The CJEU judgement on the 14th of March 2019 in the Vantaan kaupunki case shows the increasing spillover effects of the public enforcement of competition law on the private enforcement thereof. The CJEU found that the concept of ‘undertaking’ as autonomously interpreted in competition law is applicable when claiming for damages on the basis of breaches of EU competition law. This has far-reaching consequences, since it implies that both the principles of parental liability and economic continuity are henceforth part of the national rules on the private enforcement of EU competition law. This triggers some reflections on corporate law on voluntary winding-up in general and the usefulness of focussing on the economic reality outside competition law.
The rise of private enforcement as sparked by the main public enforcement actor
Since the seminal CJEU decision Courage v Crehan in 2001, private enforcement of EU competition law has been steadily on the rise. The main idea is that (natural and legal) persons can suffer harm from infringements of EU competition law, such as collusive practices (art. 101 TFEU) and abuse of dominance (art. 102 TFEU). Hence, they should have the possibility to file damage claims before a national court. This way, the compensatory function of private enforcement complements the traditional punitive and deterrent functions of public enforcement. Nevertheless, it have been the initiatives of the European Commission, being the main public enforcement actor, that sparked the proliferation of damage actions for breaches of EU competition law (the Green Paper 2005 and White Paper 2008 eventually led to the adoption of Directive 2014/104/EU). Consequently, there has always been the concern that the ideas of public enforcement would spill over to private national damages law. The judgement of the CJEU on the 14th of March 2019 provides a clear example of such a spillover effect.
Concise overview of Vantaan kaupunki case
The Vantaan kaupunki judgement concerns a preliminary ruling as requested by the Finnish Supreme Court in a damage claim based on a cartel in the Finnish asphalt market. Some of the defendants did not participate themselves in the cartel, but had continued the economic activity of infringing companies that no longer existed (due to acquisitions and voluntary winding-up). The competent Finnish District Court had ruled that those companies could be held liable, as it would have been practically impossible or unreasonably difficult to obtain compensation if the Finnish rules on civil liability were to be applied. Those rules followed the basic idea that only the legal entity that caused the damage is liable (corporate veil – separate legal entities). According to the District Court, this would undermine the effectiveness of the enforcement of article 101 TFEU. The competent Finnish Court of Appeal, however, held that the principle of effectiveness could not overrule the fundamental principles of the Finnish rules on civil liability. Hence, according to the Court of Appeal, the economic continuity test as developed by the CJEU case law (e.g. EC v Parker 2014) could not be applied.
Both Advocate General Wahl and the CJEU did not follow the reasoning of the Finnish Court of Appeal. In their view, EU law directly governs the determination of the entity that is required to provide compensation for damage caused by an infringement of article 101 (or 102) TFEU. This means that the competition law concept of ‘undertaking’, as developed by the CJEU case law (e.g. C-280/06, par. 38), is also applicable in national antitrust damages cases. Furthermore, both AG Wahl and the CJEU highlighted that such damage actions have an important deterrent function. This clearly shows how the public enforcement mind-set increasingly influences national damages law.
Concept of undertaking henceforth part of (Belgian) rules on private enforcement
Interestingly, the European Commission (as observing party) raised the argument that it is clear form article 11 (1) Directive 2014/104/EU that it is for each national legal system to determine, in accordance with the principles of equivalence and effectiveness, the entity which is to compensate for the damage. The CJEU rejected this argument as that article would only apply to the attribution of liability between the entities, but does not apply to the definition of those entities. To the contrary, according to the CJEU, the wording by article 1 Directive 2014/104/EU confirms that the concept of ‘undertaking’ is applicable in actions for damages under national law for antitrust infringements. This autonomous concept cannot have a different scope as the one in article 23 (2) Regulation no. 1/2003 (on the imposition of fines by the European Commission). This reasoning is to be applied analogously to article I.22, 2° of the Belgian Commercial Code. Consequently, the concept of ‘undertaking’ is applicable in Belgian damage cases for infringements of articles 101-102 TFEU (possibly together with articles IV.1-2 Belgian Commercial Code; article I.22, 1° Belgian Commercial Code). This means that both the principles of parental liability and of economic continuity are henceforth part of the Belgian rules on the private enforcement of EU competition law.
