Alma Mater Studiorum – Università di Bologna DOTTORATO DI RICERCA IN

278 Pages·2014·1.33 MB·English

AAllmmaa MMaatteerr SSttuuddiioorruumm –– UUnniivveerrssiittàà ddii BBoollooggnnaa
DOTTORATO DI RICERCA IN

EUROPEAN DOCTORATE IN LAW AND ECONOMICS
Ciclo 27°
Settore Concorsuale di afferenza: 12/F1; 12/E1; 12/E3
Settore Scientifico disciplinare: IUS/15; IUS/14; IUS/13; IUS/05
TITOLO TESI
THE APPLICATION OF EUROPEAN COMPETITION LAW IN ARBITRATION
PROCEEDINGS
Presentata da: Penio Penev GOSPODINOV
Coordinatore Dottorato Relatore
PROF. LUIGI ALBERTO FRANZONI PROF.DR. ROGER J. VAN DEN BERGH
_________________________ _________________________
Esame finale anno 2015
The Application of European Competition Law
in Arbitration Proceedings
Penio Penev Gospodinov
European Doctorate in Law & Economics
Erasmus University of Rotterdam
A thesis submitted for the degree of
Doctor of Philosophy
Defence date 15 December 2014
Abstract
This work provides several policy proposals capable to strengthen the
private enforcement of EU competition law in arbitration. It focuses
on the procedural law aspects that are permeated by legal uncertainty
and that have not yet fallen under the scrutiny of the law and eco-
nomicsdebate. Thepolicyproposalsdescribedhereinarebasedonthe
functional approach to law and economics and aim to promote a more
qualifieddecisionmakingprocessby: adjudicators,privatepartiesand
lawmakers. The resulting framework of procedural rules would be a
cost-effective policy tool that could sustain the European Commis-
sion’s effort to guarantee a workable level of competition in the EU
internal market. This project aims to answer the following broad re-
search question: which procedural rules can improve the efficiency of
antitrust arbitration by decreasing litigation costs for private parties
on the one hand, and by increasing private parties’ compliance with
competitionlawontheotherhand? Throughoutthisresearchproject,
such broad question has been developed into research sub-questions
revolving around several key legal issues. The chosen sub-research
questions result from a vacuum in the European enforcement system
that leaves several key legal issues in antitrust arbitration unresolved.
The legal framework proposed in this research project could prevent
such a blurry scenario from impairing the EU private enforcement of
competition law in arbitration. Therefore, our attention was triggered
by those legal issues whose proposed solutions lead to relevant uncer-
tainties and that are most suitable for a law and economics analysis.
to my wife Irene
Acknowledgements
IwouldliketogratefullyacknowledgetheEuropeanUnioninstitutions
and the European taxpayers for founding, hence making possible, my
Ph.D. work in the last three years.
Preface
0.1 Motivation
Competition law is essential for the functioning of the European Union Treaties
and for achieving the goals set therein. This statement, embodied in the case-law
of the European Court of Justice itself,1 is based on the wording of Article 3 of
the Treaty of the European Union (hereinafter Treaty of the European Union
(TEU)), namely the very article that states the aims of the European Union,
which reads: ‘[The European Union] shall work for the sustainable development
of Europe based on balanced economic growth and price stability, a highly com-
petitive social market economy, aiming at full employment and social progress’.2
Article 3 does not only refer to the existence of a positive correlation between eco-
nomic growth and the level of competition in a given market. If we read it in light
oftheFreiburgschoolofeconomics’influenceontheEuropeanUnionculturaland
economic background, Article 3 implies that competition is the necessary ground
upon which social justice can be pursued. In other words, the European Union is
founded on the assumption that a sustainable economic growth in Europe passes
necessarily through market integration tied to the concept of workable competi-
tion.
