ARBITRABILITY OF ANTI-TRUST DISPUTES IN INDIA
Author: Yash Shukla, IV year of B.Com.,LL.B(Hons) Institute of Law, Nirma University.
Arbitrability of the subject matter of the dispute is a very important aspect in arbitration proceedings. An arbitral tribunal has to decide on its jurisdiction over the subject matter of the dispute before it decides the award of the matter put before it, it is important for it to determine. Similarly, the area of anti-trust disputes has been contented to be arbitrable as per the jurisprudence developed in the area of subject matter being capable of arbitration. This article analyses the arbitrability of disputes with anti-trust as there is subject matter as per the recent developments in the field of arbitration in India.
It is the duty of the courts to transfer the disputes which are subject to arbitration to the arbitration tribunal compulsorily as per section 8 of Arbitration and Conciliation act, 1996. What can be the subject matter of arbitration is being interpreted by various courts, and the courts have discussed this issue time and again to give a broader definition of the subject matter of arbitration. Anti-trust disputes have a very blurry relation with arbitration as far as Indian jurisprudence in this regard is concerned.
However, US Supreme Court approved arbitrability of antitrust dispute in Mitsubishi Motors vs. Soler Chrysler-Plymouth Inc and subsequently various countries’ courts like EU(Eco Swiss vs. Benetton), England (Microsoft Mobile OY (Ltd.) vs. Sony Europe Ltd.), France (SNF vs. Cytec) etc. followed this stand and took the same stance. It is therefore a settled stand for foreign courts that the antitrust disputes are capable of being adjudged by an arbitration tribunal. However, the Indian scenario in this case is a little bit different.
Indian judiciary has not been that much pro arbitration in relation to disputes with antitrust subject matter. The Indian judiciary has never even directly deliberated on this point in any of the cases. The Delhi High Court, however, deliberated a bit on the arbitrability of these disputes in the case of Union of India vs. Competition Commission of India. The question in this case was related to the maintainability of proceedings before the competition commission of India when an arbitration agreement exists between parties to this effect.
However, the court held that the arbitral tribunal is only limited to decide on contractual clauses, and it does not have mandate or authority to conduct investigation necessary to decide antitrust dispute that is there with the CCI.
Thus, however the court did not directly comment on the arbitrability of antitrust disputes, it somehow implied in its judgment that antitrust is not suitable to be the subject matter of arbitration.
Other cases of the Indian judiciary are needed to be referred here to understand the jurisprudence related to “arbitrability”.
The most prominent case in this regard is that of Booz Allen and Hamilton vs. SBI Home Finance where the apex court of India discussed the concept of arbitrability and listed down a category of disputes specifically non-arbitrable in India which does not include antitrust disputes.
However, the court in this case opined that every civil or commercial dispute (be it contractual or non-contractual), which has the ability to be decided by the court, is capable of being adjudicated and resolved through arbitration unless the jurisdiction of the tribunal is barred expressly or through any essential implication.
Currently settled law for Arbitrability
Recently the Supreme Court has developed a “four-fold test” in the Vidya Drolia case in order to settle the issue of arbitrability. The case gives four corners to check the arbitrability of any dispute and provides that a dispute shall not be arbitrable in India:
When the cause of action and subject matter of the disputes are related to actions in rem and do not pertain to rights in personam arising out of rights in rem.
When the cause of action and subject matter of dispute have erga omsu effect and require centralised adjudication. When the cause of action and subject matter of dispute are related to inseparable sovereign and public interest state functions, and when the cause of action and subject matter of dispute is barred by expressed or necessary implications.
Thus this case paved the way for private forum adjudication of disputes related to statutory claims in India, which can also be seen from the apex court overruling its judgement in Himagni Enterprises vs. Kamaljeet Singh Ahluwalia and held that the disputes governed by Transfer of Property Act, 1882 are arbitrable in India. Therefore it is clear that the intention of the apex court is to lock the concept of arbitrability under these four-folds.
Applying the Four-Fold test to Antitrust Disputes
Antitrust disputes are regarded to carry a nature of public character and thus related to right in rem which can be seen from the section 19(1) of the Indian Competition Act, 2002 which allows every person to approach CCI to inform any contraventions to the act and it is not necessary for that person to have suffered damage due to that contravention.
However Section 53N of the Act also allows any aggrieved party to seek compensation based on the CCI's in rem findings, requiring adjudication of the aggrieved parties' subordinate rights in personam. Also the claims in relation to pre-existing contractual relationships like franchise agreements, joint-venture agreements, or distribution agreements will necessarily require adjudication in relation to subordinate rights in personam.
Thus it takes away antitrust subject matter away from the four folds in Vidya Drolia. A further reference here can be made to Murphy vs. Amway judgment by the Canadian Federal Court of Appeal which ruled that private claims for damages brought under the Competition Act will be arbitrable.
Thus by drawing a similar line with Indian jurisprudence, it can be concluded that antitrust claims in relation to section 53N and pre-existing contractual relationships may be held arbitrable.
The third point in the four-fold test could also not be satisfied as section 54 of the act itself precludes application of the act if such exemption is necessary for public interest or if such enterprise is performing a sovereign or inalienable function.
However the fourth point is one cannot be dissatisfied as CCI has the exclusive jurisdiction over antitrust disputes in India as per section 61 of the act, thus making antitrust disputes non arbitrable.
However, the suitability of this criterion for determining the arbitrability of disputes is debatable since arbitrators can give effect to the Act's special rights and obligations by applying mandatory antitrust laws to the disputes. In Vidya Drolia, the SCI recognises that factors such as the need to enforce mandatory legislation, the statute's public policy goal, and other factors play a role. Parties have the opportunity to nominate antitrust experts as arbitrators, allowing their rights to be decided quickly.
This was also stressed in the Mitsubishi Motors case, where the US Supreme Court held that arbitrators can be trusted to provide appropriate remedies to aggrieved parties by applying the country's substantive antitrust laws. As a result, the establishment of a specialised forum, such as the CCI, should not be the sole factor preventing antitrust arbitration.
Hence, even though the antitrust disputes are not expressly termed to be non-arbitrable and even though the subject matter of such dispute satisfies certain criteria to be arbitrable as per the Indian jurisprudence in regard, there is still a long way to go for the Indian judiciary to take a similar stand as that of courts in the US, UK and other countries.
The arbitrators can give effect to special rights and obligations by applying mandatory antitrust law to disputes, and thus the criteria that it is not excluding is debatable in itself. Thus, there is a need for the Indian Judiciary to look back at the jurisprudence in relation to arbitrability of disputes with the subject matter of antitrust law as well as the four-fold test in vidya Drolia and there is a chance that we can change our current stand.