

Zambrano can be seen as representing ‘a permanent move beyond the confines of “market citizenship”’[xxi] and towards the concept of ‘EU citizenship as such’ as a trigger for the application of EU law[xxii]. As AG Sharpston put it:

“from the moment that the Member States decided to add, to existing concepts of nationality, a new and complementary status of ‘citizen of the Union’, it became impossible to regard such individuals as mere economic factors of production. Citizens are not ‘resources’ employed to produce goods and services, but individuals bound to a political community and protected by fundamental rights” [xxiii].

Nonetheless, the Court, perhaps alarmed by the degree of disapproval following its ruling, was sceptical about applying it in the follow-up cases of McCarthy[xxiv] and Dereci[xxv], holding that the mere fact that a citizen may prefer that his family members should stay in the Union cannot constitute sufficient proof, if their stay is refused, of an effective deprivation of citizenship or of a violation of fundamental rights[xxvi]. It therefore seems that, for the time being, Zambrano has been restricted from a factual perspective. However, the decision that lack of an inter-state element can no longer ipso facto disqualify citizenship cases from falling within the scope of the Treaty, remains good law.

Asylum and immigration – N.S.: the Court’s swan song for 2011

In December 2011, the Court of Justice rendered its ruling in the long-awaited case of N.S.[xxvii] The case concerned a number of illegal immigrants who had applied for asylum in the UK. When the authorities attempted to send them back to the country of first entry, Greece, in order for their applications to be processed in accordance with the Dublin II Regulation[xxviii], the applicants claimed that, if returned, they would likely be subjected to inhuman and degrading treatment as well as a series of other human rights violations. The CJEU was asked, inter alia, to determine whether the general principles of European law and the rights enshrined in Articles 1, 4, 18 and 47 of the Charter of Fundamental Rights[xxix] offer a protection wider than that afforded by Article 3 ECHR[xxx]. The case differs from Kücükdeveci and Zambrano in that the applicability of EU law was not challenged. However, it is important as regards the lens through which the Court looks at human rights claims and their place in the Union’s constitutional hierarchy.

The Court decided that the interpretation of the rights in question under the Charter would not be different than that of the ECHR in the case at issue[xxxi]. However, and quite strikingly, it employed its own standard of protection[xxxii]. The Advocate General, who was followed by the Court, argued in clear terms that the Court is free, under the Charter, to provide more extensive protection than the ECHR[xxxiii]. Although she stressed the importance of the Convention in the interpretation of Union rights under the Charter, she went on to argue that this cannot undermine the intellectual autonomy of the CJEU regarding the reach of Union rights, particularly in view of the fact that ECtHR judgments:

“essentially constitute case-specific judicial decisions and not the rules of the ECHR themselves, and it would therefore be wrong to regard the case-law of the European Court of Human Rights as a source of interpretation with full validity in connection with the Charter[xxxiv].”

As to the substance, the Court held that an individual assessment of potential human rights violations is required by primary Union law, even if that would essentially contravene the mutual recognition rules agreed by the Member States under Dublin II[xxxv]. Thus, the N.S. case is a clear indication to the effect that a) the standard of protection of fundamental rights under the Union’s Charter is changing into a non-negotiable obligation for the Member States, even in the most sensitive areas of EU law, and b) the CJEU will only accept unchanged the standards set by the ECtHR as long as it considers them acceptable for the Union legal order, rather than the other way around. Although the judgment still awaits further development through the case law, it is in harmony with the trend of placing increasing protection on fundamental rights and is heavily reminiscent of the Kadi saga[xxxvi], where the Court emphasised that:

“the Community judicature must […] ensure the review, in principle the full review, of the lawfulness of all Community acts in the light of the fundamental rights forming an integral part of the general principles of Community law”[xxxvii].

It remains to be seen whether the Court will eventually proclaim the independence of the Union’s fundamental rights system, thus answering the “federal question” in the affirmative[xxxviii]. To that end, it is worth noting that the CJEU recently ruled against the direct application of ECHR provisions in the EU[xxxix], suggesting that the only human rights list enjoying Treaty status and, consequently, direct effect in the Member States is the Charter of Fundamental Rights[xl].

Concluding remarks: Two years of reform?

