Case BriefsInternational Courts

European Court of Justice: The Bench of N. Wahl (Rapporteur), F. Biltgen (President) and J. Passer, JJ., held that Telekom’s Zero Tariff was violative of European rule of Net Neutrality.

 A ‘zero tariff’ option draws a distinction within internet traffic, on the basis of commercial considerations, by not counting towards the basic package traffic to partner applications. Consequently, such a commercial practice does not satisfy the general obligation of equal treatment of traffic, without discrimination or interference, as laid down in Article 3(3) of Regulation 2015/2120.

 Factual Fulcrum

Telekom, an information and communications technology undertaking, had been offering its end customers an add-on option in the form of a free ‘zero tariff’ option called ‘Stream On’ which allowed data volume consumed by audio and video streamed by Telekom’s content partners (e.g. Spotify, Netflix etc.) not to be counted towards the data volume included in the basic package. By activating the ‘Stream On’ tariff option, the end customer were to accept bandwidth being limited to a maximum of 1.7 Mbit/s for video streaming, irrespective of whether the videos were streamed by content partners or other providers and once that data volume get used up, the transmission speed would reduce.

The Federal Agency for Electricity, Gas, Telecommunications, Post and Rail Networks, Germany found that the tariff option concerned did not comply with the obligations arising from Article 3(3) of EU Regulation 2015/2120, since it was accompanied by a reduction in the data transmission speed for video streaming to a maximum of 1.7 Mbit/s. Hence, the Federal Agency prohibited Telekom from limiting bandwidth for video streaming covered by that tariff option and from using terms providing for a reduction in bandwidth in both contracts concluded with content providers and with end customers.

 Question Referred

 As the matter reached for annulment before the Administrative Court, Cologne, Germany, the referring Court opined that interpretation of EU regulation in this regard was required to settle the case. The referring Court asked, whether a limitation on bandwidth on account of the activation of a ‘zero tariff’ option, applied to video streaming, irrespective of whether it is streamed by partner operators or other content providers, is incompatible with the obligations arising from Article 3(3) of Regulation 2015/2120?

Zero-Tariff

A ‘zero tariff’ option is a commercial practice whereby an internet access provider applies a ‘zero tariff’, or a tariff that is more advantageous, to all or part of the data traffic associated with an application or category of specific applications, offered by partners of that access provider. Those data are therefore not counted towards the data volume purchased as part of the basic package. Such an option, offered in the context of limited packages, thus allows internet access providers to increase the attractiveness of their offer.

Net Neutrality Rule

As per European Union’s Net Neutrality rule ( enshrined under Article 3 of Regulation 2015/2120), end-users should have right to access and distribute information and content, and to use and provide applications and services without discrimination, via their internet access service. Similarly, it requires that reasonable traffic management measures applied by providers of internet access services should be transparent, non-discriminatory and proportionate, and should not be based on commercial considerations.

Under net neutrality rule, the service providers are prohibited from engaging in traffic management measures; in particular they shall not block, slow down, alter, restrict, interfere with, degrade or discriminate between specific content, applications or services, or specific categories except for a fixed period, in order

  • to comply with Union legislative acts, national legislation that complies with Union law or measures giving effect to such Union legislative acts or national legislation,
  • to preserve the integrity and security of the network, of services provided via that network, and of the terminal equipment of end users or
  • to prevent network congestion and mitigate the effects thereof.

Consideration of the questions referred

In Telenor Magyarország Zrt v. Nemzeti Média-és Hírközlési Hatóság Elnöke,  [2020] 4 WLR 155, it was held that though the service providers are allowed to adopt reasonable traffic management measures, however, such  measures must be based on ‘objectively different technical quality of service requirements of specific categories of traffic’, and not on ‘commercial considerations’. In particular, it was held that any measure of a provider of internet access services in respect of an end user which, without being based on such objective differences, results in the content, applications or services offered by the various content, applications or services providers not being treated equally and without discrimination, must be regarded as being based on such ‘commercial considerations’.

The Top Court opined that a ‘zero tariff’ option, such as that at issue in the main proceedings, draws a distinction within internet traffic, on the basis of commercial considerations, by not counting towards the basic package traffic to partner applications. Consequently, such a commercial practice does not satisfy the general obligation of equal treatment of traffic, without discrimination or interference, laid down in Article 3(3) of Regulation 2015/2120. The Court stated,

“It should be pointed out that  failure, which results from the very nature of such a tariff option on account of the incentive arising from it, persists irrespective of whether or not it is possible to continue freely to access the content provided by the partners of the internet access provider after the basic package has been used up.”

Lastly, noticing that the limitation on bandwidth was solely on account of the activation of the ‘zero tariff’ option, the Court held that the exceptions provided for management measures could not be taken into consideration since, according to Article 3(3), such measures could not be based on commercial strategies pursued by the internet access provider.

Verdict

In the light of the foregoing considerations, the Court held that since such a tariff option was contrary to the obligations arising from Article 3(3), that incompatibility remains, irrespective of the form or nature of the terms of use attached to the tariff options on offer, such as the limitation on bandwidth. Accordingly, the Court answered that Article 3 must be interpreted as meaning that a limitation on bandwidth, on account of the activation of a ‘zero tariff’ option, applied to video streaming, irrespective of whether it was streamed by partner operators or other content providers,  was incompatible with the obligations arising from Article 3(3).[Telekom Deutschland GmbH v. Bundesrepublik Deutschland, C‑34/20, decided on 02-09-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

European Court of Justice (ECJ): In a landmark Copyright case, the Grand Chamber composed of K. Lenaerts, President, R. Silva de Lapuerta, Vice-President, J.‑C. Bonichot, M. Vilaras, E. Regan and M. Ilešič (Rapporteur), Presidents of Chambers, E. Juhász, M. Safjan, D. Šváby,S. Rodin, F. Biltgen, K. Jürimäe and C. Lycourgos, JJ.,  rules in the favour of renowned media giant YouTube. The Bench held that,

YouTube and other such intermediaries cannot be made liable for copyright infringement unless the intermediary/operator had specific knowledge that protected content is available illegally on its platform and refrains from expeditiously deleting it or blocking access to it.

The issue before the Court was regarding several infringements of the intellectual property rights held by Mr Peterson and Elsevier committed by users of the video‑sharing platform operated by YouTube and the file-hosting and -sharing platform operated by Cyando, respectively.

Peterson v. Youtube

Mr Peterson, a music producer and owner of the Nemo Studios had entered into a worldwide exclusive artist contract with the performer Sarah Brightman covering the use of audio and video recordings of her performances; including a licence agreement, covering the exclusive distribution of the recordings and performances.

On 4 November 2008, Sarah Brightman began a tour called the ‘Symphony Tour’ in which she performed the works she had recorded for the album Winter Symphony. Noticing that some private recordings from those concerts could be accessed on the YouTube online platform, Mr Paterson issued cease-and-desist declarations under threat of penalties to the owner of Youtube, Google Germany. Though the access to those videos was blocked initially, some audio recordings from Sarah Brightman’s performances, accompanied by still and moving images once again reappeared on YouTube’s online platform. Consequently, Mr Peterson brought an action against Google and YouTube seeking an injunction, disclosure of information and a declaration that they were liable to pay damages.

