Resolving commercial disputes effectively is central to determining the ease of doing business in a country. Arbitration is vitally important to enhance ease of doing business as expeditious & effective resolution can reduce the pendency in courts and instill investor confidence. The Arbitration and Conciliation Act, 1996 (‘The Act’) has addressed various concerns related to alternative dispute resolution and introduction of pro-arbitration measures based on recommendations of the Standing Committee of Commerce shows that the we have set our foot in the right direction yet there is a long way to go.
An integral facet of arbitral proceedings is the jurisdiction of arbitral tribunals & the power to grant interim measures. Thereby, parties are inclined to opt for arbitration because of the ability to obtain immediate interim relief once a dispute arises, to preserve the status quo or prevent the opposite party from continuing the breach in question. Obtaining timely interim measures is crucial in arbitral proceedings but under the current regime, parties have to either approach the domestic courts, which implies compromising on confidentiality & getting involved in lengthy court procedures, or wait till the arbitral tribunal gets constituted. Accordingly, leading arbitration institutions have acknowledged this concern & devised the novel concept of ‘Emergency Arbitration’.
A party that requires immediate relief, such that inability to obtain the relief would result in huge loss to its assets or evidence which cannot be compensated through damages, can appoint an emergency arbitrator before the substantive tribunal is formed. The proceedings before the emergency arbitrator are carried out as per the agreement of the parties. He shall provide a reasonable opportunity to all parties to be heard and his appointment is only for the purpose of granting urgent interim relief within a stipulated time. An emergency arbitrator minimizes the extent of judicial intervention and provides an expeditious remedy.
POSITION IN INDIA
Various arbitration institutions like the Singapore International Arbitration Centre (SIAC), the International Chamber of Commerce (ICC), the Hong Kong International Arbitration Centre (HKIAC) and the London Court of International Arbitration (LCIA) have provided for emergency arbitration. The arbitration institutions in India including the Delhi International Arbitration Centre (DIAC), Indian Council of Arbitration (ICA) and the Mumbai Centre for International Arbitration (MCIA) provide for the appointment, procedure, time period and powers of the emergency arbitrator in their respective rules. Some countries like Singapore and Hong Kong have passed amendments to recognize emergency awards.
However, Emergency Arbitration is not recognized under the Act in India. The Law Commission’s 246th Report (2014) proposed to amend the definition of an arbitral tribunal under Section 2(1)(d) of the Act so as to include within its ambit, an emergency arbitrator appointed under the rules of an institution. The 2015 Amendment to the Act did not incorporate this recommendation. Subsequently, in 2017, the Report of the High Level Committee headed by Justice Srikrishna had also strongly advocated for recognition of emergency awards and their enforcement under the Act, keeping pace with the international practice. Yet, the Act currently does not recognize an emergency arbitrator within the definition of arbitral tribunal given under Section 2(1)(d).
JUDICIAL PRECEDENTS
The courts in India have encountered the issue of enforceability of an emergency award but there is no settled position on this issue. In HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. & Ors. (2014) [‘HSBC Holdings’], the arbitration was conducted outside India but the parties had reserved their rights to seek interim reliefs before Indian courts. The Plaintiff had applied for seeking an injunction under Section 9 of the Act after obtaining a favourable order from the emergency arbitrator in Singapore. The Hon’ble Bombay High Court observed that the Petitioner was not obtaining a direct enforcement of the interim award as it had approached the court under Section 9 & had not bypassed any compulsory conditions for enforceability. The Court held that the interim award had become final and conclusive on the issue of jurisdiction and granted interim measures in a similar vein as that of the emergency arbitrator.
In Raffles Design International India Private Limited & Anr. v. Educomp Professional Education Limited & Ors. (2016), the arbitration agreement between the parties was governed in accordance with the laws of Singapore. The Petitioner had received a favourable interim order in an emergency arbitration which was later enforced by the High Court of Singapore. The Petitioner sought interim reliefs against the Respondents, alleging that the Respondents were acting in contravention of the interim award, by filing an application under amended Section 9 of the Act before the Hon’ble Delhi High Court. The Court held that an emergency award passed by the arbitral tribunal under SIAC rules cannot be enforced under the Act as Section 17 of the Act does not apply to arbitral proceedings conducted outside India. It is because Part I of the Act is only applicable to arbitration proceedings where the juridical seat is in India and there exists no mechanism even in Part II of the Act for enforcement of interim awards passed by foreign seated arbitral tribunals or emergency arbitrators. Thereby, interim reliefs granted by foreign seated arbitral tribunals or emergency arbitrators are not directly enforceable in India. The Court said that the only method available to the petitioner for enforcing the emergency award was to file a suit.
