Un litige est survenu au sujet d'un contrat par lequel les demanderesses s'engagent à acquérir certaines activités des défenderesses. Le contrat est régi par le droit français et les différentes parties sont des sociétés appartenant à différents pays européens. Les demanderesses allèguent que les défenderesses ont violé la clause 11 du contrat, en acceptant une fusion avec une tierce partie. Ladite clause interdisait entre autres au vendeur de commettre des actes de concurrence pendant une période de sept ans.

Première sentence partielle

'EUROPEAN COMPETITION LAW

The Respondents contend that if clause 11 is read as [Claimants] propose then the clause falls foul of Article 81 of the EC Treaty.

It was agreed by the Respondents that the Tribunal was only concerned with EU competition law and they were not disposed to argue that any different result would be reached by the application of either French competition law or French civil law. The Tribunal has acted on this assumption to which [Claimants] did not demur.

•What are the requirements of EU law as regards the application of non-compete covenants?

The applicable text is Article 81 of the EC Treaty which provides:

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

a) directly or indirectly fix purchase or selling prices or any other trading conditions;

b) limit or control production, markets, technical development, or investment;

c) share markets or sources of supply;

d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.

•Effect on trade between Member States

For EU law to apply to an agreement it is necessary that the agreement "may affect trade between Member States" (Article 81(1)).

The Community authorities traditionally apply a low burden of proof to the notion of an effect on trade. For example, undertakings operating in a single Member State market, or a single Member State region have been found sufficiently significant to have an appreciable effect on trade between Member States.

•A non-compete covenant that triggers the application of EU law can nonetheless be found valid.

In this regard three issues must be addressed:

- the burden of proof;

- an appreciable effect on competition;

- the substantive requirements of EU law.

•Burden of proof

As a restriction on competition, a non-compete clause is seen as an exception to the general principle of freedom of competition which can, however, be justified by the benefiting party by demonstrating that the clause is necessary to give effect to a contract of sale. Thus, it is for the beneficiary to establish the validity of the clause where same is called into question.

For example, the European Court of Justice has held in Grunding & Consten v. Commission ((1966) E.C.R. - 299) that the burden of proof as regards exceptions to the rules on competition lies primarily with the undertaking concerned. This position of the Court was also set out in Remia v. Commission ((1985) E.C.R. - 2545) where the validity of a non-compete clause was accepted where it worked to promote competition, thereby establishing it as an exception. It is apparent that such clauses are valid in certain conditions and it is thus for the party claiming the benefit of an exception to justify his right to it.

•An appreciable effect on competition

The question of appreciability has been considered by the Commission in its Notice on Agreements of Minor Importance which do not fall within the meaning of Article 81(1).

In its opinion, the Commission has provided that:

Agreements between undertakings engaged in the production or distribution of goods . . . do not fall under the prohibition in Article 81(1) if the aggregate market shares held by all of the participating undertakings do not exceed, on any of the relevant markets:

(a) the 5% threshold, where the agreement is made between undertakings operating at the same level of production or of marketing . . .

(b) the 10% threshold, where the agreement is made between undertakings operating at different economic levels.

In the case of a mixed horizontal/vertical agreement or where it is difficult to classify the agreement as either horizontal or vertical, the 5% threshold is applicable.

However, it should be recalled that the Notice is not binding in effect and smaller market share thresholds have been found to have the necessary appreciable effect on trade between Member States. Furthermore, the European Court of Justice does not make reference to quantitative criteria when deciding this question, but rather refers to the global context of the restriction.

•The substantive requirements of EU law regarding the validity of non-compete covenants

This issue has been the subject of case law from the Court of Justice and also the Commission has expressed its position in a Notice on ancillary restrictions. The approach of both institutions has been to consider the validity of a non-compete clause in terms of its duration, geographic scope and subject matter and where justifiable on these grounds to consider the clause as valid.

•Duration

On the question of duration, the Commission Notice on ancillary restrictions comments:

With regard to the acceptable duration of a prohibition on competition, a period of five years has been recognized as appropriate where the transfer includes the goodwill and know-how, and a period of two years when it includes only the goodwill.

The Commission only admits a longer duration in particular circumstances for example if the parties can demonstrate that the economic life cycle of the products is longer than five years and should be taken into account.

