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BELGRADE INTERNATIONAL ANTITRUST
CONFERENCE
“Arbitration as an Alternative Means of
Private Enforcement in
EU Competition Law and Merger Control”
Gordon Blanke MCIArb,
Habib Al Mulla & Co, Dubai
Yougoslav Theatre of Drama, Belgrade,
26 May 2010
3
Overview – Ordinary EU competition and
EU commitment arbitrations
• Ordinary EU competition arbitrations (Part I)
• EU commitment arbitrations (Part II)
Conditional merger clearance decisions under the EU
Merger Regulation (A)
(Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of
concentrations between undertakings [2004] OJ L 24/1)
Commitment decisions under Article 9 of Council
Regulation 1/2003 (B)
(Council Regulation 1/2003 on the implementation of the rules on competition laid
down in Arts 81 and 82 of the Treaty [now Arts 101/102 TFEU] [2003] OJ L1/1)
4
Part I – Ordinary EU competition arbitrations
• Advantages of competition enforcement through arbitration over
enforcement through the courts:
Proceedings are private and confidential, avoiding adverse
publicity
Arbitrating parties can choose arbitrator (private judge) by
reference to industry sector expertise and competition law
experience
Resultant award (private judgment) is final and binding
(unappealable on the merits) and enforceable in over 140
leading industrial nations (including all EU Member States)
under the New York Convention (on the recognition and
enforcement of foreign arbitral awards)
5
The scope of the arbitrator’s jurisdiction
• In theory:
Enforcement actions under Arts 101/102 TFEU
Euro-defence in ongoing arbitrations
Follow-on damages actions on the basis of a Commission’s previous
finding of a competition infringement
• In practice:
Over 50 ICC competition arbitrations from 1964 to date in relation to
alleged competition infringements (e.g. exclusivity and non-compete
provisions) in e.g. distribution and licence agreements
Caveat cartel agreements
6
The arbitrator’s findings
• Declare an anti-competitive agreement null and void ab initio
under Art. 101(2) TFEU
• Declare that an agreement that complies with the
requirements of Art.101(3) TFEU is not in breach of Art.101
TFEU
• Declare that an agreement is block-exempted
• Find abuse of a dominant position under Art. 102 TFEU
• Award compensatory damages and other private law remedies
(including all those that may be awarded by an alternatively
competent court, such as extra-compensatory damages and
injunctions)
7
Part II – EU commitment arbitrations
(A) Arbitration commitments in
EU conditional merger clearance decisions
(B) Arbitration commitments in
Art. 9 commitment decisions
8
Part II (A) - Conditional merger clearance
decisions under the Merger Regulation
• Behavioural or structural remedies under Art. 6 and 8 of the Merger
Regulation
• “The categorisation of a proposed commitment as behavioural or
structural is […] immaterial. […] the possibility cannot automatically be
ruled out that commitments which prima facie are behavioural, for instance not
to use a trademark for a certain period, or to make part of the production
capacity of the entity arising from the concentration available to third-party
competitors, or, more generally, to grant access to essential facilities on non-
discriminatory terms, may themselves also be capable of preventing the
emergence or strengthening of a dominant position [a significant impediment
of effective competition].”
