TY - JOUR
AU1 - Dalhuisen FciArb, J., H.
AB - Introduction The arbitrability of competition issues remains a little explored topic in Europe, both for domestic and international arbitrations. In the United Kingdom, Mustill and Boyd in their leading textbook on domestic arbitrations1 generally take the view that English law has never managed to develop a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. In practice the issue is whether courts will stay ordinary proceedings or enforce the awards. The emphasis appears to be upon the latter as they believe in principle that any dispute or claim concerning legal rights which can be the subject of an enforceable award are capable of being settled by arbitration. As to this issue of enforceability, the main limitations they see are in the type of remedies which arbitrators can give as these are particularly limited by public policy and by the fact that arbitrators are appointed by the parties and not by a state. Thus arbitrators cannot impose fines or imprisonment, commit a person for contempt or issue a writ or subpoena. Neither can they make an award which is binding on third parties or which affects the public at large such as judgments in rem against ships, divorce decrees, or winding-up orders. This also applies, in their view, to decisions exempting agreements from the competition rules of the EC under Article 85(3) of the Treaty of Rome. The same would appear to follow for the granting of negative clearances. It also would, one assumes, imply that arbitrators cannot issue anti-trust awards which have an effect amongst a whole class of parties affected by similar behaviour. The authors do not draw from this any general conclusion that criminal, admiralty, family or company matters cannot be referred to arbitration. Nor do they conclude that an arbitrator cannot effectively rule on a claim or defence raised under the anti-trust provisions of Articles 85 and 86 of the Treaty of Rome or under applicable domestic anti-trust laws. On the contrary, they state that unless the nature of the question is such as to render the arbitration agreement itself void or, in anti-trust cases under EU law, the European Commission has itself initiated proceedings (or domestic authorities have done so under their own law), arbitrators can and should rule on it. This latter limitation may not always obtain, however, since, as will be discussed below, the initiation of proceedings by the EU or any other authority may have a character and objective of its own and does not a priori rule out any concurrent or even later private suits. Redfern and Hunter in their book on international arbitration2 state generally that the concept of arbitrability relates to public policy limitations upon arbitration as a method of settling disputes. States may determine these limitations; but these authors believe that, particularly in international cases (either resulting from the different residences of the parties, from the nature of their dispute or perhaps from an unrelated place of arbitration), there has to be a balance of competing policy considerations: domestic public policy concerns with human rights and criminal issues, for example, have to be balanced against the public interest in the encouragement of arbitration in commercial matters so as to reduce the burden on the courts, to promote international trade, and respect comity. In this connection it could be that States in international cases do not have the last word on arbitrability to the same extent as they may have in domestic arbitrations as their public policy considerations may be mitigated by international requirements, although the authors do not elaborate on the true effects of the international nature of an arbitration in this context. The reason is probably that they see arbitrability basically as a matter of the law of the place of the arbitration,3 therefore essentially as a question of a domestic arbitration law, although such domestic law might itself allow for some different rules if the arbitration can be qualified under it as international. Yet, in international cases, also the law applicable to the contract and the substantive anti-trust law applicable to the dispute may be relevant in this connection and certainly also the law of the place of enforcement, cf., Article V 1 (c) and (e) and Article V 2 (a) of the New York Arbitration Convention of 1958. The authors note indeed the difficulties that arise if the domestic law applicable to the arbitration agreement or the law of the place of arbitration (if one assumes that international arbitrations are not delocalized or that the parties have not chosen a particular arbitration law) do not allow the issues concerned to be settled by arbitration as the arbitration agreement may become unenforceable in the sense that concurrent ordinary proceedings will not be stayed. Moreover, recognition and enforcement of any subsequent award in other countries may be refused if the subject matter of the arbitration was not arbitrable under the law of the country where enforcement is sought, quite apart from the arbitrability of the issue under the law (of the place) of the arbitration itself. Of course, public policy considerations may also be a direct bar to recognition and enforcement, although it is conceivable that these considerations themselves will take into account the requirements of comity in international cases. Matters that relevant States may not consider capable of settlement by international arbitration include, in their opinion, securities issues, competition and anti-trust matters, matrimonial status, bankruptcy and certain intellectual property rights. Some matters of a public law nature, such as criminal law issues, do not normally admit of settlement by private parties. Yet, even then, public policy limitations on arbitrability are not considered by them always to require the arbitral tribunal to refuse to consider the issues. Often this means no more than that arbitrators must honour the law in respect of a particular aspect, as when patents are claimed which must be accepted at face value without arbitrators being able to declare them void by going behind the determination of the regulatory agencies granting them. In this connection the authors note that, in anti-trust matters, the EC was given exclusive jurisdiction