Liability of Managing Directors or Management Board Members Involved in Antitrust Violations vis-à-vis the Companies Managed by Them
September 1, 2023
On July 27, 2023, the Higher Regional Court of Düsseldorf ruled on the question of whether a company that has been fined under antitrust law can hold itself harmless by seeking indemnification from the statutory representatives in its managing corporate body. While the Higher Regional Court rejected a claim for reimbursement of the fine imposed on the company by the German Federal Cartel Office and the costs of the fine proceedings, it confirmed the personal liability of the company’s statutory representatives in its managing corporate body for any consequential damages arising from the antitrust infringement, e.g., as a result of claims for damages by third parties.
Whether a company that has been fined by an antitrust authority can hold itself harmless by seeking indemnification from its managing directors and management board members is an open question under German law. The decision discussed here is the first time that a Higher Regional Court has taken a position on this issue and reached a nuanced decision.
This Alert Memorandum will first present the ruling of the Higher Regional Court of Düsseldorf, before placing it in the context of the range of opinions in existing case law and highlighting possible practical implications.
Ruling of the Higher Regional Court of Düsseldorf
In July 2018, the Federal Cartel Office imposed a fine of €205 million on six companies in the stainless steel sector, a trade association and ten responsible individuals; this is the starting point of the legal dispute before the Higher Regional Court of Düsseldorf. Among those fined was the Defendant in the present case, who was both the managing director of one of the companies fined (Plaintiff 1) and the chairman of the management board of the holding company of that company (Plaintiff 2).
Subsequently, both companies filed claims against the Defendant on the basis of directors’ and officers’ liability under statutory corporate law (“D&O liability”) for participation in anti-competitive cartel agreements: Plaintiff 1 sought compensation for the fine imposed by the Federal Cartel Office plus fees and expenses, and Plaintiff 2 sought compensation for fact-finding and defense costs it incurred in the course of the fine proceedings. Both companies also feared that they would be held liable for damages by third parties on the basis of the antitrust violation established by the authorities. They therefore also sought a declaration that the Defendant was liable for any consequential damages.
No entitlement to compensation for the fine imposed or to compensation for the costs related to fact clarification and defense
The Higher Regional Court of Düsseldorf agreed with the lower court and denied the claim for compensation for the fine imposed and for the costs of clarifying the facts and defending the case, even in view of the fact that the statutory representative in the managing corporate body had played a significant role in the antitrust infringement. The Court held that the fine imposed on the company pursuant to German antitrust law should be excluded from D&O liability, and that D&O liability should be interpreted accordingly. According to the Court, this is supported in particular by (i) the particularities of the antitrust sanction regime and (ii) the purpose of the antitrust sanction regime.
Particularities of the antitrust sanction regime
In addition to the fine imposed on the company, the legislator also provided for the possibility of imposing individual fines on the individuals responsible for the antitrust violation. The fact that this legal option is available to the antitrust authorities already constitutes an argument against the passing on of the sanction imposed on the company to its managing directors and management board members via the general liability doctrine under civil law. The different maximum fines provided for by the legislator make it clear that the legislator’s intention was primarily to burden the company and not the individual. Accordingly, the range for setting a fine for a company is significantly higher than that for an individual: The liability of an individual is limited to €1 million, while the maximum fine for companies is 10% of the annual turnover of the entire corporate group, which can easily lead to fines in the hundreds of millions – and regularly does.
Purpose of the antitrust sanction regime
The purpose of the fine imposed on the company is to deprive the company, as the alleged direct beneficiary of the antitrust violation, of the benefits derived from that violation. This purpose would be frustrated if the company were able to hold itself harmless by seeking indemnification from the statutory representatives in its managing corporate body or if the damages were ultimately settled as an insurance claim under the statutory representatives’ management liability insurance (D&O insurance).
Since the costs of fact-finding and defense were incurred solely to avoid or reduce a potential fine and are therefore directly related to the fine imposed, the Court held that they should also be excluded from the D&O liability.
Liability of statutory representatives in the managing corporate body for damages beyond compensation for the fine and the costs of the fine proceedings
In contrast, the Higher Regional Court of Düsseldorf confirmed the liability of the managing director/chairman of the management board for damages in addition to the fine and the costs of the fine proceedings. The injured parties in this context are generally contractual partners of the company that was involved in the cartel who claim damages. In this respect, the Court assumed that the Defendant had violated the duty to comply with all legal provisions applicable to the company in its relationship with third parties (so-called duty of legality) as a result of the established antitrust violation and that the Defendant had not sufficiently exonerated itself. The Higher Regional Court affirmed the possibility of damages against the background of already existing and possible further claims of third parties due to the antitrust violation established by the authorities.
Tendency to reject the eligibility for compensation for antitrust fines in lower-court case law
The German Federal Court of Justice has not yet had the opportunity to clarify the issue of recourse for fines imposed by an antitrust authority. There is also a lack of uniformity in the case law of the lower courts and in the legal literature. While there seems to be a tendency in case law, based on earlier decisions of the Regional Court of Saarbrücken and the Regional Labor Court of Düsseldorf, to reject a right of recourse with respect to the fine and the direct costs of the fine proceedings, there are also positions to the contrary in a recent indicative order handed down by the Regional Court of Dortmund.
- In 2020, the Regional Court of Saarbrücken rejected a claim for recourse by the company with regard to the fine imposed in the fine proceedings.In its decision, it emphasized the deterrent effect intended by the fine, which would be weakened or even eliminated by the possibility of recourse.
