March.30.2021
Our Italy team is advising Roche in a high-profile case at the intersection of competition law and pharmaceutical sector regulation. The outcome may have broad implications for the relations between the European Court of Justice in Luxembourg (“ECJ”) and the national courts of EU Member States.
In 2014, the Italian Competition Authority (“ICA”) imposed hefty fines on Roche and Novartis, alleging that the two groups put in place a collusive plan to artificially differentiate Lucentis – a drug authorized to treat certain eye diseases – from Avastin – an oncological product used “off-label” by physicians to treat the same eye diseases – by emphasizing and disseminating concerns as to the safety of off-label Avastin in order to induce physicians to use Lucentis rather than off-label Avastin. In the ICA’s view, this would maximize the profits of both Novartis, which commercializes Lucentis pursuant to a global licensing agreement with Roche’s U.S. subsidiary Genentech, and Roche, which developed both products and obtains royalties on Lucentis’ sales. Similar allegations have since been brought in other jurisdictions as the underlying issue is a global one.
We appealed the ICA’s decision first to the Regional Administrative Court of Lazio and then to the Council of State, Italy’s highest administrative court. Taking up a number of our arguments, in 2016 the Council of State referred the case to the ECJ for a preliminary ruling on five interpretative questions concerning the scope for legitimate collaboration between a licensor and a licensee under EU competition rules, as well as the interaction between competition rules and pharmaceutical regulation.
After the ECJ issued its preliminary ruling in 2018, the case went back before the Council of State, which in July 2019 upheld the ICA’s decision. In doing so, however, the Council of State, in our view, clearly departed from the guidance provided by the ECJ in its preliminary ruling and, more specifically, failed to carry out two crucial factual verifications that the ECJ had expressly required it to do with a view to correctly applying the legal principles established in the preliminary ruling. We thus filed an action for revocation against the judgment, which would have otherwise marked the end of the matter. Under Italian law, revocation is an extraordinary judicial remedy against judgments of last instance courts that involves convincing a different composition of the same court that the previous judgment was based on a blatant error of fact and that, as such, has rather limited chances of success.
Our team framed the revocation appeal along the required lines, but also added a further and novel twist. We argued that the Council of State’s judgment clearly failed to follow the guidance provided by the ECJ in its preliminary ruling and that, as the Italian legal system does not expressly allow for the revocation of national court judgments that infringe EU law (in this case, an ECJ preliminary ruling), it is incompatible with EU law principles, namely with the duty of loyal cooperation incumbent upon Italy as an EU Member State. We told the Council of State that, if in doubt, it should submit these issues to the ECJ for a new preliminary ruling.
With its unprecedented order of March 18, the Council of State has done so, asking the ECJ to rule on whether the July 2019 judgment was in violation of the previous ECJ preliminary ruling as well as on whether the Italian legal system is incompatible with EU law principles to the extent that it does not allow for a judicial remedy preventing a judgment of an Italian last instance court that clearly violates EU law from becoming res judicata.
The Council of State’s referral to the ECJ not only reopens the legal battle as to the lawfulness of the original ICA decision, but, much more broadly, may eventually lead to introduction into the Italian legal order of a completely new – and very relevant – ground of revocation of last instance courts’ judgments. The ECJ preliminary ruling could also have implications for any company wishing to challenge judgments of national courts in the EU that do not follow the ECJ’s own pronouncements in the context of preliminary rulings and should in any event further clarify the not always easy relations between the ECJ and EU Member States’ national courts.
Our team is led by Pietro Merlino and includes Marianna Meriani.