to grant exemptions if the agreement improves production or distribution or promotes economic progress. It is therefore not for arbitrators to go into these justifications of anti-competitive effect or question and amplify them: but they may determine whether an exemption exists and particularly whether an agreement is part of a block exemption. It may thus be seen that the subject of arbitrability is not fully clarified in the United Kingdom and there is, as a consequence, no great clarity on the arbitrability of competition issues. There also remains considerable doubt on the subject elsewhere in the European Union (EU). One reason may be that competition law itself is not particularly well developed in most EU countries. This is different under EU anti-trust law, itself directly effective in the Member States,4 but there is no leading case law from the European Court in Luxembourg on the issue of arbitrability5 and there is therefore some considerable doubt on the precise rules of arbitrability of competition issues even under EU law. In the United States the situation is so far simplified that the issue of arbitrability under local law has been the subject of a Supreme Court decision in 1985,6 which, although rendered to support an international arbitration case, is now also followed by the lower courts in domestic arbitrations involving anti-trust matters.7 Older case law had held that anti-trust claims were not arbitrable for a number of reasons: anti-trust enforcement would suffer from a decrease in ordinary treble damage suits; contracts of adhesion would increasingly force these alternative procedures on unsuspecting customers; discovery and hearing might be curtailed; and commercial arbitrators might be biased against anti-trust law application. The United States Supreme Court in 1985 rejected these arguments and expressed confidence in the competence and integrity of arbitrators and in the ability of the arbitration process itself to deal with the complications and often intractability of anti-trust suits.8 The Supreme Court thus saw fit to balance its policies and clearly opted for enforceability of arbitration agreements in anti-trust matters, subject only to specific state substantive or procedural laws or policies to the contrary. It cited in support a strong federal policy favouring arbitration as exhibited by the Federal Arbitration Act 1925, amended in 1970 to provide for enforceability of arbitration agreements in an international context. In fact, this attitude in favour of arbitration is being extended by the United States Supreme Court to other federal statutory claims, such as those in the securities and racketeering fields, always subject, however, to the requirement of a fair forum and the impossibility to waive statutory claims in advance.9 It implies in public law related arbitrations a more substantial check on the result in enforcement proceedings even in the United States,10 whilst the enforcement of such awards may more readily be denied for public policy reasons in other countries. As a consequence, the 1985 Supreme Court decision requires a further analysis and a more precise description of the various issues that may arise in order to determine the true import of the modern American attitude. This may at the same time serve as a guide to competition issues arising in arbitrations in Europe and to a more careful drafting of arbitration clauses. Especially where third parties become involved in determining a conspiracy (concerted practices or conscious parallelism) or to establish broader market effect, the arbitration approach becomes vulnerable, even in the United States. It may also become impractical as there may be a need to involve parties who are not bound by the arbitration agreement and who are therefore not subject to the arbitrators' jurisdiction or compelled by their findings. The support that ordinary courts can give in the circumstances may then also be limited and full concurrent anti-trust enforcement proceedings in the ordinary courts or through other enforcement agencies may become more appropriate. Where conduct is tort related, as in the abuse of a dominant position, it is unlikely that there is an arbitration clause at all between the parties most directly concerned (until after the event, if they so wish), so that arbitration may not be relevant. Where overriding public policy considerations may be invoked, as in the EU the requirements of the development of the internal market (which may well go beyond the more privately oriented tenor of anti-trust law in the United States), or where certain justifications may be invoked derived from the public good (as may be done by private parties in the United States in the absence of an exemption procedure there), it would also appear that arbitration is less appropriate to give expression to these considerations which may affect whole classes of citizens and might also have to be balanced against other considerations such as industrial, regional, environmental or foreign trade policies. Another difficult area is the operation of trade associations and the exercise of their powers over members (including the members' submission to binding arbitration by these bodies and the effects or legality of their rules and findings (from an anti-trust point of view), the contractual relationships between members of these organizations or between members and third parties. In the EU under Regulation 17/62, the group exemption and negative clearance techniques have served to reduce doubts and possible conflict in the areas of policy and public benefit. They also implicitly reduce the need for litigation and simplify and facilitate arbitrations in anti-trust matters,11 although they may leave arbitrators with questions of interpretation about the extent of the exemptions and negative clearances granted. The 1993 EU Notice on cooperation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty12 may also serve to clarify some of the issues even in arbitrations, as it insists, on the one hand, on the sole jurisdiction of the Commission in exemption matters, but on the other accepts a role for the courts in this area in private suits if the parties have notified their agreement to the Commission but the exemption remains pending or in the case of the interpretation of block exemptions. There