ABSTRACT

This article examines the interaction between antitrust legislation and arbitration systems in cross-border business disputes. Because corporations operate on a worldwide scale, the combination of antitrust and arbitration offers special challenges. We look at topics such as jurisdictional disputes, the enforceability of arbitration rulings, the contradiction between secrecy and transparency, procedural inequities, and cost-efficiency concerns. Understanding this complex connection is crucial for promoting fair competition and effective dispute resolution in a globalised economic context where borders are frequently blurred.

INTRODUCTION

Firms may disadvantage customers by charging unjust prices and preventing rivals from entering into an anticompetitive market. Antitrust laws serve a vital role in ensuring fair competition and combating monopolistic practices in a country’s commercial environment. These laws primarily strive to establish equal opportunities for all market players and protect the interests of both the firm and its consumers by prohibiting anti-competitive behaviour and regulating commercial activity. Arbitration, on the other hand, is a conflict settlement system that provides an alternative to regular court action. It entails disputing parties consenting to have their issues resolved outside of the courtroom by an unbiased third party known as mediator. While antitrust laws strive to defend public interests by promoting free and fair competition in marketplaces, arbitration is a private and contractual mechanism.

Almost every country today allows private disputes to be settled through arbitration mechanisms. Tribunals are authorised to make obligatory awards to the contracting parties. The advantage of the system is that the disputes are not only resolved in a neutral forum[1] but the concerned parties also have their claims enforced more easily in non-native countries where the losing party’s assets may be situated. Arbitration awards are enforceable in every nation that has ratified the New York Convention.[2] However, while considering antitrust law concerns in international arbitration, arbitral tribunals may encounter a number of possible conflicts. The implementation of mandatory legislation results in irreconcilable disagreements, which raise expenses and diminish the benefits of international arbitration.

Taking into consideration the emergence of multi-national firms, whose ongoing development is hampered by a tangle of competition restrictions, the problem of competing required antitrust laws in arbitration is critical. Around 111 nations today have competition law frameworks, the great majority of which have just been in place for the last 25 years. Moreover, the stakes are tremendous, and judgements in a single case might amount to billions of dollars.

Interplay between International Arbitration Laws & Antitrust Laws in the Indian Context

Traditionally, courts in many countries have held that competition law conflicts cannot be referred for arbitration as a private and voluntary means of dispute settlement; it is deemed an improper mechanism for addressing competition law problems pertaining to the interests of the public at large, supporting competitive markets. In India, no significant judgement regarding disputes that arise because of the arbitrability of competition law has been made. However, a widespread consensus has developed that an arbitration forum is not stepping beyond its realm of authority to consider matters in personam but ought not to take up issues pertaining to rights in rem.[3]

Although the problem of arbitrating competition law concerns has yet to be lucidly addressed by the judiciary, the judges have concluded that legal actions under the Competition Act, 2002 (henceforth, the Competition Act) cannot be delayed because both sides have agreed to arbitrate. In Union of India v. Competition Commission of India, parties to a Model Concession Agreement with the Ministry of Railways lodged an accusation claiming that the Railway Board (henceforth, RB) was misusing its authority by exacting increased rates. The RB contested the Competition Commission of India’s (CCI) authority based on the parties’ arbitration agreement. The Delhi High Court rejected this as an insufficient reason for staying the CCI proceedings, stating that the jurisdiction and target of the CCI’s investigations would be completely distinct from those of the arbitration forums.

As already stated previously, it is a well-established concept that rights in rem do not qualify to be the subject of arbitration, but rights in personam can be resolved by this mechanism. Some provisions of the Competition Act that have an effect on the interest of the public at large, such as anti-competitive agreements, are included under Section 3 of the Competition Act.[4] To the contrary, harassment by a dominant corporation in connection with a distributorship agreement may pertain to rights in personam. Judicial pronouncements dealing with the question of arbitrability of fraud remained vague and clear till October 2016, when the Supreme Court (henceforth, SC) stated that while issues pertaining to assertions of “serious fraud” would not be subject to arbitration, cases pertaining to mere accusations of fraud would be.[5] The reasoning of this judgement is derived from the requirement of adhering to appropriate procedures and hold a full-fledged trial when the disagreement involves serious fraud. Arbitral bodies are not as proficient at holding hearings as the courts are. A claim of serious fraud in a conflict would be challenging, and the judgement on it would require considerable testimony, for which civil courts might serve as a better-suited forum.

