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Arbitrability Of Competition Disputes In The Indian Context

Abhishek Sahoo
1 Feb 2020 8:02 AM GMT
Arbitrability Of Competition Disputes In The Indian Context
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The Competition Act, 2002 seeks to prevent enterprises from engaging in abusive practices that are detrimental to fair competition and thereby promote consumer welfare in the economic market. The Act brings an element of substantial public interest within its ambit. And when it comes to punishing the violators certain penal sanctions are laid down which makes the arbitrability of the competition law dispute quite doubtful in the present scenario. This article shall provide that whether the competition law disputes satisfies the test of arbitrability while analyzing the position in the international jurisdiction.

  • International scenario with regard to the arbitrability of competition disputes

Generally, the courts in other jurisdictions are of the view that the competition disputes cannot be arbitrable. There was a mindset among the courts that the resource to arbitration by the parties for matters involving competition concerns was not a suitable method of dispute resolution because the competition matters were too fact-intensive; or due to the fact that arbitrators have a pro-business bent of mind which might lead to under-enforcement of the competition laws.[1] There was a change in the judicial reasoning with respect to the arbitrability of the competition law disputes witnessed in the US and European jurisdiction.

In the matter of Mitsubishi Motors Corp v. Soler Chrysler Plymouth[2], the US Supreme Court held that an arbitration clause in an international contract can be bought into full effect, when the dispute involves competition concerns. It also acknowledged the fact that that arbitrators having adequate knowledge of competition disputes can deal with disputes of the like nature.

Similar shift in the trend was witnessed in the European jurisdiction in the matter of Eco Swiss China Time Ltd. v Benetton Int'l NV[3], wherein the European Court of Justice (ECJ) held that the disputes having competition concerns elements are amenable to the jurisdiction of the arbitral tribunal. The similar observation was made in the matter of ET Plus SA v Welter[4], wherein it was held that the disputes having competition law concerns can be decided by an arbitral tribunal, if they fall within the arbitration clause of the contract.

The Swedish Supreme Court also observed that an arbitral tribunal could adjudicate over a mater pertaining to competition law and it would be upon the court to decide upon the reasonableness of the arbitral award.

Therefore, the courts in the US and European jurisdictions have a pro-arbitration approach when it comes to competition disputes. But there has been no precedent in India which permits arbitral tribunal to adjudicate upon competition disputes.

  • INDIAN ARBITRATION REGIME AND THE TEST OF ARBITRABILITY
  • Indian Arbitration Regime

In India the law relating to arbitration is governed by the Arbitration and Conciliation Act, 1996 (Arbitration Act). Section 7 of the Arbitration states that all disputes arising out of a legal relationship whether contractual or not shall be submitted to arbitration. On the literal interpretation of the provision, an understanding can be created that all kinds of disputes can be arbitrated irrespective of it having public element. But Section 7 should not be read in isolation, it should be read in consonance with Section 2(3) of the Arbitration Act which states that this Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration.[5] Further any arbitral award passed by the arbitral tribunal can be set aside under Section 34(2)(b) or Section 48(2) of the Arbitration Act, 1996, if the said award is against the fundamental policy of India.

  • Test of Arbitrability in the Indian Context

There is no straightjacket formula for what would constitute "arbitrability" of a dispute. In the Indian scenario, there is no express provision in the Arbitration Act, 1996 or the Competition Act, 2002 which bars the arbitral tribunal from deciding disputes pertaining to competition elements but the said position can be deduced from the precedents of the Indian Courts.

The Supreme Court of India in the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Limited
[6] observed that disputes which involve adjudication of the right in personam can be decided by the arbitral tribunal but the dispute regarding the right in rem is only amenable to the jurisdiction of the courts. Similarly in Kingfisher Airlines Limited v. Prithvi Malhotra Instructor[7], the same observation, as laid down in Booze Allen case, was reiterated, wherein it was observed that the disputes which involves adjudication of the right in personam cannot be arbitrable, if a tribunal has been constituted under a statute for deciding such disputes. The Supreme Court in the matter of Natraj Studios Pvt. Ltd. v. Navrang Studios[8] , the court considered the provisions of the Rent Control Act at a higher pedestal than the terms of the contract between the parties. The Apex Court had further observed that special tribunal has been constituted under the Act to adjudicate on such matters, hence the dispute cannot be submitted for arbitration before any arbitral tribunal.

Therefore on the perusal of the precedents, the arbitrability of any dispute in India can be decided on the basis of the following factors discussed hereunder:-

  1. The characteristics of the disputes, i.e. whether the dispute involves adjudication of matter involving right in rem or right in personam.
  2. Whether any special tribunal or court has been set up for the adjudication of any dispute.

  • WHETHER COMPETITION DISPUTES CAN BE ARBITRATED.

