INTRODUCTION

Emergency arbitration is being increasingly recognised and adopted by several jurisdictions and institutional arbitration centres around the globe.

The Law Commission of India's 246th Report (2014) pertaining to the amendments in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), proposed an amendment to the wordings of Section 2(d) of the Act. This amendment was proposed to ensure that institutional rules such as the SIAC Arbitration Rules, or the ICC Arbitration Rules or any other Institutional Arbitration Rule's which provide for an appointment of an emergency arbitrator are given statutory recognition in India.

Emergency arbitration has recently been in controversy in India due to the dispute between Amazon and Future Group before the Delhi High Court and the Supreme Court of India, The Hon'ble Supreme Court of India scrutinized the powers of an Emergency Arbitrator and the award passed by the Emergency Arbitrator.

WHAT IS EMERGENCY ARBITRATION?

Emergency Arbitration is a procedure through which parties to the dispute can seek interim relief, even before the constitution of an Arbitral Tribunal. It is usually opted for in the cases where a delay in granting interim relief will result in irreparable loss to a party to the dispute. The role of an Emergency Arbitrator comes to an end after passing of the Interim Emergency Award. Thus, it is considered an alternative to interim relief granted by the courts.

Major benefits of emergency arbitrations are that it is more expeditious than court procedure, it is cost effective and extra judicial intervention is avoided.  However, if the order of the emergency arbitrator is not enforced, it would render the entire mechanism of emergency arbitration redundant.

WHO IS AN EMERGENCY ARBITRATOR?

An emergency arbitrator is a sole arbitrator appointed by an arbitration institution to consider an Emergency Interim Relief Application. The status of the emergency arbitrator is based on party autonomy as the law gives complete freedom to the parties to choose an arbitrator or an arbitral institution. The powers of the emergency arbitrator are the same as that of an arbitral tribunal to decide the interim measures. The award passed by the emergency arbitrator is binding on all the parties. However, it does not bind the subsequently constituted arbitral tribunal and the arbitral tribunal is empowered to reconsider, modify, terminate or annul the order/ award of the emergency arbitrator.

WHAT ARE THE POWERS OF AN EMERGENCY ARBITRATOR?

An Emergency Arbitrator carries out the following functions and becomes functus officio after the Interim Order is made:

  1. Emergency arbitrator shall establish a schedule for consideration of the application for emergency relief in accordance with the institutional arbitration rules under which he has been appointed.
  2. Such a schedule shall provide a reasonable opportunity to all the parties to be heard. It may provide for proceedings by way of telephonic conference or on written submissions as alternatives to a formal hearing.
  3. In certain conditions due to strict timelines, the emergency arbitrator may never actually hear or consult with the parties apart from certain major clarifications and simply give his order on the basis of the documents and written submissions placed before him.
  4. Timelines vary as per various international arbitration rules, but a typical emergency arbitration takes around ten to fifteen days from the date of application to the date of the award.
  5. The Emergency Arbitrator shall have the powers vested in the arbitral tribunal pursuant to these rules, including the authority to rule on his own jurisdiction, and may order any party to take such interim measure of protection, as the arbitrator may consider necessary considering the subject matter of the dispute.
  6. The nature of the interim orders include asset freezing orders, both prohibitive and mandatory injunctions, orders for the preservation and inspection of evidence, preventive orders to avoid misuse of intellectual property or confidential information as well as anti-suit injunction.

An order passed by the emergency arbitrator is not binding on the arbitral tribunal with respect to any question, issue or dispute determined, yet, the interim order has to be definitely varied, discharged or revoked, in whole or in part, by a subsequent order or award made by an arbitral tribunal upon application by any party or upon its own initiative.

INDIAN COURTS AND EMERGENCY ARBITRATOR'S AWARDS

In the case titled, Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd.& Ors.1, the Delhi High Court granted interim relief to the applicant in whose favour the emergency award had been issued.

In HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd.2 , the Bombay High Court granted relief similar to that granted in the emergency arbitrator's award (in a Singapore seated EA), and the applicant accordingly succeeded in enforcing it.

Recently, the Delhi High Court passed a judgment in the case of Ashwani Minda and Ors. v. U-Shin Ltd. and Ors.3, rejecting a party's request for interim relief under Section 9 of the Indian Arbitration Act, when the party had failed to obtain the same relief at first instance before the emergency arbitrator. In doing so, the court in effect recognised the outcome in the EA.

The Delhi High Court in the above stated case held that 'having invoked the mechanism of the emergency arbitrator and invited a detailed and reasoned order, it is not open for the applicants to take a second bite at the cherry. There has been no change of circumstance after the said order as none has been pleaded or even argued.' The above set of rulings provide insight into recognition value of awards issued by emergency arbitrators when parties approach courts for interim relief. However, the burning issue is of direct enforcement of emergency awards/orders which remains unresolved.