Extending the same reasoning to the arbitrability of competition law matters, the degree of arbitrability will be decided on the basis of the type of matters introduced. If the accusations constitute an investigation of an anti-competitive nature, the CCI would be a more appropriate forum. However, if the allegations are connected to the adjudication of other claims, the arbitral tribunal should have the absolute authority to decide. It is also worth noting that litigants usually never seek to present solely antitrust disputes to a tribunal because the remedies linked with the Competition Act include fines for breaches rather than damages or compensation, which are contractually binding remedies pursued by the parties during dispute resolution proceedings. If the purpose of the dispute before an arbitral body is to seek contractual relief and the subject matter is restricted to the contract, the tribunal should continue regardless of whether incidental antitrust problems arise. This is consistent with worldwide practices that enable competition law matters to be arbitrated.

Interplay between International Arbitration Laws & Antitrust Laws in the UK

Anti-competitive activity is forbidden in the United Kingdom (henceforth, UK) under Chapters I and II of the Competition Act 1998 and may be embargoed under Articles 81 and 82 of the European Communities Treaty. Such provisions prevent anti-competitive commercial arrangements and the abuse of the cat bird seat in a market.

In the UK, parties to a contract may choose to arbitrate their antitrust issues by including a clause for arbitration in the contract.[6] The prospect for arbitration under European Commission (henceforth, EC) competition law was impliedly but unequivocally approved in the landmark Eco Swiss case[7] presented before the European Court of Justice (henceforth, ECJ). Thus, any issue emerging from horizontal or vertical collusion or abusive behaviour can be filed for arbitration, conditioned on an existing arbitration agreement between the concerned parties. Regarding whether or not Article 81(3) EC is suitable for arbitration, it is worth noting that, up to this point, the arbitrability of EC competition law seems to have been governed by a single principle: the authority of arbitrators to decide on EC competition law matters should align in scope with that of national judges. The ECJ seems to be aware of this idea in Nordsee[8]: by remaining silent, it tacitly recognised not just this rule but also the prospect of arbitrators adopting all EC competition regulations with immediate effect.

In fact, removing Article 81(3) from the arbitrators’ armoury would unreasonably place them in an unpleasant situation of confronting a procedural impasse. Consider a scenario where an arbitral tribunal encounters an Article 81(3) EC matter and explores potential resolutions. Under the new rules, referring the matter to the Commission is not an option and is also unlikely to succeed due to the Nordsee precedent. The most viable course of action appears to be involving a national court in a supportive capacity. One of the most perplexing and contentious issues surrounding the implementation of EC competition regulations by international arbitrators revolves around whether these arbitrators are required to spontaneously introduce and enforce these rules when neither party involved in the arbitration proceedings raises them or when one party raises them and the other object. Surprisingly, the ECJ has carefully avoided directly addressing this issue, thus avoiding intervention in the sphere of arbitration.

Inherently and in practice, international arbitrators have a responsibility to apply EC competition legislation on their own initiative where it relates to the individual dispute they are adjudicating. This requirement appears to apply independently of the contract’s controlling law or whether the arbitral tribunal is situated inside or outside of Europe. Furthermore, where the prevailing law (or the law adopted by the arbitrators) is from an EU Member State, the arbitration takes place inside the European Community, or there is a possibility of pursuing enforcement within the European Community, this responsibility becomes much more prominent. This statement calls for elaboration in two key areas: the ‘relevance test’ and the basis for this implicit and practical responsibility. Concerning the former, arbitration practice and legal precedents have developed a practical criterion, contained in the following question: might the agreement in issue potentially damage the territory of the European Community, particularly commerce between its Member States? In practice, arbitrators use this standard in a manner similar to that described in Article 7(1) of the Rome Convention[9]. In terms of the latter, international arbitrators have two primary roles. To begin, they must make every effort to guarantee that their arbitral ruling is enforceable. Second, they should attempt to connect their conduct of the arbitration processes and their judgements with the parties’ reasonable expectations. Arbitrators who fail to follow global obligatory standards that are genuinely applicable to the individual dispute at issue certainly diverge from the parties’ legitimate expectations and impair the award’s quality. As a result, the award is vulnerable to review by national courts, and its enforcement is jeopardised.

Thus, there is no express legal responsibility derived from EC law for foreign arbitrators to handle EC competition law issues that emerge during arbitration procedures. Nonetheless, as a result of the Eco Swiss case, they now have an implicit and practical need to examine, raise, and implement EC competition legislation where it is relevant to the individual case in order to protect the quality, effectiveness, and enforceability of their arbitral judgement. However, it is important to note that this de facto duty does not imply that international arbitral tribunals are directly bound by the general duty of cooperation under the doctrine of Community law supremacy or even the related duty to preserve and promote consistent application of EC competition law across the European Community. Indeed, this statement highlights one of the most complex and difficult aspects of competition arbitrations: the careful balance between the contractual mandate assigned to international arbitrators by the parties and their function as private enforcers of public policy.

