This article has been authored by Aayushi Singh & Pavitra Dubey, 5th Year law students at Rajiv Gandhi National University of Law, Patiala.
In accordance with Section 7 of the Arbitration and Conciliation Act, 1996, arbitration is a method by which neutral third-party endeavours to find a resolution for disputes between two parties by arriving at a mutual agreement or ad-idem. The efficacy of arbitration in providing cost-effective and expeditious dispute resolutions has made it exceedingly popular over recent years; however, when attempting to implement this approach in cases where the dispute pertains to right-in-rem, such as antitrust laws, complex legal intricacies undoubtedly emerge. Unlike traditional litigation processes that may exacerbate tensions between parties involved in the conflict, ADR approaches’ consensual style allows for a more harmonious and cooperative engagement that’s geared towards preserving the interests of all stakeholders, including members of the public.
Generally, there already exists a view that conflicts in Competition law/Antitrust law can be resolved by ADR because the right of the public at large is at stake. However, this common opinion was reversed by the US Apex Court in the case of Mitsubishi Motor Corp. v Soler Chrysler Plymouth, where the agreement entered by the parties had the arbitration clause that too in a broad sense, and therefore court included Antitrust Laws also under its Ambit.
Thus far, no such legislation or substantive decision has been made in India, and a general view of the non-competence of the Tribunal in deciding the Antitrust law has prevailed. Even Section 34(2)(b) and Section 48(2) of the Competition Act, 2002 bars arbitrability of certain matters and authorizes the court to reject or set aside any award passed by the Arbitral tribunal if the given dispute is not competent to be resolved by the Arbitration.
Streamlining the Arbitration of Antitrust laws in India
There have been several cases in India where the question of arbitrability of competition law has arisen. Following the timeline, in the year 2011, in the case of Booz Allen and Hamilton v SBI Home Finance, certain categories of disputes were categorized and considered to be non-arbitrable. However, it did not include the Competition Act of 2002 (same also held in the case of Ayyasamy v Paramasivam). But soon, in the year 2012, Indian courts deliberated the issue contended in the case of Union of India v Competition Commission of India and upheld the maintainability of proceeding before CCI even after having an arbitral clause in the agreement and justifying the conduct with the lack of expertise possessed by the Arbitral Tribunal in dealing with the matter related to competition.
In the case of Vidya Drolia v Drug Trading Corporation on December 12, 2020, SC held that while determining whether a dispute is suitable for arbitration, it is crucial to consider the cause of action and subject matter at hand and further propounded the four-fold test to determine the arbitrability of disputes in India, it runs as: –
If the actions in question concern actions in rem rather than subordinate rights in-personam arising from such rights, it may not be appropriate for resolution through arbitration.
If third-party rights are affected, or there are erga-omnes effects, centralized adjudication may be required.
In cases where the State’s non-assignable sovereign and public interest functions are involved, seeking alternative means of resolution outside of arbitration may be more appropriate, given their importance.
Finally, if mandatory statutes prohibit arbitration or make it impractical, then other alternative methods should be used.
Current Standpoint of Arbitration in Competition Act of 2002
The legislation does not include a method for addressing disagreements that arise from these mergers, particularly when they involve entities from various jurisdictions. This could result in unpredictability, delays, and increased expenses for the involved parties. Consequently, it is crucial to incorporate an arbitration provision in the Competition Act of 2002, which would allow parties to direct their disputes to an impartial and effective arbitration forum. can deliver effective and timely resolutions while maintaining flexibility and privacy. The swift settlement of disputes is particularly pertinent in cases involving antitrust laws since time can prove fateful. Corporations may wish to act promptly so as not to fall foul of negative press or inadvertently provide competitors with an unjust upper hand. The added benefit of arbitration rests on its ability to grapple with knotty legal matters such as those subsumed by antitrust laws- parties can elect expert referees proficient in that particular field. Such conciliations perfectly aligned with public policy objectives; claims that it might diverge from these goals are unfounded, considering that numerous states allow antitrust issues vis-a-vis arbitration. Arbitration can also supplement the role of the Competition Commission of India (CCI), which is the statutory authority responsible for enforcing the Competition Act of 2002. The CCI can continue to exercise its regulatory and supervisory powers over mergers, while arbitration can offer an alternative and efficient solution for private parties.
What is the Need for Arbitration in Competition Law, 2002?