Elsevier v. Cyando

Elsevier, an international specialist publisher, held the exclusive rights to use the works at issue namely Gray’s Anatomy for Students, Atlas of Human Anatomy and Campbell-Walsh Urology. On being aware that Cyando, an operator of ‘Uploaded’ file-hosting and -sharing platform, had uploaded three works in respect of which it (Elsevier) held exclusive rights, Elsevier had send a notice to Cyando. Later on, Elsevier brought an action against Cyando for prohibitory injunction, as the party responsible for the copyright infringements in the alternative, as a participant in those infringements and, in the further as an interferer.

Questions Referred

  1. Whether Article 3(1) of the Copyright Directive must be interpreted as meaning that the operator of a video sharing platform or a file-hosting and ‑sharing platform, on which users can illegally make protected content available to the public, itself makes a ‘communication to the public’ of that content, within the meaning of that provision, in conditions such as those at issue in the main proceedings.
  2. Whether Article 14(1)(a) of that directive must be interpreted as meaning that, for that operator to be excluded, under that provision, from the exemption from liability provided for in Article 14(1), it must have knowledge of specific illegal acts committed by its users relating to protected content that was uploaded to its platform.
  3. Whether Article 8(3)of the Copyright Directive must be interpreted as precluding a situation where the right holder is notable to obtain an injunction against an intermediary whose services are used by a third party to infringe the rights of that right holder unless that infringement has previously been notified to that intermediary and that infringement is repeated.

Findings of the Court

‘Communication to the Public’ whether by the operator/intermediary or by users?

Under Article 3(1) of the Copyright Directive, Member States are to provide authors with the exclusive right to authorise or prohibit any communication to the public of their works, the authors thus have a right which is preventive in nature and which enables them to intervene between possible users of their work and the communication to the public which such users might contemplate making, in order to prohibit such communication.

Communication to the Public

The Bench observed that potentially illegal content was uploaded to the platform concerned not by the operator, but by users, who acted autonomously and who were responsible for their own actions. In addition, it was the users of the platform who determine whether the content they had uploaded was made available to other internet users via that platform so that those other internet users could obtain access to it.

Further, YouTube does not intervene in the creation or selection of content uploaded to its platform by platform users, and that it does not view or monitor that content before it is uploaded; that content is uploaded to that platform automatically. It was also apparent that YouTube clearly informs its users, in its terms of service and every time a file is uploaded, that it is forbidden to post protected content on that platform in breach of copyright. Furthermore, where a video is blocked due to a report by the right holder, the user who has uploaded it is warned that his or her account will be blocked in the event of repeated infringements. In addition, YouTube has put in place various technological measures in order to prevent and put an end to copyright infringements on its platform, such as, inter alia, a notification button and a special alert procedure for reporting and arranging for illegal content to be removed, as well as a content verification program for checking content and content recognition software for facilitating the identification and designation of such content. Thus, it is apparent that that operator has adopted technological measures to counter credibly and effectively copyright infringements on its platform.

Regarding the Uploaded file-hosting and -sharing platform, it was common ground that a download link allowing access to uploaded content was communicated only to the user who uploaded the file and that the platform did not make it possible to share that link. Thus, in order to share that content, the user must either send the download link directly to the persons to whom he or she wishes to give access to that content or must publish that link on the internet, for example in blogs, forums or ‘link collections’. Moreover, the operator does not create, select, view or check content uploaded to its platform either. Furthermore, it informs its users, in the conditions of use of its platform, that they are prohibited from infringing copyright via that platform.

Consequently, the Bench held that

Article 3(1) of the Copyright Directive must be interpreted as meaning that the operator of a video-sharing platform or a file-hosting and ‑sharing platform, on which users can illegally make protected content available to the public, does not make a ‘communication to the public’ of that content, within the meaning of that provision, unless it contributes, beyond merely making that platform available, to giving access to such content to the public in breach of copyright.

The Bench clarified, an operator could only be held liable for the infringement made via its platform where it has specific knowledge that protected content is available illegally on its platform and refrains from expeditiously deleting it or blocking access to it, or where that operator, despite the fact that it knows or ought to know, in a general sense, that users of its platform are making protected content available to the public illegally via its platform, refrains from putting in place the appropriate technological measures that can be expected from a reasonably diligent operator.

Whether Operators can claim exemption from liability?

In order to ascertain whether the operator of a video-sharing platform or a file-hosting and -sharing platform may be exempted under Article 14(1) of the Directive on Electronic Commerce from liability for the protected content which users illegally communicate to the public via its platform, it was necessary to examine whether the role played by that operator was neutral, i.e., whether its conduct was merely technical, automatic and passive, which mean that it had no knowledge of or control over the content it stores, or whether, on the contrary, that operator played an active role that gave it knowledge of or control over that content.

Noticing that the service providers concerned could not, in accordance with Article 15(1) of that directive, be subject to a general obligation to monitor the information which they transmit or store or to a general obligation actively to look for facts or circumstances indicating illegal activity; and that the Bench held that the platform operators at issue did not create, select, view or monitor content uploaded to their platforms, and the fact that the operator of a video-sharing platform, the Bench held that,

For such an operator to be excluded from the exemption from liability provided for in Article 14(1), it must have knowledge of or awareness of specific illegal acts committed by its users relating to protected content that was uploaded to its platform and that as soon as the service providers actually obtained knowledge or awareness of illegal information, it acted expeditiously to remove or to disable access to that information/content.

Whether actions can be brought against the intermediary without previously notifying it of infringement?

 Article 8(3) of the Copyright Directive provides that ‘Member States shall ensure that right holder are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe copyright or a related right’. Is that Article 8(3) of the Copyright Directive must be interpreted as not precluding a situation under national law whereby a copyright holder or holder of a related right may not obtain an injunction against an intermediary whose service has been used by a third party to infringe his or her right, that intermediary having had no knowledge or awareness of that infringement, within the meaning of Article 14(1)(a) of the Directive on Electronic Commerce, unless, before court proceedings are commenced, that infringement had first been notified to that intermediary and the latter had failed to intervene expeditiously in order to remove the content in question or to block access to it and to ensure that such infringements do not recur. The Bench opined,

Where the ‘interferer’ is a service provider whose service consists in storing information provided by a user, in principle that service provider can be the subject of a prohibitory injunction only if, after notification of a clear infringement of an intellectual property right had been provided, that right is infringed again or continued to be infringed because that service provider had not intervened expeditiously after that notification to remove the content in question or to block access to it and to ensure that such infringements do not recur.

