AG Szpunar’s Opinion on C-253/23: ASG 2
Introduction
Last week, Advocate General Maciej Szpunar delivered his Opinion in case C-253/23, a preliminary reference that stems from a form of collective private enforcement of competition law in Germany called the ‘assignment model’. This type of litigation is founded on the fiduciary transfer of claims from many persons or companies that bought cartelized goods and may be entitled to claim damages. These claims are bundled together with the assignee through the assignment. The assignee, which is usually a legal entity founded solely for the purpose of pursuing these claims in a subsequent damages proceeding, is often called ‘action vehicle’ (Klagevehikel). It is also known as an ‘action vehicle (Klagevehikel). The assignors and assignees agree on a contingency fee, or quota litis, that will be deducted if the claim is successful. In his Opinion AG Szpunar endorsed the assignment model in general. He argues, based on the referring court’s analysis of national laws relevant to the case, that the legality for such a form bundled private enforcement must comply with the principle effectiveness in conjunction with Art. 101 TFEU and the right to effective judicial protection.
The opinion was much awaited in Germany, as many similar proceedings are currently pending or under appeal. The legal issue at hand is relatively specific to Germany as it concerns the German law on the provision of legal services (Rechtsdienstleistungsgesetz – RDG, see English version here) limiting the assignment of claims to service providers. The RDG only allows legal services to be provided by entities or persons other than lawyers and law firms under certain conditions. This is done to protect the quality of legal advice in general. These conditions are less strict for lawyers, who are bound to more comprehensive and precise laws governing the legal profession. in Germany Bundesrechtsanwaltsordnung and the Berufsordnung fur Rechtsanwalte). Alternative legal service providers have a greater chance of obtaining third-party funding and their compensation models are more flexible. Contingency fees can be paid more easily. Alternative legal service providers are not bound by many obligations under German law that restrict lawyers and their firms to providing similar services. The RDG allows for the provision of legal service under a lower duty standard, but only for certain fields or services, such as debt collection services. There has been a lot of debate about the boundaries and the cases that alternative legal service provider can pursue when they use a license for debt collection. It is disputed if competition law claims are included in ‘debt collections’. The Case Facts
The Land North Rhine-Westphalia in Germany allegedly harmonised the prices of roundwood for itself and other forest owners in the area from 2005 to 2019 in violation of Article 101 of the TFEU. In 2009, the Federal Cartel Office issued a commitment decision
relating to the Land of North Rhine-Westphalia as well as other German Lander who were involved in the marketing of Roundwood. In 2012, the Federal Cartel Office opened a second investigation into the relevant conditions of the market in the Land of Baden-Wurttemberg. As a result of this second investigation, the FCO rendered a prohibitory injunction against the said practice in the Land of Baden-Wurttemberg
and annulled the previous commitment decision of 2009 relating to that Land. The German Federal Court of Justice later annulled that injunction on procedural grounds. The Federal Court of Justice held that it was not legal under section 32b of German Act against Restraints of Competition Act (ARC) for proceedings to be reopened if they had already been concluded with a decision of commitment unless there were relevant changes in factual circumstances. In its appeal decision, the Federal Court of Justice denied that there had been a relevant change in facts. Since then, no further steps have been taken under public enforcement regimes.However, this did not prevent potential claimants from engaging in private enforcement. ASG 2, an ASG 2 licensed under the German RDG brought the claims before the regional court in Dortmund on its own behalf and at its expense. The Land of North Rhine-Westphalia contested the action, arguing the assignments were null under German law because of violations of the RDG. (Essentially, the Land argued that the litigation went outside the licenses of the alternate legal service provider). The Landgericht Dortmund asked the ECJ whether national laws that prohibit private enforcement of claims through the assignment in the case were in violation of EU law, specifically Art. The Landgericht Dortmund asked
the ECJ whether national laws prohibiting private enforcement through the assignment of claims such as in the given case contravene EU law, especially Art. 47 of the Charter. It distinguishes between cases of follow-up litigation (1.) and stand-alone litigation (2.). It differentiates between cases of follow-on litigation (1.) The third question is merely declaratory in asking about whether such national laws should be left unapplied which would obviously be the consequence if these national laws were contrary to EU law and could not be interpreted in conformity.
