On 11 February 2025, the Antitrust Division of the Federal Court of Justice (Bundesgerichtshof) deliberated on the much-discussed and highly controversial question of whether companies can demand compensation from managers for cartel fines imposed against them based on management liability (Organhaftung) or whether such liability provisions must be interpreted restrictively due to overriding EU law. The Federal Court of Justice has referred this question to the Court of Justice of the European Union (CJEU) for a preliminary ruling. It is unlikely that the CJEU will deliver a decision before 2026.
Background and proceedings to date
The plaintiffs are two affiliated companies: a limited liability company (Gesellschaft mit beschränkter Haftung, (GmbH)) and a stock corporation (Aktiengesellschaft, (AG)). The defendant was the managing director of the GmbH and a member of the management board of the AG. The German Federal Cartel Office (Bundeskartellamt) found that he had – in these two capacities – participated in a steel industry cartel from 2002 to 2015 in which the cartel members, among other things, agreed on price components. The Federal Cartel Office imposed a cartel fine of EUR 4.1 million on the plaintiff GmbH pursuant to section 81(1), no. 1 Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) for violations of sections 1 and 2 GWB and Article 101(1) TFEU. The GmbH is asking for damages in this amount. The AG, against which the cartel proceedings were discontinued, is seeking damages for investigative expenses and lawyers’ fees incurred as a result of the antitrust investigation. The GmbH and the AG are seeking a declaration that the defendant is liable for consequential damages resulting from the antitrust violation.
The court of appeal – Düsseldorf Higher Regional Court, judgment of 27 July 2023, VI-6 U 1/22 – found, as did the court of first instance – Düsseldorf Regional Court, judgment of 10 December 2021, 37 O 66/20 –, that the fine imposed by the Federal Cartel Office was not recoverable as this would defeat the purpose of the cartel fine. The Higher Regional Court held that the purpose of the fine against the company was specifically to affect the latter’s assets. It also held that recourse could not be sought for the lawyers’ fees and investigation expenses either, since they directly related to the damage for which the fine had been imposed. However, the action has so far been successful to the extent it was found that the defendant was liable for further damage resulting from the antitrust violation – in particular for the costs related to actions for damages.
German Federal Court of Justice decision
The Federal Court of Justice delivered the following decision on recourse for the fine:
“In this regard, the antitrust division of the Federal Court of Justice has submitted a request for a preliminary ruling to the Court of Justice of the European Union (CJEU).
Pursuant to section 43(2) Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG) and section 93(2), sentence 1 Stock Corporation Act (Aktiengesetz, AktG), managing directors and management board members who breach their obligations are liable to the company for any resulting damage. The defendant’s participation in the price-fixing cartel prohibited under Article 101 TFEU constitutes an intentional breach of duty. The appeal must also proceed from the assumption that plaintiff 1 suffered damage as a result of the fine. Recourse to the managing director’s assets may, however, be at odds with the spirit and purpose of fining the company, which may in turn call for a restrictive interpretation of section 43(2) GmbHG. Whether this is the case is disputed.
What is also relevant to this question is whether EU law compels a restrictive interpretation of section 43(2) GmbHG and section 93(2), sentence 1 AktG. Although the Member States themselves have authority over the specifics of the fines, the case law of the CJEU requires them to ensure that the national competition authorities can impose effective, proportionate and dissuasive fines on companies that intentionally or negligently infringe Article 101 TFEU. Such fines are intended to penalise unlawful acts by the companies concerned and to deter both them and other economic operators from infringing EU competition rules in future. This desired impact of fines on companies may be lessened if a company can wholly or partly relieve itself of the burden of the fine through recourse to the managing body. As the CJEU has recognised, much of the impact of a fine could be lost if the affected company were entitled to offset even a part of it against tax. This therefore also raises the question of whether a shifting of the fine from the company to the managing director pursuant to company law provisions is detrimental to the purposes of the cartel fine.” (Gleiss Lutz translation)
Further oral explanations by the German Federal Court of Justice
In the oral hearing, the Antitrust Division stated the following, among other things, as a “preliminary assessment”:
- The case law of German courts on advisor liability, obstruction of justice and reimbursement – by a spectator – for a fine imposed on a sports club shows that the legal system does not in principle disapprove of recourse to compensation for fines. An exclusion of recourse relating to cartel fines can therefore only be considered based on a teleological interpretation of the provisions on management liability.
- From a purely national perspective, it is possible that there is no sufficient basis for a teleological interpretation. However, the principle of effectiveness under EU law could require that companies not be permitted to seek recourse from their managers for a cartel fine imposed on them.
- A right of recourse has greater impact on the deterrent effect of cartel fines than whether or not a fine is tax deductible. According to the CJEU, however, even tax deductibility can impair a fine’s practical effectiveness.
- The fact that the managers usually have D&O insurance is not a significant factor when determining whether or not to permit recourse for a fine.
Assessment
- Companies’ right of recourse against management for cartel fines has long been debated in legal literature and lower-court case law. It was hoped that the Federal Court of Justice would put an end to this uncertainty. Now that the matter has been referred to the CJEU, a final decision is likely to be months – if not years – away.
- The Antitrust Division of the Federal Court of Justice pointed to the CJEU’s case law on the tax deductibility of fines, and the Presiding Judge at the Antitrust Division commented in the oral hearing that any right of recourse would have greater impact on the deterrent effect of cartel fines than tax deductibility. This suggests that in the view of the Antitrust Division, there is an a fortiori argument in favour of European law requiring the limitation of German director liability law in respect of the right to claim recourse against management for cartel fines. However, it remains to be seen whether the CJEU will give priority to effet utile and deny such recourse.
- The Presiding Judge at the Antitrust Division commented during the oral hearing that from the perspective of national law only, teleological interpretation could not provide sufficient basis to deny recourse for fines. That could be taken to mean that the Antitrust Division would permit internal recourse for cartel fines in purely national matters without effect on trade between Member States, in which Article 101 TFEU is not violated and therefore only a breach of national antitrust law (section 1 et seq. GWB) is established. If the CJEU denies internal recourse on the grounds that it violates European law, that could result in a divergence where internal recourse is precluded in matters with EU relevance, but allowed in purely national matters. However, any practical effects are likely to be limited because the effect on trade criterion is interpreted very broadly in antitrust proceedings, meaning that Article 101 TFEU will be relevant in addition to section 1 et seq. GWB in most cases. The Federal Cartel office usually cites Article 101 TFEU alongside section 1 et seq. GWB when it investigates.
- Management boards and supervisory boards need to consider the question in dispute particularly when reviewing potential damages claims against members of the other body in accordance with the ARAG-Garmenbeck principles. For now, they will have to continue to live with the fact that it has not yet been definitively settled whether companies have a right to claim recourse for cartel fines. In purely national cases, those considerations will need to include whether this Federal Court of Justice decision could be seen as a sufficient basis to assume the right to claim recourse against management for cartel fines. In cases with an EU dimension, the body responsible should act to ensure the time limitation does not expire before the CJEU issues its judgment.
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