is also some discussion as to whether broader block exemptions should be issued and whether to give national authorities some voice in the granting of exemptions. This attitude may eventually also further involve courts in this area in private suits. This might in turn have an effect on the power of arbitrators. Competition Issues The competition laws of the United States and the EU are conceptually similar, even though their background is somewhat different: the United States rules are more inspired by a market oriented approach, the EU approach (at least at the outset) more by the promotion of the internal market. In the EU this is part of a strategy in which the free movement of goods and services, the regulation of public monopolies, subsidies and procurement also play a role. In the United States these are more particularly covered by the constitutional Commerce Clause. Domestic anti-trust laws in the various EU countries may show different concerns and considerations altogether and have in any event developed in very different ways. Their further development appears, however, impeded by the competition laws that have emerged at EU level in the meantime. It may well be, however, that, through the globalization of the markets and with the greater focus on international trade issues within or outside GATT and its successor, the traditional policy issues so prevalent in Europe, most certainly also at EU level, may become of lesser importance. It may generally enlarge the area for private remedies and consequently for arbitrations in this field in a less regulatory and institutionalized, but at the same time more conceptual and universal anti-trust approach of a transnational nature, which will be more generally market oriented. This development may prove a great deal less unrealistic and may be much nearer than it might appear.13 It might allow parties to invoke general principles and justifications of anti-trust law, possibly as part of the applicable domestic (including, where relevant, EC) law if this approach is preferred to the acceptance of transnational law – but in any event outside the present anti-trust enforcement framework or as a correction to it. The 1993 EU Notice referred to above14 may testify to this trend as it appears to be directed, not only towards encouraging national court involvement in private suits so as to allow the Commission to concentrate on exemption requests and policy issues of a broader nature, but also to loosening the formalism attached to the exemption process itself. As a minimum, it may well lead to wider block exemptions to be interpreted by national courts (and arbitrations) in each case. At the present legislative level, in the United States there are, foremost, sections 1 and 2 of the Sherman Act of 1890. Section 1 covers horizontal and vertical agreements in restraint of trade: the horizontal ones concern agreements or concerted practices among competitors fixing prices, dividing customers and territory or organizing boycotts. Vertical agreements usually result in some forms of tying arrangements with, or restrictions on, regular purchasing customers, distributors, patent licensees and franchisees. Section 2 prohibits the use of a monopoly power to exclude others from the market or any conspiracies or other attempts to achieve market dominance by predatory means as opposed to honest industrial conduct. The Clayton Act complements and clarifies the American anti-trust rules and explicitly prohibits in its section 2 price discrimination, in its section 3 anti-competitive tie-ins and exclusive dealing and in its section 7 anticompetitive mergers and share acquisitions. In the EU there are, foremost, Articles 85 and 86 of the Rome Treaty of 1957 amplified by the Council Regulation No. 17/62 pursuant to Article 87 and by the Merger regime under Regulation 4064/89. There are further the competition rules of the Coal and Steel Treaty of 1952 (Articles 65 and 66) and the domestic competition laws of each individual Member State, more particularly relevant in Germany. Article 85 EEC prohibits all agreements or concerted practices which have as their object and effect the prevention, restriction or distortion of competition within the common market. It gives some (non-exclusive) examples: the fixing of purchase or selling prices or any other trade conditions; the limitation or control of production, markets, technical developments or investment; the sharing of markets or sources of supply; the application of dissimilar conditions to equivalent transactions placing other trading parties at a competitive disadvantage or rendering the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which have no natural connection with such contracts. Article 86 prohibits the abuse of a dominant position and also gives a number of examples: unilaterally imposing unfair purchase or selling prices or other unfair trading conditions; limiting production, markets or technical developments to the prejudice of consumers; applying dissimilar conditions to equivalent transactions and making the conclusion of contracts subject to supplementary obligations. This list is also not conclusive and besides the discrimination techniques mentioned as examples in the Article itself, predatory price cutting and the refusal to supply may also be abuses of a dominant position. Anti-trust cases tend to be complicated in that anti-competitive effect must be proved within a relevant market which itself must be demonstrated by the plaintiff. In the United States there was a system of so-called per se violations (notably price fixing) developed by case law in order to lighten substantially the burden of proof for the plaintiff. As mentioned before, this approach is now increasingly abandoned and defendants are given more room to prove efficiency considerations.15 Under EU law the per se approach never took hold and Article 85(3) always made provision for exemptions where agreements or concerted practices contributed to improving the production or distribution of goods or to promoting technical or economic progress, allowing consumers a fair share of the resulting benefit, provided the restrictions are not indispensable and do not substantially eliminate competition. However, under EU law pursuant to Regulation 17/62 the exemption can only be granted by the European