Privatization of Competition Law Adjudication Arbitrability of Competition Law Disputes

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Written by: G. Madhavi Lakshmi

Introduction

In the present modern age of rapid globalization, modernization and the tepid, pugnacious and ponderous nature which traditional methods of dispute resolution have metamorphosed into[1], Arbitration has become the “prima donna” of settling business and other commercial disputes. The reason Arbitration has achieved widespread popularity is because of its flexible, speedier, and relatively more private mode of adjudication.

The parties which iron out their disputes through arbitration, usually through arbitration clauses in contracts between them, or even as it is increasingly becoming common through separate arbitration agreements, which the parties enter into before entering into contracts or any other commercial relationship. The very factors which makes arbitration attractive and increasingly common, have in a way come back as its worst nemesis and is proving to be a stumbling block ,especially when it relates to the realm of “public interest Law”, i.e. areas of Law which substantially affects the public at large .

Competition Law is one such arena where the State acts as an economic policeman, and checks practices which are detrimental to the well being of the economy by enforcing punitive measures such as fines and economic sanctions. It punishes actions which are aimed towards creating “monopolies” in any business or service, and safeguards the welfare of consumers and plays a role in increasing the overall efficiency of markets in a economy[2]

The very factors such as speedier hearing process, informality of hearings and choosing of subject matter experts as adjudicators and excluding of the traditional courts and tribunals which rendered arbitration so attractive a mechanism for settlement of disputes are now causing apprehensions about its reliability in adjudication of disputes of competition Law.

What does the term “Arbitrability” refer to

In simple parlance “arbitrability” refers to the capability of a dispute, that is issue being fit for being referred to the arbitral process[3]. The concept of arbitrability encompasses mainly three aspects, namely: 1)whether the disputes on account of their inherent nature are being capable of being resolved through recourse to an arbitral tribunal,

2)whether the disputes are covered as per the terms of the arbitration agreement and lastly, whether the parties have consented to resolve their disputes through arbitration? In this paper we are only concerned with the aspect and in most cases it is the first issue itself which arises as bone of contention in most disputes of arbitrability across jurisdictions.

Arbitrability of Competition Law Disputes: International Perspective

One of most important jurisdictions to discuss arbitrability of competition law disputes in international perspective is European Union (EU), wherein during the past three decades series of judicial decisions have arrived at the conclusion that EU competition claims are arbitrable but subject to subsequent judicial review.

In Eco Swiss China Time Ltd v Benetton Int’l NV,[4] the European Court of Justice (ECJ) laid down that an arbitration agreement could validly be given effect with respect to EU competition claims (subject to judicial review of any resulting award).[5] The European Union by its Regulation 1/2003, decentralized competition law and allowed national courts of member states to hear competition law matters.[6]

The national court decisions[7] in EU member states like France, Switzerland, Germany, Italy, Sweden and England have at many occasions held that EU and member states’ competition law claims may validly be the subject of an international arbitration agreement.[8]

Both the ECJ and member states’ courts have emphasized that the arbitral awards deciding EU competition law claims will be subject to subsequent judicial review,[9] which is similar to Mitsubishi’s[10] “Second Look” doctrine in the USA,[11] which will be discussed in the next section. Apart from the USA and European Union, other countries like Australia, Canada, New Zealand have rejected the ideology of non-arbitrability of the competition law claims. An Australian court in its decision stated that, “Courts should facilitate, rather than impede, agreements for the private resolution of all forms of dispute, including disputes involving claims under statutes such as the Trade Practices Act”.[12]

Arbitrability of Competition Law Disputes

In India, the “Competition Act, 2002” was enacted to promote and sustain the competition in markets and to protect interests of the consumers. The Act was promulgated to ensure freedom of trade carried on by other participants in markets in India[13]

The “Competition Act, 2002” provides for establishment of the “Competition Commission of India (CCI)”, which has been conferred with the powers to keep an eye on the anti-competitive practices not only taking place in India, but outside India as well, having an adverse impact on the domestic Indian markets.

The “Competition Act” provides that it will have an overriding effect with respect to other laws in force and is in addition to the provisions of any other law in force.[14] The “Competition Act bars jurisdiction of civil courts to entertain any suit or proceeding with respect to any matter within the purview of the CCI.[15] Thus, the question arises whether the Act by conferring exclusive jurisdiction to CCI with respect to disputes that arise under the Act, prevents parties from using arbitration as means of dispute resolution. This issue will be answered in the subsequent section.

Conclusion

On a reasonable analysis of the available subject matter we can now reasonably conclude that as far as India is concerned ,Competition Law disputes will not be submitted to the arbitral mechanism. The “Public Interest” aspect of Competition Law makes the matter unsuitable to be resolved by Arbitration. The imposition of fines and other deterrence for Infringement bring it an element of Governmental Authority in addition to creation of “Rights In Rem”, making it wholly unsuitable for Arbitration.

