IBA PRIVATE ENFORCEMENT - ARBITRATION (i) Role of arbitration in the enforcement of EC competition law Commercial contracts frequently refer disputes to be determined and settled by arbitration. This is particularly common in international agreements, but is also the case in agreements between parties based in the same jurisdiction. Advantages and disadvantages of arbitration over litigation are discussed in section iii. Arbitration takes place through two different types of procedures. The procedure may be governed by the rules of an arbitration institution, such as the ICC (International Chamber of Commerce) Court of Arbitration in Europe, the London Court of International Arbitration and the Arbitration Institute of the Stockholm Chamber of Commerce. Irrespective of the location of the institution itself, the parties are free to choose a suitable venue for the hearing of the dispute. These institutions have adopted their own rules for the arbitration proceedings, have boards and a permanent secretarial body managing the institute and rendering services to the arbitration tribunals in the current cases. The institutions mentioned have been in existence for a considerable amount of time and have a longterm commitment to the supervision of arbitration proceedings. These features are particularly important when considering the possibility of such institutions requesting rulings from the European Court of Justice (ECJ) (see below). The other type of arbitration procedure is "ad hoc" proceedings. This type of procedure takes place to determine a specific dispute, following the commencement of proceedings by the parties. The case will be wholly managed by the arbitrators, or a sole arbitrator, and will cease upon a final award or a settlement, with no further administrative measures relating to the case. In addition to the terms of the arbitration agreement between the parties themselves, most European countries have adopted national arbitration legislation to govern procedure. For ad hoc proceedings, the national courts are given certain powers. National arbitration legislation will also have an effect on institutional arbitration as some rules are mandatory. A harmonization of national arbitration legislation, which promotes international arbitration, is achieved by the model law drafted by UNCITRAL. It should be noted that competition law issues may frequently arise in commercial contract disputes during arbitration, and may thereby become subject to being handled and ruled on by arbitration tribunals. Arbitrators, like judges, will have to be aware of any developments in the application and enforcement of competition law. (ii) How widespread is its use in competition cases and in what type of disputes is it used? Euro-defence and/or claim for damages?
In the vast majority of cases, an arbitration agreement is inserted and negotiated between the parties as a part of the entire contract and it will concern and be drafted in view of any potential future disputes relating to the interpretation of, or matters in connection with, the agreement. Dispute resolution clauses may vary from the relatively simple to the very elaborate. For arbitration, common features which may be included are reference to an arbitration institution to govern the procedure, the number of arbitrators, the venue for the arbitration and the substantive law for the dispute. It is very rare for the dispute resolution clause to refer to specific substantive issues. It may also be possible to enter into an arbitration agreement in cases where a dispute has arisen but the contract does not contain a dispute resolution clause, (or where the dispute resolution clause does not refer to arbitration), and the dispute is therefore to be heard in a national court. In this situation, the nature of the dispute may be identified as including a competition law issue. The parties may then tailor the arbitration tribunal by choosing competent arbitrators. However, experience shows that in a situation where a dispute has arisen, the parties may be less inclined to agree on arbitration at that stage. It should also be noted that, even at this stage, the parties may not be aware of any competition law issues raised by the dispute. This said, competition law disputes in many jurisdictions, including Sweden, appear to be on the increase. This seems to be a result of a growing awareness, both amongst parties to disputes and, perhaps more importantly, amongst commercial lawyers who are not competition law practitioners, of competition law, its effects and the remedies available. In arbitration cases, it will primarily be the case that alleged infringements of Article 81 are pleaded as a defence (so-called "Euro-defence") to a claim by a contractual party for breach of the agreement. Third party claims, against one or both parties to an agreement, alleging restrictive effects, are not common, due to the lack of an original arbitration agreement in relation to the third party, unless a separate arbitration agreement is concluded with all relevant parties at this stage. For this reason, Article 82 cases will also be rare unless they are covered by an original or subsequent arbitration agreement. This may be the case for unilateral behaviour by a dominant undertaking using standard delivery terms that incorporate an arbitration clause. In Denmark, arbitration has, thus far, not played a major role in the enforcement of EC competition law and/or national competition law. This is, however, not surprising, as there have only been very few court cases, and most claims for damages have been follow-on claims based on decisions from the competition authorities. Thus, the very recent Supreme Court judgment in the Danish railway case (GT-Linien) represents - as far as we know - the first successful non-follow-on claim for infringement of competition rules in Denmark.