•Geographic scope

In the opinion of most authorities and the Notice of the Commission on ancillary restrictions:

the noncompetition clause must be limited to the area where the vendor had established the products or services before the transfer.

•Subject matter

The Commission Notice states:

In the same manner, the noncompetition clause must be limited to products and services which form the economic activity of the undertaking transferred. In particular, in the case of a partial transfer of assets, it does not appear that the acquirer needs to be protected from the competition of the vendor in the products or services which constitute the activities which the vendor retains after the transfer.

•What occurs where EU law finds a non-compete covenant to be illegal?

Where a clause is found illegal Article 81(2) is applicable, i.e. the clause shall be automatically void. The conditions and effects of the nullity are determined by the national applicable law.

CONCLUSIONS AND REASONS ON ABOVE ISSUES

. . . . . . . . .

7. If [Respondent] is in breach of clause 11 of the [contract] is that clause or any part thereof curtailed to any extent or unenforceable under EU competition law?

The Tribunal has already set out the basic provisions and approach of EU competition law. It is now necessary to amplify this and relate it to the facts of this particular dispute.

The Tribunal is first of all required to decide upon which of the parties lies the burden of proof. In this regard the parties have submitted conflicting arguments. For [Claimants], it is argued that as Article 11.3 is contrary to EU competition law this amounts to an "affirmative defence" and thus the burden of proof falls on the party so claiming. In this regard, Professor [A] has quoted a decision of the French Cour de cassation , which provides:

It is for the party which pleads the nullity of contract to prove that it infringes the provisions of European competition law, by providing all useful, precise information about the context which is likely to clarify this infringement.

. . . . . . . . .

On the contrary, [Respondent] has argued that as a non-compete clause is an exception to the pro-competition rule established under Article 81 of the EU Treaty, such an exception must be defended. However, although both parties claimed the burden of proof rested with the other, they both nonetheless sought to discharge this burden, in case the Tribunal was to decide to the contrary; thus, the arguments of both parties are clearly on the table for consideration by the Tribunal. In any event, nothing turns on this point because the Tribunal is satisfied the position under EU competition law is clear.

•Effect on trade between Member States

In order for EU competition law to apply, it is necessary that the parties establish that the provision is one "which may affect trade between Member States". The purpose of this provision is to set the boundaries of EU competition law. Consequently, for EU law to apply in the present matter, it is necessary to demonstrate more than a distortion of competition, rather it must be necessary "to foresee with a sufficient degree of probability . . . that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States . . ." It is the opinion of this Tribunal, and it has not been argued to the contrary by the parties, that in the present matter an appreciable effect on trade exists, given the pan-European nature of the business purchased by [Claimants] and the geographic scope of the Territory as defined in Schedule 11.1 of the [contract]. As noted earlier, this point is not really contested by either of the parties. Rather the dispute between them is whether the transaction has an appreciable effect upon competition.

•Appreciable effect on competition

[Claimants] have argued that there is no appreciable effect on competition, as required under competition law and that thus the provisions of EU law are not applicable to this matter. In this context Professor [A] and Professor [B], experts for [Claimants], both argued that it is also necessary to show that this effect is appreciable. In this regard, Professor [B] quoted the Commission's Notice on agreements of minor importance.

The Court of Justice of the European Communities has clarified that this position is not applicable where the impact of the agreement on intra-Community trade or on competition is not appreciable. Agreements which are not capable of significantly affecting trade between Member States are not caught by Article 85.

However, in the opinion of [C], again referring to the Commission's Notice:

It appears from the Commission's Notice on agreements of minor importance that agreements between undertakings engaged in the production or distribution of goods are presumed prima facie to be capable of affecting trade between Member States, so as to fall within the prohibition in Article 81(1), if the goods or services which are the subject of the agreement, together with the participating undertakings' other goods and services which are considered by users to be equivalent in view of their characteristics, price and intended use, represent more than 5% of the total market for such goods or services in the area of the common market affected by the agreement.

As expert witnesses for both parties correctly pointed out, the question of the appreciability of effect on competition has been considered by the Commission in its Notice on agreements of minor importance which do not fall within the meaning of Article 81(1).

