Thursday, February 22, 2024

Hogan Lovells, Cuatrecasas secure victory against Realia in Decennial Insurance cartel

Hogan Lovells has represented Asefa, and Cuatrecasas has represented Scor against Realia before the Provincial Court of Madrid, securing the revocation and dismissal of the lawsuit filed by Realia, which had brought a follow-on action based on the CNC decision of 12 November 2009 declaring the existence of the ten-year insurance cartel


Judgment number 377/2022, of 19 May, handed down by the Madrid Provincial Court in the ten-year insurance cartel case upheld the appeals brought by SCOR GLOBAL P&C IBÉRICA SUCURAL and ASEFA SA SEGUROS Y REASEGUROS against the first instance judgment handed down by Madrid Commercial Court no. 2 (judgment number 210/2020, of 9 June).

The Provincial Court revoked this decision and dismissed the lawsuit filed by Realia Business S.A., which had brought a follow-on action based on the CNC decision of 12 November 2009 declaring the existence of the ten-year insurance cartel.

Realia had taken out ten-year insurance policies with Mapfre, an entity that, despite being sanctioned in the CNC decision, was acquitted in the contentious-administrative proceedings. However, the Court considers that Realia may have suffered indirect damages derived from the effects of the conduct on the market.

The Madrid Provincial Court stresses the importance of proving these damages and underlines the inapplicability of the ex re ipsa doctrine, as not all cartels cause overpricing. This is corroborated, the Board points out, by the conclusions of reports such as Oxera’s, which document that a significant portion of cartels does not cause damage. The Court, therefore, insists on the importance of analysing the specific case before a court.

After assessing the expert reports, the Chamber rejects the report submitted by Realia, which “cannot be taken into account for the determination of the existence and amount of damages” and considers that the expert report provided by the co-defendant Scor and prepared by KPMG presents the “most complete and reasonable” alternative scenario, accepting the result of this analysis, which amounted to €159,253.91 compared to the €2,651,570.82 claimed by Realia. Notwithstanding the above, the Madrid Provincial Court considered it to be proven that Realia did not effectively suffer this damage because it passed it on in the price of its real estate developments, thus upholding the defence of passing on raised by the defendants.

The Chamber recalls that the passing-on defence is based on Community law and on the rules of domestic law prohibiting unjust enrichment. Therefore, contrary to the ruling contained in the lower court’s judgment – which rejected the defence for reasons of temporal application – it considers that the aforementioned defence is applicable without the need to resort to article 78.3 of the Law on the Defence of Competition, which regulates it and was introduced by Royal Decree-Law 9/2017, of 26 May, transposing the Damages Directive.

Based on the evidence in the case file, the Provincial Court concludes that “the excess price that the plaintiff had to pay was passed on to the clients as a cost of the development, so that the damage derived from the unlawful action was not borne by the developer, but was passed on to the purchasers of the homes.” The Court, assessing the evidence presented in first instance, appreciates that in setting the prices of the homes, all costs were taken into account and recovered, including the ten-year insurance, without this leading to a decrease in sales or in the plaintiff’s income, given that during the period of the cartel “there was a real estate boom that led to an increase in the prices of homes and in the results of the developers.” Thus, it is concluded that a possible recognition of the damage in favour of the plaintiff would mean an unjust enrichment in favour of the plaintiff that “cannot be admitted”.

Asefa was represented by Hogan Lovells Litigation partner Jon Aurrekoetxea Garay, while Scor was represented by Paul Hitchings, ex-Cuatrecasas and now managing partner of Hitchings & Co, with the assitance of Cuatrecasas partner María Pérez Carrillo, and lawyers María Cecilia Páez-Montero and Olga Andrés.

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