In the present modern age of rapid globalization,modernization and the tepid,puganacious and ponderous naure which tradional methods of dispute resolution have metamorphized into1,Arbitration has become the “primma donna” of settling business and other commercial disputes.The reason Arbitration has achieved widespread popularity is because of its flexible,speedier,and relatively more private mode of adjudication.The parties which iron out their disputes through arbitration,usually through arbitration clauses in contracts between them,or even as it is increasingly becoming common through separate arbitration agreements,which the parties enter into before entering into contracts or any other commercial relationship.The very factors which makes arbitration attractive and increasingly common, have in a way come back as its worst nemesis and is proving to be a stumbling block ,especially when it relates to the realm of “public interest Law”,i.e areas of Law which substantially affects the public at large .
Competition Law is one such arena where the State acts as an economic policeman,and checks practices which are detrimental to the well being of the economy by enforcing punitive measures such as fines and economic sanctions. It punishes actions which are aimed towards creating “monopolies”in any business or service,and safeguards the welfare of consumers and plays a role in increasing the overall efficiency of markets in a economy2.The very factors such as speedier hearing process,informality of hearings and choosing of subject matter experts as adjudicators and excluding of the traditional courts and tribunals which rendered arbitration so attractive a mechanism for settlement of disputes are now causing apprehensions about its reliability in adjudication of disputes of competition Law.
What does the term “Arbitrability” refer to?
In simple parlance “arbitrability” refers to the capability of a dispute,that is issue being fit for being referred to the arbitral process3.The concept of arbitrability encompasses maily three aspects,namely 1)whether the disputes on account of their inherent nature are being capable of being resolved through recourse to an arbitral tribunal,2)whether the disputes are covered as per the terms of the arbitration agreement and lastly,whether the parties have consented to resolve their disputes through arbitration?.In this paper we are only concerned with the aspect and in most cases it is the first issue itself which arises as bone of contention in most disputes of arbitrability across jurisdictions.
Why does the Dispute arise?
A bare perusal of these two branches of Law throw up virtually no similarities,as they are essentially two different aspects of Law,one is essentially a substantive Law while the other is merely a procedural legislation,enacted with a view to make the process of dispute resolution simpler and less cumbersome.The prevailing notion worldwide was that adjudication of Competition Law disputes is extremely fact intensive and requires detailed analysis4 and the appointed arbitrators would look at the germane issues with the “myopic lens of a businessman or a man of commerce5” rendering the whole nature of anti-trust litigation as null and void as the genesis of the anti-trust doctrine is rooted against the hedgemony of big business and the first Anti trust legislation6,”The Sherman Act7” was enacted in the year 1914 to break up the steel,rubber and oil conglomerates in the United States of America.The whole system of Arbitration is centered around the exclusion of national courts and the finality of Arbitral awards ,therefore it was feared for a long period of time that if issue was left to the wisdom of the arbitrators,then the issue would”disappear inside a black whole and would never be seen or heard of again8”.
What does the International system say?
In the Europpean Continent for long adjudication of Competition Law disputes had been the exclusive domain of the “Europpean Commission9” and the national courts where excluded of this power and as a consequence arbitral tribunals where excluded from hearing competition law disputes as arbitral tribunals where constituted as a substitute for the regular courts10.The position in the European continent changed radically when Regulation 1/2000311 was enacted which decentralized anti-trust Law in Europe and gave jurisdiction to the national courts,and as a consequence even arbitral tribunals to hear cases pertaining to Competition Law.The judgement in EcoSwiss China Time Ltd. v. Benetton International NV12 where arbitration of competition Law disputes was allowed if there was an earlier contract between parties,thus overruling the view that competition Law disputes could not be adjudicated by private parties.
In the United States of America also after the judgement of Mitsubishi Motor Corp vs Soler Chrysler Plymouth13 the entire jurisprudence related to arbitrability of Competition Law disputes was redefined by the Supreme Court of the United States of America when it was held that “if between parties there is an arbitration clause or there is a separate arbitration agreement between the parties which provides for adjudication of Competition Law disputes by arbitration,then such parties can be referred to arbitration irrespective of the public policy questions it raises.