[Frank Peterson v Google LLC & YouTube Inc., C‑682/18, decided on 22-06-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

European Court of Justice (ECJ): The Second Chamber composed of A. Arabadjiev, President of the Chamber, A. Kumin, T. von Danwitz (Rapporteur), P.G. Xuereb and I. Ziemele, JJ., held that Tesco’s work conditions might be gender discriminatory with regards to equal pay for equal work. The Bench clarified,

“The pay conditions of workers of different sex performing equal work or work of equal value can be attributed to a single source comes within the scope of Article 157 TFEU and that the work and the pay of those workers can be compared on the basis of that article, even if they perform their work in different establishments.

The request had been made in proceedings between approximately 6000 workers and Tesco Stores Ltd., which employs or employed those workers in its stores, concerning a claim for equal pay for male and female workers.

Legal context

EU law: Provisions relating to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union The Court of Justice of the European Union shall continue to have jurisdiction to give preliminary rulings on requests from courts and tribunals of the United Kingdom made before the end of the transition period.

Article 119 of the European Economic Community (EEC) Treaty (which became, after amendment, Article 141 EC, now Article 157 of TFEU (Treaty on the Functioning of the European Union) was worded as follows:
Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work.

Article 157 TFEU provides:
Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.

The Dispute in the Main Proceedings and the Questions Referred for a Preliminary Ruling

Tesco Stores is a retailer that sells its products online and in 3 200 stores located in the United Kingdom. The stores, of varying size, have a total of approximately 250 000 workers, who are hourly paid and carry out various types of jobs. The company also has a distribution network of 24 distribution centres with approximately 11 000 employees, who are also hourly paid and carry out various types of jobs.

The claimants in the main proceedings were female employees or former employees of Tesco Stores, who brought proceedings against Tesco Stores before the Watford Employment Tribunal (United Kingdom), from February 2018 onwards, on the ground that they had not received equal pay for equal work, contrary to the Equality Act 2010 and Article 157 TFEU. In support of their equal pay claims, the claimants submitted that their work and that of the male workers employed by the company in distribution centers were of equal value and, that they were entitled to compare their work and that of those workers under both the Equality Act 2010 and Article 157 TFEU, although the work was carried out in different establishments.

The company disputed that the claimants had any right to compare themselves with the male workers at the distribution centers in its network, on the ground that there were not common terms of employment, for the purposes of section 79(4) of the Equality Act 2010. The company further argued that Article 157 TFEU was not directly effective in the context of claims based on work of equal value, and therefore the female claimants could not rely on that provision. Similarly, the Tesco Stores contended that it cannot be classified as a ‘single source’ for the terms and conditions of employment in the stores and the distribution centers in its network.

Findings of the Tribunal

The referring Tribunal stated that the female claimants in the main proceedings and the male workers taken as comparators, although employed in different establishments, had the same employer. In order to determine whether the jobs of the female claimants were of equal value to those of their comparators, the referring Tribunal observed there was uncertainty within UK Courts regarding direct effect of Article 157 TFEU, in particular with the distinction articulated in Defrenne (43/75, EU:C:1976:56), between discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay and discrimination which can only be identified by reference to more explicit implementing provisions of EU or national law.

Question Referred

  1. Is Article 157 [TFEU] directly effective in claims made on the basis that claimants are performing work of equal value to their comparators?
    2. Is the single source test for comparability in [Article] 157 [TFEU] distinct from the question of equal value, and if so, does that test have direct effect?

In other words, whether Article 157 TFEU must be interpreted as having direct effect in proceedings between individuals in which failure to observe the principle of equal pay for male and female workers for ‘work of equal value’ that the criterion of ‘work of equal value’, unlike the criterion of ‘equal work’, requires definition by provisions of national or EU law. Furthermore, whether the findings of the Court Defrenne (43/75, EU:C:1976:56), when work of equal value is being compared, is founded on a claim of discrimination that is identifiable only by reference to provisions more explicit than those of Article 157 TFEU?

Analysis and Findings of the ECJ

According to Article 157 TFEU, each Member State is to ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied. Therefore, it imposes an obligation to achieve a particular result and is mandatory as regards both ‘equal work’ and ‘work of equal value’. Thus, the Court remarked,

“Since Article 157 TFEU is of such a mandatory nature, the prohibition on discrimination between male and female workers applies not only to the action of public authorities but also extends to all agreements which are intended to regulate paid labour collectively, as well as to contracts between individuals.”

In Defrenne (43/75, EU:C:1976:56), the Court had stated that discrimination which has its origin in legislative provisions or collective labour agreements is among the forms of discrimination which may be identified solely by reference to the criteria based on equal work and equal pay laid down by Article 119 of the EEC Treaty (which became, after amendment, Article 141 EC, now Article 157 TFEU) – in contrast to those which can only be identified by reference to more explicit implementing provisions.

Accordingly, the Court held that it was apparent from settled case-law that contrary to Tesco Stores’ submissions, the direct effect of Article 157 TFEU is not limited to situations in which the workers of different sex who are compared perform ‘equal work’, to the exclusion of ‘work of equal value’. In the light of the above factors, the Bench held that

“The interpretation that a distinction should be drawn, as regards the direct effect of Article 157 TFEU, according to whether the principle of equal pay for male and female workers is relied upon in respect of ‘equal work’ or of ‘work of equal value’ is such as to compromise the effectiveness of that article and attainment of the objective that it pursues.”

Hence, the Bench held that a situation in which the pay conditions of workers of different sex performing equal work or work of equal value can be attributed to a single source comes within the scope of Article 157 TFEU and that the work and the pay of those workers can be compared on the basis of that article, even if they perform their work in different establishments. Accordingly, the Bench reached to the conclusion that Tesco Stores constitute in its capacity as employer, a single source to which the pay conditions of the workers performing their work in its stores and distribution centers may be attributed and which could be responsible for any discrimination prohibited pursuant to Article 157 TFEU, which it was for the referring tribunal to determine.[K v. Tesco Stores Ltd., Case C‑624/19, decided on 03-06-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

European Court of Justice (ECJ): In a long-fought battle against Facebook the Belgian Data Protection Authority had secured a major win.  The decision of the Grand Chamber composed of K. Lenaerts, President, R. Silva de Lapuerta, Vice‑President, A. Arabadjiev, A. Prechal, M. Vilaras, M. Ilešič and N. Wahl, Presidents of Chambers, E. Juhász, D. Šváby, S. Rodin, F. Biltgen, K. Jürimäe, C. Lycourgos, P.G. Xuereb and L.S. Rossi (Rapporteur), JJ., had made Facebook and other Tech companies vulnerable to potential sanctions in the European Union after the Court authorized the supervisory authority of a Member State to lift the “one-stop-shop” veil.

In Issue

  • Regulation (EU) 2016/679 of the European Parliament and the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data.
  • Repealing Directive 95/46/EC (General Data Protection Regulation) read together with Articles 7, 8 and 47 of the Charter of Fundamental Rights of the EU.

Privacy Infringement by Facebook

The President of the Privacy Commission, Belgium had brought legal proceedings seeking an injunction against Facebook Ireland, Facebook Inc. and Facebook Belgium before the Court of First Instance. The object of those injunction proceedings was to bring to an end to the ‘serious and large scale infringement, by Facebook, of the legislation relating to the protection of privacy consisting in the collection by that online social network of information on the internet browsing behaviour both of Facebook account holders and of non-users of Facebook services by means of various technologies, such as cookies, social plug-ins (Like or Share buttons) or pixels. The Commission contended that those features had permitted Facebook to obtain certain data of an internet user who visits a website page containing them, such as the address of that page, the ‘IP address’of the visitor etc.

