Cartels disrupt market integrity and harm economic players. As companies worldwide face increasing risks from the anti-competitive practices of cartels, international arbitration is emerging as a critical tool for resolving these disputes.
Understanding Cartels: The Basics
A cartel is an agreement or coordinated action between two or more competitors, typically entities offering similar goods or services, designed to manipulate market competition. In this context, members of a cartel collude to “fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce”.[1] This anti-competitive behaviour is one of the most severe violations of competition law and, as such, is prohibited by most legal frameworks worldwide.
At its core, the goal of cartel members is to inflate profits by distorting market dynamics. Consequently, consumers often face higher prices, and goods may become less available.[2] Not only do cartels harm the public interest by causing an inefficient allocation of economic resources, but they also infringe upon the private rights of market participants.[3]
Public vs. Private Enforcement of Cartels: What Role for Arbitration?
Measures are taken on two levels to address violations. Firstly, public measures, which penalize offenders and aim to restore market competition through fines and other remedies. Secondly, private measures, which compensate those harmed by cartel activities and/or invalidate unlawful agreements.[4]
While these enforcement methods are key to tackling harmful cartel behaviour, they raise the question of whether such disputes can be handled through arbitration, as a private enforcement. Historically, the arbitrability of antitrust and competition disputes, including cartel cases, was heavily contested.[5] Initially, many questioned whether arbitrators could rule on competition law, as these rules are considered public policy.[6]
Nevertheless, this view has evolved significantly in recent years. More and more jurisdictions allow antitrust disputes, including those involving cartels, to be handled through arbitration. However, this development comes with certain limitations — arbitral tribunals may be restricted in the relief they can grant, or courts may reserve the right to review arbitral awards.[7]
Jurisdictions Supporting Arbitrability of Cartel Disputes
Both the United States and Switzerland have adopted strong liberal approaches.[8] On the one hand, the United States was one of the first jurisdictions to accept cartel-related disputes in international arbitration. On 2 July 1985, in the landmark Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. decision, the U.S. Supreme Court ruled that antitrust disputes could be resolved through arbitration under the Arbitration Act. Moreover, the Court emphasized: [W]e are well past the time when judicial suspicion of the desirability of arbitration and the competence of arbitral tribunals inhibited the development of arbitration as an alternative means of dispute resolution.[9]
On the other hand, Switzerland goes further, as Swiss courts do not consider antitrust laws — whether Swiss or foreign — as part of public policy.[10] The Swiss Federal Supreme Court has consistently upheld the arbitrability of such disputes. In BGE 132 III 389 (2006), the Swiss Federal Supreme Court reaffirmed its consistent position by stating that competition law and antitrust provisions do not constitute part of public policy.[11] This approach leads to several significant consequences: firstly, errors in applying antitrust laws no longer, by themselves, provide grounds for the annulment of an arbitral award. Secondly, Swiss arbitral tribunals retain jurisdiction to examine the validity of agreements under foreign competition law when raised by the parties. Lastly, if neither party invokes competition law, the tribunal is under no obligation to consider it ex officio.[12]
Jurisdictions Opposing Arbitrability of Cartel Disputes
In contrast, China and Singapore follow conservative approaches.[13] In China, Article 3(2) of the Arbitration Law prohibits arbitration of disputes requiring administrative decisions, making antitrust, and so cartel-related disputes, disputes generally non-arbitrable.[14] Similarly, in Singapore, antitrust regulatory issues are considered non-arbitrable, even though no explicit rule provides this. Commentators justify this exclusion by noting that such disputes often involve public interest considerations and require administrative oversight.[15]
The European Union’s Nuanced Approach to Arbitrability
The EU’s approach can be seen as a middle ground between the liberal stance of jurisdictions like the U.S. and Switzerland, which broadly accept arbitration in cartel disputes, and the more conservative approaches of China and Singapore, which restrict it due to public policy concerns.
Article 101 of the Treaty on the Functioning of the European Union (TFEU) firmly prohibits cartels as a matter of public policy. European Union (EU) Member States generally permit arbitrators to address the civil consequences of competition law violations. Consequently, arbitrators can annul contracts or clauses that breach Article 101 TFEU or award damages to victims of cartel conduct. However, EU law imposes certain restrictions.
In Cartel Damage Claims Hydrogen Peroxide SA v Akzo Nobel NV et al (2015), the Court of Justice of the European Union (CJEU) ruled that claims for damages resulting from cartel conduct must explicitly be included in a forum selection clause to fall within its scope.[16] Although the decision focused on forum selection, many commentators believe it can extend to arbitration clauses, as the Advocate General had referred to arbitration in his opinion.[17] This ruling implies that, even if a contract contains an arbitration clause, national courts may still assert jurisdiction over cartel damage claims if the case is brought before them.
