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JUDGMENT OF 20. 9. 2001 — CASE C-453/
JUDGMENT OF THE COURT 20 September 2001 *
In Case C-453/99,
REFERENCE to the Court under Article 234 EC by the Court of Appeal (England amd Wales) (Civil Division) for a preliminary ruling in the proceedings pending before that court between
Courage Ltd
and
Bernard Crehan
and between
Bernard Crehan
and
Courage Ltd and Others,
on the interpretation of Article 85 of the EC Treaty (now Article 81 EC) and other provisions of Community law,
*Language of the case: English.
COURAGE AND CREHAN
THE COURT,
composed of: G.C. Rodríguez Iglesias, President, C. Gulmann, M. Wathelet (Rapporteur) and V. Skouris (Presidents of Chambers), D.A.O. Edward, P. Jann, L. Sevón, E Macken and N. Colneric, J.N. Cunha Rodrigues and C.W.A. Timmermans, Judges,
Advocate General: J. Mischo, Registrar: L. Hewlett, Administrator,
after considering the written observations submitted on behalf of:
— Courage Ltd, by N. Green QC, instructed by A. Molyneux, Solicitor,
— Bernard Crehan, by D. Vaughan QC and M. Brealey, Barrister, instructed by R. Croft, solicitor,
— the United Kingdom Government, by J.E. Collins, acting as Agent, and K. Parker QC,
— the French Government, by K. Rispal-Bellanger et R. Loosli-Surrans, acting as Agents,
— the Italian Government, by U. Leanza, acting as Agent,
COURAGE AND CREHAN
2 The four questions have been raised in proceedings between Courage Ltd (hereinafter 'Courage') and Bernard Crehan, a publican, concerning unpaid supplies of beer.
Facts of the case and the questions referred for a preliminary ruling
3 In 1990, Courage, a brewery holding a 19% share of the United Kingdom market in sales of beer, and Grand Metropolitan pic (hereinafter 'Grand Met'), a company with a range of catering and hotel interests, agreed to merge their leased public houses (hereinafter 'pubs'). To this end, their respective pubs were transferred to Inntrepreneur Estates Ltd (hereinafter 'IEL'), a company owned in equal shares by Courage and Grand Met. An agreement concluded between IEL and Courage provided that all IEL tenants had to buy their beer exclusively from Courage. Courage was to supply the quantities of beer ordered at the prices specified in the price lists applicable to the pubs leased by IEL.
4 IEL issued a standard form lease agreement to its tenants. While the level of rent could be the subject of negotiation with a prospective tenant, the exclusive purchase obligation ('beer tie') and the other clauses of the contract were not negotiable.
5 In 1991, Mr Crehan concluded two 20-year leases with IEL imposing an obligation to purchase from Courage. The rent, subject to a five-year upward- only rent review, was to be the higher of the rent for the immediately preceding period or the best open market rent obtainable for the residue of the term on the other terms of the lease. The tenant had to purchase a fixed minimum quantity of specified beers and IEL agreed to procure the supply of specified beer to the tenant by Courage at the prices shown in the latter's price list.
JUDGMENT OF 20. 9. 2001 — CASE C-453/
6 In 1993, Courage, the plaintiff in the main proceedings, brought an action for the recovery from Mr Crehan of the sum of GBP 15 266 for unpaid deliveries of beer. Mr Crehan contested the action on its merits, contending that the beer tie was contrary to Article 85 of the Treaty. He also counter-claimed for damages.
7 Mr Crehan contended that Courage sold its beers to independent tenants of pubs at substantially lower prices than those in the price list imposed on IEL tenants subject to a beer tie. He contended that this price difference reduced the profitability of tied tenants, driving them out of business.
8 The standard form lease agreement used by Courage, Grand Met and their subsidiaries was notified to the Commission in 1992. In 1993, the Commission published a notice under Article 19(3) of Council Regulation No 17: First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition, 1959-1962, p. 87), stating its intention to grant an exemption under Article 85(3) of the Treaty.
9 That notification was withdrawn in October 1997 following the introduction by IEL of a new standard form lease agreement, which was also notified to the Commission. The new lease is, however, not at issue in the main proceedings, as the actions brought concern the operation of the beer tie under the old lease.
10 The considerations which led the Court of Appeal to refer questions to the Court of Justice for a preliminary ruling were as follows.
JUDGMENT OF 20. 9. 2001 — CASE C-453/
16 In those circumstances, it decided to stay proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
'1. Is Article 81 EC (ex Article 85) to be interpreted as meaning that a party to a prohibited tied house agreement may rely upon that article to seek relief from the courts from the other contracting party?
- If the answer to Question 1 is yes, is the party claiming relief entitled to recover damages alleged to arise as a result of his adherence to the clause in the agreement which is prohibited under Article 81?
- Should a rule of national law which provides that courts should not allow a person to plead and/or rely on his own illegal actions as a necessary step to recovery of damages be allowed as consistent with Community law;
- If the answer to Question 3 is that, in some circumstances, such a rule may be inconsistent with Community law, what circumstances should the national court take into consideration?'
