The first preliminary ruling on Directive 2014/104/EU: Case 637/17 Cogeco
By Guilherme Oliveira e Costa
With two major decisions, March 2019 was an interesting month with regard to the Court of Justice’s (also ‘ECJ’) case-law on private enforcement of competition law: Skanska (C-724/17) and Cogeco (C-637/17). This post will comment on the judgment in Cogeco, whereas a previous post analysed the Skanska ruling.
Cogeco is, in fact, an unsurprising judgment, particularly regarding its conclusions. But the decision itself contains a lot of interesting points, and was preceded by a noteworthy Opinion of AG Kokott. Additionally, its importance must not be underestimated since it is the first preliminary ruling on Directive 2014/104/EU (‘Damages Directive’) and, as pointed out by AG Kokott, there are still several questions connected with this Directive which need clarification. Moreover, this ruling also shows a very clear example on how unsuitably some national legal systems (the Portuguese one in the case at hand) treated private enforcement before the harmonisation implemented by the Damages Directive.
Summary of the facts
On 14 June 2013, the Portuguese Competition Authority (‘AdC’) condemned Sport TV Portugal for an abuse of dominant position by applying a discriminatory pricing policy in the market of premium TV sports channels with conditioned access, under article 102 TFEU and article 11 of the Portuguese Competition Law. However, on appeal, it was decided that only national law was infringed, while Article 102 TFEU was considered not applicable for lack of proof that Sport TV Portugal’s practice may affect trade between the Member States. As a result, the fine was reduced from 3.73 million euro to 2.7 million euro (Cogeco, paras. 16 to 18).
On 27 February 2015, Cogeco Communications (‘Cogeco’) – a shareholder of Cabovisão, a Portuguese telecommunications company, and competitor of Sport TV Portugal – brought before the Lisbon District Court an action for damages against Sport TV Portugal and its parent companies seeking compensation for the damage caused by the latter’s abuse of dominant position. Moreover, Cogeco asked the District Court to previously determine that Sport TV Portugal’s practice had also violated article 102 TFEU. In this regard, the District Court recognised that Cogeco could still try to prove that Sport TV Portugal’s behaviour affected trade between the Member States (Cogeco, para. 19) for the purpose of the action for damages. The defendants’ main argument was that, even if Cogeco was entitled to a compensation, its right was time-barred. Indeed, the Portuguese law establishes a three year limitation period for non-contractual civil liability and such period starts when the victim has all the necessary information to assess whether or not it is entitled to compensation. In casu, Cogeco’s understanding was that it only could assess such claim after the AdC’s decision. Contrarily, Sport TV Portugal argued that Cogeco could have previously made such assessment, since there were other moments where Cogeco had all the information that was needed (Cogeco, paras. 20 and 21).
In light of those arguments, the District Court halted the proceedings and referred several questions to the Court of Justice (Cogeco, para. 23) which were mainly related, on the one hand, with the ratione temporis application of the Damages Directive and, on the other, with the compatibility of certain provisions of Portuguese civil and civil procedure law with articles 9 and 10 of that same Directive or with the applicable general principles of EU law (in particular, the principles of equivalence and effectiveness).
The ECJ’s judgment
- The temporal application of the Damages Directive
The Court of Justice started by analysing the questions related with the temporal application of the Damages Directive, since, at the time of the claim’s presentation, the deadline to transpose the Directive had not yet expired, neither had it been implemented in the Portuguese legal order (Cogeco, para. 31). Portugal only implemented Damages Directive on 5 June 2018 under Law n.º 23/2018 – one and a half year after the implementation deadline.
It is evident that the referring court had presented those legal facts; however, as explained by AG Kokott (Opinion, para. 20), the Portuguese court’s doubts were related to the potential applicability of the Directive under the Van Duyn and Mangold jurisprudence and the duty of sincere cooperation (article 4 (3) TEU), especially due to the Portugal’s late transposition of the Damages Directive.
One should recall that article 22 of the Damages Directive prevents Member States not only from applying their national law implementing the Directive’s substantive provisions retroactively, but also from applying national legislation implementing the procedural provisions of the Directive to damages actions brought to national courts before 26 December 2014, i.e. one month after the adoption of the Directive. As the Court of Justice stated, this means, a contrario, that Member States could establish that national procedural rules implementing the Directive may be applicable to legal actions started after 26 December 2014, but before its transposition (Cogeco, para. 28).