(T-102/96 Gencor v Commission, Judgment of the General Court of 25 March 1999, [1999] ECR
II-753)
• behavioural nature of the remedy, which by definition requires some form of
medium- to long-term judicial monitoring to ensure its correct
implementation
9
The Commission’s use of arbitration
commitments in merger control:
Statistics (I)
Totals and percentages 1992 - 2009
Phase II
Phase I Decisions Total
Decisions
Article 6 Merger 186
Regulation
Article 8 Merger 91 277
Regulation
ARBITRATION 37 20 57
COMMITMENTS
approx. % 20.0 22.0 21.0
10
The Commission’s use of arbitration
commitments in merger control:
Statistics (II)
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Year
No. of
Conditional
Merger 7 2 4 6 3 9 16 23 38 20 15 17 16 18 19 22 24 12
Clearance
Decisions
No. of
Arbitration
Commitments 3 0 0 1 1 2 1 4 8 4 2 4 3 6 4 9 2 3
11
The Commission’s use of
arbitration commitments in merger control:
Statistics (III)
40
No. of decisions/arbitration commitments
35 8
30
25
2
20 4
4 4 9
15 1 30 4 3 6
2
22 3
10 19
2 15 16 15
3 1 13 13 13 12 13
5 0 9
5 1 7
4 0
2 4 2
0
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Year
No. of conditional merger clearance decisions No. of arbitration commitments
7
12
The Commission’s use of
arbitration commitments in merger control:
Statistics (IV)
Totals and percentages 1992 – 2009 as per nature of remedy
package
Phase I decisions Phase II decisions Total
No. Appr. % No. Appr. % No. Appr. %
Arbitration
37 100 20 100 57 100
commitments
Purely behavioural 19 51 6 30 25 44
Structural 3 8 0 0 3 5
Mixed 15 41 14 70 29 51
13
The Commission’s use of
arbitration commitments in merger control:
Statistics (V)
Phase I decisions Phase II decisions Total
80
70
% of Arbitration commitments
70
60
51 51
50 44
41
40
30
30
20
8
10 5
0
0
Nature of Arbitration Commitments
Purely behavioural Structural Mixed
14
The Commission’s use of arbitration in
access commitments in merger control (I)
• mainly access problems to some type of essential facilities or key
technology or infrastructure controlled by the merged entity
“Nearly all past cases involve remedies providing for the granting of
access to networks, key technology, film content, or to put it more
general, the granting of access to important infrastructure or assets.”
(J. Lübking, “The European Commission’s View of Arbitrating Competition Law Issues” in G. Blanke
(ed.), Arbitrating Competition Law Issues: A European and a US Perspective, EBLR Special Edition,
19(1) EBLR (2008))
• access commitments supported by arbitration have now expressly
been sanctioned by the European Commission in its revised Notice
on Remedies
(Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
Commission Regulation (EC) No 802/2004 (of C267/1, 22 Oct. 2008)
15
The Commission’s use of arbitration in
access commitments in merger control (II):
Commission’s revised Notice on Remedies
• “Normally, such monitoring has to be done by the market participants themselves, e.g.
by those undertakings wishing to benefit from the commitments. Measures allowing
third parties themselves to enforce the commitments are in particular access to a
fast dispute resolution mechanism via arbitration proceedings (together with
trustees) or via arbitration proceedings involving national regulatory
authorities if existing in the markets concerned. If the Commission can conclude
that the mechanisms foreseen in the commitments will allow the market participants
themselves to effectively enforce them in a timely manner, no permanent monitoring of
the commitments by the Commission is required. In those cases, an intervention by the
Commission would only be necessary in cases where the parties do not comply with the
solutions found by those dispute resolution mechanisms. However, the Commission will
only be able to accept such commitments where the complexity does not lead to a risk of
their effectiveness from the outset and where the monitoring devices proposed ensure
that those commitments will be effectively implemented and the enforcement
mechanism will lead to timely results.”
(revised Notice on Remedies, para. 66)
16
The Commission’s use of arbitration in
access commitments in merger control (II):
Commission’s revised Notice on Remedies (cont’d)
“[G]iven the long duration of non-divestiture commitments and their frequent complexity, they
often require a very high monitoring effort and specific monitoring tools in order to allow the
Commission to conclude that they will effectively be implemented. Therefore, the Commission
will often require the involvement of a trustee to oversee the implementation of such
commitments and the establishment of a fast-track arbitration procedure in order to
provide for a dispute resolution mechanism and to render the commitments
enforceable by the market participants themselves. In past cases, the Commission has
often required both the appointment of a trustee and an arbitration clause. In those
circumstances, the trustee will oversee the implementation of the commitments, but will also
be able to assist in arbitral proceedings to the effect that they may be finalised in a short
period of time.”
