9 April 2021
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On 18 March 2021, a Single Judge of the Delhi High Court passed an order in Amazon vs Future Group holding that an emergency arbitrator is an arbitrator for all the intents and purposes under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and therefore such an order is valid and enforceable in Indian courts. The order, which comes in the backdrop of a major tussle between world’s largest e-commerce business Amazon Inc. against India’s largest company Reliance over retail assets of the Future Group of Industries, can emerge as a torch bearer of Emergency Arbitration in India.
Emergency Arbitration
Emergency arbitration was first adopted by the International Centre for Dispute Resolution of American Arbitration Association in 2006, followed by Singapore International Arbitration Centre (“SIAC”) in 2010, International Chamber of Commerce (“ICC”) in 2012, and Hong Kong International Arbitration Centre in 2013. Over the last few years, majority of arbitral institutions across the globe have also incorporated the provisions relating to emergency arbitration in their rules. Generally, these rules provide that in cases where one of the parties to an arbitration requires urgent interim reliefs before the constitution of an arbitral tribunal, an emergency arbitrator may be appointed to consider the issue. The order of the emergency arbitrator is binding on all the parties but may be later revisited by the arbitral tribunal once constituted.
It should be noted that the Arbitration Act does not expressly define or prescribe ‘Emergency Arbitrations’. However, various arbitration institutions in India such as Indian Council of Arbitration, the Delhi International Arbitration Centre, the Nani Palkhivala Arbitration Centre, Mumbai Centre for International Arbitration prescribe provisions for Emergency Arbitration. In order to recognize emergency arbitrations, in 2014 the Law Commission proposed an amendment to Section 2(1)(d) of the Arbitration Act as shown in italics – “Section 2(1)(d): “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator.” However, the 2015 Amendment to the Arbitration Act did not incorporate this recommendation.
It is pertinent to mention that the New York Convention only recognizes that a final award, and not an interim order, can be enforceable in nature. Therefore, strictly from a textualist approach, there are no specific provisions under Indian Laws for recognition and enforcement of awards passed by an emergency arbitrator in a foreign seated arbitration.
Enforcement of emergency awards in India
Part II of the Arbitration Act provides for enforcement of foreign awards in India. India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”). A party desirous of enforcing an arbitration award from a country which is a signatory to the New York Convention / the Geneva Convention and if the award is made in a territory which has been notified as a convention country by India, will have to file an execution petition in Indian courts for enforcement of such awards. However, as mentioned above, question of whether interim relief granted by an emergency arbitrator is enforceable under the said conventions in the same manner as the final arbitration award of the arbitral tribunal is an unresolved issue. Therefore, a party in need of immediate interim relief generally approaches the High Courts of India by filing an application under Section 9 of the Arbitration Act. By virtue of an amendment in the Arbitration Act in 2015, a party even in a foreign seated international commercial arbitration can also approach Indian courts for interim relief, provided that the parties have not expressly or impliedly excluded the applicability of Section 9 of the Arbitration Act. Indian Courts have, till date, taken a view that, merely by choosing a foreign seat to govern arbitrations, parties cannot be said to have impliedly excluded the applicability of Section 9 of the Arbitration Act altogether and the parties can approach the appropriate court in India seeking interim measures.
With regards to enforceability of emergency arbitration awards by Indian Courts, the High Courts have pronounced three important judgements in this regard. The Bombay High Court in HSBC vs Avitel and the Delhi High Court in Raffles vs Educomp held that an emergency award cannot be enforced using Section 9 of the Arbitration Act. Instead, the parties will have to approach the court for an interim relief by filing an application under Section 9. This application would be considered independent of the emergency arbitration proceedings. Similar position was also followed by the Bombay High Court in Plus Holdings vs Xeitgeist wherein an order was passed indirectly enforcing the order of the emergency arbitrator despite the lack of legislative recognition to emergency arbitrators under the Arbitration Act.
Relevance of the Delhi high Court order in Amazon vs Future Group
The Amazon vs Future Group order is important because it not only gives legal recognition to emergency arbitrators in domestic seated arbitration under the Arbitration Act, but also provides for their direct enforcement by Indian Courts. In Amazon vs Future Group, it was held that the definition of “arbitration tribunal” and “arbitration award” under the Arbitration Act are inclusive of emergency arbitrators and an emergency arbitrator is an arbitrator for all intents and purposes. The Court also opined that considering the wide scope of these definitions, there is no need for an amendment to the Arbitration Act. The Court further noted that the Arbitral Tribunal has the same powers to make interim order as the Court and under Section 17(2) of the Arbitration Act such an interim order is enforceable as if it was an order of the Court. To add further teeth to the arbitration regime in India, the Court also penalized Future Group for deliberately taking actions in violation of the award of the emergency arbitrator.
However, it should be noted that the HSBC vs Avitel, Raffles vs Educomp, and the Plus Holdings vs Xeitgeist judgments dealt with an award of the emergency arbitrator in foreign seated arbitration, whereas the Amazon vs Future Group was an Indian seated arbitration (New Delhi). In the latter, the Single Judge had equated the decision of the Indian seated emergency arbitrator as a decision of an Arbitral Tribunal under the Arbitration Act and has therefore allowed for its enforcement under Section 17(2) of the Arbitration Act. Thus, the route under Section 17(2) will not be available for foreign seated arbitrations.
Our thoughts
Enforcement of arbitral awards, whether interim or final, is the ultimate aim of resolving disputes through arbitration. The Amazon vs Future Group order giving formal statutory recognition to the awards of domestic seated emergency arbitrator and allowing for its direct enforcement may be a watershed moment for Emergency Arbitration in India. The judgment of the Delhi High Court is another step forward in cementing India’s position as an arbitration friendly jurisdiction. While the Indian courts in the past did not seem to favor direct enforcement of the interim awards of the emergency arbitrators, the Amazon vs Future Group recognizes the numerous advantages of emergency arbitration, and rightly gives recognition to the principle of party autonomy which is fundamental to any arbitration mechanism.
It is pertinent to note that on 22 March 2021, a division bench of the Delhi High Court had stayed the Amazon vs Future Group order, however, the legality of emergency arbitration under Arbitration Act was not under consideration before the division bench. In our opinion, the Single Judge has taken a progressive and welcome approach towards resolving disputes using arbitration in India which will further strengthen the development of arbitration law in India by minimizing judicial intervention and expediting resolution of disputes using arbitration.
For further information, please contact:
Souvik Ganguly, Partner, Acuity Law
al@acuitylaw.co.in
