Originally from European International Arbitration Review

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I. Introduction

Competition law is an area in which the relationship between party autonomy, the courts’ power to exercise judicial control on the award and the powers of the arbitral tribunal is often strained. This has led to important developments in the law, and at the same time it exposes how arbitration requires a balancing exercise between its two masters: party autonomy and court control. It is not surprising that the tension between the two masters becomes particularly clear in the field of competition law.  States or supranational organizations such as the EU have a strong interest in ensuring a functioning market and preventing conduct or arrangements that may restrict a fair competition; while, at the same time, commercial actors are interested in maximizing their efficiency and profit. These two interests do not necessarily always coincide, which leads states to issue mandatory and even overriding mandatory rules in order to restrict party autonomy.  Regulatory norms of competition law are typically directed to private parties and are implemented in rules that forbid agreements or practices that would otherwise restrict competition in a certain market (forbidden agreements);  or forbid conduct that abuses a dominant position enjoyed by one party in a certain market (forbidden conduct).  These provisions are typically implemented by competition authorities, but also have civil law consequences between the private parties. For example, a forbidden agreement may be deemed void. Competition law also contains regulatory norms directed to states, particularly rules forbidding a state to affect competition in a certain market by giving aid to one party over another. 

In the context of arbitration, competition law has traditionally been considered in connection with the first mentioned category of rules: norms directed at private parties.  For example, where a dispute occurs between contracting parties and one party requests a remedy following the other party’s breach of its contractual obligations, the defaulting party may allege that the contractual obligations are void because they violate competition law. Recently, the rules on state aid have also become relevant to arbitration. In particular, where a dispute occurs between a foreign investor and the host state under investment protection law such as bilateral investment treaties that were entered into before the host country became member of the EU. If the investor requests a remedy for the host state’s withdrawal of favourable investment conditions, the host country may allege that the obligation to maintain the preferential treatment is void because it violates competition law.