[This article is authored by Sanya Sethi, a penultimate year law student at JGLS, Sonipat.]
Keywords: Arbitrability, Competition Law, Arbitration Agreement.
Arbitration has consistently been a preferred means of dispute resolution because it is flexible, speedy, and most importantly, a private mode of adjudication. However, the private nature of arbitration raises a pertinent question, that is, whether issues which involve public interest are capable of being resolved by arbitration. Competition law is one such area, the object of which is to prevent market distortions and safeguard the welfare of consumers, involving a substantial public interest in its domain. This article deals with the issue of the arbitrability of competition law disputes and the ways in which these two seemingly diametrically opposite branches could coexist within the Indian context.
International Position at a Glance
The European Union (“EU”) is one of the most important jurisdictions with respect to the arbitrability of competition law disputes. A series of judicial decisions in the past have resulted in a conclusion that EU competition disputes are arbitrable but are subject to subsequent judicial review. In Eco Swiss China Time Ltd. v. Benetton International NV, the European Court of Justice (“ECJ”) upheld the arbitral tribunal’s power to decide on issues related to competition law, subject to judicial review of the resulting award. However, it was also stated that EU competition law would be a part of the public policy of its member states and that an arbitral tribunal shall apply the relevant rules even if they are not raised by the parties. Additionally, national courts may refer to the ECJ, if necessary, in order to determine the inconsistency of an arbitral award with EU competition law. Therefore, in conformity with Eco Swiss and other relevant cases, the arbitrability of competition law disputes is accepted under the EU law, however, arbitral awards may be refused to be enforced on grounds of inconsistency with public policy in case they contradict with EU competition law.
Similarly, in the United States (“US”) Supreme Court’s landmark decision in Mitsubishi Motor Corp v. Soler Chrysler Plymouth, it was held that full effect should be given to an arbitration agreement in an international contract, even if it requires the submission of competition law disputes to arbitration. The concern that competition disputes are too complex to be entrusted to arbitrators because of the requirements such as expedition and minimum requirement of a written rationale was dismissed by the Court, and it was held that arbitral tribunals would be capable of adjudicating such disputes. Instead, it was observed that parties tend to submit disputes to arbitration precisely because of the features that were being considered harmful. The Court observed, “it is often a judgment that streamlined proceedings, and expeditious results will best serve the needs that cause parties to agree to arbitrate their disputes; it is typically a desire to keep the effort and expense required to resolve a dispute within manageable bounds that prompts them to mutually forgo access to judicial remedies.”
Therefore, competition law disputes are arbitrable in the EU as well as in the US. The arbitration of competition law is now a fait accompli in these jurisdictions.
Indian Perspective on Arbitrability of Competition Law Disputes
The arbitrability of competition law disputes has been a subject of debate for a long time. The Competition Commission of India (“CCI”), the body through which the Competition Act, 2002 is enforced, is vested with both quasi-judicial and regulatory powers. According to the current position in India, competition law disputes are not arbitrable in nature. In Union of India v. Competition Commission of India, notwithstanding a valid arbitration clause, the Court held that CCI has the jurisdiction to decide on the case. This case also confirmed the general view that an arbitral tribunal is competent to decide on rights in personam, but not rights in rem. Furthermore, the Court was of the opinion that although the tribunal had the mandate, it lacked the necessary expertise to decide on the issue of abuse of dominant position by one of the parties to the contract, thereby holding that the dispute was non-arbitrable.
Similarly, in Man Roland v. Multicolor Offset, which dealt with a similar factual matrix under the Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP”), the Supreme Court held that the remedies available under the MRTP Act are in addition to the remedies that may be available under contract law. Therefore, the courts continue to have jurisdiction despite an arbitration agreement existing between the contracting parties.
A Dilemma of Coexistence?