COURAGE AND CREHAN
The questions
17 By its first, second and third questions, which should be considered together, the referring court is asking essentially whether a party to a contract liable to restrict or distort competition within the meaning of Article 85 of the Treaty can rely on the breach of that provision before a national court to obtain relief from the other contracting party. In particular, it asks whether that party can obtain compensa- tion for loss which he alleges to result from his being subject to a contractual clause contrary to Article 85 and whether, therefore, Community law precludes a rule of national law which denies a person the right to rely on his own illegal actions to obtain damages.
18 If Community law precludes a national rule of that sort, the national court wishes to know, by its fourth question, what factors must be taken into consideration in assessing the merits of such a claim for damages.
19 It should be borne in mind, first of all, that the Treaty has created its own legal order, which is integrated into the legal systems of the Member States and which their courts are bound to apply. The subjects of that legal order are not only the Member States but also their nationals. Just as it imposes burdens on individuals, Community law is also intended to give rise to rights which become part of their legal assets. Those rights arise not only where they are expressly granted by the Treaty but also by virtue of obligations which the Treaty imposes in a clearly defined manner both on individuals and on the Member States and the Community institutions (see the judgments in Case 26/62 Van Gend en Loos [1963] ECR 1, Case 6/64 Costa [1964] ECR 585 and Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR I-5357, paragraph 31).
COURAGE AND CREHAN
BRT and SABAM [1974] ECR 51, paragraph 16, ('BRT ľ) and Case C-282/95 P Guérin Automobiles v Commission [1997] ECR 1-1503, paragraph 39).
24 It follows from the foregoing considerations that any individual can rely on a breach of Article 85(1) of the Treaty before a national court even where he is a party to a contract that is liable to restrict or distort competition within the meaning of that provision.
25 As regards the possibility of seeking c o m p e n s a t i o n for loss caused by a c o n t r a c t or by c o n d u c t liable t o restrict o r distort c o m p e t i t i o n , it should be r e m e m b e r e d from t h e outset t h a t , in a c c o r d a n c e with settled case-law, t h e n a t i o n a l courts w h o s e task it is t o apply the provisions of C o m m u n i t y l a w in areas within their jurisdiction m u s t ensure t h a t those rules t a k e full effect a n d m u s t protect t h e rights which they confer o n individuals (see inter alia t h e judgments in Case 106/77 Simmenthal [1978] E C R 6 2 9 , p a r a g r a p h 16, a n d in Case C-213/ Factortame [1990] E C R 1-2433, p a r a g r a p h 19).
26 T h e full effectiveness of Article 8 5 of the Treaty a n d , in particular, the practical effect of the prohibition laid d o w n in Article 85(1) w o u l d be p u t a t risk if it were n o t o p e n t o any individual t o claim d a m a g e s for loss caused t o him by a c o n t r a c t or by c o n d u c t liable t o restrict o r distort c o m p e t i t i o n.
27 Indeed, the existence of such a right strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community.
JUDGMENT OF 20. 9. 2001 — CASE C-453/
28 There should not therefore be any absolute bar to such an action being brought by a party to a contract which would be held to violate the competition rules.
29 However, in the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive directly from Community law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render practically impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness) (see Case C-261/95 Palmisani [1997] ECR I-4025, paragraph 27).
30 In that regard, the Court has held that Community law does not prevent national courts from taking steps to ensure that the protection of the rights guaranteed by Community law does not entail the unjust enrichment of those who enjoy them (see, in particular, Case 238/78 Ireks-Arkady v Council and Commission [1979] ECR 2955, paragraph 14, Case 68/79 Just [1980] ECR 501, paragraph 26, and Joined Cases C-441/98 and C-442/98 Michailidis [2000] ECR I-7145, paragraph 31).
31 Similarly, provided that the principles of equivalence and effectiveness are respected (see Palmisani, cited above, paragraph 27), Community law does not preclude national law from denying a party who is found to bear significant responsibility for the distortion of competition the right to obtain damages from the other contracting party. Under a principle which is recognised in most of the legal systems of the Member States and which the Court has applied in the past (see Case 39/72 Commission v Italy [1973] ECR 101, paragraph 10), a litigant should not orofit from his own unlawful conduct, where this is proven.
JUDGMENT OF 20. 9. 2001 — CASE C-453/
Consten and Grundig v Commission [1966] ECR 382). That case-law concerns the conditions for application of Article 85 of the Treaty while the questions put before the Court in the present case concern certain consequences in civil law of a breach of that provision.
36 Having regard to all the foregoing considerations, the questions referred are to be answered as follows:
— a party to a contract liable to restrict or distort competition within the meaning of Article 85 of the Treaty can rely on the breach of that article to obtain relief from the other contracting party;
— Article 85 of the Treaty precludes a rule of national law under which a party to a contract liable to restrict or distort competition within the meaning of that provision is barred from claiming damages for loss caused by performance of that contract on the sole ground that the claimant is a party to that contract;
— Community law does not preclude a rule of national law barring a party to a contract liable to restrict or distort competition from relying on his own unlawful actions to obtain damages where it is established that that party bears significant responsibility for the distortion of competition.
COURAGE AND CREHAN
Costs
37 The costs incurred by the United Kingdom, French, Italian and Swedish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT,
in answer to the questions referred to it by the Court of Appeal (England and Wales) (Civil Division) by order of 16 July 1999, hereby rules:
- A party to a contract liable to restrict or distort competition within the meaning of Article 85 of the EC Treaty (now Article 81 EC) can rely on the breach of that provision to obtain relief from the other contracting party.
