Digital evidence gathering during inspections

On the subject of competition law inspections and similar procedures, tensions have been building between the European Court of Human Rights (ECtHR) and the Court of Justice of the European Union (EUCJ). The latest case-law appears like a step in the direction of reconciling the two. One of the crucial points that must be resolved in the future is the lawfulness of the authorities’ extensive digital evidence gathering during on-site inspections. Such searches are nowadays a matter of routine, although the law seems to be lagging behind. Not only must the lawfulness of those measures be resolved, but also the matter of procedure. Companies subject to inspections have gone to court repeatedly in order to obtain up-front judicial control of specific measures such as copying and mirroring of hard drives and servers.

Delta Pekárny concerned a competition law inspection. The inspection began with an examination of digital correspondence. Delta Pekárny was subsequently fined for refusing to allow an in-depth examination of its data. It challenged that decision, arguing, among other points, that it was contrary to domestic law and to the European Convention on Human Rights (ECHR) for the Czech Competition Authority to carry out an inspection without having received prior authorisation from a court. In the judgment, the ECtHR makes references to EU law, to a comparative study of the investigative procedures prevailing in all Member States, and to the Commission’s inspection powers. The ECtHR considered that in the absence of a prior judicial authorisation by a judge, an effective control afterwards of the necessity of the measure, and rules on destruction of copies made, the procedural guarantees were insufficient to prevent the risk of an abuse of powers. There had been a violation of Article 8 of the ECHR (right to respect for private and family life, home and correspondence).

The ECtHR’s legal assessment in Delta Pekárny cannot, in my opinion, be seen as a criticism of the investigation procedure under Regulation 1/2003, a procedure that has been copied in several Member States. Rather, the outcome seems specific to the procedural rules applicable in the Czech Republic.

Delta Pekárny builds partly on Robathin, a case that concerned a search warrant at the office of an Austrian practicing lawyer who was suspected of aggravated theft, aggravated fraud and embezzlement. The warrant was issued by an investigating judge in the context of criminal proceedings. All files of the lawyer’s computer system were copied. The ECtHR held that domestic law and practice must afford adequate and effective safeguards against any abuse and arbitrariness. There should be particular reasons to allow the search of all data, having regard to the specific circumstances prevailing in a law office. There were no such reasons either in the search warrant itself or in any other document. The ECtHR found that the seizure and examination of all data went beyond what was necessary to achieve the legitimate aim. There was a violation of Article 8 of the ECHR.

The Robathin case concerned classic or hard core criminality. Depending on the circumstances, a competition law fine can be considered a criminal penalty. Competition law cases nevertheless  lean more towards the administrative enforcement side, and this can influence the procedural requirements.

A hint at how the ECtHR may regard competition law dawn raids came in Bernh Larsen Holding. The case concerned a tax inspection.Three companies used a server jointly and the Norwegian tax authorities copied the entire sever content. The inspection order was adopted without prior judicial authorisation. Volumes of surplus information without importance for the tax inspection had been copied, including private correspondence and business secrets. The ECtHR accepted considerations of efficiency of the tax audit, but made clear that this did not confer on the tax authorities an unfettered discretion. The Court assessed whether the measure was necessary and proportionate. There was a wider margin of appreciation since the measure was aimed at legal persons and not at an individual. The nature of the interference was not of the same seriousness and degree as in the case of search and seizure carried out under criminal law since the consequences of a tax subject’s refusal to cooperate were exclusively administrative. The outcome was that the Norwegian order had been subject to important limitations and was accompanied by effective and adequate safeguards against abuse. There was no violation of Article 8 of the ECHR.

The judgments of the ECtHR can be seen in relation to those of the EUCJ. In Nexans, the Commission carried out a dawn-raid and decided to remove four DVD-ROM discs and a copy of the hard drive of the laptop of an employee of Nexans France, for later review at its premises in Brussels. The inspection decision, as well as the mirroring measures and other measures, were appealed to the General Court. Nexans’ claim relating to the Commission’s decision to remove copies of certain computer files and of the hard drive, was deemed inadmissible. After reminding that Nexans could bring its claims within an appeal against a final decision, the General Court pointed out that Nexans could also bring an action for damages against the Commission if it believed that copying of several computer files and of a hard drive for later examination in its offices was illegal and had caused harm. There was consequently no assessment in substance.

An outcome which appears opposite can be observed in Deutsche Bahn. Deutsche Bahn challenged three Commission inspection decisions. One of the claims was that Deutsche Bahn’s defence rights had been infringed in view of irregularities during the first inspection. According to Deutsche Bahn, the second and third inspections were based on information that had been unlawfully obtained during the first inspection. Among other things, the Commission had searched certain e-mails that were clearly unrelated to the subject-matter of the first inspection. Allegedly the Commission officials had also used certain keywords unrelated to the inspection during their electronic search. The General Court looked into all those aspects in relative detail and finally rejected the plea as unfounded. The General Court’s judgment has been appealed.

While the General Court’s judgment in Nexans seems somewhat difficult to reconcile with the case-law of the ECtHR, the approach in Deutsche Bahn appears to be more in line with the methodology envisaged by the ECtHR in Robathin and Bernh Larsen Holding. The facts of Delta Pekárny may be too specifically related to Czech domestic law to be of general application. Nevertheless, the ECtHR’s approach is telling. Step by step, the Court in Strasbourg is moving into domains that have, for many years, primarily been a matter for the EUCJ. This as such, should come as no surprise. The EUCJ has made references to the ECHR for decades in competition law rulings. Can we in the years to come expect to see a mutual alignment?

Featured image credit: FW Pomeroy’s statue of Justice atop the Old Bailey. Photo by Ben Sutherland. CC-BY-2.0 via Flickr