Competition Law involves Rights In Person am as well, however those claims also would not be subject to the jurisdiction of the Arbitral Tribunals because they come under the exclusive jurisdiction of the Tribunal.

There is a strong need in today’s day and age to adjudicate disputes through the Arbitral process as the Public Courts have increasingly become cumbersome on account of numerous cases pending in them, and due to the increased nature of free trade in today’s time Competition Law claims are on the rise and it is essential that they be resolved in an harmonious manner.

There is a very valid concern that public interest will be adversely affected if Competition Law issues can be resolved by Arbitration. The panacea to that can be in the way of the Competition Commission working as a “Amicus curiae” for the Arbitral Tribunal, as is common in Europe where the European Commission functions as an “Amicus Curiae[16]”.The Arbitration Act already provides the Courts under Section 34 of the Act to set aside an Arbitral Award if it adversely affects Public Policy.

Arbitration offers a much more officious way of dealing with disputes because of its confidentiality, informal procedure and the privacy which it offers to the parties resorting to it. Arbitration should not be thus seen from a myopic lens and rather it should as an “enabling mechanism” for fulfilling the obligations of the Competition Commission.

Arbitration holds great promise in India and recent surveys show an increase of almost 200% in disputes being referred to the arbitral process.[17] The Courts in India have reinforced India’s pro-Arbitration image and the Legislature has also contributed in this regard. If Arbitration is allowed in the adjudication of Competition Law claims our image as an investor-friendly destination will be strengthened and it would greatly bolster the accessibility of our markets to investors in a manifold way.

Reference


[1] Elliot Nestor,”The Law and Practise of Arbitration”(5th Edition,Tarly Publishers,Essex,1998)

[2] Jason Channing,”The Regulations of the Free Market Economy”The Economist,Twelfth of August,2009 available at https://sajms.com/wp-content/uploads/2016/regulation of markets(Last visited on February 25,2019)

[3] Alexis Mourre, Arbitrability of Antitrust Law from the Europe and US Perspectives, in 1 EU

AND US ANTITRUST ARBITRATION: A HANDBOOK OF PRACTITIONERS (3rd Edition,Strattford Upon Avon,2000)

[4] Case No. C-126/97, [1999] E.C.R. I-3055 (E.C.J.).

[5] Gary B. Born, International Commercial Arbitration (Vol 1, 2nd edn, Kluwer Law International, Jan 2014) 978

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

[7] Gary B. Born, International Commercial Arbitration (Vol 1, 2nd edn, Kluwer Law International, Jan 2014) 978

[8] T Plus SA v Jean-Paul Welter [2005] EWHC 2115, (“There is no realistic doubt that such ‘competition’ or ‘anti-trust’ claims are arbitrable; the issue is whether they come within the scope of the arbitration clause, as a matter of its true construction.”); Judgment of 4 June 2008, SNF v Cytec, 2008 Rev. arb. 473 (French Cour de cassation) (confirming award where arbitrators applied EU competition law), Judgment of 13 November 1998, XXV Y.B. Comm. Arb. 511 (Swiss Federal Tribunal) (2000).

[9] Eco Swiss China Time Ltd v Benetton Int’l NV, Case No. C-126/97, [1999] E.C.R. I-3055 (E.C.J.).

[10] Mitsubishi Motors Corp. v Soler Chrysler-Plymouth 473 US 614 (1985).

[11] Gary B. Born, International Commercial Arbitration (Vol 1, 2nd edn, Kluwer Law International, Jan 2014) 979

[12] Francis Travel Mktg Pty Ltd v Virgin Atl. Airways Ltd, [1996] 131 FLR 422, 428 (N.S.W. Ct. App.).

[13] Payel Chatterjee, Simone Reis, ‘Private Enforcement of Competition Law Issues Competition Commission of India vis-à-vis Alternate Forums – Is it actually an option?’, Nishith Desai Associates, accessed on 5 August 2019.

[14] Section 60. Act to have overriding effect. – The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

[15] Section 61. Exclusion of jurisdiction of civil courts.- No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Commission is empowered by or under this Act to determine and no injunction shall be granted by a  court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. 

[16] Michael Pryles, ‘THE GROWTH OF INTERNATIONAL ARBITRATION’,

<http://www.ag.gov.au/agd/www/rwpattach.nsf/viewasattachmentPersonal/0417185A03AF31B7CA256C8A00025187/$file/GrowthINtArb.pdf> Accessed on 17th of Febuarary, 2019

[17] Jeremy Fleming, ‘Getting the best seat’, (2006) Euro. Law., 60, 51-53 at 51.


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