Arbitrability of Antitrust Disputes: A case against the orthodox approach of the Indian Courts

Introduction

Arbitrability of disputes has always been a big fuss amongst the scholars. No law or act in India prescribes the subject matter of disputes which could be resolved through arbitration. Albeit, § 2(3) of the Arbitration & Conciliation Act, 1996 [“A & C Act”] clarifies that Part-I shall not affect the operation of any other laws in the country and certain disputes may not be submitted for resolution through arbitration. The issue of arbitrability of disputes relating to Competition law is contestable. The dubitable proposition is ‘whether a competition law dispute arising out of a contractual agreement between two parties could be submitted to an arbitral tribunal’. In other words, whether a dispute resolution mechanism primarily focused to address private parties’ concerns and is very much confidential could resolve an issue arising out of Competition law, which is of ‘Public Nature’ or includes ‘Public Interest’.

The correlation of Competition law concerns with arbitration is at sixes and sevens. The judicial interpretation has been controversial wherein the court has held that the Arbitral Tribunal cannot resolve complex antitrust issues and the Competition Commission of India [“CCI”] has exclusive jurisdiction in such cases. Now, this preclusion is very problematic and orthodox which needs to be changed. To solicit the said argument firstly, the author elucidates upon the ‘Arbitrability of

Disputes’ in India, secondly, examining the Indian’ courts approach and comparing it with international jurisprudence and lastly, the article advocates that it is high time we should bring a transformative change in this field for better dispute resolution.

Arbitrability of Disputes

Arbitrability is nothing but the ability of any subject matter to be arbitrated or to be resolved through arbitration proceedings. In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., ^[1]

[“Booz”] The Supreme Court of India enunciated the criterion to decide the arbitrability of any dispute, which includes: – 

• ·   whether the subject matter of dispute could be resolved by arbitral tribuna privately or the matter relates to the ‘public interest’ and 
• the Court(s) is entrusted to decide and whether the contractual agreement between the parties includes such arbitration clause and
• Whether they agree to refer the dispute to arbitration.

Furthermore, in Booz, the Court also held that the disputes relating to “rights in personam” shall be subject to arbitration, and all disputes relating to “rights in rem” shall be subject only to judgment by the courts and public tribunals. In the case of A. Ayyasamy vs. A. Paramasivam & Ors ^[2], the court held that where a close examination of complex merits is warranted or legal issues are serious, such issues cannot be made arbitrable. The ‘UNCITRAL Model Law and the New York Convention do not define the term ‘arbitrability’, probably with the objective of not limiting the subject matter(s) of any dispute which form part of that nation state’s ‘public policy’.

Furthermore, in India also, the A & C Act does not define the term ‘arbitrability’ and does not enlist any of the subject matter(s) of dispute(s) that could be arbitrated.

Correspondingly, certain other restriction(s) exist in the A & C Act, such as §34(2)(b) wherein the arbitral award could be set aside if the court feels that “the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force” and can deny its enforcement. Further, §48(2)(b) says that “the enforcement of an arbitral award could be denied if it would be contrary to the public policy of India”. And thus, giving the impression that the antitrust disputes could be arbitrated in India.

International Practice: Unsettling the plains

To analyze the approach of the Indian courts, international practice must also be taken into consideration. The development of the concept of arbitrability in the United States of America

[“USA”] was predominantly by judicial decisions. Cases ensuing public interest were not at all arbitrable. Yet there has been a change in the court’s attitude against the arbitrability of the dispute – adopting a pro-arbitration stance. The Court established an exception to the arbitrability of disputes relating to antitrust in the Second Circuit decision of American Safety Equipment Corp. v

J.P. Maguire & Co. ^[3]

The US Supreme Court decision in “Mitsubishi Motors Corp. v Soler Chrysler-Plymouth” ^[4] further held that “An arbitration clause must be fully effective in an international contract, even if it means that antitrust matters are subject to arbitration. The courts have recognized that arbitrators face complex problems today and that it is always possible to choose an arbitrator who is an expert in competition litigation”. The Court also expounded the “Second Look” doctrine which means that the court can judicially review or have a second look on the decisions taken by the arbitral tribunal.

