Introduction

Arbitration has become the most popular method of dispute settlement due to the rise in global trade and commercial conflicts. It is a consensual method of resolving disputes between the parties in a private setting. It is preferred because disputes can be resolved quickly, as opposed to courts, which can be quite time-consuming. Moreover, compared to other means it is more flexible, impartial, and versatile.

Competition Law in India was initially enforced through the Monopolies and Restrictive Trade Practices Act, 1969, later replaced by the Competition Act, 2002, to ensure competition in the market in such a way that no particular enterprise can exert influence in their favour. The main objective of the Act is that business enterprises work in an open market, i.e., a market which is competitive enough. It is important that firms are competing with each other in a market, as it ensures that the ultimate consumers get the best product at the best price, which is not possible in a non-competitive market. Competition Law governs two major aspects, i.e. the establishment and functioning of The Competition Commission of India [hereinafter “CCI”], and the tools used by CCI to prevent certain anti-competitive practices, such as regulations to prevent “Appreciable Adverse Effects on Competition [AAEC]”, to check if any enterprise is abusing its position of dominance, and also to regulate the combinations.

Arbitration and Competition law are considered to be the opposite ends of a coin, as arbitration deals with two parties in an agreement and does not deal with matters having an element of public interest, whereas Competition Law is applicable in cases where there is a question of general public. In the present article, the authors would examine the issues that arise in arbitrating competition law disputes in India.

Arbitrability of a dispute

Arbitration in India is regulated by Arbitration and Conciliation Act [hereinafter A&C] and it comprises both national and international arbitration. There are certain disputes that fall beyond the scope of arbitration and are reserved exclusively for the courts to adjudicate upon. Section 2(3) of the A&C states that the Act would be consistent with laws prohibiting the arbitration of certain types of disputes. Additionally, an award can be set aside and refused enforcement according to sections 34(2)(b) and 48(2) if the subject matter is such that it is not capable of being resolved by means of arbitration. Notably, the Act has not defined the matters that cannot be arbitrated and has left the debate open ended. The first landmark case that discussed the issue of arbitrability was Booz Allen and Hamilton Inc v. SBI Home Finance Ltd. & Others. The apex court asserted that the disputes which involve ‘rights in personam’ can be arbitrated, whereas those which involve ‘right in rem’ cannot be arbitrated. The locus of arbitration of in personam disputes was elaborated in Kingfisher Airlines Limited v. Prithvi Malhotra Instructor. In this case the court highlighted that creation of a special tribunal does not outrightly bar the arbitration of the disputes. Rather, disputes can be denied arbitration only where a specific enactment creates special rights and obligations and vests the tribunal with special powers that are not conferred to the courts. The decision was followed in the case of HDFC Bank v. Satpal Singh wherein the court permitted arbitration of a debt recovery matter on the lines that the debt recovery tribunal has been established for expedite disposal of the cases and not to confer the tribunal with special rights and power. However, in the case of Natraj Studios Pvt. Ltd. v. Navrang Studios the court did not allow arbitration of a rent control dispute and expressed that even though it deals with right in personam, the Arbitral tribunal will not have the requisite jurisdiction to hear the dispute because the Rent Control Act confers special rights and power to the tribunal to deal with such disputes.

Why Is Competition Law Considered Non-Arbitrable?

The case that discussed the question of arbitrability of competition law dispute is Union of India v. Competition Commission of India wherein a group of parties which entered into an agreement with the railways sued the Ministry of Railways, and alleged that they were abusing their position of dominance, and creating strategic barriers. They filed this application under A&C Act under a valid clause. However, the Delhi High Court allowed the Competition Commission to deal with the present dispute. According to the court, the arbitral Tribunal neither has the expertise nor sufficient resources to adjudicate the matter.

