The deliberation regarding the Emergency Arbitration and Emergency Award got impetus in the country after the dispute between Amazon and Future Group, concerning enforcement of an ‘Emergency Award’ (“EA”), was brought before the Delhi High Court. The concept of Emergency Arbitration is unknown to the Arbitration and Conciliation Act, 1996 (“Act”), however, its existence was not new for the Indian courts and various arbitration institutions established across the nation.
The EA is essentially a mechanism by which the parties can elect to obtain urgent interim relief or measure, in a case where one of the parties cannot wait till the formation of the arbitral tribunal or where waiting may cause such damage or loss to the party which would be irreparable. The EA is passed by an Emergency Arbitrator either with the consensus of the parties or according to the agreement executed and thereafter, the Emergency Arbitrator vacates its office i.e., becomes functus officio.
One of the shortcomings of the arbitration tribunal is that the arbitral tribunal cannot grant any interim measure until it is formed. Thus, the parties used to take recourse to the civil courts, which in general, are easily accessible specifically under Section 9 of the Act. However, these proceedings are normally excessively lengthy and time consuming and there is no assurance of a speedy relief. Therefore, the EA plays an important role especially in international arbitrations, which enables a party to obtain urgent reliefs without wasting time in the formation of the tribunal.
Advent of Emergency Arbitration in India and the Law Commission Reports:
In today’s time as well, this remains a fact that the concept of EA or Emergency Arbitration is not part of the Act. However, to give recognition to Emergency Arbitrations, the Law Commission's 246th Report[1] and the B.N. Srikrishna Committee Report[2] on amendments to the Act had proposed an amendment to Section 2(d)[3] of the Act and incorporation of the term “Emergency Award” under the definition of “arbitral award”, which currently only includes the “interim award” under Section 2(1) (c) of the Act. The amendments,[4] however, failed to incorporate the recommendation/s of the said reports and do not provide at all for Emergency Arbitration.
Although, after the 2015 Amendment, interim orders of India seated arbitrators, were declared to be enforceable under Section 17 of the Act. The term “only arbitration tribunal” [as has been defined in Section 2(d) of the Act] did not include the Emergency Arbitrator and there were/are no provisions similar to Section 17 under Part II of the Act.
Global Scenario:
India’s approach to the issue differs from that of developed arbitration jurisdictions such as Singapore and Hong Kong which have recognized the enforceability of orders/awards given by an Emergency Arbitrator. Singapore amended the International Arbitration Act in 2012 to broaden the definition of ‘arbitral tribunal’ under Section 2(1) to include Emergency Arbitrator(s),similarly, Hong Kong also introduced the Arbitration (Amendment) Ordinance, 2013. Some of the significant institutional approaches towards the Emergency Award are discussed here in the below table:
Indian Judiciary’s approach towards the EA:
As there is no clear proviso under the Act concerning the EA, there are very few judicial precedents available on the Emergency Arbitration. Over the years, the courts in India have adopted a pro-arbitration approach and have indirectly enforced the award passed by the Emergency Arbitrator and the latest example is the Amazon-Future judgment. Some of the other landmark precedents regarding enforcement of EA are discussed hereunder:
The Supreme Court of India in the case of BALCO[1], stated that the powers of Indian courts are prospectively excluded to grant interim relief in relation to foreign seated arbitrations.
In the case of HSBC[2], the Bombay High Court had granted interim relief to the Petitioner under Section 9 of the Act in line with the award of the Emergency Arbitrator and held that the agreement between the parties was executed before the BALCO[3] judgment (wherein the Supreme Court held that Part I of the Act would not be applicable to international commercial arbitration).
The Delhi High Court in the landmark case of Raffles[4] has held that the award passed by the Emergency Arbitrator cannot be enforced under the Act and the court shall not consider the award passed by the Emergency Arbitrator while granting the interim measures. However, it was ordered that the parties always have the option to approach the court for interim reliefs under Section 9 of the Act.
On the contrary, in the case of Ashwani Minda[5], the Division Bench of the Delhi High Court indirectly enforced the award of the Emergency Arbitrator and rejected the Section 9 Application on the ground that as the party has failed to obtain the same relief before the Emergency Arbitrator, it is not open for the applicants to take a second bite at the cherry.
The latest judgment passed by the Supreme court in the matter of Amazon NV Investment Holdings (“Amazon”) V. Future Coupons Limited [6] is acting as a turning point in the Indian Legal Landscape as regards Emergency Arbitration. In this judgment, the apex court held that an emergency arbitration award is enforceable in India. The court further stated that Section 2(1)(d) of the Act, which defines an arbitral tribunal, is wide enough to include an Emergency Arbitrator and that an order passed by an Emergency Arbitrator is exactly like an order of an arbitral tribunal once rightly constituted.
The Supreme Court in its above judgment dealt with two issues namely, whether an award delivered by an Emergency Arbitrator under an institutional arbitration is an order under Section 17(1) of the Act and whether an appeal can be filed against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Act.
To address the first issue, the Supreme Court analyzed the provisions of the Act and held that if a party has agreed to submit its disputes to an arbitral institution, then the arbitral institution as chosen by the parties will be the arbitral tribunal and the rules of the arbitral institution will apply to include Emergency Arbitrator. The term “arbitral tribunal” is defined under Section 2(1)(d) of the Act as “a sole arbitrator or a panel of arbitrators”. Sections 2(6) and 2(8) of the Act make it clear that parties are free to authorise any person, including an institution to determine issues that arise between the parties and that party autonomy goes to the extent of an agreement. Hence, the Supreme Court held that Section 17(1) permits the parties to apply for interim reliefs before the arbitral tribunal and does not exclude the application of rules of arbitral institutions that the parties may have agreed to. It was further held that Section 9(3) and Section 17 forms part of the same scheme, and that an “arbitral tribunal” as defined under Section 2(1)(d) would not apply and that the arbitral tribunal spoken of in Section 9(3) would be like the “arbitral tribunal” spoken of in Section 17(1) which would include an Emergency Arbitrator appointed under institutional rules.
