Termination of a license agreement / Claim of abuse of a dominant position based on Article 86 of the Treaty of Rome / Jurisdiction of the Arbitral Tribunal to decide on Defendant's request based on Article 86 / Arbitrability, yes / Possibility for the Arbitral Tribunal sitting in Switzerland to apply or take account of EC law even if Swiss law is the substantive law of the contract, yes / Articles 177 and 19 of the Swiss Private International Law / Article 86 is directly effective to the relations between the parties, yes / Authority of the Arbitral Tribunal to decide on the consequences of an alleged abuse of a dominant position, yes / Limits to the Arbitral Tribunal's jurisdiction

This arbitration involved a French Company Licensor (Claimant) which had entered into a sublicense agreement with a Finnish Company as Licensee (Defendant) providing that the latter could use Claimant's technology in the Scandinavian countries.

In 1991, Licensor terminated the sub-license agreement claiming damages and restitution of various documents. In its preliminary answer, Licensee denied that the Arbitral Tribunal had jurisdiction over the dispute. It also filed a counterclaim, based on the violation by Licensor of Article 86 of the Treaty of Rome, in which it alleged that Licensor had formed an anticompetitive scheme to strengthen or extend a dominant position. Licensor contended that the counterclaim, based on Article 86, lacked arbitrability and exceeded the scope of the arbitration agreement.

The place of arbitration was Switzerland and Swiss law was applicable to the substance of the dispute.

The Arbitral Tribunal's jurisdiction over Licensee's counterclaim regarding Licensor's alleged violation of Article 86 of the Treaty of Rome In the event that the Arbitral Tribunal asserts jurisdiction over Licensor's Request, which it does, Licensee has submitted several counterclaims one of which is based on Article 86 of the Treaty of Rome. The Article 86 count is based on the allegation that Licensor attempted to freeze Licensee out of the market for engines and spare-parts using so-called X… technology. Licensee claims that this behaviour represents both an abusive restriction of competition in the spare-parts market and an abuse of the dominant position which Licensor and its parent hold in the market of low-speed and medium-speed diesel engines. Licensor disputes the Arbitral Tribunal's jurisdiction over this counterclaim based on Article 86. According to Licensor, this counterclaim is outside the scope of the arbitration agreement to the extent it addresses Licensor's parent and the market of . . . engines and additionally lacks arbitrability.

For international arbitrations taking place in Switzerland, Article 177 (1) PIL provides that "any dispute involving pecuniary matters (toute cause de nature patrimoniale/jeder vermögensrechtliche Anspruch) may be the subject matter of an arbitration". This is a substantive rule of private international law (ATF/BGE 118 (1992) II 355; 118 (1992) II 196). The Swiss Federal Supreme Court has recently held that the test under Article 177 (1) PIL is whether at least one of the parties is ultimately seeking a financial benefit (ATF/BGE 118 (1992) II 356: "any claims that have a pecuniary value for the parties, whether assets or liabilities, in other words rights which present, for at least one of the parties, an interest that can be assessed in monetary terms" [quoted in French in the Award]. According to Bucher, such may be the case even when the claim does not have itself a monetary value, but is closely connected to a legal right having such a monetary value (Bucher, International Arbitration in Switzerland, Basel 1988, p. 42 note 67). To the extent that the consequences of an abusive behaviour or of a dominant market position on the contractual relationship are at issue, Defendant's claim involves pecuniary matters.

The Swiss Federal Supreme Court ruled that competition matters arising under EC Competition law fall within the purview of the term "pecuniary matters" as used in Article 177 (1) PIL. In the decision ATF/BGE 118 (1992) II 193 the Supreme Court set aside a partial arbitration award on the subject of jurisdiction because the Arbitral Tribunal had refused to decide on the argument that the parties' agreement was void under Article 85 of the Treaty of Rome. It is true that this decision was rendered in connection with a contract governed by Belgian law of which the EC law forms an integral part. However, EC law might also be applicable or taken into account if Swiss law is the substantive law of the contract. It is generally agreed that under Art. 187 (1) PIL, arbitrators must or at least may observe the international public policies of other states or of the European Communities irrespective of the substantive law applicable (See Bucher, International Arbitration in Switzerland, Basel, 1988, p. 104 note 208/209, p. 142 note 286; Walter/Bosch/Brönnimann, Internationale Schiedsgerichtsbarkeit in der Schweiz, Bern, 1991, p. 185/186; Rüede/Hadenfeldt, Schweizerisches Schiedsgerichtsrecht, 2. Aufl. Zürich 1993, p. 278; Lalive/Poudret/Reymond, Le droit de l'arbitrage interne et international en Suisse, Lausanne, 1989, p. 396 note 13 under Art. 187).

