European Commission is liable for civil damages for illegally blocking a merger
In 2001, the Commission declared illegal the acquisition of Legrand by Schneider. In 2002, the Commission ordered a diverstiture. Schneider complied and sold Legrand to KKR. Subsequently, Schneider appealed the decision to the Court of First Instance and won. Then, Schneider sued the Commission for damages - and won.
The Court holds that the illegality vitiating the decision of incompatibility confers on Schneider a right to compensation in respect of two categories of financial losses incurred by it. The first comprises the expenses incurred by Schneider relating to its participation in the resumed merger control procedure which was undertaken by the Commission following the annulments pronounced by the Court on 22 October 2002. The second represents the reduction in the divestiture price which Schneider had to concede to Wendel/KKR in order to obtain a postponement of the execution of that divestiture. Two-thirds of the latter loss is to be compensated, since the Court considers that Schneider had itself contributed to its own loss by assuming the real risk that the merger would subsequently be declared incompatible and that resale of the shareholding in Legrand would be the inevitable consequence. The parties must inform the Court of the amount of the first category of loss within a period of three months from the date of delivery of the judgment. The second category of loss shall be assessed by an expert.The virtually unqualified doctrine of sovereign immunity in the U.S. is both of questionable origin and of questionable contemporary value. Holding governments (in addition to individual government officials) accountable for their actions, not just politically and by way of injunction but also in civil actions for damages, is consistent with and (under certain circumstances) compelled by a government under the rule of law. This is a case to watch. The press release is here. The decision is here.
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