Urja Thakkar and Jigme Palzer Tshering*[1]
Emergency relief has often been touted as the ‘Achilles’ heel’ of an otherwise systematized International Arbitration. Emergency Arbitration is a fledgling concept and was devoid of strong footing in Indian arbitration till the Supreme Court judgement in the case of Amazon.Com NV Investment Holdings vs Future Retail Ltd and Others[2].
I- Background
Amazon NV Investment Holdings LLC sought interim relief of injunction in the form of an emergency arbitration under the Singapore International Arbitration Council Rules (“SIAC Rules”) with regard to the transaction between Future Retail Limited and Mukesh Dhirubhai Ambani Group. The dispute arose due to pre-existing shareholder agreements between Amazon and FRL which the aforestated transaction allegedly violated. The interim relief was granted by the emergency arbitrator, however, the Biyani group went ahead with the impugned transaction claiming nullity of the award as the emergency arbitrator was coram non judice or without legal jurisdiction. FRL filed a civil suit before the Delhi High Court which sought to interdict the arbitration proceedings and prayed for an interim relief of restraining Amazon from writing to statutory authorities for enforcement of the emergency arbitrator’s Award. Amazon nevertheless filed an application under Section 17(2) of the Arbitration and Conciliation Act 1996[3] (“the Act”) which was heard and disposed of by the learned Single Judge of the Delhi High Court. The breach of the Shareholders’ Agreements was admitted and the plea only extended to the claim of nullity of the emergency arbitrator’s award which was heard and rejected by the learned Single Judge and it was held that the Award was enforceable as an order under the Act.
Questions of Law
The primary question of law before the Court was of whether an “award” delivered by an Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre [“SIAC Rules”] can be said to be an order under Section 17(1) of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”].
Secondly, the Court had to determine whether an order passed under Section 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable.
Held
The Supreme Court upheld the order of the single bench of the Delhi High Court which had ruled in favour of the enforcement of the Emergency Award and has held that the single judge’s order was not appealable to the division bench of the High Court under Section 37(2) of the Arbitration Act.
II- The Effects of Popularizing Emergency Arbitration in India
This judgment marks the first concrete step in Indian judicial history and jurisprudence towards Emergency Arbitration (“EA”), with judicial decisions on the matter varying in nature and being few and far between[4]. Before delving further into this discourse, one must inculcate an accurate picture of the merits, demerits, and effects thereof.
As can be inferred, Emergency Arbitration exists to provide pro tem measures when the party/parties are not able to await the formation of an Arbitral Tribunal. Therein lies its primary merit.
Akin to the very concept of arbitration, EA stands as a substitute for national courts, in lieu of the distrust of the parties in these courts’ ability to provide urgent relief, with lengthened trials and hefty litigation costs often serving as hallmarks of the Indian judicial system. The decision of popularizing EA, therefore, stands to be meritorious in this aspect. Party autonomy is one of the foundational pillars of arbitration, as was reiterated by this case, citing the cases of Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd.[5] and Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.[6]
Additionally, the Court reasoned that unlike in India, international practice is in favour of the enforcement of emergency arbitral awards with Singapore, Hong Kong, and the United Kingdom all permitting enforcement of emergency awards. It was of the opinion that adopting such practice is of utmost pertinence. Due to this aforementioned practice, international businesses are attracted to these jurisdictions in the pursuit of timely interim relief furthering the development of arbitration as a field. As India attempts to adopt an arbitration-heavy approach to dispute resolution as well as draw in international companies and conglomerates such as Amazon in this case, this new development stands to further its cause.
However, while the concept has its proponents, this so-called ‘Achilles’ heel’ of the arbitration system has been considered riddled with demerits.
It was argued by Harish Salve on behalf of FRL that this can be evidenced by the fact that the Parliament chose to not adopt the measures suggested by the 246th Law Commission Report regarding the amendment of Section 2 of the Arbitration Act, to include within sub-section (1)(d) a provision for the appointment of an Emergency Arbitrator.
While the Court deemed it appropriate to read the legitimacy of Emergency Arbitration into the Arbitration Act and the legislative intent, citing the case of Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd.[7], it is undeniable that the fact that there exists no direct statutory provision for the same leads to a certain level of ambiguity. As any emergency tribunal would, Emergency Arbitration tribunals would tend to gloss over a lot of the subject matter, consequently overlooking certain facts that might otherwise be deemed significant.
