DR.

RAM MANOHAR LOHIA NATIONAL LAW

UNIVERSITY, LUCKNOW
ACADEMIC SESSION
2018 - 2019

FINAL DRAFT
Arbitrability of Competition law disputes in India

SUBMITTED TO: SUBMITTED BY:

Ms. SHAKUNTLA SANGAM PRAGYA YADAV

ASSISTANT PROFESSOR (LAW) B.A.LLB (HONS)

DR. RMLNLU, LUCKNOW SEMESTER VII

ENROLL 150101097
 Acknowledgement
On the very outset of this research, I would like to extend my sincere and heartfelt obligation
towards all the personages who have helped me in this endeavor. Without their active guidance,
help, cooperation and encouragement, I would not have made headway in the project.I am
ineffably indebted to Ms. Shakuntala Sangam, Assistant Professor (Law) for conscientious
guidance and encouragement to accomplish this assignment.

I also acknowledge with a deep sense of reverence, my gratitude towards my seniors who have
constantly been a support and a guide and without whose help it would not have been possible to
continue the research.

Special thanks to Madhu Limaye Library whose constant help, support and guidance helped me
in the completion of the research.
 Introduction
In this contemporary era where the global trade and modernization is on the rise, there is also a
parallel rise in the commercial disputes. These days the best available remedy to settle these
disputes is via Arbitration. It is one of the key mechanisms of ADR that provides a flexible and
impartial adjudication of disputes. These days almost all the contracts/agreements/understanding
between the private parties include an arbitration clause and enables the parties to forgo the time
consuming court adjudication. Arbitration is generally the solution when the disputes are
between the private parties but the moot question that arises is whether the disputes within the
ambit of “public law” are arbitrable or not. The Competition Law, 2002 is the successor of the
MRTP Act and the aim of the act is to promote competition in India with control on anti-
competitive practices. Thus, the act is in domain of larger public interest as it simultaneously
fosters the growth of fair trade practices in the market with protection of the consumers from the
unfair trade practices. Today, arbitration is considered to be one of the most popular means of
dispute resolution. By adding a midnight clause private parties waive their right to approach
national courts. The private nature of arbitration often raises a question that whether issues,
which involves public interest, is capable of being settled by arbitration.

Competition law came into picture to promote fair trade practice and safeguard consumer
welfare. Basically, the main concern of any competition law is to promote fair trade practices,
which leads to competitive market, which further results in cheap and quality goods, technology
development, and results in high living standards of people. Now, both the laws are opposite to
each other, competition law involves public interest whereas arbitration law works on party
autonomy. Now a question arises whether competition law disputes can be resolved by means of
arbitration.

UNDERSTANDING THE QUESTION OF ARBITRABILITY IN INDIA

Traditionally, courts were of the opinion that disputes under competition law cannot be resolved
by arbitration. The reason being arbitration is a private and consensual method of dispute
resolution on the other hand competition law deals with issues, which involves public interest
and can only be resolved by courts.This hostility changed, when the Supreme Court of United
States in the landmark case of Mitsubishi Motors Corp v. Soler Chrysler Plymouth[1] held that
the antitrust issues could be resolved by means of arbitration. Later, European Court of Justice in
the landmark case of Eco Swiss China Time Ltd. v. Benetton international NV[2] held that
arbitral tribunal are empowered to hear disputes related to competition law. Most of countries
have law, which are arbitration friendly, but Indian courts are yet to decide on the issue.

The Arbitration Act, 1996 does not list any class of dispute as non-arbitrable. Nevertheless,
section 2(3) of the act talk about that the act would not affect any other law by virtue of which
certain disputes may not be submitted to arbitration. Generally, rights in personam can be
submitted to arbitration whereas rights in rem can only be adjudicated by courts[3].For eg. A
criminal case, which is an example of right in rem, can only be heard by courts and not by
arbitration. In Kingfisher Airlines Limited v. Prithvi Malhotra Instructor [4]Supreme Court
placed a restriction on arbitrability. It held that dispute which involves rights in personam is not
arbitrable if it is reserved for public forum as a matter of public policy.

Further, in Natraj Studios Pvt. Ltd. v. Navrang Studios[5], Supreme Court held that arbitral
tribunal is not empowered to hear dispute for which special tribunal is made. Thus, from the
following cases, it can be concluded that to determine whether a particular issue can be arbitrated
two question need to answered. First, whether the subject matter is right in remor right in
personam? If the answer to the first question is right in personam then the Second question
arises, whether the claim arising under right in personam is reserved by legislature for some
special public forum as a matter public policy.

Section 19 (1) of the Competition Act – Filing a complaint with the CCI

 Section 19 (1) of the competition act empowers any person, consumer and association
to file a complaint with the CCI, when the act of a party is in contravention of
competition act and involves public interest.
 On the other hand, section 53 provides remedies only to an aggrieved party and all the
claims made under this will only deal with individual party. Hence, claims made
under competition law can be both rights in rem as well as rights in personam.
  Section 19 is associated with right in rem, as a result, there is no scope of arbitration.
Whereas Section 53 is associated with right in personam and can be submitted to
arbitration but the second question needs to be answered here.
 Section 18 of the competition act empowers CCI to eliminate anti-competitive
practices.
 Further, section 61 of the competition act declares that civil courts cannot entertain
any dispute related to competition act. Thus, it can be concluded that claims (rights in
personam) under competition law cannot be submitted to arbitration as CCI has
statutory power to hear cases pertaining to competition law.