Further views and opinions on the extent of arbitration in competition law matters and on enforcement aspects are provided by Marc Blessing in Arbitrating Antitrust and Merger Control Issues, Swiss Commercial Law Series, Vol. 14 2003. (iii) Advantages and disadvantages of arbitration over litigation The traditional position is that, whereas litigation is slow, non-confidential and cheap (relating to court costs), arbitration is faster (as it normally is a one-instance-procedure with time limits), confidential and more expensive (to cover party costs as well as those of the arbitrators). Arbitration has the same advantages and disadvantages in relation to competition law infringements as in any other area of law. Competition proceedings involve an assessment of complex issues and it is our experience that the likely time-frame for dealing with these issues in traditional court proceedings, including perhaps prior proceedings before the national competition authorities, is considerable. For Denmark, this is supported by the fact that the most recent Supreme Court decision, awarding damages for the Danish railways infringement of competition rules, had been argued in the courts since 1996. If the parties should choose arbitration instead of traditional court proceedings this will, of course, not solve the problem that competition cases, in general, involve a complex assessment of facts. However, as in other areas of law, the arbitration process is mainly controlled by the parties and this also includes the time-frame for the proceedings. In Denmark, the cost of court proceedings concerning an infringement of competition rules depends, inter alia, on the amount of damages claimed by the plaintiff. In long-term court proceedings, the legal fees are often also very high. By way of comparison, an arbitrator determines the costs of the proceedings on the basis of similar principles to those applicable to traditional court proceedings, so in this respect litigation does not differ significantly from arbitration. However, the cost of legal advice is likely to be lower when two private parties commence arbitration proceedings, as the decision is not subject to appeal. On this issue, arbitration proceedings in competition cases do not differ from arbitration proceedings in other areas of law. An important advantage of arbitration is in relation to the enforcement of arbitration awards in other countries, subject to the New York Convention of 1958, which is ratified by some 150 countries. The EU Brussels Regulation on the enforcement of judgments by the courts 1 is limited to the EU countries. Another advantage of arbitration is that the parties can influence the choice of arbitrators. In the case of a dispute involving competition law issues, the parties can nominate one or more competition law specialists as arbitrators. Also arbitration institutions can nominate 1 Council Regulation EC No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L12 of 16.01.2001).
such a specialist on the request of the parties or on its own initiative. In litigation before national courts, the judges rarely have such specialist knowledge and experience. (iv) Impact of Article 16 Regulation 1 on an arbitration tribunal If the arbitrators become aware of an investigation by the Commission relating to the subject matter of the arbitration, (either having been informed by the parties, or as a result of a query made by the arbitrators to the Commission), Art. 16 para. 1 should apply in the same way for arbitrators as for courts. Also, where there are parallel proceedings being carried out by the Commission, it may be considered whether the corresponding principles should apply in the same way as in relation to proceedings before national courts, including the possible application of the Commission Notice on cooperation with national courts. The Masterfood judgement (C-344/98), providing for primacy of a decision by the Commission, would be relevant also for arbitrators. In relation to proceedings before a NCA, the same principles as mentioned above in relation to the Commission would apply due to the new ECN network. Parallel proceedings before an arbitration tribunal and national courts are unlikely. Forum is principally a matter to be agreed between the parties, either under the contract or under the rules of the arbitration institution (eg the ICC). Where there is a dispute as to whether an arbitration tribunal has authority to decide a case or whether the case falls within the jurisdiction of a national court, according to national procedural and/or arbitration law, one proceeding will be stayed, pending a decision. (v) Arbitration as part of the ECN The ECN is a network between the Commission and national competition authorities. National courts are not part of this network and arbitration institutions or tribunals cannot be part of it either. (vi) Commission as amicus curiae Confidentiality is a key feature for arbitration, although it is possible for the parties to give up confidentiality if necessary. EU competition law enforcement may constitute a situation where this may be appropriate, due to cooperation/contacts with the Commission and ECJ. However, it is hardly appropriate for the Commission to act as amicus on its own initiative, in view of the private and confidential character of arbitration. National courts are obliged to report on competition cases and/or judgments to the Commission, allowing the Commission to consider taking an amicus curiae position where the case is pending or in the case of an appeal. Arbitration is not suitable to such amicus curiae procedure as arbitration proceedings are not reported and not normally subject to appeal. However,
where an arbitration award is appealed before a relevant court, either on procedural or substantive grounds, the Commission may act as amicus. (vii) Comparison of funding/costs vs. litigation. See main cost differences above. While the costs for arbitration normally have to be carried by the losing party or divided based on the outcome, liability to pay opponents litigation costs in civil litigation varies considerably between Europe and the US. US law, on the one hand, normally requires each party to bear its own costs, irrespective of the outcome, while in Europe the losing party will normally will usually be required to pay the winning party its costs in full (as in Scandinavia) or in part. (viii) Specific issues for arbitration - Assistance from the Commission or NCA Like national courts, following the Commission Notice on the cooperation with National Courts, arbitration tribunals should be able to benefit from corresponding assistance from the Commission, for example, the provision of market data, information on pending decisions, etc. Alternatively, assistance could be rendered by the NCA in the jurisdiction where the arbitration proceedings are held, or by the NCA of the country of the applicable substantive law. - Preliminary rulings from ECJ There is ECJ jurisprudence establishing that arbitration tribunals may not request preliminary rulings from the ECJ under