More specifically in its Notice, the Commission has stated that:

Agreements between undertakings engaged in the production or distribution of goods . . . do not fall under the prohibition in Article 81(1) if the aggregate market shares held by all the participating undertakings do not exceed, on any one of the relevant markets:

(a) the 5% threshold, where the agreement is made between undertakings operating at the same level of production or marketing . . .

(b) the 10% threshold, where the agreement is made between undertakings operating at different economic levels.

In the case of a mixed horizontal/vertical agreement or where it is difficult to classify the agreement as either horizontal or vertical, the 5% threshold is applicable.

Interestingly, as we have seen, both parties made reference to the Notice in support of their claims. In the opinion of Professor [B], the [contract] concerned a vertical agreement and thus the threshold of 10% was applicable and there was no evidence that for the purposes of …, the relevant market under clause 11.3 (d), that the Respondents market share exceeded 10%. This point of view was also expressed by Counsel for [Claimants]:

. . . and the restraint we are talking about is in the nature of a vertical restraint and that because it deals with . . .

To the contrary, the Respondents have argued, through their Counsel, that the matter concerns a horizontal agreement.

. . . . . . . . .

In the opinion of the Tribunal, the reasoning of [Claimants] and their expert witness in this regard is flawed. Firstly, the sale, the subject of the [contract] is a horizontal agreement involving a sale from one . . . company supplying consumers to another company pursuing the same activity. In this regard, the activities of the parent companies are of no relevance. Therefore, in order to establish a lack of appreciable effect on competition for the purposes of the Notice, it is necessary that the participating undertakings have less than 5% in either of the markets, . . ., the relevant market being either the EU market as a whole or the individual national markets.

Under the Notice, as pointed out by the expert witnesses, a participating undertaking can be:

a) undertakings being parties to the agreement:

b) undertakings in which a party to the agreement, directly or indirectly:

- owns more than half of the capital or business assets, or

- has the power to exercise more than half of the voting rights, or

- has the power to appoint more than half of the members of the supervisory board, board of management or bodies legally representing the undertakings, or

- has the right to manage the undertakings business . . .

Thus, the market share of [Claimants], its subsidiaries, [and Respondents] should be taken into account for the purposes of defining the market share.

The Tribunal accepts [Claimants]' basic contention that if the agreement was to be considered as not restricting competition to an appreciable extent, it could not be considered as coming within the provisions of EU law. It has long been a principle of EU law that:

an agreement falls outside the prohibition of Article 81 where it only has an insignificant effect on the markets, taking into account the weak position which persons concerned have on the market in question. (Völk, [1969] E.C.R. 295)

In the present matter, the parties have not provided conclusive evidence as to whether the "aggregate market shares held by all of the participating undertakings do not exceed . . . the 5% threshold", nor have they addressed the question of the relevant market. However, this does not serve to prevent the Tribunal deciding whether there was an appreciable effect on competition. This follows since the expert witnesses on both sides accepted that the thresholds set out in the Notice are only meant to serve as a rule of thumb.

Indeed, as the Notice is not binding in effect, smaller market share thresholds have been found by the Community control authorities to have the necessary appreciable effect on competition. Furthermore, the European Court of Justice does not make reference to quantitative criteria when deciding this question, but rather refers to the global context of the restriction.

It is thus necessary for the Tribunal to consider the case law of the European Court of Justice on the question of the appreciability of the effect on competition and the scope of the de minimis rule it has established.

As we have seen, in the opinion of the Court, an agreement falls outside the prohibition of Article 81 where it has only an insignificant effect on the markets. However, the Court considers that an undertaking with a market share of less than 5% may be subject to the provisions of Article 81(1) where an appreciable effect on the market can be demonstrated. (See Bellamy & Child, Common Market Law of Competition , 4th ed., Sweet & Maxwell, p. 120.) This, in the opinion of the Court, is especially the case where large undertakings are concerned. In this regard the Court makes reference to the turnover of the undertakings concerned and the significance of the brand name in question. (See Musique Diffusion Française v. Commission [1983] E.C.R. 1825.) . . .

