The CJEU confirms that a claim may not be served on a subsidiary that is not a defendant

In January 2024, we published an entry (LINK) on Case C-632/22, on the question of whether it was possible to serve a claim for antitrust damages on an unsuccessful subsidiary, where we analysed the non-binding opinion of the Advocate General of the European Union. Now, the CJEU puts an end to the debate and confirms that the claim must be served on the defendant entity and cannot be served on its subsidiary.

Background

Case C-632/22 arises from a question referred for a preliminary ruling by the Spanish Supreme Court in the context of the truck litigation. In July 2018, Transsaqui filed a lawsuit against AB Volvo. Although AB Volvo had its registered office in Sweden, Transsaqui pointed out that the claim had to be served at the address of its Spanish subsidiary Volvo Group España S.A.U. (in Madrid).

AB Volvo was summoned to answer the claim at the domicile of Volvo Group España, which refused the summons, stating that the domicile of its parent company was in Sweden. The commercial court considered that the summons was valid, declared AB Volvo in default and proceeded with the proceedings until a judgment was issued against AB Volvo. Attempts were again made to serve the judgment on the Spanish subsidiary, which again refused service. The judgment became final and Transsaqui requested its enforcement, which was granted by the court.

In light of this, AB Volvo filed an application for review of the default judgment before the Supreme Court. The Supreme Court granted the application for review and agreed to make the following reference to the CJEU for a preliminary ruling:

"1.- In the circumstances of the truck cartel litigation described in this decision, can Article 47 of the Charter of Fundamental Rights of the European Union, read in conjunction with Article 101 of the Treaty on the Functioning of the European Union, be interpreted in such a way that the summons of a parent company against which a claim for damages for a restrictive practice is directed is deemed to have been properly served? so that the service of process on a parent company against which an action for damages for an anti-competitive practice is brought is to be regarded as having been properly effected where service was effected (or attempted) at the address of the subsidiary company domiciled in the State in which the legal proceedings are pending, and the parent company, which is domiciled in another Member State, did not appear in the proceedings and remained in default of appearance?

2.- If the answer to the above question is in the affirmative, is this interpretation of Article 47 of the Charter compatible with Article 53 of the Charter, in the light of the case law of the Spanish Constitutional Court concerning the summons of parent companies domiciled in another Member State in litigation concerning the truck cartel?"

The CJEU decision

In its judgment of 11 July 2024, the CJEU decides whether, in application of the principle of economic unity, a claim for damages for competition against a parent company may be served at the domicile of its subsidiary (domicile which coincides with the Member State where the proceedings have been initiated). All this with the aim of, inter alia, reducing the costs of translation and service of judicial documents and avoiding delays in the proceedings.

In this regard, the CJEU explains that, although the concept of "undertaking" and "economic unit" entail the joint and several liability of the entities that make up the economic unit at the time of the commission of the infringement when the requirements set out in its case law are met, such "undertaking" lacks its own legal personality. Therefore, the victim cannot bring an action against the "company" or “undertaking” but must direct his claim against one of the entities that compose it. In line with the above, the fact that the subsidiary and the parent company constitute a single economic unit does not mean that the subsidiary has been appointed as the person authorized to receive the legal documents addressed to the parent company.

The CJEU is clear in this regard: where the alleged victim of a cartel chooses to direct its action against the parent company rather than against the subsidiary, it cannot then rely on the existence of an economic unit to serve judicial documents on the parent company at the domicile of the subsidiary.

According to the CJEU, neither Article 47 of the Charter nor the useful effect of Article 101 TFEU can justify a different solution, even if the obligation to serve the judicial documents in another Member State creates additional obligations for the plaintiffs. Respect for the right to an effective remedy under Article 47 of the Charter - which, as the CJEU emphasizes, is equally applicable to the Defendant even if he has committed an infringement - requires the actual and effective receipt of the documents by the Defendant and the provision of a sufficient period of time for the latter to prepare his defense.  

With regard to the costs of translation and service of judicial documents, the CJEU indicates that (i) the doubts raised by the Spanish Supreme Court on the possible incompatibility of the Spanish rules on costs (which make an order for costs conditional upon the claim being upheld in full) with EU law (issue addressed in the CJEU judgment of 23 February 2023, case C-312/21, Tráficos Manuel Ferrer, which confirms the compatibility of the Spanish costs regime with European law), do not justify not applying the provisions on the service of judicial documents. The latter correspond to a matter regulated by European Union law as part of the regulatory framework on the coordination of civil proceedings between Member States and judicial cooperation, and must prevail; and (ii) furthermore, the alleged victim could bring his claim against the subsidiary domiciled in the Member State where the proceedings have been initiated if the applicable requirements were met, and thus save the costs of translation or service of judicial documents in another Member State.

As regards delays in the proceedings and the right of everyone to a fair and public hearing within a reasonable time (Article 47 of the Charter), the CJEU notes that this "reasonable time" must be assessed in the light of the circumstances of each case. In this case, taking into account the cross-border nature of the dispute, the delay caused by the obligation to serve judicial documents in another Member State would not imply a breach of the aforementioned Article 47.

Therefore, the CJEU concludes by stating that "Article 47 of the Charter and Article 101 TFEU, read together with Regulation No 1393/2007, must be interpreted as meaning that a parent company against which proceedings have been brought for compensation for damage caused by an infringement of competition law is not validly served with a summons where service of the document instituting the proceedings was effected at the address of its subsidiary domiciled in the Member State in which the proceedings were brought, even if the parent company forms an economic unit with that subsidiary".