Introduction
The ever-growing increase in the backlog of cases has forced the litigants to opt for an alternative method of dispute resolution1. Globally, the judiciary has pushed to choose settlements outside the court2. Owing to the fact that it has multiple benefits such as less costly, less adversarial, and less time-consuming. Overall, it may be said that alternative dispute resolution could be regarded as more efficient and less adversarial.
Amidst the intensifying array of outside court settlements, the ambit of the subject matter of arbitration has been in constant debate. One of the existing gray areas in such matters is anti-trust matters. Traditionally, matters consisting of right in personam are referred to arbitration, whereas matters consisting of right in rem are refrained from referring to arbitration3. Advancing, anti-trust matters incorporate the right in rem, as it involves public interest against any anti-competitive behavior. Therefore, the arbitrability of such matters has not been settled so far.
In India, there has been no clear indication of allowing arbitration as a method of resolving competition disputes in any of the legislation governing the same. The Competition Act, 20024 as well as the Arbitration and Conciliation Act5 neither specifically incorporates, and nor does it entirely rule out arbitrability of such matters. Whereas, globally a positive trend is recognized with regards to arbitrability of anti-trust matters6. The inconsistency in the legislations across jurisdictions has hampered the ongoing development.
The paper examines the existing framework across India, the USA, and the EU, and access the interface of International arbitration and Competition law. Moreover, it highlights the practical problems faced in International arbitrability of competition matters, and suggesting the strategy to resolve the issues tracked.
Interface Of International Arbitration And Competition Matters
As of now 172 countries excluding a few African countries7 is a signatory of the New York Convention of 19588. The convention binds the ratifying parties to enforce all International Arbitral awards9. However, while considering the arbitration of anti-trust matters there arises a scope for irregularities. As, every jurisdiction encompass its own set of legislation governing anti-competitive behaviors in the market. Some countries such as USA and EU enforce a stringent framework as compared to Arab countries10 which are late in adopting the competition legislation and have a weaker implementation. Such discordance in the framework raises conflict and irregularity in allowing arbitration of competition law. So far, there exists no legislative framework to regulate the same.
Legislative Landscape Across Jurisdictions- India, USA And EU
In India, traditionally competition dispute is not referred to as a private or voluntary dispute. Competition law govern anti-competitive behavior in the market concerning the public at large, thus arbitration is not deemed as a proper mechanism for dispute resolution. A negative trend is recognized with no significant judgment regarding the issue. The Delhi High Court highlighted that legal procedure as per the Competition Act cannot be suspended or delayed to prefer arbitration in the case of Union of India v. Competition Commission of India11. Thus, reiterating the well-settled principle that rights in rem matters are reserved for the courts to remain concurrent in India.
Globally, judicial pronouncements reflect a rather positive trend. In the European Union, Articles 81 and 82 of the European Communities Treaty12 (ECT) regulate anti-competitive behavior13 in the market. Moreover, the parties are allowed to choose arbitration as a means of dispute resolution conditioned through a consensual agreement. Such principle is impliedly propounded in the Eco Swiss case.14 Along with this, the honorable court also highlighted the need to strike a smooth balance between contractual mandate and enforcement of public policy.
On the other hand, in the USA, the Supreme Court in the case of Mitsubishi Motors Corp v. Soler Chrysler-Plymouth15 held that anti-trust matters can be arbitrated conditioned to adhere to provisions of International Commercial arbitration as in the contract. The main legal structure regulating arbitration in the United States is the Federal Arbitration Act (FAA)16. This law encourages the resolution of disputes arising from contracts related to interstate or international trade17. Under the FAA, American courts have consistently supported arbitration agreements, including those involving domestic antitrust disputes, without reservation.
Complex Challenges in Arbitrating International Antitrust Disputes
The abovementioned precedents further defined the contours; moreover, they highlighted the challenges that persist in the practical application of the determinants.
One of the major problems faced by the arbitrators is maintaining a delicate balance between exercising their authority to determine damages and impose civil sanctions in conflicts involving competition law, while also avoiding encroaching on the exclusive jurisdiction and powers of competition authorities. This delicate balance requires arbitrators to carefully consider the boundaries of their authority to ensure their decisions are legally sound and not vulnerable to being overturned for violating public policy.
Another challenge is determining the applicable law in a cross-border dispute. The problem may emerge in three circumstances, first, in the absence of an explicit agreement between disputing parties on the governing law, secondly, when the chosen governing law is completely unrelated to the pertinent dispute, or third, the selection is made deliberately to escape stricter rules, ad argumentandum. Moreover, the governing law chosen may at times hinder the law prevailing in other jurisdictions. On the other hand, the seat of arbitration chosen commonly lacks any substantive relevance, as in the majority of cases the reason for such selection is neutrality purposes. Thus, choosing a law of the country that is majorly impacted becomes vital.
