With the increase in international commercial trade and business have also
led to the increase in the role of arbitration in almost every sphere. In a
similar way arbitration can be used as a method to resolve competition and
antitrust issue, though the arbitrability of such disputes have not been
directly discussed in any cases in India.
Talking about the nature of disputes arbitrable disputes are private in nature
whereas in case of competition disputes there are various cases that can affect
the consumers, market and distributors that may feature public interest in such
cases. Another important reason for the increase in number of such cases is due
to the neutrality of the forum as application of various national jurisdictional
law may lead to further complex the dispute.
This paper will try to examine the question of arbitrating such disputes and
applicability of various law by comparing it with the European Union Competition
Law and U.S and the usage of second look doctrine followed by the courts and how
it can be followed in the Indian scenario.
Arbitration has expanded its frontiers by allowing for the resolution of
hitherto unresolvable disagreements. Despite this improvement, the application
of international commercial arbitration to competition law remains a vague area
owing to a number of difficulties. In India, a specific conclusion on the
arbitrability of competition law issues has yet to be reached. The ability of an
arbitral tribunal to decide in personam concerns is well established, but rights
in rem should not be resolved.
Arbitration was not traditionally regarded as a mechanism of resolving
competition disputes, but this started to change in the 1980s or early 1990s.
Arbitration in competition law matters is currently accepted in almost every
established competition law jurisdiction. With the passage of time, arbitration
has emerged as one of the most important topics to examine in resolving
international competition disputes.
Given the absence of a viable alternative to the Competition Act 2002 and the
Competition Commission of India's limited powers, the door to arbitration of
certain anti-competitive activities by dominant organisations is urgently
Application Of Arbitration In Competition Disputes In India
The application of arbitration in competition issues have not only been
questioned in India but also in foreign countries due to its nature. Neither the
Arbitration and Conciliation Act nor the Competition Act explicitly mentions
about arbitration competition disputes.
Competition Law, 2002 And Arbitration And Conciliation Act, 1996 The Competition Act, 2002 was enforced to promote fair and healthy
competition in the market while protecting the interest of the consumers and
traders. The Act has further stated to set up a separate commission for
dealing competition issues and has an overriding effect to other laws of
the country. It also bars the court to entertain disputes related which are
within the ambit of CCI.
Any dispute which involve Section 19 of the
Competition Act can be said as right in rem. Section 2(4) of the ACA states
that the Act will have no effect on any legislation that prohibits certain
disputes from being referred to arbitration. Further, Sections 34(2)(b) and
48(2) of the ACA restricts arbitrability on certain matters by enabling
Courts to set aside an award or reject its enforcement if the matter in
dispute is not competent of resolution by arbitration under the law
currently in force or whether the award is contrary to Indian public policy.
Developments In The Indian Scenario Even though the Competition Act does not recommend for any other alternative
method for resolving disputes, the case of Union of India v. Competition
Commission of India was the first case which talked about the issue of
arbitrability of competition disputes.
A concession agreement was entered
between the Ministry of Railway and the operators of the container. Later
on, a complaint was filed by the operators before the CCI alleging abuse of
dominant position by the Railway authorities. The position of the CCI to
entertain this matter was questioned in the matter as due to the arbitration
agreement entered between the parties. The Court dismissed the petition
stating that the scope of examining the matter by CCI is completely
different to that of the arbitral tribunal.
The tribunal examines the
aspects of the clauses whereas the CCI will look into the facets of abuse of
dominance. The tribunal does not have the ability or expertise to
investigate the issue of abuse of dominance. The case of Amazon.com NV
Investment Holdings LLC v. Future Coupons (P) Ltd., can be emphasis that
arbitrable awards can be applicable to only those cases where the dispute in
matter is not against the 'public policy' of the nation and are plainly
considered as commercial under the domestic law.
