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    The Arbitrability Loophole: An Indian Perspective on IP and Competition Law Disputes

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    © All Rights Reserved
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    7 views17 pages

    The Arbitrability Loophole: An Indian Perspective On IP and Competition Law Disputes

    Uploaded by

    Jalaj Jain
    The Arbitrability Loophole: An Indian Perspective on IP and Competition Law Disputes

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    © All Rights Reserved
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    ALTERNATE DISPUTE RESOLUTION JaLay Jane: 174058, GUJARAT NATIONAL Law UNIVERSITY, GANDHINAGAR Gujarat National Law University SUBMISSION FOR ADR TO PROFESSOR VIKAS GANDHI SEMESTER FIVE ALTERNATE DISPUTE RESOLUTION ‘TABLE OF CONTENTS. PART I: THE ARBITRABILITY LOOPHOL! N INDIAN PERSPECTIVE ON IP AND COMPETITION LAW DISPUTES .ssssssssstssststiteitieueienenenenesei INTRODUCTION TEST OF ARBITRABLILITY .. RIGHT IN REM VS RIGHT IN PERSONEM wvsssssssssssisnesnnstannnatinnanaesease 5 STAGE OF DISPUTE vissssssutssiensnseitnneitintisienenenenenenananananannnnnansss 5 INTELLECTUAL PROPERTY DISPUTES.sssstsssstisisuenensnansnanananatisesiss 6 COMPETITION LAW DISPUTE ‘THE CONCLUSION: CONTRACTUAL LOOPHOLI PART II: ARBITRATION AGREEMENT... ALTERNATE DISPUTE RESOLUTION 3 PART I: THE ARBITRABILITY LOOPHOLE: AN INDIAN PERSPECTIVE ON IP AND COMPETITION LAW DISPUTES INTRODUCTION “The purpose of this writing is to understand an integeal part of the Arbitrability. The behaviour of Indian Courts can be classified into two categories and the behaviour has been studied to prove how one supersedes the other. The Arbitrability dependence have been classified into two categories of Right in Rem and Right in Personam. ‘The definitional establishment and the declaration. of assumptions for the study of the two kinds of actions is pretty clear but one of them is arbitrable and the one is not. The idea of how the Acbitrability di fers according to the kind of dispute is not an alien concept, but there is a visible loophole that has not been necessarily explored as concept: KEYWORDS: Arbitration, Acbitrability, Right in Personam, Contracts, Praud ALTERNATE DISPUTE RESOLUTION 4 ‘TEST OF ARBITRABLILITY There are certain subject matters excluded from the area of arbitration. According to Section 4 awards with regard to subject matters incapable of arbitration can beset ide by the competent court of law. Also, article V(2) of the New York Convention recognizes this exclusion. It provides that recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: ()) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (ii) the recognition or enforcement of the award would be contrary to the public policy of that country. In India, what forms part of arbitrable subject-matter is determined as per the test laid down in the Booz Allen Case’, expanded upon by the Ayyasami Cas . The following two categories of disputes are thereby inarbitrable in nature: 1. Disputes involving the adjudication of actions én rem as opposed to actions in personem, such as, disputes relating to criminal offences, guardianship matters ete. 2. Disputes arising out of special statute, which are reserved for exclusive jurisdiction of spe courts, such as, matters reserved for small causes courts.” In addition to ascertaining the nature of rights, it is also important to assess the nature of remedy sought or deemed appropriate in disputes involving IP rights, Competition Law and fraud disputes. ‘The types of remedies, which the arbitrator can award, are limited by considerations of public policy and by the fact that he/she is appointed by the parties and not by the state. For example, an arbitral tribunal cannot impose a fine or a term of imprisonment, nor can he/she make an award which is, binding on third marties or affects the public at large, such of a judgment in rem declaring validit patent. Thus, disputes involving remedies, which can be provided only by courts, would be non- arbitrable, ' Boos Allen & Hamilton Inc v SBI Home Finance Limited & Ors (2011) 5 SCC 532 2A Apyasamy v A Parumasivam & Ors, Civil Appeal Nos 8245 & 8246 of 2016 5 Natraj Studios Private Ltd v. Naveang Studios & Another, 1981 AIR 537 ALTERNATE DISPUTE RESOLUTION 5 An Acbitral award is simply not binding if it is against the public policy of India. Public