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On dawn raids and the ECJ’s Judgment in Deutsche Bahn (Case C-583/13 P)

with 3 comments

Last week the ECJ rendered its Judgment in Deutsche Bahn, a case that was already discussed in this blog at the time Advocate General Wahl issued its Opinion

For background on the case, comments on the Opinion, and interesting readers’ comments, see our previous post). Those already knowledgeable of the case and of the issues it raises can jump directly to the second half of the post, in which we discuss the ECJ’s ruling and give our views.

(This is a bit lengthy, but I bet you’ll find a couple of interesting points)

The facts. For those too lazy to read the Judgment or our prior comments, the case is, in a nutshell, about an inspection carried out without judicial authorization in the course of which the Commission found documents related to a possible different infringement in relation to which the Commission had received a prior complaint (apparently, and this is key, inspectors had also been briefed about that complaint, although the Commission says this was only for background purposes). Since the subject matter of that evidence was out of the scope of the inspection decision, the Commission adopted a second inspection decision on the fly [old/bad joke alert!]. Those as well as a third inspection decision were later appealed before the General Court.

[By the way, the substance of the case would have also been interesting. The first suspected infringement was about whether Deutsche Bahn could offer preferential treatment to its subsidiaries; does that sound familiar? The case was nevertheless eventually closed pursuant to commitments (see here) which, as it happens, closed the case but did not clarify the law].

The General Court’s Judgment (see here) unsurprisingly confirmed the Commission’s wide inspection powers, stating that there was no need for the Commission to obtain judicial authorisation prior to a raid and that documents discovered (genuinely) by accident which indicated a separate infringement could be used as evidence of that infringement, as long as the proper procedural requirements were respected.

AG Wahl’s Opinion nicely summarized the relevant case law on inspections, and essentially took the view that whereas the Commission shall have a certain leeway when it comes to inspection powers, those already ample powers are to be used prudently, and their misuse must be subject to effective judicial review.

Firstly, with regard to the alleged necessity of prior judicial authorization, Mr. Wahl considered that ex post judicial review on the part of EU Courts already offers an adequate level of protection of fundamental rights, and observed that in Delta Pekarny (a recent case in which the ECtHR ruled that fundamental rights were infringed) the ECtHR decision could be explained by the fact that the inspection decision was not subject to any—either ex ante or ex post—judicial review.  Secondly, on “surprise” discoveries, the AG took a different view from the General Court and took issue with the fact that the Commission had informed inspectors about the “second” infringement.  AG Wahl suspected the “only plausible explanation […] is that information on the DUSS suspected infringement was given to the Commission staff so that they could ‘keep their eyes peeled’ for evidence related to the second complaint” (para 77).  This means that the Commission effectively circumvented Art 20(4) of Reg 1/2003, either deliberately or through negligence. Whereas in Dow Benelux, the Court ruled that there is no reason why the Commission should disregard documents pointing to a different infringement if it was genuinely found by accident, AG Wahl noted in para. 82 that “[t]his is clearly not the type of conduct which the Court meant to allow under its Dow Benelux case-law. There is, in my view, no difference between a case in which the Commission launches an inspection without a valid decision and one in which the Commission proceeds on the basis of a valid decision, but searches for information relating to another investigation, not covered by that decision”.

The ECJ’s Judgment:

On whether a judicial authorization is necessary:

In a prelude of what is to come, the ECJ analyzes the case law of the ECtHR concerning the fundamental right to the inviolability of the home, observing (i) that it states expressly that absence of prior judicial authorization nay be counterbalanced by a post inspection review covering both questions of fact and of law; and (ii) that the EU legal system is premised on that basis, and that its legality under the ECtHR is ensured by the fact that EU Courts carry out an in-depth review of law and fact (unsurprisingly, the ECJ cites KME and Chalkor in support of this declaration). Judicial authorizations are only necessary, pursuant to Art. 20(6) and (7) of Regulation 1, when the undertaking opposes the inspection, which was not the case here.

The ECJ also goes on to explain why this system is also compliant with the fundamental right to effective judicial review, thus dismissing the applicant’s second ground of appeal.

On the “not-so surprise” findings:

The debate before the ECJ focused on whether the Commission had had valid reasons for telling its officials about the existence of suspicious concerning the second infringement prior to the inspection, as declared by the General Court, but as disputed by the applicant and the AG.