UNDERSTANDING THE QUESTION OF ARBITRABILITY IN INDIA

 Arbitration in India is governed as per the provisions of the Arbitration and Conciliation
Act,1996. The Act is silent as to what kind of disputes are non- arbitrable but a bare
reading of section 7 1 of the Act creates an imprint that all such disputes can be resolved
by Arbitration unless one reads Section 2(3) which reads that ““This Part shall not affect
any other law for the time being in force by virtue of which certain disputes may not be
submitted to arbitration.””. Thus the Act per se bars the jurisdiction of an Arbitral
Tribunal and thus what is arbitrable or not depends upon the precedents that have been
laid by the courts.
 One such case is of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited 2, the
Supreme Court held that the rights in personam (Right against an individual) was the
subject matter of Arbitration whereas rights in rem( Rights against all) are required to
be adjudicated by courts and special tribunals. This position was further made clear in
the case of Kingfisher Airlines Limited v. Prithvi Malhotra Instructor 3 wherein it was
held that the creation of special tribunals per se does not oust the jurisdiction of
Arbitration instead disputes would be considered non-arbitrable only where a particular

1
“” arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which
have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.””
2
Booz Allen and Hamilton Inc v SBI Home Finance Ltd (2011) 5 SCC 532.
3
Kingfisher Airlines Limited v Prithvi Malhotra Instructor 2013(7) Bom CR 738 (India).
 enactment creates special rights and obligations and gives special powers to the Tribunals
that are not enjoyed by civil courts.4
 Understanding the Arbitrability Of Competition Law And Growth In International
Perspective and National Perspective

 Growth in International Perspective

Originally, the position regarding the arbitrability of Competition Law at the International level
was very ambiguous and there was no settled law. But the legal position went an overhaul after
the landmark judgment in the case Mitsubishi Motors Corp v. Soler Chrysler Plymouth 5 where
the court held that “”antitrust issues can be submitted to an arbitration proceedings in an
international contract and it should be given full effect and adjudication of such disputes shall
be done by arbitrators who are more acquainted or experts in competition law.””In another
leading case of EcoSwiss China Time Ltd v. Benetton International NV6,the European Court of
Justice ruled that the Arbitral Tribunal has the requisite power to hear the competition law
disputes. Thus, at the international level the position regarding the nexus between the arbitration
and the competition law is way too coherent and lucid.
 Growth in National Perspective
So the above discussion will enable us to understand that what is arbitrable or not, If we analyze
the Competition Act, 2002 we see that it has subject matter for both – rights in personam and
rights in rem. Like section 3 which deals with anti-competitive agreements like agreements
pertaining to price-fixing, output restriction and tying arrangements are all in nature of rights in
rem whereas the abuse of dominant position in the market( section 4) is in nature of right in
personam. So does it imply that there can be arbitration for disputes under Competition Law ?
This was discussed in the case of Union of India v. Competition Commission of India 7 wherein
it was held that ““the Arbitral Tribunal would neither have the mandate, nor the expertise, nor
the wherewithal”” to decide the dispute in question. Here, the court allowed CCI to settle the
dispute by the very reasoning that the scope of CCI’s proceedings is very different from that of
Arbitral Tribunal. Thus the conclusion drawn is that the presence of an arbitration clause per se

4
Id.
5
Mitsubishi Motors Corp v Soler Chrysler Plymouth, 473 US 614 (1985).
6
Eco Swiss China Time Ltd. v Benetton Int’l NV (1999) ECR I- 3055.
7
Union of India v Competition Commission of India AIR 2012 Del 66.
will not oust the jurisdiction of CCI but whether there can be adjudication via arbitration in
Competition Law disputes remains unanswered and an open ended question

CONCLUSION

A number of decisions of various national courts have dealt with the issue whether a competition
law dispute may be referred to arbitration. Although the case law tends to favour a positive
answer, it is still an issue that is being continuously brought up in litigation as an easy way out of
arbitration clauses. This is supported by the reasoning that mandatory rules implementing public
policy goals, such as competition law, should protect important social interests and their
enforcement should not be left to uncontrolled national or international arbitral bodies. Thus, it
can be concluded that disputes arising under competition cannot be submitted to arbitration.
Only CCI has the statutory power to hear case related to competition law.

Today, most of the companies want to settle their dispute by using arbitration instead of litigation
because arbitration is the most effective means to resolve disputes. Judicial authorities have
given many landmark judgments, which make India an arbitration-friendly nation. Although
disputes regarding competition cannot be submitted to arbitration and can only be heard by CCI,
now the time has come to make India a little more arbitration-friendly. My suggestion in this
regard is, in case of dispute, parties can go for arbitration and then CCI can give a second look to
the arbitral award. If the award is in contravention to the competition law against public policy,
CCI can annul the award.

BIBLIOGRAPHY

1. Mitsubishi Motors Corp v Soler Chrysler Plymouth, 473 US 614 (1985).

2. Eco Swiss China Time Ltd. v Benetton Int’l NV (1999) ECR I- 3055.
3. Booz Allen and Hamilton Inc v SBI Home Finance Ltd (2011) 5 SCC 532.
4. Kingfisher Airlines Limited v Prithvi Malhotra Instructor 2013(7) Bom CR 738 (India).
5. Union of India v Competition Commission of India AIR 2012 Del 66.