In the Euribor cartel case, the Court (third chamber) recalled the fundamental nature of the right to the presumption of innocence and of the principle of impartiality and opened the path towards a lighter burden of proof upon undertakings seeking the annulment of a decision infringing their rights (Case C-883/19 P).
Background to the dispute
The case concerns the European Commission’s investigation into the Euro Interbank Offered Rate (“Euribor”) cartel between seven financial institutions, aimed at distorting the normal course of pricing on the market for Euro Interest Rate Derivatives.
In December 2013, Barclays, Deutsche Bank, Société Générale and RBS settled the case with the Commission. Three years later, the Commission adopted a decision fining JPMorgan, Crédit Agricole and HSBC, the non-settling parties, for their participation in the same by-object infringement. In its appeal before the General Court, HSBC raised, among others, the plea that the Commission had infringed its presumption of innocence by adopting the settlement decision.
In staggered hybrid cartel proceedings, the Commission indeed first adopts a decision against the settling parties following a settlement procedure (“the settlement decision”) and later a decision against the non-settling parties at the end of the ordinary procedure (“the final decision”). Both decisions relate to one and the same cartel.
By its judgment of 24 September 2019 (T-105/17), the General Court annulled the 33,6 million EUR fine imposed on HSBC for insufficient statement of reasons in relation to the calculation of the fine but dismissed HSBC’s plea in relation to the presumption of innocence.
In its long-awaited judgment of 12 January 2023, the ECJ partially sided with HSBC finding that the lower court failed to properly assess HSBC’s claims on the breach of its right to be presumed innocent. The Court however largely dismissed HSBC’s pleas on the substance of the case, confirming its participation in the Euribor cartel (C-883/19 P).
A noteworthy judgment
Although the outcome of the proceedings against HSBC is not affected by the errors found by the Court, this judgment is particularly noteworthy where the Court reemphasizes the fundamental nature of the principle of impartiality and the right to the presumption of innocence. The ECJ also seems to confirm its progressive departure from the stringent harmless error test in case of serious infringements. According to the harmless error test, a procedural error can in principle only lead to the annulment of a challenged act if the applicant is able to prove, in addition to the existence of a procedural irregularity, that the content of the contested decision would have been different if that breach had not occurred (Suiker Unie test). This requirement proves to be particularly difficult in practice. In this judgment, however, the Court seems to lighten the need to demonstrate this impact if the irregularity entails a breach of fundamental rights.
On the presumption of innocence in a staggered hybrid procedure
In the present case, HSBC submitted that the adoption of the settlement decision in the context of a staggered hybrid procedure led to an infringement of its right to be presumed innocent in so far as that decision prejudged its liability.
According to the EU case law, the Commission can adopt staggered decisions provided that (i) it takes sufficient drafting precautions in the settlement decision to avoid premature judgment as to the companies’ liability refusing to settle the case and that (ii) the references to those companies in that decision are necessary.
The General Court rejected HSBC’s plea based on the harmless error standard, i.e., the bank had in any case failed to demonstrate that the alleged irregularity had an impact on the final decision.
In the context of the appeal, the ECJ sided with HSBC and found that the General Court’s reasoning was vitiated by an error in law as it had applied the Suiker Unie test in relation to fundamental rights.
According to the ECJ, in order to review the Commission’s observance of the presumption of innocence in case of a staggered hybrid procedure, it is for the judges to analyse the settlement decision in light of the particular circumstances of the case, as required by Pometon (C-440-19 P). This obligation could not be evaded on the simple ground that HSBC did not demonstrate the existence of an impact on the final decision. The General Court was therefore under an obligation to carefully examine the settlement decision to ascertain that it did not express a premature expression of guilt.
Doing so, the ECJ draws a distinctive line between formalities and minutiae errors whose gravity is unlikely to have influence over the final decision and serious infringements capable of vitiating the entire procedure that led to the adoption of the challenged act.
This judgment will most likely pave the way towards a lighter burden of proof upon aggrieved undertakings in case of a violation of their right to the presumption of innocence. Does it yet imply that the mere violation of the right to the presumption of innocence could henceforth suffice to automatically set a final decision aside without having to demonstrate at any point that the irregularity had any impact or influence on the outcome of the proceedings? The question remains open as the Court ultimately dismissed HSBC’s argument.
Without referring the matter to a lower court for retrial, the Court indeed reviewed the settlement decision but found that the Commission has taken sufficient precautions when drafting that decision. Setting what seems to be a higher standard of “strict necessity”, the Court also found that the references to HSBC in the decision were limited to what was strictly necessary for the purposes of a proper understanding of the facts.
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