SHAREHOLDER LIABILITY FOR INFRINGEMENTS OF EUROPEAN TREATY
Antitrust law infringements
John D. Briggs and Sarah Jordan (Howrey) published an article in Business Law International (Vol 8 No 1, January 2007, p. 1-37) titled ‘Presumed Guilty: Shareholder Liability for a Subsidiary’s Infringements of Article 81 EC Treaty’.
Article 81 of the Treaty (full text below) prohibits agreements and concerted practices between firms that distort competition within the Single Market. Fines of up to 10% of their worldwide turnover may be imposed on the guilty parties. In 2006, the Commission has adopted new Guidelines on the method of setting fines for companies that infringe the EU competition law rules.
Shareholders can be held liable for competition infringements by a present or former subsidiary. Since the beginning of 2004, shareholders have been held liable for more than EUR 1,000 million by the European Commission. Liability of such shareholders bears little or no relationship to any independently improper conduct on their part. One can acquire such liability for a subsidiary’s infringement when buying shares in its capital.
Briggs and Jordan call this a shadowy area in the European law. According to the article, European, Asian and North American companies are probably largely unaware of it. In their opinion there is no good reason for shareholders to be guilty by having some presumed decisive or other influence over the conduct of subsidiaries such that they should share in the quasi-criminal or civil liability that might ensue.
If you plan to buy shares in an EU based company, you better hire an EU law expert first. Alternatively, you could consider buying shares in a Netherlands Antilles based company (provided it is not involved in arrangements that violate Article 81). In the Netherlands Antilles there are no competition or anti-trust laws.
Karel Frielink
Curacao-based Attorney (lawyer) / Partner
Article 81 EC Treaty:
1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
– any agreement or category of agreements between undertakings,
– any decision or category of decisions by associations of undertakings,
– any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