We will have to keep the global scenario in mind as we shall embark on a comprehensive analysis whether arbitration can be used as an effective tool to adjudicate claims of Anti Trust Law in the Indian scenario.
A Glance at the Arbitration Regime in India and the question of Arbitrability
The definition of “Arbitrability” is not to be found anywhere,hence the seminal question that is “what disputes are arbitrable and which ones are not” is to be primarily found in the Arbitration Act itself .that is the Arbitration and Conciliation Act,199614 based on the UNICTRAL Model Law15 on International Commercial Arbitration and certain specific Legislation which bar any other forum to adjudicate those specific disputes other than the Government courts.The Act of 1996 does not bar any any type of dispute,on the contrary it displays its libertine approach by saying”arbitration can be resorted to in all disputes arising out of all legal relationships,whether contractual or not”.The position is somewhat betrayed by the wordings of Section 2(3) of the act which says that “if the disputes cannot be resolved by arbitration then the provisions of the act will not apply in these disputes”.The mandate of Section 34(2) and Section 48 also exclude certain disputes from the purview of Arbitration by stating that”if Arbitral Award is against the Public Policy” and if “subject-matter of dispute is not capable of being settled by Arbitration under the Law in force”.
The aforesaid provisions are couched in pusillanimous language which does not advance the remedy that is sought and as a consequence of this most of the jurisprudence in India vis a vis Arbitrability of disputes has developed through Case Law Jurisprudence.In the landmark case of “Booz Allen vs SBI Home Finance Ltd16” it was held that all disputes related to”Rights in Personam” can be resolved by arbitration .Blacks Law Lexicons says that rights in personam are those rights which are enforceable against a 17specific person,such as a right related to contractual obligations or a right arising out of torturous liability as contrasted from “right in rem” which is enforceable against the world at large. Consitutional and Fundamental Rights such as Right to Free Speech,Right to Life etc are all Rights in Rem as the enforceability of these rights are available against the world at large.
“Russel on Arbitration”18 the seminal work on International Commercial Arbitration specifies in no uncertain terms that”not all matters are capable of being referred to Arbitration.In English Law certain matters are reserved exclusively for the English National Courts to adjudicate.These are the matters where the type of remedy or redressal required is one which a private Arbitral Tribunal comprising of subject matter experts is not empowered to give.
Mustill and Bond(Law and Practise of International Commercial Arbitration)19says”the question which arises is not whether a particular dispute is being capable of settlement by Arbitration ,but where it ought to be referred to Arbitration or whether it will give rise to an enforceable award.It is for this reason primarily that English Jurisprudence has never arrived at a single straitjacketed theory theory for deciding which disputes are amenable to Arbitration.
Also the type of remedies which Arbitrator can award are limited and hindered by considerations of Public Policy and the fact that he was appointed by the parties and not by the State.To quote an example he/she cannot impose fine or impose term of imprisonment as that only be done by a person acting under the authority of the state.
Many Authors and commentators are of the view that “real rights” which are valid against the world at large cannot be subject to private Arbitration,although some Legal Jurists and scholar now opine that subordinate rights in personam, derived from real rights can be decided by a Arbitral Tribunal.For Eg rights accruing under a Patent License can be resolved through Arbitration,however Arbitration cannot be used to determine the validity of a Patent.
There are some matters whose adjudication solely depends on the national courts,for eg-Insolvency and Bankruptcy matters,matters related to Criminal Liability,matrimonial proceedings,testamentary and probate matters and also Admiralty matters and also to some extent Landlord- Tenent relationships.The rule is not absolutely iron clad and there are instances when even “Rights In Rem would be subject to the jurisdiction of an Arbtration tribunal.Notable examples of this would be pecuniary damages arising out of criminal liability which would be subject to arbitration and although matrimonial proceedings are excluded from the purview of arbitration ,the terms on which couples can separate may be decided by a Arbitral Tribunal.The concept of “Pre-Nuptial agreement” which has become “sine que non” in Hollywood weddings20 are in most cases subject to jurisdiction of the Arbitral Tribunals.