The three cases cited in this paper have illustrated the willingness with which the CJEU has assumed a wider scope for adjudicating in the vast spectrum of human rights claims. Fundamental rights have gradually become part and parcel of European Union law, initially respected, then protected and nowadays even asserted, qua general principles and through the Charter, against market values. As some commentators have argued, in a time of crisis for the Union’s ‘old ideals’, strong liberal democratic principles and an express commitment to the protection of human rights now form an integral part of the EU’s normative foundations[xli].

The care that the Court has taken in the last two years to ensure the uniform and autonomous application of fundamental rights throughout the Union, irrespective of the existence of a traditional EU law setting, signals a ‘constitutionalisation’ of rights which is single-handedly carrying through the polity-building process initiated by the Lisbon Treaty[xlii]. The Union has come a long way from the debate this paper started with. Time will show whether the edifice will ever be completed.

 

[i] See for example J. Enninger, “Menschenrechte und Staatsaufgaben – ein europäisches Thema” (1996) JZ, 585; I. Pernice, “Eine Grundrechts-Charta für die Europäische Union” (2000) DVBl. 847; P. Eeckhout, “The EU Charter of Fundamental Rights and the Federal Question” (2002) 39 CMLRev.,945.

[ii]A. von Bogdandy, “The European Union as a human rights organization? Human rights and the core of the European Union” (2000) 37 CML Rev., 1307, 1333.

[iii] Case 294/83 Les Verts v Parliament  [1986] ECR 1339, paragraph 23

[iv] Case C-555/07 Kücükdeveci v Swedex GmbH [2010] ECR I-00365.

[v] Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation [2000] OJ L 303/16.

[vi] Case C-91/92 Faccini Dori [1994] ECR I-3325, paragraph 20.

[vii] Kücükdeveci, supra n. 4, paragraph 27 (emphasis added).

[viii] Opinion of Advocate General Bot, delivered on 7 July 2009, in Kücükdeveci, supra n. 4paragraph 90.

[ix] Editorial Comment,  “The Scope of Application of EU law. An Even Expanding Union?” (2010) 47 CMLRev.,1589, 1593.

[x] M. Dougan, “When Worlds Collide! Competing visions of the Relationship between direct effect and supremacy” (2007) 44 CMLRev 931.

[xi] S. Peers “Supremacy, Equality and Human Rights: Comment on Kücükdeveci (C-555/07)” (2010) E.L.Rev., 849, pp.855-6 (emphasis added).

[xii] E.Muir, “Of Ages In – And Edges Of- EU law” (2011) 48 CMLRev 39, 60.

[xiii] Case C-447/09 Prigge and Others v Deutsche Lufthansa, judgment of 13 September 2011, nyr, paragraph 38; Joined cases C-297/10 and C-298/10 Hennigs v Eisenbahn-Bundesamt, Land Berlin v Mai, judgment of 8 September 2011, nyr, paragraph 47.

[xiv] Opinion of AG Cruz Villalòn in Prigge, ibid., delivered on 19 May 2011, paragraph 26; See also: Opinion of Advocate General Cruz Villalòn, delivered on 5 may 2010 in Case C-515/08 Santos Palhota, judgment of 10 October 2010, nyr, paragraph 53; Opinion of Advocate General Kokott, delivered on 30 September 2010, in Case 236/09 Association Belge des Consommateurs Test-Achats and Others, paragraphs 26-28.

[xv] Case C-34/09 Zambrano v Office national de l’emploi, judgment of 8 March 2011, nyr.

[xvi] No discrimination on grounds of nationality, Union citizenship and citizens’ right to move and reside freely in the Union, respectively.

[xvii] Respect for private and family life, non-discrimination and the protection of children, respectively.

[xviii] Case C-135/08 Janko Rottmann v. Freistaat Bayern, judgment of 2 March 2010, nyr.

[xix] Zambrano, supra n. 15, paragraphs 42-43 (emphasis added).

[xx] Zambrano, supra n. 15, paragraph 41; Case C-184/99 Grzelczyk [2001] ECR I‑6193, paragraph 31; Case C-413/99 Baumbast and R [2002] ECR I-7091, paragraph 82; Garcia Avello, ibid., paragraph 22; Cf. Case C-200/02 Zhu and Chen [2004] ECR I‑9925.

[xxi] K. Hailbronner and D. Thym, “Annotation of Case C-34/09” (2011) 48 CMLRev 1253., 1269

[xxii] Ibid., at 1263

[xxiii] Opinion of AG Sharpston, delivered on 30 September 2010, in Zambrano, supra n. 18, paragraph 128.

