Arbitration

 

Author Definition

 

Definition

Arbitration is an alternative dispute resolution mode under which an arbitral tribunal composed of one or more – generally three – independent persons (the arbitrators) issues one or more formal decisions (awards) that aim to settle a legal disagreement outside the ordinary judicial system according to the rules designated by a contract or a treaty. Appeals against the awards may be brought before a court but only on limited grounds, such as lack of competence of the arbitral tribunal or violation of public policy. The New York Convention of 1958 generally governs the recognition and enforcement of foreign awards.

 

Commentary

Since the Mitsubishi judgment, the arbitrability of antitrust cases has become a standard admitted in most – if not all – jurisdictions. Arguments based on competition law first arose in connection with agreements (e.g. vertical restraints) and quite quickly extended to abuses of dominant positions. Nevertheless, in the 2019 Shell (China) Limited v. Hohhot Huili Material Co., Ltd. case the Chinese Supreme People’s Court opted for a restrictive interpretation, excluding from arbitration civil disputes involving monopoly issues, since these are unrelated to contractual or other property rights.

Although merger control remains within the hands of competition authorities, arbitration procedures may be used in or even fully integrated into some measures relating to the implementation of remedies. For instance, the powers of a monitoring or divestiture trustee may be extended in order to allow it to render proper decisions and, as was the case in the EU Standard Trustee Mandate, give the possibility to the parties to provide for an arbitration clause. In connection with the proposed acquisition of Aleris Corporation by Novelis Inc., the buyer and the US Department of Justice agreed in 2019 on the terms of a binding arbitration procedure on the question of the relevant market under the Administrative Dispute Resolution Act of 1996 (5 U.S.C. § 571 et seq.). Beyond commercial disputes, one can observe interesting developments in sports arbitration, where parties have been invoking breaches of competition law by various organizations active in this field, including sports federations or anti-doping agencies.

In the Pechstein case, the German Federal Court (“Bundesgerichthof”) deemed both the arbitration clause and its acceptance by skaters to be valid, although athletes had no choice but to adhere to it if they wanted to participate in a competition. More specifically, it pointed out that both the national and international associations involved in this dispute were organized according to the “Ein-Platz-Prinzip”, i.e. they held exclusive competence over speed-skating competitions in Germany and internationally. Thus, the two federations as monopolists maintained dominant positions in their relevant markets. On the other hand, the imposed jurisdiction of the Court of Arbitration for Sport (CAS) was justified by legitimate grounds and therefore not abusive (paragraph 42 et seq.). Similarly, in International Skating Union v Commission (paragraph 163) the General Court accepted the argument that arbitration rules that confer on the CAS exclusive jurisdiction to review the legality of ineligibility decisions do not constitute an aggravating circumstance under the EU Guidelines on the calculation of fines. In a judgment of 2 October 2018, the European Court for Human Rights (ECHR) rejected objections pertaining to a fair hearing or a structural absence of independence and impartiality in the CAS, but admitted that the merits of the sanction imposed on Claudia Pechstein for doping required a public hearing.

Arbitral tribunals may not decline their competence and have to decide on issues pertaining to competition law, provided that these aspects are sufficiently related to the disputes covered by the arbitration clause. However, they have generally been denied the possibility to submit references for preliminary rulings to the Court of Justice of the European Union (CJEU). Indeed, the Court has consistently stated that an arbitral tribunal is not a ‘court or tribunal of a Member State’ within the meaning of Article 267 TFEU. Nevertheless, in its 2014 order in Merck Canada the CJEU confirmed that it would consider: “admissible preliminary questions referred to it by an arbitral tribunal, where that tribunal had been established by law, whose decisions were binding on the parties and whose jurisdiction did not depend on their agreement” (paragraph 18). While supporting the views expressed by legal authors that the prospect of a broader opening vis-à-vis other types of arbitration tribunals is not so remote, one should also nuance this perspective. Indeed, the 2018 Slovak Republic v. Achmea BV jurisprudence and the 2021 conclusions of Advocate General Maciej Szpunar in the Republic of Moldova v Komstroy case show, at least in the context of investment arbitration, that the CJEU is still reluctant to put national courts and arbitration tribunals on an equal footing.

