Arbitrability of Antitrust Disputes in the US and Europe

22.03.2023

CeCo EE.UU

International arbitration has been an alternative way of international dispute resolution for a long time. The role and importance of arbitration as an alternative dispute resolution between parties is gradually increasing. Therefore, the dispute’s subject matter is expanding, and more legal issues are being accepted as arbitrable.

One of the challenging issues regarding arbitrability is antitrust disputes. The problem is caused because of the particularity of the antitrust field, as it represents concerns of both private and public law. On one hand, the leading players in the market are private business entities, and they need flexible dispute resolution mechanisms, such as arbitration. On the other hand, the decisions that are adopted in these cases may have an impact on an entire industry and on a large group of consumers. Antitrust law seeks to protect public interests by ensuring free and fair market competition while aiming to protect the interests of all consumers across the country  (OECD, 2015). Therefore, both private and public interests should be considered in the discussion of this matter.

In this regard, a decision of the German Federal Court of Justice (Bundesgerichsthof), adopted in September 27, 2022, overturned an arbitral award on the basis of substantive public policy concerns. The Court vacated an award in the case “BGH KZB 75/21” (decision of September 27, 2022), on the grounds that the arbitral tribunal had erred in its application of a fundamental norm of the German Antitrust Act (GWB). The Court held that, when applying substantive competition rules (e.g., conduct of dominant undertakings or bycott practices), the judicial control of the arbitration award is not limited to the correction of evident errors, thus extending to any error made in the application of said rules (i.e., Articles 19. 20 and 21 of the GWB) (Peter Sester, 2021).

Therefore, it seems relevant and necessary to assess what is the current degree of acceptance of arbitration in disputes involving antitrust concerns in the US and Europe.

In the first place, it is worth to mention that, at the international level, the number of -bilateral and multilateral- free trade and investment agreements including arbitration proceedings (as dispute resolution mechanism) is rising. For example, the rules governing the system of the WTO’s mechanism for resolving international trade are outlined in the Dispute Settlement Understanding, which includes arbitration proceedings. Also, North American Free Trade Agreement contains provisions about dispute settlement through an arbitration. Thus, international business transactions are increasing, providing more potential for international disputes. International arbitration offers the parties to tackle the difficulties of international disputes because of its efficiency and flexibility.

Secondly, regarding to antitrust law, traditionally there have not been many supporters for the arbitrability of antitrust disputes but, as it is shown below, the development of the legal practice shows that, at least nowadays, most jurisdictions recognize the arbitrability of antitrust disputes.

The Earlier Approaches to the Arbitrability of Antitrust Disputes

Regarding competition law, the arbitrators’ duty to raise competition concerns ex officio has become disputable, owing to the general acceptance that antitrust rules are arbitrable (Alexis Mourre, 2011). The presumption is that the arbitrators have the authority to apply such regulations. Therefore, arbitrators see no reason to raise that question on their initiative if the parties do not.

However, this widespread agreement was non-existent in the past. Historically, lower courts held that antitrust claims could not be arbitrated because antitrust was simply overwhelmingly important to be left in the hand of private arbitrators rather than judges (Andrew Foster, 2011). Other common reasons for the non-arbitrability of antitrust claims included the idea that antitrust disputes required sophisticated legal and economic analyses that needed to be improved and adapted to the arbitral process. Also, many arbitration clauses were in contract adhesion, making contractual forum determination problematic.

In antitrust cases, the disputable facts could be intertwined with other law areas. One of the most prevalent cases in antitrust is intellectual property (IP) disputes. For example, American Safety v. McGuire (391 F.2d 821, 1968)was one of the first leading cases in the United States regarding arbitrability of antitrust disputes. In this case, a Federal Court denied the arbitrability of a trademark license agreement dispute by invoking various considerations, such as the general interest at stake (Alexis Mourre, 2011). Moreover, the court ruled that the pre-dispute agreements to arbitrate all claims arising from an agreement or contract were unenforceable as to federal antitrust claims (Bruce Brown, 1989). The reason behind this conclusion was that the dispute may involve third-party rights and that arbitrators may have different resources than state courts to gather evidence of antitrust violations (Alexis Mourre, 2011).

The American Safety doctrine remained the general rule in this area until the Supreme Court ruled in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc (473 US 614, 1985). The territorial restrictions inserted into a distribution agreement between a Puerto Rican automobile dealership (Sole), a Japanese automobile manufacturer (Mitsubishi), and Chrysler International, S.A., were at the heart of the dispute (Eric J. Fugslang, 1997). The agreement gave Soler the authority to sell Mitsubishi vehicles within a specific geographic area. Furthermore, the agreement included a broad arbitration clause. In this case, the US Supreme Court paved the way for the international recognition of the arbitrability of competition disputes, assuming the parties have agreed to arbitrate these issues (Richard C. Levin, 2018). Until that point, most -if not all- jurisdictions worldwide considered antitrust competition issues solely for courts.