Art 234 of the EC Treaty (i.a. Nordsee C- 102/81). This is in contrast to courts or certain tribunals, in particular, public institutions or fora established on the basis of national law, having a permanent standing, and where the parties cannot have an influence on the appointment of the arbitrators hearing the case. The time to obtain a ruling from the ECJ usually amounts to 2-3 years. In arbitration proceedings taking 1-2 years to hear and decide upon, the additional time required to obtain a ruling from the ECJ would usually render the arbitration process not commercially viable, particularly since the arbitration process does not normally provide for a stay of proceedings in the same way as in the courts. On the other hand, the possibility of obtaining a ruling might render arbitration more attractive to parties. In EC competition law matters, it would theoretically be possible to ask the ECJ for a preliminary ruling. This would ensure conformity between national law and EC regulations. To make use of this possibility, an arbitration tribunal must be recognised as a court within the meaning of Article 234 of the EC Treaty. This would need a new position to be taken by the ECJ and would need to be supported by the Commission. While arbitration tribunals in ad hoc proceedings may run administrative risks by having to wait a considerable time for a ruling, and are perhaps, therefore, not suitable for the ECJ ruling procedure, the arbitration institutions should be
fully suitable to exercise this right to obtain rulings. Hence, this is another aspect in support of a new regime for obtaining preliminary rulings from the ECJ or CFI that would grant this possibility at least to tribunals administered by such institutions. - EC competition law being arbitrable There has been a discussion in the legal doctrine over the years as to whether EC competition law may be subject to hearings in arbitration. The general opinion should now be that this is the case and that, accordingly, competition law is arbitrable. This would also be confirmed by the ECJ in i.a. the cases Nordsee and Eco Swiss/Benetton 2. However, there are examples of where national courts have considered this not to be the case, and where arbitration as a bar to litigation has not been respected. The Swedish Arbitration Act, for example, states specifically that arbitrators are competent to hear the civil law effects of competition law. This relates to rulings on the invalidity of agreements or contract clauses, and the imposition of sanctions, such as damages. In a recent amendment to the Swedish Competition Act, it is now explicitly stated that infringements of Articles 81 and 82 are also subject to claims for damages. Moreover, the scope of those entitled to claim damages has been widened to cover anybody who can prove a loss from the violation. Accordingly, this will also have a great impact for arbitration. - Ex officio examination by tribunals It is apparent that the Eco Swiss/Benetton case has caused considerable legal discussion and concern in arbitration circles due to its lack of clarity as to its effects on the arbitration procedure. Some Commission officials and some national scholars claim that Eco Swiss/Benetton lays down a general ex officio obligation for arbitrators to apply EU competition law. Others - and among them many arbitrators - take a different view, saying that such an effect does not follow from this case, which relates to an obligation under national public order not to enforce an arbitration award upholding an agreement in violation of Article 81. Ex officio application of EU competition law by national courts, as laid down in Van Schijndel 3, is wholly a matter for national procedural law. A case of a national court, which it is important to note in this context, is the Thalès/Euromissile judgment of the Paris Court of Appeals of 18 November 2004. It is apparent that the whole issue of ex officio examination is considered highly confusing. A clarified position from the Commission on this issue is therefore of great importance for competition arbitration. 2 C-126/97 3 C-430/93
As regards ex officio examinations in Danish law, it is a basic principle - both in litigation and arbitration - that the parties mainly control the case and the questions arising during the case. Certain exemptions apply, according to mandatory (and other) rules, where society has a certain interest. Under Swedish law the arbitrators are principally bound by the general rule, under the Court Procedural Code, that the arbitrators may not go beyond the reliefs requested by the parties and the legal grounds argued in support thereof. The Swedish Government, having said it might consider a change to the law following the Eco Swiss/Benetton judgment, did not ultimately propose any changes to the legal position on this matter. - Assessment of alleged violations, competence to apply Article 81(3) and burden of proof There has been some uncertainty as to the competence of arbitrators to apply Article 81(3). However, there are also opinions expressed by Commission officials that, like the national courts, arbitration tribunals are competent to apply Article 81(3). This should be set out explicitly in the forthcoming Green Paper, to confirm the position on this matter. Accordingly, the Commission Notice with Guidelines on the application of Article 81(3) of the Treaty (OJ C101, 27.4.2004 p. 97-118) should also be applied by arbitrators where appropriate. - Competence to award damages and declare infringing contract terms invalid. Such competence for arbitrators would follow from the applicable national substantive law. For example, in Denmark, the general principles governing liability for damages also apply to claims for damages based on infringement of competition rules. In addition, no distinction is made between claims based on EC competition law or on national law. Under Swedish law, the Competition Act (Article 33) explicitly lays down a right to claim damages for a another company or a contract party suffering from an infringement of the Act, which provides for the similar prohibitions as in EC Articles 81 and 82. In an amendment proposed by the Government, expected to enter into force on 1 August 2005, this provision will be extended to comprise a right for anyone to claim damages. For assessing intent and negligence, the level of evidence hereon and the damage suffered, either the general Act on Torts will apply or the principles for contractual damages. In addition, this provision now also explicitly covers damages caused by violations of Articles 81 and 82 EC. Furthermore, the limitation period for claiming damages has been extended from 5 to 10 years. Subject to the Swedish Contracts Act (Article 36), a contract or clause may be set aside or be adjusted if it is unreasonable. This provision may also be used to set aside agreements/clauses that violate competition law.
- Training programs for arbitrators As is the case is for judges of the national courts, training should be arranged by the Commission for arbitrators from different countries.