There are two aspects to competition law conflicts. The first is the
administrative law component of competition law, which involves the
enforcement of public punishments such as fines for non-compliance. A claim
based on such laws includes a right in rem and so fails to meet the aspect
of the 'arbitrability test,' rendering it completely inappropriate for
Administrative components of competition law are not arbitrable
in any jurisdiction given the element of public interest involved. At the
same time, a breach of competition law has civil law repercussions, such as
the right of an aggrieved party to file an individual, private claim for
damages for damage sustained as a result of anti-competitive behaviour or
other contractual remedies. Because they entail right in personam, such
civil law conflicts fulfil the arbitrability test. Further in the case of
Olympus Superstructures Pvt. Ltd v. Meena Vijay Khetan and Ors., the SC
allowed arbitration for settlement of claims even though the dispute had an
element of right in rem. Establishing such tribunals can help in speedy
disposal of cases, even though no special powers are vested with the
Section 53N of the Competition Act talks about compensation to the aggrieved
party. Such monetary claims are made between the parties and does not
involve the matter of right in rem. Hence such claims can be very much
arbitrable. There are several other anti-trust claims such as joint-venture
agreement or franchise agreement which are right in personam. Hence while
examining the matter the Court can contemplate the nature of the dispute
before coming to a blatant denial for arbitrating competition issues and
there are no judicial precedent in which both the parties have willfully
agreed for arbitrating competition issues, one need to wait for the Court to
clarify on the same.
Enforceability Of Award An arbitral award can be set aside if it is in conflict to the public policy
of India. Even though the term public policy is not defined in any Indian
Law, one can define public policy as the matter which involves the public
good and public interest. While enforcing the award from foreign
jurisdiction the enforceability of the award can not be blatantly denied if
it is in violation of the Indian Law, unless and until it is contrary to:
the Fundamental Policy or interest of India; or against justice; or involves
While opposing the enforceability of the award India
should mainly focus on Article V(2)(a) of the New York Convention and
becomes the sovereign duty to honor such awards, or one can simply say
that there should be minimal intrusion of courts while enforcing foreign
Application Of Arbitration In Other Jurisdictions
Arbitration And Us Competition Law The Federal Arbitration Act governs the process of arbitration in US.
Section 1 and 2 of the Act mentions about exceptions and enforceability
of agreements. The development of arbitration competition issues are through
various judicial decisions. One such decision which re-defined the view of
arbitrating anti-trust matter was the case of Mitsubushi Motor Corp v. Soler
Mitsubishi Heavy Industries, Inc and Soler Chrysler
International (car dealer) decided to form a joint venture that became known
as Mitsubishi Motors. Their goal was to distribute automobiles through Soler
Chrysler dealers outside of the US area. When the market's demand for
automobiles fell, Soler was unable to reach the planned product sales and,
as a result, requested that Mitsubishi postpone or cancel the scheduled
distribution of orders. Mitsubishi declined this request. The court said
that the international arbitrators are a group of renowned legal academics,
and the judiciary must acknowledge the parties' autonomy in choosing
arbitration as their preferable means of conflict settlement.
The Court also
states that if the Court takes the traditional approach in determining the arbitrability of the matter, it will not only jeopardize the opportunities
of international trade and commerce, but it will also endanger the
countries' role of arbitration, as ADR has been continuously expediting
among the global commercial and economic bodies as one of the most appealing
means of private settlement of disputes. The Court concluded that federal
anti-trust claims can be arbitrable if it arises out of international
Second Look Doctrine
This case led to the creation of "Second Look Doctrine" in the jurisprudence
of arbitration. A dispute cannot be said arbitrable by just citing the
complexity of the dispute or the incompetency of the issue to be arbitrable.
However, this doctrine can be used by the court to dismiss the arbitral
award if the arbitrators by consciously or by mistake fails to address the
issue of competition aspect involved in the case or is dangerous to the
policies of the nation, in accordance to the New York Convention.
not hamper the autonomy of the party as it gives the arbitrator to examine
the issue with accordance to the law but also gives them fair chance to
substantive their grounds for passing the awards, the courts review of the
awards remain minimal and does not require intrusive review of the award. A
mere error in the application of the law can be said as a sufficient ground
to set aside the award or, for the courts to intervene or review the matter.
However, one of the major issue with this doctrine is that it is applicable
only to the awards made in US. Any award that violates United States
competition law might not been enforceable in the United States, and it
might be enforceable in another nation.
United States V. Novelis Inc. Et Al.
The issue in this case was related to merging parties. Novelis resulted from
a civil antitrust complaint brought by the Department of Justice in the US
District Court to dispute Novelis' intended acquisition of Aleris. According
to the complaint, the purchase would merge two of only four North American
makers of aluminium vehicle body sheet (ABS), resulting in a concentration
of around 60 percent of overall production capability. The decision was
passed in favor of the Division.
While deciding a matter for arbitration
three criteria were identified which are:
The arbitrator in this case was a former director of the Bureau of Competition
at the Federal Trade Commission and the arbitrator's knowledge over the matter
can be considered as an major factor for passing an effective award.