Commission. Notwithstanding this important procedural difference, it seems nevertheless a fact that United States and EU law are converging further within the context of encouraging private enforcement action everywhere. In practice there is in all systems scope for enormous diversity in the type of antitrust cases that may arise. According to Baker and Stabile,16 in the United States they may run: the gammit, ranging from a terminated dealer suing his or her manufacturer claiming that the termination occurred because the dealer would not abide by anti-competitive restrictions in the distribution contract, to a gigantic class action case in which a horde of plaintiffs are charging multiple defendants with some vast ‘robber baron’ cartel to rip off the public to the tune of billions of dollars. The same authors then attempt to identify the private anti-trust disputes more precisely and divide them into four broad categories based on the nature of the claim and the parties, as follows: Partners' disputes concerning the terms of their (long-term) contract either of a horizontal or vertical nature. This may concern disputes on pricing, exclusivity, territory or termination. Even though they may lead to complex market inquiries, these disputes are considered arbitrable without great difficulty. Bilateral buyer/seller disputes over the terms by which they conduct or refuse to conduct business where parties operate on a transaction-by-transaction basis. They concern vertical or unilateral activities including price discrimination, tie-ins, resale or use restrictions, refusals to deal or other monopoly abuses. These disputes are also thought arbitrable. Disputes over conspiracies with strangers involving claims by one party to a business relationship that the other has conspired with outsiders to suppress competition and injure the first party accordingly. These embrace horizontal conspiracies of any kind, including price fixing, market division and boycotts. They are less suited for arbitration as proof may involve third parties which are not subject to the arbitration agreement and the jurisdiction of arbitrators. Competitors' disputes involving claims by one competitor that it has been or is likely to be injured by the acts of one or more competitors through predatory pricing, refusal to deal, monopolistic abuse, price discrimination, exclusive dealings, unfair competition, anti-competitive takeovers and the like. In the absence of any contractual relationship between the competitors there is no arbitration agreement binding these parties and these disputes are therefore also not normally arbitrable. They concern largely tortious behaviour which, as already suggested above, is in any event unlikely to be covered by a pre-existing arbitration clause. One may note that the concerns here expressed are more of a practical than a policy nature and fit in the more market oriented United States approach. They specifically relate private anti-trust suits to contract issues and questions of privity, although they may sometimes also cover tortious behaviour, but only, it would appear, within a contractual framework. The System of Remedies As a consequence of its general philosophy, the United States system of anti-trust enforcement, although providing for strong public agencies such as the Federal Trade Commission and the Anti-trust Division of the Justice Department, favours private actions and encourages these by awarding private plaintiffs treble damages for any proven loss and reasonable costs.17 Therefore mere is in the United States not only the incentive of avoiding burdensome contracts but also the expectancy of a substantial reward in effectively managing to do so. However, an American peculiarity should be noted here: a party to a contract action cannot raise an anti-trust defence to a claim, although the courts will not grant specific performance of a provision which amounts to an anti-trust violation.18 It would appear that in United States arbitrations, in terms of enforcement the foremost question is whether arbitrators can award treble damages and (subsequently) whether such damages awards are capable of enforcement through the ordinary courts in the United States and elsewhere. Another question is whether, if arbitrators cannot award treble damages, civil courts could still do so on the basis of the arbitral award, a typical American dilemma of a procedural nature which must remain undiscussed here. As to awarding treble damages itself, much seems to be said for the proposition that such damages are penal in nature and therefore not properly within the competence of arbitrators.19 Their enforcement through the ordinary courts in the United States as the country of the arbitration may, in any event, be in doubt. Elsewhere this is even more so under Article V of the New York Convention, especially if the award of these damages may not be considered in accordance with the law of the country where the arbitration took place or if there remains doubt in the matter (Article V.l(e)), or because this aspect is not believed to be capable of settlement by arbitration in the country of enforcement (Article V.2(a)), or if enforcement is generally considered contrary to the public policy of the country where it is sought (Article V.2(b)).20 EU law does not specify any criminal or civil sanctions beyond the nullity of anti-competitive contracts (Article 85 (2)) and criminal and civil sanctions are considered the preserve of domestic law of the Member States except where the Commission itself uses its extensive powers under Regulation 17/62, initiates proceedings and imposes penalties. These are, however, of an administrative nature and not meant to recompense the victims. Although action by the Commission has become the heart of anti-trust enforcement in the EU, it is thus limited in nature and notably not meant to relieve parties directly from their contractual obligations or reimburse them for their losses for which domestic private action is necessary. This also leaves scope for arbitrations. It is particularly important to note in this connection that the authority to pronounce agreements void under Article 85(2) is not exclusively reserved to EU institutions and can be invoked by the ordinary courts.21 As suggested above, negative clearances certifying that there are no