Policy forms the bedrock of Arbitrability. In Booz Allen, the Supreme Court culled out three facets of arbitrability as under: @ whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties or fall within the exclusive domain of public Fora; (i) whether the disputes are enumerated as matters to be decided through arbitration; and (ii) whether the parties have submitted disputes to arbitration that fall within the scope of the arbitration age ement. RIGHT IN REM VS RIGHT IN PERSONEM Most rights can be categorized as rights in rem and rights in personam. A right in rem is a right exercisable against the world at large. Actions in rem refer to actions determining the title to property, and the rights of the parties not merely among themselves but also against all persons at any time claiming an interest in that property." In contrast, a right in personam is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status. Several commentaries provide that disputes relating to ‘real’ rights in rem, which are valid against the whole world, cannot be subject to private arbitration. However, some acknowledge that arbitrators may rule upon subordinate rights in personam derived from the rights in rem. STAGE OF DISPUTE Lastly, itis important to assess the provision under which the issue of arbitrability is raised. This issue could arise at the time when a party makes an application to court under section 11 of the A&C Act for appointment of an arbitrator (when the other party fails to so appoint or agreement does not Indian Performing Right Society Lid. v Entertainment Neswork (India) Ltd, Arbiteation Petition Nos 341 of 2012 and 1017 of 2012 (Bombay). ALTERNATE DISPUTE RESOLUTION 6 provide a procedure for appointment); orat the time when a party makes an application to court under section 8 of the A&C Act (when in spite of arbitration clause a party approaches the court and the other party seeks reference of dispute to arbitration as per the arbitration agreement). Under section 11, the court would only need to prima facie assess if a valid arbitration agreement exists between the parties, before appointing an arbitrator. It would not embark upon an examining the ‘arbitrability’ of 7 the dispute or appropriateness of adjudication by a private forum. This would be left to the arbit tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under section 34 of the Act. However, under section 8 of the A&C Actin a pending suit, the court will have to decide all aspects of arbitrability of a dispute before refering parties to arbitration. At this stage, the court may not leave the issue to the decision of the Arbitrator. Hence, the stage of the proceedings influence the treatment accorded to the issue of arbitrability of a dispute INTELLECTUAL PROPERTY DISPUTES. Alternative fort and mechanisms for dispute resolution are on the rise due to their commercial fficacy—delivering expert expeditious solutions and adjudication to an increasingly commercial world. The WIPO Arbitration & Mediation Rules is exemplary of this shift towards Alternate Dispute Resolution (ADR) for IP disputes, and is being adopted worldwide.* While negotiation, mediation and conciliation assist parties to artive at non-binding commercial solutions, arbitration provides binding decisions that adjudicate upon the rights and obligations of parties. In the contemporary world, arbitration is the strongest parallel to court adjudication, IP rights of any owner is against the world at large, but there are subordinate rights which can be ed recogni private in nature. While the right is granted by the State to the owner of IP, the owner might further deal with its sight through contracts with other patties. Thus, multiple patties in varying SKshama A Loya, Gowrce Gokhale, Arbitmbility of intellectual property disputes: a perspective from India, Journal of Intelctual Property Law & Practice, Nolume 14, Issue 8, August 2019, Pages 632-641, hitps://doiorg/10.1093/iiplpip2072 ALTERNATE DISPUTE RESOLUTION 7 forms and capacities, making matters complex, could hold IP rights. For example, assignment of a trademark under Chapter V of the Trade Marks Act, 1999 is a ptivate right of the owner of the IP, Some commentaries acknowledge that arbitrators may adjudicate subordin: e rights in. personam derived from the real rights. Thus, the conventional view is that, for example, rights under a patent licence may be arbitrated, but the validity of the