Dealing with the second issue, the Supreme Court analyzed Section 37, read with the amended Section 17 and 9 and held that no change was made in Section 37(2) (b) to bring it in line with Order XLIII, Rule 1(r). Section 37 continued to provide appeals only from an order granting or refusing to grant any interim measure under Section 17(1). In fact, the opening words of Section 17(2), namely, “subject to any orders passed in appeal under Section 37…” also demonstrates the legislature’s understanding that orders that are passed in an appeal under Section 37 are relatable only to Section 17(1). For example, an appeal against an order refusing an injunction may be allowed, in which case subsection (2) of Section 17 then kicks in to enforce the order passed in appeal. Also, the legislature made no amendment to the granting or refusing to grant any measure under Section 9 to bring it in line with Order XLIII, Rule 1(r), under Section 37(1)(b). What is therefore clear from this is that no appeal lies under Section 37 of the Act against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Act.
Conclusion
While Emergency arbitration serves as a turning point for the worldwide scenario, India still awaits full statutory recognition of EA. Prima facie, taking into consideration various advantages and disadvantages, it can be safely concluded that emergency arbitration is the need of the hour which works in the interest of both the parties and thus creates a win-win strategy, which is one of the objectives behind alternative dispute resolution.
Authors:
Sidhartha Srivastava, Partner, Link Legal
Yasmeen Sabir, Senior Associate, Link Legal
[1] The Law Commission's 246th Report dated 05.08.2014.
[2] https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf [ Merged File (legalaffairs.gov.in)].
[3] Proposed amendment to "Section 2(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."
[4] The Arbitration and Conciliation (Amendment) Act, 2015 and the Arbitration and Conciliation (Amendment) Act, 2019.
[5]https://sccinstitute.com/media/194250/ea-practice-note-emergency-arbitrator-decisions-rendered-2015-2016.pdf
[6]Appendix II Article 4(2) SCC Rules 2017
[7] Schedule 1 Rule 26.2 SIAC Rules (2010)
[8]In the International Arbitration Act (IAA) on April 9, 2012, by Singapore Parliament.
[9] Article 7 ICDR Rules 2021
[10] Article 29, supported by Appendix V (“Emergency Arbitrator Provisions”) of the 2021 ICC Revised Rules
[11]Article 29(6) ICC Rules 2021
[12]Article 9A LCIA Rules 2021
[13] Appendix II Article 1 SCC Rules 2017
[14] Rule 30.2 and Schedule 1 SIAC Rules (2016)
[15] Article 7 (1) ICDR Rule 2021
[16]Article 29(1) ICC Rule 2021
[17] Article 9B (9.4) LCIA Rules 2021
[18] Appendix II Article 7 SCC Rules 2017
[19] Schedule 1 (8) SIAC Rules (2016)
[20] Article 7 (3) ICDR Rules 2021
[21] Appendix V Article 5(2) ICC Rules 2021
[22] Article 9B (9.7) LCIA Rules 2021
[23] Appendix II Article 4(1) SCC Rules 2017
[24] Schedule 1(3) SIAC Rules (2016)
[25] Article 7(2) ICDR Rules 2021
[26] Appendix V Article 2(1) ICC Rules 2021
[27] Article 9B (9.6) LCIA Rules 2021
[28] Appendix II Article 1(2) SCC Rules 2017
[29] Schedule 1(7) SIAC Rules (2016)
[30] Schedule 1(8) SIAC Rules (2016)
[31] Article 7 (4) ICDR Rules 2021
[32] Appendix V Article 6 (1) ICC Rules 2021
[33] Article 9B (9.8) LCIA Rules 2021
[34] Appendix II Article 8(1) SCC Rules 2017
[35] Schedule 1(7) SIAC Rules (2016)
[36] Schedule 1(9) SIAC Rules (2016)
[37] Article 7 (3) ICDR Rules 2021
[38] Appendix V Article 6(4) ICC Rules, 2021
[39] Article 9B (9.8) LCIA Rules 2021
[40] Appendix II Article 8 (1) SCC Rules 2017
[41] Appendix II Article 9 (5) SCC Rules 2017
[42] Schedule 1(10) SIAC Rules 2016
[43] Article 7(5) ICDR Rules 2021
[44] Article 7(5) ICDR Rules 2021
[45] Appendix V Article 1(6) ICC Rules 2021
[46] Article 9B (9.11) LCIA Rules 2021
[47] Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. (“BALCO”), (2012) 9 SCC 552
[48] HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors., Arbitration Petition No. 1062/2012 dated January 22, 2014
[49] BALCO - (2012) 9 SCC 552
[50] Raffles Design International India Private Limited and Ors. vs. Ducomp Professional Education Limited and Ors. 2016 (6) ARBLR 426 (Delhi)
[51] Ashwani Minda and Ors. v. U-Shin Ltd. and Ors, 2020 (4) ArbLR 256 (Delhi)
[52] Amazon NV Investment Holdings (“Amazon”) v. Future Coupons Limited dated 18.03.2021
Disclaimer: The contents of this article are for general information and discussion only and is not intended for any solicitation of work. This article should not be relied upon as a legal advice or opinion.