Lithuania
Jurgita Malinauskaite*
- The transposition process
1.1.Overview of the Directive and assessment of its impact on the Lithuanian legal system
The Directive 2014/104/EU on antitrust damages actions was signed into law on 26 November 2014[1] and was due to be transposed into Member States’ legal systems by 27th December 2016. Lithuania was among the first ten Member States to have fully transposed the Directive.[2]
The transposition process in Lithuania began a few months after the Directive entered into force, [3] with the working group being set up on 25 February 2015. The pubic consultation process in Lithuania started on February 2016 with the first draft being proposed to Seimas (the Lithuanian Parliament) on 22 November 2016. The proposal was publicly announced and then there was consultation with 28 public and state institutions (yet, only three of them provided some comments on the proposal). The impact assessment was carried out in order to analyse the costs and benefits of the implementation of the Directive and its impact on the Lithuanian economy, finance, and administration system, which will be further discussed in section 1.3. Additionally, this proposal was checked to ensure its compliance with the European Convention of Human Rights and the requirement of official language and law making procedures.Seimasadopted the amended Law on Competition which implemented the Directive as a matter of urgency with 99 MPs voting in favour, 16MPs taking a neutral stance, and with no MP voting against the proposal on 12 January 2017. The Lithuanian president approved the new law,[4]which wasthen signed on 18 January 2017 and came into force on 1st February 2017.[5]
Lithuania not only aimed to implement the Directive, but also used this opportunity to review some other substantive provisions of the Law on Competition (such as the provisions on State Aid) as well as to employ a new way that the Competition Council will be funded in the future to secure further independence from the State.[6]With the implementation of the Directive, Lithuania sets to facilitate antitrust damages claims by creating more favourable conditions for victims to seek redress in the Lithuanian courts. Underdevelopment of private enforcement in Lithuania, which is an important complement to public enforcement, means that the deterrent effect of the competition rules is not as great as it should be and the victims of anti-competitive activities are not compensated for their losses,[7] which is guaranteed by EU law.
There are two main models of transposition: the copying method (also known as literal transposition) and the elaboration method.[8]Lithuania has opted for the first option - literal implementation and reproduced the text of the Directive almost ‘to the letter’. A combination of several reasons could have steered the Lithuanian legislators towards this minimalist approach oftransposition regarding the rules of private enforcement. First of all, harmonisation of Lithuanian competition law provisions with the European provisions is one of the main objectives of the Lithuanian Law on Competition.[9] Secondly, given that the Member States should ensure that the Directive is fully effective according to the objective it pursues,[10] the literal transposition provides some sort of ‘security’ against any future actions by the European Commission under Article 258 TFEU. Finally, potentially there is a small country’s syndrome that any variations can be instigated by large influential Member States, which have more bargaining power in comparison with small Member States.
1.2.The consultation process
The proposal for the implementation of Directive 2014/104/EU was prepared and led by the Ministry of Economy of the Republic of Lithuania (ŪkioMinisterija). Given that the Ministry of Economy is a competition policy-maker since July 2011 in Lithuania and works closely with the Competition Council,[11] one may wonder whether the spirit of the implementation was set to truly facilitate private enforcement or to ensure that public enforcement would not be undermined. Nevertheless, the working group was created on 25February 2015[12] consisting of ten experts (in total) representing diverse institutions. These included the officials fromthe Ministry of Economy,[13] the Ministry of Justice (including the European Law Department under the Ministry of Justice),[14]the Competition Council,[15] academics and practitioners with expertise in competition law and civil law and civil procedure.[16]The working group met at least once a month until March 2016.[17]
The main objective of this working group was not only to find the best way to implement the Directive but also to better facilitate private damage actions for competition infringements in Lithuania ensuring that any natural or legal person has no less favourable possibilities to bring a claim in the Lithuanian legal system in comparison with other Member States. Even before the implementation of the Directive, any individual could claim damages for the infringements of competition law in Lithuania following the general rules of civil law and civil procedure.[18] Yet, similarly to most Member States,[19] especially smaller newer Member States, private enforcement in Lithuania is underdeveloped.[20] For instance, during the period 2000-2014, the Competition Council found 57 infringements under Articles 101 and 102 TFEU or their domestic equivalents (Articles 5 and 7 of the Law on Competition respectively).[21] However, only approximately five damages claim cases reached the courts. The outcomes were even less satisfactory: the damages were awarded in one case, but 10 times lower than the requested amount;[22] one case was dismissed due to the lack of evidence,[23] and at least two cases were settled outside the court procedure.[24] There are some cases pending.[25]The litigation in one case has lastednearlya decade and is still on-going.[26]
