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Magnus Strand

This first Chapter of the book presents the passing-on problem and identifies the major legal issues triggered by that problem that are discussed throughout the book. ‘Passing-on’ in this respect is the act of letting harm or loss incurred by a business pass through that business and thereby move on to burden its customers, i.e., the next level of the supply chain. This can be done, knowingly or otherwise, by raising selling prices in response to the harm or loss at issue. The point of departure in this chapter and throughout the book is that the passing-on problem is not a single and coherent legal problem that can be addressed as such, but a set of factual circumstances that gives rise, in turn, to several legal issues that need to be resolved in a consistent manner. Three main legal issues triggered by passing-on are identified: (1) Who in the supply chain will have access to court to bring an action in respect of the initial harm caused? (2) Will those parties be able to demonstrate sufficient proximity (within the meaning of applicable substantive law) to the original harmful act or unjustified transaction, as the case may be, to bring a successful claim? (3) Will a possibility for the claimant to pass on the alleged harm or loss be relevant to the estimation of the award? This chapter further identifies the different parties involved in the passing-on problem and their respective interests, introducing shorthand denominators for those parties that are used in the book. Finally the chapter outlines the various EU law contexts in which passing-on has or could occur, and presents the structure of the presentation to follow in subsequent chapters. Keywords: EU law, private enforcement, damages law, restitution law, passing-on, indirect purchasers
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Magnus Strand

In Chapter 7 the passing-on problem is discussed for the purposes of damages actions brought for a breach of competition law. In Section 7.B the development of the action is presented, including a survey of the case law in which the availability of this action was established. Section 7.B also includes an overview of Directive 2014/104 which now provides harmonized details of the action, including some aspects of the passing-on problem, and the accompanying soft-law instruments. A few general problems of competition damages are also discussed. Section 7.C concerns access to court. The general impact of EU law requirements of effective judicial protection on national limitations of access to court is addressed, but the focus is on a juxtaposition of the approach chosen in the Directive, where downstream claimants are granted access to court, and the approach chosen in federal US antitrust law, where downstream claimants are barred. The main arguments in the corresponding EU and US debates on access to court for downstream claimants are presented and discussed. Section 7.D concerns the element of substantive proximity (i.e., in the context of damages, causation). Special attention is devoted to recent case law in respect of so-called umbrella pricing and to implications of certain provisions of the new Directive. It is however stressed that there is considerable uncertainty with regard to causation. In Section 7.E case law on the estimation of competition damages will be presented, but emphasis will be on the provisions and guidelines included in the new harmonized regime. The EU law approach with regard to the defence of passing-on, which has explicitly been endorsed, is discussed extensively. Beginning with a sub-section on case law, emphasis will be on the new regime in which the defence of passing-on has been explicitly endorsed. The main arguments of the passing-on debate will be presented and examined in a final sub-section. It is submitted in that context that the deterrent effect of private enforcement of competition law could have been increased if the defence of passing-on had instead been discarded, but also that the same effect might be achieved as the law stands if all potential claimants in a supply chain subrogate their claims to a joint claimant body. Keywords: EU law, private enforcement, damages law, competition damages, passing-on, indirect purchasers
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Magnus Strand

Chapter 6 concerns the passing-on problem in damages actions brought against a Member State for a breach of EU law. The discussion is, by and large, hypothetical in nature as the case law on passing-on in this context is limited to one case only. Section 6.B introduces the EU law action for damages against a Member State. Section 6.C is devoted to the particular issues identified as inherent in the passing-on problem; access to court, causation and the estimation of damages. As in previous chapters, general observations on those issues in the context of the action concerned will be presented before continuing to more detailed discussions of how passing-on issues are likely to be managed by the Court of Justice. It is submitted on the basis of the case available that downstream claimants cannot be automatically barred from bringing an action for damages directly against the Member State for reasons related to passing-on. Nonetheless it will be a great challenge for such claimants to establish a direct causal link between the breach of EU law by the Member State and harm incurred by them. With regard to the defence of passing-on it is submitted that the Court should accept a defence of passing-on available under national law but also that the onus of proving passing-on should be on the Member State. Keywords: EU law, private enforcement, damages law, liability of the Member State for a breach of EU law, passing-on
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Magnus Strand

Chapter 3 concerns the passing-on problem in the context of damages actions brought against an institution or agent of the EU pursuant to Article 340(2) TFEU. Section 3.B provides an introduction to the action for damages under Article 340(2) TFEU. In Section 3.C the applicable conditions for admissibility are examined in light of Article 47 of the EU Charter of Fundamental Rights. It is submitted that downstream claimants should not be automatically barred from bringing proceedings under Article 340(2) TFEU, but be allowed to attempt to state the circumstances corresponding to the conditions for liability for the EU with the clarity and precision required for the action to be admitted. Section 3.D is devoted to the problem of substantive proximity. In the context of damages, this problem is addressed through the assessment of causation. It is acknowledged that substantive proximity problems will increase the further away from the tortfeasor a claimant is positioned. Downstream claimants may only exceptionally be able to identify harm passed on with sufficient certainty for the direct causal link to persist down the supply chain. Section 3.E concerns the estimation of damages. In the general observations, available heads of damages are identified and discussed. Thereafter EU case law on the defence of passing-on is presented in detail. The presentation of the case law is followed by an in-depth analysis in light of legal debate on that case law. It is submitted that the passing-on problem cannot, as the case law stands, be addressed to the full satisfaction of justice perfectionists. At best a class-action mechanism could approximate a fair distribution of damages among those who have suffered harm. Keywords: EU law, private enforcement, Article 340(2) TFEU, damages law, passing-on
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Magnus Strand