In recent times, the US Supreme Court in the case of “Ohio v. American Express” ^[5] has also considered that both arbitration and antitrust disputes are expert-driven areas and the major Competition law developments are based on solid economics (issues such as the definition of the relevant market, supra-competitive price, etc.).

In the European Union [“EU”], the judgment of Eco Swiss China Time Ltd v Benetton Int’l NV,

^[6] the European Court of Justice [“ECJ”] stipulated that an arbitration agreement could have a valid effect concerning EU competition claims. The ECJ, as well as the courts of the member states, have stressed that arbitral awards for EU competition law claims would be subject to corresponding judicial review, which is very similar to Mitsubishi’s “Second Look” doctrine in the USA.^[7] The EU subsequently adopted Regulation 1/2003, which decentralized competition law and allowed Member States national courts to hear competition law issues.^[8] In addition to this recently in one of the cases in EU, the Madrid Court of Appeal^[9] concluded that the arbitrability of trade disputes is not precluded by EU or Spanish law as long as the applicable award follows compulsory competition laws and regulations. Today, both EU and US jurisprudence continues to offer a constructive answer to the issue of the arbitrability of competition law disputes.

Indian Outlook in Arbitrating Competition Law Cases 

The Indian Competition regime is governed through the Competition Act of 2002 with the main objective of promoting market competitiveness and protecting consumers’ interests in order to foster trade equality. CCI has been created to keep an eye on the anti-competitive practices taking place not just in India but also outside India with adverse consequences on the Indian domestic markets.

The disputes which are of right in rem innaturecannot be arbitrated as the right is available against the whole world and not a single party. However, right in personam refers to is an interest protected against an individual and these issues could be referred for arbitration. Now, In Competition law,

§53 of the Indian Competition Act, 2002 refers to the statutory rights and remedies only to an ‘aggrieved party’ and such a claim would involve determining the rights and interests of only the individual party in the subject-matter of the case. And therefore, the antitrust disputes do involve right in personam and do not affect any third party rights. (Satisfying the above-mentioned Booz test)

§61 of the Competition act excludes the jurisdiction of civil courts in Competition law cases. So, the exclusive jurisdiction of such disputes is limited to CCI only and no other conflict resolution mechanism is mentioned in the Act. In the case of “Union of India v CCI” ^[10] where the Hon’ble Delhi High Court ruled on the question of the validity of the litigation before CCI where there was an arbitration arrangement between the parties to the settlement, the Indian courts dealt for the very first time with the question of the arbitrability of India’s Competition law disputes. In this case, the Hon’ble High Court reflected upon the point that the issues raised before the CCI (core

Competition issues) are completely different from the issues raised before the arbitral tribunal (contractual and procedural issues). They in the latter part also held that “The arbitral tribunal has no authority, expertise or the capacity to perform an inquiry sufficient to assess the misuse of a dominant role by one of the negotiating parties. And, therefore the antitrust matter(s) would be termed non-arbitrable”. This view was later reiterated by the Hon’ble Bombay High Court in “Central Warehousing Corporation v. Fort point Automotive Pvt. Ltd.” ^[11] where the court concluded that “The CCI shall have exclusive jurisdiction over the Competition law disputes and the §5 read with §2(3) of the A&C restrict the judiciary to intervene in such disputes.”

We have also seen that in USA and EU, a more liberal approach in this regard has been taken by the courts. It is not argued that the dispute resolution mechanism of CCI is any less but could be in abidance with the arbitration. The Preamble read with §18 of the Competition Act commends the CCI with a responsibility to eliminate anti-competitive practices and ensure freedom of trade and the Competition Act is only entrusted to protect the special rights of antitrust laws only.

Competition protection in India is heavily dependent on the CCI’s prosecution of anti-competitive behavior. Arbitrating such disputes would be way more advantageous to the development of both the arbitration and Competition law regimes in India. Also, CCI could act as both parens patriae and amicus curiae(Legal Protector & Friend of the Court) of any dispute. Arbitration offers more flexibility, confidentiality, and privacy in any dispute and is a more feasible method of resolution in any Competition law disputes.

