Historic Ruling: Biggest Fine in Serbian Competition Law Annulled

A testament to human rights safeguards or show of a deeply flawed system?

Summary

Gecić Law successfully assisted EPS Distribution, the leading regional distribution operator, in obtaining a landmark judgement from the Administrative Court that annulled the RSD 330 million fine (cca. EUR 3 million) previously levied against this company by the Serbian watchdog.  The court confirmed that the record fine was imposed in violation of the basic principles of national and EU competition law, as well as ECHR guaranteed human rights.  After a long and tumultuous battle, which took years and a total of three judgements, EPS Distribution finally succeeded in repealing the Serbian competition authority’s decision in full, including the biggest fine ever imposed via Serbian competition enforcement, and secured the reimbursement of the total amount, plus cca. EUR 300,000 of statutory interest.

In particular, last seven months have been anything but boring in the Balkans competition circles (as noted by the preeminent competition blog, Chillin’Competition), but the latest landmark decision of the Administrative Court on the annulment of the largest fine ever issued by the national competition authority, certainly represents a watershed moment in Serbian antitrust enforcement and judicial review.  As this drama reaches its epilogue, we analyze the chronological developments and far-reaching consequences this case can have for the future development of competition law in Serbia.

Chronology of Events

December 23, 2016 the Commission for Protection of Competition, Serbian national competition authority (the “NCA”) imposes the biggest fine in its thirteen-year history, since its founding in 2006 (cca. EUR 3 million) against the national Distribution System Operator EPS Distribucija d.o.o. Beograd (“EPS Distribution”), for alleged abuses of dominance (the “Decision”).  Action against NCA’s Decision has no suspensory effect, and, under threat of further penalties, EPS Distribution proceeds to pay the highest ever fine in history of Serbian and regional competition law.

January 23, 2017 – EPS Distribution files a lawsuit against the Decision, contesting both the merits of the case and numerous breaches of due process committed by the NCA.

April 6, 2017 – without holding even an oral hearing or conducting a detailed assessment of disputed facts or points of law, in a deferential and limited, so-called control of legality (contrôle de légalité), the Administrative Court fully rejects EPS Distribution’s lawsuit and confirms the Decision.

July 13, 2017 – EPS Distribution files a request for review of the Administrative Court’s judgment to the Supreme Court of Cassation (the “Supreme Court”), putting additional emphasis on due process issues and the (un)constitutionality of the Competition Act and NCA’s practices – the matter that was subsequently recognized for its magnitude by the National Bar Association, the largest professional organization of lawyers in the region (link), amongst many others.  The state of play has attracted worldwide attention of public institutions and experts both in the field of EU competition law (link) and the energy sector (link).

November 17, 2017 – the Supreme Court establishes that (i) EPS Distribution’s right to a fair trial, as guaranteed by the Serbian Constitution and the European Convention on Human Rights (the “ECHR”) has been unequivocally violated by the Administrative Court and the NCA, and that (ii) neither the NCA nor the Administrative Court properly assessed the alleged abuse of dominance by EPS Distribution.  The Supreme Court orders a retrial.

February 23, 2018 – in the retrial, after rectifying all procedural and substantive errors, the Administrative Court annuls the Decision in its entirety, on all points of fact and law, and returns the case back to the NCA, with mandatory guidance on how to remedy the established violations of procedural and substantive rules (the “Judgment”).

The Judgment

In its Judgment, the Administrative Court found that “the [NCA] violated the law to the detriment of EPS Distribution“, since it failed to properly assess:

  • relevant product and geographic markets,
  • EPS Distribution’s market share,
  • the existence of EPS Distribution’s alleged dominance,
  • the existence of any of the alleged abusive behaviors,
  • “adverse consequences” and effects of the alleged abuse for EPS Distributors’ competitors,
  • effects of said alleged abuses for end consumers,

in other words, none of the elements that have to be assessed in case of an alleged abuse of dominance, prior to even determining the level and, eventual, issuance of a fine.

Further, according to the Administrative Court, the original NCA Decision was made without a proper analysis of evidence and was based on mere assumptions, thus violating EPS Distribution’s right to a fair trial and due process.

Finally, committed errors in fact and law led to an illegally levied fine against EPS Distribution.

The Outcome

Annulment of the record high competition fine ever imposed in Serbia will have multifaceted and equally unprecedented consequences:

  • The NCA must return cca. EUR 3 million to EPS Distribution, together with 11.5% statutory interest (cca. EUR 300,000) – the largest amount ever to be reimbursed by the NCA;
  • The Decision is no longer final and enforceable, and EPS Distribution is granted a new process;
  • In the new procedure, the NCA is mandated to thoroughly examine all points of fact and law regarding the alleged abuse of dominance, and rectify any and all procedural and substantive errors observed by both the Supreme Court and the Administrative Court;
  • In the new procedure, the NCA is strictly bound to respect EPS Distribution’s human rights guaranteed under the Serbian Constitution and the ECHR; and
  • In the new process, the NCA must now adhere to the provisions of the new General Administrative Procedure Act, adopted with the primary aim to robustly increase the level of protection of human rights and strengthen procedural safeguards (link) in all administrative matters, antitrust procedures included.

This is the first case in history of Serbian competition law in which the judicial review resulted in the annulment of an NCA’s decision in its entirety, leading to reimbursement of the biggest fine ever imposed by the Serbian watchdog, together with considerable statutory interest.

The Judgment represents a historic milestone in the development of competition law in Serbia, since it (i) reinforces the right to a fair trial and due process, (ii) calls for a thorough assessment of relevant facts and evidence in each specific case, and (iii) creates a strong incentive for an in-depth judicial control (in terms of both procedure and substance) in all competition matters.

However, the case and its outcome beg the question whether it is possible for an agency-based enforcement model inherently plagued with inquisitorial bias to be adequately cured with the announced statutory amendments?   Or, instead, only the introduction of a robust antitrust tribunal model can guarantee legal and correct outcomes, and, equally important, compliance with the ECHR and the Constitution?   

This is of a particular relevance in Serbia, being a jurisdiction in which the highest criminal fines for companies are capped at RSD 500 million (cca. EUR 4.2M), and can be imposed only following full-fledged criminal proceedings before a court of law.   As the law currently stands, the NCA, as an administrative agency can issue and enforce fines equal and even higher than that of a court of law in criminal proceedings.  Against this backdrop, it is self-evident that two statutes, the Competition Act and the Corporate Criminal Liability Act, cannot coexist in their current forms as parts of a coherent legal system, one that Serbia endeavors to achieve. 

The proverbial ball is now both with the Serbian Constitutional Court, whose decision on constitutionality of the Competition Act is still pending since 2015, as well as with the European Commission, as the chief architect responsible for the antitrust model introduced in Serbia and the region.

The Gecić Law team advising EPS Distribution included partner Bogdan Gecić, counsel Marija Papić, and associates Miluša Okiljević, Tatjana Sofijanić and Ivana Stojanović, as well as litigation head Jovan Rajković and senior counsel Ognjen Colić.

 

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