European Commission publishes guidance for national courts when handling disclosure of confidential information in competition damages claims
(Last updated 12 October 2020)
On 20 July 2020 the European Commission published a “Communication on the protection of confidential information by national courts in proceedings for the private enforcement of EU competition law”. We summarise the guidance and consider the potential impact for different member states.
Jurisdictions updated since 18 August 2020 include France, Poland and Spain.
The Antitrust Directive 2014/104/EU (the “Damages Directive”) sets out a common framework under which individuals and companies can claim damages for infringements of EU antitrust law. The Damages Directive obliges Member States to ensure that national courts have the power to order disclosure of evidence; at the same time, Member States need to ensure that national courts can dispose of effective measures to protect evidence containing confidential information.
The purpose of the communication adopted by the Commission on 20 July 2020 (the “Communication”, available in English here) – which is not binding on national courts and does not amend any procedural rules applicable to civil proceedings in the different Member States – is to provide practical guidance to national courts in establishing effective protective measures. The Communication lists several measures (including redactions, confidentiality rings, use of experts, closed hearing) which national courts may order for the purpose of protecting confidential information in the context of disclosure throughout and after the end of proceedings.
The Communication considers that, in the context of private enforcement of EU competition law, evidence may not always be readily accessible to the party that bears the burden of proof; that is why national courts, upon request of the interested party, may decide to order disclosure of such evidence, provided that (i) the damages claim is plausible, (ii) the evidence sought is relevant, and (iii) the disclosure request is proportionate. The Communication indicates that disclosure requests should identify specific items of evidence or relevant categories of evidence "as precisely and as narrowly as possible" based on reasonably available facts.
The Communication specifies that national courts generally decide what may constitute confidential information on a case-by-case basis pursuant to national and EU rules and relevant jurisprudence.
The Communication does not provide a definition of confidential information, instead suggesting that reference be made to the jurisprudence of EU courts, according to which confidential information must meet the following cumulative conditions:
- to be known only to a limited number of persons;
- its disclosure must be liable to cause serious harm to the person who provided it or to third parties; and
- the interests liable to be harmed by the disclosure of confidential information must be, objectively, worthy of protection.
The Damages Directive provides that leniency statements and settlements submissions can never be disclosed ("black list documents").
Additionally, if the Commission or a national competition authority has not yet closed its proceedings, the national court cannot order the disclosure of:
- information that was specifically prepared for the proceedings before a competition authority;
- information that the competition authority has drawn up and sent to the parties in the course of its proceedings; or
- settlement submissions that have been withdrawn;
("grey list documents").
Cooperation between the Commission and national courts
In civil proceedings relating to the application of Articles 101 and 102 of the Treaty on the Functioning of the European Union, a national court may request the Commission for an opinion on questions concerning the application of EU competition law, or to transmit any legal, economic or procedural information in its possession in line with the principle of loyal cooperation of Article 4(3) of the Treaty on European Union.
The Damages Directive allows the court to order the disclosure of documents from the Commission’s file, if no other (third) party can reasonably provide them, except for black listed or grey listed documents. To receive a response from the EU Commission, the national court should guarantee the appropriate protection of the requested information, should this be confidential.
Measures to protect confidential information in disclosure
The Communication suggests a number of measures to protect confidentiality. The most appropriate measure(s) will depend on the particular circumstances of the case and may depend on the relevant national rules and other factors, such as, inter alia:
- nature and commercial/financial/strategic value of the information subject to disclosure (e.g. customer names, prices, structure of costs, margins, etc.) and the possibility of its aggregated or anonymised form;
- volume or number of documents to be disclosed;
- number of parties concerned by the litigation and disclosure;
- whether the disclosing party is a direct competitor of the party seeking disclosure, or whether the parties have an ongoing supply relationship;
- potential rights of third parties to the civil proceedings in the protection of their confidential information;
- circle of individuals allowed to access the information;
- risk of inadvertent disclosure;
- ability of the court to protect confidential information throughout the civil proceedings; and
- any other constraints such as increased costs or additional administrative steps for the national judicial system, costs for the parties, potential delays to the proceedings, etc.