[xxiv] Case C-434/09 McCarthy v Secretary of State for the Home Department, judgment of 5 May 2011, nyr.

[xxv] Case C-256/11 Dereci and others v Bundesministerium für Inneres, judgment of 15 November 2011, nyr.

[xxvi] Ibid., paragraphs 66-68.

[xxvii] Joined Cases C-411/10 and C-493/10 N.S. and others, judgment of 21 December 2011, nyr. (The case is  also commonly referred to as “Saeedi” in the UK).

[xxviii] Council Regulation (EC) No 343/2003 of 18 February 2003 establishing the criteria and mechanisms for determining the Member State responsible for examining an asylum application lodged in one of the Member States by a third-country national.

[xxix] Right to dignity, right not to be subjected to torture and inhuman or degrading treatment or punishment, right to asylum and right to a fair hearing, respectively.

[xxx] Right not to be subjected to torture and inhuman or degrading treatment or punishment.

[xxxi] N.S., supra n. 29, paragraph 115.

[xxxii] Ibid., paragraphs 111- 113. The ECtHR had reached a very similar decision earlier in 2011 in M.S.S v Belgium and Greece (Application no. 30696/09), where, under similar circumstances, Belgium had returned an asylum seeker to Greece. Contrary to previous rulings in that regard, the ECtHR held that Article 3 ECHR had been violated.

[xxxiii] Opinion of AG Trstenjak, delivered on 22 September 2011, in N.S., supra n. 29, paragraphs 142-148.

[xxxiv] Ibid., paragraph 146. See also: Opinion of Advocate General Maduro, delivered on 9 September 2008 in Case C-465/07 Elgafaji [2009] ECR I-921, paragraph 23.

[xxxv] N.S., supra n. 29, paragraph 94. It is worth noting that the Court also emphasised the constitutional nature of human rights in the EU and affirmed that the Charter is applicable in the UK.

[xxxvi] Joined Cases C-402/05 P & C-415/05 P Kadi and  Al
Barakaat International Foundation v Council and Commission [2008] ECR I-6351.

[xxxvii] Ibid., paragraph 326.

[xxxviii] Eeckhout, supra n. 1.

[xxxix] Case C-571/10 Kamberaj, judgment of 24 April 2012, nyr, paragraph 63.

[xl]  L. Ankersmit, “Case C-571/10 Kamberaj: the Charter and not the ECHR has effect in Member States’ legal orders”, European Law Blog, 26 Aprill 2012, available at: http://europeanlawblog.eu/?tag=c-57110-kamberaj (accessed on 26 April 2012). Of course, the Convention will be applied to the extent that the Charter adopts and extends the rights enshrined therein (Article 52(3) Charter).

[xli] T. Chopin and C. Lequesne, « 20 ans après la chute du mur de Berlin, la liberté, nouveau récit commun de l’Europe?», in M. Foucher and T. Chopin (eds), Rapport Schuman sur l’Europe: L’Etat de l’Union européenne 2010, Paris: Lignes de Repères, 2010, 43, pp.47-50; Opinion of Advocate General Sharpston delivered on 30 September 2010 in Zambrano, supra n. 15, paragraph 165.

[xlii] P.Maduro, ‘The Double Constitutional Life of the Charter of Fundamental Rights of the European Union’, in T.K. Hervey and J. Kenner (eds.), Economic and Social Rights under the EU Charter of Fundamental Rights, Hart Publishing: Oxford, 2003, 269.

 

A Prosecutorial Model could lead to a more Efficient Enforcement of Article 101 TFEU in Cartel Cases

Andrea Usai

PhD Candidate in EU Law, University of Bologna-Université de Strasbourg; LLM in EU Competition Law, King’s College London

 

Introduction

This article seeks to contribute to the ongoing debate on whether a separation of powers between the prosecutorial and the adjudicative functions, which are now both held by the European Commission (“EC”), could entail a more efficient enforcement of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) in cartel cases. In the first part it will be explained how the procedure works and then why the current concerns regarding fairness could jeopardize efficiency. Indeed, although the scope of this paper is not of going deeply into the alleged lack of fairness in the Enforcement System, it is important to understand that the debate on fairness could affect efficiency.

