The Ministry of Justice has prepared a bill to transpose the European Union DireCtive 2019/1 (ECN+ Directive) to enhance competition supervision, which, as an important aspect, provides for the fining of undertakings outside offence proceedings. Under the same rules of procedure as the fining, the bill makes it possible to prescribe a cessation of the violation or also to approve assumption of an obligation. It is also possible to terminate proceedings without applying competition supervision measures, including on the grounds that the case is not a priority. The person subject to proceedings is obliged to provide information and to assist.
The Competition Authority had an advisory role in the preparation of the bill, provided opinions on it and explained the meaning and possible effects of the amendments. The first versions of the bill were prepared in the Ministry of Justice in 2021, after which it passed the round of approval. Several discussions have taken place, as a result of which the Ministry has made changes to the text of the bill and supplements to the explanatory memorandum. At the end of 2023, the bill remained pending the decision of the Government of the Republic, which was reached in mid-February 2024. Negotiations prior to this led to a number of significant amendments, while the proposed improvements on some issues were abandoned.
The deadline for transposition of the ECN+ Directive was 4 February 2021 and to date Estonia is the only Member State that has not transposed the Directive. In connection with exceeding the deadline, the European Commission initiated infringement proceedings against Estonia (No 2021/0112) and on 18 September 2023 the Commission brought an action against Estonia to the Court of Justice concerning the failure of a Member State to fulfil its obligations.
Below is an overview of some of the most important topics that we dealt with in 2023.
Distinguishing provision of assistance from self-incrimination
In her opinion on the bill, the Chancellor of Justice has raised the question of whether the extensive obligation to provide information to a person subject to penal proceedings under the bill is in conformity with the constitutional privilege of non-self-incrimination (nemo tenetur se ipsum accusare). Pursuant to subsection 3 of § 22 of the Constitution of the Republic of Estonia, no one shall be compelled to testify against himself or herself, or against those closest to him or her. In the analysis of the fundamental rights of the bill it was concluded that the scope of the right to remain silent granted to natural persons (including the privilege of non-self-incrimination) is not equally transferable to legal persons.
When talking about competition supervision, it is important to bear in mind that it examines an undertaking’s market activities, and not the criminal or misdemeanour matters of natural persons associated with it. The person subject to the proceedings is the person forming the undertaking, which in the vast majority of cases is a legal person. For this reason, this is not a typical criminal proceeding, in which a person faces alone the powerful penal system of the state, and through it the entire state apparatus.1 This begs the question whether the representative of the legal person forming the undertaking should be able to refuse to provide information in the proceedings as if they were a natural person facing criminal charges. The answer to this question is negative. The privilege of non-self-incrimination in competition supervision proceedings cannot be so broad as to extend to the right not to provide information at all and to remain silent.
For the effective conduct of proceedings in competition cases, a limited obligation to assist is prescribed for the person subject to the proceedings.2An undertaking whose activities are associated with an infringement of competition law may refuse to provide the Competition Authority with the information necessary to investigate and prove the infringement only in limited cases. Similar to the Directive, the bill restricts the right to request information from the person subject to the proceedings in such a way that the person may not be compelled to admit the infringement. Consistent case-law of the Court of Justice confirms that it is possible to compel a legal person to provide all necessary information concerning such facts as may be known to it and to disclose such documents relating thereto as are in its possession, even if they may result in self-incrimination.3 It is prohibited to be compelled to give answers that could be considered as an admission of guilt. The provision of the right to request information in the Directive bears a full harmonisation requirement and therefore the Member State does not have discretion as to its wording and content. Otherwise, the directive has not been correctly transposed by the Member State, which leads to substantive infringement proceedings before the Court of Justice.
The Competition Authority approached the other European competition authorities with the question of how other countries, when transposing the directive, have distinguished a person’s obligation to assist from the privilege of non-self-incrimination. To this end, the Authority examined whether the competition authorities of other European countries may require from a person, without said person being compelled to plead guilty to the infringement, information: (a) which contains evidence that can be used against them in imposing a fine as a result of competition supervision proceedings (hereinafter also referred to as competition fine proceedings); (b) where not only the information available is required, but where the addressee must also prepare information in order to respond (for example, explain their price list, provide data and calculations on the cost-basis of the price). Secondly, the Authority asked whether the person subject to the proceedings could rely on the so-called right to remain silent in competition fine proceedings and refuse to answer questions which do not compel the person to admit to the commission of the infringement.
Responses were received from the competition authorities of Austria, Belgium, the Czech Republic, the Netherlands, France, Sweden, Germany, Slovakia, Slovenia and Spain, and the European Commission. The vast majority of9 respondents stated that information can be required from the person subject to the proceedings to be used as evidence against them, which does not concern only existing documents but may include an obligation to compile, explain, justify, calculate, etc. The obligation of the person subject to the proceedings to provide assistance is limited with the prohibition to be compelled to give incriminating testimony, outside of this there is no right to remain silent as inherent in criminal proceedings.
Previous replies from Lithuania, Latvia and Finland also showed that undertakings held liable in competition supervision proceedings do not have the right to refuse to provide information and explanations. The person conducting the proceedings is prohibited from compelling the person subject to the proceedings to answer questions that would directly lead to the admission of the infringement. In other matters, there is an obligation to assist, not only including the obligation to provide the required documents, but also to provide explanations, etc.