The Communication recommends national courts to impose deterrent penalties for non-compliance with obligations to protect confidential information to avoid parties seeking to use confidential documents outside the proceedings in which they have been disclosed.
The procedure of editing copies of documents by removing the confidential information is known as redaction. The Communication specifies that disclosing parties shall be required to limit redaction to what is strictly necessary to protect the interests of those from whom the information originates (e.g. third parties).
Redaction may be especially effective where:
- the confidential information concerns market data or figures (e.g. turnover, profits, market shares, etc.) which can be substituted with representative ranges, or where qualitative data can be meaningfully summarised;
- the volume of confidential information subject to disclosure is limited; and/or
- the requesting party who would receive access to the information and the third party, to which information provided by a disclosing party refers, are competitors.
For an efficient handling of applications for redaction, the Communication highlights that national courts may be actively involved in the process and request parties:
- to mark all the confidential information in the original confidential documents in square brackets and highlighted in a way that remains legible before taking a decision on what should be redacted;
- to draft a list of all the information proposed to be redacted (each word, data, paragraph and/or section to be redacted);
- for each proposed redaction, to submit the specific reasons why the information should be treated confidentially;
- to substitute the redacted information with an informative and meaningful non-confidential summary of the redacted information;
- to submit non-confidential versions of the documents concerned which mirror the structure and format of the confidential versions; and/or
- to ensure that the non-confidential versions submitted are technically reliable and that the information redacted cannot be retrieved by any means including the use of forensic tools.
A confidentiality ring is a disclosure measure whereby the disclosing party makes specified categories of information, including confidential information, available only to defined categories of individuals. According to the Communication, it may be effective:
- to ensure disclosure of quantitative data (e.g. revenues, prices, margins, etc.) or very strategic commercial information that, while relevant for the claim of the party, are very difficult to redact or summarise in a meaningful way;
- to allow for procedural economies and cost efficiencies, in particular when the number of documents requested is voluminous and all the documents are placed entirely in the ring; and/or
- to have an electronic confidentiality ring, to remove the need for the physical handing out of the information or the physical presence of the members of the ring in a particular location.
The members of the confidentiality ring may range from external advisers of the parties (e.g. external legal counsel or other advisers) to in-house legal counsel and/or other company representatives, according to the nature of the confidential information. Where the confidentiality ring is composed of a combination of external advisers and in-house legal counsel and/or company representatives, the Communication suggests that different access rights be granted to them.
The Communication indicates that national courts may request that members of a confidentiality ring submit written undertakings, concerning, inter alia:
- the duty not to disclose the confidential information to any person different from those listed by the court as confidentiality ring members, without the express consent of the court;
- the obligation to use the confidential information only for the purpose of the civil proceedings in which the disclosure order was issued;
- the obligation to (i) ensure adequate custody of the information; (ii) adopt any measure necessary in the circumstances to prevent unauthorised access; (iii) not copy, print, download, otherwise replicate, transmit or communicate the documents accessed; (iv) return or destroy any copies of documents containing confidential information; (v) make the documents unavailable to the identified persons from any computer or devices after a specific date, etc.; and/or
- in cases where the court allows access to the confidentiality ring by external advisers only, the obligation not to disclose the confidential information to their clients. This may conflict with the deontological bar rules to share the information with the client, requiring an express release by the latter.
To ensure that confidential information disclosed in a confidentiality ring is protected throughout the proceedings, national courts may request that parties submit both a confidential and a non-confidential version of their pleadings.
Appointment of experts
Some national courts may decide to appoint a third-party individual with expertise in a specific field (e.g. accounting, finance, competition law, audit, etc.) to access certain confidential information concerned by a disclosure request. The expert's assignment may, for example, be:
- to draft a meaningful non-confidential summary of the information to be made available to the party requesting disclosure; and/or
- to draft a confidential report that may be made available only to the external legal counsel and/or other external advisers of the party requesting disclosure, while a non-confidential version of the report may be made available to the requesting party itself.
The appointment of experts may prove to be an effective measure where:
- the information to be disclosed is commercially very sensitive, and quantitative or technical in nature (e.g. information included in commercial or accounting books, customer data, manufacturing processes, etc.);
- one party requests further access to confidential documents containing underlying data, for example, to evaluate the robustness of methodologies used to assess the extent of damages, overcharges passed on; and/or
- a large number of the documents to be disclosed concerns third party confidential information.
