Case C-583/13 P Deutsche Bahn — The obligation to state reasons and the right of defence in premise searches

On June 18, 2015, in the European Court of Justice (“Court of Justice” or “ECJ”) an appeal¹ was filed by Deutsche Bahn AG (“DB”) and its subsidiaries, seeking to set aside the judgment of the General Court which dismissed their action for the annulment of three Commission decisions ordering inspections at the premises of DB and its subsidiaries on account of a suspicion of infringement of competition rules. Such inspections were conducted without prior judicial authorisation.

The lack of prior judicial authorisation

As a first ground for its appeal, DB claimed that the General Court disregarded relevant judgments of the European Court of Human Rights (“ECHR”), when it stated that “the absence of a prior judicial authorisation is only one of the factors borne in mind by the ECHR when deciding whether Article 8 of the ECHR has been infringed” (§ 14).

The ECJ replied to the first argument by stating that in the light of the ECHR’s case law, the lack of prior judicial authorisation “was not capable, in itself, of rendering the inspection measure unlawful”. In fact, the Court argues that the lack of prior judicial authorisation may be counterbalanced by a post-inspection review covering both questions of fact and questions of law, as it results from the ECHR’s judgments in Harju² and Heino³.

Post-inspection review

Regarding this post-inspection review, DB criticised the General Court for having based its reasoning on a given number of case law decisions by the ECHR, as in such cases the relevant competition authorities had obtained prior judicial authorisation.

To this respect, the Court of Justice stated that the General Court correctly claimed that the key issue is the “intensity of the review” covering all matters of fact and law and providing an appropriate remedy if an activity found to be unlawful has taken place and not the point in time when it was carried out.

The obligation to state reasons and the violation of DB’s right of defence

Lastly, DB claimed that the guarantees set out by the General Court do not ensure sufficient protection of its right of defence against interference with its fundamental right to the inviolability of private premises caused by the inspections conducted by the Commission. In fact, the undertaking claimed the Commission could not lawfully tell its officials about the existence of suspicions concerning its subsidiary DUSS before the first inspection decision, which later led to subsequent inspections by the Commission.

The Court of Justice stated that Regulation no. 1/2003 requires the Commission to provide reasons for the decision ordering an investigation by specifying its subject matter and purpose. This obligation is a fundamental requirement, designed not merely to show that the proposed entry onto the premises of the undertakings concerned is justified but also to “enable those undertakings to assess the scope of their duty to cooperate whilst at the same time safeguarding their rights of defence” (§ 56).

Moreover, the ECJ underlined that information obtained during investigations must not be used for purposes other than those indicated in the inspection warrant or decision. On the other hand, the Court of Justice acknowledged that it cannot be concluded that the Commission is barred from initiating an inquiry in order to verify or supplement information which it “happened” to obtain during a previous investigation if that information indicates the existence of conduct contrary to competition rules.

However, in the present case, it was apparent that the Commission informed its agents immediately before the first inspection was conducted that there was another complaint against DB’s subsidiary. It should also berecalled, as the Advocate General observed in his opinion, that the information provided bythe Commission to its agents must “relate solely to the subject-matter of the inspection ordered by the decision” (§ 62).

These facts led the Court of Justice to conclude that this information was unrelated to the subject matter of the first inspection decision and that the failure to inform DB about the existence of a complaint against its subsidiary violates the Commission’s obligation to state reasons and DB’s right of defence. As a matter of fact, it was expressly acknowledged by the General Court that “the fact that the second inspection decision was adopted whilst the first inspection was underway demonstrates the importance of the information gathered during that inspection in triggering the second inspection and that the third inspection was unambiguously based, in part, on information gathered during the first two inspections” (§ 65).

Consequently, the Court of Justice set aside the appealed judgment in so far as it dismissed the actions brought against the second and third inspection decisions.

This case draws important guidelines and alerts for national courts and authorities as to the way their inspection prerogatives must be seen against companies’ rights of defence.

This article was co-authored with lawyer Miguel Cortes Martins.

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