Direct vs. Indirect Damages: When Are Losses Indemnifiable Under Romanian Law?

In our practice, we often encounter the question whether clients should accept liability for indirect and contingent damages. Here’s a brief explanation as to why indirect damage cannot be enforced under Romanian law.

Concept

“Damages” (in Romanian, “daune interese” or “despăgubiri”) refer to the compensation that one expects to receive or may receive following a situation where they suffered a loss due to another person’s intentional or unintentional unlawful conduct. Understanding the concept of damages under Romanian law is crucial because it impacts and applies to all interactions within the business environment. From a simple non-disclosure agreement that covers damages for breach of confidentiality obligations to indemnification under an M&A deal, the concept remains consistent. Also, it is noteworthy that the concept of “damages” has applicability both in contract law and in tort law, with contract law allowing certain flexibility of the parties in what concerns damages quantification, the conditions needing to be met for indemnification etc.

Types of Damages in Romania

The Romanian Civil Code allows for the claiming of compensatory damages (in Romanian, “daune materiale”) and moral damages (“daune morale”). Both kinds need to meet the conditions for being awarded, as further detailed below.

Compensatory damages are the reparation in cash that the person causing the damage needs to pay back to the damaged party. For example, a party breaching an agreement may be held liable to pay compensatory damages to cover the actual loss suffered by the other party or the loss of opportunity suffered by the other party. Moral damages are the reparation in cash or otherwise for damages brought against the other party’s reputation, image etc. Moral damages are usually harder to quantify and their grounds harder to prove.

Prerequisites for Damages under Romanian Law

The rule under Romanian law is that, for a claim for damages to be admissible (i) the damage should be existing (not contingent); (ii) the damage should be the consequence of an unlawful action or inaction; and (iii) the person inflicting the damage should be at fault (intention or negligence).

The loss – which covers both the loss actually suffered (damnum emergens) by the party claiming damages and the benefit deprived of (lucrum cessans) needs to be (i) a direct result of the unlawful action or inaction – Romanian law does not allow indemnification for indirect losses; and (ii) certain – this means that the loss has already occurred or is certain to occur in the future.

Indirect and uncertain losses are not indemnifiable under Romanian law, as these losses do not meet the legal prerequisites for indemnification.

Conclusion

Understanding the concept of damages under Romanian law is essential for anyone engaged in business or legal matters in Romania. Whether dealing with compensatory or moral damages, it’s crucial to meet the legal prerequisites for a claim to be admissible, ensuring that the loss is direct, certain, and caused by unlawful conduct. While the flexibility in contractual indemnification allows some room for negotiation, Romanian law remains stringent in its exclusion of indirect and uncertain losses. By grasping these principles, parties can better navigate liability and protect their interests in both contractual and tortious matters.

The use of images captured by the video surveillance system for the disciplinary investigation of employees

The fourth article in the series dedicated to the practical aspects of labor law and data protection explores a question frequently asked by employers: is it permissible to use video footage captured by the surveillance system in disciplinary investigations involving employees, and subsequently, present it as evidence in legal proceedings?

Let's break down the topic into two easy-to-understand parts:

a) Examining procedural legal rules.

b) Understanding personal data processing laws.

Procedural legal rules

The provisions of the Labor Code that regulate labour disputes do not prohibit the use of video recordings in the disciplinary investigation. They rather contain general references to the concept of "evidence", without necessarily indicating the nature of admissible evidence in labour disputes.

However, art. 275 of the Labour Code[1], part of the chapter that regulates certain special rules of the procedure applicable to labour conflicts, expressly establishes that the rules of the Labor Code are complemented by the legal provisions established by the Civil Procedure Code.

The Civil Procedure Code allows the use of various forms of evidence, including what is termed "material evidence," such as photographs, films, discs, audio tapes, and other technological mediums, in civil conflicts such as labour disputes, on the condition that they were acquired lawfully and ethically.

Hence, since the special legislation in the field of labour relations does not prohibit, and according to the Civil Procedure Code, video recordings are material evidence, we may conclude that, from a procedural point of view, there is no obstacle in using video recordings as evidence in the course of a disciplinary investigation and/or labour dispute in order to prove a disciplinary offence[2].