Depending on the different procedural rules, national courts may be able to appoint third party independent experts from a list of "court approved" experts or from a list of experts proposed by the parties. When appointing an expert, the national court may also need to decide who will bear the expert’s costs.
The Communication clarifies that appointed experts may be required to agree:
- not to disclose confidential information to any person other than those listed by the court or without the express consent of the court;
- to use the confidential information only for the purpose of the civil proceedings in which the disclosure order was issued;
- to ensure adequate custody of the information; and/or
- to adopt any measure necessary in the circumstances to prevent unauthorised access and to return or destroy any copies of documents containing confidential information, etc.
These undertakings may also provide for penalties in case of a breach of the duty of confidentiality.
Protecting confidential information during and after hearings
Finally, the Communication recommends that national courts consider how confidential information disclosed in proceedings can be used throughout and after the proceedings.
In camera hearings
Pursuant to the principle of open justice, civil proceedings are generally public in nature such that national courts may need to weigh the protection of confidential information against the principle of open justice. Subject to national rules, it is open to courts to exclude references to confidential information at public hearings, or to hold in camera (i.e. in private) those parts of the hearings where confidential information might be discussed.
The Communication also suggests that hearings in camera may be an effective means to cross-examine parties or witnesses on confidential evidence disclosed through a confidentiality ring or to hear an expert on the confidential evidence included in his or her report.
Notification to the parties and publication
The Communication notes that national courts may have to anonymise any information that could identify the source of the information or to redact from the publicly available version of the ruling those parts referring to confidential information. As part of this process, the court may request the parties' assistance in identifying information that should not be disclosed to the wider public (e.g. by requesting a marked-up version of the judgment).
Access to court records
Finally, depending on the national rules, it could be appropriate for courts to restrict access to their records either with regard to part of a file (e.g. to refuse access to documents disclosed in a confidentiality ring, expert reports, minutes of in camera hearings, confidential version of pleadings, etc.) or with regard to the entirety of a file. Courts may also need to take into account the persons requesting access, e.g. if they operate in the same market or business activity as the parties involved in the civil proceedings.
Potential impact on domestic proceedings
The Communication contains helpful guidance for the French courts that however already have adequate tools allowing them to order, but also to protect in the meantime, the disclosure of confidential information in damages claim proceedings. Indeed, disclosure of documents during a competition damages action before civil and commercial courts is regulated by the rules of civil procedure (see articles L.153-1 et seq. and L. 483-1 et seq. of the French Commercial Code (“FCC”)).
Similarly to the Communication’s disclosure requests, the FCC provides that, as a general rule, a claimant may request disclosure by another party or a third party of evidence relevant to its claim when it establishes a plausible harm resulting from anticompetitive practices. When deciding on a request for disclosure, the French courts must, inter alia, consider the legitimate interests of all parties and third parties concerned. More specifically, the French courts must take into account the protection of the confidentiality of such evidence as well as the usefulness of the requested evidence.
When the owner of the confidential information wants to challenge disclosure of their information ordered by a French court, they have to file a request for confidentiality and establish that the production of the relevant documents, or parts of them, violates its business secrets or is protected by legal attorney-client privilege. It must hand over the relevant documents to the French court together with a non-confidential version of them, a summary explaining the nature of the redacted information and an explanation of the reasons for its confidentiality. The French court can also hear any interested party to this end. Ultimately, when the French Court is of the opinion that the information is indeed confidential, it can: (i) prevent the disclosure of information which contains business secrets; (ii) order the partial disclosure of the requested information where only the information relevant to the claim is visible to the other party (i.e. similar to the Communication’s redaction tool); (iii) order the disclosure of a summary of the confidential information; and/or (iv) order the complete disclosure of the requested information where that information is relevant for the claim, but the disclosure is limited to a group of people (involving lawyers and/or economic experts), bound by a non-disclosure obligation (i.e. similar to the Communication’s confidentiality ring or appointment of expert tools).