(revised Notice on Remedies, para. 130)
17
The Commission’s use of arbitration in
access commitments in merger control (III):
Examples
• access to essential infrastructure (e.g. Comp/M.4745 – DB/EWS,
Commission decision of 6 Nov. 2007: Driver Training & Maintenance
Programme)
• transfer of slots and/or the granting of interlining and/or inter-modal
agreements in the airline industry (e.g. Comp./M.3280 - Air France/KLM,
Commission decision of 11 Feb. 2004);
• the granting of technology licences (e.g. Comp./M.3225 - Alcan/Péchiney (II),
Commission decision of 29 Sept. 2003); and
• the provision of inter-operability (information) for the interactive use of
technical devices from different suppliers (e.g. Comp./M.3083 -
GE/Instrumentarium, Commission decision of 2 Sept. 2003)
18
What is a unilateral arbitration commitment? (I)
• erga omnes obligation on part of the merged entity to submit to
arbitration vis-à-vis third-party beneficiaries of rights flowing from a
behavioural remedy under the merger clearance decision
• corresponding right on part of third-party competitor to trigger the
arbitration commitment to enforce rights it derives from the
behavioural remedy and to claim:
compensation for civil law damages caused to it by the incorrect
or non-performance of the remedy by the merged entity; and/or
specific performance of the remedy by the merged entity
19
What is a unilateral arbitration commitment? (II)
• arbitration as a private means of enforcement
• “[I]f there is a potential unlimited number of beneficiaries of access
commitments [as is often the case], the commitments have to include
a mechanism for self-enforcement, or to put it differently, it has to be
left to the market to enforce such commitments. This is exactly what
should be achieved through the arbitration clause in the
commitments.”
(J. Lübking, op. cit. in G. Blanke (ed.), op. cit.)
20
How to trigger an arbitration commitment
• as per the terms of the Commission’s merger clearance decision
• as per the Commitment Letter appended to the Commission’s
merger clearance decision (forming part of the acte communautaire)
• as per the arbitration clause contained in the agreement concluded
between the merged entity and the third-party competitor in
implementation of the behavioural remedy (the “implementation
agreement”)
• third-party notification requirement (Comp/M.3998 –
Axalto/Gemplus, Commission decision of 19 May 2006), incl. posting
on merged entity’s website
21
How to enforce an arbitration commitment
• arbitration commitment qualifies as an “obligation” under Art. 19 of the revised
Notice on Remedies (see also Comp./M.2621 – SEB/Moulinex, Commission decision of
8 Jan. 2002, at para. 148)
• breach likely to trigger Commission’s own investigations in the first instance
• merged entity likely to be fined for its intransigence to date
• merged entity likely to comply with arbitration commitment as nothing to be gained
from thwarting the arbitral proceedings
• Union Courts have approved (Case T-158/00 - ARD v Commission, Judgment of the
General Court of 30 Sept. 2003; and Case T-177/04 - easyJet Airline Co Ltd v
European Commission, Judgment of the General Court of 4 July 2006)
22
The concept of the arbitration commitment
in context
Commission
COMMITMENT DECISION
REMEDY PACKAGE
First Step
ARBITRATION
COMMITMENT
Merged entity
IMPLEMENTATION
Second AGREEMENT
Step
ARBITRATION CLAUSE
Third-party
beneficiary
23
The scope and nature of
the arbitrator’s jurisdiction (I)
• confined to adjudicating civil law consequences of the incorrect or non-
implementation of the behavioural remedy, awarding private law remedies
• Commission preserves its regulatory function, including the prerogative to
impose public law sanctions (i.e. fines and/or dismantling of an already
consumed merger) within the meaning of the Merger Regulation
• Commission remains responsible for the correct implementation of the
remedy
• the arbitrator’s private law mandate complements the public administrative
functions of the European Commission
24
The scope and nature of
the arbitrator’s jurisdiction (II)
“The Commission, by accepting commitments which include arbitration clauses, does not and, legally,
cannot delegate its powers under the Merger Regulation. Equally, the use of arbitration does not affect
the Commission’s statutory powers concerning the implementation of commitments.