However, should it be discovered that there could be fairness concerns, would it be acceptable to have a fair system which is not efficient? In other words, are we sure that a prosecutorial model can foster efficiency? Is there any risk that a reform will make the system worse off? The literature is mostly concerned about fairness. In this paper it is argued that a prosecutorial model can be more efficient than an administrative one. Indeed, efficiency means fewer costs and more benefits. Deterrence can be fostered together with the credibility of the whole system. The possibility of having wrong decisions can be drastically reduced and the risks of bias in the decision-making process completely avoided.

Therefore it analyses, in the light of what the game-theory calls the cut-off strategy, whether the current structure of the system can be considered as efficient enough. After taking into account the risks of too long proceedings and bias in the decision-making process that seem to be typical of the administrative model, it will be shown how the judicial review can be fostered if the EC acts as a prosecutor before a specialized Competition chamber within the General Court (“GC”).

1. How the procedure works

According to the procedure laid down in Reg. 1/2003, the EC’s procedure usually starts with the Statement of Objections (“SO”), which contains all the elements of facts and law against the alleged anticompetitive agreement. Indeed, the SO is drafted by the members of Directorate General Competition (“DGCOMP”) and it is reviewed by the Legal Service, by an economist, the Director and the Director General and the Cabinet of the Commissioner for Competition. Afterwards, the undertakings, which are addressees of the SO, can make written replies and have a right to ask for an oral hearing.[i] Usually, the officials who drafted the SO take part in the hearing together with some of the other officials already involved.[ii] After the hearing takes place, the same officials who wrote the SO will write the decision.[iii] At this stage of the proceedings, as regards cartel cases, there is normally no peer review examining the case. The decision is commented on by the Advisory Committee, which brings together competition experts from the Member States. In the end, the Competition Commissioner proposes it to the other Commissioners. In fact, formally speaking, the final decision is taken by the Commissioners and takes the form of a Commission’s decision. To put it differently, it seems clear that the same officials both write the SO and draft the final decision.

As it has already been stressed, the scope of this paper is not to go deeply into the concerns regarding fairness, which have been raised by scholars and practitioners. There is still a big debate between those who argue that the system is fair and those who firmly believe that it is not fair at all. Indeed, it is claimed that although fairness is very important, the enforcement of competition law, especially in cartel cases, should focus primarily on efficiency[iv] in order to protect consumers and to guarantee the proper functioning of the Internal Market.

2. Efficiency

It can be certainly argued that an eventual structural reform, in order to be deemed to foster efficiency, should first of all not entail any loss of effectiveness when enforcing Art. 101 TFEU. Even more, an eventual reform should entail further benefits and diminish the current costs that can be eliminated. In other words, the big radical structural reform that this paper suggests should guarantee effectiveness and foster efficiency. Indeed, if it could be proved that an adversarial model could be more efficient in cartel enforcement proceedings, the debate regarding fairness could be read from a different point of view. As long as the separation of the three functions[v] now held by the EC can provide for an efficient system saving time and money and providing for better outcomes, there would be no reason to speak about fairness and due process in Competition Law proceedings.

To begin with, it should be pointed out what efficiency means. Efficiency is usually maximised when it is possible to have fewer costs. What does ‘fewer costs’ mean? It means to save time and money and to provide for tools that reduce the risks of bias, the risks of inaccurate decisions and the risk of having too many cartels which are not detected or not punished properly. Moreover, ‘fewer costs’ also means diminishing the risk of having a non-credible system. Then, efficiency must necessarily mean more benefits. To be more explicit, it means faster proceedings, less costly procedures, more objectively taken decisions, more accurate decisions and maximisation of the number of cartels which are detected and punished. Efficiency means also fostering deterrence and the credibility of the system. Moreover, the understandable concerns about efficiency should also take into account the most efficient way to get a more efficient system. In other words, the structural reform that could be done in the fastest and easiest way should be preferred. In the EU, this would be reformation without going through the Treaty amendment procedures. In this case, it is argued that it would be possible to use Art. 103 (1) TFEU.[vi]

Furthermore, one way to foster efficiency is to act strategically.[vii] Sometimes it could be in a player’s interest to reduce his own freedom of future action and to create a non-return situation, an emergency situation. For instance, this strategy was taken by Cortés who burned his own ships after his arrival in Mexico. He deliberately eliminated the option of going back to Spain. Without ships to sail back home, Cortés made it clear to his crew that they could either fight and destroy their enemies or perish. No matter that his soldiers were enormously outnumbered. This strategy, which at the beginning scared his army and risked mutiny, was the best solution. In fact, Cortés put himself and his crew in an urgent and one-way situation. They could not fail. Failure would have certainly meant death. Indeed, they did not fail. They fought and they won. This is to demonstrate that, in order to work out what is best, it is often a good strategy to cut off all the different options that you have but one.