In the case of Ashwani Minda v. U-Shin Ltd. (2020), an application was filed by the Appellants under Section 9 of the Act seeking various interim reliefs. Prior to this application, the Appellant had already applied for emergency measures under Japan Commercial Arbitration Association (JCAA) Rules which were rejected by the emergency arbitrator. The Hon’ble Delhi High Court held that a party to a foreign-seated arbitration has the option of seeking interim measures of protection in the Indian courts or of going to the seat court or the tribunal for interim relief. The Court further remarked that the appellants could not be allowed “a second bite at the cherry” after they have invoked the JCAA process to approach the emergency arbitrator and failed to obtain interim relief. This clearly means that the Court recognized the proceedings before the emergency arbitrator and thereby, disallowed a second chance to the applicant who had approached it to seek the same interim relief(s).
The latest case which has brought the entire issue of emergency arbitration & its enforcement to the forefront is Future Retail Ltd. v. Amazon.com Investment Holdings (2020) [‘Future Retail’]. The facts of the case are such that Reliance Retail had entered into a deal for the acquisition of the assets of the Petitioner; the Respondent had alleged that this deal was in violation of the shareholders’ agreement entered between the Respondent and the promoter firm of the Petitioner. As per the shareholders’ agreement, it was an obligation on the said promoter firm to inform the Respondent before entering into any transaction with third parties. The Respondent had successfully obtained an order from an emergency arbitrator in Singapore & had contacted regulatory authorities to stay the said transaction based on this order. The Petitioner had subsequently filed a petition before the Hon’ble High Court of Delhi for an interim injunction under Section 9 of the Act requesting the Court to prohibit the Respondent from impeding its transaction with Reliance Retail.
A single bench of the Hon’ble High Court of Delhi held that the Act does not prohibit parties from obtaining emergency relief from an emergency arbitrator. It observed that party autonomy is the underlining principle of arbitration and it must be safeguarded. The Court relied on National Thermal Power Corporation v. Singer Company and Ors., and Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. to hold that as per the arbitration clause, the parties had themselves agreed to refer their dispute to arbitration in accordance with the arbitration rules of the SIAC and so it would be governed by the procedure given under those rules. Further, Section 2(8) of the Act entitles the parties to choose any procedural rules and there is no prohibition under the Act w.r.t. any reliefs that can be obtained under the said rules. Therefore, the principle of party autonomy entitled the parties to choose procedural rules which provide for emergency arbitration.
On the issue dealing with emergency arbitrators not being defined within the definition of an arbitral tribunal under the Act, the Court relied on HSBC Holdings and observed that the absence of the term ’emergency arbitrator’ from the definition cannot be interpreted as the intent of the legislature. In an application under Section 17(2) of the Act, the single judge of the Delhi High Court held that prima facie, the emergency arbitrator was an arbitrator, the impugned order was not a nullity, and that the order of the emergency arbitrator was an order under Section 17(1) of the Act and was appealable under Section 37 of the Act. Presently, a division bench of the High Court has granted a stay on the order passed by the single judge and an appeal is pending before the Hon’ble Supreme Court.
CONCLUSION
In order to preserve the sanctity of arbitral proceedings; confidentiality, party autonomy & minimal court intervention must be ensured and recognition of emergency arbitration in India will go a long way in ensuring the same. The Future Retail judgment has strengthened the principle of party autonomy in India by recognizing emergency arbitrations within the scheme of the Act. Some arbitral institutions, like the MCIA, explicitly provide in their rules that interim reliefs awarded by the emergency arbitrator will be equivalent to interim measures awarded by a tribunal under Section 17 of the Act. And in Future Retail, the Court has further clarified that an order passed by an emergency arbitrator is an interim measure passed by an arbitral tribunal under Section 17(1) of the Act and thus enforceable as an order of the court under Section 17(2) of the Act. Therefore, awards of domestic seated emergency arbitrator can be directly enforced.
But, the Future Retail judgment dealt with an Indian seated arbitration and so it is the need of the hour to drive clarity & certainty in the enforceability of such orders where the seat of arbitration is outside India. In the author’s opinion, there should be a specific provision for interim reliefs in foreign seated arbitrations under Part II of the Act as the definition of foreign award under Section 44 of the Act does not include interim awards and currently there is no provision for enforcement of interim reliefs in foreign seated arbitrations. Moreover, our arbitration laws need to keep pace with international standards in order to make India a hub for arbitration. A pro-arbitration amendment providing for the recognition of foreign seated emergency awards and their enforcement under the Act would also provide much needed legislative support to the arbitration institutions in India and foster the growth of institutional arbitration in India.