Evading Competition law disputes through Arbitration: Piercing the Archaic Misconceptions

Akshay Anurag*


India, being the world’s largest democracy suffers from an inherent defect of extensive delays in the conventional judicial system. It is a quite well known fact that India has huge pendency of cases in various courts. The prevailing litigative journey in the courts has become expansive, time consuming, complex and most cumbersome. The advent of alternative dispute resolution has become a global necessity as it has been one of the most significant movements for conflict management and judicial reform. Alternative Dispute resolution as the name manifests is an alternative to the conventional dispute resolution mechanism which is primarily litigation centric. With the passage of time, arbitration has evolved as the instrument which is assisting the parties to settle their disputes in a very short span of time.[1]

Competition law was brought in the pursuit of globalization wherein India has responded by opening up its economy, removing controls and resorting to liberalization. The main aim of Competition Act, 2002 is to promote and sustain competition in markets, to protect the interests of consumers. The main objective of the law is to encourage healthy competition in trade and business and help stop unscrupulous business activities that, in most cases, are aimed at cheating the consumers and controlling markets through means -- fair or foul.[2] Since competition law exists to prevent market distortions, enhance the overall efficiency of the market and safeguard consumer welfare, there is a substantial public interest involved.

Unlike competition law, arbitration is the creation of private autonomy. Whenever a dispute has potential to affect public at large, uncertainty arises as to the arbitrability of the dispute quite often. However considering the conventional litigation as a dispute resolution method and the pendency of decisions before various authorities notified under competition law, one can rest his arguments in favour of arbitration as an alternative.

Arbitrability of Disputes and an Air of Uncertainty.

The prevailing notion is that a dispute is arbitrable only if it is capable of being settled by arbitration. However, no definite criteria have been laid down to determine whether a dispute can be resolved by arbitration or not.[3] The complex issue of arbitrability of disputes is not governed by any statue but only by the virtue of case laws. It is pertinent to note that reference to arbitrability is mentioned only under section 2(3) of the Indian Arbitration Act, 1996, which states that certain disputes may not be submitted to arbitration, but again this provision failed to take note of disputes that cannot be resolved via Arbitration.[4] To fill the void, the apex court has proved to be the torchbearer throwing the light on the arbitrability of a subject matter. In the case of Kingfisher Airlines Limited v. Prithvi Malhotra Instructor[5], the apex court held that the creation of special tribunal with respect to certain subject matter per se does not preclude arbitration in that subject matter. Instead, disputes would be considered non-arbitrable only where a particular enactment creates special rights and obligations and gives special powers to the Tribunals that are not enjoyed by civil courts. However, in the case of Natraj Studios Pvt. Ltd. v. Navrang Studios[6] the court pronounced that the arbitral tribunals, which are a substitute to civil courts cannot hear a dispute under the Rent Control Act as the statute noted that these rights to be adjudicated in the specialized tribunals only.

International Position at a glance

Owing to the fact that Competition law is a public law for safeguarding the public interest, the anti-trust disputes must be raised by courts notwithstanding the will of litigants.[7] Also, competition law issues more often require complex economic evidence discouraging the parties to choose arbitration which proved to be time consuming and expansive in this scenario.

However the United States has taken contrary view as to the Indian aspect, taking a lead to arbitrate an antitrust dispute. In Mitsubishi Motors v. Soler[8], the US supreme court noted that subjecting the antitrust claims to arbitration would not violate public policy and the antitrust claims can be very well submitted to arbitration proceedings and it should be given full effect in international contract. Following the same trend the European Court of Justice held that claims implicating European Union competition law are arbitrable, even though by definition they implicate public policy.[9]

Arbitrating Disputes vis-a-vis Adjudication before Competition Commission of India (CCI)

The Competition Act is primarily enforced through the Competition Commission of India which is vested with both regulatory and quasi-judicial powers.[10] But it must be borne in mind that CCI neither has a statutory power to refer a dispute to any alternative method nor competition act permits the parties to proceed with alternative dispute resolution methods.

The arbitrability of competition issues has been the subject of controversy since ages. India has a conventional approach with respect to the arbitrability of competition law disputes. Thus far in India, antitrust disputes can’t be subjected to arbitration as the general view confirms that arbitral tribunal is well competent to decide issues in personam but fails in deciding rights in rem.[11] This view was reflected in the case of Union of India v. Competition Commission of India[12] wherein notwithstanding a valid arbitration clause the court held that CCI has the jurisdiction to hear the matter. The court further pronounced that, though the arbitral tribunal has the mandate, it lacks expertise or the ability to conduct an investigation necessary to decide issues of abuse of dominant position by one of the parties to the contract. Thereby making the dispute non- arbitrable. The right to file a suit before the CCI is an unwaivable right which is grounded on the perception that the scope of proceedings in CCI is different from the scope of proceedings before an arbitral tribunal whose mandate is only circumscribed by the terms of the contract.[13] Further, Section 5 of the Arbitration and conciliation Act cannot be read in isolation. It must be juxtaposed with Section 2(3) of the Indian Arbitration Act, 1996 which renders certain disputes to be non- arbitrable.