Main Findings of the AG and Analysis of the Opinion
Stand-alone vs. Follow-on Actions and the Issue of AdmissibilityAs outlined, litigation was based on the 2009 commitment decisions which, after the intervention of the Federal Court of Justice, are the only NCA decisions which are still in place. The referring court appeared to imply that this form of action was considered follow-on litigation. (See first referral question
) The AG disagrees. He stresses that commitment decisions made under Art. The final findings of infringements under Art. 101 TFEU (para 56). Despite the fact commitment decisions (at the very least those made by the EC), should be regarded in private damages proceedings as indicative or prima facies evidence (see the judgment C-547/16 – Gasorba
at para 29 and para 57 in the opinion of ASG 2), it does not mean that competition law violations were asserted. The AG therefore qualifies national damages proceedings as standalone actions (see para. 57). The first question on the hypothetical scenario of a follow-on lawsuit is therefore unadmissible. (See para 61). The second question, which is essentially the same but is based on the premise of a stand-alone private prosecution, is deemed admissible (paras 62-71). The AG begins with a relatively abstract reflection on whether the legal notion of ‘claimant’ in private enforcement of EU competition law is directly (though not explicitly) regulated by EU law as part Art. He seems to believe that this issue is governed by EU law, as part of “constitutive” conditions of liability (paras. 92f). The AG then reflects on whether the transferability rights of claimants is also governed under EU law (paras. 95-99), which he denies. Even if the conditions for transfer and assignment are subject to national laws (see para. 98), it does not mean that EU law cannot guide the interpretation of national laws. It is well-established in the Court’s jurisprudence that the principles (of effectiveness and equivalence), limit the autonomy of national procedural laws. It is therefore important that national laws do not impose conditions that make it impossible or too difficult to enforce rights guaranteed by EU law. I would be surprised if the Court took up any of these sections of the opinion in its judgment, as they don’t seem to relate to answering the question. It is also important to remember that the general transferability was not questioned during the national proceedings. More precisely, the focus of the national proceedings was whether the (generally possible) assignment of claims to an entity which acts as an alternative legal service provider is contrary to the national laws on the provision of legal services (here Rechtsdienstleistungsgesetz). No one would seriously doubt that the laws governing the legal profession are matters of national competence, and the so-called national procedural independence. They can only be checked in terms of the principles of effectiveness or equivalence when it comes to their compatibility with Art. Relevance of Art. 47 of the Charter
The AG suggests to examine the case as suggested by referring court under both the principle effectiveness in relation to art. The AG proposes to examine the case, as suggested by the referring court, under both the principle of effectiveness in relation to Art. 47 of the Charter. (See para. 117). He seems to ascribe specific relevance to Art. In this case, he seems to attribute specific relevance to Art. The application of Art. 101 TFEU. The findings of violation in para 126 were based on the standard formula for the principle effectiveness, which is arguably the relevant legal test in this case. It is not convincing to combine both legal bases. Instead, it risks to diminish the clarity of the applicable legal test as I will further explore in my reflections on justifications (see below).
Relevance of the Directive 2014/104/EUWhereas the referring court based its arguments also on Art. 2 Nr. 4, Art. The AG does not focus on these norms. The AG does not concentrate on these norms. He argues that Art. He argues that Art. 101 and the principle if effectiveness (see paragraphs 79,81,142). 2 Nr. The fact that 4 is part of the definitions section does not impose any specific types of assignment to member states. It only clarifies that the directive will cover such assigned claims (see paras. 100-104). Art. 2 Nr. 4 of the Directive does not contribute to resolving the legal questions at issue.