breaches of Article 85(1) or Article 86 and (block) exemptions under Article 85(3) reduce the need for action, either public or private, and limit the need for, or possibility of, policy considerations in litigation. These techniques at the same time facilitate arbitrations by eliminating or solving policy issues. But there remains the question of the interpretation of the scope of the negative clearances and the exemptions in relevant cases, which, as mentioned before, may again be private issues and, as such, arbitrable. In the EU, anti-trust enforcement may thus be initiated by private parties, although it appears to remain exceptional as the European Commission normally exerts its special enforcement powers subject to appeal to the European Court in Luxembourg and remains the focus for complaints. Yet parties may have their own objectives, particularly in the area of the nullity of the agreements and in the matter of damages. The question of treble damages does not arise in (domestic) European law so that this complication and inducement of private law suits in the ordinary courts (as against arbitration) need not be discussed further. As mentioned earlier,22 the Commission has now started generally to encourage private actions in the domestic courts. This may well prove to be an important development and a significant signal of the depolitizarion of anti-trust enforcement even in the EU. In this connection there is, on both sides of the Atlantic, the further question of the effect of concurrent or later anti-trust enforcement action by the competent public agencies. In the EU, Article 9(3) of Regulation No. 17 makes it clear that state courts remain competent at least as long as the Commission has not taken action. This does not necessarily mean, however, that when the Commission opens proceedings all private actions are automatically terminated as they may have different purposes in terms of remedies and damages. This would also apply to arbitrations. Where a private action has been concluded before Commission involvement, the matter is res judicata between the parties, even though it is conceivable that a contract held valid notwithstanding an antitrust attack in private proceedings is later undone by public action. There are examples of this happening.23 The opposite is less easily imaginable but in theory also possible. Damages awarded and paid would men remain unaffected even if the contract was later upheld. As suggested earlier, special aspects of anti-trust proceedings in terms of reaching third parties in conspiracy cases and where necessary to give evidence on market related aspects are complications everywhere. It is certainly a fact that arbitrators are always limited by privity in the consideration of anti-trust matters although they may try to rely on the ordinary courts for orders to compel others to cooperate. Public issues, including the effect on whole classes of citizens, must also be considered out of their reach. This leaves the question whether they may or must desist if these aspects arise. On the other hand, many anti-trust cases have only an incidental character, especially where brought as a defence against a contractual claim for specific performance and where the nullity of the agreement and related damages are claimed. It would thus appear that private anti-trust enforcement is largely limited to this area – and all the more so arbitrations. An aspect of great interest in international cases, is the question of the contractual choice of a domestic law supporting any litigation whether or not in arbitration. Since anti-trust laws are mandatory in nature they cannot be rendered ineffectual or be opted into at will merely through choice of law clauses. They cannot be superseded by arbitrators acting as amiable compositeurs or by arbitrators required to find on the basis of equity.24 In line with Article 3 of the EU Convention on the Law Applicable to Contractual Obligations (the Rome Convention of 1980, now ratified by all EU countries), parties cannot opt out of mandatory rules of a country when all the elements connected with the situation are relevant to that country. Short of this, effect may also be given to the mandatory laws of any country with which the situation has a close connection – an approach largely reflected in the United States in section 187 of the Second Restatement of Conflict of Laws. Another way to look at this issue of applicable law is mandatorily to apply the anti-trust law of the country where the anti-competitive effect is produced.25 It would certainly be appropriate where the allegation is tortious behaviour such as the abuse of a dominant position. The country where the effect is produced would then be the country with the closest connection. The mandatory rules of domestic anti-trust laws may take different forms themselves and may need further consideration in international cases in view of the different approach to anti-trust enforcement or procedural issues in various countries. In Germany, for example,26 the law is specific in that parties can only arbitrate issues which they have a right to settle privately.27 Within these confines, the German Supreme Court has constantly held that antitrust issues are arbitrable, including the validity of contracts.28 However, section 91 of the German Anti-trust Law 1957 requires that, as to certain classes of anti-trust disputes not pending at the time of the conclusion of the arbitration agreement, an option to proceed in the normally competent courts must be included for all the parties. Without this the arbitration clause is void even though an argument can be made that the difference in treatment of present and future disputes is illegal under Article II. 1 of the New York Convention of 1958, ratified by Germany. The section concerns sales-, discount-, production-, rationalization-, specialization- and import-cartels. Whether section 91 also applies in foreign cases impacting on Germany is another matter. In any event, it is assumed that the option is not relevant in anti-trust issues arising under EU law in Germany. Finally, an important procedural aspect of EU law is that under Article 177 of the Rome Treaty the ordinary courts are able (and often obliged) to ask for a preliminary ruling from the European Court in Luxembourg on the interpretation of EU law. It