However, the absence of a procedural ban in using video recordings as evidence, is not a sufficient condition for their practical use.

Hence, it is crucial to ascertain the legality of capturing captured images intended for use as evidence in disciplinary proceedings or labour disputes, by referencing the original purpose of their collection and its legitimacy.

Personal data processing

The legitimacy of video recordings usage, captured in the employer’s premises, to prove disciplinary offenses must be seen in close connection with the primary purpose of capturing that recording.

Video surveillance can serve several legitimate purposes, such as, for example, ensuring the protection of property and other assets, ensuring the protection of life and physical integrity of individuals[3].

Therefore, if the video monitoring took place for the purpose of protecting assets, persons, premises and the act of an employee is closely related to the violation of internal rules prohibiting stealing of assets, destruction of assets or acts of violence, then we may consider that the use of those recordings the purpose of which was of monitoring such events, could be used as evidence to prove a disciplinary offense consisting of: physically assaulting a colleague, stealing an asset from the employer's assets and leaving the workplace in the possession of such assets.

On the contrary, the use of the same records to prove disciplinary violations that are not closely related to the purpose of monitoring and that do not meet the level of reasonable expectation on the part of employees (e.g. to prove that an employee is late at work or to prove the work performance of employees) might be considered[4] a disproportionate measure in relation to the rights and freedoms of employees since those disciplinary offences can be proven by using less intrusive means, such as the use of information captured by the attendance card systems or, respectively performing employees’ appraisal according to the provisions of the employer’s Internal Regulation.

Caution!

In different circumstances, the same disciplinary offence may fall within the purpose pursued by the employer when collecting personal data by video surveillance system.

Ex. 1:

§  The purpose of video monitoring: ensuring the safety of workers at the workplace

§  Disciplinarily investigated act: smoking close to inflammable equipment.

or may exceed it

Ex. 2:

§  The purpose of video monitoring: ensuring the safety of workers at the workplace

§  Disciplinarily investigated act: taking too frequent smoking breaks.

By reference to Art. 22 of the GDPR which provides the right of data subjects not to be subject to decisions based solely on automated processing which significantly affects them, obtaining the employees’ point of view on the images used during the disciplinary investigations is necessary.

Also, the identification and use, if possible, of additional evidence is always welcome.

To conclude, in order to prevent issues related to the legitimacy of such records that could be used in a disciplinary investigation procedure, from the perspective of data privacy provisions, a careful analysis of each fact is recommendable since, as mentioned above, the same fact/offence may or may not, depending on the circumstances, fall under the legitimate interest pursued by the employer through video monitoring of the areas.

[1] Art. 275: "The provisions of this title are supplemented by the provisions of the Code of Civil Procedure".

[2] Art. 341 para. 2 of the Civil Procedure Code: "Photos, photocopies, films, discs, sound recording tapes, as well as other such technical means, are also material means of evidence, if they were not obtained by violating the law or good manners."

[3] Guide 3/2019 regarding the processing of personal data through video devices  issued by the EDPB.

[4] Opinion no. 4/2004 of the former Working Group art. 29: images collected solely to protect property and/or detect, prevent and control serious misconduct shall not be used to charge an employee with minor disciplinary misconduct.

Abuse of Dominance - Intel and Mondelez

In recent years, there has been European-level discussion about the (alleged) abuse of dominant position by technology giants in particular (for example, the Intel case[1]), but also in other industries (such as the most recent decision in the Mondelez case[2]). The concept of abuse of dominant position adopted by the European Commission for limiting and sanctioning it has undergone a notable evolution (although Regulation 1/2003[3] is still in force without substantive changes)[4]. The major reservation regarding the sanctioning of abuse of dominant position is probably that no one wants to discourage large competitors, capable of investment, innovation, and progress, from doing exactly these things for rather sterile reasons, such as the fact that at some point their conduct fits the textbook description of abuse of dominant position. Perhaps that is why the European Commission (the Commission) and the Court of Justice of the European Union (CJEU) have understood that they need to allow for flexibility and adaptation of this concept to the realities and needs of the present, so that consumer interest is prioritized.