The advancement of “Arbitrability” which was achieved by the ruling of “Booz-Allen vs SBI Home Finance Ltd21” was to a small extent riled by the ruling of the Bombay High Court where it was held that” the Industrial Disputes Act confers special rights on Workmen22 which are not available in the regular courts and for that purpose the special tribunals has been set up to adjudicate on these type of disputes.Industrial Disputes are not private in nature and have significant ramifications for the industry concerned and hence do not fall within the jurisdiction of an Arbitral Tribunal.The Delhi High Court also has somewhat narrowed down the scope of arbitration in white collar crimes by ruling in the case of RRB Energy vs Vesta Wind Ltd23 that claims which are predominantly have criminality associated with them,would not be subject to the jurisdiction of the arbitral tribunal.
In the Indian scenario the question of Arbitrability would have to be a multifaceted enquiry,whether the dispute which is to be submitted to the jurisdiction of the arbitral tribunals is a Right In Rem or is it a Right In Personam?If the dispute relates to Right In Rem it would not be amenable to the jurisdiction of the arbitral tribunal.If it is Right In Personam then the question which would arise is whether the dispute has been made the exclusive domain of the national courts and whether it relates wholly to the concept of Public Policy?If the answer to this query returns an affirmative answer in that case arbitration will not apply to such disputes.
LEGAL HINDRANCES TO ARBITRATION OF COMPETITION LAW DISPUTES
In 1991 India bid adieu to the bygone era of the License Raj and ushered in a new era of liberalized and globalized economy based on the “Laissez-Faire”model of Economics.The Competition Act,200224 was enacted to further this model of Economic development.The Act aims to curb cartel like behaviour in all sectors of the economy and it also seeks to regulate mergers and acquisitions of economic powerhouses in order to maintain the efficiency of the economy.The Competition Commision of India is the body tasked with the enforcement of Competition policy in India and it armed with investigatory as well as quasi judicial powers.
There is only instance in this country when the question of Arbitrability of Competition Law matters was agitated,it was in the case of Union of India vs Competition Commision of India25”where the Ministry of Railways was sued by a group of parties who had entered into a concession agreement with the Ministry Of Railways and who alleged that the Railways was using its dominant position in the market to increase catering tariffs,and was also creating strategic barriers to the use of its infrastructure,which was also against the agreement.The parties filed a Section 8 application under The Arbitration and Concilliation Act,1996 seeking direction from the court to be referred to Arbitration as it was provided in the agreement.The High Court of Delhi allowed the Competition Commision to adjudicate the issue despite the valid Arbitration agreement subsisting between the parties as it was of the opinion that “the Arbitral Tribunal was not endowed with sufficient resources to conduct the investigation in this regard ,nor did it possess sufficient expertise to deal with the matter.
In the case of “Man Ronald vs Multicolour Offset26”based on similar circumstances the Apex Court opined that the redressals which where available under the “Monopolies and Restrictive Trade Practises Act,196927”where in addition to the remedies available under the ordinary Law of Contract.
On a cursory glance,both these judgments appear to be a setback as far as arbitability is concerned,however both the judgments do not put a blanket ban on the jurisdiction of Arbitral Tribunals vis a vis claims of Competition Law and the question still remains unresolved to this day.
WHETHER RIGHTS AND LIABILITIES ARISING UNDER COMPETITION LAW ARE RIGHT IN REM?
This topic has interesting connotations to it,and it has been hotly debated by Legal scholars around the globe ,as Anti-Trust Law has both public and private ramifications.
