German Federal Court Resolves Controversy Around Statute of Limitations for Cartel Damage Claims

06/12/2018
Client Alert

Introduction

In a landmark decision, on June 12, 2018, the German Federal Court of Justice (Bundesgerichtshof, BGH) decided that the statute of limitations for all cartel damage claims that arose prior to July 1, 2005, shall be suspended for the time of the cartel authority’s investigation. The decision is claimant-friendly. It brings long-awaited clarity to a legal question that is immediately relevant in every case where the cartel damage occurred before July 1, 2005. As a result of today’s judgment, and assuming German substantive law applies, those damages can generally still be claimed.

Case History

The case concerns the German cement cartel. The cartel had operated from the 1970s until it was discovered in 2002. The German Federal Cartel Office (“FCO”) fined several cartelists and announced this in a press release in April 2003. Some of the cartelists appealed the fine, which, however, was essentially upheld by the BGH with a legally binding ruling in February 2013.

In February 2015, a customer filed a lawsuit against one participant of the cartel, claiming damages for purchases made between 1993 and the end of 2002. While the court of first instance essentially followed the claimant’s arguments, the court of appeals (OLG Karlsruhe) dismissed the majority of the claim. It argued that the cartel damage claims were time-barred. The plaintiff then presented the case to the BGH, which now – following an oral hearing in February – came down with its decision (case no. KZR 56/16).

The Legal Issue at Stake

The case deals with a major reform of the German Act against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) that came into effect on July 1, 2005. With this reform, the legislator introduced a new provision that basically said that damage claims in cartel cases shall not become time-barred for as long as a competition authority is still investigating the cartel, including any subsequent court proceedings if the cartelist challenges the authority’s infringement decision. However, the reform was silent about any retroactive effect of this new provision – in other words: First, would it also apply to cartel activity that happened prior to July 1, 2005, or only to damages from cartels that occurred after the effective date of the new law? And second, would it also apply to cases where the investigation was already underway on July 1, 2005, or only to damages from cartels that were investigated after the effective date of the new law?

Under German law, two different limitation periods must be considered. Per whichever period lapses first, a damages claim becomes time-barred; either:

  • three years from the end of the calendar year in which the claim arose (i.e., the date of the purchase of the cartelized good), provided that the claimant obtained (or should have obtained) knowledge of the circumstances giving rise to the claim and of the identity of the defendant (the so-called “Knowledge-Dependent-Limitation-Period”); or
  • ten years from January 1, 2002 (if the claim arose prior to that date) or from the date when the claim actually arose afterwards, notwithstanding knowledge or a grossly negligent lack of knowledge (the so-called “Knowledge-Independent-Limitation-Period”).

The relevant provision, as it was introduced in 2005 and now at the core of today’s BGH ruling, works as a suspension clause. Where it applies, it pauses the statutory limitation period for cartel damage claims for as long as the cartel is being investigated by the authority, including any subsequent court proceedings if the cartelist challenges the authority’s infringement decision.

In the cement case, all the claimant’s purchases had occurred prior to the end of 2002. Under the Knowledge-Independent-Limitation-Period, the damage claims would thus have been time-barred by the end of 2012 and, under the Knowledge-Dependent-Limitation-Period, as of December 31, 2006 (three years from the end of 2003 when the FCO had issued its press release) – unless the relevant limitation period was suspended in the interim. Suspension could have occurred from when the FCO launched its investigation in 2002 until the infringement decision finally became binding when the BGH upheld it in 2013. This is why the controversial issue of applying the suspension clause to pre-July-2005 damage claims became a decisive issue here.

Prior Views of the Matter

At the appeals level in the cement case, the OLG Karlsruhe developed a defendant-friendly position and ruled that the claims were time-barred. In the court’s view, the statute of limitation period was not suspended during the FCO’s investigation and the subsequent court proceedings. The OLG Karlsruhe pointed out that, with the reform of 2005, the legislator not only introduced the suspension clause (sec. 33 (5) GWB), but in fact also a new substantive provision to bring follow-on damage claims as such (sec. 33 (3) GWB). The court therefore argued that the suspension clause can only be applied in cases where the actual damage claim itself is already based on the new law – and this can only be true where the actual damage occurred after July 1, 2005. This view, which the OLG Karlsruhe had explained in quite some detail in its decision of November 9, 2016, was later also shared by a Dutch court (Rechtbank Limburg) in a damages case that was governed by German law.

Prior to the OLG Karlsruhe’s ruling, however, there had already been claimant-friendly views on the legal question at hand. The OLG Düsseldorf (another German appeals court), but also some lower-level courts, had found the suspension clause to apply also to pre-July-2005 damage claims. They argued primarily with the legislative history and the aim and purpose of introducing the suspension clause in 2005, which had been driven by a political will to effectively enhance private cartel enforcement. This legislative will, the advocates of this view argued, was not limited to post-July-2005 claims only.

Today’s Decision

With today’s decision, the BGH resolved the controversy around the interpretation of the suspension clause. It ruled in favor of the claimant-friendly position. According to its press release (with the full version of the judgment not yet available), the BGH found that new statute of limitations rules (including the disputed suspension clause) shall apply – based on a general principle of German law – directly to all claims that were not yet time-barred at the time when the new provisions came into effect on July 1, 2005. This general principle of German law goes back to the Imperial Court of Justice (Reichsgericht), and in the BGH’s view, the legislator adhered to it ever since. The BGH therefore decided that the suspension clause shall also apply to the cartel damage claims in the case at hand because these claims were not yet time-barred on July 1, 2005. The limitation period was thus suspended from July 1, 2005 until the BGH came down with its final judgment on the cartelist’s appeal against the FCO’s infringement decision in 2013, and thus, the plaintiff in the case at hand can still claim damages relating to the purchases made between 1993 and the end of 2002.

Practical Consequences

The BGH’s judgement has been long awaited, and it will serve as an important precedent when bringing cartel damage claims under German law. It will thus have a much broader impact than just on the specific cement case at hand.

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