Navigating the challenges in arbitrating competition law issues

Competition law arguments may arise in commercial arbitrations in many different forms.  For example, a party may challenge the exclusivity clause in a licensing agreement on the basis that it has an anti-competitive effect; a party may allege that the opposing party abused its dominant position during the negotiation or performance of the contract; or there may be disputes on the scope and enforceability of non-compete clauses, particularly in a joint venture or distribution context.

Presenting these arguments in an arbitration is not straightforward.  Not only would a party have to establish that the arbitral tribunal has jurisdiction to hear disputes over anti-competitive conduct and that those issues are arbitrable under the relevant laws, a party would also have to explain the market and economic arguments to arbitrators who have less investigatory powers than national competition authorities and are often less familiar with competition law.

Further complicating these arguments, different jurisdictions have different approaches to the arbitrability of competition law disputes.

On the one hand, courts in the U.S. and England and Wales have long accepted that competition law issues are arbitrable as long as the parties have consented to arbitrate them and the arbitration does not deprive the parties of their substantive rights under the national competition laws or prevent the courts or competition authorities from exercising their regulatory and supervisory functions.  Similarly, French and German courts have also recognized and supported the arbitration of the civil or private aspects of antitrust disputes as long as they apply and respect EU competition law, although the European Commission retains an exclusive jurisdiction to enforce competition law in the EU.  German courts have even found that EU antitrust rules form part of German public policy and require arbitrators to take EU competition law into account when rendering awards.

On the other hand, the Supreme People’s Court of the People’s Republic of China ([PRC] has held that antitrust disputes are not arbitrable under PRC law because arbitration is not among the dispute resolution mechanisms expressly provided under the PRC Anti-Monopoly Law.  It remains to be seen whether PRC courts will enforce awards that are alleged to have anti-competitive effect in the PRC and whether the PRC Arbitration Law, which is to be amended soon, will address the arbitrability of antitrust disputes in China.  Arbitrating antitrust disputes is also relatively untested in Japan, although commentaries suggest that this is possible.

The complexity of the legal issues involved in arbitrating competition law disputes does not mean parties should avoid them.  Arbitration offers a confidential method to resolve what would often prove to be sensitive and potentially reputation-damaging disputes.  In the right cases, raising competition law arguments can turn the tables and potentially help a party to secure a favorable settlement.  As this area of law continues to evolve, parties should keep abreast of the latest developments in the jurisdictions and markets in which they operate and seek advice from lawyers who have expertise in international arbitration as well as competition law.