What is Emergency Arbitration? It is a procedure where an emergency arbitrator is assigned to grant temporary remedies that are so urgent that they cannot wait for the final tribunal to be established so as to save either of the parties from counterplay. “To ensure the effectiveness of arbitration, a side must have ample means to deter the counterparty’s threatening behavior. The counterparty could, for example, destroy evidence in his possession or transfer property offshore in order to frustrate the successful enforcement of an award.”[1] Nonetheless, it is important to consider the counterparty’s interests and to address the need for due process. If these conditions are not fulfilled, the award will be contested and set aside. Since arbitrators seek only enforceable and conclusive awards, they are cautious of awarding interim measures. Many international arbitration organizations, including the “Singapore International Arbitration Centre”, the “London Court of International Arbitration”, and the “International Chamber of Commerce”, have included clauses in their regulations for the selection of an emergency arbitrator. The emergency arbitrator becomes functus officio after passing the interim award, according to the majority of the rules. It is founded on two legal maxims: first, the fair probability that the claimant will prevail on the merits (fumus boni iriuris), and second, the claimant will be caused irreparable harm if the remedy is not granted urgently (periculum in mora). These may be regarded as special-purpose arbitral tribunals whose authority ends after their work is completed.

Furthermore, although the UNCITRAL Model Law does not explicitly have provisions for emergency arbitration, the ability to use this path is implicitly included in the scope of ‘Arbitration’ thereunder. “Article 2(a) of the UNCITRAL Model” Law defines arbitration as “any arbitration whether or not administered by a permanent arbitral institution.”[2] Since many of the laws of the arbitral agencies allow for emergency arbitration, the Model Law implicitly covers emergency arbitration within its framework.

HISTORY OF EMERGENCY ARBITRATION IN INDIA

The 246th Law Commission Report[3] proposed a change to the concept of an “arbitral tribunal” under “Section 2(1)(d) of the Arbitration and Conciliation Act, 1996”[4]. To add “in case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitration, includes such emergency arbitrator”. The aim of the recommendation was to promote the culture of institutional arbitration in India and to ensure that institutional rules like the SIAC Arbitration Rules, which allow for an emergency arbitrator, are granted legislative recognition in India. However, after the Arbitration and Conciliation (Amendment) Act, 2015 went into effect, this recommendation was not implemented.

However, it is necessary to note that the rules of several arbitral institutions developed in India prior to the 246th Law Commission Report provide provisions for emergency arbitration. Rule 14 of the Delhi International Arbitration Centre (Arbitration Proceeding) Regulations, for example, establishes procedural rules for the operation of Emergency Arbitrations. Similarly, the Rules of the Mumbai Centre for International Arbitration and the Rules of the Madras High Court Arbitration Centre provide for Emergency Arbitrations and interim awards. The law report also suggested that Section 2(1)(c) should include the words “emergency award” under the definition of arbitral award which only comprises the term “interim award” in it.

LEGAL STANDING OF EMERGENCY ARBITRATOR IN INDIA

Legal complexities –

The meaning of arbitral tribunal excludes “emergency arbitration,” and there is no clear clause in the Arbitration and Conciliation act for direct application of international emergency awards. As a result, the parties typically seek protection from international emergency awards in court under “Section 9 of the Arbitration and Conciliation Act”. Though, the Delhi High Court in the case of “HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Ltd.”[5]has stated that the emergency arbitrator proceedings will be used to provide an impartial opinion on the appeal for interim relief before the court.

ORDERS AGAINST THIRD PARTIES

Third-party relief cannot be granted by emergency arbitrators. This is a significant drawback resulting from the fact that the authority of emergency arbitrators and the (eventual) arbitral tribunal is restricted to parties who have agreed to refer their dispute to arbitration. “Article 29(5) of the ICC Rules”[6], for example, specifically states that the ICC’s Emergency Arbitrator Provisions extend only of the signatories to the arbitration arrangement or their heirs.

Indian courts, as courts in other countries, may, however, provide temporary relief against third parties in some cases. The most common scenario is where a freezing order is issued against a bank that retains assets on behalf of one of the respondents. An emergency arbitrator will be unable to compel the bank to comply with the freezing order.

EX-PARTE ORDERS

In situations where an element of surprise is needed, a party’s ability to receive ex parte interim orders may be critical (For example, where prior warning to the respondent will cause him to withdraw his properties from the court’s jurisdiction). In extraordinary cases, Indian courts, like other jurisdictions, may issue ex parte orders. Emergency arbitrators, on the other hand, are not allowed to award relief ex parte. This is due to the fact that one of the fundamental tenets of arbitration is that both sides are given an equal chance to discuss their case.

AMAZON- RETAIL DISPUTE

In this ongoing case[7], where it was before the Delhi High Court, the court had to examined the status of the emergency arbitration applicable in India.