Whereas an arbitration clause included in the commitments does, therefore, not lead to a change of the
Commission’s powers, it is a substantial part of the commitments and establishes a monitoring
mechanism for the commitments submitted by the parties. […] What are the consequences? In a way,
this leads to parallel responsibilities between the Commission and the arbitrator. On the one hand, the
Commission keeps the responsibility for the overall monitoring of the commitment. The ARD judgment of
the Court of First Instance says in this respect that, if the parties do not comply with the arbitral award,
the Commission has to make sure that the arbitral award is enforced. Non-compliance with the arbitral
award would be a violation of the commitments by the merging parties and the Commission could rely
on the provisions of the EC Merger Regulation relating to the enforcement of commitments. On the other
hand, with respect to the arbitration tribunal, the task of the arbitral tribunal is to resolve the dispute
between private parties, thereby indirectly enforcing the commitments. […] the arbitral tribunal is not an
agent of the Commission in this procedure. […] However, it can also not substitute itself for the
Commission and, for instance, change the commitments under the review clause, but its role is limited to
the one assigned to it in the framework of the commitments.
To sum up: From the Commission’s point of view, the consequence of the role of the arbitral tribunal
under the commitments is that its independence in adopting a decision is to be maintained as only this
will lead to a proper enforcement of the commitments. At the same time, there should be close and good
co-operation with the Commission as the Commission remains responsible for the overall enforcement of
the commitments.”
(J. Lübking, op. cit. in G. Blanke (ed.), op. cit.)
25
The arbitrator’s findings (I):
where implementation agreement in place
• the merged entity is in breach of the implementation agreement, order specific
performance and make an award for damages accordingly;
• the implementation agreement is defective and has not correctly implemented
the relevant behavioural commitments underlying the commitment decision and
that the implementation agreement falls short of the pro-competitive effects
originally intended by the Commission, in which case the parties may be ordered
to vary the implementation agreement accordingly;
• even though correctly implemented, the original behavioural commitments,
prove, ex post facto, insufficient, and refer the case back to the Commission for a
review of the deficient remedies in accordance with the Merger Regulation read in
conjunction with the Remedies Notice; or
• the implementation agreement is not deficient, that the merged entity has
correctly implemented the relevant behavioural commitments, and render an
exculpatory award in favour of the merged entity accordingly
26
The arbitrator’s findings (II):
where implementation agreement not yet in place
• order the merged entity to propose an appropriate implementation agreement to
the third-party beneficiary that is in full compliance with the commitment
decision, if the merged entity has simply refused to enter into any such agreement
and accordingly to make any draft propositions, and make an award for damages
for loss caused by the merged entity’s recalcitrance; and/or
• resolve any dispute arising from the drafting process, i.e. any differences in
relation to the necessary terms and conditions of the agreement (provided this is
not a task attributed to the Monitoring Trustee under the original commitment
decision); and/or
• refer the parties’ differences in relation to the terms and conditions of the
agreement to the Monitoring Trustee (provided such a trustee has been designated
under the original commitment decision to oversee the drafting process of the
requisite agreements that would allow the correct implementation of the
behavioural remedies in question)
27
Why arbitrate?
• swiftness of the arbitral proceedings and expertise of the tribunal
• recoverability of private law damages
• ease of enforceability of resulting final award under the New York Convention
• costs of the arbitral proceedings borne by the arbitrating parties (cost-efficient self-
enforcement of third-party competitor’s rights without engaging the resources of the
European Commission)
• increase in use of behavioural remedies to obtain clearance of a merger proposal (with
arbitration commitment meeting a company’s individual needs and best business
interests)
• quick, efficient and fair remedy for third-party competitor in form of compensation
for suffered damage and enforcement of its rights through specific performance of the
remedy
28
The Commission’s recent practice (I):
Typical provisions of
a viable arbitration commitment
• the institutional framework applicable to the arbitration proceedings (provided the
proceedings are not meant to be ad hoc);
• a detailed description of the constitution of the arbitral tribunal and a working
triggering mechanism for the arbitral procedure;
• the language and place of the arbitration;
• the applicable substantive and procedural law;
• the third-party notification requirement/consultation phase to ensure that
potential third party beneficiaries are aware of the availability and the functioning of
the arbitration procedure;
• a preliminary negotiations phase before the parties finally resort to arbitration;
• a sufficiently flexible timeframe (even though fast-track) for the implementation of the
various procedural steps of the proceedings and the deadline of the final award;
• interim relief mechanisms to ensure that the tribunal make a preliminary
award/order that will provide relief to the suffering party whilst the arbitral
proceedings are pending;
• the arbitrator’s powers more generally; and
• the burden of proof and the prima facie evidence rule, whereby if the third party
beneficiary can prove a prima facie case, the tribunal is bound to make an award in
favour of the beneficiary provided the merged entity cannot present evidence to the
contrary.