I didn’t take for granted that the ECJ would have dealt with the issue given that –as argued by the Commission- it could be characterized more like a question of fact than of law, and as you know issues of fact cannot be reviewed by the ECJ. Nonetheless, the ECJ states very very succinctly in para. 54 that DB “is arguing that the GC erred in law by holding that the Commission had valid reasons to tell its officials about the existence of suspicions concerning [the second infringement] before the first inspection”. The ECJ does not explain why the claim is really a legal and not a factual one (interestingly, the whole incident does not appear in the factual introduction to the Judgment…) but right away asserts the admissibility of the plea [perhaps to reassure some as to the appropriateness of the judicial review carried out by EU Courts in this area??? 😉 ] (to better understand this, we suggest you read our comments below).

As to the merits, the ECJ recalls the relevant case law in the field, emphasizes that the Commission can only search for documents coming within the scope of the subject-matter of the inspection as defined in the decision (para. 60), recalls that pursuant to Dow Benelux the Commission can start new investigations if it comes across new evidence genuinely by surprise (para 59) , but concludes –siding with the AG- that although inspectors need to be provided with background info about a case, “all that information must nevertheless relate solely to the subject-matter of the inspection ordered by the decision” (para. 62). The Court then concludes that the first inspection was vitiated by an irregularity “since the Commission’s agents, being previously in possession of information unrelated to the subject-matter of that inspection, proceeded to seize documents falling outside the scope of the inspection as circumscribed by the first decision” (para. 66). The ECJ decided to give itself final Judgment under Art. 61 of the Statute of the Court and annulled the second and third inspection decisions instead of sending the case back to the GC.

Our comments

The Judgment is solidly built on the case law of the ECtHR, which is abundantly cited, as well as on AG Wahl’s Opinion, which is also repeatedly cited. It is no surprise that procedural standards have progressively aligned  with those set out by the ECtHR, whose great influence in Luxembourg is already now undeniable and increasingly more visible, even pre-EU membership to the Convention.

-As we said in our previous post, we agree with the idea that it would be excessive to necessarily require prior judicial authorization, when ex post judicial review is available, but, in our view, the key issue is that of the quality of the judicial review itself. The ECJ actually cites case law of the ECtHR saying exactly that, “that the key issue is the intensity of the review covering all material matters of fact and law and providing an appropriate remedy if an activity found to be unlawful has taken place (…)” (para. 41 of the Judgment). The ECJ then assumes that since judicial review extends to both matters of law and fact, and includes the power to assess evidence and annul decisions, it is intense enough. In my view, however, scope and intensity are two different things, and the ECJ does not really talk about intensity. Admittedly, the intensity of judicial review is hard to assess, it is more a matter of attitude than of law (as I explained here; in Spanish, sorry…).

– With regard to the misconduct of the investigation:

(i) it may be just me, and I see how this is arguable, but I think it is possible that the Court may have blurred the lines between what is an issue of law and fact amenable to appeal before the ECJ as a way to appease concerns about the intensity of the review required by the ECtHR; if so, that would be an interesting development;

(ii) on the merits, the Judgment endorses a strict approach towards the Commission’s misuse of the very ample powers that it enjoys and that EU Courts recognize –and typically uphold- with no problem. The thing is that when one has such great powers, there is really no need to use shortcuts or engage into arguable practices; the Commission could have avoided this whole problem by adopting two different decisions, or by referring to the two suspected infringements in the same one. Why it did not do that is not easy to understand;

(iii) at the end of the day, in my view, the Judgment is more remarkable for its sensible approach and general message than for its practical consequences (not only was the situation at issue very specific but also I, for one, have first-hand recent experience confirming that the Commision had already learnt the lesson prior to the Judgment being rendered..)

P.S. I offer a couple of rounds of beers to anyone who can tell good inspection anecdotes in the comments to this post (hearsay is admitted) 🙂

Written by Alfonso Lamadrid

23 June 2015 at 6:38 pm

Posted in Case-Law

3 Responses

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  1. By the way, the substance of the case would have also been interesting.

    Now there’s an understatement. I’ve been meaning to write something that case ever since it was first announced, but I haven’t had the time. It’s the perfect storm of competition in regulated industries: a regulated infrastructure company (DB Netz) allegedly abusing its market power as an infrastructure company in another regulated sector (electricity).

    Martin Holterman

    29 June 2015 at 11:28 am

  2. Now that the inspection decision has been annulled, but this has no bearing on the substance of the case. The case ended with a commitment decision anyway, suggesting that DB had implicitly endorsed any procedural wrongdoing on the part of the Commission. I think the outcome is more significant for other stakeholders and their legal counsel, rather than DB

    ahmetfatihozkan

    29 June 2015 at 4:12 pm

  3. Arriving as the member of the inspection to the office of company, we found that in our order was a misprinted name of this company. This means that formally we were not allowed to conduct the inspection. However, the CEO of the company invited us in and allowed to conduct the inspection (the order was amended next day). P.S. the company was found guilty.

    Rusantitrust

    29 August 2015 at 6:58 pm


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