The Competition Act 2002 does not expressly states that the competition disputes can be adjudicated before the arbitral tribunal. But the same issue came before the Delhi High Court in the matter of Union of India v. Competition Commission of India[9], wherein the court observed that the arbitral tribunal does not have the expertise to conduct an investigation and prepare a report based on the basis of the investigation like the Director-General of the CCI thereby allowing the court to have jurisdiction of the matter despite of the presence of an arbitration clause in the contract. The precedent did not expressly stated that the competition disputes cannot be arbitrated. Hence the question with regard to its arbitrability is still a moot point. Therefore on the basis of the two folded factors as stated in part B of this article we shall determine whether the competition dispute can be arbitrated?

  • Whether disputes under the Competition Act, 2002 involves right in rem or right in personam.

Section 19(1) of the Competition Act, 2002 empowers any person, consumer or association to file information with the CCI with respect to any (alleged) contravention of the Competition Act, 2002. Thereafter the CCI on the basis of the Director-General of the CCI report passes an order under Section 27 of the Competition Act, 2002 penalizing the violator(s). Even under Section 53N of the Competition Act, 2002, any third party affected by anti-competitive conduct can approach the NCLT and claim damages for the harm suffered. Therefore, it is evident that the following dispute involves a right in rem as the effect of the anti-competitive conduct and other ablutionary conduct affects the public at large. Therefore, disputes under the above-mentioned provision cannot be arbitrable.

Competition disputes involves right in personam as well. For instance, under Section 53 of the Competition Act, 2002, only an aggrieved party can claim for any injury for the contravention of the provision and the liability would be based on the rights and interest of the aggrieved party only. The following remedy does not affect the third party. Such claims involves right in personam of the aggrieved person. Therefore as per the Booze Allen case, the claim under Section 53 of the Competition Act, 2002 can be arbitrable.

  • Whether the CCI has the exclusive jurisdiction to decide on competition matter under the Competition Act, 2002?

Section 61 of the Competition Act, 2002 is a non-obstante clause which states that the civil courts shall not have the jurisdiction to try the said matters. If the observation made in the matter of Natraj Studios Pvt. Ltd. v. Navrang Studios[10] is relied upon then as per Section 61, the CCI is a special forum constituted under the Competition Act, 2002 to decide on such competition disputes thereby implying that the arbitral tribunal shall have no jurisdiction over such disputes.

The proponents of the pro-arbitration school would argue that Section 5 of the Arbitration and Conciliation Act, 1996 begins with a non-obstante clause and provides that notwithstanding anything in any other law, the jurisdiction of the Court is excluded where there is an arbitration agreement therefore, the arbitral tribunal shall also have the jurisdiction to decide on such matters. But contrary to such argument, the Court in the matter of Central Warehousing Corporation v. Fortpoint Automotive Pvt. Ltd[11] had observed that Section 5 should be read together with Section 2(3) of the Arbitration and Conciliation Act, 1996 which states that the provisions of the Arbitration Act will not affect any other law by virtue of which certain disputes cannot be submitted to arbitration.

  • CONCLUSION

The question with respect to the arbitrability of the competition law disputes is still a moot point in the present scenario. With respect to the Indian jurisprudence on the subject matter there is no precedent which expressly states that dispute regarding competition concerns cannot be arbitrable. But on a perusal of the judicial precedents regarding the test of arbitrability, it is concluded that competition disputes cannot be arbitrated because it fails to satisfy the two folded factors mentioned in this article.

It is prevalent that with regard to competition disputes, the approach of the Indian courts with respect to its arbitrability is quite hostile, unlike the courts in the European and the US jurisdiction which have a pro-arbitration approach.

In the present scenario with a huge amount of pending cases, arbitration is a viable option. The environment can be made more conducive for arbitration of the competition disputes by the making the CCI the amicus curiae of the arbitral tribunal wherein, the technical expertise of the CCI can be extended to the arbitral tribunal during the investigative phase. Similarly "the second look doctrine" which evolved from the US jurisdiction[12] can be implemented, wherein the competition disputes can be arbitrated and then the courts has set aside the award if the provisions of the Competition law is not correctly invoked or the said award is against public policy.

Abhishek Sahoo is a 2014-19 batch graduate of Gujarat National Law University. He is currently working as a Legal Strategy Consultant at MyAdvo Techserve Pvt. Ltd. and could be contacted at abhishek.sahoo@myadvo.in.

[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]


[1] Emanuela LecchI & Michael Cover, Arbitrating Competition Law Cases (March 2008) www.charlesrussell.co.uk

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

[3] Eco Swiss China Time Ltd. v Benetton Int'l NV (1999) ECR I- 3055.

[4] ET Plus SA v Welter, [2005] EWHC 2115 (Comm).

[5] Neelam Meshram, Arbitrability of Competition Law Issues: An Indian Perspective, RMNLU Law Review Blog ( February 1, 2008)

[6] Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 S.C.C. 532.

[7] Kingfisher Airlines Limited v Prithvi Malhotra Instructor 2013(7) Bom CR 738

[8] Natraj Studios Pvt Ltd v Navrang Studios AIR 1981 SC 537.

[9] Union of India v. Competition Commission of India, A.I.R. 2012 Del 66 (India).

[10] Supra, Note 8.

[11] Warehouse Corporation v. Fortpoint Automotive Pvt. Ltd., 2010 (1) Bom C. R. 560

[12] Supra, Note 2.

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