Observations on the arbitrability of anti-monopoly disputes

By Ryan Fang and Simon Shi, Jingtian & Gongcheng
0
54

Anti-monopoly disputes are civil cases where an operator’s monopolistic conduct leads to another’s losses, as described under article 60.1 of the Anti-Monopoly Law (AML). As legislators have yet to clarify if anti-monopoly disputes can be resolved in arbitration, courts in practice have arrived at entirely different or even polar opposite conclusions.

Besides generating public debate, these cases serve as cautionary tales on potential risks for enterprises and practitioners alike.

CURRENT LAWS

Ryan Fang, Jingtian & Gongcheng
Ryan Fang
Partner
Jingtian & Gongcheng

Under the Arbitration Law, contractual disputes and other disputes over rights and interests in property between citizens, legal persons and other organisations of “equal subject” status may be arbitrated. Articles 3 and 17 of the law set out types of disputes that cannot be arbitrated and circumstances that would invalidate an arbitration agreement, but without mentioning anti-monopoly disputes.

Meanwhile, article 60 of the amended AML neither expressly permits nor forbids arbitration as a way to resolve anti-monopoly civil disputes. Similarly, while the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct listed ways to launch litigation to resolve anti-monopoly civil cases, they did not expressly refute arbitration.

In short, current legislation has yet to draw a decisive conclusion on the arbitrability of anti-monopoly disputes.

JUDICIAL PRACTICE

The authors’ research indicates that decisions on the arbitrability of anti-monopoly disputes by the Supreme People’s Court (SPC) and higher courts most commonly involve either monopoly agreements or abuse of dominant market position, summarised as follows:

Simon Shi, Jingtian & Gongcheng
Simon Shi
Counsel
Jingtian & Gongcheng

(1) Disputes over monopoly agreement. In a 2020 dispute over a fresh milk sales and purchase contract involving a Heilongjiang dairy farm, the SPC held that civil disputes arising from monopolistic conduct were not general contract or infringement disputes. The determination of monopolistic conduct affects fair market competition and social public interests, and the case content and object of trial exceeded the contractual rights and obligations of the parties, as well as the scope of the arbitration clause. Therefore, the case was assigned to the court.

In VISCAS v Shanghai Municipal Electric Power (2019), the SPC held that litigations over infringements of horizontal monopoly agreements, similar to infringement disputes, should be handled by the courts. This was mainly because the case content and object of trial far exceeded the scope of the arbitration clause agreed by the parties, and that the AML has obvious traits of a public law.

In Shell (China) v Hohhot Huili Material (2019) the SPC – having analysed the AML’s value in upholding market order and its “public law” nature – determined that monopoly disputes were not contract disputes. It further pointed out that the determination of monopolistic conduct exceeded the rights and obligations of the parties, and there was no legal basis for anti-monopoly disputes to be resolved in arbitration. In the end, it ruled against the case’s arbitrability.

(2) Disputes over abuse of dominant market position. In Baicheng Xinniu Dairy v Lindian Yili Dairy Industry et al (2021), the SPC held that the case should be handled by a court, mainly because the AML had obvious traits of a public law, and the case content and object of trial far exceeded the scope of the arbitration clause.

In Shanxi Changlin Industry v Shell (China) (2019), the SPC believed that the parties should be bound by the arbitration clause and the case should be resolved in arbitration. The main reasons given were that the claim and reason behind it were closely tied to contractual rights and obligations, with the dispute essentially arising from performance of the contract, and the arbitration clause was legal and should be deemed valid.

In Samsung (China) Investment v Nanjing Songxu Technology (2015), the Higher People’s Court of Jiangsu province held the case non-arbitrable after considering the AML’s “public law and public policy” nature, the limit of legal provisions to administrative and litigation-related resolutions, and the interests of third parties and consumers.

In summary, there is no consensus in current judicial practice over the arbitrability of anti-monopoly disputes, as the SPC alone can reach different conclusions even with an identical cause of action.

Generally speaking, however, judicial decisions against arbitrability of anti-monopoly cases outnumber the opposite, and the cause of dispute, monopoly agreement or abuse of dominant market position make little difference.

PRACTICAL SUGGESTION

Due to the lack of a clear and uniform standing on the issue of arbitrability, either legislative or judicial, anti-monopoly disputes arising from contracts containing arbitration clauses may deviate drastically – in terms of jurisdiction and manner of resolution – from what the parties agreed on or expected. Until more clarity can be gained, parties should take into account uncertainties over the jurisdiction of anti-monopoly disputes.

On the other hand, should parties wish to resolve anti-monopoly disputes through arbitration, or avoid any discord over jurisdiction after disputes arise, they are advised to explicitly list anti-monopoly disputes, or even disputes over monopolistic contracts or abuse of dominant market position, into the arbitration clause to increase the likelihood of such clauses being recognised by the court.

Since coming into force on 1 August, the amended AML holds no clearer answer. However, article 2 of the amended Arbitration Law (Draft for Comment) deletes the restrictive phrase of “equal subject” from the original application scope of arbitration, which may denote more flexibility towards arbitration in anti-monopoly disputes.

Furthermore, the authors note that members and experts of the National Committee of the Political Consultative Conference discussed moderate expansion of arbitration applicability, as well as inclusion of anti-monopoly cases, during the 63rd biweekly consultation forum.

Parties to anti-monopoly disputes are therefore advised to keep a watchful eye on the issue, and timely assess the risks involved, in order to make the most informed adjustments and responses.

Ryan Fang is a partner and Simon Shi is a counsel at Jingtian & Gongcheng

collateral

Jingtian & Gongcheng

34/F, Tower 3, China Central Place
77 Jianguo Road, Beijing 100025, China

Tel: +86 10 5809 1165

Fax: +86 10 5809 1100

E-mail: fang.ye@jingtian.com
shi.shuwen@jingtian.com

www.jingtian.com