Civil liability adds uncertainty for potential leniency applicants, says Louis

Janith Aranze

16 April 2018

Civil liability adds uncertainty for potential leniency applicants, says Louis

Left to Right: Casey Halladay, Djordje Petkoski, Brent Justus (chair), Frédéric Louis, and Antoine Chapsal (Credit: Freedom Film-Christopher Lazzaro)

The risk of follow-on damages claims in Europe is a “contributing factor” in the difficulty of convincing a company to enter into a leniency programme, and has increased “uncertainty” for practitioners in advising clients, a Brussels lawyer said last week. Janith Aranze at GCR Live Cartels in Washington, DC

There is “total uncertainty” on what the risk of follow-on damages means for clients, Frédéric Louis at Wilmer Cutler Pickering Hale and Dorr in Brussels said at the GCR Live Cartels conference.

“You know you are going to have damage exposure, but it is virtually impossible to assess how big it is going to be” – and the most important element in the immunity “bargain” is certainty, he said.

“When you decide to blow the whistle on a company, to create a huge headache for yourself, and do untold damage to your reputation, and perhaps your market valuation, you need to know you are taking this risk against a guaranteed outcome,” Louis said.

Only after the European Commission adopted the US approach to leniency by offering total immunity to first-in applicants did amnesty really take off in the EU, he noted. The commission’s first immunity programme was a “gigantic failure”, said Louis, as it did not offer unconditional total immunity from fines to the first-in applicant, and hence lacked certainty.

It is “hopelessly complex” to advise a client on how much a follow-on damages claim will cost, Louis said. It could be as little as €10 million or as much as €800 million, he said, which “is not a range that gives anyone enough comfort so you can factor it into your decision.”

Beyond the potential liability to claimants, litigating in different jurisdictions involves differing costs, he said.

“If you are sued in Germany, your defence is going to be much cheaper than if you were sued in the United Kingdom,” Louis explained. However, German judges have a lower threshold compared to English judges for a claimant to show causation for damages, he said.

Speaking on the same panel, Shearman & Sterling Washington, DC, partner Djordje Petkoski said seeking amnesty is still a good idea in most cases, and will trump the costs that flow from civil litigation. He acknowledged the civil litigation costs can be “quite significant”, and companies are thinking about it when deciding to seek amnesty.

In marginal cases, for example where the conduct “is not black and white” and not obviously a per se violation, fears of follow-on damages litigation could scare companies away from leniency, Petkoski said.

Casey Halladay, a partner at McMillan in Toronto, questioned whether second-in applicants are getting the value of the leniency bargain even in their dealings with the European Commission.

“If you look at the people who paid fines in the [EU’s] air cargo case, it was the people who cooperated. Several people that were implicated, I believe named in the initial statement of objections from the commission, did not pay fines,” Halladay noted.

The GCR Live Cartels conference concluded last week.

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