Alternatively, the Tribunal's competence to apply or to take into account provisions outside the lex causae can also be derived from Art. 19 PIL. Thus, the considerations of the Supreme Court as regards the arbitrability of competition matters are valid also when Swiss law is the proper law of the contract at issue. This understanding of the Supreme Court's practice is also consistent with Article 18 of the revised Swiss Federal Statute on Cartels (dated December 20, 1985), which provides explicitly that disputes over the existence, the validity and the termination of international cartel agreements are arbitrable without limit. Thus, the Swiss practice regarding arbitrability of competition matters under Article 85 of the Treaty of Rome is the same as in most of continental Europe (see Kaplan, L'arbitrabilité des litiges commerciaux en matière de droit de la concurrence, 1988, "Droit et pratique du commerce international", p. 403, and authorities cited therein).

Claimant argues that Article 85 differs substantially from Article 86 so that the practice of the Swiss courts regarding the arbitrability of claims under Article 85 cannot be extended to include claims under Article 86 of the Treaty of Rome.

Article 86 prohibits any abuse of a dominant position within the Common Market or in a substantial part of it-by one or more undertakings-in so far as trade between Member States could be affected. In contrast to Article 85, Article 86 addresses not only agreements of an abusive nature but generally any form of abusive behaviour in a dominant position.

In the decision 127/73 Belgische Radio en Televisie et al. v. SV Sabam et al. (ECR 1974 p. 51, p. 62 note 16), the European Court of Justice held that Article 86, like Article 85(1), is directly effective to the relations between the parties. This is in conformity with Article 1 of Regulation 17 (OJ 1962 Nr. 58 p. 1655 as amended), which provides explicitly that the prohibitions contained in Articles 85 and 86 are both effective without a prior finding being required from the EC Commission that a particular agreement is restricting trade within the meaning of Article 85 or is an abuse of a dominant position as prohibited by Article 86. According to Kapteyn and Verloren van Themaat (Introduction to the law of the European Communities, 2nd ed. 1989, p. 555 and the authorities cited therein), this means in particular that civil actions for damages or seeking an injunction to restrain a prohibited practice can be based on Article 86.

Article 86 contains no express provisions as to the legal consequences of an agreement or behaviour which is found to be abusive. In the decision 66/86, Ahmed Saeed Flugreisen (ECR 1989, p. 803, at p. 851 note 45) the European Court of Justice held that: "If it is ascertained that an undertaking has abused its dominant position within the market, and that trade between Member States is likely to be affected by this, the prohibition laid down in Article 86 applies to the conduct of the undertaking in question. In the event that the Commission has not intervened, on the basis of the powers it holds by virtue of the Treaty and its regulations, in order to terminate the violation or to sanction it, it is up to the competent administrative authorities or national courts to draw the consequences of the applicability of the prohibition and, as the case may be, to hold that the agreement in question is null and void, by basing its decision, in the absence of EC rules in this area, on their own national legislation [quoted in French in the Award]." From this, results that the Courts can deal with the civil consequences of an infraction of Art. 86 and that they have with regard to the legal consequences of that infraction to apply the substantive law applicable to the issue at hand (see Schröter, Kommentar zum EWG Vertrag (Groeben/Thiessing/Ehlermann, ed.) Vol. 2, 4th ed. 1991, p. 1814, note 47/48).There are no reasons why an Arbitral Tribunal should not have the same authority as ordinary courts to decide over the consequences of an alleged abuse of a dominant position. The tribunal is in the matter of competition law therefore in the same position when dealing with a claim based on Article 86 as it is when facing a claim which involves Article 85 of the Treaty of Rome.

There are certainly limits to the Arbitral Tribunal's competences which the Tribunal has to observe when dealing with Defendant's counterclaim based on Article 86.

First, the Tribunal is bound by the arbitration clause contained in the Sublicense Agreement. It must therefore restrict its findings with regard to the alleged abuse of a dominant position within the Common Market to issues "arising out of or in connection with the Sublicense Agreement".

Second, the Tribunal is not permitted to extend its jurisdiction onto third parties and/or subject matters which are not related to the Sublicense Agreement. Only within this framework the alleged ties of Licensor with . . . and the alleged ties between the markets pertaining to low-speed engines and medium-speed engines can as a matter of substance be a relevant fact when dealing with the issue of abuse of a dominant position.

Third, the Tribunal's competence is restricted to the civil law consequences of an abuse (as, for instance, validity of actions, termination of the agreement or breach of contract with the consequences of damages) (See Stoufflet/Chaput, "Pratiques restrictives de concurrence", in: Traité de droit européen, Vol. 3, collection des Juris-Classeurs, Fasc. 1430, at p. 17 note 138/142). In this, the Tribunal is also conscious of the fact that it lacks any power to carry out investigations ex officio. Therefore, the party which bases its claim on Article 86 will be under an obligation to furnish pertinent proof of the alleged dominant position of the other party and of its abuse in connection with the Sublicense Agreement.

Concluding, the Arbitral Tribunal finds that within the limits set out above it has jurisdiction to decide on Defendant's request based on Article 86 of the Treaty of Rome.'