Adding on, there exists a procedural challenge posed by the arbitral review process in international antitrust disputes. The 'second look doctrine18' propounded in the cases of Mitsubishi19 and Eco Swiss20, which entail courts with the power to review arbitral decisions. The arbitrability of the matter depends upon the check by the court. However, cases involving parties belonging to two different jurisdictions pose a challenge to selecting the judicial review bench. Thus, it poses a procedural dilemma in the review process.
Another issue arises when there is an ongoing concurrent proceeding regarding the same anti-trust dispute in any court or competitive authority. The concern is multifaceted and contingent upon various factors, the violated, the whereabouts of the case, and the timeline of the proceeding. The discordance in legislation across jurisdictions acts as a hurdle to a uniform procedural format. In the EU, the arbitrators are not obligated to halt arbitration proceedings for an ongoing inquiry. Although, the arbitrators aren't bound by decisions of competitive authority but the arbitral award may be affected by such rulings. They may face potential legal challenges to substantiate the award in a situation of contradiction of an arbitral award with the competition authority's decision.
Even though there is a wide acceptance of arbitration of competition matters across jurisdictions, there are multiple problems in its practical applicability. The ambit of International arbitration does confer public policy issues which can be resolved by mandating the "second look doctrine" as propounded in the cases. These challenges can be met by formulation of structured framework at an international level keeping in mind the principle of public policy and fairness.
A Way Ahead?
To tackle the challenge of arbitrability regarding competition law issues, it's crucial to consider the specific nature of the accusations involved. If the allegations primarily relate to anti-competitive behavior, it may be more appropriate for the Competition Commission of India (CCI) to handle the investigation. However, if the claims are connected to other contractual disputes, the arbitral tribunal should be empowered to make decisions.
It's important to note that parties typically avoid solely presenting antitrust disputes to a tribunal due to the remedies under the Competition Act21, which often involve fines rather than the damages or compensation sought in contractual disputes. Therefore, if the dispute primarily concerns contractual relief and is confined to contractual matters, the tribunal should proceed with arbitration even if ancillary antitrust issues arise. This approach is in line with global practices allowing for the arbitration of competition law matters, and offering a practical solution to ensure effective dispute resolution.
Conclusion: Embracing Arbitration's Role in Resolving Competiton Disputes
In essence, while arbitration offers a promising alternative for resolving competition disputes efficiently, its practical application faces challenges. The debate over the arbitrability of competition matters persists, particularly in jurisdictions like India where they are considered issues of public interest. However, positive trends are observed globally, with both the EU and the US recognizing the potential for arbitration in such disputes, albeit subject to conditions. By addressing the challenges and embracing principles of fairness and transparency, arbitration can play a significant role in resolving complex competition issues in today's globalized world. Even though the interface of International arbitration and competition matters remain blurred, it is a foregone conclusion.
Footnotes
1. Designing The Future of Dispute Resolution: The ODR Policy Plan for India, GOVERNMENT OF INDIA, NITI AAYOG, 2023.
2. Yun-chien Chang, Daniel Klerman, Settlement Around the World: Settlement Rates in the Largest Economies, JOURNAL OF LEGAL ANALYSIS, Vol. 14, Issue 1, 80–175, 2022.
3. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd (2011) 5 SCC 532.
4. Competition Act, 2002, No. 12, Acts of Parliament, 2002 (India).
5. Arbitration and Conciliation Act, 1996, No. 26, Acts of parliament, 1996, (India).
6. Alexandra Theobald, Mandatory Antitrust Law And Multiparty International Arbitration, UNIVERSITY OF PENNSYLVANIA JOURNAL OF INTERNATIONAL LAW, Vol. 37, 1059-1089, 1064, (2016).
7. Guide to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, UNCITRAL UNITED NATIONS, 2016 https://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=4&menu=671&opac_view=-1
8. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38.
9. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. I(1), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38.
10.Approaches to and Challenges in Implementing Competition Law and Policy in the Arab World, FRIEDRICH NAUMANN FOUNDATION, https://www.freiheit.org/middle-east-and-north-africa/approaches-and-challenges-implementing-competition-law-and-policy-arab#:~:text=Conversely%2C%20the%20majority%20of%20the,Why?.
11. Union of India v. Competition Commission of India (1999) 6 SCC 667.
12. Treaty establishing the European Economic Community, Mar. 25, 1957, 298 U.N.T.S. 11.
13. Treaty on the Functioning of the European Union, art. 101, Dec.13, 2007, O.J. (C 115) 47.
14. Eco Swiss China Time Ltd. v. Benetton International, [1999. ECR I-3055.
15. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).
16. Federal Arbitration Act, 1925.
17. Federal Arbitration Act, 9 U.S.C. §§ 1-16 (1925).
18. The doctrine was propounded by the US court which allows the judiciary to review arbitral award in anti-trust. It allows a framework of double-check to ensure fairness and compliance with public policy, especially in competition law matters.
19. Supra note 15.
20. Supra note 14.
21. Supra note 7.
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