Introduction
Typically, there is a perceived incompatibility between arbitration and antitrust disputes. In India, there is a widely held belief that invoking arbitration to enforce certain laws, including antitrust laws, should be avoided. This view is grounded in the understanding that these laws are enacted to protect vital societal interests and requires profound comprehension and nuanced application of these laws, which might be compromised in an arbitration setting. Essentially, arbitration is deemed suitable only for disputes of a private nature, as resolving matters with public interests through a private process without court intervention is generally considered inappropriate.
The question of arbitrability has been addressed in various cases, notably in Booz Allen and Hamilton v SBI Home Finance wherein the Supreme Court of India outlined six categories of disputes deemed non-arbitrable in India. Notably, antitrust disputes were not expressly mentioned [¶22]. Subsequently, in Ayyasamy v Paramasivam, the Supreme Court of India referred to a category of disputes generally considered non-arbitrable, and this did encompass antitrust disputes [¶9].
The issue of whether antitrust disputes are arbitrable was raised for the first time in India in the case of Union of India vs. Competition Commission of India, wherein the Ministry of Railways contended that the existence of a binding arbitration agreement between the parties precluded the Competition Commission of India (CCI) from intervening thereby making the case untenable. Contrarily, high court of Delhi rejected the argument, stating that the disputes of CCI are distinct from contractual obligations handled by arbitration panels. The court emphasized the primacy of the Competition Act over other laws and noted that arbitration tribunals might not possess the expertise, authority, or capability to conduct necessary investigations for addressing matters related to abuse of dominance [¶16].
Resolving Antitrust disputes : India’s current mechanism
Antitrust regulation in India is carried out by the Competition Commission of India (CCI), as mandated by the Competition Act. The CCI possesses both regulatory and quasi-judicial authority. The National Company law Appellate Tribunal is designated to hear appeals from decisions made by the CCI. Ultimately, the Supreme Court holds the highest authority in adjudicating such disputes.
Furthermore, Section 61 of the Competition Act overrides other laws, rendering civil courts unable to adjudicate the matters falling within the jurisdiction of the Competition Commission of India (CCI). Consequently, law does not offer an alternative avenue to resolving matters related to competition law.
Applying the Four-Part test given in Vidya Drolia Judgment
To tackle question related to arbitrability of disputes, the Hon’ble Supreme Court, in Vidya Drolia vs. Durga Trading Corporation, outlined a comprehensive “four-fold” test. This test aims to ascertain whether a particular dispute is eligible for arbitration within India. As per this test a dispute is non-arbitrable in the below mentioned circumstances [¶31 – 33].
- When the legal basis and content of the disagreement involve matters concerning actions impacting everyone rather than individual rights stemming from such actions;
- When the legal basis and content of the disagreement influence the rights of third parties, possess “Erga Omnes” implications, necessitate centralized resolution;
- When the legal basis and content of the disagreement concern the inherent governmental and public interest functions, and;
- When the topic of the disagreement is explicitly or implicitly deemed non-arbitrable according to compulsory statutes.
Antitrust conflicts often have a public dimension and entail resolving disputes that involve actions “in Rem.” The provision of Section-19 allows for any individual to file a claim without requiring personal injury or interest. Any ruling made under Section-19, imposing liability on the offender, would constitute an action “in Rem” because anti-competitive behaviour not only affects rival businesses but also impacts consumers collectively. As the remedy for a complaint under Section-19 affects the broader public interest beyond the parties involved in the arbitration agreement, only the Competition Commission of India (CCI) has the authority, as granted by statute, to issue such orders. Antitrust disputes are “Rights in Rem” therefore they are non-arbitrable considering the “four-fold” test.
It is also crucial to note that Section-53N of the Competition Act permits any affected party to seek compensation resulting from “in rem” determinations made by the Competition Commission of India, necessitating the examination of personal rights of the parties which are affected. Likewise, claims involving antitrust elements emerging within pre-existing contractual arrangements like franchise agreements, joint-venture agreements etc, will also demand an assessment of individual rights. In these instances, the fulfilment of criteria of “four-fold test” is unlikely, as the adjudication would pertain to the mutual rights between the involved parties.
Furthermore, the exclusive jurisdiction granted to the Competition Commission of India over competition law related disputes, as stipulated by Section-61 of the Act, obstructs the possibility of resolving these issues through arbitration.
Alternative Approach
Nevertheless, the effectiveness of “FOUR-FOLD” criterion in determining arbitrability is a matter of debate. It is argued that those engaged in disputes related to competition might choose arbitrators well-versed in antitrust law, ensuring a swift resolution of their claims. This stance aligns with the ruling given by the Supreme Court of U.S.A in Mitsubishi Motors Corporation vs. Soler Chrysler Plymouth Inc., which asserts that arbitrators are capable of upholding substantive antitrust laws and delivering suitable remedies to those wronged. Thus, relying solely on the presence of a specialized body like the CCI shouldn’t be the exclusive reason for precluding arbitration in matters related to competition U.S. courts harmonized their endorsement of arbitrability by requiring arbitrators to adhere to antitrust law. This led to the establishment of the “Second look Doctrine,” wherein courts scrutinize the arbitral decision during enforcement phase to guarantee the thorough incorporation of competition law elements. This doctrine serves as a safeguard, preventing private parties from sidestepping compulsory competition law scrutiny, through arbitration.
Conclusion
By adopting “Second Look Doctrine” and endorsing the realm of collaborative expertise, India possesses significant capabilities to transform the arbitrability landscape for competition law related disputes. This approach allows for the protection of public policy goals while leveraging the benefits of arbitration. Nevertheless, the lack of agreement on the criteria for review and the level of deference that domestic courts should give to arbitrators’ decisions present a significant challenge. As a result, various courts have embraced slightly divergent approaches to addressing this issue.
Author(s)
Akanksha Saini
Student at UILS, Panjab University