Some reflections on corporate winding-up and the usefulness of focussing on the economic reality
By piercing the corporate veil through holding the successor companies liable following voluntary winding-up, the CJEU let the economic reality prevail on the legal reality. This is justified, as explained above, to guarantee the effectiveness of the enforcement of article 101 TFEU and its deterrent effect. Taking this into account, there are some reflections to be made on corporate voluntary winding-up and the effect it has on other creditors who are unable to set aside the legal reality.
In their seminal article “towards unlimited shareholder liability for corporate torts”, HANSMANN and KRAAKMAN identified voluntary winding-up (“dissolution”) as an exacerbating factor on the negative consequences of limited liability on non-adjusting creditors. Indeed, by voluntarily winding-up the corporation before certain liabilities attach, shareholders can increase the net-assets available for distribution amongst themselves. Ideally, liquidation proceedings would avoid this and would ascertain that all creditors can exercise their claim before the corporation ceases to exist. However, it is far from easy to identify all contingent liabilities during liquidation.
Note the important information-asymmetry underlying this problem: whereas insiders possibly are aware of defective products, violations of competition law, or possible contingent tort claims, the creditors themselves might be unaware of a potential claim they might possess upon winding-up of the corporation. Their damages and their claim possibly materialize only after several years, when their debtor already vanished into thin air. The possibility to evade these creditors generates an opportunistic winding-up incentive for shareholders. This in turn has far-reaching effects: corporate actors being aware of the availability of voluntary winding-up as an exacerbating factor of their limited liability, might not operate with the required amount of care to avoid tort claims for example. In doing so, the cost-internalizing function of the law fails, and costs are externalized to – often the most vulnerable – creditors (consumers, tort claimants etc.), left behind after winding-up. Stated differently: the deterring function of tort claims can be hindered by voluntary winding-up, a lot like the effectiveness of article 101 TFEU can be impaired by it.
So, the powers of the CJEU to set aside the legal reality in competition law, reminds us of an interesting challenge for corporate law: providing a waterproof liquidation procedure following voluntary winding-up, leaving no creditor behind. Other solutions are possible as well, like successor liability, bearing resemblance to the approach of the CJEU in the case discussed here. The Belgian legislator recently devoted his attention to improving the liquidation procedure, as part of the encompassing Belgian company law reform of March 2019, by providing important additional safeguards for creditors (discussed here). For example, limited shareholder liability following dissolution is introduced (article 2:104 WVV). This mitigates the exacerbating effect of voluntary winding-up to an extent.
 E.g. J. KORTMANN, “The EC White Paper on antitrust damage actions: why the Member States are (right to be) less than enthusiastic”, ECLR 2009, 30(7), 340-351.
 This article rules that each Member State has to ensure that undertakings, which have infringed competition law through joint behavior, are jointly and severally liable for the harm caused by the infringement.
 Similarly: C. CAUFFMAN, “Het begrip “onderneming” in de Kartelschaderichtlijn en de (mogelijke) impact op de civielrechtelijke aansprakelijkheid van moedervennootschappen voor gedragingen van hun dochtervennootschappen naar Belgisch recht” in N. CARETTE and B. WEYTS, Verantwoord aansprakelijkheidsrecht, Antwerpen, Intersentia, (131) 143.
 H. HANSMANN and R. KRAAKMAN, “Toward unlimited shareholder liability for corporate torts”, The Yale Law Journal 1991, (1879) 1884.
 J. VANANROYE, “Kwaliteitscontrole op de vereffening: tijd voor een verandering van focus”, TRV 2011, 529.
 J. MATHESON, “Successor Liability”, Minnesota Law Review 2011, 383.
 E. DE BIE and J. VAN EETVELDE, “De vereffening als sluitstuk van het vennootschapsrecht: soepel waar mogelijk, streng waar nodig”, in M. WYCKAERT (ed.), Themis vennootschapsrecht, die Keure, 2018.