Liability of board members and managing directors for antitrust infringements –NO recourse for fines but possible recourse for cartel damages claims
Judgement of the Higher Regional Court (OLG) in Düsseldorf of 27 July 2023 in Case No. VI-6 U 1/22 (Kart)
Cartel members or their board members and managing directors, who violate their fiduciary responsibilities, are not personally liable for fines imposed against the undertaking. In contrast, the Court held that companies can generally seek recourse for cartel damages claims.
Damages from cartel fines and cartel damages claims
If hardcore cartel infringements lead to fining procedures, companies can face significant fines of up to ten percent of the worldwide group turnover. Fines in the hundreds of millions or even billions are therefore almost commonplace. Once fining procedures conclude, further danger looms. Companies that have suffered damage as a result of the infringement can claim compensation for that damage. Cartel damages claims do not have any upper limit, the participants in the cartel are joint and severally liable, and interest applies from the time the damage first occurred. In practice, cartel damages claims often significantly exceed the fines imposed.
Recourse from board members and managing directors who participated in the cartel?
In such cases, companies regularly face the question of whether they can – or even must - seek recourse personally from board members or managing directors that participated in the cartel infringement or breached their supervisory duties for the damages caused by the fines against the company or even for cartel damages claims. In line with the “ARAG Garmenbeck” case, the supervisory board of a stock corporation must independently examine whether cartel damages claims against the company can be enforced against directors. If the supervisory board concludes that the company has enforceable damages claims, the board must pursue these claims unless there are strong reasons in the interests of the company not to do so. Indeed, the personal assets of board members will often not be sufficient to offset the damages caused. However, D&O insurance and the D&O insurer can reduce any liability gap.
For a claim against managing directors and board members and, indirectly, against their D&O insurers to be successful, the board must be personally liable for any antitrust fines imposed on and cartel damages claims awarded against their company. This is a matter of some debate in Germany, and the highest courts have not yet decided the issue. The courts of first instance have had differing views on this issue: the District Courts in Düsseldorf (railway track cartel), Saarbrucken (sanitary cartel) and Düsseldorf (stainless steel) objected to directors being personally liable for antitrust fines against companies. Meanwhile, in an indicative ruling (Hinweisbeschluss), the District Court in Dortmund (railway track cartel) took a different view.
Judgment of the Higher Regional Court in Düsseldorf of 27 July 2023
In its judgment of 27 July 2023, the Higher Regional Court (Oberlandesgericht, OLG) in Düsseldorf confirmed the lower court judgment and – like the District Court in Düsseldorf – held that recourse could not be sought for antitrust fines against companies. Essentially, a company must pay any fine against it to fulfil the fine's preventative purpose. If companies could pass fines on to managing directors and board members, companies could escape their legal responsibility for cartel infringements in the form of fines. The OLG Düsseldorf also rejected the possibility for companies to seek recourse for their fact-finding and defence costs due to the close practical link these costs had to the fines on the company. In contrast, the Court confirmed that managing directors and board members could be found personally liable for damages caused to the company by compensation payments to parties injured by the cartel.
The OLG Düsseldorf has allowed the appeal, paving the way for the German Federal Court of Justice (Bundesgerichtshof, BGH) to clarify this controversial issue of law.
Comments and practical tip
The judgment of the OLG Düsseldorf is persuasive only in certain aspects. If members of company organs were to be found personal liable, it would contradict the preventative purpose of fining companies under antitrust law and is therefore ruled out. In contrast, the position of the OLG Düsseldorf on the ability to seek recourse from directors and board members for damages suffered by a company for compensation paid for cartel damages is not convincing. The Court overlooks the special nature of cartel damages claims law - influenced by EU law. In enacting § 33a of the Act Against Restraints of Competition (GWB), German legislators created an “effective system of civil law sanctions” with “significant deterrent effect,” also to implement EU antitrust law. Subsequently, the BGH recognised the preventative purpose of cartel damages claims and even held that this purpose takes priority over compensation considerations (rail train cartel IV). Accordingly, cartel damages claims and antitrust fines must have the same treatment: both serve preventative purposes. This preventative purpose would not be served if the fine and/or settlement could be shifted to a managing director or board member.
The practical importance of this legal question is significant. Directly at stake is the obligation to assess whether recourse can be sought from board members and, where the chances of success are favourable, to pursue these claims. Indirectly, it affects not “only” whether such risks can be insured, but also the possibility to grant amnesty to board members in order to ensure their cooperation within the framework of the leniency programme. This is particularly important under antitrust law and in practice. It also affects the possible binding effect of the fining decision in regress litigation and the relationship between recourse claims and direct claims against board members for fines under administrative law (§§ 9 and 130 of the Act on Regulatory Offences, OWiG) or compensation (§ 826 Civil Code, BGB).
Moreover, the question of whether recourse can be sought from board members for fines against companies arises not only in antitrust law but also, for example, under data protection law, the Act on Due Diligence in the Supply Chain and capital markets law.
Regardless of how the BGH finally answers this question: managing directors and board members will avoid liability risks if they comply with their compliance obligations and can provide evidence of this – often years later – through careful documentation. If a director or officer has not breached their duties, the company will have no grounds to seek recourse from them, even if the BGH affirms that companies can generally seek recourse for fines and compensation payments.
Dr Christian Heinichen
Dr Moritz Jenne