Regarding the ongoing protection of the confidentiality of the information, the French court can order a closed-door hearing (i.e. similar to the Communication’s in camera hearings tool) and adapt the reasoning and publicity of their decision to preserve the confidentiality (also recommended by the Communication).
Lastly, similarly to the Communication, the FCC imposes limitations on the use of disclosed information by the litigants, such as the preservation of confidentiality, and the prohibition of the reuse of the information for another purpose.
In summary, the French courts are not ill-equipped with regards to the disclosure of confidential information, but the Communication will for sure legitimise and facilitate even more a litigant’s claim to gain access to such confidential information.
The Communication contains helpful guidance for the German courts. In Germany, the legislator has opted for a two-fold approach to implement the abovementioned requirements of the Damages Directive as relates to the protection of confidential information in private antitrust enforcement. First, the court must consider the protection of business and trade secrets when deciding whether (and to which extent) to grant a claim for the production of evidence pursuant to section 33g (3) of the German Act against Restraints of Competition (“ARC”). Second, the court is required by section 87b (7) ARC to “take the measures required in the individual case to ensure the protection of business and trade secrets and other confidential information”.
The latter provision grants substantial leeway to the courts. However, due to the novelty of this provision and the concept of document disclosure in German civil proceedings at large, there is little case law on how best to protect confidential information in German litigation. When introducing section 87b (7) ARC, the German legislator made reference to an existing concept for the protection of business and trade secrets in intellectual property litigation called the “Dusseldorf process”. This process consists of two main steps. First, an expert is granted access to the (potentially) confidential information to render an opinion on the question whether there is a threat of a breach of business and trade secrets. In a second step, the expert’s opinion is then provided (i) to the party whose confidential interests are at stake and (ii) to the legal counsel of the opposing party, who must not disclose its contents to their client, to give them the opportunity to comment on confidentiality interests. To the extent the expert opinion contains confidential information, the court may decide – after having heard the parties – not to hand over the entire expert opinion to the opposing party but only a redacted copy.
Against this backdrop, the present communication is likely to broaden the German courts’ horizons as regards potential further measures beyond the “Dusseldorf process” that the German legislator originally had in mind. This is why German legal scholars have welcomed the Communication as helpful guidance for the German courts. Many of the measures in the Communication, or a combination thereof, had already been proposed in German legal scholarship. The Communication lends further support to these proposals and adds helpful practical guidance.
Due to its broad ambit, section 89b (7) ARC can generally serve as a legal basis for most of the measures proposed in the Communication. However, difficulties may arise in specific situations where German procedural law contains conflicting requirements. For instance, a court may decide not to allow public access to the proceedings but generally may not exclude the parties themselves or their legal representatives from participating in the proceedings. The same issue may arise if confidential information is only revealed to a restricted number of persons. If an expert is appointed to access the confidential information, a careful differentiation will be necessary between the expert’s role in assisting the court in dealing with the confidential information and the expert as a potential means of evidence for specific factual questions.
The Communication is likely to provide helpful guidance to Italian courts in dealing with confidentiality requests, especially in the context of follow-on actions.
In contrast to certain common law regimes, no disclosure duty exists between the parties in Italian proceedings. The production of relevant documents and/or pieces of evidence can only be ordered by courts, upon a specific and reasoned request from the other party. The scope of such a request has, however, been broadened by the implementation of the Damages Directive.
The domestic legislation implementing the Damages Directive (Legislative Decree of 19 January 2017, No. 3; the “Decree”), defines confidential information by referring to documents containing confidential information of a personal, commercial, industrial and financial nature relating to persons and businesses, as well as business secrets. Art. 3 of the Decree currently provides for a range of measures aimed at protecting confidential data and information for which disclosure is sought, broadly corresponding to those suggested by the Communication, such as:
- a court order that specific documents cannot be used outside the proceedings in which they are produced;
- redactions to documents;
- the possibility that hearings are ordered not to be held in public;
- a court order that a limited number of persons are allowed to examine the documents in question; and/or
- the appointment of experts for producing a summary of the relevant information, omitting confidential data and information.
Nevertheless, a number of measures are not yet familiar in domestic proceedings in Italy, as they have only recently been introduced, such as the establishment of “confidentiality rings” or the appointment of experts to access data and information which are deemed to be confidential. Therefore, the Communication is expected to provide useful guidance on how and within what bounds the measures indicated therein shall be resorted to by courts.