underlying patent may not. In Eros, the Court was seized with the issue of special statutes versus the A&C Act. Itwas argued that the Copyright Act, 1957 and the Trade Marks Act, 1999 ousted applicability of the A&C Act since they expressly provided for courts that would have jurisdiction to adjudicate upon IP disputes arising under the statutes. In other words, it was argued that ifa statute confers a right and provides exclusive one. The Court for a remedy for its enforcement, the remedy provided by the state rejected this contention and observed that these so-called ‘intellectual property’ statutes could not be seen as statutes relating to sights that stand wholly apart from the general body of law. Inthe Ay asami Case, patents, trademarks and copyrights were listed in the category of inarbitrable disputes. However, the main issue before the court was of arbitrability of fraud. Thus, categorization of IP disputes bitrable was only obiter dictum, Therefore, this decision cannot be read to bar arbitrability of IP disputes, ‘Thus, as per the current position in India, there is no blanket bar on arbitrability of IP disputes. Instead, arbitrability is determined on the basis of nature of claims raised. Disputes of royalty, geographical area, marketing. and other terms of the license agreements, which are purely contractual would be arbitrable in nature. COMPETITION LAW DISPUTES ‘Traditionally, courts across jurisdictions have taken the view that competition law disputes are non- arbitrable. ‘This was because arbitration being a private and consensual mode of dispute resolution, ‘was considered to be an inappropriate forum for deciding competition law issues which related to the larger public interest of promoting competitive markets. However, around late 1980s to early 1990s, the judicial trend on arbitration of competition law disputes changed. The U.S. Supreme Court's ALTERNATE DISPUTE RESOLUTION 8 decision in Mitsubishi Motor Corp. v. Soler Chrysler Plymouth® (Mitsubishi) and the European Court of Justice’s decision in Eco Swiss China Time Ltd. v. Benetton International N.V.” held that an arbitral tribunal could also arbitrate upon competition law issues." ‘The question of whether competition law disputes can be arbitrated has not arisen before the apex court of India due to the niche area and its statutory limitation with respect to the special courts established and the form remedy that the competition law courts can award. ‘There are certain aspects under the Competition Act which k: a bearing on public interest such as cartel activities or other anti-competitive agreements which fall within the ambit of Section 3 of the Competition Act. On the other hand, abusive conduct by a dominant enterprise in relation to distributorship agreement may relate to rights in personam. Accordingly, an arbitral tribunal may be allowed to adjudicate upon a dispute as long as it relates to deciding rights inter se between the pasties Judicial decisions regarding arbitrability of fraud were unclear until October 2016, when the Supreme Court clarified that matters volving. allegations of “serious fraud” would not be arbitrable, but matters related to “mere allegations” of fraud were arbitrable’ The rationale for this decision ster from the need to follow adequate procedures and carry outa full-fledged trial when the dispute relates to serious fraud. Arbitral tribunals are not as adept as courts in conducting trials. An allegation of serious fraud in a dispute would be complex in nature and a decision on it would require extensive evidence for which civil coust would be a more appropriate forum. Applying the same reasoning to arbitrability of competition law disputes, the extent of atbitrability would depend upon the nature of allegations that are made. If the allegations are such that they involve an inquiry into anti-competitive conduct, the CCI would be a more appropriate forum. But, if the allegations are such that they incidentally relate to the determination of other claims, the arbitral tribunal should be allowed to & Mitsubishi Motors Corp v: Soler Chrysler Plymouth, 473 US. 614 (1985). * Case C ~ 126/97, Eco Swiss China Time Ltd. v. Benetton Int N.V., 1999 ECR. 1— 3058. * Asbitrating Competition Law Disputes in India, ‘AnshumanSakle’, December 12,2017, bitps:/ /eompetition eyslamarchandblogs.com/2017/12/arbiteating-competition-law-

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