Section 19(1) of the Competition Act,2002 says that “any person,association or consumer can file a complaint with the CCI alleging contravention of the Competition Law regime in India.After this an detailed investigation is done by the Office of the Directorate General and if the report of the investigatory body is conclusive then fine may be imposed and even a “cease and desist”order may be passed by the Commision. The aggrieved parties may also appeal to the COMPAT under Section 53 N of the Competition Act,2002 to claim compensation for losses suffered due to anti-competitive behaviour.
The parties who feel that Competition Law has a significant ramifications on the public at large use the example of Section 19 of the Act do advocate the view that rights and liabilities arising out of Competition Law are purely in the nature of “rights in rem” .The reasoning behind such a view is because any order which is made under Section 19 of the Act has significant bearings not only on the infringing party,but also also the consumers and retailers who have suffered on account of its anti-competitive practices.
Section 53 N of the Act creates rights and obligations only in favour of an “aggrieved party” as is clear from the wordings of the Act.The relief offered under this provision is wholly a “right in personam”,as its enforceability is directed towards a specific person or corporation or association.This provision does not create any rights or liabilities towards the “world at large” thus excluding it from the definition of “right in rem”.
The test of “Booz Allen vs SBI Home Finance Ltd28” stands vindicated in the case of arbitrability of competition Law disputes ,as there is arises a right in personam in Competition Law proceedings which can be resolved through Arbitration.
Are disputes arising out of Competition Law the exclusive domain of Public Courts
We can now conclude that Anti-Trust Law is amenable to the authority of a private Arbitral Tribunal as it creates “Rights In Personam” to some extent.Our next line of enquiry must be whether the claims arising under the Competition Act,2002 are the exclusive domain of the National Courts.
The Competition Commission has a mandate to protect the free market system in the country and promote the welfare of the consumers.Section 18 of the Act obliges the Commission to eliminate anti-competitive behaviour ,Section 61 of the Act bars the authority of Civil Courts to adjudicate in any dispute related to Competition Law.
If we apply the Ratio Decendi of the HDFC29 bank case it becomes abundantly clear that the CCI was created for the purpose of adjudication of special rights arising under the specific legislation.An inference can be drawn now that since the CCI has the exclusive jurisdiction by virtue of Section 61 of the Act and in all probability the jurisdiction of the private forums is excluded.
A section of Legal Scholars are of the view that Section 5 of the Arbitration Act which begins with a “Non-obstante” clause would inhibit the jurisdictions of the Public Courts.The position has undergone a change after the pronouncement of the judgement in the case of Central Warehousing Corporation v. Fortpoint Automotive Pvt. Ltd.30,which says that Section 5 of the Act must not be read isolation and must be read with Section 2(3) of the Act which provided that certain category of disputes cannot be remedied by taking recourse to the arbitral process.
On a reasonable analysis of the available subject matter we can now reasonably conclude that as far as India is concerned ,Competition Law disputes will not be submitted to the arbitral mechanism.The “Public Interest” aspect of Competition Law makes the matter unsuitable to be resolved by Arbitration.The imposition of fines and other deterences for Infringement bring it an element of Govermental Authority in addition to creation of “Rights In Rem”,making it wholly unsuitable for Arbitration.
Competition Law involves Rights In Personam as well,however those claims also would not be subject to the jurisdiction of the Arbitral Tribunals because they come under the exclusive jurisdiction of the Tribunal.
There is a strong need in todays day and age to adjudicate disputes through the Arbitral process as the Public Courts have increasingly become cumbersome on account of numerous cases pending in them, and due to the increased nature of free trade in todays time Competition Law claims are on the rise and it is essential that they be resolved in an harmonious manner.
There is a very valid concern that public interest will be adversely affected if Competition Law issues can be resolved by Arbitration.The pancea to that can be in the way of the Competition Commision working as a “Amicus curiae” for the Arbitral Tribunal,as is common in Europe where the Europpean Commision functions as an “Amicus Curiae31”.The Arbitration Act already provides the Courts under Section 34 of the Act to set aside an Arbitral Award if it adversely affects Public Policy.
