This paper, available here, takes a practical take on how arbitration clauses should be construed when trying to determine whether a competition claim is arbitrable. It argues that the current EU approach to these clauses risks creating circumvention efforts, whereby competition law claims are ‘dressed up’ as contractual claims to circumvent the perceived effect of the CDC decision. A more predictable and sustainable approach would be the ordinary approach of focusing on the objective measure of connection between tortious competition law complaints and the subject matter of the agreement containing the arbitration clause.
The paper is structured as follows:
A first section reviews prior debates on the interplay between competition and arbitration.
Historically, the literature focused on three topics, namely: (i) whether competition law claims are arbitrable at all; (ii) whether arbitral tribunals are under a duty to rule upon competition law claims raised by the parties or to raise such issues ex officio, and (iii) whether and in what ways a court, asked to review an arbitral award, should apply competition law even if not raised before the arbitral tribunal. These three topics are now the subject of a reasonably settled consensus. As to the first, the arbitrability of claims arising from EU competition law is now well-established. As to the second topic, it has been clear for some time that there is no duty upon national courts – a fortiori arbitrators – proactively to root out infringements of the competition rules; but it is likewise reasonably clear that a refusal to rule upon a competition law issue raised by one of the parties – so long as within the scope of the arbitration agreement – would render any award liable to be set aside for reasons of public policy. As to the third topic, while a vigorous debate continues concerning the intrusiveness or otherwise of the scrutiny to be applied by a national court, the ECJ’s Eco Swiss case conclusively decided that an arbitration award may in principle be challenged on ground of a lack of compliance with EU competition law, so long as the relevant domestic rules of procedure require the national court – as they usually do – to grant an application for annulment founded on failure to observe national rules of public policy.
With the settlement of these matters, another question of key commercial and legal significance has come to the forefront of the debate: will an arbitration clause in any given commercial agreement, or set of regulatory or self-regulatory rules, be construed as including or excluding competition law claims? This requires one to look at the leading case on this topic, the CDC v Akzo Nobel case already discussed above.
A second section reviews the CDC v Akzo Nobel case.
This broadly follows the description of the case in the article reviewed above, but it provides a bit more colour to the factual background. The case arose from a decision of the European Commission that several companies participated in a single and continuous infringement of Article 101 TFEU. Some of the contracts of sale between the suppliers in the cartel and their purchasers included arbitration and jurisdiction clauses. Several undertakings, allegedly victims of the cartel, assigned their claims to CDC, which brought a consolidated ‘follow on’ claim for damages and disclosure before a court in Germany. The defendants disputed the jurisdiction of the German court to hear the case, relying inter alia on the existence of the arbitration and jurisdiction clauses in the contracts of sale referred to above.
Advocate General Jääskinen regarded it as ‘debatable’ and open to ‘doubt’ whether a generally worded arbitration or jurisdiction clause could ever be applicable so as to catch a claim for damages under Article 101 TFEU against the participants in an unlawful cartel. He observed that such claims were ordinarily regarded as tortious rather than contractual; and emphasised that a covert cartel gave rise to claims which of their very nature could not have been known about at the time the clauses in the supply contracts in question were agreed. The Court of Justice said nothing about this, instead simply stating that it had insufficient information at its disposal to provide a useful answer as regards the arbitration clauses. However, the Court dealt with the exclusive jurisdiction clauses, and created something close to a rule whereby a generally worded jurisdiction clause may never be regarded as encompassing competition law claims based on any form of covert or undisclosed conduct. Such claims may only be caught if the jurisdiction clause instead makes specific reference to liability for infringements of competition law.
It has been observed by a number of distinguished commentators that this reasoning by the Court of Justice was, both on its face and as a matter of strict law, inapplicable to arbitration clauses. While correct, the Court of Justice’s reasoning was nevertheless of at least analogical relevance to arbitration clauses, as was made clear by a number of national decisions.
A third section describes how the CDC decision has been received and applied in certain Member States.
In July 2015, exactly 2 months after the ECJ’s decision, the Court of Amsterdam delivered a judgment in the Dutch hydrogen peroxide cartel litigation, where it applied the ECJ’s reasoning on jurisdiction clauses to arbitration clauses and found that an arbitration clause in a supply agreement did not catch tortious claims in relation to such a cartel. To similar effect, in October 2015 the French Cour de Cassation delivered a judgment in a claim against Apple, finding that an exclusive jurisdiction clause in favour of the Irish courts contained in an authorised retailer agreement was inapplicable to claims under European competition law, because it did not specifically refer to such claims. The ordinary forms of arbitration clause, even in their widest drafting, do not generally make specific reference to competition law claims. Thus, a litigant would be left to pursue a claim in the national courts rather than in arbitration.
