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The Court of Justice of the European Union (“CJEU”) has dismissed the European Commission’s appeal against the General Court (“GC”) judgment annulling the EUR 14.96 million fine imposed on the broker ICAP for facilitating a cartel involving banks that manipulated LIBOR and TIBOR rates. This groundbreaking judgment by the CJEU clarifies the European Commission’s obligation to state reasons when setting fines, particularly if it departs from its standard methodology to calculate the amount of fines.

ICAP as a cartel facilitator who refused to settle

On December 4, 2013, the European Commission (EC) found several cartels in the yen interest rate derivative market (AT.39861 Yen Interest Rate Derivatives Settlement). The EC fined the participating banks and a broker (RP Martin) EUR 670 million after they submitted to a settlement procedure with the EC obtaining a 10% fine reduction. A second broker, ICAP (currently NEX Group plc), decided not to settle. So, under the standard proceedings, the EC imposed a fine on ICAP of almost EUR 15 million in its decision of February 4, 2015 (AT.39861 Yen Interest Rate Derivatives ICAP).

In both decisions, the EC imposed fines on ICAP and RP Martin for being “facilitators” of the cartel. According to the EC, since these are companies providing brokerage services that distribute quotes and information on interbank exchange rates and facilitate bank transactions, they enabled the banks to use this information to manipulate LIBOR and TIBOR rates. The EC decisions are consistent with the well-established case law of EU courts under which, in addition to cartel members, any entities helping cartel members to achieve their objectives, like ICAP and RP Martin, should be fined. This applies although ICAP could have helped without directly benefitting or even without noticing that it was participating in the infringements. The EC considered that it sufficed that ICAP indirectly benefited from its business relationship with the cartel members.

The EC fined ICAP for six infringements separate from one another but arising from the same collusive behavior. Based on point 37 of the Guidelines on the method of setting fines, the EC departed from the standard calculation methodology. Since the case affected complex financial instruments that did not generate a turnover, and considering the facilitators’ particular situation, the EC decided to apply an alternative calculation methodology ensuring deterrence, which the standard method had not achieved. The EC calculated the amount of the fines for ICAP and RP Martin using the same five-step test applied to determine the duration and seriousness of their involvement in the infringements.

In November 2017, ICAP brought an action for annulment of Commission Decision of February 4, 2015. The GC upheld the action, arguing that the EC had not sufficiently justified why it used the alternative calculation methodology.

After the appeal brought by the EC, the CJEU confirmed that, although the EC has a broad discretion for the calculation of fines and it may use alternative methods, it must sufficiently justify its calculation methodology. This obligation to state reasons (i) allows ICAP to understand the weighing and assessment of factors taken into account to determine the amount of the fine; and (ii) enables judicial review.

The CJEU concluded that the EC must state the reasons why the specificities of the case justify the application of an alternative methodology. The CJEU does not require the EC to provide all the figures regarding every calculation step, but the EC must explain the weighing and assessment of factors considered to determine the seriousness and duration of the infringement and ICAP’s involvement. These factors must be individually assessed having regard to the circumstances in each case. The EC will fulfill its obligation to state reasons as long as its decisions explain the factors considered to determine the seriousness and duration of the infringement.

After this judgment, the EC could maintain the amount of the fine imposed on ICAP, although further explaining its calculation methodology, as in AT.39780 Envelopes. In this case, the EC imposed the same fine on Printeos after the fine had been annulled for not sufficiently reasoning its calculation. CJEU judgment is interesting because the annulment of the fines imposed on ICAP occurred during a hybrid settlement procedure, where a facilitator did not settle but the remaining cartel members and the other facilitator (RP Martin) did. None of them challenged the decision, and therefore it became final.

This judgment reminds of the risk of being a cartel facilitator, even without directly benefitting from it. The EC may impose a major fine if it finds that the facilitator has enabled collusion between the participants considering that the facilitator knew or should have known about the cartel. This is why this judgment is particularly interesting for consulting companies, business associations or public authorities that are more likely to be considered facilitators of a cartel due to their activities.

Authors: María López Ridruejo, Emilija Berzanskaite, and Marie Trapet Llamas

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