In Portugal, the legislator decided that Law n. º 23/2018 is only applicable to legal actions initiated after its entry into force (article 24 of Law n. º 23/2018), which is compatible with article 22 of the Damages Directive (Cogeco, paras. 32-34) . Nevertheless, it is interesting to take notice of the ECJ’s interpretation of the Directive. It highlights the EU legislator’s intention to allow the widest possible temporal application of the procedural provisions of the Directive, but without violating the principle of legality (no retroactive application of substantive provisions) and without disregarding the Member States’ procedural autonomy, a crucial principle underpinning EU harmonisation of private enforcement (Cogeco, paras. 33 and 42 and case-law referred there).
Furthermore, there is another important question (not necessarily for the Cogeco case, but for private enforcement in general): are articles 9 (1) and 10 of the Directive on the effects of national decisions and limitation periods substantive or procedural provisions?
The Court of Justice did not address the issue, but AG Kokott referred to it, even though it was in rather unsubstantiated terms. Indeed, the AG qualified the rules regarding the effects of National Competition Authorities’ (‘NCAs’) decisions (article 9 (1)) as substantive in nature, but without justifying this position (Opinion, paras. 62 and 63). Concerning the legal nature of EU minimum rules on limitation periods, the AG avoided the discussion by merely referring to the Portuguese legal qualification of those provisions as substantive ones, maybe with the ECJ’s rulings on Taricco I and II in mind, even though the subject-matter of those cases was criminal…
Notwithstanding, since the legal nature of this kind of provisions is not entirely consensus and its qualification may be highly relevant to its temporal application, it would have been useful to have some insights in the AG’s train of thought.
- Limitation periods’ rules and the principle of effectiveness
The date of the claim’s presentation, the Portuguese legislator’s option considering article 22 of the Damage Direction and the absence of horizontal direct legal effect of Directives resulted in the complete inapplicability of the Damages Directive to the present case (Cogeco, paras. 32 and 34; cf. Opinion, paras. 68 and 69). However, probably anticipating this outcome, the Portuguese court had included in its questions to the ECJ a reference to the general principles of EU Law.
As such, regarding the rules on limitation periods, the Court of Justice concluded that a national rule as provided for by article 498 (1) of the Portuguese Civil Code is contrary to both article 102 TFEU and the principle of effectiveness (Cogeco, para. 55).
It is important to breakdown the Court’s interpretation of article 498 (1) of the Portuguese Civil Code to understand how it breaches the principle of effectiveness. As recognised both by AG Kokott and the ECJ, all the elements of the Portuguese rules on limitation periods must be taken into consideration, since some of the elements, taken individually, may not be seen as contrary to the principle of effectiveness. For example, in the case at hand, the problem was not necessarily the three years period (contrary to the minimum period of five years imposed by article 10 of the Damages Directive), but such limitation period combined with the fact that (i) it starts to run irrespective of the date the infringer is identifiable and (ii) it cannot be suspended or interrupted in the course of proceedings before the national competition authority (Cogeco, para. 53 and Opinion, paras. 78 and 83-84). AG Kokott’s perspective in what regards the duration of the limitation period is also worth noting, since it was suggested that, isolated and in the absence of the Damages Directive applicability, three years is enough.
In the light thereof, Cogeco may be seen as a concretisation of the Manfredi judgment where the Court reasoned that, “in the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to prescribe the limitation period (…) provided that the principles of equivalence and effectiveness are observed.” (Manfredi, para. 81). Moreover, in Manfredi, the ECJ had already ruled that a limitation period which starts to run from the day of the agreement or the concerted practice’s adoption allied with the impossibility of suspension “could make it practically impossible to exercise the right to seek compensation” (Manfredi, para. 78).
Going back to the case at hand, the ECJ’s ruling means that the legal proceedings before the Lisbon District Court would not likely be time-barred, if that this national court decides that article 102 TFEU is applicable. Indeed, due to the roots of the breach of the principle of effectiveness in casu, the national court must consider that, even though the limitation period is three years, it only started on the day of AdC’s final decision (14 April 2013) or, at least, it was suspended during the AdC’s investigation proceedings.