Arbitration has the potential to provide a quicker, more affordable dispute resolution process while also offering flexibility and privacy to the parties involved. This is particularly significant in competition law situations where time is critical. Companies may feel compelled to resolve disputes promptly to avoid negative press or to prevent competitors from obtaining an unfair advantage. Furthermore, arbitration can handle intricate and technical concerns, such as those related to competition law, by enabling parties to select arbitrators knowledgeable in the relevant field. Additionally, the arbitration of competition law disputes is not in opposition to public policy or public interest, as some may contend. In reality, numerous nations, including the US and the EU, have acknowledged the arbitrability of competition law disputes and have permitted arbitral tribunals to implement and interpret competition law principles.
Considering the absence of a mechanism for resolving disagreements that can arise from mergers, specifically in cases involving entities from various jurisdictions, unpredictability, delays, and increased expenses could become prevalent concerns. Thus, there is a critical need to include an arbitration provision in the Competition Act of 2002. Through arbitration, parties can refer their disputes to an impartial forum.
Can Antitrust Disputes be Resolved through Arbitration in India?
Due to the right in rem, which deals with the arbitrability test, antitrust cases in India cannot be settled by arbitration. The NCLAT and the Competition Commission of India (CCI), to the exclusion of all other bodies, including arbitration courts, have been designated as the exclusive authority to hear antitrust issues under the Competition Act. Therefore, any arbitration provision has no effect on the right to contact the CCI. However, in accordance with the Booz Allen principle, claims emerging from compensation for injured parties that are in the nature of the right in personam may be addressed to arbitration. The relevant case law that elaborates on the idea that rights in personam claims emerging from compensation for wronged parties may be arbitrated in accordance with the idea established in Booz Allen is HDFC Bank v. Satpal Singh Bakshi. In this instance, the Court permitted arbitration of a debt recovery issue that was the subject of a separate tribunal. It argued that the creation of a separate tribunal for debt collection was done so that matters may be resolved quickly and did not give the tribunal any further rights or authority. Arbitration might be used in cases involving rights in personam claims, which are claims deriving from compensation for injured parties. It is crucial to remember that arbitration can still be refused even in an in personam issue if the disagreement must be resolved in a public forum due to current legal regulations or government policy. This was noted in the Kingfisher Airlines Limited v. Prithvi Malhotra Instructor case, in which the Bombay High Court established a new requirement for a dispute’s arbitrability. The court noted that arbitration can be refused even in personam disputes if the issue is only appropriate for a public forum due to enforcing laws or government policy. Therefore, to decide whether a matter is arbitrable in the context of Indian arbitration, it is required to adopt a two-fold inquiry developed from the case of Natraj Studios Pvt. Ltd. v. Navrang Studios.
Determine if the issue at hand is a “right in rem” or “right in personam”; arbitration is not an option for rights in rem. If a right in personam is at issue, more investigation is necessary to determine if public forums or tribunals are authorized by legislative enactments to settle disputes of this nature.
The disagreement cannot be submitted to arbitration if the second question is answered in the positive.
Difference between the policy aspect and private compensation aspect of antitrust disputes
The first is the policy component, which is concerned with controlling market competition and punishing infractions. This component relates to a right in rem and the arbitrability test. In other words, it protects the public interest in encouraging free market competition by limiting and punishing businesses that engage in specific economic practices, such as abuse of dominance and anti-competitive agreements, with a large negative impact. The NCLAT and the Competition Commission of India (CCI) are in charge of this component, which is not susceptible to arbitration. The second is private compensation, which entitles the person that sustained harm as a result of anti-competitive behaviour to compensation. This element involves a right in personam; hence it passes the first part of the arbitrability test. To the exclusion of all other bodies, including arbitration courts, competition legislation has designated the CCI and the NCLAT as the exclusive authority to resolve antitrust issues. Therefore, the second test—which talks about the peculiar jurisdiction of the court—is not satisfied. Therefore, arbitration might be used to resolve private compensation claims resulting from antitrust conflicts.
The arbitrability of antitrust disputes in India is a complicated issue that necessitates two separate investigations to ascertain whether the dispute concerns a right in rem or a right in personam, and whether the dispute is one that legislative enactment has reserved for resolution by public fora or tribunals. Despite the fact that the Competition Act does not mandate arbitration in antitrust cases, private compensation claims resulting from anticompetitive behaviour may be submitted to arbitration. However, it is commonly accepted that issues involving public interest and impacting the rights of the general public cannot be arbitrated. A dispute’s capacity to be arbitrated ultimately depends on the unique facts and circumstances of each case and must be assessed individually.