On these premises the European Union produced, on the one hand, a body
of substantive law defining a framework of workable competition that is pursued
1Case C-126/97, Eco Swiss China Time Ltd v Benetton International NV [1999] I-
3055,availableatthisURLaddress: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=
CELEX:61997J0126:EN:HTML.
2Article 3(3) of the Treaty on European Union, available at this URL address: http://
eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12012M/TXT.
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0. PREFACE
by the lawmaker, and on the other hand, a body of procedural law determining
to what extent the workable competition objective can be, and is, practically
achieved. Leaving aside any discussion about the content of the EU competition
policy, that is the substantive part, this research is focused on the latter, namely
the procedural one. This decision is based on the assumption that, a legal norm
is only as good as the mechanism by which it is enforced. Therefore any attempt
to strengthen the EU competition law should not overlook the legal enforcement
procedure.
The traditional antitrust enforcement systems are both public and private.
Private enforcement contributes to pursue effectively and efficiently competition
law objectives alongside with public enforcement. In the words of Mario Monti as
European Commissioner for Competition, private enforcement has the potential,
ifcoordinatedwithpublicenforcement,tosignificantlycontributetoanidealcom-
petition law enforcement model which combines both the pillars, private as well
as public, and promotes citizens as the principal guardians of the legal integrity
of competition law in Europe.3 Nowadays, however, European competition law is
mostly enforced by competition authorities and subject to the review of courts.
In fact, it is widely acknowledged that private enforcement of both European
and national competition law has been extremely limited in Europe.4Hence, it
is possible to argue that the current European procedural law framework does
not provide private parties with the incentives that are necessary to achieve the
optimal level of private enforcement.
Strengthening the European private enforcement has been at the centre of the
debate on competition law for almost ten years.5 However, on the one hand, the
3Monti, Mario. ‘Private Litigation as a Key Complement to Public Enforcement of Compe-
tition Rules and the First Conclusions on the Implementation of the New Merger Regulation.’
speech given in Brussels, 2004.
4See the Study on the conditions of claims for damages in case of infringement of EC
competition rules, available at this URL address: http://ec.europa.eu/competition/antitrust/
actionsdamages/study.html.
5The debate started with the Commission [2005, 2008, 2011] and has recently resulted
in the Directive on damages actions for breach of the EU antitrust rules, proposed by the
Commission and available at this URL address: http://ec.europa.eu/competition/antitrust/
actionsdamages/documents.html.
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lawmaker’s attention and that of the legal scholars focuses mainly on the private
enforcement in front of national courts and through mass litigation, leaving al-
most untouched the topic of private enforcement through any alternative dispute
resolution mechanism, such as arbitration.6 On the other hand, the economic
literature focuses either on competition policy or on theories of litigation, but it
also completely disregards the market players’ incentives when competition law
disputes are solved by arbitrators.
The need for a Law and Economics analysis on antitrust arbitration is proven
by the number of specialised legal practitioners that are investigating the applica-
tion of competition law in arbitration.7 Their work shows that in order to apply
competition law in arbitration proceedings, legal practitioners need to answer a
wide range of open questions emerging from the existing legislative vacuum in
this matter. In fact, although competition law is an extremely important set
of norms subject to mandatory application, the lawmaker does not provide any
guidance on how should they be applied by international arbitral tribunals.
The adjudicators of different jurisdictions have tried to fill the legislative gap
in the field of antitrust arbitration. Nevertheless, the solutions proposed to most
problematic issues are often contrasting and inconsistent among jurisdictions.
Such scenario increases the legal uncertainty and leaves room for the strategic
behaviour of private parties. It creates cracks and loopholes in the structure of
this legal field that, due to the fundamental importance of competition law for
the EU legal systems, can be as dangerous as cracks and loopholes in a dike. The
risk is to jeopardise the level of enforcement of competition law in the European
Union and create adverse effects (i.e. distortions) on the whole functioning of the
internal market.
