The ECtHR increases protection against the actions of inspectors of competition authorities.

On April 4, 2023, the European Court of Human Rights (“ECtHR”) issued a judgment in the case of UAB Kesko Senukai Lithuania v. Lithuania. The Court found that Lithuania had violated article 8 of the European Convention on Human Rights (“ECHR”) by failing to provide sufficient judicial safeguards to review the actions of the Lithuanian competition authority (“LCA”) during a dawn raid.

The judgment is available here: Application no. 19162/19, Case of UAB Kesko Senukai Lithuania v. Lituania

Background:

The dispute stems from the dawn raid carried out by the LCA in April 2018 at the headquarters of UAB Kesko Senukai Lithuania (“UAB”) in the context of an investigation of potential anticompetitive conducts.

Although the LCA had judicial authorization, UAB claimed before the Lithuanian Competition Council (“Council”) that the dawn raid should be declared illegal for (i) the indiscriminate seizure of information outside the scope of the investigation; and (ii) the limitation of its right to contact external counsel at the initial stage of the investigation. The Council rejected both arguments.

UAB appealed before the Vilnius Regional Administrative Court (“Court”) in July 2018. The Court refused to examine the merits of the case and dismissed the appeal based on the lack of subject matter jurisdiction. In the absence of a fine against UAB, the Court could not assess any legal consequences resulting from the dawn raid. 

In August 2018, UAB appealed before the Lithuanian Supreme Court. The company alleged that the Law on Competition of Lithuania allowed appeals against Council decisions regarding the actions of its officials when they may have injured its rights. It also argued that should the Council decide to close the investigation, there could be no sanctioning decision against which to appeal—which in turn would prevent the company from challenging the violations allegedly suffered. Consequently, there might not be an avenue for judicial review on the alleged illegality of the dawn raid.

The Supreme Court dismissed UAB’s appeal, reiterating that only decisions and/or actions that injure a complainant’s rights, and therefore encompass a legal interest to defend, can be appealed. It also found that appeals against LCA’s actions can only be filed once the Council has issued a decision or the action has produced material legal consequences. In that case, the company could also bring a damages claim in the civil jurisdiction.

In March 2020, the Council closed the investigation against UAB, not finding sufficient evidence of the prohibited conduct.

Complaint and pleadings before the ECtHR:

After exhausting all domestic judicial remedies the company filed in April 2019 a complaint before the ECtHR against the Government of Lithuania for an alleged violation of articles 6 (right to a fair trial), 8 (right to respect for home and correspondence) and 13 (right to an effective remedy). UAB argued that the failure to obtain a judicial ruling on the alleged illegality of the dawn raid constituted a disproportionate interference with the right to respect for home and correspondence. 

First, UAB claimed that the dawn raid should have been declared illegal for having exceeded the limits established by law, but this was impossible in the absence of effective judicial control mechanisms.

Second, UAB argued that the Council’s decision to close proceedings gave rise to a paradox: a favorable decision has prevented UAB from claiming damages from the dawn raid—since, according to the interpretation made by the Lithuanian courts, there would be no decision or action to challenge. 

Finally, UAB also alleged that the possibility of bringing a damages claim against the Competition Authority was not sufficient to repair the damage caused by the indiscriminate seizure of large amounts of confidential information—and not an economic loss.

Judgment of the ECtHR:

The ECtHR stated that the subject matter of the dispute was not the legality of the LCA’s actions but whether the refusal of the Lithuanian courts to hear the case was justified.

First, the ECtHR initially established that article 8 ECHR does not necessarily require an ex post judicial control of the actions of the inspectors to protect the right to respect for home and correspondence. In fact, it highlighted the limits that the Lithuanian Law on Competition already imposes on the LCA’s investigation powers.

However, according to the ECtHR, UAB did have a specific legal interest to clarify whether the dawn raid had violated the company’s right to respect for its home and correspondence.

To protect this right, the ECtHR found that the courts should have the possibility of hearing the case. Hence, the illegality was not the dismissal of the case itself but the absence of a judicial remedy to review the actions of the competition authorities. Given the evidence of possible irregularities by the inspector’s team, the flat refusal of the courts to rule on the merits without considering the specific circumstances of the case violated the ECHR by failing to ensure sufficient judicial protection.

In addition, the closure of the investigation entailed an even greater harm. In this regard, the lack of judicial review made it impossible for an independent and impartial domestic authority to assess the alleged violation of UAB’s rights.

Thus, even though the ratio decidenci seems to be based upon the right to a fair trial (article 6 ECHR) and to an effective remedy (article 13 ECHR), the judgment finds a violation of the right to respect for home and correspondence (article 8 ECHR). Therefore, the ECtHR concludes that it was not necessary to rule on whether the other rights had been violated as they had all been subsumed under the claim relating to article 8 ECHR.

Increased protection of the rights of defense of the inspected

This decision of the ECtHR further develops the case law on the protection of the rights of the companies during a dawn raid. The Court of Justice of the European Union (“CJEU”) and the General Court (“GC”) have recently ruled on the European Commission’s obligations to guarantee the rights of defense of companies under an investigation. Specifically, the Commission must keep records of all evidence of a possible involvement in anticompetitive conducts and to make them available to the companies concerned (see post on CJEU’s Intermarché judgment and GC’s Qualcomm judgment).

In the present case, the ECtHR goes further and does not separately assess whether the competition authority complied with its powers during the dawn raid. Instead, this ruling requires the States part of the ECHR to guarantee effective judicial protection that allows to adequately and effectively safeguard the right to respect for home and correspondence of the parties concerned against potential abuses and arbitrariness of competition authorities.