CONCEPT OF EMERGENCY ARBITRATION IN INDIA BY ADV. SAURABH MISHRA

This article was written by Saurabh Mishra, Advocate-On-Record at the Supreme Court of India.

INTRODUCTION

In the current scenario involving a commercial dispute, parties can either opt to compromise on confidentiality by approaching domestic courts, or they can wait for the establishment of an arbitral tribunal[1], which sometimes takes months. Providing a quick and effective dispute resolution, the emerging concept of emergency arbitration (EA) in India is a boon for the parties who wish to protect their assets and evidence that may otherwise be lost or tampered with and cannot be compensated through damages.

The proceedings under the EA are carried out either according to the parties’ agreement or with the consensus of the parties, which limits the scope of judicial intervention[2]. The emergency arbitrator, whose role is to award an urgent interim relief within a specified time frame, provides a reasonable opportunity for both the parties to be heard. Though at present, there is no mention of the concept under the Arbitration and Conciliation Act, 1996[3], over the years, there has been a great evolution of the concept through several case laws, most recent of which is the case of Amazon v. Future. This article aims to discuss the present status of EA in the Indian scenario, along with a glimpse of the global scenario.

GLOBAL SCENARIO

Many leading institutions such as the International Centre for Dispute Resolution of the American Arbitration Association (ICDR), the International Chamber of Commerce (ICC),  the Singapore International Arbitration Centre (SIAC), the Stockholm Chamber of Commerce (SCC), London Court of International Arbitration (LCIA), the Swiss Chambers Arbitration Institution (SCAI), the Hong Kong International Arbitration Centre (HKIAC)  have introduced “emergency arbitrator procedures” which strives to reduce the gap between the occurrence of a dispute between parties and the formation of arbitral tribunals. However, the New York Convention only recognizes a final award which can be enforceable in nature and not an interim order.

MOVE BY INDIAN ARBITRATION INSTITUTIONS’ TOWARDS EA

Some leading arbitral institutions and their provisions relating to EA are quite similar to the international arbitration institutional rules and are discussed as follows[4]:

  • The Delhi International Arbitration Center (Delhi High Court): Part III of Arbitration Rules and Section 18A.
  • Court of Arbitration of the International Chambers of Commerce: Article 29 of the ‘Arbitration and ADR Rules’ and Appendix V.
  • International Commercial Arbitration (ICA): Section 33 and Section 36(3).
  • Madras High Court Arbitration Center (MHCAC) Rules, 2014: Section 20 under Part IV, Schedule A and Schedule D.
  • Mumbai Center for International Arbitration (Rules) 2016: Section 3.
RELIEFS THAT CAN BE OBTAINED UNDER EA

The reliefs that could be sought from an emergency arbitrator depends on the type of dispute. For instance, in a construction dispute, an award of security for claim, or the preservation of evidence or assets, could be sought[5]. In many cases, relief has been sought to prevent a party from relying on a performance bond or suspending the application of liquidated damages. Parties must carefully consider the type of relief they require and who is best suited to provide it at the time[6].

It is important to note that any form of relief that binds a third party, such as making premises available for inspection or requiring witnesses to appear, could not be sought. Further, a relief cannot be granted by the emergency arbitrator without notice to the other party. The consequence of not doing so gives rise to the need to present the case before the court[7].

EVOLUTION OF JUDICIARY’S APPROACH TOWARDS EA

BHARAT ALUMINIUM CO v. KAISER ALUMINIUM TECHNICAL SERVICES (2012)

The Supreme Court held in this case[8] that the 1996 Act[9] was not passed by the Indian Parliament with an intention for it to have extraterritorial application, and thus Indian courts are prospectively barred from granting interim relief in the matters of foreign seated arbitrations.

HSBC PI HOLDINGS (MAURITIUS) LTD v. AVITEL POST STUDIOZ (2014)

In this case[10], the plaintiff sought an injunction in India under Section 9 of the 1996 Act after obtaining a favourable order from the emergency arbitrator in Singapore, since the parties had reserved their rights to seek interim reliefs before Indian courts.

