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03 April 2014
Following a recent controversial ruling by the Brno Regional Court, parties to notification proceedings are now unable to speed up the legal force of the approval decision issued by the Competition Authority. They must wait until 15 days have passed after issuance of the decision before proceeding with their business (ie, the acquisition in question). If any third party (most probably a competitor) appeals the approval decision, the notification procedure will be prolonged for at least another 30 days.
On February 13 2014 the Brno Regional Court dismissed(1) a decision issued by the chairman of the Competition Authority. The authority had issued notification approval for a party to the proceedings in question. However, a third party that was not a party to the proceedings submitted several objections against this acquisition during the course of the notification proceedings.
After the authority's approval decision had been released, the third party appealed such decision (or rather, the associated press release) before the authority's chairman. The chairman turned down the third party's appeal, arguing that it lacked the standing to submit such an appeal. The third party challenged the chairman's decision and submitted the administrative action to the court, where it was successful.
In its ruling, the court appears to have ignored any negative effects that its decision might have on the mergers and acquisitions market, stating that even third parties (despite not being party to the previous notification proceedings) can challenge the authority's approval of a notification in relation to those parts of the decision that affect the third party's rights to have its objections properly settled.
In July 2013 the court issued a similar decision regarding the same matter in relation to the business entities of two identical groups.(2) Both decisions are controversial in terms of precedent case law, applicable laws and the character of a concerned business.
The authority and persons participating in the proceedings before the court (ie, parties to the previous notification proceedings) have submitted cassations to the Supreme Administrative Court against both decisions, which are still pending and eagerly awaited.
Lack of standing
The court appears to have ignored the third party's lack of standing to submit an administrative action to the court – arguably, the third party had no standing to submit an appeal to the chairman, since it had never been a party to the notification proceedings. However, the third party was a party to the appeal proceedings. In considering the appeal, the chairman did not set, change, abolish or determine a binding right or obligations for the third party. These are required conditions on which a decision of administrative authority must be based if an administrative action is lodged. Due to the lack of these conditions in the chairman's decision, the court arguably should have refused the third party's action in accordance with the Code of Administrative Justice.
Failure to assess rights of third parties
Furthermore, the court failed to assess the legal question of the rights of third parties that have filed objections in the notification proceedings to have their objections reviewed on appeal. First, such right to appeal is not set by either applicable or previously effective law. The previous Competition Act specified that an approval decision can be challenged only by a party to the proceedings and any other person whose rights might be affected by the authority's approval decision (eg, the target). The third party in the case at hand was not a party to the proceedings; neither did the Competition Authority decide on its rights or obligations in the challenged approval decision. The court admitted this fact.
The fact that the status of a party to proceedings is inevitable for eligibility to file an appeal is in accordance with the applicable laws and has been confirmed numerous times by previous case law. However, the court stated that even though the third party in the case at hand was not a party to the previous notification proceedings, it could appeal those parts of the approval decision concerning its rights (ie, to ensure proper settlement of its objections).
The court further stated that if the Competition Act enables a third party to submit objections during the notification proceedings, third parties should have the right to have their objections reviewed during an appeal. The chairman was therefore obliged to review whether the objections had been settled properly during the notification proceedings.
The court left many other practical questions open, in particular in relation to notification of the approval decision and the actual form of the appeal.
With regard to notification of the approval decision, the approval decision is delivered only to parties to proceedings. Third parties can obtain only a press release from the Competition Authority's website, as at the time of its issuance, the approval decision will contain confidential information. It is therefore not publicly available to be properly appealed by third parties. As a result, such parties would have no chance to find out from the press release whether the authority had settled their submitted objections properly.
With regard to the actual form of the appeal, the court did not make clear which parts of the approval decision can be appealed. An approval decision has two main parts: verdict and reasoning. Only the verdict of the decision is binding, since it sets out the rights and/or obligations of the parties to the proceedings. Therefore, only the verdict can be appealed. However, the authority always settles the objections of third parties in its reasoning, which cannot be challenged by an appeal.
Due to the considerable confusion and many questions left open by the judgment, the Supreme Administrative Court's ruling is eagerly awaited. It will either abolish the regional court's judgments or answer all remaining questions brought by such judgments, thereby offering renewed legal certainty.
For further information on this topic please contact Jitka Linhartová at Schoenherr by telephone (+420 225 996 500), fax (+420 225 996 555) or email (firstname.lastname@example.org). The Schoenherr website can be accessed at www.schoenherr.eu.
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