1. Introduction
Arbitration as a mechanism of resolving disputes is now widespread in contracts all across the world. It is owing to the courts being infamous for taking too much time to resolve a dispute due to their overworked systems. The Arbitration and Conciliation Act (the “Act”) was designed to redirect cases from the conventional path of litigation to alternative methods of dispute resolution. The inclusion of orders issued by an Emergency Arbitrator (“EA”) would be one such means of avoiding judicial intervention. On August 6, 2021, in Amazon.com NV Investment Holdings Inc. v. Future Retail Ltd. (“Amazon“), the Supreme Court of India laid down the jurisprudence for the enforceability of such arbitral orders India-seated arbitrations. Despite its novelty, this case has now established the stance on the enforceability of emergency arbitrator’s orders in Indian seated arbitration.
2. Background
The brief facts of the case are that Amazon initiated arbitration proceedings against Future Coupons Pvt, Ltd. (“FCPL”), Future Retail Limited (“FRL”) and others based on the arbitration agreement contained in the Shareholders Agreement. The arbitration agreement provided that it would be governed by and construed in accordance with Indian laws, the seat of arbitration shall be New Delhi, and the disputes would be resolved in accordance with the Singapore International Arbitration Centre Rules (“SIAC Rules”). Amazon filed an application under the SIAC Rules for emergency interim relief to prevent FCPL and FRL from pursuing the disputed transaction of transfer of its retail assets to the Reliance Group. SIAC appointed an emergency arbitrator in response to Amazon’s application.
3. Validity of an EA Award
An EA is appointed at the request of one party to grant emergency conservatory relief when one party cannot wait for the arbitral tribunal to be convened in line with the arbitration agreement. The alternative to an EA would be to go before the court under Section 9 of the Arbitration and Conciliation Act, 1996 (the “Act”) and seek interim relief before the constitution of the Arbitral Tribunal. This method, however, results in judicial involvement, which is a lengthy process. Following the addition of Section 9(3), prevents the courts from entertaining an application for interim relief if there is an equally efficacious remedy available under Section 17 of the Act. Pertaining to this The Courts have now begun to refrain from issuing orders to avoid prejudice to any party after the constitution of the Arbitral Tribunal. Thereby ensuring that interim relief under Section 9 is primarily sought prior to the constitution of the Arbitral Tribunal.
The Supreme Court in the Amazon Case primarily addressed the issue of the validity of the ‘award’ delivered by the EA and its enforcement as an interim measure under Section 17(1) of the Act. The court noted that, while there is no provision for EA orders in the Act, party autonomy remains it’s the cardinal principle as stated under sections 2(6), 2(8), and 19(2) of the Act enable parties to determine the arbitration rules and the procedure to be followed by the Arbitral Tribunal in conducting its proceedings. This has recently been upheld in the PASL Wind Solutions Case.
In the Amazon case, the Supreme court held that the definition of the ‘Arbitral Tribunal’ is wide enough to include EA. The definition Clause under Section 2 of the Act begins with “unless the context otherwise requires”, which when read with Section 2(1)(a) that provides for “any” arbitration, whether or not administered by a permanent arbitration institution which in itself would prima facie include EA. Additionally, as per the international practice, a majority of international arbitration institutions, such as SIAC, the Stockholm Chamber of Commerce, the Swiss Chambers Arbitration Institution, and the Netherlands Arbitration Institute, provide for rules for formation for both the Arbitral Tribunal as well as the EA. Hence, The 246th Law Commission Report and the High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India, headed by Justice B. N. Srikrishna, have suggested inclusion of the provisions for orders passed by the EA in the Act so that it can come at par with international practice of making the process of arbitration as self-sustainable as possible.
The Supreme Court took reference from its decision in the case of Avitel Post Studioz Ltd. Case, and resorted to backing up the Law Commission’s 246th Report by stating that simply because a Law Commission suggestion is not accepted by Parliament doesn’t mean it cannot hold persuasive value in the statute.
The SIAC recognizes the concept of EA, which should have been enough to demonstrate the legitimacy of the order passed by the EA. However, FRL contended that an award must have been made during the course of the arbitration for it to be recognized as an interim order under Section 17(1) of the Act as the Arbitral Tribunal had not been constituted at the time of the award and the arbitral proceedings had not yet commenced.
