Is constitution and recognition of Emergency Arbitration an Emergency in India?

This is co-authored by Rashika Agarwal and Hatim Tinwala, students of the Institute of Law, Nirma University. In this article, the authors explained the recognition of Emergency Arbitration an Emergency in India.

Abstract

With the advent of a decision of Emergency Arbitrator in the Future-Reliance- Amazon dispute, the ambiguity regarding the enforceability of emergency arbitral orders has gained momentum before the courts. Thus, through this article, the authors aim to analyze and deliberate upon the scope and extent of Emergency Arbitration and its relevance in the Indian context. Further, the article aims to analyze the ambiguity of the concept by highlighting the lacunae existing in the current legal system pertaining to Alternative Dispute Resolution. The authors would be casting light upon inconsistencies in the regime through analyzing relevant case laws.  Further, the article would ponder over the state of the efficacy of emergency arbitral awards in India and offer suggestions to strengthen the concept and scope of an emergency arbitral award in India.

 Read: THE CASE FOR INSTITUTIONAL ARBITRATION IN INDIA

Introduction

The alternative Dispute Resolution process provides for Emergency Arbitration as a mechanism facilitating an emergency relief that is unable to await the constitution of an arbitral tribunal. It provides for a special purpose arbitral tribunal whose mandate is terminated as soon as its function is performed and it derives the authority for this relief from the arbitration agreement itself.  Its genesis is attributed to two legal maxims ie, fumus boni iriuris, i.e., claimant succeeds on merits and periculum in mora i.e., irreparable harm would be caused to the claimant if an immediate remedy is not granted. The method of emergency arbitration conducted by institutions such as SIAC, ICC, etc. has achieved precedence over national courts in the past few decades as it exemplifies the principle of party autonomy, reduces litigation costs, expedites the arbitration process, and protects confidential information from being breached.

Also Read: Emergency Arbitration and Issues Related Thereto

In India, the term is not statutorily recognized. From tracing the legislative intent, it is abundantly clear that it is leaning towards a pro-arbitration approach however, the nuanced approach via amendment of section 9 thereby extending its applicability to foreign-seated arbitration and of section 17, mandating the parties to approach arbitral tribunals for interim measures has not brought about the required clarity concerning the enforceability and efficacy of Emergency orders or awards in India. As is clear from the plain reading of section 2(1)(d) defining arbitral tribunal, it does not include under its ambit “emergency arbitration”.

Further, the act itself does not harbor any explicit provision for direct enforcement of foreign emergency awards thus, this had led to an influx of petitions under section 9 for the enforcement of foreign emergency awards. Thus, the present article will attempt to analyze the efficacy and enforcement of foreign emergency award through tracing the series of judgments given by the court with the major focus upon the current Reliance-Future-Amazon dispute which has proved to be the latest in the long line of cases showcasing the attempts to evade the legislative intent and bounds of Arbitration and Conciliation Act by discarding the awards pronounced by foreign emergency tribunals.

The Convoluted Past and Present of Emergency Arbitration in India

The Indian Legislature has till date demonstrated a Pro-Arbitration attitude by bringing effect to the UNCITRAL Model Law, yet there remains some lacuna in the said Legislature concerning the validity of the award passed through the virtue of “Emergency Arbitration”.

The lack of finality associated with the award is what renders inadequate recognition of the same. For starters, the “Emergency Arbitrator’s” status as an “Arbitral Tribunal” for the purposes of the Arbitration Act is debatable, as an “Arbitral Tribunal” refers to a sole arbitrator or a panel of arbitrators and does not envisage an arbitrator who is vested with powers to grant only interim relief. This spurts out further complications as the award passed by such a questionable authority does not have legislative sanctity to back it up.

The award passed during the Emergency Arbitration is only “interim-binding,” meaning it may be modified by the Arbitral Tribunal formed by the parties in compliance with the arbitration agreement. As a result, an award made by the Emergency Arbitrator may be revised or even vacated at any time during the proceedings. Moreover, the situation is further complicated in case of an arbitral award passed by a foreign seated arbitral proceeding, as Section 48 of the New York Convention, which India has ratified, talks about the validity of Foreign Arbitral Awards by recording that the enforcement of awards passed by such authority is liable to be refused in cases where the opposite party proves that such award is not binding or is prone to be suspended or set aside.

