Arbitration is a private and voluntary method of resolving disputes that have grown in popularity in recent years. Antitrust laws are designed to foster free-market competition by banning and penalizing businesses that engage in anticompetitive agreements and abuse of dominance. These practices impact consumers, retailers, and the market. Disputes before arbitration must be private, as it is not regarded suitable for public concerns to be handled privately without court intervention. As a result, antitrust disputes and arbitration are often considered incompatible.
‘Arbitrability’ has no definite meaning; yet, it is commonly interpreted as a dispute’s ability to be qualified as a topic of arbitration. In Booz Allen and Hamilton Inc. v. SBI Home Finance Limited [(2011)5 SCC 532], the Supreme Court of India considered this issue. The Court used a three-pronged approach to evaluate whether a disagreement should be resolved through arbitration. It encompasses: (i) the nature of the issue to be addressed by arbitration or in court; (ii) the dispute’s subject matter in the arbitration agreement; and (iii) the parties’ desire for redress through arbitration.
The Arbitration and Conciliation Act, 1996 governs arbitration in India, and it does not categorize any issue as “non-arbitrable” per se. According to Section 2(3) of the 1996 Act, the act would not affect any statute prohibiting the submission of certain disputes to arbitration. In India, the arbitrability of competition law disputes was addressed for the first time in 2012 in the case of Union of India v. Competition Commission of India [WP (C) 993 of 2012 & C.M. Nos.2178-79 of 2012]. The Ministry of Railways (Opposite Party) argued that the mere existence of an arbitration agreement between the parties precludes the Competition Commission of India (CCI) from intervening, rendering the issue moot. The Delhi High Court, however, firmly rejected this argument, stating that all disputes brought before the CCI was distinct from contractual obligations dealt with by an arbitral tribunal and that the Competition Act, 2002 trumps all other legislation. Since, arbitration tribunals lack the competence, mandate, and ability to conduct an investigation; they may ignore the nitty-gritty involved in the process of adjudication of issues of abuse of dominance.
In the case of Central Warehousing Corporation v. Front pint Automotive Pvt. Ltd [2010(1) Bom C.R 560], the Bombay High Court stated that Section 5 of the Arbitration and Conciliation Act, 1996 should not be interpreted in isolation from Section 2(3) of the Arbitration Act 1996. As a result, the Arbitration Act’s provisions have no bearing on any other law, preventing certain issues from reaching the arbitration forum. It should also be remembered that in competition disputes, penalties for anti-competitive conduct are sought rather than damages or compensation for contractual remedies, which are normally decided by arbitration forums. Furthermore, the Supreme Court in the case of Samir Aggarwal v. Competition Commission of India and Ors. [Competition Appeal (AT) No.11 of 2019] in December 2020 approved the resultant claim that the CCI’s investigations are in rem and not in personam. In reality, on 4 May 2021, the CCI issued an order (against Tata Motors) reiterating that the CCI exercises inquisitorial rather than adjudicatory powers, thus opening the forum to the public interest, and the proceedings before them and the NCLAT are inquisitorial and in rem in character. Although certain activities covered by Section 3 of the Competition Act, such as cartels and other anti-competitive agreements, have an impact on the general public, abusive conduct by dominant enterprises concerning distributive agreements has an element of right in personam, allowing arbitral tribunals to resolve the dispute.
The Supreme Court recently used the “four-fold” approach to antitrust challenges in Vidya Drolia V Drug Trading Corporation [2019 SCC Online SC 358]. The four criteria used by the Supreme Court in determining whether a dispute should be arbitrated in India were:
- When the cause of action and the subject matter of the dispute are actions in Rem, subordinate rights in Personam arising from the rights in Rem are not involved.
- When the cause of action and the subject matter of the dispute touch third-party rights and have an erga omnes effect (which implies all rights and obligations are owed to all), centralized adjudication is required.
- When the cause of action and the subject matter of the dispute are related to the state’s unalienable sovereign and public-interest functions; and
- When the subject matter of the dispute is expressly or impliedly non-arbitrable under applicable statutes.
If any of the aforementioned factors are present, the issue will become non-arbitrable. The Supreme Court further clarified that while these four-fold standards are not “watertight containers,” they will aid in establishing when a dispute’s subject matter is non-arbitrable in India. In the above case, the Supreme Court acknowledged the arbitrability of issues originating from actions in rem involving subordinate rights in Personam and overturned a previous Supreme Court decision in N. Radhakrishnan V Maestro Engineers[(2010)1 SCC 72], holding that disputes involving fraud are arbitrable. The Supreme Court of India held in Himangi Enterprises V Kamaljeet Singh Ahluwalia[(2017)10 SCC 706] that Landlord-Tenant issues are arbitrable in India. As a result, the arbitrability of competition issues, like other types of conflicts, will be determined by these four characteristics.
Given the “four-fold test,” India’s position on the arbitrability of domestic antitrust cases is similar to that of the United States before Mitsubishi Motors Corp. v. Soler Chrysler – Plymouth, Inc.[ 473 U.S.614 (1985)], when the necessity for specialized antitrust adjudication prevented arbitration (American Safety doctrine). In this regard, the US Supreme Court stated in Mitsubishi Motors that even if antitrust cases are not arbitrable in the United States, they must be arbitrable in the international environment, as evidenced by international arbitration verdicts. Even though antitrust issues have long been regarded as unsuitable for arbitration, recent practice shows that the distinctions between the two have blurred. Since the US Supreme Court’s decision in Mitsubishi Motors v Soler (“Mitsubishi Motors”), similar agreements have been reached in the EU (Eco Swiss v Benetton), England (Microsoft Mobile Oy (Ltd) v Sony Europe Limited), Switzerland (Tensacciai v Freyssinet Terra Armata), France (SNF v Cytec), New Zealand (Government of New Zealand v Mobil Oil), Italy ( Nuovo Pignone SpA v. Schlumberger), Sweden (Systembolaget v. Absolut Company) and Canada (Murphy v. Amway). However, other nations, including India, do not have a similar pro-arbitration posture when it comes to antitrust cases.