On the pretext of above case, we can see that the issues prohibiting the arbitrability of competition law disputes are as follows-

Deals with rights in rem: The basic goal of the Competition Law is to operate the competition in markets and to ensure that there is a free market for the enterprises, and arbitration, on the other hand, excludes matters which involve the interests of the public at large [‘in rem’], and hence, it is considered that arbitration is not the appropriate dispute resolution mechanism for the Competition Law cases. Moreover, In the recent case of Samir Agrawal v. Competition Commission of India and Ors, the Supreme Court further reiterated this proposition by holding that enquiries conducted by CCI are in rem, and not in personam.

Exclusive Jurisdiction: According to Section 18, and preamble of the Act, CCI was established by Competition Act specifically for the purpose of promoting and sustaining the competition in the Indian Economy. Moreover, section 61 of the Act expressly states that civil courts are not supposed to adjudicate in the matters when it falls within the purview of CCI or NCLAT[National Companies Law Appellate Tribunal]. Moreover, CCI by virtue of the Act has been granted special rights and power to deal with the competition law disputes. Thus, it can be concluded that even if the competition law dispute involves right in personam, it cannot be submitted to arbitration because CCI has been conferred with exclusive jurisdiction to deal with antitrust cases.

Requisite Knowledge: Further, Section 26 prescribes the procedure and powers to the director-general to investigate in the matter, whereas arbitrators may not have the requisite power and sufficient knowledge to investigate the matter.

The Approach Adopted by the Foreign Jurisdiction

The case that provoked the discussion in the USA was Mitsubishi Motors Corp v. Soler Chrysler Plymouth. In this case, Mitsubishi (a Japanese company) entered into an agreement to sell automobiles with another company (Soler), and had arbitration as their decided mode of resolution. It was alleged by the respondent that the petitioners had tried to divide the market in restraint of trade, which was against The Sherman Antitrust act, 1890, and since this matter involved competition law, it must not be dealt with by the mode of arbitration. However, the Supreme Court held that the clause between parties was wide enough that it could cover all the statutory provisions including the antitrust claims. The second look doctrine was also formulated, by the virtue of which a double-check mechanism was provided, that is the national courts were given the power to check if the award given by the arbitrators is in accordance with the Antitrust laws.

In the European Union, matters related to Articles 101 and 102 of the [Treaty of the Functioning of the European Union [hereinafter “TFEU”] can be arbitrated subject to judicial review, which is akin to second look doctrine of the USA. However, with respect to Articles 106-108, and under secondary legislation (EU Merger Control Regulation), there are varied opinions and hence deliberation is required in such matters. A similar approach can be adopted in India as well, by ascertaining certain sections which can be arbitrated, as Sections 3 and 4 of the Indian Competition Act are based on Articles 101 and 102 of the TFEU.

Conclusion: The Way Ahead

Thus, we can conclude that in the Indian scenario, arbitrability of the Competition Law disputes is not possible because firstly, the matter includes in rem rights, and secondly, the CCI has the exclusive jurisdiction to deal with such matters, even if it deals with in personam rights.

However, due to the pendency of cases, and overburden on CCI, sometimes it becomes difficult to solve cases on time, leading the private parties to hang in for the adjudication of disputes. Hence, arbitration tribunals can be proven useful to expedite the whole process and provide a solution. To arbitrate the Competition Law matters in India, some sections/provisions can be identified and ascertained which specifically deal with right in personam, and it can be allowed to arbitrate in such matters. There are basically two aspects of the Competition Laws, i.e. the administrative law aspect which includes the imposition of public sanctions, this constitutes right in rem, and thus cannot be arbitrated at all. Whereas the other aspect involves civil law consequences, where an aggrieved person can make an individual claim due to anti-competitive behavior or contractual obligations, this will constitute right in personam, and these can be allowed to be arbitrated. For example, as under Section 4(2)(d) of the Act, seeking any information which is not relevant to the contract has been mentioned as a practice of abuse of dominance, since this matter essentially involves only two parties, and does not take in consideration any right for the public in large, it may be arbitrated. Taking the example of foreign jurisdictions, The Indian courts can also adopt the “second look doctrine”, and CCI can act as parens patriae during the proceedings. Hence, by looking at Competition Law through the lenses of arbitrability, and bringing certain changes to the approach, we can solve this issue of pendency as well.