Whereas Art. While Art. The Directive’s Article 4 does cover the relevant legal questions in the present case. However, its scope is not beyond that of Art. The 101 TFEU and the Court’s subsequent jurisprudence based on Art. 101 and the principle effectiveness. It is therefore reasonable that the AG does not focus his legal reasoning directly on the Directive, which has no direct effect on individuals (see para. 142), but on Art. 101 and the principle effectiveness. This allows him to avoid taking a stance on the temporal application of the Directive, as clearly Art. The 101 applies ratione temporis. (See paras 73 to 81 of the Opinion. See further information on these distinctions in a previous paper I wrote on the Volvo case, here
, and a blog post that is shorter on the Paccar Case, here
). The AG’s argumentation is relatively thin on the question of whether national laws on the legal profession, interpreted in the way laid out by referring court, violates principle of effectiveness. The AG and the Court cannot answer the question of whether there are other viable options for pursuing a claim, without assigning it an alternative legal service provider or “lawsuit vehicles”. This is because national law governs the matter. The AG raises important questions and asks that the referring court examine carefully if the assignment model is indeed the only way to effectively pursue claims. One could think of different types of assignments (e.g. Non-fiduciary or individual actions (see paragraphs 122, 124) may allow actions that are not in conflict the national procedural law. If there were such alternatives and their implementation did not make private enforcement too difficult, the principle underlying Art. 101 TFEU is not violated. The AG interprets the LG Dortmund’s order for referral in such a way as to imply that the referring courts implies that viable alternatives do not exist. As the AG points out, such findings on national laws by the referring court in first instance will not be checked by ECJ, but they may be subject to judicial scrutiny by appellate courts within the national proceedings (see paragraph 122). The prohibition of the so called assignment model, as the only viable option for engaging in private enforcement, is contrary to the principle effectiveness in conjunction with Article 101 TFEU (see para 126). 101 TFEU (see para 126).
Justification of Violations of the Principle of Effectiveness?
Surprisingly, the AG then moves on to enquire whether violations of the principle of effectiveness might be “justified with a view of protecting a fundamental principle” (para 128) in the legal order of the respective Member State. This could be the result of the confusion between the principle of efficacy and Art. The AG had proposed 47 CFR before. It is not convincing. The Charter (Art. 52 CFR is not usually applied to violations of principle of effectiveness. In addition, the assessment of violations to the principle of efficacy already includes a balancing between objectives and consideration of “all aspects” of the national regime (see also paragraph 121 of the opinion). In cases of conflict between the effectiveness and autonomy of national procedural laws, the legal test for the principle already contains a balancing as it states that in cases of legal conflict, the principle itself contains a balancing because it states that in cases of legal conflicts, the principle itself contains a balancing since it establishes only in cases in which the pursuit of rights protected by EU law is rendered impossible or excessively hard, the national legal standards must be interpreted according to EU law or left unapplied. The effectiveness principle and a substantive EU law norm only take precedence when it is necessary to protect the effectiveness and supremacy EU law. In a concrete situation, the only reason to consider other general principles as limiting the effectiveness principle would be if such general principles were regulated by EU law. So, for example, Art. 101 TFEU against other treaty provisions and general principles of EU Law. This balance cannot be achieved by comparing the legal principles of member state judicial systems with Art. 101 TFEU interpreted together with the principle effectiveness takes precedence over national laws and constitutional principles. The AG’s proposal in para. The supremacy of EU Law is violated by 128 and the Court should not follow it. It is clear from the wording and the context that the AG relates his reasoning to national legal principles because these are precisely those which were brought forward by the defendants who argued based on the national laws prohibiting the assignment of claims. Whereas the AG makes reference to the jurisprudence of the Court supporting his reasoning (see footnotes 65-67), it is questionable whether these cases concern a comparable situation. Two quoted judgments concern the principle of legal certainty (see here
at para 74 and here
at para 28) which is a general principle protected by EU law. As outlined before, a balancing of general principles of EU law with the principle of effectiveness might be easier conceivable than a balancing with national legal principles. However, the jurisprudence of the Court in the quoted case law does not clearly distinguish these cases.
Besides, the quoted case law does not imply that national legal principles could be used as means of justification for violations of a principle of EU law. They merely establish that the “question whether a national procedural provision renders the exercise of an individual’s rights under the European Union legal order impossible in practice or excessively difficult must be assessed taking into consideration, as appropriate, the principles which lie at the basis of the national legal system concerned” (see here
at para 48 as quoted by the AG). The fact that such legal principles should be taken into consideration could (and should) be interpreted in a way that these considerations only serve the determination of whether indeed the national legal procedure is rendering the pursuance of the EU-law-protected right excessively difficult or not. In fact, in the quoted case, the ECJ asks the referring national court to examine its own national procedure (possibly in light of principles which lie at the basis of the national legal system), see paras 49-56 of the aforementioned judgment. Understood in this way and given that context, the jurisprudence quoted by the AG does not support a general possibility to justify violations of the principle of effectiveness with principles which lie at the basis of the national legal system.