is clear that this facility, or indeed the duty to ask for a preliminary ruling, does not concern the arbitration panel.29 It does not rule out, however, the possibility that the Panel asks for and receives the assistance of the Commission offered to the ordinary courts in the 1993 Notice. It also does not rule out the possibility that the recognizing court, in enforcement proceedings within the EU of anti-trust arbitral awards, still asks for an opinion of the European Court, e.g. on whether a block exemption has been correctly invoked. Conclusions What conclusions can be drawn from the above? A number of principles may be said to present themselves: The anti-trust issues that may arise in arbitration are limited to contractual issues and do not therefore normally extend to tortious behaviour such as abuses of a dominant position or monopoly power, except if they arise in a contractual context or if arbitration is agreed after a conflict has arisen. The contract issues would appear to centre on the validity of the contract itself (also as a basis of the competency of the arbitrators), of its horizontal or vertical restrictions, and on any damages resulting from anti-competitive behaviour. One must assume that under modern law the nullity of the contract or any of its offensive conditions may be ground for a claim as well as a defence in an arbitration. Involvement of third parties (including trade associations) to prove conspiracies or determine markets and market share would, if resisted, appear to depend on the cooperation of the ordinary courts in the countries of these parties and is naturally limited by the fact that these parties will normally not be subject to the arbitration agreement. Parallel civil action in the ordinary courts may be another answer to obtain reasonable discovery and access to evidence from these third parties; but it may, in international cases, have to cover several countries creating its own complications and in any event resulting in duplications and extra cost. An alternative may also be to file a complaint with the public anti-trust enforcement agencies where operating. Their involvement would not necessarily supersede the private action, whether or not in arbitration, as the issues in terms of remedies and damages might be quite different. Judgments and awards already rendered and damages paid would in any event remain unaffected by any subsequent public action, although the contract itself, if originally upheld, could still be held void. Arbitrations are not appropriate to determine class actions of any sort or to reach results which extend in their effect to third parties or any classes of interested parties. Arbitrators should limit their awards accordingly. Justifications of efficiency or other public benefits are difficult to test in arbitrations and, where they arise, arbitrators may have to consider abandoning the case for lack of jurisdiction. But the tendency is to broaden the involvement of the ordinary courts – and consequently of arbitrators – in this area. Under EU law these considerations are in principle still reserved to the Commission and its exemption policy. This may, however, also simplify the situation for arbitrators and facilitate their involvement. In this context, arbitrators would always be able to test whether the alleged offence is cured by an EU (block) exemption or covered by a negative clearance. Under EU law, if applicable, they may also be able to pronounce on the likelihood of an exemption if a request therefor is pending. There would, however, not be any recourse by arbitrators to the system of preliminary rulings under Article 177 of the Rome Treaty to help determine these issues (although courts within the procedure for enforcement in the EU might still request such rulings). Arbitrators may, however, receive assistance from the EU Commission to the extent that ordinary courts can now obtain this. In international cases (either because of the nature of the claim or the location of the parties or tribunal) arbitrators still tend to apply the arbitration law of the country where they sit in aspects of arbitration (unless parties have explicitly chosen another law), including arbitrability of antitrust issues, but the proper law of the contract as to the validity of the arbitration clause itself. The latter may also bear on the issue of arbitrability. Both may normally be chosen by the parties. The applicable substantive anti-trust rules may also be relevant in this connection, but are of a mandatory nature and can therefore not be circumvented or opted into by a choice of law clause or be affected by arbitrators sitting as amiable compositeurs or in equity. This means that, regardless of where arbitrators sit, they must apply the anti-trust rules of any country with which the case is in all its aspects connected. If there is no such country, they might apply the anti-trust rules of any other country with which the contract is closely connected or where the anti-competitive effects are produced. There remains an obvious problem if the lex contractus does not accept arbitrability of certain anti-trust disputes, even if the lex arbitri does. The applicable substantive anti-trust laws might in turn not accept it or, as in Germany in certain cases under domestic anti-trust law, require the option for parties to have access to the ordinary courts, without which option the arbitration clause might be void altogether. The result is that the arbitration clause might not then be applicable as a matter of contract law whilst there may also be problems with, or resulting from, the subsequent application of the substantive law. This would appear to be an unavoidable hazard in international arbitrations, although on arbitrability all applicable laws may gravitate towards the conclusions reached under (a), (b) and (c) above as common denominator. Also parties may minimize the problems by choosing the lex contractus and lex arbitri of the country whose anti-trust laws are most likely to apply. It nevertheless highlights the greater risk of private proceedings in public law related issues. Yet arbitrations would appear more vulnerable than concurrent private ordinary court proceedings as the latter may not everywhere be stayed so easily and international enforcement of arbitral awards might sometimes be subject