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Arbitrability Of Competition Law Disputes

The fast track process in adjudicating the dispute by the arbitration proceedings has created a craze in most of the parties to get their dispute resolved through the arbitration irrespective of getting trapped in the court procedure for so many years. But the crux of the arbitration is that it can only adjudicate those matters which are between two parties and not the matters in which there is large involvement of the public.

Competition law matters for example is associated with the larger public interest and hence it is believed that adjudication of the competition law disputes through arbitration proceedings will harm public interest. But Section 53 N of the Competition Act, 2002 clears that any aggrieved party can also individually claim for the compensation from the appellate tribunal. This provision has thrown a light that competition law is not a rigid act but the matters can be adjudicated by the arbitration process.

This paper analyses how the landlord-tenant dispute which was the long standing debate on the issue that the matter involves the provision of the Transfer of Property Act, 1882 is also associated with the Competition law as the interest is attached by the public at large but how the arbitration can be a medium to solve this dispute. Also the paper has done a comparative analysis between India and USA on the arbitrability of competition law.

Arbitration and competition law is regarded as the opposite poles of the magnet. The disputes which arises between the two parties in mostly contractual agreement cases gets resolved through arbitration. Whereas, in the competition law cases are resolved by the courts since they affect the public at large. Hence, arbitration is more adaptable in cases which involves disputes among the private parties but then it comes to acknowledging the disputes larger in the public context then the difficulty arises and arbitrability of the subject matter comes into question.

In the case of Eco Swiss China Time Ltd. vs. Benetton International N.V. where the European Court of Justice upheld:
The authority of the arbitral tribunal that the competition law disputes matter can also be heard and adjudged by this forum. The arbitration which is part of the alternative dispute resolution procedure is fast track mechanism to adjudicate the dispute and pass the award.

Most of the competition law matters are from a very long time pending before the National Company Law Appellate Tribunal (NCLAT) as from 2017 onward there is a transition of the matters from Competition Appellate Tribunal (COMPAT) to NCLAT as the government of India decided to merge both the forums. So the people tend to solve those long pending competition law disputes through arbitration as it is being marked as the best mechanism for resolving the disputes in a specified time limit of 12 months.

But the major drawback that is existing in the arbitrability of competition law disputes is that the Competition Act isn't providing any alternative mechanism so that the adjudication can take place through dispute resolution procedure both the forums i.e. Competition Commission of India (CCI) or NCLAT isn't possess any statutory powers by which they can direct the parties to use such ways.

Why disputes arise and their arbitrariness to solve the dispute

There are certain aspects under the Competition act which significantly constitutes public interest such as cartel activities or other anti-competitive agreements which fall within the ambit of Section 2(c) and Section 3 respectively of the Competition Act, 2002 which lead the competition law dispute to arise.

There are certain ways like cartel, price fixing, market sharing, bid rigging by which the undertakings are making an agreements among themselves who are engaged in the similar kind of business in the marketplace and as a result they indulge in an unfair means of conducting business and this is affecting the fair competition in the market.

This led the dispute to arise in the public at large and hence such right in rem are non-arbitrable as in the case of Booz-Allen & Hamilton Inc. v. SBI Finance Ltd., it was stated by the apex court that:
Matters involving right in personam are arbitrable while those involving right in rem are non-arbitrable.

The fact that despite involving only right in personam in certain situation, Indian courts have time and again discouraged the arbitration adjudication in the competition law claims. The Bombay High Court in the case of Kingfisher Airlines Ltd. v. Captain Prithvi Malhotra, stated that:
that even if a dispute involves 'action in personam' it would still be non-arbitrable if its resolution is reserved for public forums as a matter of public policy.

Section 61 of the Competition Act, 2002 empowers the:
Competition Commission of India (CCI) or the NCLAT to handle all the disputes in relation to the competition law and hence civil courts are restricted from entertaining the matters under the competition law disputes. Moreover, there is also Section 2(3) of the Arbitration Act, 1996which clearly specifies that arbitration shall not take place in certain dispute matters which are subject to other laws for the time being in force.

But for the first time in India the courts dealt with the issue of arbitrability of competition law disputes. In the case of Union of India v. Competition Commission of India, the Delhi High Court has ruled upon the issue of maintainability of the proceedings before the:
Competition Commission of India where an arbitration agreement exist between the parties to contract.

Arbitrability in Tenancy Disputes

The dispute remaining between the landlords - tenants from several years which are coming within the ambit of public policy under the umbrella of right in rem was in question that the tenancy matter is not arbitrable. The difference between right in rem and right in personamwas observed and it was held by the apex court in Booz Allen & Hamilton Inc. v. SBI Finance Ltd. that:
The right in rem is a right which can be exercisable against the world at large as contrasted from a right in personam which is an interest protected solely against specific individuals. All disputes which are related to rights in rem are required to be adjudicated by courts and public tribunals being unsuited for arbitration.

But the Hon'ble Supreme Court after analysing the catena of precedents in the tenancy dispute cases has solved this historical jurisprudence in the case of Vidya Drolia v. Durga Trading Corpn. as the court held that:
Landlord-tenant disputes are arbitrable except when they are covered by the specific forum created by the rent control laws. There is nothing in the Transfer of Property Act to show that a dispute as to determination of a lease arising under Section 111 of the Transfer of Property Act cannot be decided by arbitration.