The above pronouncements proved to be a guiding light in determining arbitrability of competition disputes. However, this pronouncement raises a separate query as to whether the arbitral tribunal has jurisdiction where both the parties wilfully submit the dispute to arbitration.

Arbitrating Competition Law disputes: Changing Perspective

There are many instances wherein courts have been hostile towards the arbitrability of antitrust disputes in order to safeguard the public interest.[14] It must be noted that merely precluding arbitrability of competition law disputes is not the only way to preserve public interest. An alternative to this would be that the Competition Commission of India should play the dual role of parens patriae and amicus curiae in the arbitral proceedings pursuant to allowing the parties to proceed for arbitration.[15] An amicus curie provides submissions on the matter at issue on behalf of parties. This ensures that an arbitral tribunal has the opportunity to hear from third parties that have expertise in the matter at stake and can assist in dispute proceedings thereof.

The United States (US) has allowed the arbitration of antitrust disputes but the US court balanced its strong stance in favour of arbitrability with an obligation for the arbitrator to apply the antitrust law. Similarly, a glance at Section 27 of the Indian Arbitration Act, 1996 to be made which allows an arbitral tribunal to seek assistance from the Court in taking evidence. This provision can be invoked by the arbitral tribunals to consult the CCI when confronted with questions of competition law.

Furthermore, non- arbitrability of antitrust claims has led to various shortcomings. A report published in 2014 indicates that in the past five years of CCI’s establishment, almost all the cases decided by the CCI are pending before appellate bodies. Consequently, no private claim has reached its conclusion and the aggrieved parties are still awaiting a remedy.[16] Since, arbitration offers a greater degree of flexibility, confidentiality and autonomy to parties than court proceedings which would make it easier for private parties to vindicate their claims under competition law and also proved to be compatible with the aims and objectives of Competition law i.e welfare of the consumers.[17] However, the enforcement i.e imposition of fines etc. or interpretation of legal aspects of competition act should be the prerogative of competition authorities. Hence arbitration should be considered as the accompanying means and not as a substitute to CCI.

Summing Up

It is evident that there is a lack of jurisprudence in India with regard to alternative means available to resolve competition issues. As India is attempting to reclaim its position on the stage of international arbitration, allowing arbitration to resolve competition law disputes with some safeguards, would be a progressive step in the right direction to align India’s arbitration regime with international standards. This can be achieved legislatively by an amendment to Competition Act, 2002 obliterating the bar on civil courts jurisdiction to entertain competition law disputes.

* Akshay Anurag, Associate, Singh and Associates, Gurugram. he can be contacted at akshayanurag07@gmail.com and https://www.linkedin.com/in/akshay-anurag [1] Ethiopian Airlines v. Stic Travels (P) Ltd., (2001) 7 SCC 454. [2] Competition Law to relieve consumers of unhealthy business practice, Shafique, available at http://www.thefinancialexpress-bd.com/more.php?news_id=135247&date=2012-07-02, last visited on August 20, 2020. [3] Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., AIR 2011 SC 2507. [4] Aftab Singh v. Emaar MGF Land Limited, 2017 SCC OnLine NCDRC 1614. [5] Kingfisher Airlines Limited v Prithvi Malhotra Instructor 2013(7) Bom CR 738 (India). [6] Natraj Studios Pvt Ltd v Navrang Studios AIR 1981 SC 537. [7] Assimakis P. Komninos, Arbitration and EU Competition Law 7 (Univ. Coll. London, Dep‘t of Law, Working Paper, 2009) available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=152010 [8] Mitsubishi Motors v. Soler , 473 US 614 (1985) [9] Eco Swiss v. Benetton,(1999) ECR I- 3055. [10] John R. Allison, Arbitration Agreements and Antitrust Claims: The Need for Enhanced Accommodation of Conflicting Public Policies, 64 N.C.L. REV. 219 (1986) Available at: https://scholarship.law.unc.edu/nclr/vol64/iss2/5, last accessed on March, 22, 2020. [11] Supra note 3. [12] Union of India v. Competition Commission of India, A.I.R. 2012 Del 66 (India). [13] Man Roland v. Multicolour Offset, (2004) 7 S.C.C. 447 (India). [14] Union of India v. Competition Commission of India, AIR 2012 Del 66; Man Roland v. Multicolour Offset, (2004) 7 S.C.C. 447. [15] Tanya Choudhary, ‘Arbitrability of Competition Law Disputes in India – Where are we now and where do we go from here?’, (2016) IJAL IV (2) 69, 84, available at: http://www.ijal.in/sites/default/files/IJAL%20Volume%204_Issue%202_Tanya%20Choudhary.pdf, last accessed on March, 23, 2020. [16] Aman Malik, Complaints Dwindle as CCI Faces Awareness Deficit, LIVE MINT, available at http://www.livemint.com/Politics/p3uUm7UvYnBZTbbgljwU7K/ComplaintsdwindleasCCI-faces-awareness-deficit.html, last accessed on March, 23, 2020. [17] Carl W. Hittinger & Terry Smith, Arbitrating Antitrust: Are Things Getting More Complicated?, available at: http://www.thelegalintelligencer.com/id=1202541387095?keywords=Arbitrating+Antitrust:+Are+Things+Getting+More+Complicated&publication=The+Legal+Intelligencer , last accessed on March, 23, 2020.

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