Arbitration and Antitrust An overview of EU and national case law

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Arbitration and Antitrust: An overview of EU and national case law PHILLIP LANDOLT Landolt & Koch (Geneva) phillip@landoltandkoch.com I. Introduction Arbitration is a prominent method of binding dispute resolution in international commercial relations. Some commentators, generally international arbitration practitioners, even claim that it is “the preferred method of international dispute settlement”. Since arbitration ousts all other substantive jurisdiction, where there is arbitration it is generally the only opportunity for the private enforcement of antitrust laws concerning the parties to the arbitration. The case law on antitrust and international arbitration features two prominent issue clusters, and scattered other issues. The first of the prominent issue clusters comprises questions as to the extent to which states are prepared to leave antitrust determinations to arbitrators. Within this cluster are therefore issues of the arbitrability of antitrust disputes, and refusals to enforce arbitration awards because of their incompatibility with antitrust laws. The second issue cluster relates to questions of the efficacy of antitrust enforcement within arbitration. Thus in this cluster one finds issues of what support states will provide to favour the enforcement of antitrust law in arbitration. This article will introduce the case law on these issues. The focus will be on the antitrust and international arbitration laws of the major jurisdictions - the United States, the European Union -, and their component members, as well as Switzerland. It should be mentioned here in this introduction that much of the treatment of antitrust law in the context of international arbitration is conducted by arbitral tribunals themselves. This occurs in commercial, sports and investment arbitrations. Certain regulators, notably the EU Commission, even delegate portions of their activities to arbitral tribunals, such as determinations upon merger control behavioural remedies. But the publication of arbitral awards is sporadic for commercial arbitration, which is where the great majority of antitrust questions arise. Thus no reliable conclusions may be drawn from what is published [1] . II. States Acceptance of Arbitration 1. Arbitrability and unenforceability of arbitration clauses A. US Law In Mitsubishi v. Soler [2] the questions before the United States Supreme Court were, first, whether the parties intended antitrust claims to be within their arbitration clause, and, secondly, whether a conspiracy claim under §1 of the Sherman Act was of a type permissible to be settled by arbitration, i.e. (objectively) arbitrable. The first question is dealt with in section B. below. As for the second question, the six to two majority decided that US federal antitrust claims were arbitrable in international matters. Previously, the Court of Appeals for the Second Circuit had found in American Safety v. J. P. Maguire [3] that antitrust law was not arbitrable. In Mitsubishi the Supreme Court distinguished American Safety on the basis of the international character of Mitsubishi, and the federal policy of supporting arbitration in the service of international commerce. In reaching their conclusion in Mitsubishi the majority rejected four objec- Arbitration and Antitrust: An overview of EU and national case law PHILLIP LANDOLT l 13 April 2012 l e-Competitions l N°45083 l www.concurrences.com 1
tions, but the one it considered the most forceful (calling it the “American Safety doctrine”) was that accepting the arbitrability of international antitrust disputes would weaken the private enforcement of antitrust laws. The Court found though that there was no reason from the outset to conclude that arbitrators would not apply antitrust law. Arbitrators are bound to “effectuate the intentions of the parties” [4] and if one party makes a claim based on antitrust law the tribunal will be required to decide it. Moreover, the Supreme Court pointed to the availability of public policy review at the stage of the enforcement of the arbitral award. Under the widely-applicable 1958 New York Convention on the Recognition and Enforcement of Arbitration Awards, one of the few grounds to refuse to enforce is where the award is contrary to public policy. The Supreme Court famously held in Mitsubishi that “it would not require intrusive inquiry to ascertain that the tribunal took cognizance of the antitrust claims and actually decided them”. This has come to be known as the “second look doctrine”. In Vimar Seguros [5] the Supreme Court held that an arbitration clause was enforceable insofar as the alleged attenuation of statutory rights had not yet occurred. The rights there were not rights under the Sherman Act, but rather rights under the Carriage of Goods by Sea Act. Since, however, before an arbitral tribunal has the opportunity to determine statutory rights it will almost never be clear that it