The Arbitrability Of Antitrust Related Issues And The Competition Act, 2002

[By Aniket Panchal & Mehar Kaur Arora]

The authors are students at the Gujarat National Law University. 

Introduction: setting the tone

The arbitrability of competition law disputes has always been a hot potato. In this regard, arbitrability can be defined as ‘the ability of a dispute to constitute the subject matter of the arbitration.[i] That said, there is no denying the fact that the Competition Law and Arbitration lie at two opposite poles since arbitration is a consensual mode of private dispute resolution, unlike the competition law which seeks to set the seal on fair competition in the market and promote public interest as a whole.  Although it may seem that both the subjects are diametrically opposite to each other, greater heights could be reached if a middle ground is struck by the Competition Law regime in India.

With the lack of alternative to the Competition Act 2002 (hereinafter, “the Act”) rather than approaching the domestic courts and the limited powers vested in the Competition Commission of India (hereinafter, “CCI”), there is a pressing need for the door to be opened towards arbitration of certain anti-competitive conducts by dominant entities. In this article, the authors will venture into this not-so-explored terrain. In doing so, the authors will also make a mention of other countries with robust competition law regimes such as the United States and the European Union and their approach towards the same.

A sneak peek into the approach adopted by the United States and European Union

Last year, in the United States, arbitration was employed over a competition law dispute. In a historic win, the US Department of Justice Antitrust Division (hereinafter, “DOJ”) got a favourable order over a  product market definition in a matter involving the merger of Aluminum firms, namely Aleris and Novelis. While Aleris and Novelis contended that the relevant product market should be broader so as to include sheet ABS (hereinafter, “ABS”) as well, the DOJ maintained that the relevant product market should be restricted only to aluminium ABS.  In this case, it was alleged that the acquisition, if effectuated, would combine two out of four North American producers of aluminium ABS which would lead to sky-scraping concentration (as much as 60%) of total production capacity in the hands of Novelis.

After a ten-day-long arbitration, the arbitrator issued a ruling in favour of the US Antitrust Division and found that aluminium ABS constitutes a relevant product market. Interestingly, it is also the first time the antitrust division used its authority to resolve a competition law related matter under the Administrative Dispute Resolution Act (1996). In fact, the Department of Justice marvelled at this development as a “flexible and efficient” arbitration mechanism. In this case, the proposed acquisition of Aleris by Novelis was challenged by the DOJ.

Following this ruling, realizing the potential of arbitration in effectively resolving competition law disputes, Attorney General Delharim marvelled “this first-of-its-kind arbitration proved to be an effective procedure for the streamlined adjudication of a dispositive issue in a merger challenge. As demonstrated in this case, arbitration has the potential to be a powerful dispute resolution tool in the right circumstances …”.

As for the European Union, there is a ballooning consensus on the full arbitrability of competition law disputes arising out of Article 101 and 102 of the Treaty on the Functioning of the European Union (hereinafter, “TFEU”). However, all the competition law matters which are made arbitrable, are subject to judicial review. While the arbitrability of these disputes arising out of these articles may not require much deliberation, there is a divided opinion on the issues arising out of other provisions such as Articles 106-108 as well as a matter arising under secondary legislation (For instance, the EU Merger Control Regulation).[ii]

With regards to the approach adopted by the European Union, it is observable that the position of the United States is somewhat different than that of the EU. This is primarily attributable to the relationship between European Courts or Tribunals and European Competition Law for merger enforcement. To contextualize the same, in the United States a tribunal is always involved in the enforcement of Antitrust, whereas in the EU the competition commission can neither refer antitrust cases to enforcement bodies nor an arbitral tribunal. In a way, the inability of referring antitrust cases to an arbitral tribunal is in line with the objectives of the EU which is entirely opposed to referring cases to enforcement bodies.

Is India averse to the confluence of arbitration and competition law?

The Indian jurisprudence has taken shape miles away from the approaches adopted by these countries having robust competition law regimes. For starters, the Act that governs India’s competitive landscape has an overriding effect on the other statutes (Section 60), thereby imposing a bar on the jurisdiction of the civil court for adjudication of disputes that are to be dealt with by the CCI (Section 61). Therefore, an alternative mechanism for adjudication of competition disputes has not been prescribed under the Act.