This adaptation to market realities is known as the „economics-based approach”. This method focuses on the economic effects of a dominant company's behaviour on the market and consumers, using detailed economic analysis and econometric tools to substantiate decisions. The goal is to ensure that interventions are justified and proportionate, thereby promoting competition and economic efficiency. However, the concrete application of the economic approach has taken different forms, as evidenced by the comparison of two important cases in recent years, i.e., Intel and Mondelez, reflecting the complexity and peculiarities of each case.

Intel Case

The Intel case refers to the charges brought by the Commission against Intel regarding the alleged abuse of dominant position in the processor market through conditional discounts and direct payments to computer manufacturers and retailers to exclude its main rival, AMD. In 2009, Intel was fined by the Commission €1.06 billion (the largest fine at the time) for anticompetitive practices aimed at eliminating competition and limiting consumer choices. In a first instance, the EU General Court upheld the Commission's decision, stating that the discounts offered by Intel were capable of restricting competition. This decision was appealed by Intel, and in 2017 the ECJ upheld the appeal and referred the case back to the General Court for re-evaluation, emphasizing the need for a detailed economic analysis of Intel's behaviour. In 2022, the General Court annulled the fine imposed by the European Commission, concluding that it had not sufficiently demonstrated the anticompetitive effects of Intel's discount schemes. In other words, in this case, the final judgment showed that economic analysis was necessary to establish the anticompetitive effects of Intel's practices.

Mondelez Case

In May 2024, the Commission imposed a fine of €337.5 million on Mondelez International, a major global food company, finding that it engaged in anticompetitive practices by restricting the cross-border sales of its products in the European Union. The Commission found that Mondelez violated EU competition rules by (i) entering into anticompetitive agreements or concerted practices intended to restrict cross-border trade in various chocolate, biscuit, and coffee products, and (ii) abusing its dominant position in certain national markets for the sale of chocolate tablets. Mondelez's anticompetitive behaviour would have included: (i) limiting the areas or customers to which certain wholesalers could resell Mondelez products, imposing higher prices for exports than for domestic sales; (ii) preventing distributors from selling in other Member States without prior approval; (iii) refusing to supply certain intermediaries or ceasing supply in certain countries to maintain higher prices. The Commission's conclusion was that these practices hindered free trade between Member States and led to the artificial segmentation of the market, allowing Mondelez to maintain higher prices for its products at the expense of EU consumers. In the Mondelez case, the infringement identified was serious and obvious, having as its object the restriction of competition in the EU and making economic analysis redundant.

***

In both cases, the Commission used economic principles and methodologies to assess the effects of companies' behaviour on competition and consumer welfare. This approach involves analysing market dynamics, assessing market power, evaluating potential efficiencies, and considering the impact on consumers through the prism of product prices and variety of choice. However, the Intel doctrine (according to which - in certain cases - dominant players can demonstrate the lack of anti-competitive effects of their practices) did not apply in the Mondelez case, where the violations were serious and had as their obvious object the distortion of competition (Mondelez admitting otherwise the infringement, cooperating with the Commission and benefiting from a 15% reduction of the fine).[5] 

[1] Intel Corp v European Commission (Decision) [2017] C-413/14 P, EU:C:2017:632.

[2] European Commission Decision C(2022) 1234 final, Case AT.40012 – Mondelez

[3] Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty

[4] The idea that competition law has undergone significant changes in recent years, even though the provisions of Articles 101 and 102 of the TFEU (formerly Articles 81 and 82 of the Treaty of Rome (EEC)) have essentially remained the same, is extensively discussed in a very good recent work that I quote here, namely Pablo Ibáñez Colomo, The New EU Competition Law (Hart Publishing 2023).

[5] The idea of ​​the parallel between the two cases - Intel and Mondelez - can be found in the article Mondelez: abuses by object, consistency and the administrability of Article 102 TFEU, by Pablo Ibanez Colomo and published on May 30, 2024 on the website https:// chillingcompetition.com/.