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Arbitrating Competition And Antitrust Disputes In India

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.

Introduction
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 needed.

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.
  1. 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[1] to other laws of the country. It also bars the court to entertain disputes related which are within the ambit of CCI[2].

    Any dispute which involve Section 19[3] 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.
     
  2. 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[4] 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.[5]

    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,'[6] rendering it completely inappropriate for arbitration.

    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.[7], 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 tribunal[8].

    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.
     
  3. Enforceability Of Award

    An arbitral award can be set aside if it is in conflict to the public policy of India[9]. 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[10]. 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 patent illegality.

    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[11], or one can simply say that there should be minimal intrusion of courts while enforcing foreign awards.


Application Of Arbitration In Other Jurisdictions

  1. 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[12] 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 Chrysler Plymouth[13].

    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 agreements.

    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.

    This does 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.[14]

    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:
    1. the extent to which arbitration can increase efficiency;
    2. the presence of a clearly stated matter for referring to the arbitrator;
    3. if arbitration would lead to a missed chance to produce effective legal precedent.
    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.
     
  2. Arbitration In EU

    The 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[15]. 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 their losses.

    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.

Conclusion
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 enforceable awards.

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.

Bibliography:
  1. Demystifying public policy to enable enforcement of foreign awards � indian perspective part II. The National Law Review. (2022, March 20). Retrieved March 20, 2022, from https://www.natlawreview.com/article/demystifying-public-policy-to-enable-enforcement-foreign-awards-indian-perspective-0
  2. Sharma, D., Indulia, B., & Bhateja, N. (2022, January 11). The subtle art of interfering: Amazon-future retail "Anti-arbitration" injunction saga. SCC Blog. Retrieved March 20, 2022, from https://www.scconline.com/blog/post/2022/01/11/amazon-future-retail-anti-arbitration-injunction-saga/
  3. Arshinkov, B., �ivković, P., Scherer, M., Schwarz, F., Ortner, H., & Jensen, J. O. (2020, October 8). Antitrust arbitration: How German courts are supporting the Pro-Arbitration Trend launched in the Microsoft case. Kluwer Arbitration Blog. Retrieved March 20, 2022, from http://arbitrationblog.kluwerarbitration.com/2020/10/25/antitrust-arbitration-how-german-courts-are-supporting-the-pro-arbitration-trend-launched-in-the-microsoft-case/
  4. Kolasky, W. J. (2020, March 24). DOJ's first antitrust arbitration is unlikely its last - anti-trust/competition law - united states. Welcome to Mondaq. Retrieved March 20, 2022, from https://www.mondaq.com/unitedstates/antitrust-eu-competition-/906858/doj39s-first-antitrust-arbitration-is-unlikely-its-last
  5. Pinto, D�bora. (2016). The Role of the Arbitrator in Applying EU Competition Law under the Modernisation Process; https://www.researchgate.net/publication/311576323_The_Role_of_the_Arbitrator_in_Applying_EU_Competition_Law_under_the_Modernisation_Process/citation/download
  6. Commercial agency agreements in EU Competition Law. The National Law Review. (n.d.). Retrieved March 20, 2022, from https://www.natlawreview.com/article/commercial-agency-agreements-eu-competition-law
  7. KENDRA, T. H. O. M. A. S., & RITZ, C. H. R. I. S. T. I. A. N. (2020, April 30). Arbitrating competition law disputes: U.S. and European perspectives. ARBlog. Retrieved March 20, 2022, from https://www.hlarbitrationlaw.com/2020/04/arbitrating-competition-law-disputes-u-s-and-european-perspectives/
  8. Jan Engelmann, International Commercial Arbitration and the Commercial Agency Directive, A Perspective from Law and Economics, ISSN 2364-1851 ISSN 2364-186X (electronic) International Law and Economics ISBN 978-3-319-47448-9 ISBN 978-3-319-47449-6 (eBook) DOI 10.1007/978-3-319-47449-6
  9. Korzun, Vera, "Arbitrating Antitrust Claims: From Suspicion to Trust" (2016). SJD Dissertations. 6. https://ir.lawnet.fordham.edu/sjd/6
  10. Gordon Blanke & Renato Nazzini, Arbitration and ADR of Global Competition Disputes: Taking Stock (Part I), 1(1) Global Competition Law Review, 46, 48-49 (2008).
End-Notes:
  1. Section 60 of the Competition Act
  2. Section 61 of the Competition Act
  3. Inquiry into certain agreements and dominant position of enterprise
  4. A.I.R, 2012, Del 66.
  5. Bibek Debroy & Suparna Jain, Strengthening Arbitration and its enforcement in India � Resolve in India, NITI Ayog, https://smartnet.niua.org/sites/default/files/resources/Arbitration.pdf.
  6. Booz Allen and Hamilton Inc. v. SBI Home Finance Limited, (2011) 5 SCC 532 which lists the disputes that are not are not arbitrable & Vidya Drolia v Durga Trading Corporation , CIVIL APPEAL NO. 2402 OF 2019 which lists down the four fold test given by the SC.
  7. (1999) 5 SCC 651
  8. HDFC Bank v. Satpal Singh Bhakshi, WP(C) NO. 3238/2011
  9. Section 34(2)(b)(i) & (ii) of the ACA
  10. Central Inland Water Transport Corporation Limited and another v. Brojo Nath Ganguly and another [(1986) 3 SCC 156]
  11. https://www.natlawreview.com/article/demystifying-public-policy-to-enable-enforcement-foreign-awards-indian-perspective-0
  12. United States Code (U.S.C.) � 1 states that, "Nothing herein contained shall apply to the contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce"
  13. 473 U.S. 614 (1985).
  14. 85 FR 31212
  15. Case C-126/97

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