Normally, private damages claims in the Lithuanian legal system are regulated by the Civil Code and the Code of Civil Procedure. This means that any person whose interests have been violated by a breach of law, including competition rules (i.e. either EU competition rules or domestic equivalents),can apply to the civil courts for damages. There were two possible optionsconsidered for the implementation of the Directive. The first option was to amend both thelexgeneralis - the Civil Code and the Code of Civil Procedure and lexspecialis - the Law on Competition, whereas the second option was to implement the Directive solely in the Law on Competition. The first route was quickly dismissed given the particularities imposed by the Directive that did not sit neatly with the Lithuanian standard provisions (i.e. the Directive’s imposed rebuttable presumption that cartels cause harm, a different limitation period etc.). Additionally, the procedure to amend general laws, such as the Codes, is more complex in comparison with specialised law. Given that Lithuania is a monist country and that any international treaties and conventions ratified by Seimas prevail over national laws, both the Civil Code and the Code of Civil Proceduredenote that different rules regulating civil proceedings can be followed in the implementation of EU law or other international laws.[27]Therefore, the second alternative was chosen to implement the Directive via amending solely the Law on Competition, mainly by adopting a new chapter on civil liability.Since 1st February 2017, private enforcement of anycompetition law infringements (namely Articles 101 TFEU and 102 TFEU and their domestic equivalents Articles 5 and 7 of the Law on Competition respectively) follows a specialised civil procedure.
1.3 Impact assessment
Given that the impact assessment, which should be carried out by each legislator drafting a legal act pursuant to the Methodology for Assessing the Impact of Planned Regulatory Framework, the Ministry of Economy also assessed the Directive’s potential impact on the Lithuanian Economy, State finance and administrative burden.[28]The Ministry noted several positive aspects for the Lithuanian economy. First of all, it remarked thatthe implementation of the Directive will improve foreign direct investment in Lithuania. This is because potential investors will have the right to claim compensation for any harm suffered as a result of an infringement of the EU competition rules in Lithuanian courts. Secondly, these rules will improve fair competition, leading to better productivity and efficiency, further contributing to the growth of the Lithuanian economy. Thirdly, the increased likelihood of being held liable for illegal conduct would discourage anti-competitive behaviour and therefore increase deterrence in Lithuania. Fourthly, the new rules will improve small private businesses’ access to the courts. The assessment report welcomes the exceptions provided to SMEs for joint liability due to their limited financial and human resources. Fifthly, it will improve potential competitors’ access to the market. Finally, the new rules should benefit consumers through lower prices, higher quality and more choice as a result of the improved enforcement. Additionally, consumers will have the right to claim compensation for any overpayment due to any anti-competitive infringements.[29]
Apart from the positive effects, the evaluation report indicates that the implemented Directive will have a negative impact on the Lithuanian State finance. It is estimated that Vilnius County court will hear up to 50 additional cases falling into this anti-trustdamages action category. Two different assessment methods were employed to determine the estimated cost of additional cases to the State budget. The first statistical method quoted 17,500 Euros per annum based on the estimated cost of one case being 350 Euros.[30]Given that competition cases are complex by their nature, the second method provided more accurate calculations, raising the estimated costs significantly up to 72,060 Euros per annum. This figure was based on the salary of a judge, a judge assistant and a court secretary.[31]Yet, this estimation is not entirely accurate, as it does not include any additional court costs (i.e. indirect costs). Nevertheless, the Ministry of Economy concluded that the cost for the court would be within a range of 17,500 to 72,060 Euros.Finally, the Ministry of Economy also noteda potential burden on the State administration due to a potential increase in cases at Vilnius County court.