- The Regional Labor Court of Düsseldorf ruled similarly in 2015.In doing so, it rejected – as the Higher Regional Court of Düsseldorf has now done – in particular the argument that the concept of sanctions is sufficiently taken into account by the fact that the fine is imposed on the company itself and that it is irrelevant under the law on administrative offenses and criminal law who ultimately pays the fine.The Court held that the express purpose of a fine imposed on a company is to affect the company itself and to encourage it to exercise sufficient control over its corporate bodies.This purpose would therefore be undermined if the fine were passed on under civil law.
- In contrast, the Regional Court of Dortmund recently affirmed a right of recourse for the fined company.In doing so, it emphasized that – at least in the case it had to decide – the antitrust violation was ultimately committed by a statutory representative in the managing corporate body that was also behind the company.Therefore, any recourse would affect the person ultimately responsible.In addition, it held that a strict systematic separation between the law of administrative offenses and civil law was necessary.It stated that the sanction under the administrative offenses law would not be undermined by a possible civil liability.This is because the fined company bears the risk of insolvency of the respective statutory representative in its managing corporate body, which fulfills the deterrent and preventive functions intended by the fine.In addition, it held that, due to the amount of the fine, the company would not normally be reimbursed (in full) by the statutory representative or be relieved by the D&O insurance on behalf of the statutory representative, as the amounts covered are generally lower than the fines imposed.
In view of the inconsistent case law of the lower courts, the question of a company’s ability to hold itself harmless by seeking indemnification from the statutory representatives in its managing corporate body with regard to antitrust fines must currently be regarded as open. As a result of the appeal allowed by the Higher Regional Court of Düsseldorf, there is now an opportunity for clarification by the German Federal Court of Justice.
However, there is agreement that the statutory representative in the managing corporate body of a company is liable towards the latter for any consequential claims of third parties, e.g., for antitrust damages, if the representative has culpably violated the provisions of EU or German antitrust law. In this context, the statutory representative’s defense that the infringement was committed in the alleged interest of the company cannot be heard.
Could we see the application of the principles established by the Higher Regional Court of Düsseldorf to “regular” employees?
It is not uncommon that (also) “regular” employees are involved in agreements or practices that violate antitrust law. As far as can be seen, the question of the liability of individuals on hierarchical levels below managing directors and management board members for such breaches of duty towards the company has not yet been clarified by the courts.
However, there are grounds for applying the principles established by the Higher Regional Court of Düsseldorf to the liability of “regular” employees as well, and for rejecting the possibility of recourse by the company for at least the fine imposed by an antitrust authority and the associated costs. In such a case, the above-mentioned considerations arising from administrative offense and antitrust law must also be taken into account: Here, too, the antitrust authority has the option of imposing an individual fine on the “regular” employee who committed the antitrust violation in addition to the fine imposed on the company. The deterrent and sanctioning effects of the fine can only be achieved if the liability of the “regular” employee for recourse by the company is excluded.
For damages beyond compensation for a fine and the costs of the fine proceedings, the liability of “regular” employees can generally not be based on D&O liability. However, a right of recourse could arise from the general provisions of the law of obligations in connection with the employment contract, whereby special features of employment law, such as the principles of intra-company damage compensation (Grundsätze des innerbetrieblichen Schadensausgleichs) and the rules on the allocation of the burden of proof under employment law, must be observed. As a rule, however, antitrust fine proceedings do not only involve cases of minor and moderate negligence, but predominantly intentional antitrust violations, so that a reduction of liability based on principles of employment law is highly unlikely to come into play.
The liability of the statutory representative in the company’s managing corporate body for consequential damages under civil law – as far as the internal relationship with the company is concerned – has consequences for damage claims by third parties due to an antitrust violation involving a statutory representative, which are generally directed only against the company.
The company should consider filing a third-party impleader against the responsible statutory representative in the initial proceedings in order to secure possible recourse claims. The service of the third-party notice has the effect of suspending the statute of limitations of the company’s claims against the statutory representative. At the same time, the main findings with respect to the culpable antitrust violation on which the company’s liability is based in the initial damages proceedings will then also be binding for the subsequent proceedings of the company against the statutory representative. However, it is always necessary to check beforehand whether, for example, a contractual agreement (such as a waiver of claims) has been concluded with the statutory representative as part of the company’s internal investigation of the antitrust infringement, which could prevent the possibility of recourse. The same considerations apply to any claims the company may have against “regular” employees, as far as the internal relationship between the company and such employees is concerned.
 Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), available online.
 In general: Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 173 et seqq.
 Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 178 et seqq.
 Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 77 et seqq.
 Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 135 et seqq.
 For a detailed description, see Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 7 et seqq.
 Regional Court of Saarbrücken, Judgment of September 15, 2020 – 7HK O 6/16, available on juris.
 Higher Regional Court of Düsseldorf, Judgment of July 27, 2023 – 6 U 1/22 (Kart), paras. 149 et seqq.
 Regional Labor Court of Düsseldorf, Partial Judgment of January 20, 2015 – 16 Sa 459/14, ZIP 2015, 829; This judgment was overturned by the Federal Labor Court in the Judgment of June 29, 2017 – 8 AZR 189/15 since the question of the possibility of recourse for corporate fines is a preliminary issue under antitrust law which leads to the exclusive jurisdiction of the regional courts.
 Regional Labor Court of Düsseldorf, Partial Judgment of January 20, 2015 – 16 Sa 459/14, ZIP 2015, 829 (830).
 Regional Court of Dortmund, Decision of June 21, 2023 – 8 O 5/22 (Kart).
 Accordingly also Regional Labor Court of Düsseldorf, Partial Judgment of January 20, 2015 – 16 Sa 459/14, ZIP 2015, 829 (833).
 The situation may be different for employees who act as so-called “de facto corporate bodies”.
 According to the principles of intra-company damage compensation, the employee’s liability may be reduced or excluded entirely if the breach of duty is due solely to negligence.