Test Case on National Insolvency Law & Economic Successor Liability
Gibson & Co. recently acted for the European Commission in High Court litigation in London. The matter was an important test case brought against the Commission by Conex Banninger Limited concerning the inter-relation of English insolvency law and the Commission’s right to impose fines in relation to cartel membership upon economic successor entities.
An English and a French company (IBP Limited and IBP France SA) were fined a total of €35 million by the European Commission in 2006 for their involvement in a copper-fittings cartel. The fines were never paid. Both companies went into administration in 2007, leaving the fines owing to the Commission as an unsecured debt. Conex acquired the relevant shareholdings. The Commission began investigating Conex and issued an Information Request as part of its inquiry into whether Conex was liable, as an economic successor to the IBP companies, to pay the unpaid fines.
In December 2009 Conex started proceedings in the High Court against the Commission, asking for a declaration that it was not liable, by succession or otherwise, for the IBP infringements. This was on the basis that any attempt by the Commission to enforce the fine on Conex as IBP’s economic successor would be to “subvert the national insolvency regime” and to elevate the Commission above its unsecured creditor status.
The Commission claimed that if the Court were to grant the declarations, this could “give the appearance of supporting, faciliating, encouraging and endorsing breaches of competition law” on the basis that the purchase by Conex of the IBP assets were not, as Conex claimed, “carried out in good faith“.
Prior to the trial of the action, Conex applied for leave to refer these questions to the European Court of Justice. The Commission contended that the English Court had no jurisdiction to grant the substantive declaratory relief sought where it would interfere with a pending competition inquiry. Any reference to the ECJ was similarly premature.
In July 2010 the English High Court ruled in favour of the Commission and declined to grant Conex’s application that the questions be referred to the European Court of Justice on the basis that “the references have no realistic prospect of obtaining for Conex the protection they seek“.
Conex’s application for leave to appeal to the Court of Appeal was granted by the first instance Judge (Mr Justice Floyd). The Commission cross appealed that the first instance finding be upheld on further and alternative grounds to those found by Floyd J. Regrettably however in 2011, shortly before the appeal was due to be heard, Conex itself went into administration and so the appeal did not proceed.