to even greater scrutiny than that of ordinary judgments. As to international enforcement, the results will substantially depend on the award being within the terms of the arbitration agreement and binding in the country in which or under the law of which it has been rendered, on the arbitrability of the issue under the lex arbitri, the lex contractus, the applicable anti-trust law, and under the law of the place of enforcement (so that four legal systems ultimately might have to agree), and on its acceptability on public policy grounds in the country where enforcement is required. A finding by arbitrators of nullity of a contract or certain of its provisions because of anti-trust considerations may be unlikely to prove objectionable in this connection. But an award requiring a party to perform a contract which the enforcing courts might consider void under applicable anti-trust law might more readily be so regarded.30 Treble damages in particular may not be internationally enforceable on public policy grounds. There would not yet appear to be much scope for a transnationalized antitrust approach to international cases. Although international cases may present extra complications – both in terms of the law applicable to arbitrability and also the arbitration process or the substance and enforcement of the awards – these complications seem not as yet to be assuaged or overridden by special considerations of efficiency or comity or through application of general anti-trust and arbitration principles including those referring to arbitrability thus reducing at least the number of potentially applicable legal regimes. It is conceivable, however, that a transnationalized concept of anti-trust laws will develop with its own rules and justifications based on general principles of competition law, if necessary to be construed as overriding principles of domestic law. It is bound to be less policy- and more market- and private enforcement-oriented, as the law in the United States already is, and thereby ease the problem of arbitrability. As to arbitrability, the conclusions reached above, particularly under (a) to (c), could serve as the core. It is also conceivable that in recognition and enforcement of anti-trust awards, even now, in international cases notions of comity will penetrate the use of public policy as a bar and reduce its impact in the context of the development of the international public order concept, thus easing at the same time the public policy exception to anti-trust awards. In all cases arbitrators would have to be mindful of the requirements of a fair forum, the need for and requirements of a proper hearing and adequate discovery, the privity related limitations on their involvement, the mandatory rules and public policy requirements of the States most directly concerned with the case, and above all of the possibilities of enforcement of the resulting award in the places where it is likely to matter most. They should restrict their involvement or even desist if they are not confident that it is useful under the circumstances, although their power to do so might be limited by the wording of the arbitration clause itself. Drafting of the Arbitration Clause This discussion raises the question whether, through drafting of the arbitration clause, further clarification can be obtained, the scope of arbitration can or should be varied, and the role of arbitrators could be better defined. As an arbitration may be inappropriate in competition issues, a broad arbitration clause normally written to cover entirely different kinds of disputes is highly likely to create confusion. Where anti-trust issues might conceivably arise and parties nevertheless want to enter into the relevant contractual arrangements, a general arbitration clause should be avoided (if not excluding arbitration in competition issues), in order to avoid the prospect of unenforceability for the reasons set out at the end of the previous paragraph. More specific reasons for the exclusion of arbitration might arise where a party is likely to be the plaintiff and does not want to be forced by the defendant into an arbitration which might be less suitable if only from a point of view of endangering treble damage recovery in the United States, losing the benefit of a jury trial there, foregoing the possibility of similar actions being joined, or acquiring evidence from unwilling third parties.31 It is not easy to separate out the issues that may make an arbitration inadvisable in advance of an anti-trust dispute and there are limits to the complications one can introduce in a more tailored arbitration clause. This may be a further reason for excluding anti-trust issues from arbitration altogether. Yet if it is possible to be more specific in the arbitration clause, then mere is no reason to except from arbitration any claims to annul the contract or its offensive clauses on anti-trust grounds, anti-trust defences against a request for specific performance, or claims for related damages.32 In this connection, it may prove helpful to make clear in the clause that parties may raise anti-trust issues as both claims or defences in contractual actions. If it is desired to retain the facility to arbitrate anti-trust issues more generally, the arbitration clause should preferably allow the arbitrators summarily to dismiss (or to do so after the completion of discovery) without prejudice all antitrust claims substantially involving third parties or likely to lack enforceability in countries where it might matter most. To avoid endless argument, arbitrators should in that case be given broad powers to do so. It has also been suggested that courts themselves may develop some rules in this area through rejection of petitions to compel arbitrations if clearly unsuitable in the situation.33 Discovery is another difficult area to cover in an arbitration clause before a dispute has arisen. In any event, whatever procedure is agreed by the parties, it may not affect third parties without the sanction of the ordinary courts. But parties could promise each other cooperation in invoking judicial assistance or allow arbitrators to desist if in their opinion the hearings and the discovery process are not likely to be adequate in the circumstances. In the area of remedies it might also be possible to agree in the