The Current Tendency to the Arbitrability of Antitrust Disputes

In many jurisdictions, there is a broader acceptance of the arbitrability of disputes involving mandatory rules (Alexis Mourre, 2011). Therefore, nowadays, there is widespread agreement that arbitrators have the authority to apply mandatory rules, either primarily or incidentally. Currently, the arbitrability of competition law issues is a foregone conclusion. Whether competition law disputes can be resolved through arbitration has been answered in the affirmative by local courts in both the United States and Europe.

For instance, arbitration of competition law issues is well established in France. Also, in Switzerland, the arbitrability of EU competition law was recognized by a Federal Tribunal decision in 1992, which stated that “neither Article 85 of the [EU] Treaty nor Regulation 17 on its application forbids a national court or an arbitral tribunal from examining the validity of that contract” (Nigel Blackaby, 2023).

Rather than addressing whether antitrust issues can be arbitrated, subsequent decisions have tended to focus -at least in the European Union and the United States- on the scope of a state court’s authority to review arbitral awards in relation to disputes involving competition issues (Nigel Blackaby, 2023).

In its landmark decision Eco Swiss China Time Ltd v Benetton International NV, the European Court of Justice (ECJ) identified Article 81 of the EU Treaty (now Article 101 TFEU) as a matter of public policy that would justify the annulment or refusal of enforcement of an award that disregards it (Nigel Blackaby, 2023). In the context of a challenge to an award that gave effect to a license agreement that was later found to violate Article 81 of the EU Treaty, the ECJ ruled that “a national court that hears an application for annulment of an arbitration award must grant that application if it believes that the award in question is in fact contrary to Article 85 of the Treaty [now Article 81 TEU], and its domestic rules of procedure require it to grant an annulment application based on failure to observe national rules of public policy.’’

Although the ECJ did not explicitly rule in Eco Swiss on whether arbitrators have a duty to apply Article 81 EC ex officio if the parties themselves made no reference to it, this decision is widely interpreted as implying that arbitrators should do so or risk having their award annulled on grounds of a violation of public policy (Nigel Blackaby, 2023). However, it is unclear how serious the alleged violation of competition law must be in order for an award to be annulled. A ‘minimalist’ standard of review, under which only a ‘flagrant, effective, and concrete’ violation of public policy justifies the annulment of an award, has historically prevailed, though recent cases have demonstrated a willingness to depart from this approach (as happened with the case resolved by the German Federal Court of Justice, mentioned at the introduction).

Conclusion

The discussion of an antitrust dispute should be or not under arbitration proceedings has a very long and rich history. The primary approach regarding this issue (i.e., that the antitrust disputes are too crucial for arbitration) seems to be not defensible. Modern arbitration has all the procedural characteristics that are necessary to discuss a dispute properly. Especially in international disputes, arbitration is the most flexible and adequate way to resolve a case. Antitrust law is particular, and not all judges of national court have expertise in this field. So, in the case of arbitration, parties can choose arbitrators who have relevant experience in the matter and guarantee a high-qualified judgment. Also, parties can determine the seat of arbitration, which can be most convenient for them.

The recent history shows that antitrust disputes are arbitrable and national courts are enforcing arbitration awards resolving antitrust matters. Antitrust disputes are related to commercial matters, and parties should not be forbidden to resolve their dispute under arbitration. As time goes on, more commercial cases are under the proceedings of arbitration.

Related links & books:

• Nigel Blackaby, Constantine Partasides, Redfern Alan, Redfern and Hunter on International Arbitration (Seventh Edition), Oxford University Press, ISBN: 9780192869906, Oxford, 2023.
• Relationship Between Public and Private Antitrust Enforcement, OECD, 2015.
• Alexis Mourre, Arbitrability of Antitrust Law from the European and US Perspectives, in: EU and US Antitrust Arbitration: A Handbook for Practitioners, Gordon Blanke, Landolt Phillip (editors), Kluwer Law International, ISBN: 9789041127600, Alphen aan den Rijn, 2011.
• Andrew L. Foster, Peter E. Greene, The Essentials of US Antitrust Law for Arbitration Practitioners, in: EU and US Antitrust Arbitration: A Handbook for Practitioners, Gordon Blanke, Phillip Landolt (editors), Kluwer Law International, ISBN: 9789041127600, Alphen aan den Rijn, 2011.
• Eric James Fuglsang, The Arbitrability of Domestic Antitrust Disputes: Where Does the Law Stand?, De Paul Law Review, Vol. 46, Issue 3, 1997.
• Alexandra Theobald, Mandatory Antitrust Law and Multiparty International Arbitration, University of Pennsylvania Journal of International Law, Vol. 37, Issue 3/5.
• Richard C. Levin,  On Arbitration of Competition/Antitrust Disputes: A Tribute to Mitsubishi, Dispute Resolution Journal, Vol. 73, No. 4.

You may also like:

Arbitraje y Libre Competencia: ¿Es posible una complementariedad?

En defensa de la arbitrabilidad de las cuestiones de libre competencia

Estados Unidos: nueva guía sobre arbitraje y libre competencia

Trans-Pacific Partnership (TPP): El capítulo de inversiones