As the AG does not find sufficient grounds for a justification (see paras 133-136), this dogmatical argument has no impact on the outcome of the case. However, given the high relevance of the principle of effectiveness for nearly every private enforcement case and for EU law generally, the Court should be careful to create a precedent for easily made justifications for violations of that important principle.
Consequences for the National Proceedings and Beyond
As a complete prohibition of the assignment of claims to alternative legal service providers infringed the principle of effectiveness of Art. 101 TFEU, according to the AG, the referring national court needs to either interpret its national laws in accordance with EU law in order to avoid this situation (see para 141), or it needs to leave the relevant national laws (here the laws possibly prohibiting the assignment to alternative legal service providers) unapplied (see para 143). It seems that the national court only considered the latter of these two options. That perception is shared by the AG (see para 141). However, interpretation in accordance with EU law might be the more viable option to solve this case. Actually, when looking beyond the one case which is subject to this referral, there were multiple diverging approaches taken by German courts dealing with similar cases either in the same or other private enforcement cartel cases. Some had indeed interpreted the law of the legal profession restrictively and denied the possibility of assigning claims to alternative legal service providers (see for example LG Mainz, judgment of 7.10.2022 – 9 O 125/20; LG Stuttgart, judgment of 28.4.2022 – 30 O 17/18 and judgment of 20.1.2022 – 30 O 176/19; LG Hannover, judgment of 1.2.2021 – 18 O 34/17). Most recently, in one of the first appeal decisions on this matter in Germany, the Oberlandesgericht Stuttgart held
that the assignment of claims to an alternative legal service provider did not infringe the German laws on the legal profession and was therefore valid. Notably, this judgment by the appellate court in Stuttgart was rendered without prior reference to the ECJ. As the full judgment has not been published yet, it remains to be seen whether the line of argumentation is based solely on German law or also encompasses references to an interpretation of the German RDG in accordance with EU law. In any event, the appeal on grounds of law to the German Supreme Court (BGH) is admissible so one can expect that the last word on this matter has not been spoken yet.
For the present case, this judgment by the Stuttgart higher regional court is already relevant as it shows that an interpretation of national law in conformity with EU law is – opposed to the AG’s reading of the LG Dortmund’s referral – possible. This option should be further explored by the Dortmund regional court when it needs to decide on the matter after the procedure before the ECJ is concluded. Additionally, an interpretation of the national procedural laws, especially the RDG, in conformity with EU law might benefit from more convincing legal reasoning. As the AG outlined, for leaving the national laws unapplied due to the principle of effectiveness of Art. 101 TFEU, the LG Dortmund would need to argue that there were no other ways to effectively bring the claims. Despite the fact that the currently used assignment model is arguably the easiest and most favourable model for mass litigation, mere advantageousness does not suffice. It is uncertain whether appellate courts would concur with the LG Dortmund that bringing individual claims or bundled claims purchased by one legal entity would not be effective ways for private enforcement in these particular cases. Especially with regard to the specifics of the market for timber which is characterized by B2B trade of assumingly substantial amounts of goods, it is not inconceivable that individual claims would be worthy of being pursued such as it was the case in the trucks cartel litigation where we saw both individual as well as bundled litigation (i.a. through the same assignment model), too.
One may recall that the German Bundesgerichtshof has, in its jurisprudence in other areas of law, favoured a more open interpretation of the law of the legal profession and allowed the assignment of rights to alternative legal service providers for the bundling of claims in a number of areas (see for example BGH of 13.6.2022, VIa ZR 418/21 – financialright
; and 13.7.2021, II ZR 84/20 – AirDeal
). I and others have argued in favour of the application of these arguments to cases of collective private enforcement through the assignment and bundling of claims (see for example here
and here). The principle of effectiveness of Art. 101 TFEU has always been one argument in favour of such an interpretation. If the ECJ follows the AG in the case of ASG 2, it will be an argument which German courts will not be able to disregard anymore. Therefore, the decision will have an influence far beyond the referred case and concerns private enforcement more generally. The so-called ‘assignment model’ will likely stay the most important tool for private enforcement. The directive on collective redress, although being transposed in Germany in a broad way, applying i.a. to cartel damages claims, cannot be expected to fully resolve the existing issues and will likely not replace the assignment model (on the general development of collective redress see also Hornkohl, here in German and in English
; see on practical implications also Imgarten (2024)).
