ARBITRABILITY OF ANTI-COMPETITIVE DISPUTES

ARBITRABILITY OF ANTI-COMPETITIVE DISPUTES

Globalization has brought about significant changes in the world, leading to the dissipation of borders between nations and creating opportunities for economic development. While globalization has facilitated increased revenue and trade on a global scale, it has also resulted in inequality, particularly for developing countries that lack the necessary infrastructure to harness the benefits of an integrated economic market. These countries often need to seek technical knowledge, infrastructure, and financial advice from companies established in developed nations, which may lead to excessive borrowing and investments that could result in an unsustainable infrastructure.

This unequal playing field in the global economy has resulted in anti-competitive practices and legal disputes arising from said practices. One such legal dispute is the Future Retail Limited1 case, which was filed by Amazon before the Supreme Court to enforce the emergency arbitrator’s interim order dated October 25, 2020 (“Emergency Order”), passed in arbitration proceedings before the Singapore International Arbitration Centre (“SIAC”) which was initiated by Amazon against Future (“Arbitration Proceedings”), this Emergency Order was in favour of Amazon, barring Future from taking any steps to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party (“Award”).2

The Arbitration Proceedings were initiated by Amazon.com Investment Holdings LLC (“Amazon”) owing to Future Retail Limited's (“Future”) intention to sell its retail business and assets to Reliance Industries Limited (“Reliance”). This was challenged stating that it is a violation of the shareholder’s agreement dated August 22, 2019 with FCPL (“Shareholder Agreement”). By virtue of this Shareholder Agreement, Amazon had controlling rights over Future owing to the subsisting shareholder’s agreement between Future and Future Coupons Private Limited (“FCPL”), which stated that any transfer of assets by Future needs prior permission from FCPL, that power is now vested with Amazon owing to Shareholder Agreement, which was alleged to be violated.

However, despite there being contentions that this dispute was under the jurisdiction of the Competition Commission of India (“CCI”), the Supreme Court ordered for continuation of Arbitration Proceedings (“Order”). Furthermore, they recognized the Award as an interim relief as provided under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”)3 and can be enforceable as per the provisions of Section 17(2) of the Arbitration Act.4

This Order flew against the settled principles of law, as by this time the CCI passed an order suspending the proposed deal between Reliance and Amazon and levying a monetary penalty of Rs. 200,00,00,000 (Rupees Two Hundred Crores Only) on Amazon (“CCI Order”). The parties to the Arbitration Proceedings argued before SIAC that the CCI Order terminates the Arbitration Proceedings, but this argument was rejected.5

It is to be noted that the Order went against the provisions of the Competition Act, 20026 which provides for a blanket ban on all judicial bodies or tribunals to adjudicate on disputes arising from or in relation to the Act, apart from CCI and appellate tribunal as provided under the Act. This principle was affirmed by the Supreme Court’s decision in the Ayyasamy case7, which explicitly excluded antitrust disputes from arbitration.

However, the Order is in consonance with the recent developments in the Indian judicial system, wherein the judiciary has widened the scope of arbitrability. These developments can be observed from the Supreme Court's decision in the Vidya Drolia case8, wherein it was clarified what is considered arbitrable by clearly stating what is non-arbitrable. In the judgment, it was clarified that disputes, when the cause of action and subject matter relate to actions in personam (affecting specific person(s) only), are arbitrable. Applying these principles the Court passed this judgment overruling Himangi Enterprises case9 and recognizing the Arbitrability of landlord-tenant disputes which are governed by the Transfer of Property Act.10

These advancements in the Indian judicial system align with the progress seen in the international judicial system with respect to the arbitrability of competition law disputes. A practice that has witnessed significant developments in various jurisdictions. In the United States, the Arbitrability of antitrust disputes was recognized by the Supreme Court in the Mitsubishi Motors Corp case.11 This principle was further cemented owing to its implementation by the lower courts, wherein, arbitrability of domestic antitrust disputes was recognized as well.12

Similar developments have taken place in Canada, where the Canadian Federal Court of Appeal recognized the arbitrability of private claims for damages under the Canadian Competition Act.13 The Canadian judiciary also relied on a similar distinction as the Indian courts, wherein disputes in personam were held to be arbitrable. However, The European Union has been at the forefront of recognizing the Arbitrability of antitrust claims, with particular reference to competition disputes arising from supply agreements, license agreements and similar business agreements14 generally executed between individual parties and any claims arising from them generally affecting the said parties to the agreement(s).

