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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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Gerard McCormack, Andrew Keay and Sarah Brown

Chapter 5 considers Procedural issues relating to insolvency proceedings. It shows that there is considerable variation on these issues between Member States. These divergences may affect the assessment of credit risk (more likely to be done on a country-by-country basis rather than a pan-European basis) and hinder the financing of businesses at a cross-border level. On some issues, however, there is a fair degree of consensus. For instance, in most countries, either creditors or the insolvent debtor him- or herself are able to open insolvency proceedings leading to liquidation and directors are obliged to open some form of insolvency proceedings if their company is insolvent. But restructuring type proceedings can usually only be opened by the insolvent debtor him- or herself. The opening of proceedings is published in a gazette or journal to which the public has access or in a newspaper, and so creditors are usually advised of the opening of proceedings by this route. There is a general understanding that insolvency law exists, in part at least, to preserve the ‘going concern’ value of an ailing enterprise and to reduce or eliminate frictions in making the most effective use of assets. The chapter suggests that in considering how to frame an insolvency law, it is necessary to address certain matters, including the following: • whether the law should facilitate expedited liquidation and/or restructuring proceedings as an appropriate mechanism for preserving ‘going concern’ value; • what provisions should be put in place with a view to ensuring that expedited procedures do not unfairly advantage certain creditors and other ‘insider’ parties at the expense of others; • whether the law should contain particular provisions for use in small business cases, in particular small business restructurings; how should such provisions should be designed and what companies should be eligible to make use of the procedure; • whether it would be more appropriate to ‘think small first’, i.e. to design a set of provisions that are appropriate for use in all insolvency cases and then supplement these provisions with other provisions that were specifically tailored for use in respect of small businesses.
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Gerard McCormack, Andrew Keay and Sarah Brown

Chapter 3 concerns the Ranking of claims and order of priorities. Recital 22 of the Preamble to the recast Insolvency Regulation acknowledges the fact that ‘as a result of widely differing substantive laws it is not practical to introduce insolvency proceedings with universal scope throughout the Union’. This study has indeed revealed very different approaches in Member States on the priorities enjoyed by the holders of security interests (secured creditors) and preferential (priority) claimants in an insolvency. This may cause creditors to assess credit risk by reference to individual countries rather than on a Europe-wide basis, though undoubtedly, a number of other factors enter into the assessment of credit risk and not just the insolvency or collateral law in a particular country. The chapter considers a number of issues, including the relatively poor position of EU countries on the ‘getting credit’ indicator of the World Bank Doing Business Project. It asks whether this is down primarily to the way in which these rankings are composed rather than due to any fundamental deficiencies in the relevant laws and practices of EU Member States. The chapter highlights a number of matters that may be appropriate for consideration by the European legislator, although some of them may be rather controversial with difficulties in securing agreement. These include: • whether a minimum set of EU rules on the ranking of claims in the event of insolvency might impact favourably on the availability and cost of credit in some or all EU Member States; • whether claims by unpaid employees should be given any special status at EU level; • whether the financial position of employees might be more appropriately protected by enhancing the protections available under employment law Directives and, in particular, by strengthening national wage guarantee funds and other employee safeguarding measures; • whether the protections should be extended to self-employed persons and how might self-employed persons be defined for this purpose; • whether special rules are appropriate giving ‘new money’ advanced during the course of, or in anticipation of, restructuring and/or liquidation proceedings priority over other creditors.
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Gerard McCormack, Andrew Keay and Sarah Brown

Chapter 7 deals with Second chance for individual entrepreneurs. The EC Recommendation on a new approach to business failure and insolvency includes the question of rehabilitation of bankrupts and the provision of second chance (fresh start) for entrepreneurs. This extends beyond corporate entities to the individual sole trader who will have unlimited liability, and who in many respects will face similar issues to those faced by the personal debtor. Encouraging entrepreneurship is vital to a healthy economy and contributes to the efficiency of the internal market. However, the position is that such support and opportunity should only be available to those who have not acted irresponsibly or fraudulently; in other words, it should only be available to ‘honest’ entrepreneurs. Bankruptcy is traditionally something that is seen as attracting unwanted stigma, and fear of the consequences of bankruptcy can have a negative effect on willingness to start a business, innovate or try again where previously there has been failure. It is therefore important to limit the negative impact of bankruptcy and debt settlement procedures. The approach of the EC Recommendation is to limit the discharge period to a maximum of three years, after which a debtor is freed from outstanding debt (as appropriate), whilst safeguarding the livelihood of the entrepreneur. The chapter considers the procedures available to the entrepreneur across the EU Member States and the extent to which ‘second chance’ is supported, as envisaged by the EC Recommendation. The data gathered evidences divergence across the EU, whether in terms of the basis upon which entrepreneurial debt is treated and the connected issue of availability of procedures, length of the discharge period, or how the livelihood of the entrepreneur is safeguarded. Discharge from debt within five years is now possible in most Member States. However, whilst discharge within three years is now widely available, the EU’s goal of discharge within three years is not yet guaranteed. In relation to supporting the honest entrepreneur, and safeguarding livelihoods, again there is some similarity in approach. Divergence lies in the detail, and highlights some important issues that need further consideration: what constitutes a living wage; what assets are excluded from liquidation; and protection against losing the family home.