will not do so, Vimar Seguros appears firmly to establish the principle of arbitrability of antitrust rights arising by statute, such as under the Sherman Act. There is a significant body of case law in the US on the question of whether the lessening of particular rights due to their having to be asserted in arbitration, or in arbitration of a certain character, may result in the invalidation of an arbitration clause. As regards antitrust law, these cases are material for two reasons. First, statutory rights such as those under the Sherman Act are often intended to be mandatory, and may not therefore be attenuated by private agreement, such as an agreement to arbitrate. Secondly, where arbitration lessens the ability to bring a claim, or otherwise the prospects of it, it might be unenforceable for unconscionability. Especially with horizontal agreements in restrain of competition, there are often a multitude of antitrust plaintiffs each with a claim of modest value. Arbitration and features of arbitration (classically a prohibition on representative and class actions, and even consolidation) may make the vindication of such claims an impossibility. In AT&T Mobility v. Concepcion [6] the US Supreme Court held that a prohibition on class arbitration and consolidation in arbitration did not invalidate the arbitration clause there. The Federal Arbitration Act favouring arbitration took primacy over state law seeking to protect from unconscionable contracts. In Vimar Securos [7] , the majority of the US Supreme Court held that the mere increased costs entailed in arbitrating statutory rights in a far-flung place does not invalidate the arbitration clause. In Green Tree Financial Corp.-Alabama v. Randolph [8] the US Supreme Court accepted (unanimously on this point) the principle that high costs of arbitrating a statutory claim (there Truth in Lending Act and Equal Credit Opportunity Act claims) may be a basis to invalidate the arbitration clause, but placed the burden of showing this squarely upon the party impugning the arbitration clause. In In re American Express Merchants’ Litigation [9] the Court of Appeals for the Second Circuit found, on the meticulous evidence there, that the exclusion of class actions, representative actions, and consolidation in an arbitration clause effectively deprived the “small merchant” plaintiffs of the statutory protections under antitrust laws, on the basis that the size of any potential remedy would not justify the expense of an individual arbitration. The Court pronounced the whole arbitration clause unenforceable, and not just the class action waiver. In Kristian and Masterman v. Comcast Corporation [10] the Court of Appeals for the First Circuit declared in obiter that an exclusion of §4 Clayton Act treble damages and reasonable attorney’s fees as remedies that arbitrators could award would have been unenforceable. The Court also invalidated a prohibition on class-action arbitration and required that any arbitration proceed as a class-action arbitration, but this does not survive the US Supreme Court’s decision in Stolt-Nielsen [11] . In In re Cotton Yarn Antitrust Litigation [12] , the Court of Appeals for the Fourth Circuit held (unanimously on these points) that an exclusion of joinder and a contractually agreed shortening of the four-year time limitation period in the Clayton Act to one year untollable in an arbitration did not prevent that plaintiff from asserting its rights under antitrust statutes. The Court emphasized that the burden on the party impugning the arbitration clause is a substantial one and proof must be concrete and not speculative. B. EU and EU Member State Law There is no decision of the EU legal order explicitly pronouncing EU competition law to be arbitrable, although this is not doubted since it is an inference which can be drawn from a number of decisions of the European Court of Justice (ECJ), and at all events the EU has never done much to resist such arbitrability. The EU has in recent years itself positively embraced arbitration, by subjecting certain EU competition law determinations to arbitral tribunals. In the Eco Swiss [13] case the ECJ was expressly concerned not to interfere with arbitration and the finality of arbitration awards. In that case, moreover, it limited the required material review of arbitration awards to review for public policy violations. By inference then, in Eco Swiss the ECJ, and with it the EU legal order, accepts the arbitrability of EU competition law. Where the question has even arisen, courts in various EU Member States have pronounced their respective competition law to be arbitrable [14] . It would appear moreover that there is nothing in EU law which would prevent the legal order of an EU Member State from treating EU competition law as inarbitrable, but none has done so. Arbitration and Antitrust: An overview of EU and national case law PHILLIP LANDOLT l 13 April 2012 l e-Competitions l N°45083 l www.concurrences.com 2
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