A recent decision of the Court of Justice of the European Union may pave the way for clauses in supply agreements which commit the parties to arbitrate antitrust disputes.

Purchasers may agree to such clauses without appreciating their significance.

In a decision about procedure in a damages action by victims of the hydrogen peroxide cartel, the Court of Justice answered three questions from the District Court of Dortmund, the third of which was whether arbitration or choice of jurisdiction clauses could validly exclude Arts. 5(3) and 6(1) of the Brussels Regulations – now Arts. 7(2) and 8(1) of the Recast Regulations – which confer jurisdiction on the courts:

  • Art. 5(3): where the harm occurred; or
  • Art. 6(1): where another member of the cartel is being sued.

Art. 6(1) is particularly significant. Actions for damages for breach of competition law are frequently joint actions by multiple claimants against multiple defendants, because the resultant economies of scale significantly reduce the damages one needs to have suffered in order for the claim to be viable.

Art. 6(1) plays a significant role in enabling multi-defendant actions because, provided there is one “anchor” defendant subject to the jurisdiction of the courts of a Member State, other cartelists can be joined as co-defendants in that action. Also, claimants can choose which defendant shall be the anchor, thereby giving them flexibility to choose the jurisdiction most favourable to their claim.

In answer to the third question, the Court of Justice decided that, in most cases, an arbitration clause would not be effective in overriding Arts. 5(3) and 6(1). It held that:

  • A clause which abstractly refers to all disputes arising from contractual relationships does not extend to disputes relating to participation in an unlawful cartel.
  • This is because the purchaser could not have foreseen the dispute at the time of the contract, having no knowledge of the cartel. Therefore the dispute cannot be regarded as stemming from the contractual relationship.

However, in the pre-penultimate paragraph of its judgement, the Court found that:

  • If the clause specifically refers to disputes of liability for infringement of competition law, it may successfully exclude a court’s jurisdiction under Arts. 5(3) and 6(1).

This finding may serve as a signpost for cartelists to include in their supply agreements clauses specifically referring antitrust disputes to arbitration, drafting them to appear as innocuous as possible.

Liability for infringement of competition law is tortious, not contractual, and all cartelists are jointly and severally liable for the loss. Therefore, a victim may participate in a joint action even if its supplier is not one of the chosen defendants.

The danger for a party who has submitted to arbitrate antitrust disputes with its supplier is that, perversely, it may find itself excluded from actions in which its supplier is a defendant.

It may be possible to work around the exclusion:

  • The purchaser may be able to come to an arrangement with its supplier in exchange for an agreement not to insist on the arbitration clause.

However, this cannot be guaranteed. Particularly, if various cartelists have similar arbitration clauses in their contracts, there may be a collective reluctance to waive them if the network of arbitration agreements can stymie the action.

  • The proceedings may be drafted in a way which attempts to exclude any claim against the supplier.

However, this is not obviously possible where liability is on a joint and several basis. Even if drafting can overcome the exclusion, it could lead to all manner of procedural and substantive difficulties, for example in collective settlement.

At the very least, an agreement to arbitrate introduces another hurdle to actions which are notoriously difficult to get off the ground anyway.

If presented with such a clause, purchasers would be well advised to negotiate for its removal, asking the supplier why it wants the clause.