Directions of the Court of First Instance

On the substance, that Court held that Facebook was not adequately informing Belgian internet users of the collection of the information concerned and of the use of that information. Further, the consent given by the internet users to the collection and processing of that data was held to be invalid. Consequently, that Court ordered Facebook Ireland, Facebook Inc. and Facebook Belgium

  1. to desist from placing, without consent, cookies that remain active for two years on the devices when browsing a web page in the Facebook.com domain or visiting the website of a third party, and from placing cookies and collecting data by means of social plug-ins, pixels or similar technological means on third party websites, in a manner that was excessive in the light of the objectives pursued by the Facebook social network,
  2. to desist from providing information that might reasonably mislead the data subjects as to the real extent of the mechanisms put in place by Facebook for the use of cookies, and
  3. to destroy all the personal data obtained by means of cookies and social plug-ins.

Stand Taken by Facebook

Facebook approached the Court of Appeal Brussels, Belgium contending that the action brought for injunction was inadmissible, as the DPA had no competence and right to bring such an action given the existence of the ‘one-stop shop’ mechanism provided under the provisions of Regulation 2016/679. On the basis of those provisions, it was only the Data Protection Commissioner (Ireland) who could bring injunction proceedings against Facebook, the latter being the sole controller (one-stop shop) of the personal data of the users of the social network concerned within the European Union.

The Court of Appeal referred the question raised by Facebook regarding one-stop shop to the European Court of Justice for its opinion on the matter.

Analysis by the Court

To ascertain whether under Article 55(1), Articles 56 to 58 and Articles 60 to 66 of Regulation 2016/679, read together with Articles 7, 8 and 47 of the Charter, a supervisory authority of a Member State other than the ‘lead supervisory authority’ has the power to bring any alleged infringement of that regulation to the attention of a Court of that Member State and to initiate or engage in legal proceedings with respect to cross-border data processing; the Bench noticed,

“In relation to such data processing the legal basis of Regulation 2016/679 is Article 16 TFEU, which enshrines the right of everyone to the protection of personal data concerning them and authorises the European Parliament and the Council of the European Union to lay down the rules relating to the protection of individuals with regard to the processing of that data by European Union institutions and by the Member States, when carrying out activities which fall within the scope of EU law, and the rules relating to the free movement of such data. Second, recital 1 of that regulation confirms that ‘the protection of natural persons in relation to the processing of personal data is a fundamental right’ and states that Article 8(1) of the Charter and Article 16(1) TFEU lay down the right of everyone to the protection of personal data concerning them.”

Exceptions to “One-stop Shop” Mechanism

One-stop Shop: The ‘one-stop shop’ mechanism, is based on an allocation of competences between one ‘lead supervisory authority’ (Data Protection Commissioner (Ireland)), wherein only the supervisory authority of the main establishment is to be competent to act as lead supervisory authority and handle can handle legal cases involving cross-border data complaints.

The top Court, though upheld the ‘one-stop shop’ shop mechanism, at the same time proceeded to carve out certain exceptions for the same:

Exception 1: As per Article 56(2) of Regulation 2016/679, a supervisory authority which is not the lead supervisory authority is to be competent to handle a complaint lodged with it concerning a cross-border processing of personal data or a possible infringement of that regulation, if the subject matter relates only to an establishment in its own Member State or substantially affects data subjects only in that Member State.

Exception 2: Article 66 of Regulation 2016/679 provides for an urgency procedure. That urgency procedure makes it possible, in exceptional circumstances, where the supervisory authority concerned considers that there is an urgent need to act in order to protect the rights and freedoms of data subjects, immediately to adopt provisional measures intended to produce legal effects on its own territory with a specified period of validity which is not to exceed three months, while Article 66(2) of Regulation 2016/679 further provides that, where a supervisory authority has taken a measure under Article 66(1) and considers that final measures must urgently be adopted, it may request an urgent opinion or an urgent binding decision from the European Data Protection Board, giving reasons for requesting such an opinion or decision.

Hence, a supervisory authority of a Member State has the power to bring any alleged infringement to the attention of a court of that Member State and to initiate or engage in legal proceedings in relation to cross‑border data processing even though it is not the ‘lead supervisory authority’  provided that that power is exercised in one of the situations where Regulation 2016/679 confers on that supervisory authority a competence to adopt a decision finding that such processing is in breach of the rules contained in that regulation.

The controller against whom such proceedings are brought need not to have a main establishment in the member State taking action

In the event of cross-border data processing, it is not a prerequisite for the exercise of the power of a supervisory authority of a Member State, other than the lead supervisory authority, to initiate or engage in legal proceedings that the controller against whom such proceedings are brought has a main establishment or another establishment on the territory of that Member State.

Action can be brought under EU Directive against processing of personal data happened prior to when the regulation became applicable

Where a supervisory authority of a Member State other than the ‘lead supervisory authority’, has brought a legal action on the instance of cross-border processing of personal data before the date when that regulation became applicable, that action may be continued on the basis of the provisions of Directive 95/46/EC of the European Parliament and of the Council of 24-10-1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, which remains applicable in relation to infringements of the rules laid down in that directive committed up to the date when that directive was repealed. Article 58(5) of Regulation 2016/679 must be interpreted as meaning that that provision has direct effect, with the result that a national supervisory authority may rely on that provision in order to bring or continue a legal action against private parties, even where that provision has not been specifically implemented in the legislation of the Member State concerned.[Facebook Ireland Ltd, Facebook Inc. & Facebook Belgium v.  Belgian Data Protection Authority, C‑645/19, decided on 15-06-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

General Court (Second Chamber): The Bench comprising of V. Tomljenović, President, F. Schalin and I. Nõmm (Rapporteur), JJ., settles the design right dispute regarding a building block toy set in favour of Danish toy manufacturer, Lego. The Bench said, the European Union Intellectual Property Office (EUIPO) erred in law in declaring the design invalid.

 The applicant, Lego A/S, filed an application for registration of a Community design with the EUIPO. The goods to which the contested design was intended to be applied were in Class 21.01 of the Locarno Agreement, 1968 and corresponded to the following description: “building blocks from a toy building set”. By its decision on 10 -04-2019, the Third Board of Appeal (BoA) of EUIPO declared the contested design invalid, holding that that all the features of appearance of the product concerned by the contested design were solely dictated by the technical function of the product, namely to allow assembly with, and disassembly from, the rest of the bricks of the set.

