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Case C-126/97
Eco Swiss v Benetton
~ The relationship between arbitration and competition law ~
The facts:
Benetton, a company established in Amsterdam concluded in 1986 an 8 year licensing agreement
with Eco Swiss (Hong Kong) and Bulova (New York).
In 1991, Benetton announced the termination of the agreement 3 years before the period
provided for in the contract.
Between Benetton, Eco Swiss and Bulova were instituded arbitration proceedings wich were
followed in 1993 by a Partial Final Award which stated that Benetton must compensate Eco
Swiss and Bulova for the termination of the licensing agreement and by a Final Arbitral Award in
1995 which assesed the quantum of the damages.
Benetton applied to the Court for annulment of the two arbitral decisions on the grounds that
they were contrary to public under art. 85 of the Treaty (never raised in arbitration stage). The
application was dismissed and Benetton filed and appeal.
The Court of Appeal determined that the agreement in question was partialy void because it
enabled the parties to share the market, was not notified to the Commission and was not covered
by a block exemption and decides to refer to the ECJ for a preliminary ruling.
Legal rules that are invoked:
1)Benetton invoked nulity of the licensing agreement under art. 85 of the EC Treaty, as it
conflicted with the EU Competition rules which prohibits agreements having as their object or
effect the prevention, restriction or distortion of competition witin the common market.

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Under the Dutch law an arbitral award is considered to be contrary to public policy only if its in
conflict with a mandatory rule that is considered fundamental and competition law was not
included in that category.
2) Acording to Netherlands national procedural law, the interim award acquired the force of res
judicata and was open to appeal within a period of 3 months. Also, an interim award in the nature
of a final award, may not be annuled simultaneously with the subsequent award. So the question
is if those rules are not be applied, if this is necessary in order to examine whether the agreement,
which the interim award considered it to be valid, may be void because it conflicts with Article
85 of the Treaty.
Arguments:
1) The ECJ argued that art. 85 of the EC Treaty is public policy because it constitutes a fundamental
provision, esential for the accomplishment of the Communitys tasks. Invoking procedural
autonomy, the Court stated that if national rules of public policy can enable the national court to
annul an arbitration award, then it must also grant annulment if the application is founded on
failure to comply with EU public policy.
In addition, matters concerning the interpretation of the prohibition laid down in art. 85 should
be open to examination by national courts when they are asked to determine the validity of an
arbitration award and that they can reffer, if necessary, to the ECJ for preliminary ruling.
2) The answer given by the Court regarding the seccond matter was that EU law does not require a
national court to refrain from applying domestic rules of procedure that set a time-limit after
which they may no longer be called in question by a subsequent arbitration award, nor to refrain
from applying the rule that annulment of an interim award in the nature of a final award, may not
be sought simultaneously with that of the subsequent award.
In summary, Eco Swiss v Benetton stands for the proposition that art. 85 must be treated as rules
o national public policy by the courts of the Member States.