Ultimately, in ISU v. European Commission (2023), the CJEU emphasized that judicial review of arbitral awards in cartel cases must be “effective”.[18] This requirement for effectiveness suggests that national courts could subject arbitral awards in cartel cases to a full review of their merits. This scenario brings the issue of forum shopping into focus. In particular, multinational companies may opt for jurisdictions outside the EU, such as Switzerland, to enforce arbitral awards and avoid the possibility of a full review on the merits.[19]
Inconsistent National Court Interpretations in the EU
National court interpretations of arbitral jurisdiction in cartel cases are inconsistent. For instance, German courts have allowed claims related to cartel damages under standard arbitration agreements, even when the agreement does not explicitly address competition law violations.[20] In contrast, Dutch and Finnish courts have rejected these claims because the arbitration agreement did not explicitly cover non-contractual liability arising from competition law breaches.[21] Thus, the lack of a consistent approach among EU member States complicates the resolution of cartel-related disputes through arbitration in the European Union.
Conclusion: Navigating Cartels and International Arbitration
The evolving landscape of cartel-related disputes highlights the growing role of international arbitration as a viable solution for resolving competition law issues. Notably, jurisdictions like the United States and Switzerland offer flexibility and efficiency, making arbitration an attractive option for resolving cartel disputes. Nevertheless, the situation remains complex in the European Union, where arbitral awards must align with EU competition law, and in countries like China and Singapore, where arbitration is generally not an option.
As businesses face increasing risks from cartel involvement, carefully drafting arbitration clauses and selecting supportive jurisdictions are key steps in dispute management. Further, by navigating these complexities, companies can better safeguard their interests in the global marketplace.
[1] OECD (2019), Recommendation of the Council concerning Effective Action against Hard Core Cartels, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0452; see also Notice on Immunity from fines and reduction of fines in cartel cases [2006] OJ C 298/17, point 1; Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on Certain Rules Governing Actions for Damages Under National Law for Infringements of the Competition Law Provisions of the Member States and of the European Union [2014] OJ L 349/1, Art. 2(14).
[2] A. Robles Martín-Laborda, Standard Arbitration Agreements and Cartel Damages under EU Law, Market and Competition Law Review (M&CLR), 30 June 2024, p. 114.
[3] Id. p. 115.
[4] Id. pp. 115-116.
[5] M. de Boisséson, Arbitrabilité et Droit de la Concurrence, in M. Fernández-Ballesteros and D. Arias Lozano (eds.), Liber Amicorum Bernardo Cremades (2010), p. 243.
[6] Ibid.
[7] F. Gélinas and L. Bahmany, Chapter 3: Major Approaches to Arbitrability in Different Fields of Law, in Arbitrability: Fundamentals and Major Approaches (2023), para. 113.
[8] Id. paras. 115-125.
[9] Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, Inc, 473 US 614 (1985) at 627-628.
[10] F. Gélinas and L. Bahmany, Chapter 3: Major Approaches to Arbitrability in Different Fields of Law, in Arbitrability: Fundamentals and Major Approaches (2023), para. 121.
[11] BGE 132 III 389 S. 398.
[12] F. Gélinas and L. Bahmany, Chapter 3: Major Approaches to Arbitrability in Different Fields of Law, in Arbitrability: Fundamentals and Major Approaches (2023), para. 122.
[13]. F. Gélinas and L. Bahmany, Chapter 3: Major Approaches to Arbitrability in Different Fields of Law, in Arbitrability: Fundamentals and Major Approaches (2023), para. 126.
[14] Id. para. 127.
[15] Id. para. 130.
[16] CJEU, Cartel Damage Claims (CDC) Hydrogen Peroxide SA v. Akzo Nobel NV and Others, 21 May 2015, Case C-352/13, para. 69.
[17] S. M. Kröll, Chapter 15: Arbitrating Post-cartel Damages Claims in the European Union: Taking Stock, in S. Tung, F. Fortese, et al. (eds), Finances in International Arbitration: Liber Amicorum Patricia Shaughnessy (2019), para. 15.02.
[18] CJEU, International Skating Union (ISU) v. European Commission, 21 December 2023, Case C-124/21 P, paras. 193-194
[19] M. Schrader, J. Schmidt, et al., CJEU’s “ISU Decision”: A Nail in the Coffin of Antitrust-Related Arbitration in the EU?, Kluwer Arbitration Blog, 9 February 2024.
[20] S. M. Kröll, Chapter 15: Arbitrating Post-cartel Damages Claims in the European Union: Taking Stock, in S. Tung, F. Fortese, et al. (eds), Finances in International Arbitration: Liber Amicorum Patricia Shaughnessy (2019), para. 15.03; LG Dortmund, 13 September 2017, 8 O 30/16.
[21] S. M. Kröll, Chapter 15: Arbitrating Post-cartel Damages Claims in the European Union: Taking Stock, in S. Tung, F. Fortese, et al. (eds), Finances in International Arbitration: Liber Amicorum Patricia Shaughnessy (2019), para. 15.03; Amsterdam Gerechtshof, Kemira Chemicals OY c. CDC Project 13 SA, 21 July 2015, Case No. C/13/500; District Court of Helsinki, CDC HP v. Kemira, 4 July 2013, Case no. 11/16750.