A fourth section deals with the response of English litigants.
In February 2017, the English High Court delivered a judgment in Microsoft Mobile Oy v Sony Europe Ltd that may enable tortious claims under European competition law to be subject to arbitration even in the absence of any specific words in the arbitration clause.
The overall approach of English law is to favour a ‘one stop shop’ for arbitration. The construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to have entered to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction. As a result, it has been recognised in English law for some years that competition law claims may in principle come within an arbitration clause. However, under both EU and English law, there is an emphasis on avoiding parties—or ‘rational businessmen’—being taken by surprise. The mere fact that a price is said to have been the subject of a cartel does not bring any tortious claims relating to the cartel within the ambit of an arbitration clause in a sale or supply agreement under which that price is charged.
Against this backdrop, the High court in Microsoft dealt with a case where all the allegedly cartelised supplies had been made pursuant to an agreement with an arbitration clause requiring ‘any disputes related to this Agreement or its enforcement’ to be settled by arbitration. The High Court held that the question of whether the tortious claims (i.e. the competition damages claims) were within the arbitration clause depended on whether the conduct giving rise to the tortious claims also gave rise to an arguable contractual claim. The court accepted a submission that the cartel was a breach of contract as well as being tortious, because (i) the relevant prices had been subject to an express obligation that they be negotiated in good faith and (ii) the cartelist was subject to a further obligation to disclose events that reasonably may affect its ability ‘to meet any of its obligations’ under the agreement. It was ‘very difficult’ to see how Sony could have engaged in the conduct complained of in the tort claims, without also breaching the contract.
This creates, in effect, a contractual ‘workaround’ to the received application of the CDC case in the context of arbitration clauses. The availability or otherwise of this workaround depends on whether the party wishing to arbitrate an alleged contravention of European competition law is able to argue that such breach amounts simultaneously to a breach of whatever contract was in place between the parties and in which the relevant arbitration clause is contained.
A last section discusses the extent to which the current approach of the courts in the context of arbitration clauses is logical and desirable from a policy perspective.
The current state of affairs, despite the technical inapplicability of CDC to arbitration clauses, is that any argument in a court of a Member State of the EU to the effect that a competition law claim is caught by an arbitration clause is likely to face a steep uphill struggle unless the arbitration clause makes specific reference to competition law claims. This does not appear to be a sensible or desirable state of affairs for at least four reasons: (i) it incentivises legal gerrymandering, whereby damages claims are ‘dressed up’ as also giving rise to viable parallel claims for breach of contract; (ii) it is difficult to square with the ordinary approach, at least in English law, to the interpretation of arbitration clauses more generally, which starts from a ‘one stop shop’ presumption in favour of arbitration; (iii) it is not obviously consistent with the general trend towards encouraging the private enforcement of competition law; (iv) adopting a set of presumptions developed specifically for competition law claims, rather than simply applying the same presumptions which apply to other non-contractual claims in the arbitration context, is arguably something of a hangover of approaches that questioned the arbitrability of competition law claims, when the reasons underpinning such restrictive approaches to the arbitrability of competition law have been defeated across the board.
One obvious way of addressing the apparent setback to competition law arbitration caused by CDC would be for standard forms of arbitration clause to be adjusted so as expressly to include competition law claims. An alternative, and preferable approach is for national courts faced with an arbitration clause which does not explicitly identify competition law claims to focus more clearly on the fact CDC is in no way binding in relation to arbitration clauses. The proper scope of an arbitration clause thus remains a matter for the law of that clause. Under English law, that would dictate an approach that would focus more on the objective measure of connection between a given competition law claim and the contractual relationship giving rise to the arbitration clause.
This article – again, aggressively pro-arbitration – neatly complements the one reviewed just above. On the one hand, that article contained a discussion of more, and more diverse European cases, and provided practical advice on how to ensure that competition claims could be subject to arbitration. This article engages more directly with the literature on competition and arbitration, and with the normative foundations of the case law, which is necessary to any proper understanding of these papers.
For a more detailed description of the Microsoft case, see my review of a blog post by this same author posted in March 2017.