Case Law: Courage

8 Colum. J. Eur. L. 499 (2002)

Elke Ballon. Center for European Economic Law, Katholieke Universiteit Leuven.

Case C-453/99, Courage Lid v Bernard Crehan (E.C.J. Sept. 20, 2001) (not yet reported).

Competition – Article 81 of the EC Treaty (formerly Article 85 EC) – Beer tie – Leasing of public houses – Restrictive agreement – Right to damages of a party to the contract

Facts and procedure

The Courage case has its origins in the infringement of Article 81 of the EC Treaty by the parties to a so-called “brewery agreement” (containing a beer tie) and a dispute about unpaid supplies of beer. Article 81 of the EC Treaty prohibits as incompatible with the common market all agreements between undertakings, decisions by an association of undertakings and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction or distortion of competition within the common market. Other decisions of the Commission and case-law of the Court of Justice and the Court of First Instance deal with the (in)compatibility of these brewery agreements, and the exclusivity clauses and non-compete provisions commonly applied therein, with Article 81 of the EC Treaty.

However, the issue in Courage, brought before the Court of Justice through a referral for a preliminary ruling by the Court of Appeal of England and Wales, was not the (in)compatibility of the agreement in question with Article 81, but the civil law consequences of infringements of Article 81, more specifically compensation in tort by a private party.

The facts of the case were as follows. Mr. Crehan had taken on a lease of a public house for a period of twenty years. Under the terms of the lease, the tenant was obliged to purchase all his requirement of certain beers exclusively from a specified undertaking, Courage Ltd., and to purchase minimum amounts of those beers. Mr. Crehan fell behind in his obligation to pay rent, and the brewery commenced proceedings. The tenant alleged that the beer tie agreement was void, in breach of Article 81 EC, and that he had suffered loss as a result of adhering to this agreement. The price that he was obliged to pay as a tied tenant was substantially higher than those charged to the brewers’ customers who were not subject to the tie. As to the civil law consequences of infringements of the European rules on competition, Article 81 (2) provides that “[a]ny agreements or decisions prohibited pursuant to this Article shall be automatically void.” The Treaty is silent on other possible civil law consequences of breaches of the competition rules, e.g. a claim for compensation by aggrieved parties or a claim of restitution of the benefits of an agreement that is held to be void. In principle, in the absence of Treaty provisions, national law of the Member States, in particular the law on procedures and remedies, will apply in the enforcement of EC competition law in private litigation. This principle is, however, not without qualifications. As explained below, national courts applying domestic procedures and remedies must take into consideration the extent to which those remedies effectively safeguard the rights derived from the Community legal order.

The Court of Appeal, having decided that the agreement between the parties indeed was incompatible with Article 81(1), hesitated about whether Mr Crehan’s claim for damages could be founded on this infringement. Mr Crehan had entered into the agreement with the brewery. It is well established in English case law that a party to an illegal agreement cannot claim damages arising from the illegal agreement. In another case, decided not long before the Courage case, the same Court of Appeal held that this illegality rule also applied to situations where the plaintiff was a party to an agreement, which is illegal because of its incompatibility with European competition rules.

In the Courage case, doubts were raised as to the compatibility of the absolute application of the illegality rule with the obligation for national courts to ensure the effective protection of rights that individuals derive from the EC Treaty. Therefore, the case was referred to the Court of Justice. The Court of Appeal asked: 1) whether a party to a contract liable to restrict or distort competition within the meaning of Article 81 of the Treaty could rely on the breach of that provision before a national court to obtain relief from the other contracting party. In particular, it asked: 2) whether that party can obtain compensation for loss which he alleges to result from his being subject to a contractual clause contrary to Article 81 and 3) whether, therefore, Community law precludes a rule of national law which denies a person the right to rely on his own illegal actions to obtain damages. Also, the Court of Appeal asked: 4) if such a national rule was precluded by Community law, what factors had to be taken into consideration in assessing the merits of such a claim for damages.