The Tribunal agrees and in its opinion the present matter concerns two global sized undertakings both of whom enjoy established brand names with a global presence. In these circumstances one should have no hesitation in considering when, taking the global size of the undertakings into consideration and the established nature of their trademarks, that there is a sufficiently appreciable effect on competition capable of hindering the attainment of the objectives of the single market thereby justifying the application of EU law to the terms of the [contract].

•The substantive requirements of EU law

Thus, having accepted the applicability of EU law, it is necessary to consider whether clause 11.3 retains any validity.

The validity of non-compete covenants has been the subject of European Court of Justice case law and the Commission has also expressed its position in its Notice on ancillary restrictions. The approach of both institutions has been to consider the validity of a non-compete clause in terms of its duration, geographic scope and subject matter and, where justifiable on these grounds, to consider the clause as valid. However, where the clause fails under any one of these grounds, it is considered null and void and as having no effect.

•Duration

On the question of duration, the Commission Notice on ancillary restrictions provides:

With regard to the acceptable duration of a prohibition on competition, a period of five years has been recognized as appropriate where the transfer includes the goodwill and know-how, and a period of two years when it includes only the goodwill.

(Art. III, 2, Commission Notice on restrictions ancillary to concentrations)

The Commission only admits a longer duration in particular circumstances, for example if the parties can demonstrate that the economic life cycle of the products is longer than five years and should be taken into account or where it is particularly necessary given the particular circumstances of the agreement under consideration.

[Claimants], referring to the opinion of Professor [B] and Dr [D], have claimed that non-compete clauses may have the duration necessary to give effect to the transaction. In this regard Dr [D] commented:

the duration of the non-compete clause needs to reflect the lengthy periods (up to above seven years) required to discover and commercialise new … for use in … products.

However, it should be recalled that a period of longer than five years is truly exceptional and would need to be justified by going to the very heart of the product the subject matter of the contract.

Conscious of the exceptional duration of clause 11.3, [Claimants]' expert witnesses, in order to justify the duration of seven years, go outside the provisions of the [contract], and making reference to the provisions of the [research and development agreement], attempt to justify the period of seven years on the basis that such a time period is necessary to allow [Claimants] to draw full benefit from this agreement. However, the restrictive interpretation applied to non-compete clauses under EU law, as established under the Commission's Notice on restrictions ancillary to concentrations, requires that a non-compete clause be justified by the provisions of the contract in which it is contained.

On the other hand in this case the Tribunal cannot ignore the existence of the other agreements, including the [research and development agreement], which form part of the economic factual matrix in which this contract was negotiated and executed. The Commission's Notice has no binding effect but clearly sets out guidelines which should only be departed from in unusual circumstances.

Finally, [Claimants] have also concentrated on the purchase price they paid [Respondents] as indirect justification for the duration of the non-compete clause. This of course is no justification. The limits placed on non-compete clauses are limits established by public order, and are indifferent to the price one undertaking may have paid for another.

More generally, on the question of duration, as the Tribunal has already noted, the Commission Notice on ancillary restrictions recommends a five year limit for non-compete clauses involving transfers of goodwill and know-how. Further, this Notice is to be amended and the recommended period of five years reduced to three years. Thus, there would appear to be a trend in Community law against periods of excessive duration.

Does the present matter involve a transfer of know-how? The sale involved a . . . business. It does not appear strictly to involve the sale of know-how. As the Tribunal has seen, if know-how was not involved, the applicable period is two years. For these reasons the Tribunal is of the opinion that the duration of seven years set out in the non-compete clause is excessive and that the clause should fall on this account.

•Subject matter

. . . . . . . . .

[T]he Tribunal is disposed to the view that the scope of clause 11.3 may be too broad in respect of subject matter. . . . However, as the Tribunal is of the view that clause 11.3 is unsustainable due to its duration, it is not strictly necessary to decide this issue. Nevertheless it is a matter to which the Parties should return if and when they re-negotiate clause 11.3.

•Geographic scope

. . . As the Tribunal has concluded that clause 11.3 fails on the grounds of duration, it is not necessary to have regard to its geographic scope. However, when re-negotiating this contract, the Parties will doubtless have regard to the state of the evidence relating to [Claimants]' interest in protecting the sale of its products in various territories. . . .

•What occurs where EU law finds a non-compete covenant to be illegal?

