EMERGENCY ARBITRATION- PATH FROM DISSENT TO ASSENT.
Author: Parth Bindal, III year of B.B.A.,LL.B from School of Law, UPES.
Emergency arbitration is gaining popularity around the world, and it comes into play when there is no arbitral tribunal in place or when setting one up would take too long, depending on the requirements of an arbitration agreement or the institutional rules.
The emergency arbitration procedure adjudicates the interim relief sought by either party to the dispute more quickly than court procedures, is less costly, and eliminates extra - judicial intrusion. However, if the emergency arbitrator's order is not followed, the entire emergency arbitration mechanism is rendered ineffective.
The enforceability of awards made by an emergency arbitrator in India was clouded by conflicting judgments from various High Courts. In order to counter this inconsistency over the same the Law Commission of India proposed an amendment to the wordings of Section 2(d) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) in its 246th Report (2014). This amendment was proposed to ensure that institutional rules such as the SIAC Arbitration Rules, the ICC Arbitration Rules, or any other Institutional Arbitration Rules that provide for the appointment of an emergency arbitrator are legally recognized in India.
Despite the Law Commission's report, no such necessary changes have been made to nullify the opposing viewpoints. However, the Supreme Court's decision in the Amazon and Future Group dispute case is expected to end India's conundrum of emergency arbitration enforcement, which we will discuss in greater detail in the following section.
EMERGENCY ARBITRATOR VIS-À-VIS ARBITRAL TRIBUAL
The single arbitrator appointed by an arbitration institution to hear an application for Emergency Interim Relief is referred to as the Emergency Arbitrator. It is to be noted that under Emergency Arbitration the position of the emergency arbitrator's is based on party autonomy because under Arbitration and Conciliation Act, 1996, the parties to the dispute has complete independence to select and appoint an arbitrator.
Further under emergency arbitration, to decide on interim measures, the emergency arbitrator has the same powers as an arbitral tribunal. The award passed under Emergency Arbitration is binding on all parties to the dispute. It does not, however, bind the arbitral tribunal that is later formed, and the arbitral tribunal has the authority to reconsider, modify, terminate, or annul the emergency arbitrator's order/award and any order given under emergency arbitration by the emergency arbitrator is not binding on the arbitral tribunal pertaining to any question, issue, or dispute resolved; however, the interim order must be definitively varied, discharged, or revoked, in whole or in part, by a subsequent order or award issued by an arbitral tribunal on the application of any party or suo motu.
The Amazon and Future Group dispute over the enforcement of an "Emergency Award" ("EA") fueled the growth of Emergency Arbitral award in the country. The Arbitration and Conciliation Act of 1996 does not recognize the concept of Emergency Arbitration; however, Indian courts and arbitration institutions are familiar with it. This can be attributed by looking forward to the discussion on the same with the help of case laws.
Like in the case of Raffles Design International India Pvt. Ltd. & Anr. v. Edu comp Professional Education Ltd. & Ors., the arbitration took place in Singapore, and the appointed EA granted interim relief. A Section 9 petition was filed before the Delhi High Court due to violations of the EA's order. The Delhi High Court ruled that the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act, and the petitioner's only option would be to file a suit. Although recourse to Section 9 of the Act is not available for the purpose of enforcing the Arbitral Tribunal's orders, this does not preclude the Court from independently applying its mind and granting interim relief in cases where it is warranted.
The Bombay High Court in the case of HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd allowed interim relief in favour of the applicant, as had the Delhi High Court passed previously in the emergency arbitrator's award (in a Singapore seated EA), and the applicant thus succeeded in enforcing it.
But the major difference between both the cases is that while the Bombay High Court granted interim measures in HSBC in a manner similar to that of the emergency arbitrator. But In the case of Raffles Design, it was held that it is open to a court to independently determine the grant of interim relief
SOLUTION FOR THE DISSENSE
The concept of emergency arbitration was reaffirmed and got a broader view by the apex court in Amazon and Future Group Dispute case which is necessary to put an end over the conflicting views of various High courts on emergency arbitration as discussed earlier.
In this case, on one side, there was Amazon.Com NV Investment Holdings LLC (Amazon), and on the other, there was Future Retail Limited (FRL), India's second-largest offline retailer, and its shareholders, including Future Group and Coupons Private Limited (FCPL) and members of the Biyani family (collectively, the "Biyani Group"). Amazon announced plans to invest nearly USD 190 million in FCPL on the condition that FRL not transfer its retail assets to certain "restricted persons" (including the Mukesh Dhirubhai Ambani (MDA) group) without Amazon's consent.