Adding fuel to the fire is the uncertain stand of the Indian Judiciary on the issue. The case of Ashwani Minda v U-Shin Ltd[1] displays a pro-arbitration stand of the judiciary because, in the specific case, the court denies the grant of prayer for interim relief that had been rejected by the emergency arbitrator appointed under the JCAA rules of arbitration. This exhibits the court’s acquiescence towards the reputed internationally recognized arbitral institutions, which in turn made the court inclined towards its judgment and take into consideration the intent of the legislation even when the intent was not explicitly spelled out in black and white letters of the law. On the other hand, the court in the case of Raffles Design International India Pvt. Ltd. v. Educomp Professional Education[2] gave a contrary view by disregarding the enforceability of the Emergency Arbitrator’s Award as an interim award, as the legislation pari material fails to lay down a law for consideration of the same. A separate suit for enforcing the same is the only way forward according to the court as Section 17 is not the applicable law for consideration of an order passed by a foreign seated emergency arbitration proceeding.

Read: Arbitration and Conciliation (Amendment) Bill, 2021: A Smart Move or Utopian Thought?

Future-Reliance Deal: Latest in the Line?

The buyout deal between Future group and Reliance Industries for promotion of its retail, wholesale, logistics, and warehousing enterprise for a humongous sum of Rs 26,000 Crores is pending before the apex court. This triggered the vested third-party Amazon to challenge the deal and initiation of emergency arbitration proceedings at the SIAC to ask for relief for contravention of an agreement between Amazon and Future group. The Emergency Arbitrator in light of the same passed an award in favor of Amazon and stayed the course of the Reliance-Future deal.

However, the giants refused to conform to the order which led to a series of litigations and appeals for enforcement of the said order. This raises a crucial question of ponderance and exposes the lacunae of non-accessibility of mechanism in India to enforce the foreign emergency arbitration award. Upon Amazon’s appeal, Delhi High Court held that an emergency arbitrator is an arbitrator for all intents and purposes and thus, dismissed the plea of nullity as raised by the respondents as vague and unsubstantiated. The division bench of the Delhi High Court stayed the order against which Amazon reached the apex court and accused the Future and Reliance group of engaging in “willful disobedience” of the emergency arbitrator’s order. Further, Amazon contended that the award passed under SIAC is enforceable under section 17(2) of the arbitration and conciliation act.

The present case displays blatant deliberate and malicious disobedience by the Future-Reliance groups of the award passed by an emergency arbitrator and displays that in absence of a specific provision for enforcement of an emergency award in the Arbitration and Conciliation Act, the parties have to file an application under section 9 thus, ultimately contradicting the purpose of introduction of EA.

Also Read: Positive and Negative Attributes of Alternative Dispute Resolution

Conclusion

It is now pertinent to question whether the Future-Reliance Deal will end up being in the long list of uncertain judgments of the court on the issue of whether it will induce some change in the law of the land by taking into consideration the present socio-economic condition of the country. Disregard towards the issue has already led to a situation where the demerits of the same are highly evident. Neither ordinary nor emergency awards passed by foreign seated arbitral awards are directly enforceable through the virtue of Section 17 of the Act.

Thus, in the event of a default made by any of the parties in following the same order passed by such a foreign seated arbitration, no remedy would be provided by the courts as they would not be able to guarantee the enforceability of such interim orders in the first instance. This would in turn trigger the active involvement of the parties in approaching the court for enforcement of the same relief, undermining the very intent behind the urgency associated with “Emergency Arbitration”. In this case, it would thus be counter-productive to use ‘Emergency Arbitration’ as the same would result in wastage of time, money, and efforts.

Recognition of the legality of the Awards passed by the virtue of ‘Emergency Arbitration’ would reinforce the legitimacy of the international arbitration centers and would moreover provide momentum to party autonomy. This recognition in turn would aid the parties in the attainment of prompt relief by the means of interim orders passed by such a body. Additionally, this would facilitate the growth of arbitration in India and would minimize judicial intervention which in turn would be fulfilling the basic intent of the Arbitration and Conciliation Act.  This due recognition can be endowed by taking into consideration the recommendations provided by the 246th Law Commission Report, which essentially provides for the inclusion of the term ‘Emergency Arbitrator’ under the definition of the ‘Arbitral Tribunal’ and also of ‘Emergency Award’ under the definition of ‘Arbitral Award’.

 

 

References:

[1]http://164.100.69.66/jupload/dhc/JIS/judgement/14-05-2020/JIS12052020OMPICOMM902020_074007.pdf

[2] https://indiankanoon.org/doc/166921970/

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