The District Court of Helsinki issued its judgment on March 28, 2014 regarding the expiration of compensatory damages claims brought in the wood procurement cartel case. In its ruling, the District Court held that the claims for compensatory damages brought by some claimants had expired. The claimants appealed against the District Court’s decision to the Helsinki Court of Appeal, which rendered its judgment on the matter on November 21, 2014.
Background of the matter and framing of the question
The claimants demanded compensation based primarily on the Finnish Act on Competition Restrictions. Secondarily, compensation was demanded on the grounds of contractual liability, extra-contractual liability or unjust enrichment. The questions before the Court of Appeal were whether the judgment of the District Court was incorrect in regard to its evaluation of the claims’ expiration and whether the claims should continue to be processed in the District Court.
Firstly, the following questions are answered:
- What is expiration according to s.18, a.3 of the Act on Competition Restrictions (303/1998) and from which moment does the limitation period for taking legal action begin?
- The temporal application of the s.18 of the Act on Competition Restrictions, or which damages it is applied to?
- Is the maximum time of 10 years set in the s.7.2 of Act on Expiration of Claims applied parallel to the five years’ limitation period for claims set in the s.18, a.3?
Secondly, the secondary grounds for an action are discussed:
- The expiration of claims for contractual liability for damage, extra-contractual liability for damage and repayment of unjust enrichment;
- From which moment is the three year limitation period in accordance with the s.7.1 of the Act on Expiration of Claims considered to begin?
- Have the claims expired in any case on the basis of the maximum time of 10 years set in s.7.2 of the Act on Expiration of Claims?
Expiration according to s.18, a.3 of the Act on Competition Restrictions
In the present case, the formerly valid provision of s.18, a.3 of the Act on Competition Restrictions must be applied. The Court of Appeal stated that no unambiguous conclusions can be drawn on the interpretation of the formerly valid provision of s.18, a.3 of the Act on Competition Restrictions.
In its judgment, the Court stated that a claim for damages based on a competition restriction differs from a regular claim for damages, which is based on a breach of contract. In a regular situation relating to a breach of contract, the breach of contract can usually be noticed by exploring what has been agreed and comparing it to how the contractual obligation has been fulfilled. As regards the prohibited competition restrictions, the liability for compensation arises from unlawful conduct. As its conclusion, the Court of Appeal stated that the knowledge that damage has been caused and the ability to present a claim regarding it require information on the existence of the competition restriction that is sufficiently certain.
As the judgment of the District Court shows, the Finnish Competition Authority published a press release on May 25, 2004 and made a proposal for penalty payment to the Market Court on December 21, 2006. Nevertheless, the Court of Appeal did not find that claim’s limitation period began at those moments. The judgment of the Market Court became final on January 4, 2010. According to the Court of Appeal, only after this decision did the claimant have sufficient information of the competition restriction and of the appearance of the damage.
Thus, the five year period according to the Act on Competition Restrictions for taking legal action began on January 4, 2010. Based on the provision in question, legal action had been taken before the end of the five year time limit. The claims could not be considered expired and thus rejected, as the District Court had ruled.
The application of the ten year limitation period of the Act on Expiration of Claims in addition to the s.18, a.3 of the Act on Competition Restrictions
The District Court found that the limitation period of ten years according to s.7.2 of the Act of Expiration of Claims could not be applied parallel to the limitation period of five years in accordance with s.18a of the Act on Competition Restrictions.
The Court of Appeal found that the parallel application of the special provision and s.7.2 must be assessed on a case-by-case basis, taking into account the goals of the provision on limitation periods in the special legislation. The function of s.18a of the Act on Competition Restrictions is to, as mentioned above, secure the right to bring claims until there is sufficient certainty that the competition restriction has in fact occurred and caused damage. In its conclusion, the Court of Appeal agreed with the District Court that parallel application of the limitation period in s.18.a.3 of the Act on Competition Restrictions and the limitation period of ten years in s.7.2 of the Act of Expiration of Claims is not possible.
Limitation period of contractual liability, extra-contractual liability and repayment of unjust enrichment
Firstly, the Court of Appeal found that these secondary grounds for action relate to situations where s.18a of the Act on Competition Restrictions does not apply to damage caused before October 1, 1998. Secondly, these grounds relate to situations where s.18a of the Act on Competition Restrictions is not applicable at all.
In its decision, the Court of Appeal found that sufficiently certain knowledge of the contractual breach and the consequent bringing of a claim require sufficient knowledge of the existence of the competition restriction. According to the Court of Appeal, this time was when the decision of the Market Court became final on January 4, 2010. The limitation period began at this time. The claims have been brought within the three year limitation period. According to s.4 of the Act on Expiration of Claims, a claim becomes time-barred after three years unless the limitation period is interrupted before the period has come to an end.
According to s.7.2 of the Act on Expiration of Claims, the limitation period of a claim for compensation for damage or other debt, as defined in s.7.1, must however be interrupted before ten years have passed from the breach of contract or from the event that caused the damage. According to the Court of Appeal, considering that the forbidden competition restrictions may be long lasting and that their existence is as a matter of course hidden from the contractual counterparty, it is justified to regard the ten year limitation period to begin in both contractual liability and extra-contractual liability and repayment of unjust enrichment from the moment when the competition restriction ended. As the judgment of the Market Court shows, it shall be considered that the competition restriction, as well as the unlawful circumstances, ended in the spring 2004. Legal action was taken before the ten year limitation period had ended and thus, the secondary grounds for claims could not be rejected as expired.
The Court of Appeal came to an opposite conclusion from the District Court by ruling that the presented claims for compensation had not expired. According to the judgment, the matters under appeal shall be remanded to the District Court, which shall on its own initiative take the matter into reconsideration after the judgment of the Court of Appeal has become final.
It remains to be seen whether the cases will end up in the Supreme Court and, if they do, what the Supreme Court’s view of the matter will be.