In India, the arbitrability of competition law disputes was addressed in the case of Union of India v. Competition Commission of India for the first time in 2012. The Ministry of Railways (Opposite Party) argument was that the mere existence of an arbitration agreement between the parties precludes the CCI from interfering, rendering the case non-maintainable. However, rejecting this argument, the Delhi High Court categorically stated that all disputes brought before the CCI were distinct from contractual duties dealt with by an arbitral tribunal, and the Act, 2002 supersedes all other legislation. It is so since the arbitration tribunals may tend to overlook the nitty-gritty involved in the process of adjudication of disputes of abuse of dominance since it lacks the expertise, mandate and ability to conduct an investigation.

Concretizing the ratio, the Bombay High Court, in the case of Central warehousing corporation v. Frontpint Automotive Pvt. Ltd observed that Section 5 of the Arbitration and Conciliation Act is not to be read in isolation of Section 2(3) of the Arbitration Act 1996. Thus, making it clears that the provisions of the Arbitration Act shall not influence any other law thereby precluding certain disputes from reaching the arbitration forum. It is also not to be forgotten that the Competition disputes call for remedies of penalty for anti-competitive conduct rather than damages or compensation as regards to contractual remedies which are usually adjudicated by the arbitration forums.

Further, the resultant proposition that the inquiries conducted by the CCI are in rem in nature and not in personam (as in arbitration proceedings), has been accepted by the Supreme Court in the case of Samir Aggarwal v. Competition Commission of India and Ors in December 2020. In fact, there is an order of CCI (against Tata Motors) passed as recently as 4 May 2021 which reiterates that the CCI performs inquisitorial and not adjudicatory functions thereby opening the doors of the forum to the public interest and the proceedings before them and the NCLAT are inquisitorial and in rem in nature.

Although, certain activities such as cartel and other anti-competitive agreements which fall under Section 3 of the Act have a bearing on the public at large, abusive conduct by the dominant enterprises with regard to distributive agreements have an element of right in personam which provides an opportunity to the arbitral tribunals to adjudicate the dispute.

With this, one thing is beyond doubt that the competition authorities in India are almost against this idea of the cosmic collision of Arbitration. and Competition Law. However, in India’s current modern and expanding economic environment, with constantly rising foreign investments and economic growth, there is a compelling need for arbitration of competition law disputes in accordance with the views of foreign jurisdictions such as the United States and the European Union.

Conclusion: The Way Forward

Of course, there has to be a tangible cap on the autonomy of the party and thus certain areas of law will always be far away from the realm of arbitration. Undeniably, some of these laws would include criminal law, bankruptcy law, securities law, etc.[iii] However, in the opinion of the authors, this competition-arbitration smash-up should not be narrowly perceived as a mere substitute for CCI and other authorities. Rather, it should be considered as a subordinate vehicle to further effectuate the goals of efficient and effective enforcement of the competition law in India.

Usually, the adjudication of an anti-competitive dispute passes through a cobweb of appeals. With the case moving from the National Company Law Appellate Tribunal to reaching the Supreme Court, the process leaves the private parties hanging for adjudication of the dispute, thereby becoming unfavourable at times. The arbitration tribunals can come in hand by proving an expeditious and effective resolution to the dispute on one hand and reducing the burden of the shoulder of the CCI by assisting them in various stages of the investigation if any.

[i] Gordon Blanke & Phillip Landolt, EU and US Antitrust Arbitration: A Handbook for Practitioners (Kluwer Law International, 2011).

[ii] Damien Geradin & Emilio Villano, Arbitrability of EU Competition Law-based Claims: Where Do We Stand After the CDC Hydrogen Peroxide Case?, 40(1) World Competition 2017.

[iii] Gordon Blanke & Renato Nazzini, Arbitration and ADR of Global Competition Disputes: Taking Stock (Part I), 1(1) Global Competition Law Review, 46, 48-49 (2008).


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