- NCA’s decisions effect and the need of a rebuttable presumption of infringement
Moving on to article 623 of the Portuguese Civil Procedure Code, which states that “[a] final conviction given in the criminal case constitutes, in relation to third parties, a rebuttable presumption as regards the existence of the facts which satisfy the conditions for the impositions of a penalty and the elements of an offence in any civil actions in which legal relationships depending on the commission of the offence are discussed”, it should be borne in mind that, in the referred court’s opinion, this rule may have two different interpretations: (i) that an AdC’s final infringement decision produces no effects in civil actions and (ii) that an AdC’s final infringement decision constitutes, at least, a rebuttable presumption as regards the existence of an infringement to competition law (Cogeco, para. 23, third question and Opinion, para. 92). This divergence is related with the article’s letter (“final conviction given in the criminal case”) which cannot literally be applied to competition law, but its quasi-criminal legal nature cannot, also, be ignored.
However, since the Portuguese Appeal Courts had decided that article 102 TFEU was not infringed, the ECJ’s understanding is that the questions related with this issue are not related to the facts of the main action being, therefore, inadmissible (Cogeco, paras. 58 to 60).
Nonetheless, since the Lisbon District Court stated that Cogeco could still try to prove that Sport TV Portugal’s behaviour affected trade between the Member States (leading to the application of article 102 TFEU), one must note on AG Kokott’s analysis of the question. The AG stated that the principle of effectiveness would be breached by an interpretation like the first one, since the special complexity of competition law’s infringements imposes that the previous work of a NCA must be taken into account (Opinion, para. 93). Otherwise, the AG reasoned that if the article 623 of the Portuguese Civil Procedure Code is interpret in a way where an AdC’s final infringement decision constitutes, at least, a rebuttable presumption as regards the existence of an infringement to competition law, such interpretation would be compatible with the principle of effectiveness (Opinion, para. 97).
The questions raised in Cogeco are good examples of some of the most common problems in the legal framework prior to the Damages Directive, specially concerning the principle of effectiveness. It shows that limitation period rules need a specific competition law approach and that a final infringement decision cannot be ignored. As such, this case is one more clear confirmation of the crucial role that the abovementioned principle represents in the context of private enforcement to guarantee the individuals’ right to compensation.
Concerning statutes of limitations, Cogeco may also be very important in the years to come, since there were several Member States with limitation period rules similar to article 498(1) of the Portuguese Civil Code, which is a classical civil law provision and, before the transposition of Damages Directive, only few Member States had specific limitation period rules for competition law. As such, in cases throughout all the EU where the Damages Directive (or the national law which transposes it) is not applicable, Cogeco may save the day (several times).
Although the absence of decision by the ECJ concerning the NCA’s decisions effect is understandable, if the Court had elaborated on that subject, it is probable that the same conclusion of AG Kokott would be reached, since the principle of effectiveness was applied in its classical perspective.
Therefore, even though the conclusions of this first preliminary ruling on the Damage Directive do not represent a novelty – for those who were familiar with the ECJ’s case-law in this area, this was a highly expected outcome – this judgment remains a huge step forward. Not only because it clarified some aspects of the Directive’s ratione temporis application, but also for its concretisation of Manfredi case-law, which can be seen as a gradual departure of the more hypothetic terms of the earlier ECJ’s private enforcement decisions.
Lastly, Cogeco may prove itself very useful in debates for the years to come – perhaps in the development of a second stage of the EU private enforcement –, due to the AG’s recognition that the Damages Directive is not a mere codification of pre-existing principles, but a legal instrument constructed by the EU legislator that combines such codification with some innovative steps which main goal was to increase the individuals’ judicial protection. This is special evident in the AG’s Opinion where both article 9(1) – which establishes that NCA’s final infringement decision constitutes, in its own legal order, an irrebuttable presumption of infringement – and article 10 (3) – that sets a 5 years minimum limitation period – were considered as steps forward in relation to what was already apparent from the EU primary Law and the ECJ’s jurisprudence (Opinion, paras. 95 and 80, respectively).
To sum up, it is undoubtable that, despite the continuous work that need to be done, private enforcement is growing strongly in the EU and judgments like Skanska or Cogeco are likely to foster it. These decisions are clear signals that the long way which started with Courage, and that had its highest landmark with the Damages Directive, continues to be alive and in a constant development.
 Although in the present case “Community rules governing the matter” already exists, since they are inapplicable, it is as if they do not exist.