While with regard to the previous issue of the obligation to assist, the Ministry limited itself to supplementing the explanatory memorandum, on the following issues amend[1]ments were made to the provisions of the bill.
Verification of the relevance of information after a search
At the initiative of the Estonian Bar Association, the bill established the right of access of the person subject to the proceedings in the procedure for the initial examination of the data seized during a search. This means that if the Competition Authority takes data carriers with them during a search or makes copies of them, the person subject to the proceedings has the right to be present when the Competition Authority opens the seal and proceeds with further examination to extract relevant information. The amendment was considered necessary, in particular, to protect the information submitted in a client-lawyer relationship of trust subject to LPP (legal professional privilege) which the person conducting the proceedings does not have the right to access. The provisions in the bill concerning LPP have also been significantly clarified in accordance with the comments received from the Estonian Bar Association.
Regarding the verification of the relevance of the information, the bill was clarified with regard to the reimbursement of procedural costs and the possibility of the person subject to the proceedings being reimbursed for the costs incurred by the presence of their representative in the further examination of the information was expressly excluded.
Court fines and methodology for imposing fines
The Competition Authority has drawn attention to the need to set out grounds for imposing a fine in the law. Previously, the only criterion laid down by law was 10% of an undertaking’s worldwide turnover, which according to Article 15 of the ECN+ Directive constitutes the maximum not the minimum amount. From the point of view of fundamental rights, the formation of the amount of the fine is certainly an important issue, the grounds for which must be provided for by law with sufficient precision. In view of this, the bill set out the grounds for determining the basic amount of the fine on which the European Commission is relying in its calculation of fines.
The Ministry of Justice specified in the bill the methodology for calculating the amount of the fine, but also provided for the transition from the system of administrative fines to the so-called court fines. This means that the Competition Authority will not impose a fine itself, the administrative court does, and we will only make a request to them. A system like this is not common in the European Union, nor does the European Commission use it. Still, it is in place in Finland, but Sweden, for example, recently reversed course and moved from court fines to administrative fines imposed by the competition authority.
Reimbursement of procedural costs
In addition to the above, it is worth mentioning separately that in 2023 the Competition Authority submitted its motions to amend regarding the provision setting out the reim[1]bursement of procedural costs to the person subject to the proceedings out of court at their request. The Competition Authority should, by means of an administrative act, decide on the justification of reimbursement of the costs of legal aid, economic expert assessments, translations and the like, inter alia, if a violation cannot be established in the proceedings and the matter does not reach the court.
As far as the Competition Authority is aware, no other country which has transposed the ECN+ Directive is reimbursing an undertaking subject to proceedings for the legal assistance and other procedural costs incurred in the proceedings prior to the notification of the assessment whether competition law has been violated (i.e. the lodging of a formal complaint or a (fine) decision). The exception is Hungary. The Estonian Competition Authority’s questions were answered by 22 competition authorities from the following countries: Austria, Belgium, Bulgaria, France, Croatia, Germany, Ireland, Greece, Cyprus, Lithuania, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Romania, Slovakia, Slovenia, Finland, Denmark, Spain, Hungary. In addition, the European Commission provided its input.
In competition supervision proceedings, a person is not entitled to claim reimbursement of procedural costs if the proceedings against such a person are terminated without taking measures. Nor can applications for reimbursement of costs for legal assistance be filed in pre-action proceedings, nor will the competition authorities examine such applications or decide whether the procedural costs are justified. Only the Hungarian competition authority is obliged to reimburse the person subject to the proceedings for the costs of legal assitance incurred during pre-action proceedings outside court costs and state liability. German law does provide for the right of a person subject to procedural acts in a fine procedure to claim reimbursement of costs to a limited extent, but only with regard to searches or the seizure of documents. Costs of legal assistance must relate to procedural acts carried out in relation to the relevant persons. The costs of other contractual representation and the exercise of the right of defence are not subject to reimbursement.
On 11 March 2024, the Economic Affairs Committee of the Riigikogu presented the bill for the first reading. During the proceedings in the Riigikogu, all interest groups are once again invited to participate in the process of discussion of the bill, so the amendments described above may not be final, i.e. the final text of the bill may change compared to the version sent to the Government of the Republic.
1Vt Heili Sepp ja Eerik Kergandberg. Põhiseaduse kommenteeritud väljaanne, II pt paragrahv 22 (https://pohiseadus.ee/sisu/3493), p 7. 10 Direktiivi 2019/1 artikkel 8, aga ka artikkel 6 (1) b. 11 Vt Euroopa Kohtu 02.02.2021 kohtuotsus asjas C481/19 DB v Commissione Nazionale per le Società e la Borsa (Consob), punkt 46; 18.10.1989 kohtuotsus Orkem vs. komisjon, 374/87, punkt 34;
229.06.2006 kohtuotsus komisjon vs. SGL Carbon, C301/04 P, punkt 41, ja 25. jaanuari 2007. a. kohtuotsus Dalmine vs. komisjon, C407/04 P, punkt 34.
3Vastustest joonistub järgmine pilt: 1a) 10 jaatavat vastust 1b) 11 jaatavat vastust 2) 10 jaatavat vastust