The developments in the Indian judicial system with respect to increasing the scope of arbitration as discussed above are the need of the hour with the increasing backlog of cases on the judicial system15 requiring the Government and affected persons looking to alternative dispute resolution mechanisms for speedy resolution of competition disputes rather than relying upon CCI and judicial bodies. Furthermore, with India continuing to attract foreign investments on an unprecedented scale,16 the possibility of multiple disputes in a similar vein to the Future Retail Limited case is very real. Thus, the concept of arbitrating competition law disputes which are in personam, should be adopted by our legislature and judiciary.

The developments discussed in this article are positive steps towards the arbitrability of competition disputes, similar steps have been taken by the judiciary with respect to the arbitrability of Intellectual Property Rights disputes, as the Delhi High Court allowed for trademark disputes to be arbitrated as the plaintiffs were seeking to enforce their rights against a specific group and not against the world.17 Such steps are necessary to instill confidence among foreign investors that legal disputes will be effectively resolved. Thus, improving our regulatory structure, which in turn helps India improve in the Ease of Doing Business Index.18

In conclusion, the evolving landscape of international commercial arbitration and the need for efficient resolution of competition disputes in India necessitate exploring arbitration as an alternative avenue for resolving competition law disputes. This can be done with an amendment to the blanket ban on the adjudication of competition disputes by including an exclusion for arbitrating “in personam disputes” in the Act.

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1. Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors., Civil Appeal No. 4492-4493 of 2021
2. PTI, SIAC concludes hearing over Amazon-Future dispute, (June 12, 2023 11:10 A.M.). SIAC concludes hearing over Amazon-Future dispute (indiatimes.com)
3. S.17 (1) of Arbitration and Conciliation Act, 1996
4. Para 40 of Future Retail Limited case
5. Forum Gandhi, SIAC rejects Future’s plea to terminate arbitration proceedings, (June 12th, 2023 11:30 A.M.). SIAC rejects Future’s plea to terminate arbitration proceedings - The Hindu BusinessLine
6. S. 60 of Competition Act, 2002
7. Ayyasamy v. Paramasivam, (2016) 10 SCC 386
8. Vidya Drolia & Ors. v. Durga Trading Corporation & Ors., Civil Appeal No. 2402 of 2019
9. Himangi Enterprises v. Kamaljeet Singh Ahluwalia, AIR 2017 SC 5137
10. Abhisar Vidyarthi, Applying Vidya Drolia’s “Four Fold Arbitrality Test” to Antitrust Disputes in India (June 12th, 2023 12:20 PM). Applying Vidya Drolia's “Four-Fold Arbitrability Test” to Antitrust Disputes in India - Kluwer Arbitration Blog
11. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985)
12. Nghiem v. NEC Electronics Inc., 25 F.3d. 1437 (9th Cir. 1994)
13. Murphy v Murphy, 2013 FCA 38
14. Assimakis P. Komninos, ‘Arbitration and EU Competition Law’, 6. Arbitration and EU Competition Law by Assimakis Komninos :: SSRN
15. Gaurav Pandey, The Unsettling Consequences of Justice Delay in India: A Grave Situation with Alarming Data (June 12th, 2023, 4:20 PM). The Unsettling Consequences of Justice Delay in India: A Grave Situation with Alarming Data (indiatimes.com)
16. Ministry of Commerce & Industry, (June 12th, 2023 7:23 P.M.). pib.gov.in/PressReleaseIframePage.aspx?PRID=1826946
17. Hero Electric Vehicles (P) Ltd. v. Lectro E-Mobility (P) Ltd, 2021 SCC OnLine Del 1058
18. Marek Hanusch, The Doing Business Indicators, Economic Growth and Regulatory Reform, (June 12th, 2023, 7: 45 P.M.). World Bank Document