Analysis by the Court

The main question before the Court was whether the proprietor of a contested design can claim the benefit of Article 8(3) of Regulation No 6/2002 (which provides an exception for Art. 8(2)) for the first time before the BoA. The Court answered that no provision of Regulation No 6/2002 precludes the benefit of the exception laid down in Article 8(3) of that regulation from being relied on, for the first time, before the BoA as the BoA has jurisdiction, inter alia, to rule on the claims of the proprietor of the contested design relating to the benefit of Article 8(3) and it could not be deprived of that jurisdiction merely because the proprietor of the contested design had chosen to claim the benefit of Article 8(3) for the first time at the stage of appeal proceedings.  Similarly, since neither Regulation No 6/2002 nor the rules of procedure of the BoA specify the conditions for the application of Article 8(3) of that regulation, it was not possible to consider that the applicant’s reliance on that provision, for the first time before the Board of Appeal, was out of time.

To examine whether the exempting Article 8(3) was applicable on the instant case or not the Bench assessed the application of preceding clauses of the same Article. Article 8(1) excludes protection under the law on Community designs for features of appearance of a product where considerations other than the need for that product to fulfil its technical function, in particular visual aspect had not played any role in the choice of those features. Furthermore, since, in order to fulfil the function of assembly and disassembly of the product concerned by the contested design, the features of appearance of that design must be reproduced in the exact dimensions in order to permit their connection, they also fall within Article 8(2) of that regulation. Thus, the Bench opined that such features would fall within both Article 8(1) and Article 8(2) since they were both solely dictated by the technical function of the product, namely to allow the connection and disconnection of that product, and constitute features of interconnection.

EUIPO could not apply merely Article 8(1) to the features which fall within both Articles 8(1) and 8(2) as the provisions of Article 8 must be interpreted in such a way as to preserve their effectiveness.

The Court opined that, the interpretation given by EUIPO could not be adopted since it was too restrictive. The BoA erred in law since it failed to assess whether the contested design met the requirements of Article 8(3).

The Court of Justice stated that, in order to determine whether the features of appearance of a product were solely dictated by its technical function, it must be established that that technical function was the only factor that determined those features. Accordingly,

If at least one of the features of appearance of the product concerned by a contested design was not solely dictated by the technical function of that product, the design at issue could not be declared invalid under Article 8(1).

Decision 

Rejecting the findings of BoA, the General Court held that the smooth surface of the upper face of the toy brick was a feature of the specific appearance of the product concerned by the contested design and was not limited to a mere ‘absence of studs on the upper surface of the brick’. Hence, the BoA infringed Article 8(1) as it did not identify all the features of appearance of the product concerned by the contested design and, a fortiori, did not establish that all of those features were solely dictated by the technical function of that product.

However, the Court dismissed the plea for making alteration in the findings of BoA opining that the conditions for alteration were not satisfied as the BoA had not established all the elements of fact and of law to enable the Court to determine the decision.

The decision of the Third Board of Appeal was annulled. The EUIPO and Delta Sport Handelskontor GmbH (Intervener) were ordered to bear their own costs and each to pay half of the costs incurred by Lego A/S.[Lego A/S, v. European Union Intellectual Property Office (EUIPO), T‑515/19, decided on 24-03-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

European Court of Human Rights (ECHR): In an interesting case regarding child trafficking the Fourth Section of ECHR had came up with a landmark ruling. The Bench, while acknowledging the right to protection of victims of trafficking ruled that,

“It is axiomatic that the prosecution of victims of trafficking would be injurious to their physical, psychological and social recovery and could potentially leave them vulnerable to being re-trafficked in future.”

 Facts and Findings

The instant case relates to two minor applicants, both of whom were convicted for criminal offences connected to their work as gardeners in cannabis factories. The Trial had been initiated against both the applicants and both of them, due to incompetent legal aid had pleaded guilty. The Crown Prosecution Service (CPS) persuaded to prosecute them even after being made aware by the United Kingdom Border Agency that there were reasonable grounds for believing that the first applicant had been trafficked. Similarly, the second applicant as well was recognised as victim of trafficking by the designated Competent Authority. The CPS while concluding that there was no credible evidence that the applicants had been trafficked, sentenced the first applicant to twenty months detention in a young offenders’ institution and eighteen-month detention and training order to the second applicant.

Similarly, the Court of Appeal opined that Article 26 of the Anti-Trafficking Convention was directed at sentencing decisions as opposed to prosecutorial decisions and could not, therefore, be interpreted as creating immunity for victims of trafficking who had become involved in criminal activities the court dismissed their appeal against conviction. However, the Appellate Court had reduced the sentence of the first applicant as a twelve-month custodial sentence and considering the young age of the second applicant his punishment was reduced as well to a four-month detention and training order. Being aggrieved by the conviction order the applicants reached the Supreme Court which had refused their applications.

Assessment

The Bench noted that the first applicant was discovered by police at a cannabis factory during the execution of a drug warrant, thus, the authorities should have been alert to the possibility that he – and any other young persons discovered there – could be a victim of trafficking. The CPS failed to consider that the relevant nexus had not been established between the trafficking and the criminal offence; rather, it repeatedly found that there was no clear evidence that the first applicant had been trafficked. The Court remarked,

“The prosecution of victims, or potential victims, of trafficking may, in certain circumstances, be at odds with the State’s duty to take operational measures to protect them where they are aware, or ought to be aware, of circumstances giving rise to a credible suspicion that an individual has been trafficked.”

Even though the first applicant was subsequently recognised by the Competent Authority as a victim of trafficking, the CPS, disagreed with that assessment without providing adequate reasons for its decision and the Court of Appeal, relying on the same inadequate reasons, twice found that the decision to prosecute him was justified.

Similarly, the competent authority had subsequently affirmed the possibility of the second applicant being a victim of trafficking at the time of his arrest. Observing that both the applicants were minor at the time of trafficking, the Bench stated,

“Child victims of trafficking are a particularly vulnerable group who may not be aware that they have been trafficked, or who may be too afraid to disclose this information to the authorities.”

 The State had a positive obligation to take operational measures to protect such victims; however, instead the criminal proceedings were allowed to proceed against them in the instant case.

Can Right to Fair Trial be Waived by Pleading Guilty?

On the plea of State that victims right to a fair trial was waived by pleading guilty, the Court was of the view that the victims had been deprived of a fair trial because the police had failed to undertake an investigation capable of providing them with exculpatory evidence, even though there was a credible suspicion that they had been trafficked; and the CPS’s assessment of the case was fundamentally flawed because it ignored the indicators of trafficking which were present.

It is true that neither the letter nor the spirit of Article 6 of the Convention prevents a person from waiving of his own free will the entitlement to the guarantees of a fair trial. However, such a waiver must be established in an unequivocal manner and it must not run counter to any important public interest.

Furthermore, given that trafficking threatens the human dignity and fundamental freedoms of its victims and is not compatible with a democratic society and the values expounded in the Convention, in the absence of any assessment regarding veracity of trafficking any waiver of rights by the applicants would run counter to the important public interest in combating trafficking and protecting its victims.

Whether the Trial was Prejudiced?