The Communication will increase the level of flexibility in the protection of confidential information, by offering Polish courts further guidance and tools to apply, when deciding on matters concerning private enforcement of EU competition law.
Formerly, the standard method used to protect confidential information in civil proceedings in Poland was hearing cases in camera, which restricted access to proceedings solely to the circle formed by the parties and their counsel, i.e. excluding third parties, audience, media, etc. Moreover, the defendants were given the opportunity to oppose disclosure of evidence requests when such evidence included confidential information concerning the targeted entity.
Following the implementation of the Damages Directive into the Polish legal framework via the Act of 21 April 2017 on claims for damages caused by an infringement of competition law (the “PEA”), claimants’ rights to require disclosure were significantly broadened both as regards the evidence held by other parties to disputes, and third parties. However, the regulations on disclosure of evidence provided for in the PEA do not offer detailed examples of the measures that may be introduced for the purpose of minimising the negative impact of disclosure of trade and business secrets, leaving a relatively wide margin of discretion to the courts. Among those few measures expressly provided for in Article 23 of the PEA, the courts are entitled to:
- limit the right of other parties to access a piece of evidence, or
- define detailed rules for reviewing and using this piece of evidence, for example limiting or excluding its copying or recording in another way.
The measures provided for in the PEA, however, are still perceived as a novelty in the Polish legal system and the national courts have not yet developed a consistent approach.
Given the undeveloped case law, the Communication is likely to be helpful guidance for Polish courts in antitrust damage actions, specifically when referring to the additional instruments of protection, which did not exist in Polish case law before. As an example, one should name the possibility of organising confidentiality rings or appointing experts to assess certain confidential information concerning the discovery request. They will likely become a useful tool to be used in private enforcement claims, since the PEA offers national courts a high degree of flexibility in applying measures of protection, by leaving it up to a particular court to decide on the most appropriate measures to be applied, depending on the circumstances.
Whilst most of the measures indicated in the Communication can, in principle, be applied to Polish private enforcement proceedings based on Article 23 of the Act, it does not remove the sometimes-expressed doubts as to the means of limiting the parties’ access to evidence. Polish civil procedure is based on the principle of open justice, and the adversary principle, granting the parties the right to access documents submitted in the proceedings and to take a position on each of them. Therefore, any restrictions of these procedural rights give grounds to some legal writers’ concerns that such measures may pose a threat to a party’s right to defence and exclusion of one of the parties from participating in the proceedings, which may even affect the validity of the verdict. These concerns may encourage a more conservative approach by the judiciary to apply limitations to access to evidence by the parties, including those provided for in the Communication.
As with other civil law jurisdictions, there is no disclosure regime under the Spanish legal system. Instead, Spanish law gives parties tools for requesting the sharing or exhibition of relevant information and/or documents in civil proceedings (mainly, through preparatory enquiries (diligencias preliminares) or requests for the exhibition of documents (exhibición documental)). In both cases, it is for the courts to order the relevant measure on a case by case basis after assessing whether certain requirements are met (essentially, relevance and proportionality).
Following the implementation of the Damages Directive in Spain, a new regime was created for the exhibition of documents in the context of damages claims arising from competition law breaches. These new rules, which only apply to competition damages claims, allow document exhibition requests much broader in scope than under the former (and co-existing) rules.
This broadened scope raised the issue of how best to protect confidential information. Under Spanish law, there is no single concept of confidential information. There are multiple laws regulating different types of confidential information, such as information affected by legal privilege, personal information protected by the fundamental right to data protection or business secrets, amongst many others. All of these types of confidential information are covered within the more general definition developed under the jurisprudence of EU courts, and all of them deserve protection under the document exhibition regime.
Due to the newness of this widened document exhibition regime, Spanish courts have not yet developed a coherent approach in relation to the issue of protecting confidential information. On the one hand, Spanish legislation does not provide clear guidance to select which type of protective measure is suitable for each factual scenario. On the other, Spanish courts have not been able to settle on a clear practice in this regard. However, there has been a recent and very useful effort by the Commercial Courts of Barcelona to launch a court protocol setting up procedural practices with the aim of consolidating a coherent approach for the adoption of measures protecting confidential information in any kind of civil proceedings.