The issues that could arise if antitrust disputes are allowed for arbitration include the constant tussle between issues of public fora and interest of private parties. Moreover, the question of whether such public policy issues be referred to arbitration or they are reserved only for public tribunals and courts is also essential. To answer these questions one must understand that there is an international judicial consensus ^[12] on arbitration being one of the best methods of settlement of disputes and is very much flexible and efficient. And thus, this is the perfect time where a proarbitration policy is taken into consideration while dealing with Competition law cases. 

The lack of private actions is one of the greatest deficiencies of the Indian Competition law regime.

^[13] Most of the cases that go before CCI are appealed before Competition Appellate Tribunal

[“COMPAT”] and the Hon’ble Supreme Court of India and most of them are still pending before these courts and the aggrieved party does not get any restitution or exemplary damages for the losses suffered due to anti-competitive behavior. ^[14]

The Indian judiciary has been heavily criticized for its current tendency to classify certain disputes as non-arbitrable for the precise fact that a special court has the exclusive authority over them by special statute.^[15] The Primary reason why Indian Courts have not been pro-arbitration for antitrust cases because these issues were not considered from a perspective of ‘public policy’ and the courts concluded that the arbitral tribunals are not competent enough to deal with such technical issues of antitrust that include detailed investigation in a case.

Following the EU model, the issue can be fixed by legislative means of devolution of Competition law, i.e. an amendment to the Competition Act 2002, attempting to remove the bar on the authority of courts in the handling of competition law conflicts. The other option, though, will be a legal adjustment to the requirements that assess the ‘arbitrability’ of conflicts. 

Concluding Thoughts

The arbitration process cannot be seen as a replacement for the CCI as an adjudicatory body, but as a subservient vehicle for the continued proper and effective regulation of Competition law. The arbitration process also seeks to promote competition and the welfare of consumers. We have observed an increase in the number of disputes referred for arbitration in recent years and many of the Indian firms with a dispute settlement policy prefers arbitration rather than litigation to resolve future disputes. A dependable arbitration regime would appear immensely useful in reducing transboundary trade risks; making Indian markets are more accessible to the world. But, this requires radical changes by the legislature through amending the Indian Competition Act, 2002.

It has also been suggested by many academicians that creating a specialized arbitral tribunal dealing with Competition law cases and the appointment of arbitrators regulated by CCI. Primarily, the changes that are discussed above are to be looked at from a public policy point of view and require transformative changes in this field. Secondly, it is also important to understand and analyze that whether such a system is beneficial in the Indian market or not. Considering the popularity of Arbitration all over the world, it is suggested that India must adopt actions that conform to international trends.

• (2011) 5 S.C.C. 532 ¶ 21.
• Civil Appeal Nos. 8245 and 8246 of 2016.
• 271 F.Supp. 961 (1967).
• 473 US 614 (1985).
• 138 S. Ct. 2274 (2018).
• Case No. C-126/97, [1999] E.C.R. I-3055 (E.C.J.).
• Gary B. Born, International Commercial Arbitration (Vol 1, 2^nd edn, Kluwer Law International, Jan 2014) 979.
• Council Regulation (EC) No. 1/2003 (Dec. 16, 2002).
• Auto no. 147/2013, of 18 October 2013.
• AIR 2012 Delhi 66, (2012) 3 CompLJ 303 (Del).
• 2010 (1) Bom C.R. 560.
• GKG Caribe Inc. v. Nokia-Mobira Inc., 725 F.Supp. 109, 110-113 (D.P.R. 1989).
• Payel Chatterjee & Simone Reis, Private enforcement of competition issues, Competition Commission of India vis-à-vis- Alternate Forums – Is it actually an option? (July 10, 2014) Nishit Desai and Associates.
• Rahul Goel & Anu Monga, Private Antitrust Litigation 2014, GLOBAL COMPETITION REV. 74, 77 (2014).
• Pankhuri Agarwal, Arbitrability of Disputes in India: Still Grappling in the Dark, 5 THE ARBITRATOR 2, 5 (2013).

– By Advocate Ojasvi Sharma (Institute of Law Nirma University)