 "Arbitration more efficient mechanism to seek damages")
Private enforcement is a litigious measure to enable parties to make a claim for damages on account of anti-competitive actions. Private enforcement under anti-trust legislation in the US is recognised, while in India the Competition Commission of India exclusively adjudicates claims relating to anti-competitive behaviour. The Competition Act, 2002, does not contemplate private enforcement of claims for damages.
Imposition of damages, or even the threat of damages, may act as a deterrent against anti-competitive behaviour. Permitting private parties to enforce the law engenders a healthy competitive spirit and reduces the cost of enforcement. Given India's ambitious amendments to arbitration and commercial dispute laws, it is only fitting that private enforcement of anti-competitive claims is encouraged.
With the rise in complaints before the commission, the need for an efficient mechanism to enforce the law assumes significance. Regulatory measures should not be limited to injunctions and imposition of penalty only by the regulator, since limiting the enforcement measures is counter-productive and can be inefficient.
Despite substantial penalties having been imposed by the commission, the injured party does not gain anything in the process and does not recover losses as a result of anti-competitive behaviour. Taking recourse to the commission is also taking recourse to an enforcement mechanism that is subsidised by taxpayer contributions. Allowing parties to enforce the law through arbitration may be a more efficient measure of enforcement for companies seeking damages or injunctions.
Private enforcement of competition law is an established and efficient mode. Recourse to arbitration as a means to resolve competition law issues is permissible if it is not prohibited by law and parties consent. It has been clarified through several judgments that arbitrability of competition law is only with respect to the civil aspect of the law in relation to the private law claims and not in relation to public sanction in the form of fines following a violation of the law.
Private enforcement of competition law is not recognised in Indian law and as a matter of policy also has not made much headway in India. This leaves no incentive for private parties to enforce compliance under the law.
The issue of damages has not been adjudicated in India. The Delhi High Court has briefly touched upon the issue of arbitrability of competition law claims and observed that the scope of investigations by the commission is entirely different from the scope of an enquiry before an arbitral tribunal. (Union of India vs CCI WP (C) 993/2012·).
Historically, disputes involving issues of determination of abuse of dominance have been considered non-arbitrable since an arbitrator was considered inadequately equipped to adjudicate on issues that fell within the public realm. This, however, did not prevent claims for damages from being arbitrable.
Non-arbitrability of an issue depends on the subject matter of the dispute and whether arbitration of a dispute is contrary to law and public policy. Interestingly, the Indian contract law recognised and permitted enforcement of claims that are anti-competitive.
Internationally, the trend appears to be in favour of arbitrability of disputes with issues such as oppression of minority investors in a company and anti-competitive behaviour. In several countries, including the UK, Australia and Singapore, disputes over oppressive or unfairly prejudicial conduct towards minority shareholders have been held to be arbitrable.
The Indian legal system is subsidised by taxpayer funds, is time-consuming and burdened with litigation. Resolving disputes relating to abuse of dominance, unfair trade practices, oppression, and mis-management through arbitration will be efficient for parties and the Indian legal system.
Private enforcement is an efficient way to compensate victims of illegal behaviour as the statutory enforcement mechanism only provides injunctive relief and not compensatory relief. Moreover, private enforcement of competition law claims acts as a deterrent and ensures maximum compliance with minimal enforcement. The threat of litigation and damage claims discourages companies from taking aggressive stands or indulging in anti-competitive behaviour.
Payel Chatterjee is senior member, international litigation and dispute resolution team, Nishith Desai Associates and M S Ananth is co-head, regulatory practice, Nishith Desai Associates
