Right to seek recourse for antitrust fines – breath of fresh air from Dortmund Regional Court

Dortmund Regional Court (Landgericht Dortmund) (Case no.: 8 O 5/22 (Kart)) recently published a noteworthy information order during a still-ongoing legal action relating to di-rectors’ and officers’ liability. The case involves the potential liability of the former general partner/managing director of a German limited liability partnership (GmbH & Co. KG) for claims including a fine imposed on the partnership by the competition authorities.

I. Contents of the decision

According to the Court’s provisional legal opinion, a claim for recourse brought by the partnership against its managing director seeking compensation for various losses suffered by the partnership is to be recognised based on its merits. The losses were due to the director having participated in an infringement of antitrust law attributable to the company, leading to it being subjected to fines and facing claims for damages. The Court essentially justified its legal position as follows:

1. Preventative effect of regulatory penalties does not rule out possibility of recognising claims seeking recourse for fines

The Court held the view that the possibility of seeking recourse for fines did not undermine regulatory penalties. It maintained that civil law and the law on regulatory offences existed side by side, without regulatory rules being able to limit civil rules. Furthermore, the primary payment liability of a company subjected to such fines was not called into question by taking recourse against a director or officer; instead, the company first had to pay the penalties “upfront”. The regional court went on by explaining that taking recourse frequently does not lead to the company’s costs being completely reimbursed anyway, since fines are often so high that they cannot be recovered from directors and officers in full. It pointed out that even where D&O insurance policies apply in such situations in the first place, the insured amount is often exceeded. This led to the company being exposed to the risk of the director or officer concerned becoming insolvent, it continued, meaning that the role of the fine as a deterrent and preventive measure was preserved and that recognising the right to recourse did not call into question the effectiveness (effet utile) of the EU law provisions in Articles 101 and 105 TFEU, either. The Court added that companies also suffered from reputational damage that could not be recovered by legal means.

2. Recognising recourse claims for fines avoids creating negative incentives

On top of this, the regional court believed that not taking recourse created negative incentives because it would encourage a certain willingness on the part of management to take risks in order to gain advantages directly for their company, and also indirectly for the management itself, by infringing competition law .

3. Differentiation of fines not affected by recourse

Finally, in the opinion of the Court there was also no danger that the differentiation between fines under section 81(4) of the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, GWB) would be undermined. This was because it was clear that the differentiation only related to considerations under the law on regulatory offences and not to the duty to provide compensation for damage caused existing under civil law.

4. Potential limitation of claims for recourse involving fines?

The Court obviously did not have to look in any more detail at whether to restrict the value of the penalty imposed in the specific case because a “relatively low fine” was involved. It took the standpoint that the offsetting of any benefits was the main aspect to be considered when limiting a party’s liability.

II. Implications of the decision

The information order issued by Dortmund Regional Court brings a breath of fresh air to the discussion on whether companies have the right to bring claims for recourse resulting from corporate fines (which became known above all in connection with the German “rail cartel”). The case law published up to now has unanimously rejected this right, mainly referring to the punitive nature of fines. This legal issue has always been a bone of contention in legal literature. In other fields of law such as cyber security there is a growing tendency to include such economic losses in directors’ and officers’ liability as well. The memorandum of a recently published bill regarding implementation of the NIS2 Directive contains explicit advice that liability on the part of the management provided for in the bill (as “lex specialis”) is also intended to cover recourse claims and fines [Bill to transpose the NIS2 Directive (noerr.com)]. This shows that the legal issues to be decided on by Dortmund Regional Court already reach far beyond the bounds of antitrust and competition law.

As usual, the information order only expresses the Court’s provisional legal opinion. This means that it will be interesting to see whether Dortmund Regional Court will keep to its provisional standpoint. Information available in public sources states that the decision is scheduled to be given on 30 August 2023.