6Although the EU has recently showed interest in alternative dispute resolution mecha-
nisms, for instance introducing the Directive 2013/11/EU of the European Parliament and of
the Council of 21 May 2013 on alternative dispute resolution for consumer disputes, available
at the URL address: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:165:
0063:0079:EN:PDF.
7EU and US Antitrust Arbitration. A Handbook for Practitioners, edited by: Gordon
Blanke, Philip Landolt, Kluwer Law International, February 2011.
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0. PREFACE
Increasingly wary of the contrasting solutions adopted by adjudicators at the
national level, legal scholars have tried to fill the legislative gap and to provide
with some degree of legal certainty. Comparative law experts have approached
this problem examining dispute resolution systems from different jurisdictions, to
identify similarities and differences among possible alternative solutions. Com-
parativists have proposed legal reforms which result from their attempt to under-
standandtoweightadvantagesanddisadvantagesofalternativeproceduralrules.
Thechallengefacedinthesestudiesisthatcomparativelawdoesnotprovidewith
any weighing tool capable to objectively determine the effects of alternative legal
rules on the private parties’ behaviour. Comparative law scholars have mostly
ignored the literature on the economic analysis of litigation which provides the
needed weighing tools.
We focus on what is missing in the current status of the legal literature de-
bate, namely, the use of the economic analysis of law. In this research project,
our intent is to use the economic analysis of law to study the effects of the
contrasting legal solutions proposed by the legal practitioners to overcome the
existing legal vacuum in this field. In fact, Law and Economics makes use of a
scientific methodology, consisting of mathematically precise theories (e.g. price
theory, game theory, cost-benefit analysis) and empirically sound methods (e.g.
statistics and econometrics), to verify the effects of different procedural rules on
the private parties’ economic incentives. Law and Economics is used here as a
methodological tool that can favour a more qualified decision making. The re-
sults of this study cast new insights on the effects of the available competing
legal rules upon private parties’ behaviour incentives. The implied assumption
is that the use of Law and Economics’ methodology for this study can provide
a framework of legal solutions complying with the EU legislator’s demand of an
effective private litigation process as well as with a higher degree of compliance
with the law. Therefore neither lawmakers nor adjudicators should overlook this
type of analysis.
The few interdisciplinary works on arbitration produced by Law and Eco-
nomics scholars try either to adapt the litigation theories to arbitration or to
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study under which conditions US private parties insert arbitration clauses in
their contractual relationships.8 However, these works do not have a European
perspective nor specifically address any issue raised by competition law disputes.
The primary motivation for this research is to fill the gap in the interdisci-
plinary debate about the effectiveness of private enforcement of EU competition
law through arbitration.
0.2 Methodology
The methodology adopted in this thesis, for the economic analysis of legal rules,
rests on what has been called a functional approach to Law and Economics.9 In
thiscomparativeevaluationofalternativelegalsolutions,wefocusonbothprivate
parties’ economic incentives and on the concept of methodological individualism.
The former implies that the analysis starts from the assumption that individuals’
economic incentives can be used to highlight the parties’ preference of one legal
rule above the others. Whereas the idea behind the latter relies on the existence
of a theoretical market for legal rules and on the fact that, if allowed, rational
players will choose the rules that benefit them the most. Therefore, in light of the
functional approach to Law and Economics, observing or hypothesising parties’
preferences should allow us to identify failures in the law.
Provided that this methodology cannot be profitably applied unless the pri-
vate parties reveal their preferences within a “market” of legal rules; the field of
international commercial arbitration is particularly suited for the use of such ap-
proach. In fact, when opting for arbitration, individuals are free to choose both,
which alternative legal systems and even which specific legal rules will regulate
their business relationship. The same holds true also for antitrust arbitration,
even if the EU competition law is one of the few branches of unified substantive
EU law, hence somehow impairing the private parties ability to choose between
8Benson [1999]; Drahozal and Wittrock [2008]; Eisenberg and Miller [2006]; Shavell [1995].
9Parisi [2004]; Parisi and Luppi [2012]; White [2009].
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