Arbitration and competition law: a basic summary of the debate
| Autor | Ramón Mullerat Balmañá |
| Cargo | Lawyer in Barcelona and Madrid, Spain |
| Páginas | 75-102 |
See note 1
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In the view of professor William Park2, two intersecting questions lurk in any study of international business arbitration. Each arises from the litigants’ desire for binding disputes resolution outside the framework of government-administered courts. The first question asks how arbitration is actually conducted. What procedures help arbitrators determine facts, ascertain law and interpret contract language? ("micro study"). The second line of inquire explores arbitration’s interaction with society at large. When should the enforcement of awards be declined in order to protect public interests? ("macro study").
Arbitrating competition law claims has constituted a heated debate in modern arbitration law. This debate has generated a tension for many years between the policies served by promoting international arbitration and those protected by competition law3.
Arbitrability is the quality of being arbitrable, that is the ability of a subject to validly submit or of a matter or dispute to be validly submitted to arbitration. Arbitrability involves the simple question of who can
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and who cannot and what types of issues can and cannot be submitted to arbitration4.
For reasons of public policy, national laws impose restrictions on some persons to have recourse to and also on some matters to be referred to and settled by arbitration so that they can only be resolved by state courts. It has been said5that arbitrability determines the point at which the exercise of contractual freedom ends and the public mission of adjudication begins.
Basically, then, arbitrability is the normal situation for parties wishing to take advantage of arbitration as a method to solve disputes with the only restrictions that the public policy (ordre public) interest applies on arbitration, for example in criminal law, family law, securities law, and a few others. If the arbitral agreement refers to fields that cannot be solved through arbitration, the parties can resist submitting to arbitration and, if the award is finally passed, it becomes unenforceable.
Arbitrability can be classed according to different criteria:
a) According to the scope of the term, we can distinguish between: i) strictu sensu (narrow sense) arbitrability or arbitrability of a particular matter or dispute; and ii) latus sensu (wide sense) arbitrability covering the whole issue of the arbitral tribunal’s jurisdiction. In the US it is in this second sense that the term is more used. But in Europe it is rather used in the first sense, which is the one I use in this paper.
b) According to the objectivity of the term: i) subjective arbitrability when the term is referred to the person that wishes to submit to arbitration, for example, in some jurisdictions states or state entities may not be allowed to enter into arbitration agreements at all or may require a special authorisation to do so; and ii) objective arbitrability when the arbitrability limitations are based on the subject
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matter in issue6. Indeed, certain disputes may involve such sensitive public policy issues that can only be dealt with by the judicial authority of state courts. An obvious example is criminal law, which is always the domain of national courts. Some commentators only refer to arbitrability in this objective sense
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According to the nature of the claim, there are two different types of arbitrability: i) procedural arbitrability (the subject matter of the grievance can be pursued to arbitration, but the arbitral claim has a procedural defect - such as the timeliness of the filing); and ii) substantive arbitrability (the subject matter of the grievance cannot be pursued to arbitration as a matter of law or contract) 7.
Thus, depending on the matter of the controversy, some disputes are not capable of settlement by arbitration according to applicable national law. This restriction on party autonomy is justified to the extent that arbitrability is a manifestation of national or international public policy (ordre public)8.
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The fields in which the laws or the courts have declared the non-arbitrability are considered to generate "public rights", which cannot be disposable or arbitrable9. Consequently, arbitration agreements covering disputes on such rights will, in general, not be considered valid, will not establish the jurisdiction of the arbitrators and the possible award may not be enforced.
The non-arbitrability issue can be raised at two different periods of the arbitral process:
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at the beginning of the process, when one of the parties resists the arbitrability of the agreement to arbitrate; or
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at the end of the process, when the arbitrator’s award is presented for recognition or enforcement.
Objectively, some disputes are not arbitrable in some jurisdictions which are arbitrable in other jurisdictions where the interests involved may be considered to be of less public importance or influence10. This depends on the political, social and economic policies of each state, because public policy (ordre public) varies from one country to the next11.
Generally, the law applied in the issues of arbitrability is the national law. The law governing arbitrability may also depend on where and at what stage of the proceedings the question arises. Although arbitral tribunals may apply different criteria than courts in determining the law, the criteria applied by courts at a post-award stage may differ from those
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at the pre-award stage12. The New York Convention (V, 2)13only refers to the law applicable to arbitrability at the post-award stage (national law), but the majority of courts apply national law also at the pre-award stage pursuant to the Convention principle.
Difficult conflict of law questions arise about what competition law regime should be applied in international cases especially in light of the fact that departure from the parties’ choice of law increases the risk of award vacatur on the basis of excess of arbitral authority14.
From a common law viewpoint, William Park15summarises the main arguments to refuse arbitrability to public law claims in general as follows:
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court proceedings will fertilize judicial precedent since the development of the legal system requires implementation and interpretation of statutes by courts that create precedents open for all to see;
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society at large will be injured by arbitration of public law claims for a number of reasons: i) legal and factual issues are too complicate for arbitrators16; ii) arbitration proceedings are too informal, providing inadequate discovery; iii) arbitrators, like foxes guarding the chicken coop, have a pro-business bias and will under-enforce laws designed to protect the public; iv) arbitrators are less connected to the democratic process than judges; v) the lack of appeal to arbitral awards makes arbitration a "black hole" to which rights are sent and never heard from again;
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arbitrators are paid only to do justice between the parties before them and "public rights" belong not to the litigants but to society at large since society is not a party to the arbitration. If the arbitration, which is a consensual process, affects only the parties who signed the agreement, they alone are hurt by the arbitrators’ folly. But if the dispute affects the property of one who has never signed the arbitration agreement, the arbitration takes on a different cast, says Park17. Arbitrators are then private judges, whose task is to resolve cases that the parties have submitted to them, they are not state judges, and are not entrusted with the safeguarding or any public interest or public policy as such.
In general, national laws broadly describe arbitrable disputes as "disputes involving economic interest", "disputes involving property" or refer to the "capability of parties to reach an agreement". The French Civil Code (art. 2059), for example, provides that "all persons may enter into arbitration agreements relating to the rights that they may freely dispose of" and the Spanish Arbitration Law 2003 (art. 2, 1) that "disputes on matters of free disposal according to law are susceptible of arbitration".
Historically problems of arbitrability have been found in the following areas: anti-trust and competition, securities transactions, insolvency, intellectual property rights, illegality and fraud, bribery and corruption and investments in natural resources. However, there is a gradual enlargement of objective arbitrability in most jurisdictions.
Basically, competition law is mandatory law (jus cogens) that prohibits agreements and practices which restrict competition or...
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