Instances wherein the Indian courts have been hostile towards the arbitrability of competition law disputes in order to safeguard public interest are not uncommon. However, it can be argued that precluding the arbitrability of competition law disputes in itself would not result in the preservation of public interest. Instead, the CCI should play a dual role of amicus curiae (impartial advisor to a court of law) and parens patriae (authority that protects rights of parties) in the arbitral proceedings, pursuant to allowing the parties to proceed for arbitration.[ii] Since an amicus curiae provides submissions with respect to a matter on behalf of the parties, this would ensure that the arbitral tribunal has the opportunity to hear from third parties that have expertise in the matter and can assist in the proceedings.
Furthermore, although the US Court in Mitsubishi made competition law disputes arbitrable, it balanced its strong stance in favor of arbitrability through an obligation for the arbitrator to apply competition law. Its implication is that while the arbitrators can determine questions involving competition law, the courts are empowered to take a second look at the contents of the arbitral award at the enforcement stage to analyze and verify whether the questions of competition law have been properly addressed. This is also known as the “second-look doctrine.”[iii] Similarly, Section 27 of the Arbitration and Conciliation Act, 1996 allows the tribunal to seek assistance from the court while taking evidence. When confronted with issues related to competition law, this provision can be invoked by the arbitral tribunals to consult CCI.[iv] Such a practice is also common in the EU, where the European Commission acts as the amicus curiae in arbitral proceedings involving competition law to ensure the correct application of European competition law and protect the public interest.[v]
It is evident that allowing for the arbitrability of competition law disputes is beneficial for the development of both arbitration and competition law regimes in India. Therefore, amendments to the Competition Act, 2002 obliterating the bar on the civil courts’ jurisdiction to entertain competition law disputes should be made. Furthermore, a judicial change with respect to determining the arbitrability of disputes could prove to be an efficient solution. In this regard, the only relevant question in determining the arbitrability of disputes should be whether a dispute constitutes a right in rem or a right in personam, that is, whether it significantly involves public interest or the interest of the individuals who have not agreed to the dispute being resolved by arbitration.[vi] If this is satisfied and there is no express prohibition on arbitration, the courts should not prevent parties from submitting their dispute to arbitration.
The non-arbitrability of competition law disputes has resulted in certain shortcomings. According to a report published in 2014, almost all the cases decided by the CCI are pending before appellate bodies in the past five years of its establishment.[vii] As a result, the aggrieved parties are still awaiting a remedy since no private claim has reached its conclusion. Arbitration would make it easier for private parties to vindicate their claims under competition law and would also be compatible with the objective of competition law, that is, the welfare of consumers as public enforcement would still be the prerogative of competition authorities. Therefore, arbitration should not be viewed as a substitute to CCI but rather as an accompanying vehicle to further the effective enforcement of competition law and allowing arbitration to resolve competition law disputes would also be a step in the right direction to align India’s arbitration regime with international standards.
[i] Gilmer v. Interstate Johnson Lane Corp., (1991) 500 U.S. 20; Dirland Telecom SA v. Viking Telecom AB, (2005) E.C.L.R. 432, 438 (Swed.). [ii] Tanya Choudhary, “Arbitrability of Competition Law Disputes in India-Where Are We Now and Where Do We Go from Here?” (2016) 4(2) IJAL 1, 82. [iii] Radieati di Brozolo, “Anti-trust: A Paradigm of the Relations Between Mandatory Rules and Arbitration – A Fresh Look at the “Second Look” (2004) 1 INT’L A.L.R. 23. [iv] Choudhary (n 2). [v] A.E.S. Summit Generation Limited and A.E.S.-Tisza Erdma Kft. v. Republic of Hung., ICSID Case No. ARB/07/22 (Sept. 23, 2010). [vi] Pankhuri Agarwal, “Arbitrability of Disputes in India: Still Grappling in the Dark” (2013) THE ARBITRATOR 2, 5. [vii] Rahul Goel & Anu Monga, “Private Antitrust Litigation 2014” (2014) GLOBAL COMPETITION REV. 74, 77.