Need Of The Hour - Statutory Recognition To Emergency Awards Passed In Foreign Seated Arbitrations

Introduction

1. Section 9 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") enables the parties to an arbitration agreement to approach the court for seeking interim reliefs, either before or during the arbitration proceedings, or at any time after passing of the award but before the same is enforced. Prior to the Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment"), the applicability of Section 9 was restricted to India seated arbitrations, however, post 2015 Amendment, the applicability of Section 9 is extended to arbitrations seated outside The parties to such foreign seated arbitrations are now permitted to approach Indian courts for seeking interim relief(s) provided there is no agreement (either express or implied) to the contrary .

246^th Law Commission Report & Srikrishna Committee reports

2. Section 9 of the Arbitration Act was amended following the recommendations made in the 246^th Law Commission Report ("246^th LCR") to provide efficacious remedy to parties to foreign seated arbitrations, who otherwise found it difficult to enforce the awards passed by emergency arbitrators under institutional rules of arbitration (which are akin to an interim order). Though the 246^th LCR recommended granting statutory recognition to awards passed by emergency arbitrators, the Parliament did not agree to this request while passing the 2015 Amendment to the Arbitration Act.

3. Interestingly, immediately after the 2015 Amendment was enacted, a High-Level Committee to Review Institutionalization of Arbitration Mechanism in India ("Srikrishna Committee") was set up to suggest measures for development of institutional arbitration and, examine specific issues affecting the Indian arbitration landscape. The Srikrishna Committee made a similar recommendation as made in the 246^th LCR i.e., to give statutory recognition to enforceability of awards passed by emergency arbitrators. However, once again, this recommendation was not accepted by Parliament. Accordingly, the awards passed by emergency arbitrators are not statutorily recognized as on date.

Judicial precedents and Viswanathan Committee report

4. Notwithstanding the legislative vacuum, the law with respect to recognition and enforceability of emergency awards passed in India seated arbitrations has been settled by the Hon'ble Supreme Court in com NV Investment Holdings LLC v Future Retails Ltd and Ors (2022) 1 SCC 209 ("Amazon"). The Supreme Court held that an award passed by the emergency arbitrator in an India seated arbitration, administered under foreign arbitration rules (SIAC Rules in that case), will be considered as an 'order' under Section 17(1) of the Arbitration Act and shall be enforceable under Section 17(2) of the Arbitration Act.

5. However, with respect to foreign seated arbitrations, there is neither statutory nor judicial recognition to the enforceability of emergency awards in India. Thus, a successful party who has obtained an emergency award in a foreign seated arbitration is left with no other option but to either (i) file a fresh suit based on the emergency award; or (ii) reagitate the matter afresh by taking recourse to Section 9 of the Arbitration Act and seek similar reliefs from the court. This position of law was laid down by the Hon'ble Delhi High Court in Raffles Design International India Private Limited & Anr. v. Educomp Professional Education Limited & Ors., 2016 SCC OnLine Del 5521 ("Raffles Design").

6. In 2023, the Government of India set up another expert committee, under the chairpersonship of Dr T.K. Viswanathan ("Viswanathan Committee"), to examine the working of arbitration law in the country and recommend reforms to the Arbitration Act. The Viswanathan Committee submitted its report on 7 February 2024 wherein it took a different approach vis-à-vis statutory recognition of emergency awards under the Arbitration Act. While it recommended that the Arbitration Act be suitably amended to recognize an emergency arbitrator's order passed in India seated arbitrations, it did not recommend the same for foreign seated arbitrations. The Vishwanathan Committee further recommended the insertion of Section 12B in the Arbitration Act to provide statutory recognition and enforcement mechanism for an award passed by an emergency arbitrator.

7. As regards foreign seated arbitrations, the Viswanathan Committee agreed with the position taken inRaffles Design that emergency awards passed in foreign seated arbitrations can be enforced by way of an application under Section 9 of the Arbitration Act praying for similar reliefs from the court. However, no reasoning is provided for differentiating between India and foreign seated arbitrations vis-à-vis enforcement of emergency awards passed by the arbitral tribunals. The Viswanathan Committee did not discuss the rationale behind making the above distinction or reasons for not according statutory recognition to emergency awards passed in foreign seated arbitrations.

8. The Vishwanathan Committee's recommendation of not according statutory recognition to emergency awards passed in foreign seated arbitration appears to be contrary to Article 17H of the UNCITRAL Model Law ("Model Law"), which provides for recognition and enforcement of interim measures passed by an arbitral tribunal, irrespective of the country in which it is passed. The true purport of this provision in the Model Law is to ensure that the interim reliefs granted in an arbitration proceeding are not rendered worthless merely because the parties have chosen a particular jurisdiction as seat of the arbitration. Further, this also puts unnecessary burden on the parties to reagitate the matter all over again before an Indian court, particularly when that party has already obtained a favorable interim award after satisfying the arbitral tribunal.

Conclusion

9. It is imperative that statutory recognition is accorded to emergency awards passed in foreign seated arbitrations in line with Article 17H of the Model Law. This could perhaps be achieved by an amendment to the Arbitration Act. In order to balance public policy considerations, the amendment may recognize narrow and limited grounds on which such enforcement may be refused, such as the subject matter of emergency award not being arbitrable under Indian law. Statutory recognition of emergency awards passed in foreign seated arbitrations is the need of the hour and will help India in attaining the status of a global arbitration hub. This will not only uphold parties' choice for foreign seated arbitration but will also ensure speedy enforcement of emergency awards. The current position of law laid down in Raffles Design to reagitate the underlying issues before a civil court or in a Section 9 petition, may risk the subject-matter of arbitration being frittered or depleted during the pendency of such proceedings, which will defeat the very objective of a party obtaining an emergency award. Needless to say, the reform to recognize foreign seated emergency awards will also gain investors' trusts in the Indian alternative dispute redressal mechanism and promote investment and opportunities in India.

****

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.