Eco Swiss truly sets forth the standards on judicial review of an arbitral award by a national court in relation to a recognition and enforcement application filed by one of the parties in the EU. The Court first recalled explicitly that Article 101 TFEU constituted a fundamental provision which is essential for the accomplishment of the tasks entrusted to the Community and, in particular, for the functioning of the internal market; in other words, it belongs to the provisions constituting public policy with the EU. Therefore, a national court must grant an application for annulment of an arbitration award founded on failure to observe national rules of public policy when such award does not comply with the prohibition laid down in Article 101 TFEU. This approach is consistent with the provisions of the New York Convention, since under its Article V(2)(b): “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 [t]he recognition or enforcement of the award would be contrary to the public policy of that country.” However, this judicial review should be limited since, as the Court emphasized: “[I]t is in the interest of efficient arbitration proceedings that review of arbitration awards should be limited in scope and that annulment of or refusal to recognise an award should be possible only in exceptional circumstances” (paragraph 35). European national courts broadly share this approach, whether at the time of an appeal or in respect of a recognition and enforcement application. This is especially the case when antitrust issues are raised for the first time before a court of appeal or, even worse, while the winning party is seeking the recognition and enforcement of the award.

This last point calls for two additional remarks regarding the arbitrators themselves: first, the parties should in principle select arbitrators who master the basic concepts of competition law; second, when arbitrators decide ex officio to address antitrust questions, they should obviously respect the parties’ right to be heard and give them the opportunity to present all their arguments before rendering their award.

 

Bibliography

Gordon Blanke and Phillip Landolt (eds.), EU and US Antitrust Arbitration, Volumes 1 & 2 (Kluwer 2011)

Phillip Landolt, Modernised EC Competition Law in International Arbitration (Kluwer 2006)

Organisation for Economic Co-operation and Development (OECD), Arbitration and Competition 2010, Document of 13 December 2011 (DAF/COMP[2010]40)

Tobias Zuberbühler and Christian Oetiker (eds.), Practical Aspects of Arbitrating EC Competition Law (Schulthess 2007).

Author

Quotation

Christian Bovet, Arbitration, Global Dictionary of Competition Law, Art. N° 85871

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Institution Definition

Arbitration can be defined as a situation in which a private judge or arbitrator, agreed upon by the parties and under contract, is given the task of settling a dispute through issuing an arbitration decision. This definition has a number of key characteristics. Arbitration is a private way to settle a dispute. Arbitrators are therefore distinct from judges as they have the power to state the law, but not the power to apply it. The cost of the arbitration is covered by the parties involved in the dispute. This includes the cost of the arbitrator, the arbitration institution if there is one, and any experts involved in the process. Arbitration is usually adopted in cases involving commercial issues between the parties, for example resolving a contract. However arbitration could also be used in situations involving a state body where there is no commercial relationship, between for example a company and a competition authority. Other characteristics of arbitration include: quick resolution of the dispute and methods of recourse against the final decision of an arbitrator; the autonomy of an arbitration clause should be recognised, and the fact that the arbitration clause can be separated from the rest of the contract (i.e. if a contract is null and void following a competition violation, this does not nullify the arbitration clause). Finally it is the arbitrator who pronounces his or her competence to take on the matter rather than the state (so-called principle of ‘competence-competence’). Arbitration can either be international, in which case the arbitrator has a wider freedom to establish the framework of the procedure, or domestic which means the arbitrator must apply a number of rules and regulations related to public policy. Arbitration can also be institutional or ad hoc. Institutional arbitration is administered and managed by an arbitral institution, of which there are a number in the world to choose from. Ad hoc arbitration follows the law of arbitration and all the relevant procedures, but is overseen by the parties’ agreement. Recent cases have demonstrated a clear shift from ad hoc arbitration to institutional arbitration which is now the commonly adopted process. However, two important considerations include (i) the choice of chairperson for institutional arbitration, as if the parties do not agree this can be problematic, and (ii) the choice of institution itself, as there are a number of arbitral institutions but not all have the requisite experience. It is therefore important to choose an established arbitration institution. © OECD

Arbitration is a dispute resolution mechanism in which parties agree to have their dispute resolved by a private third-party decision-maker, rather than through litigation in public courts. The parties agree in advance that the decision-maker’s ruling will be binding on them, rather than merely advisory. Although arbitration is often described as a form of alternative dispute resolution, and it does indeed provide an alternative to court litigation, arbitration’s current success has resulted substantially from the support it has received from governments and courts. Consequently, while one of arbitration’s primary benefits is the freedom that it gives to parties to resolve their dispute in a manner different than that adopted in national courts, it must be remembered that arbitration is nonetheless heavily dependent on both national legal systems and national courts. © European Parliament

Since the Mitsubishi judgment, the arbitrability of antitrust cases has become a standard admitted in most – if not all – jurisdictions. A great number of books, articles and notes have been published on the subject. Nevertheless, experience shows that several questions may still arise and that the parties should count not only on practitioners understanding the fundamentals of competition law but also on arbitrators being truly allergic to arguments of this type or being simply incompetent in the matter. Although merger control remains within the hands of competition authorities, some measures relating to the implementation of remedies may be close or even integrated into arbitration procedures. © Excerpt from Christian Bovet in the e-Competitions special issue "Arbitration & Antitrust"

 
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