The Bombay High Court observed that the case meets all the mandatory conditions for enforceability, and the petitioner is not seeking direct enforcement of the interim award, which made the interim award on the issue of jurisdiction final and conclusive. Thus, interim measures similar to that of emergency arbitrator were issued by the Court. It is important to note here that since the subject agreements were reached between the parties before the BALCO judgment, its reasoning didn’t apply to this case[11]. Through this judgement, the judiciary limited the scope of intervention by courts in arbitration matters[12].

RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED v. DUCOMP PROFESSIONAL EDUCATION LIMITED (2016)

This was another case where interim relief was granted by the Courts in sync with the order of the Emergency Arbitrator[13]. In this case[14], the parties resorted to EA seated in Singapore, where a favourable order was given to the party who sought to enforce the same in India. The Delhi High Court observed that there exists no mechanism in Part II of the 1996 Act for enforcement of interim awards passed by foreign seated arbitral tribunals or emergency arbitrators. Thereby, such interim reliefs are not directly enforceable in India and the only method available to the petitioner for enforcing the emergency award is to file a suit.

ASHWANI MINDA v. U-SHIN LTD (2020)

In this case[15], the appellant approached the Delhi High Court seeking the same interim reliefs that had been denied by the emergency arbitrator under the Japan Commercial Arbitration Association (JCAA) Rules. The HC observed 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. Thus, the Court rejected the interim reliefs and  indirectly enforced the award of the E-Arbitrator[16].

AMAZON NV INVESTMENT HOLDINGS v. FUTURE COUPONS LTD. (2021)

In this case[17], the Supreme Court changed the whole scenario of the concept of EA by giving recognition to the emergency awards passed in an Indian-seated arbitration under Section 17 of the 1996 Act and holding that an appeal under Section 37 of the Act is not maintainable against an enforcement of an  order of emergency arbitrator under Section 17. The case was that FRL (Future Retail Ltd.) and FCPL (Future Coupons Pvt, Ltd.) did not comply with the emergency award given under the the Rules of Singapore International Arbitration Centre (SIAC Rules) after which Amazon initiated proceedings in the Delhi High Court to enforce the emergency award. It is important to note here that, as per FCPL’s agreement of shareholders, the seat of arbitration was New Delhi, India.

Some of the important points that were discussed by the SC in the case are[18]:

  • Parties to an agreement have a right of exercising party autonomy by choosing institutional rules, which can include emergency arbitrators, and mandatory provision of the 1996 Act is bypassed by doing so, as the Act contains no provision that prohibit parties from agreeing on a set of rules providing for the appointment of an emergency arbitrator.
  • Section 2(1)(d) defines “arbitral tribunal” as sole arbitrator or a panel of arbitrators, but not an “emergency arbitrator.” Section 1 does, however, begin with the words “unless the context otherwise requires”. When read with Section 2(1)(a) [that provides for “any” arbitration, whether or not administered by a permanent arbitral institution] and Sections 2(6) and 2(8) [which permit incorporation of rules of arbitral institutions], it is clear that interim orders issued by emergency arbitrators under the rules of an arbitral institution would fall within the scope and context of orders issued by a “arbitral tribunal” under Section 17(1).
  • Since a remedy under Section 17 is accessible to a party “during the arbitral proceedings”, a tribunal’s powers to give such a remedy would include powers exercised by an emergency arbitrator soon after the arbitral proceedings begin. Further, the Supreme Court stated that the phrases “arbitral procedures” under Section 17 are not defined and would consequently include proceedings before an emergency arbitrator.
CONCLUSION

Emergency Arbitration is more efficient, less time consuming, and a trustworthy concept. The judgment in Amazon v. Future recognised EA awards only in Indian-seated arbitration and not otherwise, narrowing the scope of application of EA in India. However, it could be a significant step toward making India a hub for arbitration, as now domestic-seated arbitrations will be seen more favourably by parties undertaking commercial deals in India[19]. With such a landmark judgment and the recommendations of the 246th Law Commission Report[20] already in place, the Parliament must reflect on the concept and pass statutory legislation governing EA or make appropriate amendments to the 1996 Act before another judgment comes before the SC and changes the whole scenario. The much-needed statutory recognition could significantly improve India’s arbitration landscape and reduce judicial intervention to a great extent[21].