This prognostic figure of 50 antitrust cases is rather over-rated, especially as the Lithuanian Competition Council on average investigates and concludes almost ten times fewer cases (approximately 5-6 cases per annum on Articles 101 and 102 TFEU and domestic equivalents Articles 5 and 7 of the Law on Competition, respectively). Since 2012, the Lithuanian Competition Council hasthe power to set its own priorities and pursues the most significant cases instead of acting upon every complaint.[32]Even though a stand-alone process can be followed, it is not very popular due to the complex nature of competition cases.[33]Peculiarly, the antitrust private enforcement practice in the United Kingdom with a different legal system[34] and a well-established litigation culture was consulted to estimate this increase in cases. It is rather unlikely that the Directive will change the current situation overnight. It is a gradual process. Given that infringement decisions often take years to finalise, the effects of newly implemented rules is unlikely to be felt in the foreseeable future. In addition, collective redress, which was facilitated in the Lithuanian legal system following the European Commission’s recommendation, is another step towards the improvement of private enforcement in Lithuania.[35]Similar to the recommendation, it has a horizontal application and was introduced in the Code of Civil Procedure. There are no specific provisions on collective redress in the Law on Competition.[36]
2. Scope
2.1 Substantive scope
The scope of the revised Law on Competition is slightly broader than what is required by the Directive. The specific rules denoted in the Directive are applicable not only to the European provisions (namely Articles 101 and 102 TFEU), but also to domestic Lithuanian equivalents Articles 5 and 7 of the Law on Competition.[37]The working group considered that whileArticles 5 and7 of the Law on Competition are identical (save the cross border element) to Articles 101 TFEU and 102 TFEU respectively, the new provisions should apply to equivalent domestic articles. Broader application of these new rules in other areas of competition law, such as unfair competition, merger control or state aid was not even considered, as they were not encompassed in the Directive. One could argue that this led to the undue complicationof the private enforcement mechanismof competition law in Lithuania because of the following aspects.
First of all, pursuant to the Law on Competition, undertakings have both administrative as well as civil liability, whereas public administration entities are liable solely under administrative law.[38]In Lithuania the Law on Competition applies not only to undertakings but also to public administration entities which have a duty to ensure freedom of fair competition.[39] A similar provision exists in other Member States, such as in Italy, Finland, Romania, and Slovakia. During the consultation process, some stakeholders recommended the expansion of the scope of the Directive toencompass not only liability of undertakings and associations of undertakings in damages actions for the infringements of Articles 101 and 102 TFEU and domestic equivalents but also public entities under Article 4 of the Law on Competition,given that they commit the most violations of competition law.[40]During the period between2011-2016, there were 26 infringements committed by public entities in comparison with 21 violations performed by ‘undertakings’. For instance, the Lithuanian Supreme Administrative Court[41] most recently upheld the Competition Council’s infringement decision based on Article 4 of the Law on Competition. In this casethe Joniškis municipality failed to organise a competitive process for the collection of municipal waste to ensure that other undertakings willing to provide the aforementioned services at more competitive prices are not discriminated against. Along similar lines, in August 2016, Vilnius Regional Administrative Court upheld another Competition Council‘s decision of 16 July 2016 against Panevėžys City Municipality, whereby the Municipality restricted competition and consumer rights in the municipal waste management sector.[42] The Lithuanian Free Market Institute expressed that individuals should be able to bring damages action claims due to public governmental authorities’ actions which violated Article 4 of the Law on Competition in order to ensure the principle of equality as governed by Article 29 of the Lithuanian Constitution, in which it is entrenched that every person should be equal before the law, courts and other state institutions and officials. This is because currently the public bodies are in a more favourable legal position comparedto private undertakings due to their limited liability. Only recently (effective from 1 January 2017) do public entities have the same administrative liability as private undertakings.[43]It is no surprise that the public authorities currently make up a significant portion of all infringements of the Law on Competition and the current enforcement mechanism deemed to be ineffective.[44] Expanding civil liability for the public authority sector pursuant to the Law on Competition would enable consumers to seek compensation; potentially further leading to improving the law’sdeterrence effect.Even though this recommendation was not accepted, Article 3(22) of the Law on Competition defines that public administration entities fall under the notion of “undertaking” provided they are engaged in economic activities.[45]Technically, claims for private damage actions can be raised against public administrative entities only if they act in their capacity as ‘undertakings’.Damages claims against public entities are possible under the general civil law procedure.[46]However, there has not been a single case lodged under this option for the violation of Article 4 of the Law on Competition.
Secondly, the implementation of the Directive has led to at least two pathways of private action mechanism pursuant to the revised Law on Competition in Lithuania. While the enforcement procedures to claimcompensation for an infringement of either Article 101 TFEU or Article 102 TFEU or domestic equivalents are now specified following the newly implemented rules incorporated in the Law on Competition, damages claims for other competition law infringements are less clear. Damages claim for unfair competition[47]can be lodged by undertakings only pursuant to the general procedure regulated by the Civil Code and the Code of Civil Procedure.However, it is not clear which damages claim procedure applies for the other competition law infringements, such as the provisions on merger control,[48] or state aid and whether a legal or natural person can initiate a claim. This was omitted from the revised Law on Competition.[49]The complexity of different procedures has fragmenteda national legal system and could potentiallylead to legal uncertainties and inconsistencies.[50] It remains to be seen how it will be perceived by individuals and whether it will affect their willingness to litigate. For instance, the complex competition law enforcement mechanism with several pathways was identified as the main reason for the lack of private enforcement in Estonia.[51]