Can arbitration solve competition law disputes?

In this article, Rajvansh Singh discusses whether arbitration can solve competition law disputes or not.

Today, arbitration is considered to be one of the most popular means of dispute resolution. By adding a midnight clause private parties waive their right to approach national courts. The private nature of arbitration often raises a question that whether issues, which involves public interest, is capable of being settled by arbitration.

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Competition law came into picture to promote fair trade practice and safeguard consumer welfare. Basically, the main concern of any competition law is to promote fair trade practices, which leads to competitive market, which further results in cheap and quality goods, technology development, and results in high living standards of people. Now, both the laws are opposite to each other, competition law involves public interest whereas arbitration law works on party autonomy. Now a question arises whether competition law disputes can be resolved by means of arbitration.

Whether competition law disputes can be resolved by means of arbitration?

Arbitrability refers to whether arbitral tribunal is empowered to rule on a dispute. If the dispute per se is not arbitrable then the award can be set aside. Such an award can be challenged under section 34 and section 48 of Arbitration Act, 1996.

To know the arbitrability of a dispute following points are peculiar –

1) Whether the dispute can be resolved by private body like arbitral tribunal or is exclusively reserved for courts?

2) Whether the dispute is covered by an arbitration clause?

3) Whether in case of dispute parties opt for arbitration. 2nd and 3rd point does not create problem but when it comes to the 1st point it is full of ambiguity and is a matter of debate.

Antitrust issues can be resolved by arbitration

Traditionally, courts were of the opinion that disputes under competition law cannot be resolved by arbitration. The reason being arbitration is a private and consensual method of dispute resolution on the other hand competition law deals with issues, which involves public interest and can only be resolved by courts.

This hostility changed, when the Supreme Court of United States in the landmark case of Mitsubishi Motors Corp v. Soler Chrysler Plymouth[1] held that the antitrust issues could be resolved by means of arbitration. Later, European Court of Justice in the landmark case of Eco Swiss China Time Ltd. v. Benetton international NV[2] held that arbitral tribunal are empowered to hear disputes related to competition law. Most of countries have law, which are arbitration friendly, but Indian courts are yet to decide on the issue.

The Arbitration Act, 1996 does not list any class of dispute as non-arbitrable. Nevertheless, section 2(3) of the act talk about that the act would not affect any other law by virtue of which certain disputes may not be submitted to arbitration. Generally, rights in personam can be submitted to arbitration whereas rights in rem can only be adjudicated by courts[3].

For eg. A criminal case, which is an example of right in rem, can only be heard by courts and not by arbitration. In Kingfisher Airlines Limited v. Prithvi Malhotra Instructor [4]Supreme Court placed a restriction on arbitrability. It held that dispute which involves rights in personam is not arbitrable if it is reserved for public forum as a matter of public policy.

Further, in Natraj Studios Pvt. Ltd. v. Navrang Studios[5], Supreme Court held that arbitral tribunal is not empowered to hear dispute for which special tribunal is made. Thus, from the following cases, it can be concluded that to determine whether a particular issue can be arbitrated two question need to answered. First, whether the subject matter is right in remor right in personam? If the answer to the first question is right in personam then the Second question arises, whether the claim arising under right in personam is reserved by legislature for some special public forum as a matter public policy.

Section 19 (1) of the Competition Act – Filing a complaint with the CCI

  • Section 19 (1) of the competition act empowers any person, consumer and association to file a complaint with the CCI, when the act of a party is in contravention of competition act and involves public interest.
  • On the other hand, section 53 provides remedies only to an aggrieved party and all the claims made under this will only deal with individual party. Hence, claims made under competition law can be both rights in rem as well as rights in personam.
  • Section 19 is associated with right in rem, as a result, there is no scope of arbitration. Whereas Section 53 is associated with right in personam and can be submitted to arbitration but the second question needs to be answered here.
  • Section 18 of the competition act empowers CCI to eliminate anti-competitive practices.
  • Further, section 61 of the competition act declares that civil courts cannot entertain any dispute related to competition act. Thus, it can be concluded that claims (rights in personam) under competition law cannot be submitted to arbitration as CCI has statutory power to hear cases pertaining to competition law.

Union of India v. Competition Commission of India

Union of India v. Competition Commission of India[6] is an important judgement, which needs to be discussed here to know the opinion of court on the issue i.e whether disputes covered under competition law can be arbitrated?

In this case parties entered into an agreement (arbitration clause was present) with Ministry of Railways for operating container trains over rail networks. Parties filed complain before CCI as Railways started to misuse its dominant position through various acts such as not allowing to use the infrastructure.

Railway challenged the jurisdiction of CCI and contended that the dispute should be submitted to arbitration because of the arbitration clause. However, Delhi High Court held that legitimate jurisdiction lies with CCI and the matter cannot be submitted to arbitration.

Simply Put

Thus, it can be concluded that disputes arising under competition cannot be submitted to arbitration. Only CCI has the statutory power to hear case related to competition law.

Today, most of the companies want to settle their dispute by using arbitration instead of litigation because arbitration is the most effective means to resolve disputes. Judicial authorities have given many landmark judgements, which make India an arbitration-friendly nation.

Although disputes regarding competition cannot be submitted to arbitration and can only be heard by CCI, now the time has come to make India a little more arbitration-friendly. My suggestion in this regard is, in case of dispute, parties can go for arbitration and then CCI can give a second look to the arbitral award. If the award is in contravention to the competition law against public policy, CCI can annul the award.