The Court opined that in respect of both applicants the reasons given by the CPS for disagreeing with the Competent Authority were wholly inadequate. Also, though the applicants invoked Article 4 of Anti Trafficking Convention the Court of Appeal did not consider their cases through the prism of the State’s positive obligations under that Article. The Bench expressed,

“Such an approach would in effect penalise victims of trafficking for not initially identifying themselves as such and allow the authorities to rely on their own failure to fulfil their duty under Article 4 of the Convention to take operational measures to protect them.”

Under Article 4 of the Convention, it was the State which was under a positive obligation to both to protect victims of trafficking and to investigate situations of potential trafficking and that positive obligation was triggered by the existence of circumstances giving rise to a credible suspicion that an individual has been trafficked and the State had blatantly failed to meet that obligation.

 The victims cannot be required to self-identify or be penalised for failing to do so.

Consequently, it had been held that there had been a violation of Articles 4 and 6 of the Anti-Trafficking Convention on account of the failure of the respondent State to fulfil its positive obligations under Article 4 to take operational measures to protect the victims of trafficking. Hence, both the victims were granted the sum of EUR 25,000 each in respect of non-pecuniary damage. Additionally, the cost of EUR 20,000 was also imposed on the state that was to be paid to the applicants.[V.C.L. and A.N. v. United Kingdom, Applications nos. 77587 of 12, decided on 16-02-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

Case BriefsInternational Courts

European Court of Justice: The Grand Chamber presided by K. Lenaerts, President, addressed the reference question concerning interpretation of Articles 47 and 48 of the Charter of Fundamental Rights of the European Union to determine lawfulness of penalties imposed on one DB for offences of insider dealing and failure to cooperate in the context of an investigation conducted by Consob (National Companies and Stock Exchange Commission, Italy).

The Dispute in the Main Proceedings

By decision dated 02-05-2012, Consob, imposed two financial penalties of EUR 200 000 and EUR 100 000 respectively on DB, for an administrative offence of insider trading committed, under two heads, namely insider dealing and the unlawful disclosure of inside information. It had also imposed on him a financial penalty of EUR 50 000 on the ground that the person concerned had declined to answer questions put to him when he appeared at hearing.

In that court’s view, right to remain silent and to avoid self-incrimination, based on the provisions of the Constitution, of European Union (EU) law and of international law, could not justify a refusal by the person concerned to appear at hearing ordered by Consob nor to delay the hearing.

Questions Referred for Opinion

Constitutional Court of Italy had pointed out that, although Article 30(1) of Regulation No 596/2014 had required Member States to ensure that the competent authorities had  power to take appropriate sanctions and other measures, Article 30(1)(b) had prescribed that Member States should not apply such sanctions or measures to natural persons who, in an investigation concerning an offence that was punishable by administrative sanctions of a criminal nature, refuse to provide the competent authority with answers which might establish their liability for such an offence, or their criminal liability.

In the above circumstances, the Constitutional Court decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

(1) Whether Article 14(3) of Directive 2003/6, and Article 30(1)(b) of Regulation No 596/2014 were to be interpreted as permitting Member States to refrain from penalising individuals who had refused  to answer questions put to them by the competent authorities and which might establish their liability for an offence that was punishable by administrative sanctions of a “punitive” nature?

(2) If the answer to the first question was to be in the negative, whether Article 14(3) of Directive 2003/6, and Article 30(1)(b) of Regulation No 596/2014 compatible with Articles 47 and 48 of the [Charter] – including in the light of the case-law of the European Court of Human Rights on Article 6 of the ECHR?

Considerations on the Questions Referred

 The Court of Justice observed that Articles 47 and 48 of the Charter enshrine right to a fair trial and presumption of innocence. The Bench noticed,

“Second paragraph of Article 47 corresponds to Article 6(1) of the ECHR (European Convention on Human Rights) and Article 48 of the Charter is ‘the same’ as Article 6(2) and (3) of the ECHR.”

In that regard, the Court relied on European Court of Human Rights’ observation that, even though Article 6 of the ECHR did not explicitly mention right to silence, that right was a generally recognised international standard which lie at the heart of the notion of a fair trial. By providing the accused with protection against improper coercion by the authorities, that right contribute to avoiding miscarriages of justice.

On Article 30(1)(a) and 30(1)(b) of Regulation No 596/2014 the Court reached to the findings that while the wording of those two provisions did not explicitly rule out the possibility that the Member States’ obligation to determine the penalties to be applied in such a case also applies to the situation where a person so heard had refused to provide the said authority with answers that were capable of establishing that person’s liability for an offence that would be  punishable by administrative sanctions of a criminal nature, or that person’s criminal liability, neither was there anything in the wording of Article 14(3) of Directive 2003/6 that would preclude an interpretation of that provision to the effect that that obligation would not apply in such a case.

Reliance was placed on Saunders v. United Kingdom, (1996) 23 EHRR 313, wherein it had been emphasised that,

“The right to silence cannot reasonably be confined to statements of admission of wrongdoing or to remarks which directly incriminate the person questioned, but rather also covers information on questions of fact which may subsequently be used in support of the prosecution and may thus have a bearing on the conviction or the penalty imposed on that person.”

Furthermore, even if, in the present case, the penalties imposed on DB by the supervisory authority at issue in the main proceedings were not to be criminal in nature, the need to respect the right to silence in an investigation procedure conducted by that authority could also stem from the fact, noted by the referring court, that, in accordance with national legislation, the evidence obtained in those proceedings may be used in criminal proceedings against that person in order to establish that a criminal offence was committed.

Hence, it must be held that the safeguards afforded by the second paragraph of Article 47 and Article 48 of the Charter, with which European Union (EU) institutions, as well as Member States, must comply when they implement EU law, include, inter alia, right to silence of natural persons. That right preclude, penalties being imposed on such persons for refusing to provide the competent authority under Directive 2003/6 or Regulation No 596/2014 with answers which might establish their liability for an offence that would be punishable by administrative sanctions of criminal nature, or their criminal liability.

In the light of Articles 47 and 48 of the Charter of Fundamental Rights of the European Union, must be interpreted as allowing Member States not to penalise natural persons who, in an investigation carried out in respect of them by the competent authority under that directive or that regulation, refuse to provide that authority with answers that were capable of establishing their liability for an offence that would be punishable by administrative sanctions of a criminal nature, or their criminal liability.[DB v. Consob, C‑481/19, decided on 02-02-2021]


Kamini Sharma, Editorial Assistant has put this story together.

Case BriefsInternational Courts

European Court of Justice (ECJ): Confédération paysanne, a French agricultural union which defends the interests of small-scale farming, together with eight other associations, brought an action before the Conseil d’État (Council of State, France) in order to contest the French legislation which exempts organisms obtained by mutagenesis from the obligations imposed by the Directive on genetically modified organisms (GMOs). [Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC (OJ 2001 L 106, p. 1)].

In particular, the directive provides that GMOs must be authorised following an assessment of the risks which they present for human health and the environment and also makes them subject to traceability, labelling and monitoring obligations. Confédération paysanne was of the view that the use of herbicide-resistant seed varieties carries a risk of significant harm to the environment and to human and animal health, in the same way as GMOs obtained by transgenesis. It is in this context, ECJ was requested by the Conseil d’État to determine, whether organisms obtained by mutagenesis are GMOs and whether they are subject to the obligations laid down by the GMO Directive.