Where a clause is found illegal, Article 81(2) is applicable and the clause shall be deemed automatically void. However, the Tribunal must now address the arguments put forward by [Claimants] based on clause 21 of the [contract], which provides that the parties:

shall endeavour through good faith negotiations to replace the invalid . . . provisions by valid provisions, the economic effect of which comes as close as legally possible to that of the invalid . . . provisions.

Thus, where clause 11.3, or a part thereof, is struck down, it is contractually necessary in this case for the parties to negotiate an alternative. [Claimants] have argued, making reference to the expert opinion of Professor [A], that under French law a court or tribunal can alter the terms of the contract. It is true that such a power exists, although it is sparingly applied. However, the Tribunal accepts that were the parties unable to come to an agreement, it is bound to assist them, as required by the terms of clause 21 of the [contract]. In this regard clause 21 provides:

If the Parties fail to reach agreement concerning the replacement of such provisions the matter shall be referred to arbitration in accordance with clause 23 hereof.

•The status of the compensation claim of [Claimants] under clause 21

[Claimants] contend that were the Tribunal to strike down clause 11.3 on the grounds that it is too broad under EC law they have the right to seek compensation from [Respondents]. [Claimants]' argument is based on the contention that any re-negotiation of the non-compete clause will have the effect of reducing the value of their purchase. It is the Tribunal's opinion that this argument should be rejected on two grounds.

Firstly, the creation of the non-compete clause was not a unilateral act, rather it was the result of the efforts of both [Claimants] and [Respondents]. Claimants cannot subsequently turn to the Tribunal and seek compensation for something that they themselves negotiated. The competition clause is the fruit of both parties' labours. Thus, [Claimants]' "hands" are also tainted by the illegality of the non-compete clause and consequently they may not now seek to claim compensation under this heading.

Secondly, the illegality of the non-compete clause is based on the rules of Community and French public order. [Claimants] cannot seek compensation for something that is illegal under these rules. It is a rule of public order and compensation is not available as a result of its application.

This conclusion may seem harsh to [Claimants] who take the view that they are entitled to the full benefit of a clause negotiated at arms' length. [Claimants] wished to enter the European . . . market. They are a substantial company. They knew or must have been aware of European competition law and it is inconceivable that they did not take legal advice on the implications of European competition law upon the sort of non competition clause that they were seeking to negotiate. [Claimants] are deemed to know the effect of European competition law in just the same way as the Respondents or any other company incorporated and doing business in the EU. [Claimants] must have been aware that they were taking a risk in agreeing to a clause the duration of which was seven years and unfortunately for them this risk turned into reality. If the merger had not taken place, it may well be that the seven year non-compete clause would have been honoured in fact. But that it not the factual situation with which this Tribunal is dealing.

•Future negotiation of clause 11.3 by the parties

In re-negotiating this clause, the parties must take into account the provisions of EU law and French law concerning duration, geographic scope and subject matter. The Notice provides that as regards duration, where know-how and goodwill are transferred, it is possible to have a maximum duration of five years. Where only goodwill has been transferred it is necessary to limit the clause to a maximum of two years. In re-negotiating the duration of clause 11.3, doubtless the parties will take into account the hybrid nature of the present case, which involves both goodwill and benefits under the [research and development agreement].

As regards the geographic scope it is necessary that the restriction only apply to territories where the undertaking sold was active. Finally, as regards the subject matter, we have seen that EU law provides:

In the same manner, the noncompetition clause must be limited to products and services which form the economic activity of the undertaking transferred.

The Tribunal invites the parties to re-negotiate the [contract] along these lines in order to render clause 11.3 enforceable under EU competition law.

8. If any aspect of clause 11 is rendered unenforceable what effect if any does clause 21 of the [contract] have?

As clause 11.3 has been found by the Tribunal to infringe European competition law, clause 21 of the [contract] imposes on the parties a clearly enforceable obligation to negotiate in good faith to replace the invalid provision with a valid provision. The Tribunal has given some guidance on this matter and it is hoped that the parties will have little difficulty in discharging their obligations under clause 21. However, if this proves impossible, the matter can be referred back to this Tribunal to make a finding on the disputed issues.'