Brief Facts of the case:

The dispute is related to deal between the future retail and Reliance Retail Ventures ltd. Prior to this deal, Amazon had already bought the 49% of the Future Group’s unlisted firms in the year 2020 and in the agreement there was the clause that the Amazon will also have the right to buy the listed firms of the Future Group in the upcoming years. The dispute arose when Future Group going through cash crunch due to lockdown in the month of March due to the coronavirus outbreak.

Due to that Reliance Retail Ventures and Future Retail made a deal, where Reliance Retail to acquire the supermarket chain Big Bazaar, which is a supermarket in India, clothes supermarket ‘Brand Factory’ and Food supply chain unit ‘Foodhall’. This is done to decrease the debt of the Future Retail Group.

When Amazon came to know about the agreement, they claimed that contract with the unlisted firms of the Future Retail Group has been breached by the Future Group and to which in the Singapore International Arbitration Centre they invoked the emergency arbitration relief against the Future Retail Group. To this the Singapore International Arbitration Centre obtained the injunction against the transaction of acquisition by the Reliance Retail Ventures Ltd. Then Amazon approached the Delhi High Court for enforcing the SIAC emergency arbitral award which was to refrain the Future Retail from going ahead with the deal with Reliance Retail Ventures Ltd. The Delhi High Court had maintained the status quo till reserved order is pronounced by the court.

Analysis of the case:

Now the important thing to be considered is that to put an permanent injunction against Amazon their contentions in the Delhi High Court were that the Emergency arbitration relied that was invoked by Amazon is not within the scope of Arbitration and Conciliation Act, 1996 and therefore the emergency arbitral award passed by SIAC would not stand valid in India. Another Contention was the Emergency arbitration award is not defined and included under the Section 2(1)(d) of the Arbitration act amendment of 2019.

This case is a prime example of why there are ambiguities with respect to applicability of the emergency arbitration in India as the Delhi High Court single-judge bench had passed the interim injunction in the favor of Amazon, which had barred the Future Retail from going ahead with the deal with Reliance Retail Ventures ltd whereas when Future Retail Group had appealed in front of two-panel judge, the Court ruled that the emergency arbitral award would not have its impact in India as the Future Retail was not the party and it is not enforceable in India. This shows that there is still uncertainty over the applicability of emergency arbitration in India. Despite being recommended by the Law Commission Report 246^th, The 2015 amendment of the arbitration and conciliation act,1996 had not included provisions for emergency arbitration in the act but the arbitral institution that are existing in India like Delhi International Arbitration Centre of the Delhi High Court of its arbitration rules has provided the provision of ‘Emergency Arbitration’, even Mumbai Centre for International Arbitration also provided the list of provisions of emergency arbitration and also emergency arbitrator.

Conclusion

The growth of emergency arbitration in India has been minor as there is lack of clarity regarding the applicability and also interim measures that are issued by the emergency arbitrators have made the parties to approach the courts for seeking the relief. In the Part II of  Act, there is also need of a section have same characteristics like the section 17 in the Part I of the Act. If the provision was included in the Amendment 2015 of the Arbitration act, then it would have boost the Indian Arbitration law. If the provision are included in the upcoming years in the act, then there will be also a need to clear some of the ambiguities that would arise with the inclusion of the provision like when the parties have preferred the ad-hoc arbitration over the institutional arbitration in the agreement, then would they be invoke a provision regarding the emergency arbitration and also to clarity as to whether the courts can be asked to appoint the emergency arbitrators.

Thus, with the introduction of the emergency arbitration through the legislative enactment, it will encourage the foreign investors as it will secure their commercial transactions in India, otherwise  as in Amazon- Future Retail case is unfolding, the investors has to wait for the judgement with respect to emergency arbitration and makes the reputation nascent of India.

CITATIONS

[1]See e.g. Lew – Mistelis – Kröll 2003, p. 585.

[2] UNCITRAL Model Law on International Commercial Arbitration, Article 2(a), pp 25-37.

[3]246th Report of The Law Commission of India, Amendments to the Arbitration and Conciliation Act, 1996, 37 (2014), available at: http://lawcommissionofindia.nic.in/reports/Report246.pdf

[4] Arbitration and Conciliation Act, 1996, Section 2(1)(d).

[5]HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors., Arbitration Petition No. 1062/2012 dated January 22nd, 2014.

[6]ICC Rules (2021), Article 29(5).

[7] Future Retail Ltd. v. Amazon.com Investment Holdings LLC & Ors, CS(COMM) 493/2020

Author – Aarsh Brahmbhatt 

Co-author – Deep  Hirani

The post Absenteeism of Emergency Arbitration in India with reference to Amazon-Future Retail Dispute appeared first on Legal Desire Media and Insights.