- the extent to which arbitration can increase efficiency;
- the presence of a clearly stated matter for referring to the arbitrator;
- if arbitration would lead to a missed chance to produce effective legal
Arbitration In EUThe Article 101 & 102 Treaty on Functioning of the European Union (TFEU), 2007
are the major regulations related to competition law. The implementation of
Directive 2014/104/EU (Article 18) on antitrust damages establishes basic
requirements to support the efficient use of amicable dispute resolution as an
alternative path for claimants to recover damages for breach. This necessitates
an assessment of the competition law framework, the effectiveness of arbitration
in settling antitrust claims, the choice of law concerns in arbitration, and the
execution of antitrust legal disputes through judicial review. It allows for
damages under the state legislation for violations of the Member States'
competition law provisions, and it attempts to facilitate private enforcement of
European competition law remedies by reducing various complexity.
The Court of Justice of the European Union (ECJ) recognized the arbitrability of
the competition law indirectly in the case of Eco Swiss China Time Ltd v.
Benetton International NV. A tripartite agreement between the Dutch company
Benetton and the Eco Swiss (a Hong Kong Company) and the Bulova Watch Company
Inc. (American) granted Eco Swiss the right to manufacture watches and clocks
containing the words 'Benetton by Bulova,' which can be marketed by Eco Swiss
and Bulova." The agreement called for all issues to be resolved by arbitration
in Netherlands and included a Dutch choice of law clause. Following Benetton's
early cancellation of the agreement, the parties went for arbitration. Benetton
was compelled by the arbitral tribunal to reimburse Eco Swiss and Bulova for
During the arbitration, not a single involved party brought antitrust grounds,
despite the fact that the licensee agreement required market sharing, which
violated Article 101 of the TFEU. Following the award, Benetton sought a
cancellation of the award in a Dutch court on the basis of public policy, saying
that the agreement at issue breached EU competition law. The Court of the
Netherlands upheld the award stating that Article 101 is not a mandatory rule
and referred the matter to the ECJ. The ECJ stated that the annulment of the
award should be granted only in exceptional situations and for effective
arbitration the scope of reviewing done by the courts should be limited. An ex
officio review was awarded and was concluded that the award did not jeopardize
the public policy hence, the award stands. This made a major impact in deciding
subsequent cases like SNF/Cytec where the different courts reviewed the award
for four times.
In India, the courts have been quite unfriendly for arbitrating competition
issues. With the current trends of economy and growth, one can say the need for
arbitrability of competition disputes as followed in the US or EU. There are
several instances where the arbitrators have taken due diligence to the
competition and dealt the matter appropriately. Other countries have heavily
relied on judicial decisions made by the court and have led to the evolution of
arbitration in competition dispute. With the increase in the competition
dispute, it can be foreseeable that India would adopt pro-arbitration approach
for commercial bodies.
As mentioned in various cases, the court should involve in only those cases
which may have a flagrant, effective and concrete violation of the public policy
of the country. The arbitrators play a major role in deciding the matter as it
is the role of the arbitrator to review the nature of the matter and pass
The arbitrators dealing such issue should have a considerable knowledge on
competition law of the jurisdiction, as the major reason for the parties to
approach the court is due to the tribunals inability to understand the
complexity of the issue. Further, the Indian courts can adopt the method of
Second look doctrine as followed in US and EU and the New York Convention, they
should not focus only on Indian Laws. As per the words of Section 53N of the
Competition Act which is about compensation, the Competition Act can explicitly
mention the use of arbitration for deciding compensation claims.
The Competition Act can also direct for the creation of arbitrational tribunal.
Formation of such tribunal will lead to minimal appeal and intervention of the
courts, it can also take advantage of the investigative power of the commission.
Arbitration should be seen more as an aid rather than a substitute of CCI. The
CCI should act as a 'parens patriae' for arbitration proceedings.
Arbitrators only have the authority to examine on matters that the parties
agreed to arbitrate, thus it is critical to state whether it is envisaged that
the arbitration clause includes claims concerning competition law concerns when
writing an arbitration provision or agreeing to arbitrate, hence it is important
to ensure the same during the drafting of the provision. When choosing an
arbitrator, the parties should evaluate whether that person is qualified in
deciding competition law concerns.
Even though there is a competition aspect to the claim, it is possible that the
question of whether a violation occurred has been proven, and hence the
qualifications needed is in evaluating the economic impact of such a violation.
Choosing an arbitrator who is prepared to handle these concerns and who
understands the evidence needed to make an opinion on them may help to speed up
the process and reduce the expenses of advancing the case.
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