The apex court in the above case thrown light on the doctrine of competence-competence which means that it is the arbitral tribunal only in the first place to be given the primary authority to adjudicate upon the issues of non-arbitrability as the arbitral tribunal has jurisdiction to consider and decide any disputes regarding its own jurisdiction. The thumb rule was set in this judgement that in the doubtful matters where the validity of the arbitration agreement cannot be determined that matter should directly be referred to the arbitration.

The competition law disputes are considered as disputes being heated up in the public at large (right in rem). Landlord-tenant dispute is also a matter of right in rem but such matter is emerged from the personal disputes and the adjudication in such dispute is not having any effect in the public at large.

International Scenario: US perceptive in Arbitrability in competition law disputes

Competition law norms help to protect the public at large and also to enforce contractual provisions which potent opportunity for highly lucrative arbitration. The competition law disputes are governance of the public policies which opens the door for arbitration tribunals,which aid the courts to resolve disputes between two private parties may also be arbitrated. Legal system considering competition law to be arbitrable as compliance with the relevant competition law that is completely independent of arbitrability.

If the arbitration clause is not adhered to competition law, then probably it will be considered invalid and unenforceable in nature which has caused effect due to lack of arbitrability. The US analysis of whether an agreement is anticompetitive uses the joint notions of a 'rule of reason' and 'per se' illegality. As such, it has been stated that there are two complementary categories of antitrust analysis.

Rule of Reason: According to the Sherman Antitrust Act 1890, it states to restrict the business practices against the anticompetitive agreements which outlaws the monopolization or conspiracy in restraint of trade. It could not be a successful enactment because of narrow judicial interpretations which constitutes trade or commerce among the states and also attempt to monopolize by US department of justice. In this case, Continental T.V., Inc. v. GTE Sylvania Inc., The analysis distinguishes between restraints with an anticompetitive effect (or resulting in conduct likely to cause such injury) that are harmful to the consumer, and restraints stimulating competition that are in the consumer's best interest.

Later, Robinson Patman Act 1936, was designed to protect small retailers from anti-competitive practises pursued by large business chains and discount stores. An example of the anti-competitive practices is fixing minimum prices for certain retail products. Examining through different critiques of US antitrust policy is the common theme that government interference in the operation of the free market does no harm.

Rule of per se: Per se means by itself, it states that onus proof is not required, committing an act by person will be liable for violation. In this case, General Leaseways v. National Truck Leasing Assn, 'if the elimination of competition is apparent on a quick look, without undertaking the kind of searching inquiry, the practice is illegal per se'. A plaintiff has less responsibility to analyse the market where the restraint is deemed per se anticompetitive. In the case of National Soc. of Professional Engineers v. U.S. the law, however, isn't entirely clear to what extent a plaintiff must define the relevant market.

Arbitration of Antitrust Claims: Opportunities and Hazards for corporate counsel

Antitrust law raised in arbitration into a sword through party claim injunction relief of anticompetitive damages resulted in violation of contractual obligations, therefore they don't interfere but supplement the antitrust authorities. Resolving antitrust issues requires specific facts and data intensive assessments. International Arbitration tribunals helps to resolve private litigants access to the documents and the public interest promoting effective decision making.

In context to the US antitrust law, Clayton Act 1914, Section 3 strengthens that:
monopoly or attempts to create a monopoly, preventing the business from carrying out a sale, lease, contract or create monopoly in its specific industry. The agencies reserve the right to reject or approve a merger transaction depending on their findings.

In Mitsubishi Motor Corp. v. Soler Chrysler Plymouth, Soler alleged that Mitsubishi had conspired to divide markets in restraint of trade and had coercively tried to replace Soler as a distributor. The U.S. Supreme Court noted that the arbitration clause between the parties was broad enough to provide for the arbitration of all disputes, controversies and differences between the parties in relation to the agreement.

Antitrust claims can be submitted to an arbitration proceedings in an international contract and it should be given full effect and adjudication of such disputes shall be done by arbitrators who are acquainted or experts in competition law.

Thus far, in India, there has not been a substantive decision on the arbitrability of competition law disputes. A general view has prevailed that an arbitral tribunal is well within its competence to decide issues in personam but should not decide rights in rem. It is important to note that parties would almost never intend to refer purely antitrust claims to a tribunal. If the objective of the arbitral tribunal is to seek contractual remedies and the scope is limited to contract, with antitrust issues involved and also competition act doesn't allow for damages or compensation sought by the parties during the arbitrations. This is in concord with international practices which allows arbitrability in competition law disputes.

In India, the approach of cases are followed by different courts. A uniform approach to resolve disputes submitted to multiple forums. Crucially, the factor of competition law will be fully enforced by the arbitral tribunal because of the efficient influential power for drafting the arbitration clause which is in connection with the interpretation, application and performance of contract.

On the other side, if there is a rare occurrence of arbitration clause into unenforceability because of repulsion to competition law. Considering the development, one with work experience ensuring highly skilled, knowledgeable may act as arbitrators in respect of competition claim, in case if the complaint by the interest of parties hampered, Competition commission of India is different from contractual provision which are dealt before the arbitral tribunal. Few rulings of the US Department of justice has clearly stated in favour of arbitrability the statutory rights mechanism in resolving disputes recourse of civil courts.

Written By:
  • Aayush Sinha - 4th Year B.A. LLB, Bharati Vidyapeeth New Law College, Pune
  • Sakshi Kothari - Amity Law School, Gwalior

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