Later on the dispute arose between both the parties when Amazon disagreed with the Biyani Group’s decision to enter Without Amazon's consent & approval, FRL entered into a merger with the Mukesh Dhirubhai Ambani (MDA) group (the "Impugned Transaction"). Due to this the Amazon filed an arbitration claim against the Biyani Group under the SIAC Rules, and an Emergency Arbitrator was appointed, who issued an award that put the Impugned Transaction on hold. Even after passing of the award, the Biyani Group set sail with the transaction with Mukesh Dhirubhai Ambani (MDA) group, which led to the Amazon to file an application before a single judge of the Delhi High Court u/s 17(2) of the Arbitration Act, requesting that the Emergency Arbitrator's award be enforced. In the initial stage of the proceedings the single-judge issued a status-quo order, restraining the Biyani Group from go-ahead with the proposed transaction with the Mukesh Dhirubhai Ambani (MDA) group.
This was followed by a detailed judgment in which the single judge held that the Emergency Arbitrator's award was indeed an order as provided u/s 17(1) of the Arbitration Act and the same was enforceable by the court u/s 17(2). Future Retail Group filed separate appeals before a two-judge appellate bench of the Delhi High Court against the initial status-quo order as well as the single judge's judgment. The appellate bench stayed the executions of the status quo order and the single judge's judgment in separate orders. Aggrieved by this decision, Amazon filed an appeal with the Supreme Court.
The Supreme Court of India observed that parties to an arbitration agreement are free to agree on a procedure administered by an arbitral institution such as SIAC. The arbitral proceedings in this case had already begun, according to Rule 3.3 of the SIAC Rules, with SIAC's receipt of Amazon's Notice of Arbitration. Given that Section 17(1) of the Arbitration Act authorizes an arbitral tribunal to order interim measures on a party's application "during the arbitral proceedings," the Supreme Court reasoned that an order made by an emergency arbitrator under the SIAC Rules is covered by Section 17(1) and thus enforceable under Section 17(2) of the Arbitration Act and Apex Court observed that the same is supported by the Arbitration Act's lack of any express or implied prohibition on emergency arbitration proceedings.
Furthermore, the Supreme Court noted that the legislative history of Section 17(2) favours a pro-enforcement approach for emergency awards in India-seated arbitrations. The Supreme Court reasoned that enforcing emergency orders would improve the efficacy of granting interim reliefs and help to decongest India's overburdened court system.
As a result of agreeing to arbitrate under the SIAC Rules and participate in the proceedings before the Emergency Arbitrator, the Supreme Court determined that the Biyani Group could not disregard compliance with the Emergency Arbitrator's award.
Under the Arbitration Act, an order enforcing an emergency arbitration award is not appealable. According to the Supreme Court, Section 37 of the Arbitration Act provides an exhaustive, self-contained code for appeals from Arbitration Act orders. The Supreme Court ruled that Section 37 allows appeals only from orders made by an arbitral tribunal granting or refusing to grant interim measures under Section 17(1), but not from orders made by an Indian court for the enforcement of a tribunal's interim order under Section 17(2) of the Arbitration Act. As a consequence, the Supreme Court has ruled that such an appeal under Section 17(2) of the Constitution against an order enforcing an emergency award would indeed be quashed.
Despite the fact that Emergency Arbitration serves as a turning point in the global scenario in terms of injunctions in Arbitration proceedings, India still awaits formal statutory recognition of the Emergency Arbitrator's awards.
However, the Supreme Court's decisions in the Amazon and Future Retail disputes have significantly increased the effectiveness of EA decisions in the Indian context, providing further acceleration to India's arbitration jurisprudence's pro-arbitration trajectory. It also helped in re-emphasizing "party autonomy" as a guiding principle of the Act and also highlights the option of "Emergency Arbitrations," which are now recognized remedies for interim relief and are enforceable.
The order passed by emergency arbitrators in the course of emergency arbitration will be in the form of an interim award, which the parties agree to follow. If a party fails to comply with the same, it may be enforceable under the provisions of various national laws, depending on the discretion of national courts and national laws that may or may not include Emergency Arbitration provisions.