Arbitration offers a much more efficious way of dealing with disputes because of its confidentiality,informal procedure and the privacy which it offers to the parties resorting to it.Arbitration should not be thus seen from a myopic lens and rather it should as an “enabling mechanism” for fulfilling the obligations of the Competition Commision.
Arbitration holds great promise in India and recent surveys show an increase of almost 200% in disputes being referred to the arbitral process32.The Courts in India have reinforced Indias pro-Arbitration image and the Legislature has also contributed in this regard.If Arbitration is allowed in the adjudication of Competition Law claims our image as an investor-friendly destination will be strengthened and it would greatly bolster the accessibility of our markets to investors in a manifold way.
1 Elliot Nestor,”The Law and Practise of Arbitration”(5th Edition,Tarly Publishers,Essex,1998)
2 Jason Channing,”The Regulations of the Free Market Economy”The Economist,Twelfth of August,2009 available at https://sajms.com/wp-content/uploads/2016/regulation of markets(Last visited on February 25,2019)
3 Alexis Mourre, Arbitrability of Antitrust Law from the Europe and US Perspectives, in 1 EU
AND US ANTITRUST ARBITRATION: A HANDBOOK OF PRACTITIONERS (3rd Edition,Strattford Upon Avon,2000)
4 Debrah Jones,”Arbitration and the Modernisation of European Competition Law Enforcement”(2ND Edition,Lancelot Publishers,New England,2006).
5 Debrah Jones,”Arbitration and the Modernisation of European Competition Law Enforcement”(2ND Edition,Lancelot Publishers,New England,2006)
6 Loukas Mistellas,”Arbitrability-International and Commercial Perspectives”(2nd edition,Hauffman Brothers,Idaho.2011)
7 Marcos Pauli,”A Brief History of Anti Trust Legislation”(4th Edition,Lipman Publishers,Kansas City,2018)
8 Loukas Mistellas,”Arbitrability-International and Commercial Perspectives”(2nd edition,Hauffman Brothers,Idaho.2011)
9 Carl Baudenbacher & Imelda Higgins,” Decentralization of EC Competition Law Enforcement and Arbitration”,(5th Edition,Bard Publishers,London.2012)
10 William W. Park, “National Law and Commercial Justice, Safeguarding Procedural Integrity in
International Arbitration”(8th Edition,Smallville Pub;ishers,Kentucky,2013)
11 The Europpean Union Competition Law Guidelined available at html/EU.IC/Guidelines 2003(Last Visited on Fifth March,2019)
12 2003 ECR (CRL)765
13 1985 USSC(SCOTUS) 324
14 Arbitration and Concilliation Act,1996
15 UNICTRAL Model Law on International Commercial Arbitration
17 Paranjape,”Readings in Jurisprudence”(14th Edition,Shyam Publishers,New Delhi,2014)
18 Russel More,”Readings In International Commercial Arbitration”(10th Edition,2015)
19 Peter Wu,”International Commercial Arbitration in thr 21st Century”(2nd Edition.2016)
20 Franklin Geller,”A Glimpse inside Hollywood”(Sweeny Harper Publications”,1998)
22 (2004) 7 S.C.C. 447
23 2015 (1) Delhi C. R. 560
24 Available at http/cci.in(available at cci.gov.in)
25 2012 (1) Delhi C. R. 665
27 Monopolies and Restrictive Trade Practises Act,1969
29 2003 (1) Cal C. R. 254
30 (1994) XVII Ybk Comm Arb 346
31 Michael Pryles, ‘THE GROWTH OF INTERNATIONAL ARBITRATION’, See <http://www.ag.gov.au/agd/www/rwpattach.nsf/viewasattachmentPersonal/0417185A03AF31B7CA256C8A00025187/$file/GrowthINtArb.pdf> Accessed on 17th of Febuarary, 2019
32 Jeremy Fleming, ‘Getting the best seat’, (2006) Euro. Law., 60, 51-53 at 51.
ABOUT THE AUTHOR
Advait Ghosh is an advocate in Delhi. His areas of interest include arbitration and anti- trust law.