WHAT IS THE AMAZON AND FUTURE GROUP DISPUTE?

FACTUAL BACKGROUND

The case concerned Amazon.Com NV Investment Holdings LLC (Amazon), on the one hand, and Future Retail Limited (FRL), India's second-largest offline retailer, and its shareholders, including Future Coupons Private Limited (FCPL) and the members of the Biyani family (together, the "Biyani Group"), on the other hand. Amazon agreed to invest a sum of approximately USD 190 million in FCPL, on the condition that FRL could not transfer its retail assets to certain "restricted persons" (including the Mukesh Dhirubhai Ambani (MDA) group) without Amazon's consent. A dispute arose when the Biyani Group entered into a transaction for the amalgamation of FRL with the MDA group without Amazon's consent (the "Impugned Transaction").

Amazon initiated arbitration proceedings against the Biyani Group under the SIAC Rules and an Emergency Arbitrator was appointed who, by way of an award, granted a stay on the Impugned Transaction. Despite this award, Biyani Group proceeded with the Impugned Transaction. Amazon then filed an application under Section 17(2) of the Arbitration Act before a single judge of the Delhi High Court requesting the enforcement of the Emergency Arbitrator's award. The single judge initially passed a status-quo order in which he restrained the Biyani Group from concluding the Impugned Transaction.2  This was followed by a detailed judgment where the single judge held, among other things, that the Emergency Arbitrator:s award was an order under Section 17(1) of the Arbitration Act and was enforceable by the court under Section 17(2) of the Arbitration Act.3 FRL filed separate appeals against the initial status-quo order as well as the judgment of the single judge before a two-judge appellate bench of the Delhi High Court. The appellate bench, by way of separate orders, stayed the executions of the status-quo order and the judgment of the single judge.4 Amazon then challenged these orders before the Supreme Court.

LITIGATION BEFORE THE HON'BLE SUPREME COURT

Against this order of the Division Bench of the Delhi High Court, Amazon approached the Supreme Court.

The Supreme Court found in favour of Amazon and ruled that:

  • an award made by an emergency arbitrator is an order made under Section 17(1) of the Arbitration Act and can be enforced by Indian courts under Section 17(2); and
  • no appeal would lie under the Arbitration Act against an order made under Section 17(2) of the Arbitration Act for enforcement of an emergency arbitrator's award.
  • An emergency arbitration award is recognised and enforceable under the Arbitration Act.

The Hon'ble Supreme Court of India noted that parties to an arbitration agreement are free to agree on a procedure administered by an arbitral institution, like SIAC. It held that the arbitral proceedings had already commenced in this case as per Rule 3.3 of the SIAC Rules with the receipt of Amazon's Notice of Arbitration by SIAC. Given that Section 17(1) of the Arbitration Act empowers an arbitral tribunal to order interim measures on a party's application "during the arbitral proceedings", the Supreme Court observed that an order made by an emergency arbitrator under the SIAC Rules is covered under Section 17(1) and is, therefore, enforceable under Section 17(2) of the Arbitration Act. This, in the Supreme Court's view, is further confirmed by the absence of any express or implied bar against emergency arbitration proceedings in the Arbitration Act.

The Supreme Court also noted that the legislative history of Section 17(2) favours a pro-enforcement approach for emergency awards in India-seated arbitrations. Enforcing emergency awards, the Supreme Court opined, would increase efficacy in granting interim reliefs and decongest the clogged court system in India. Thus, having agreed to arbitrate under the SIAC Rules and participate in the proceedings before the Emergency Arbitrator, the Supreme Court held that the Biyani Group could not ignore compliance with the Emergency Arbitrator's award.

An order enforcing emergency arbitration award is not appealable under the Arbitration Act. In the Supreme Court's view, Section 37 of the Arbitration Act provides an exhaustive, self-contained code for appeals from orders made under the Arbitration Act. The Supreme Court held that Section 37 provides for appeals only from orders made by an arbitral tribunal granting or refusing to grant interim measures under Section 17(1), but not against orders made by an Indian court under Section 17(2) of the Arbitration Act for the enforcement of a tribunal's interim order. Therefore, the Supreme Court held that an appeal against an order enforcing an emergency award under Section 17(2) would not be maintainable.

Footnotes

1. 2016 SCC OnLine Del. 5521

2. Arbitration Petition 1062 of 2012 (Bombay HC)

3. FAO (OS) (COMM) 65/2020

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.