Chapter 4 is mainly preoccupied with a discussion of whether the passing-on problem could occur in the context of restitutionary actions brought against an institution or agent of the EU pursuant to Article 340(2) TFEU. Following examination of the restitutionary actions available in Sections 4.B and 4.C, respectively, it is concluded that this is highly unlikely. For the sake of argument a plausible approach to passing-on issues is nevertheless outlined in Section 4.D. It is thus suggested that the EU Courts reject all passing-on argumentation for the purposes of restitutionary actions brought against the EU, and encourage downstream claimants to bring a subsequent action against the direct claimant if the latter has brought a successful action (for the entire amount paid but not due) against the EU. This would be without consequence to the availability of damages under Article 340(2) TFEU for harm incurred by any suffering party in the form of e.g., decreased sales. Keywords: EU law, private enforcement, Article 340(2) TFEU, restitution law, unjust enrichment, passing-on
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Magnus Strand

Chapter 8 concerns the hypothetical occurrence of passing-on issues in horizontal liability for a breach of EU law other than competition law. EU law damages actions against private individuals (outside competition damages) are discussed in Section 8.B, where it is submitted that the Court can be expected to reserve horizontal damages to situations where the EU law rule infringed confers a right on the claimant and has a protective purpose with regard to that right. It is submitted that downstream claimants should not be barred from bringing a direct action for damages against the tortfeasor, irrespective of whether such a bar was construed under national law as a rule on access to court or as a very stringent requirement of causation. In respect of the defence of passing-on in horizontal damages it is submitted that a spill-over effect from competition damages is plausible, but it is recommended that the Court of Justice maintain a non-interventionist approach. EU law restitutionary actions against private individuals are discussed in Section 8.C. It is concluded that the incompatibility of a rule of national law with a rule of EU law will, under the doctrine of EU law precedence, render the former inapplicable. A performance in accordance with the national rule may consequently be sine causa and therefore reversible, at least where the EU law rule at issue has the properties defined for the purposes of horizontal liability in damages but plausibly also by reason of the exclusionary effect of the EU law rule at issue. In contrast with the conclusions on damages it is concluded in restitution that national rules barring a downstream claimant would not be easily overcome by use of EU law arguments. It is further submitted that it should be for the Member States to find a proper approach to the defence of passing-on in restitution. Keywords: EU law, private enforcement, damages law, restitution law, horizontal liability, passing-on
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Magnus Strand

In Chapter 5 the approach to passing-on chosen by the Court of Justice in the context of restitutionary actions brought against a Member State is examined. Focus is more specifically on passing-on in the repayment of charges levied by Member States in breach of EU law. A brief introduction to the repayment of charges levied in breach of EU law is given in Section 5.B. In Section 5.C the impact of EU law requirements of effective judicial protection on national limitations of access to court is addressed, in light of both Article 47 of the EU Charter of Fundamental Rights and of the dual EU law test of equivalence and effectiveness. The main issue is national limitations of access barring downstream claimants from bringing an action. It is noted that the right to reimbursement does extend to downstream claimants but that the Court of Justice is neutral to the form of redress available and against whom such redress is available. In Section 5.D the problem of substantive proximity, which has received scarce attention from the Court of Justice, is addressed. It is submitted that downstream claimants will probably have difficulties in demonstrating sufficient proximity, but that a priori conclusions may be contrary to EU law. The extensive Section 5.E concerns the estimation of restitutionary awards from a Member State. Following an overview of the general EU law requirements, the case law of the Court of Justice on the defence of passing-on in this context is presented. It is acknowledged that the Court of Justice has allowed Member States to resist repayment only where the charge has been borne, in whole or in part, by someone other than the claimant and reimbursement would constitute unjust enrichment of the claimant. Section 5.E further encompasses an in-depth discussion of the case law in light of the main arguments presented in legal debate. It is submitted that the defence of passing-on should not be dismissed for all restitutionary situations even though its value may often be dubious. It is furthermore stressed that it remains within the power of each and every Member State to uphold or reject the defence of passing-on within the confines of the residual normative power left to them by the Court of Justice under its case law. Section 5.E also includes an examination of other defences of ‘unjust enrichment’ that a Member State may use. Keywords: EU law, private enforcement, restitution law, repayment of charges levied in breach of law, passing-on
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Magnus Strand

‘Passing-on’ occurs when harm or loss incurred by a business is passed on to burden that business’s customers or the next level of the supply chain. In this authoritative book Magnus Strand provides the first comprehensive examination of passing-on in EU law damages and restitution. The analysis covers a broad range of contexts including competition damages and the repayment of charges.
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Folkert Wilman