Game Theory can be very helpful in our analysis. In order to foster efficiency in antitrust proceedings regarding cartels cases enforcement, there are good arguments in favour of a separation of the investigative, prosecutorial and adjudicative functions, at the present held by the EC. It seems to be arguable that if the EC cuts off its adjudicative option, leaving it to the Courts, the whole system can be made better off. This is the background of our legal and economic analysis. However, as it does not seem to be the case of giving things for granted, this paper will look at the length of the proceedings and at how the judicial review works from an efficiency point of view.

2.1. Length of the proceedings[viii]

The first cluster of criticisms deals with the length of the proceedings. In fact, as it has already been pointed out, one of the alleged advantages of the current system is that an administrative model can lead to efficiency because it provides for faster proceedings. Moreover, according to the statistics and to the problems that are usually dealt with in the national legal systems, one of the main issues regarding the administration of justice is the delays that cases encounter when they get stuck in the Courts. As it seems to be clear from the statistics regarding the Courts, the delays of the cases are mainly at the level of the GC. In fact, the average[ix] of the length of the proceedings was 40 months at the level of the GC and 35 months at the level of the European Court of Justice (“ECJ”) between 2000 and 2005. Then, between 2006 and 2010 the average goes up significantly to 54 months at the level of the GC and down to 25.5 at the level of the ECJ.

These data show two main issues: the first one is, as it has already been pointed out, that the delays concentrate at the GC level. Therefore, an eventual reform should take into consideration a solution which would be able to reduce these delays. Secondly, they show that a huge percentage of cases go on appeal before the Courts. The ease with which appeals can be brought and the fact that neither the GC nor the ECJ can substitute the EC’s decision with their own decision, as it is possible in the UK, can jeopardise efficiency.

This paper argues that also the length of the proceedings before the Commission is relevant. The average of the length of the proceedings is between one and two years from the issuing of the SO and the adoption of the final decision. In this case too, a prosecutorial model could make the system better off as there would be no issuing of the SO, no oral hearing before the Hearing Officer, no internal debate with checks and balances and no draft and final decision. There would be no supplementary SOs and remittals from the Court to the Commission. In a prosecutorial model there would be the EC acting as a prosecutor concerned about preparing its strong case to be brought before the Court. Indeed, it would be possible to save time and it would be likely that the number of cases going on appeal will be reduced, either because the cases that the EC will bring will be much stronger or because there will be more settlements as it happens now in the US.

2.2. Judicial review

One of the key issues of the current system is what happens if the reviewing court finds fault with the decision. At the present, the EU system provides for Courts that can only annul the decision but they cannot themselves take a new one substituting their decision for the EC’s. Indeed, the EU model works very differently if compared to the UK model, where the Competition Appeal Tribunal can substitute its decision for the Office of Fair Trading one. In fact, this paper argues that the GC does not exercise extensive review and that therefore it does not have full jurisdiction. The EU courts are allowed only to review the manifest errors.[x] Indeed, the GC exercises self-restraint when it comes to “complex and factual economic assessments”. Moreover, It does not use properly its unlimited jurisdiction on fines[xi]. This paper argues that the GC and the ECJ do have unlimited jurisdiction as regards fines and penalties but they lack it when it comes to facts. This problem is brilliantly emphasised in a recent case[xii] where even though the Commission had found a single and continuous agreement in the Belgian removals sector, the GC found that the applicant had participated in only part of the practices. Therefore, the GC, not being able to substitute its decision for the EC’s, had to annul the decision entirely. The likely result will be that the EC will have to readopt a new SO and a new decision and a second round of judicial review.

Another key issue is whether the Courts defer to the EC’s decisions. It is important to go deeply into this point, because it seems to be that not only do the Courts have no full judicial review which contributes to render the system inefficient, but they defer to the EC’s decisions. This paper suggests that the alleged deference of the Courts should be resolved by reforming the structure of the enforcement system. It seems to be arguable that a prosecutorial model would be much more efficient from the Courts’ perspective, as they would be given the possibility of taking the final decision. To put it differently, this paper suggests that even though it might be argued that the Courts could do their job better, the answer to this criticism stays in the reform itself. A better job could be done only if a chamber with full review is established within the GC and the EC acts as a prosecutor before it.