arbitration clause to the principle of treble damages or to their limitation or exclusion. Finally, as to the problems mentioned above under (k) and (1), parties in their arbitration clause would probably be wise – if anti-trust enforcement considerations were the only consideration, which is most unlikely to be the case except if the clause is drafted after the issue has arisen – to avoid great divergence between the lex contractus, lex arbitri and the applicable anti-trust laws and related policy considerations. Since the last are mandatory, it might then be preferable to opt for the lex contractus or at least the lex arbitri of the country whose mandatory anti-trust laws are thus likely to prevail, at least if it concerns only mandatory rules and policies of one country. Conclusion In conclusion, the trend is undeniably to extend the notion of arbitrability everywhere, and this has also an effect on the arbitrability of anti-trust issues. It is not surprising that the United States has shown the way in this area in view of the more private nature of its anti-trust laws and enforcement facilities. The internationalization of trading patterns will unavoidably lead to a ‘privatization’ of trade related law in all other modern countries. This is likely to affect the nature of anti-trust law and its enforcement everywhere and will create greater scope for private litigation and consequently for arbitration of competition issues even in countries which so far have been sceptical towards it. Although international enforcement of the ensuing awards may initially suffer, this is only the case until corresponding notions of international public order evolve supporting this internationalizing development instead of serving as a bar against it. Footnotes 1 Commercial Arbitration (2nd ed. 1989) at pp. 149 et seq. 2 International Commercial Arbitration (2nd ed. 1991) at pp. 137 et seq. 3 Op. cit. at p. 79. 4 BRT v. Sabam, ECJ Case 127/73, ECR 51(1973). Art. 85(2) in any event allows national courts to determine the civil law effects of the prohibition of Art. 85(1). 5 See for an important early discussion of the subject under EC law, also covering older, often contradictory, case law of the lower courts in France and older decisions of the EC Commission, Kovar, ‘Droit Communautaire de la Concurrence et l'Arbitrage’ in Le Droit des Relations Economiques Internationales, Etudes offertes à Berthold Goldman, 109 (1983). 6 Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth Inc., 473 US 614 (1985). 7 See Ninth Circuit in Gilmer v.Interstate/Johnson Lane Corp., 1ll S.Ct. 1647 (1991) and in Nghiem v. NEC Electronic, Inc., CA 9, No 92-16155, June 3, 1994, overruling the 1968 Second Circuit decision in American Safety Equipment Corp. v.J.P. Maguire & Co., 391 F.2d 821 (1968). 8 See for a discussion of these arguments also Lowenfeld, ‘The Mitsubishi case: another view’, Arbitration International, Vol. 2, 178 (1986). 9 See Shearson/American Express, Inc. v. McMahon, 482 US 220 (1987) and Rodrigues de Quijas v. Shearson/American Express, Inc., 490 US 477 (1989). 10 This is sometimes called the ‘second look doctrine’, see also Rogers, ‘Arbitrability’, Arbitration International, Vol. 10, 263 (1994). 11 See also Drolshammer, ‘On the Relevance of Competition Laws (EC, US) in International Arbitration, Remarks from a Swiss Perspective’, Association Suisse de l'arbitrage, ASA Special Series No. 6, 98 (1994). 12 93/C 39/05, OJ No C 39/6 (February 13, 1993). 13 See also Dessemontet, ‘Arbitrage, Propriete Intellectuelle et Droit de la Concurrence’ in Objective Arbitrability Anti-trust Disputes Intellectual Property Disputes, Association Suisse de l'arbitrage, ASA Special Series No. 6, 87 (1994). 14 See n. 12, supra. 15 See, e.g., FTC v. Indiana Federation of Dentists, 476 US 447 (1986). 16 ‘Arbitration of Antitrust Claims: Opportunities and Hazards for Corporate Counsel’, The Business Lawyer, Vol. 48, February 1993, 395, 398. 17 S. 7 of the Sherman Act as expanded in 1988 by s. 4 of the Clayton Act. 18 Kelly v. Kosuga, 358 US 516 (1959) and Kaiser Steel Corp. v. Mullins, 455 US 72 (1982). 19 See Lowenfeld, op. cit. supra, n. 8 at 189. 20 It is to be noted that even treble damages awarded by the ordinary courts may be challenged in enforcement elsewhere: see for Sweden, Nilsson, ‘Arbitration and Anti-trust – Enforcing Treble Damages from a Swedish Point of View’,J. Bus. L., 227 (1987); and for Switzerland, Bernet and Ulmer, ‘Recognition and Enforcement in Switzerland of US Judgments Containing an Award of Punitive Damages’, International Business Lawyer, 272 (1994). 21 In France this was early on much contested by J. Robert Arbitrage civil et commercial, (1967) in Dalloz (ed.), at pp. 464 et seq. The Appeal Court of Paris in a decision of January 20, 1989, Revue Arbitrale, 1989, 294, seems now to accept the nullity of the contract at least as an arbitrable defence but not (yet) as an arbitrable claim, cf. for the American situation in contract cases, n. 18 supra and accompanying text 22 See n. 12, supra. 23 See the Preflex case, Court of Brussels, October 15, 1975, Journal des Tribunaux, No. 4964, 495 (1976), upholding a restrictive contract later voided through action by the Commission, Bull. C.E. 5–180, pp. 36 et seq. 24 See, for domestic German law which is explicit in this respect, Kuhn, ‘Arbitrability of Anti-trust Disputes in the Federal Republic of Germany’, Arbitration International, Vol. 3, 230 (1987). 25 This is the view of Kovar, op. cit. n. 5, supra, 115. 26 See Kuhn, op. cit n. 24, supra, 226. 27 German Code of Civil Procedure, s. 1025. 28 37 BGHZ 194 (1963). 29 cf. ECJ, Case 102/81 (Nordsee), ECR 1095 (1982). 30 See German Supreme Court, 46 BGHZ 365 (1966). 31 See also Baker and Stabile, op. cit no. 16, supra, 410. 32 This anti-trust claims accepted in arbitration were enforced early by the Civil Court of Brussels, October 15, 1975, cited in n. 18, supra, but cf. also the Court of Appeal of Paris in the 1989 case cited in n. 18, supra. 33 See also Baker and Stabile, op. cit n. 16, supra, 421. © 1995 LCIA
TI - The Arbitrability of Competition Issues
JF - Arbitration International
DO - 10.1093/arbitration/11.2.151
DA - 1995-06-01
UR - https://www.deepdyve.com/lp/oxford-university-press/the-arbitrability-of-competition-issues-VOifDw8azX
SP - 151
EP - 168
VL - 11
IS - 2
DP - DeepDyve
ER -