ECJ held that organisms obtained by mutagenesis are GMOs within the meaning of the GMO Directive, in so far as the techniques and methods of mutagenesis alter the genetic material of an organism in a way that does not occur naturally and those organisms come, in principle, within the scope of the GMO Directive and are subject to the obligations laid down by that directive. The Court, however, made clear that the GMO Directive does not apply to organisms obtained by means of certain mutagenesis techniques, namely, those which have conventionally been used in a number of applications and have a long safety record. It nevertheless specified that the Member States are free to subject such organisms, in compliance with EU law (in particular the rules on the free movement of goods), to the obligations laid down by the GMO Directive or to other obligations.

Court also held that the GMO Directive is applicable to organisms obtained by mutagenesis techniques that have emerged since its adoption, as risks linked to the use of these new mutagenesis techniques might prove to be similar to those that result from the production and release of a GMO through transgenesis and new techniques make it possible to produce genetically modified varieties at a rate out of all proportion to those resulting from the application of conventional methods of mutagenesis.

The Court considered that the concept of ‘genetically modified variety’ must be construed as referring to the concept of a GMO in the GMO Directive, with the result that varieties obtained by mutagenesis which come under that directive must fulfil the condition for inclusion in the ‘common catalogue of varieties of agricultural plant species the seed of which may be marketed’ only if all appropriate measures have been taken to avoid risks to human health and the environment. [Confédération paysanne v. Premier ministre and Ministre de I’Agriculture, de I’Agroalimentaire et de la Forêt, Case C-528/16, judgment dated 25-07-2018]

Case BriefsInternational Courts

European Court of Justice: In 2006, EUIPO registered the three-dimensional shape of a ‘4 Finger KitKat’ as a EU trademark in respect of sweets, bakery products, pastries, biscuits, cakes and waffles. In 2007, Cadbury Schweppes (now Mondelez UK Holdings & Services) filed an application with EUIPO for a declaration of invalidity of the registration. In 2012, EUIPO rejected that application. The General Court annulled EUIPO’s decision. It considered that EUIPO had erred in law in finding that the mark at issue had acquired distinctive character through use in the EU, when such acquisition had been proved only for part of the territory of the EU. Although it had been established that the mark at issue had acquired distinctive character through use in ten countries, the General Court held that EUIPO could not validly conclude its examination without ruling on the relevant public’s perception of the mark in four other Member States (in particular, Belgium, Ireland, Greece and Portugal) and without analysing the evidence adduced in respect of those Member States.

Nestlé, Mondelez and EUIPO appealed to the Court of Justice against the judgment of the General Court. Appeal by Mondelez was found inadmissible. Nestlé and EUIPO submitted in their appeals that the General Court’s interpretation is incompatible with the unitary character of the European trademark and the very existence of a single market.

ECJ concluded that, although it is not necessary, for the purposes of registering a mark that was formerly devoid of distinctive character, that evidence of the acquisition by that mark of distinctive character through use be submitted in respect of each individual Member State, the evidence submitted for registering a sign as an EU trademark under Article 7(3) of Regulation No 207/2009 must be capable of establishing such acquisition throughout the Member States of the EU in which the sign did not, ab initio, have such character for the purposes of Article 7(1)(b) (Storck v OHIM, C-25/05 P, EU:C:2006:422, paragraph 83). The Court also stated that the part of the EU referred to in Article 7(2) may be comprised, where necessary, of a single Member State.

It followed that, with regard to a mark that is, ab initio, devoid of distinctive character across all Member States, such a mark can be registered pursuant to that provision only if it is proved that it has acquired distinctive character through use throughout the territory of the European Union (Chocoladefabriken Lindt & Sprüngli v OHIM, C-98/11 P, EU:C:2012:307, paras 61 and 63). This was contrary to the arguments by Nestlé and EUIPO that where a mark is devoid of inherent distinctive character throughout the EU, it is sufficient, in order for it to be registered as an EU trademark to prove that it has acquired distinctive character through use in a significant part of the European Union, even though such evidence has not been provided in respect of every Member State.

ECJ held that General Court was right in annulling EUIPO’s decision, in which EUIPO concluded that distinctive character had been acquired through use of the mark at issue without adjudicating on whether that mark had acquired such distinctive character in Belgium, Ireland, Greece and Portugal. On the basis of those considerations, the Court dismissed the appeals of Nestlé and EUIPO.[P Société des produits Nestlé SA v. Mondelez UK Holdings & Services Ltd, formerly Cadbury Holdings Ltd. and EUIPO,[2018] Bus LR 1848,  decided on 25-07-2018]

Case BriefsInternational Courts

European Court of Justice (ECJ): The ECJ has declared that Malta has failed to fulfil its obligations under EU law by adopting a certain derogation regime not complying with the strict conditions laid down by the Directive on the conservation of wild birds.

Directive 2009/147/EC of European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (Directive) provides that Member States must take the requisite measures to establish a general system of protection for several bird species. Nevertheless, Member States may derogate from that obligation where there is no other satisfactory solution, to permit, under strictly supervised conditions and on a selective basis, the capture, keeping or other judicious use of certain birds in small numbers. In 2014 and 2015, Malta adopted several measures authorising the capture of seven species of finches by means of traditional nets (‘clap-nets’) to benefit from the derogation laid down in the Directive. The European Commission considered these measures not meeting the conditions of the Directive and therefore approached ECJ.

The Court ruled that measures adopted by Malta did not comply with the Directive since they did not contain any reference to the absence of another satisfactory solution. The Court recalled its case-law WWF Italia, C-60/05, EU:C:2006:378 according to which the Member States may authorise actions affecting the protected species only on the basis of decisions containing a clear and sufficient statement of reasons which refers to the conditions of the Directive. Court further noted that the minutes of the meetings of the Ornis Committee cited by Malta did not reveal any in-depth assessment of alternative solutions. The Court determined that Malta has not complied with the condition that derogation must concern only ‘small numbers’ of birds as derogation did not ensure the maintenance of the population of the species concerned at a satisfactory level. In that regard, the Court noted in particular a 2007 study by NGO BirdLife Malta and defects in Malta’s assessment of ‘reference population’.

The Court further remarked that the condition of trapping in small numbers was not met and recreational trapping of birds could not be considered judicious. Additionally, the Court considered that the condition that only the selective live-capturing of finches can be permitted was not met either by the non-selective nature of the method of capturing using nets. Finally, the Court found that Malta has not adduced evidence that the derogation at issue was used under strictly supervised conditions as the density of license holders and registered trapping stations in Malta was very high, and merely 23% of hunters were subject to individual checks. To corroborate this, the Court mentioned trapping inside ‘Natura 2000’ sites.