The Communication is likely to add further useful guidance for Spanish courts in dealing with confidentiality requests. The protective measures described are generally in line with those provided under the court protocol, as well as with Spanish legislation implementing the Damages Directive and other laws passed in specific areas (such as a February 2019 law on business secrets). Additionally, the Communication includes further details in relation to the use of each type of protective measure and useful guidance to select which measure is suitable for each case. In particular, the Communication expressly refers to data rooms as a type of confidentiality ring, which is a type of protective measure that has already been ordered by Spanish courts in a number of proceedings.
Dutch procedural rules include measures for the court to ensure confidentiality of information, such as (i) Section 27 of the Dutch Code of Civil Procedure (“DCCP”), which provides that hearings can be conducted ‘behind closed doors’ in certain circumstances, (ii) Section 28 DCCP, which provides that the court can order parties not to disclose information shared in litigation with third parties, and (iii) Section 29 DCCP, which provides that the court administrator may anonymise judgments if this is needed to protect the interests of parties. These measures are already in line with the Communication, but it is expected that the courts will more proactively use these and that the parties may also be more forward with requesting confidentiality measures on the basis of the Communication.
Regarding disclosure of documents specifically, while the approach to disclosure in the Netherlands is different to that in common law jurisdictions, the DCCP does contain a number of provisions dealing with the disclosure of documents/information in the context of legal proceedings, some of which (after implementation of the Damages Directive) specifically deal with access to documents in competition law infringement cases. Parties can challenge a disclosure request if they have ‘serious grounds’ against disclosure of information (e.g. if the information requested concerns confidential business information). In many such cases, the court will allow redaction of sensitive information from the documents.
The Communication could be helpful for Dutch courts by providing them with guidelines for dealing with a wide range of confidentiality requests (keeping in mind that the Communication is non-binding for the national courts). Certain measures are less commonly applied by Dutch courts, such as the use of confidentiality rings or the appointment of experts to access certain confidential information concerned by a disclosure request. In such cases, Dutch courts may look to the Communication for guidance as to how to apply these measures (within the possibilities provided by the Dutch Code of Civil Procedure) when confronted with confidentiality requests.
The Communication is unlikely to have a material impact in the UK, which has a well-established and extensive disclosure regime, including established measures for the protection of confidential information (which we understand were drawn upon by the Commission when producing the Communication).
Parties to competition damages claims in the English courts must generally disclose the existence of all documents which are or have been in their control, and which harm or support their own or another party’s case. Those documents are then exchanged by the parties for “inspection”, save for privileged communications or “black listed” or “grey listed” items specified in the Damages Directive, which can be withheld.
Civil Procedure Rule (“CPR”) 31.22 provides that documents disclosed in civil proceedings may only be used for the purpose of those proceedings, unless (i) the document is read out or referred to at a public hearing, (ii) the court gives permission otherwise, or (iii) the party who disclosed the document and the person to whom the document belongs agree it can be used for another purpose. The court has the power to impose sanctions for breach of this rule. In practice, parties to competition damages actions will often apply to the court under CPR 31.22(2) for a court order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public.
Documents cannot be withheld from inspection on grounds of confidentiality. In practice, the confidentiality of commercially-sensitive documents is commonly safeguarded by applying redactions or by disclosing them into confidentiality rings – of the nature outlined in the Communication – in competition damages claims before the English courts. During hearings, the English courts are willing to go into private session if needed to protect confidentiality, although they will try to conduct as much of a hearing in public as possible to promote the principle of open justice. There have been a number of cases where the English courts have remained in public session but, to preserve confidentiality, have read confidential documents in silence rather than confidential information being read aloud by the parties’ counsel.
The only measure in the Communication that is not commonly used by the English court is the appointment of third-party experts. Experts in English proceedings tend to be appointed by the parties rather than by the court. However, it may be that English courts seek to make use of this in future proceedings by asking experts already appointed by the parties (who are likely to be within the relevant confidentiality ring(s)) to, for example, aggregate confidential data such that it could be referred to publicly.