Emergency Arbitration has become a rapidly growing procedure for parties to get relief in Emergency Situations from an Emergency Arbitrator, if the same is envisaged in the contractual agreement between the parties.
The concept of emergency arbitration was introduced in 1990 by the International Chamber of Commerce, which acknowledged the powerlessness of the courts/arbitral tribunals to arrive at quick orders/directions in crucial situations. Thereafter, other international institutions like SIAC, LCIA, HKIAC, etc. incorporated Emergency Arbitration given its significance. At the outset, it is to be noted that to trigger emergency arbitration, the fundamentals of a binding arbitration agreement must be met. Indeed, a party is entitled to seek emergency arbitration except if they have explicitly opted out of the clause for emergency arbitration.
The Arbitration & Conciliation Act, 1996 ("A&C Act") does not per se provide for the procedure of "Emergency Arbitration". However, it provides for interim measures under Sections 9 and 17.Section 9provides for interim reliefs before the Court like passing an injunction, preservation or security of the disputed amount, etc. Relief under Section 9 can be sought at any time, before the institution of Arbitration Proceedings or after passing of the Award.Section 17 provides for similar interim reliefs before Arbitral Tribunals which can be sought by parties during the pendency of the Arbitration Proceedings.
In the latest proposal for amendment of the A&C Act i.e. Draft Arbitration and Conciliation (Amendment) Bill, 2024 ("Amendment Bill, 2024") has for the first time proposed codification of the Emergency Arbitration procedure by way of insertion of new Section 9A in the A&C Act. The new Section 9A provides for appointment of an emergency arbitrator prior to the constitution of an arbitral tribunal by Arbitral institutions for the purpose of grant of interim measures referred to in section 9. Further, Section 9A provides that orders passed by an emergency arbitrator shall be enforced in the same manner as if it is an order of an arbitral tribunal under subsection (2) of section 17 of the A&C Act.
In addition to insertion of the new Section 9A, the Amendment Bill 2024 also proposes an amendment in the Section 17 of the A&C Act to insert under S.17(1)(d) sub-clause (da) which recognizes the Arbitral Tribunal's power to ― " confirm, modify or vacate, as the case may be, the ad interim measures granted under section 9 or order made by an emergency arbitrator under Section 9A subject to such conditions, if any, as it may deem appropriate after hearing the affected parties;"
Institutions such as Delhi International Arbitration Centre (DIAC), the Mumbai Centre for International Arbitration (MCIA), and the International Centre for Alternative Dispute Resolution (ICADR) have also incorporated Emergency Arbitration provisions, providing a more efficient and effective mechanism for parties to seek urgent interim relief before the constitution of the Arbitral Tribunal.
The proposed Amendment Bill 2024 has found favor with parties based in Indian and International Jurisdictions since the absence of formal recognition in the A&C Act of Emergency Award had let to some hesitation in their implementation by Indian Courts. At this point, it is important to appreciate the important judgments of Indian Courts on the Emergency Arbitration.
The first instance was before Bombay HC in the case ofHSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. 2014 SCC OnLine Bom 102,.In the said case, the seat of arbitration was Singapore, and the proceedings were covered under SIAC rules. Emergency Arbitration was invoked by the petitioner under the SIAC Rules and Emergency Award was passed in their favor. Thereafter, a Section 9 petition to get the same executed in India, was filed before the Indian Courts. The primary issue dealt with by Bombay HC was w.r.t the applicability of Section 9, which was enshrined in Part I, to foreign seated arbitrations. In this matter, Bombay HC did not go into the question of recognition of Emergency Arbitration under the A&C Act, however, it passed a similar order to that of the Emergency Arbitrator, implying the recognition and the deemed relevance Emergency Awards.
In a subsequent landmark ruling, the Delhi HC in Raffles Design International India (P) Ltd. v. Educomp Professional Education Ltd.2016 SCC OnLine Del 5521 decided that a Court will adjudicate upon a Section 9 petition by applying its discretion and judicial mind, independent of the order given by the Emergency Arbitrator. The Delhi HC decision had a negative impact on the jurisprudence for Emergency Awards insofar as the findings therein led to derecognition of any such Emergency Awards where Arbitration Proceedings had a foreign seat.
The issue has now settled by the Hon'ble SC inAmazon.com NV Investment Holdings LLC v. Future Retail Ltd (2022) 1 SCC 209. In this case, the seat of arbitration was Delhi, but the parties opted for Emergency Arbitration under SIAC rules. The Hon'ble SC held that an order passed by the Emergency Arbitrator is an interim order of an Arbitral Tribunal as per Section 17(1), hence, it can be enforced under Section 17(2) of the A&C Act.
Hence, the judgment of the Hon'ble SC settled the issue of recognition and enforcement of Emergency Awards in India and also paved the way for the proposed Amendment Bill, 2024, which now seeks to codify the procedure for Emergency Arbitrations, in the case of Institution Arbitrations. The proposed amendments act as a guarantee for International parties entering into commercial transactions with their Indian counterparts by due recognition of the Emergency Awards.
Therefore, the codification and implementation of Emergency Awards under the Indian Arbitration Act, will go a long way in promoting economic development and cross-border dispute jurisprudence.
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