Moreover, it might be argued, as many practitioners do, that the risk of having a prosecutorial model is that judges are not well trained in Competition Law (such as in Ireland), instead of a strong tradition of judges deciding antitrust cases, as in the US. In other words, the risk would be that judges are not as prepared as the EC’s officials are. However, this would not be the case. First of all, because there are already EU judges who are experts in Competition Law. Secondly, it would always be possible to use Article 255 TFEU in order to make sure that there will be judges well trained in Competition Law.

The idea of establishing a specialised chamber of Competition Law cases within the GC and using Art. 255 TFEU can function well in the current system too. Indeed, Art. 255 TFEU is already being used. However, it is argued that an administrative system with a specialised chamber and with Art. 255 TFEU fully applied would not be optimal, from an efficiency perspective, for the abovementioned reasons. A prosecutorial model could entail more efficiency. It could reduce the length of the proceedings, both at the Courts’ and at the EC’s level, apply the “cut-off” strategy, and reduce the risks of bias in the decision making process. Moreover, once a prosecutorial model is established, a specialised chamber within the GC would avoid the risk of having bad outcomes.

Conclusions

It seems to be clear that, for the abovementioned reasons, a prosecutorial model would entail a much more efficient enforcement in cartel cases. Firstly, because of the fact that the length of the proceedings could be drastically reduced at the Courts’ level and at the Commission’s level. Secondly, the system could be made better off with providing for a specialised chamber within the GC and giving this chamber the possibility of having unlimited jurisdiction on facts too. In this way, the new Competition Chamber would be able of taking the final decision. Moreover, it should be pointed out that a prosecutorial model should not diminish the deterrent effect of the fines and of the new settlements procedures.[xiii]

[i] The Hearing allows the addressees of the SO to present their defense arguments not just on procedure but also on substance. However, the final report of the Hearing Officer is on procedure only.

[ii] See J. Temple Lang, “Three possibilities for reform of the procedure of the European Commission in Competition cases under Reg. 1/2003, in Carl Baudenbacher (Ed.) “Current Developments in European and International Competition Law” (ICLF 2010) presented at the 17th St. Gallen International Competition forum Helbing Lichtenhahn, Basel 2011, Vol. 12

[iii] Ibid.

[iv] In this case, as it is possible to understand from the debate about fairness and due process, those who argue that the system is not fair, argue in favour of a prosecutorial model in order to comply with the European Convention of Human Rights criteria. This paper points out that, regardless of fairness and due process, a prosecutorial model can be much more efficient from different perspectives.

[v] As it has already been pointed out, the scope of this article is not to go deep into the issue of fairness, it could be argued that the fact in itself that the debate continues is jeopardising efficiency as it increases the already high likelihood of going on appeal and it contributes to diminish deterrence and the credibility of the system. See Alec Burnside, “Mario Monti should not be judge and jury”, Financial Times, 21 October 2002, p 17; and “Enforcement of Competition Law in Europe is unjust and must change”, The Economist, 18 February 2010.

[vi] Article 103 (1) reads as follows: “The appropriate regulations or directives to give effect to the principles set out in Articles 101and 102 shall be laid down by the Council, on a proposal from the Commission and after consulting the European Parliament”.

[vii] See A. Dixit and B. Nalebuff. “Thinking strategically. The Competitive Edge in Business, Politics and Everyday Life”. (New York: W.W. Norton & Company, 1991)

[viii] According to the recent developments of the European Courts’ case law, it could be argued that the length of the proceedings both before the Courts and the Commission is problematic also as regards fairness.

[ix] See D. Gerard, “Judicial Review of Cartel Decisions”, in Mario Siragusa and Cesare Rizza, eds., EU Competition Law, Vol III. Cartel Law: Restrictive Agreements and Parctices between competitors, Claeyes and Casteels, 2007, Chapter 5

[xi] Ibid.

[xii] Case T 210/2008, Coppens v Commission, par 36

[xiii] For a detailed analysis of the issues, see W. Wils, “The Use of Settlements in Public Antitrust Enforcement: Objectives and Principles” (2008) 31 (3) World Competition; See also W. Wils, “Optimal Antitrust Fines: Theory and Practice” (2006) 29(2) World Competition; See also  W. Wils, “Leniency in Antitrust Enforcement: Theory and Practice” (2007) 30 (1) World Competition