The Court referred to Section 21 of the Act which provided for the commencement of the arbitral proceedings on the date when the request for arbitration is received by the respondent. Similarly, according to Rule 3.3 of the SIAC Rules, the commencement of the arbitration would be the date of receipt of the complete ‘Notice of Arbitration’ by the registrar. It is essential to note that the rules and Act describe the commencement of the Arbitral proceeding to be before the constitution of the Arbitral Tribunal. Since as per Amazon the EA’s order is, rightly held to be for all intents and purposes, an interim order made by the Arbitral Tribunal under Section 17(1) of the Act. It is therefore deemed to be an order of the court and is enforceable in accordance with the provisions of the CPC by virtue of Section 17(2) of the Act.
4. Section 9 and relief by EA
In the case of Indian-seated arbitrations, the EA’s orders can be enforced in the same way as a court’s ruling can. As a result, this article recommends that it would be a beneficial decision for the parties to opt for institutional arbitration and adopt rules that include an EA provision, allowing them to skip section 9 and gain prompt interim relief through the arbitral procedure.
Whereas, for a Foreign seated arbitration, the lack of legislative support creates a conundrum before the parties. Foreign-seated arbitrations are governed by Part II of the Act and there is no provision in the Act bearing a resemblance to section 17 to enforce the EA orders.
As per section 2(2) of the Act, the parties can use section 9 of the Act in international commercial arbitrations. In Raffles Design International India P. Ltd. Case and, Avitel Post Studioz Ltd. & Ors. Case the parties first got the order from the emergency arbitrator and then filed a petition under section 9, for seeking the same relief. The Delhi High Court and the Bombay High Court, in the aforementioned two cases, entertained the section 9 petition for granting the same relief. Thereafter in Ashwin Minda & Anr v. U-Shin Ltd, the parties approached the Delhi High Court under section 9 as a method of appeal from the EA’s order, to which the Court held that Section 9 is not a method of appeal or enforcement of an EA order in a foreign seated arbitration.
Therefore, for the parties to enforce the orders passed by an EA, they need to first ensure that the institutional rules that govern their arbitration agreement does not exclude the provisions of section 9 of the Act and secondly, ensure that those institutional rules provide for provisions for EA and permits the parties to approach the Courts for interim relief. If the above criteria are not met, the parties will have to go through Section 48 of the Arbitration Act, which deals with grounds on which enforcement of a foreign award can be resisted. A foreign award can be enforced in India if it qualifies the conditions stipulated under Section 48 of the Act, wherein it shall be enforced in the same way as a final arbitral award leading to the destruction of the status quo.
5. Concluding Remarks
The Amazon case is a progressive step towards the complete autonomy of the Arbitral Process. The parties now have the option of going through arbitration and resolver their dispute expediently and confidentially, rather than going through court to obtain immediate interim relief. The aim of the Act is to create a self-sustaining dispute settlement mechanism, and the Supreme Court’s judgment in the case is a positive step towards ensuring that remedies within the arbitral proceedings are not rendered irrelevant or obsolete. That being said, the lack of judicial pronouncements & formal statutory recognition is still holding India back from becoming a part of the turning tide for the global scenario, that is, Emergency Arbitration.
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Reference Links/Sources
https://main.sci.gov.in/supremecourt/2021/3947/3947_2021_32_1501_29084_Judgement_06-Aug-2021.pdf (Amazon.com NV Investment Holdings Inc. v. Future Retail Ltd.)
https://www.siac.org.sg/our-rules/rules/siac-rules-2016#siac_schedule1 (Singapore International Arbitration Centre Rules)
https://indiankanoon.org/doc/79928496/ (addition of Section 9(3))
https://sccinstitute.com/media/293614/arbitration_rules_eng_17_web.pdf (PASL Wind Solutions)
https://www.swissarbitration.org/centre/arbitration/arbitration-rules/ (Swiss Chambers Arbitration Institution)
https://www.nai-nl.org/downloads/NAI%20Arbitration%20Rules%20and%20Explanation.pdf (Netherlands Arbitration Institute)
https://lawcommissionofindia.nic.in/reports/report246.pdf (246th Law Commission Report)
https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf (High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India)
https://indiankanoon.org/doc/92854857/ (Avitel Post Studioz Ltd.)
https://indiankanoon.org/doc/166921970/ (Raffles Design International India P. Ltd.)
https://indiankanoon.org/doc/4385884/ (Ashwin Minda & Anr v. U-Shin Ltd)
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