Further, matters in relation to commerce and business tend to be time-sensitive in nature, as it was in the case in discussion. There exists the possibility of parties capitalizing on this uncertainty, further highlighting the need for some manner of regulation in regard to the actual arbitral proceeding, as well as a definitive answer to the question- What constitutes an ‘emergency?
III- What Constitutes an ‘Emergency’?
The concept of an emergency arbitration evolved in an effort to provide urgent interim relief to parties in cases wherein the time-sensitivity makes it imprudent to await the formation of a tribunal. The entire process, from the date of filing the application to the announcement of the interim award, is completed in a matter of weeks if not days.
In the Indian context, the concept of emergency arbitration is yet to be cemented as a practice. This is primarily because the same is not formally recognized under the Arbitration Act. Even though the Law Commission of India in its 246th Report, 2015 recommended the inclusion of emergency tribunals under the definition of “arbitral tribunal” as an amendment to Section 2(d) of the Arbitration Act, the same has not been given statutory recognition yet. Instead, prominent Indian arbitration institutions such as the Delhi International Arbitration Center, CAICC – India, and ICA among others have absorbed the definition of emergency arbitration into their respective rules[8], however, without the due statutory recognition under the original Act, the validity and enforceability of emergency arbitral awards continue to stay in limbo which has led to a number of varying judgments without an ascertainable clear picture of the Indian position in the matter.
Internationally, however, the concept of emergency arbitration stands on the foundation of the legal maxims fumus boni iuris; and periculum in mora[9]. ‘Fumus boni iuris’ states that there must be a reasonable possibility that the judgement would favour the requesting party in terms of merit and ‘periculum in mora’ provides that if the award is not granted immediately, the loss incurred would be irreparable and could not or would not be compensated by way of damages. Further, the commonly accepted understanding of emergency arbitration proceedings in the leading jurisdictions lay down certain parameters that must be met in order to avail this interim remedy, which are as follows:
(i) a risk of irreparable harm to the requesting party;
(ii) an element of urgency;
(iii) that there is no prejudgement on the merits;
(iv) that the balance of merits favours the requesting party.[10]
Torch bearers in the field of international arbitration such as Singapore and Hong Kong[11] on the other hand, have given such, and due, statutory recognition to the concept of emergency arbitration by amending their respective definition of ‘arbitral tribunals’ to include emergency tribunals as well – instilling an undilutable validity to the interim awards pronounced by the emergency tribunals in these jurisdictions, something that is yet to be realised in the Indian context.
IV- Conclusion
As aforestated, India’s tryst with emergency arbitration – which is still in its infantile stages – should be greatly accelerated by the Supreme Court’s decision to hold the Emergency Arbitrator’s interim award valid. Though this judgment is a step forward, there exist several strides left to be taken on the path towards achieving a fully functional system of arbitration that includes concrete and statutorily embedded regulations for Emergency Arbitration in India.
[1] Urja Thakkar and Jigme Palzer Tshering are 3rd Year B.A. LLB (Hons.) students at National Law University, Delhi
[2] Amazon.Com NV Investment Holdings vs Future Retail Ltd and Others, 2021 SCC OnLine SC 145
[3] Arbitration and Conciliation Act, 1996 Available at: <https://www.indiacode.nic.in/bitstream/123456789/1978/1/AAA1996__26.pdf>.
[4] Globalarbitrationreview.com. 2021. Global Arbitration Review – The Asia-Pacific Arbitration Review 2022. [online] Available at: <https://globalarbitrationreview.com/review/the-asia-pacific-arbitration-review/2022/article/india> [Last accessed 24 September 2021].
[5] Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd, 2006 OnLine SC 564
[6] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc, 2011 SCC OnLine SC 1436
[7] Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd., 2020 SCC OnLine SC 656
[8]Mondaq.com. 2021. Emergency Arbitration In India: Concept And Beginning. [online] Available at: <https://www.mondaq.com/advicecentre/content/3958/Emergency-Arbitration-In-India-Concept-And-Beginning> [Last accessed 15 September 2021].
[9] Ibid.
[10] Ibanet.org. 2021. The developing compass of emergency arbitration in India. [online] Available at: <https://www.ibanet.org/emergency-arb-india> [Last accessed 15 September 2021].
[11]Ibid.