REFERENCES

[1] Aadesh Shinde, Emergency arbitration in India: Evolution and prospects, THE DAILY GUARDIAN (August 12, 2021, 11:12 AM), https://thedailyguardian.com/emergency-arbitration-in-india-evolution-and-prospects/.

[2] Ibid.

[3] Arbitration and Conciliation Act, 1996, Act no.26, Acts of Parliament, 1996 (India).

[4] Adimesh Lochan, Kshama A. Loya & Vyapak Desai, Amazon V. Future – Indian Supreme Court Recognizes Emergency Awards Under The A&C Act, NISHITH DESAI, https://www.bnishithdesai.com/SectionCategory/33/Research-and-Articles/12/57/NDAHotline/4799/1.html.

[5] Elizabeth Kantor (Herbert Smith Freehills LLP), Emergency Arbitration of Construction Disputes – Choose Wisely or End Up Spoilt for Choice, KLUWER ARBITRATION BLOG (February 15, 2017), http://arbitrationblog.kluwerarbitration.com/2017/02/15/emergency-arbitration-construction-disputes-choose-wisely-end-spoilt-choice/ .

[6] Ibid.

[7] Supra note 4.

[8] BALCO v Kaiser Aluminum Technical Services (2012) 9 SCC 552 (BALCO judgment).

[9] Supra note 3.

[10] HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd., 2014 SCC OnLine Bom 102

[11] S&P LLP, India: Emergency Arbitration In India: Concept And Beginning, MONDAQ, (August 20, 2021), https://www.mondaq.com/advicecentre/content/3958/Emergency-Arbitration-In-India-Concept-And-Beginning.

[12] Kopal Bansal, CASE STUDY: HSBC PI Holdings (Mauritius) Ltd V Avitel Post Studioz Ltd And Others, VIA MEDIATION CENTRE, https://viamediationcentre.org/readnews/MjQ0/CASE-STUDY-HSBC-PI-Holdings-Mauritius-Ltd-v-Avitel-Post-Studioz-Ltd-and-others.

[13] Supra Note 11.

[14] Raffles Design International India Private Limited v. Educomp Professional Education Limited, 2016 SCC OnLine Del 5521 : (2016) 234 DLT 349.

[15]Ashwani Minda v. U-Shin Limited, 2020 SCC OnLine Del 721 : (2020) 271 DLT 287

[16] Supra note 1.

[17] Future Coupons (P) Ltd. v. Amazon.com NV Investment Holdings LLC, 2021 SCC OnLine SC 3124

[18] Supra note 7.

[19] Nishant Menon and Nikhil Bhatia, India: India’s Stand On Emergency Arbitrators And Emergency Awards, MONDAQ(September 23, 2021), https://www.mondaq.com/india/arbitration-dispute-resolution/1114110/india39s-stand-on-emergency-arbitrators-and-emergency-awards.

[20] The Law Commission’s 246th Report dated 05.08.2014 on amendments to the Arbitration and Conciliation Act, 1996, proposed an amendment to Section 2(d) of the Act, which was to include emergency arbitrator within its ambit.

[21] Jyotika Thakur, India: Emergency Arbitration In India – Need For A Statutory Legislation, MONDAQ (16 June 2021), https://www.mondaq.com/india/arbitration-dispute-resolution/1080386/emergency-arbitration-in-india-need-for-a-statutory.

Leave a Reply

Your email address will not be published.

𝐖𝐀𝐍𝐓 𝐓𝐎 𝐉𝐎𝐈𝐍 𝐎𝐔𝐑 𝐎𝐑𝐆𝐀𝐍𝐈𝐙𝐀𝐓𝐈𝐎𝐍?

X
error: Content is protected !!