Interplay between International Arbitration Laws & Antitrust Laws in the USA

The Supreme Court of the United States of America (henceforth, US) ruled in 1985 that antitrust issues can be arbitrated if the charges fit within the scope of a legitimate arbitration provision contained in a contract relating to an international commercial transaction.[10] Following the Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth case, the scope of arbitrability has significantly expanded to encompass domestic antitrust and other federal statutory claims. The primary legal framework governing arbitration in the US is the Federal Arbitration Act[11] (henceforth, FAA). The FAA promotes the arbitration of disputes arising from contracts involving interstate or foreign commerce. When applying the FAA, U.S. courts have consistently upheld arbitration clauses, even in cases involving domestic antitrust claims, without hesitation.

The Department of Justice Antitrust Division (henceforth, DoJ) and the Federal Trade Commission have the power to resolve specific antitrust complaints through arbitration. This authority originates from the Administrative Dispute Resolution Act of 1996[12], which allows agencies to use binding arbitration if suitable rules are in place, which the DoJ has already provided explicitly in 1996.

The primary benefit of arbitration is its ability to allow a party to adopt customised rules targeted towards quick conflict resolution when intelligently framed. Given the high costs of antitrust litigation in a courtroom and the usually extended procedures for handling significant cases, arbitration becomes a viable choice for a well-informed corporation. Nonetheless, failing to apply sufficient attention when drafting arbitration agreements might result in unexpected and unfavourable consequences. It is usual practice for attorneys to use pre-existing templates for conventional arbitration terms when preparing a contract for a specific transaction or a consumer-related organisation. By using this approach, legal practitioners forego the opportunity to create a conflict resolution process that is more precisely tailored to their individual needs. Failure to take this step might prove to be an expensive mistake.  

A standard form of arbitration clause typically proves to be an ineffective replacement for a carefully designed contract when handling substantial antitrust disputes. The benefits of arbitrating antitrust disagreements stem from their capacity to achieve efficiency, predictability, and swifter resolution, which can be achieved by crafting contractual provisions with the insights of antitrust expertise.

Conclusion

The interplay between international arbitration law and antitrust laws represents a complex and evolving area of legal discourse. On one hand, international arbitration serves as a vital mechanism for resolving cross-border commercial disputes, offering parties a neutral forum and flexibility in selecting arbitrators. However, tension arises when antitrust concerns intersect with arbitration agreements, particularly in cases where anticompetitive behaviour or collusion is alleged. While arbitration is generally seen as a means to efficiently and confidentially resolve disputes, it must not inadvertently shield antitrust violations. Striking a balance between promoting arbitration’s effectiveness and ensuring antitrust enforcement is a challenge that requires harmonization through careful drafting of arbitration clauses and recognition of public policy exceptions.

In recent years, various jurisdictions have taken steps to reconcile these two legal domains. Courts and arbitral tribunals have shown a growing willingness to consider antitrust issues within the framework of arbitration proceedings, often guided by principles of public policy and competition law. Furthermore, international organizations like the International Chamber of Commerce have issued guidelines to help arbitrators navigate antitrust issues. The interplay between international arbitration law and antitrust laws will continue to evolve, and finding a harmonious relationship between these two legal realms is essential to promoting both efficient dispute resolution and robust antitrust enforcement in the global marketplace.

[1] Damjan Kukovec, International Antitrust: What Law in Action?, 15 IND. INT’L & COMP. L. REV. 1, 35, (2004).

[2] Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. 3, 1958 (New York).

[3] Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532.

[4] Competition Act, 2002, § 3, No. 10, Acts of Parliament, 2002 (India).

[5] A. Ayyaswamy v. A. Paramasivam, (2016) 10 SCC 386.

[6] Treaty on the Functioning of the European Union, 1958, art. 101.

[7] Eco Swiss v. Benetton [1999] ECR I-3055.

[8] Nordsee [1982] ECR 1095.

[9] Rome Convention on the Law Applicable to Contractual Obligation, 1980, art. 7, cl. 2.

[10] Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, 473 US 614, 616 (1985).

[11] Federal Arbitration Act, 1926, Acts Congress (US).

[12] The Administrative Dispute Resolution Act, 1996, Acts of Congress (US).