After making these observations, ECJ concluded that the Republic of Malta has failed to fulfil its obligations under Article 5(a) and (e) and Article 8(1) of Directive read in conjunction with Article 9(1) of that directive. [European Commission v. Republic of Malta, Case C-557/15, order dated 21-06-2018]

Case BriefsForeign Courts

European Court of Justice: ECJ has provided guidance on the scope of the standstill obligation. It ruled that gun-jumping (when an acquiring company seeks to exercise control over a target company’s business operations pre-close) can only occur when the acquiring company’s action results in a lasting change in the control of the target business and not simply because the target company takes unilateral actions in anticipation of the merger.

In 2013, Ernst & Young (EY) entered into a merger agreement with KPMG Denmark. Danish law, on the lines of EU merger-control law, prohibited the parties to a merger transaction from taking any steps to implement the transaction prior to receiving clearance from the Danish Competition Council. It is the “standstill obligation” and its violation is considered to be “gun-jumping.”

As per the agreement, KPMG Denmark gave notice to terminate its cooperation agreement with KPMG International on the day that the merger agreement was signed, before the companies had even notified the Danish Competition and Consumer Authority (DCCA) of their proposed merger, much less received clearance for it. While the notice was effective immediately, the termination did not take effect until the transaction closed. Subsequent to the notice, KPMG International established a new auditing business in Denmark. In December 2014, the DDCA ruled that KPMG Denmark had breached its standstill obligation and had jumped the gun in implementing the merger. The parties appealed that decision, and the case was referred to the ECJ for a preliminary ruling.

ECJ noted that Article 7(1) (the “standstill obligation”) of the EU Merger Regulation (EUMR) limits the standstill obligation to “concentrations” as defined under Article 3 EUMR, i.e., to situations where there is a “change of control on a lasting basis” allowing an acquirer to exercise decisive influence over the target company. The ECJ added that even the partial implementation of a concentration falls within the scope of Article 7(1) EUMR. It explained that preparatory or ancillary acts to the concentration which do not lead to a change of control, do not fall within the scope of Article 7(1) EUMR.

In essence, the EUMR applies to any transaction constituting a concentration to which Regulation 1/2003 does not apply. This means that conduct of the merging parties may breach (i) the standstill obligation if it contributes to a change of lasting control prior to clearance by the Commission, or (ii) breach Article 101 TFEU if it does not lead to a change of control, but nevertheless restricts competition within the internal market. An example of the latter conduct could be an exchange of sensitive commercial information between two merging competitors.

The ECJ concluded that the termination of the cooperation agreement between KPMG Denmark and KPMG International was not subject to the prohibition of gun-jumping as termination did not contribute to the change of control over KPMG Denmark despite the fact that it took place before the DCCA had cleared the transaction. The ECJ further stated that whether an alleged gun-jumping violation causes market effects is irrelevant. [Ernst & Young v. Konkurrencerådet, [2018] Bus LR 1718, dated 31-05-2018].

Case BriefsForeign Courts

European Court of Justice: In May 2013, Christian Louboutin initiated proceedings before the District Court, The Hague, Netherlands, claiming that Van Haren had infringed the mark at issue. In July 2013, that Court delivered a default judgment upholding in part the claims of Christian Louboutin. Van Haren challenged that judgment before the referring court, the District Court, The Hague, claiming that the mark at issue was invalid on the basis of Article 2.1(2) of the Benelux Convention on Intellectual Property (Trade Marks and Designs). Legal battle over trademarking Louboutin’s signature red-soled high-heeled shoes centred on whether his trademark involved a shape or a colour.

Article 3 of Directive 2008/95 provides grounds for refusal or invalidity of trademark on the grounds inter alia if the sign consist ‘exclusively’ of the shape which results from the nature of the goods themselves or which is necessary to obtain a technical result or which gives substantial value to the goods. Similar limitations on trademarks are laid in of Article 2.1(2) of the Benelux Convention. In the application for registration, the mark at issue is described as follows: ‘The mark consists of the colour red (Pantone 18-1663TP) applied to the sole of a shoe as shown (the contour of the shoe is not part of the trade mark but is intended to show the positioning of the mark)’.

In the context of trade mark law, the concept of ‘shape’ is usually understood as a set of lines or contours that outline the product concerned. The question before the Court was whether the fact that a particular colour is applied to a specific part of the product concerned results in the sign at issue consisting of a shape within the meaning of Article 3(1)(e)(iii) of Directive 2008/95. While pointing out that no definition of ‘shape’ has been provided in the directive the Court found that its meaning has to be understood by considering its usual meaning in everyday language.

Court noted that while it was true that the shape of the product or of a part of the product plays a role in creating an outline for the colour, it cannot, however, be held that a sign consists of that shape in the case where the registration of the mark did not seek to protect that shape but sought solely to protect the application of a colour to a specific part of that product. It ruled that Article 3(1)(e)(iii) of Directive 2008/95/EC of European Parliament relating to trade marks must be interpreted as meaning that a sign consisting of a colour applied to the sole of a high-heeled shoe does not consist exclusively of a ‘shape’, within the meaning of that provision. The Court in The Hague will deliver the final ruling on the matter based on the ECJ decision. [Christian Louboutin SAS v. Van Haren Schoenen BV, [2018] Bus LR 1411, order dated 12-06-2018]

Case BriefsForeign Courts

European Court of Justice: While dealing with the issue regarding the interpretation of Article 10(1) and (2) of Council Directive 92/85/EEC of 19 October 1992 (also known as Pregnant Workers Directive, 1992) on the measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding, the Court (Third Chamber) composed of L. Bay Larsen, President of the Chamber, J. Malenovský, M. Safjan (Rapporteur), D. Šváby and M. Vilaras, JJ., held that pregnant and breastfeeding women can be dismissed on the grounds of collective redundancy as Directive 92/85 excludes national legislation (in present case, the Spanish law) which does not prohibit, in principle, the dismissal of a worker who is pregnant or has recently given birth or is breastfeeding, as a preventative measure. It only provides, by way of reparation, to declare such a dismissal void when it is unlawful.

In January 2013, the Spanish company Bankia, opened a period of consultation with its workers’ representatives with a view to carrying out a collective redundancy. After arriving upon an agreement, the company notified a worker, who was pregnant at the time, of her dismissal by letter on the ground that it was necessary to significantly reduce the number of staff. After unsuccessfully challenging the decision of the company before the Social Court, Mataró, the aggrieved person appealed before the High Court of Justice of Catalonia, which in turn referred the matter to the ECJ, seeking an interpretation of the prohibition on dismissing pregnant workers, provided in Directive 92/85.

Perusing the laws on point, the Court observed that in such cases, the employer must provide the dismissed pregnant worker with the reasons justifying the redundancy as well as the objective criteria chosen to identify the workers to be dismissed. Further interpreting the provision in question, the Court held that, the Directive does not preclude national legislation which in the context of a collective redundancy, makes no provision for pregnant workers or who have recently given birth or who are breastfeeding, to be afforded a priority status in relation to either being retained or redeployed and the Member States are free to grant higher protection to pregnant workers and breastfeeding mothers. [Jessica Porras Guisado v. Bankia SA, Case C-103/16, decided on 22.02.2018]