Arbitrating Competition Law Disputes: Disregarding the Fundamentals for a Pro-Arbitration World

By Sandeep Suresh

Sandeep Suresh is a fourth-year law student at the National Law University in Jodhpur, India.

The legal correctness of arbitrating competition law disputes has been thought to be beyond debate after a steady line of case laws affirming the question.  This trend has to be seen as a move by countries to make their respective jurisdictions arbitration-friendly. Although the case law jurisprudence is positive, there are certain omnipresent fundamentals that have to be taken into consideration. 

Typically, either the respective domestic law does not impose any restriction on arbitrating competition disputes or the parties have agreed upon the same. However, this post will look at this issue from the perspective of ‘objective arbitrability,’which studies the suitability of settling dispute through private enforcement. For this purpose, a determined analysis of the nature of competition law disputes and arbitration proceedings is necessary.

To begin with, arbitration is purely a consensus-based private enforcement proceeding to settle contractual rights between private parties. However, when disputes substantially or incidentally involve issues of competition law, it certainly calls for an examination of policy questions that affect the larger public, social interests, and economic security of a country. This position was similarly upheld in the case of American Safety Equipment Corp v JP Maguire, where the USA Court of Appeals (2nd Circuit) held that “a claim under the antitrust laws is not merely a private matter. The Sherman Act is designed to promote the national interest in a competitive economy...Antitrust violations can affect hundreds of thousands — perhaps millions — of people and inflict staggering economic damage...We do not believe that Congress intended such claims to be resolved elsewhere than in the courts.” [i] Hence, such issues, which are crucial to the economic base of a country, cannot be left to the mercy of uncontrolled private arbitral tribunals.

Another issue that arises in the context of the private nature of arbitration is that private parties engaged in anti-competitive activities like cartel formation will tactically use private arbitration proceedings as a garb to prevent national statutory bodies from becoming aware of their illegal activities. Hence, the intended deterrent effects of competition law may be diluted.

Further, it is noteworthy that private enforcement through arbitration may result only in a solitary remedy of granting compensation to the aggrieved private party.[ii] In this light, arbitration does not seem appropriate for resolving competition disputes, as the main purpose of competition law is to award punishment for violations and deter such behavior in future.

Resolving competition law matters necessarily involves determination of various economic statistics, facts, and other kinds of information in the public domain. The realm of investigation by arbitral tribunals is restricted when compared to that of regulatory government bodies and national courts. There are potential limitations on the capacity of tribunals to obtain and discover information or evidence from outside agencies. On the other hand, the Competition Commission of India (the regulatory body in India) has the advantage of requesting the assistance of authorities like the Director-General of the Commission. This inability of arbitration proceedings may result in inconsistent and incorrect arbitral awards, thereby resulting in wrongful application of competition laws.

The legal community has to understand the stark contradictions in the nature of competition law disputes that make arbitration of competition law matters impractical, both technically and in principle. To conclude, scholars have clearly maintained that arbitrability in essence means the distinction between disputes that involve public policy and are subject to the exclusive jurisdiction of courts, and those involving private justice.[iii] Hence, to disregard such fundamentals of law and legal philosophy to establish an arbitration-friendly world may ultimately prove disadvantageous.  

[i] 391 F.2d 821 (2nd Circuit, 1968)
[ii] Deyan Draguiev, Arbitrability of Competition Law Issues Reinforced, Kluwer Arbitration Blog, January, 2014, available at http://kluwerarbitrationblog.com/blog/2014/01/10/arbitrability-of-competition-law-issues-reinforced/
[iii] L.Shore, The United States Perspective on Arbitrability, in Arbitrability: International and Comparative Perspectives, L.A. Mistelis, S.L. Brekoulakis eds., Kluwer Law International (Hague, 2009); see also Thomas Carbonneau, Liberal Rules of Arbitrability and the Autonomy of Labour Arbitration in the United States, in Arbitrability: International and Comparative Perspectives, L.A. Mistelis, S.L. Brekoulakis eds., Kluwer Law International (Hague, 2009)

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