29
The Commission’s recent practice (I):
Typical provisions of
a viable arbitration commitment (cont’d)
• the Commission’s involvement/role as amicus curiae in the
arbitration proceedings:
receives all written submissions made by the arbitrating
parties and the Tribunal, including procedural orders,
interim/final awards, terms of reference, procedural timetable
entitled to file amicus curiae briefs at any stage during the
proceedings
entitled to question the parties, witness and experts at the
hearing
gives (binding) interpretations of the commitments upon the
Tribunal’s/parties’ request
30
The Commission’s recent practice (II):
Latest cases 2008-2010
• Comp./M/4835 - Hexion/Huntsman, Commission decision of 30
June 2008
• Comp./M.5046 - Friesland Foods/Campina, Commission decision
of 17 Dec. 2008
• Comp./M.5335, Lufthansa/SNAH - Commission decision of 22
June 2009
• Comp./M.5364, Iberia/Vueling/ Clickair, Commission decision of 9
Jan. 2009
• Comp./M.5440, Lufthansa/Austrian Airline, Commission decision
of 28 Aug. 2009
• Comp./M.5579 – TLP/Ermewa, Commission decision of 22 Jan.
2010
31
The Commission’s recent practice (II):
Cases 2007
• Comp./M.4779 – Akzo Nobel/ICI, Commission decision of 13 Dec.
2007
• Comp./M.4746 – DB/EWS, Commission decision of 6 Nov. 2007
• Comp./M.4691 – Schering-Plough/Organon Biosciences,
Commission decision of 11 Nov. 2007
• Comp./M.4730 – Yara/Kemira Growhow, Commission decision of
21 Sept. 2007
• Comp./M.4504 – SFR/Télé 2 France, Commission decision of 18
July 2007
• Comp./M.4494 – Evraz/Highveld, Commission decision of 20 Feb.
2007
32
The Commission’s recent practice (II):
Cases 2006
• Comp./M.4314 - Johnson & Johnson/Pfizer Consumer
Healthcare, Commission decision of 11 Dec. 2006
• Comp./M.4180 - Gaz de France/Suez, Commission decision
of 14 Nov. 2006
• Comp./M.3998 - Axalto/Gemplus, Commission decision of
19 May 2006
• Comp./M.3916 - T-Mobile Austria/Tele.ring, Commission
decision of 26 April 2006
33
Part II (B) - Commitment decisions under
Article 9 of Regulation 1/2003
• Recital 12 of Reg. 1/2003 - termination of infringement of
Arts. 101 & 102 TFEU by adoption of preferably behavioural
commitments
• Article 9 of Reg. 1/2003 – commitment decision making the
commitments offered by the parties binding
34
The Commission’s use of arbitration in
access commitments in
Art. 9 commitment decisions
• Comp/E-2/39.140 – DaimlerChrysler, Commission decision
of 13 Sept. 2007
• Comp/E-2/39.142 – Toyota, Commission decision of 13
Sept. 2007
• Comp/E-2/39.143 – Opel, Commission decision of 13 Sept.
2007
• Comp/F-1/39.596 – British Airways/American
Airlines/Iberia, pending
35
Conclusion: Lessons to be learnt
• increasing importance of arbitration as a private enforcement
mechanism of EU competition claims:
under Arts 101 and 102 TFEU
under conditional EU merger clearance decisions and under
Article 9 commitment decisions
• important for competition counsel to:
be aware of the usefulness of arbitration for ensuring (i) swift
and efficient private enforcement of EU competition claims and
(ii) the acceptability of less burdensome, behavioural
commitments to secure clearance of a merger or to avoid a
finding of infringement under Arts. 101 / 102 TFEU; and to
garner the requisite know-how for drafting viable arbitration
commitments for that purpose
36
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