The highly debated issue raised in Future Retail Limited v. Amazon.com Investment LLC was put to rest by the Hon’ble Delhi High Court as it upheld the validity of the appointment of Emergency Arbitrator (hereinafter “EAr”). The issue raised due to non-compliance of the Shareholders Agreement, which prohibited Future Retail from selling its assets to the enlisted entities, resulted in invoking the Emergency Arbitration (hereinafter “EA”) clause by Amazon LLC before Singapore International Arbitration Centre (SIAC). The EA comes into the picture when the parties don’t have sufficient time to wait for the formation of an Arbitral tribunal to obtain interim relief. While the concept of EA has not been defined in the Arbitration and Conciliation Act, 1996 (hereinafter “A&C Act”), it is neither expressly deemed to be invalid or contrary to the Act.
LEGAL STATUS OF EA
The parties to the abovementioned suit had chosen the SIAC arbitration rules, making it to be the curial law for their arbitration. Rule 2 of the SIAC defines an Arbitral Tribunal to include EAr. Further, Rule 30 envisages that the parties may seek interim relief from either a tribunal, an emergency arbitrator, or a court of competent jurisdiction, thus keeping the substantive rights of the parties to approach courts for relief under section 9 of the A&C Act available. The issue before the court for consideration was whether the appointment of EAr was contrary to the A&C Act.
The court relied on the observations of the Apex court made in National Thermal Power Corporation v. Singer Co. & Ors. and concluded that since the parties had expressly chosen the SIAC rules as the curial law, the same would be applicable, provided that they are not in conflict with the public policy of India or any mandatory requirement of the act. The court went a step ahead to note that by virtue of Section 2(8) of the A&C Act, the rules of SIAC, including the provision for EA would be applicable as the parties had expressly incorporated the said rules in the arbitration agreement. Accordingly, Section 2(1)(d) of the Act was considered to include EA. Further, the court reiterating the party autonomy being the brooding and guiding spirit in arbitration, opined that the parties to the arbitration agreement were free to agree on different laws governing their proceedings, to avail interim relief from the EAr on the one hand, or from the courts under A&C Act on another hand.
Further, the court clarified that parties by an agreement could decide the inapplicability of section 9 along with Sec 27, 37(1), and 37(2)(b). The term “even if the place of arbitration is outside India” in proviso section 2(2) was highlighted by the court, indicating that the exemption applies to international commercial arbitrations as well. As a result, the court upheld the validity of EA and the appointment of EAr under SIAC rules, adjudging that it was not contrary to any mandatory provisions of the A&C Act. Since, there was nothing in the act that could invalidate the whole process of EA, the same could not be surmised merely because it did not fall under the definition of ‘Arbitral tribunal’.
VALIDITY OF AWARDS PASSED BY EA
This was not the first time the validity of interim relief granted by EAr was challenged in India. Sec 48 of the A&C Act provides the conditions for enforcement of foreign awards but does not provide a clear path for the enforcement of emergency awards. In the leading case of HSBC v. Avitel, the Bombay High Court was considered to be the torchbearers in cases wherein interim relief was provided by the courts in accordance with the Emergency Arbitrator’s order. The court did not only uphold the award of EA but also granted interim relief. In Raffles Design International Pvt. Ltd. v. Educomp Professional Education Ltd. & Ors., the Court held that section 9 cannot be used by the parties to enforce emergency awards but can only be filed for interim relief. Further, it was held that amendment to section 2(2) had widened the power of courts to grant interim reliefs, and it was clear that Section 9 of the Act is applicable to International Commercial Arbitration held outside India. Thus, the fact that the parliament did not accept the recommendations of the 246th Law Commissions’ report had no bearing in the interpretation of the provision in the A&C Act. By mutual agreement the parties could agree to a remedy such as EAr and the same has been valid under Indian law and the EA order constitutes an interim measure under Section 17(1) of the A&C Act enforceable as an order of the Court under Section 17(2) of the A&C Act.
A NEW PHASE IN THE INDIAN ARBITRATION
While the domestic arbitration institutes contained provisions for EA, the absence of explicit recognition under the A&C Act remained a hurdle in the implementation of this internationally recognized concept in India. The previous arguments invalidating the orders passed by EA are less likely to find favour with the courts post this crucial development. This precedent will serve to defeat the arguments that are based solely on the anvil of the dichotomy between the awards passed ‘arbitral tribunal’ and ‘emergency arbitrator’ under the Act. The new phase in the Indian Arbitration, with recognition of EA and the attached prospect of expeditious resolution of disputes will certainly help the country in its journey of establishing itself as a globally accepted arbitration hub. It is noteworthy that the decision of the court does not call for amendments in the act, opining that the current framework sufficiently accommodates the concept. However, to ensure that this new phase of development is not stalled amidst conflicting judgments it is necessary that the law be amended.
Several other international arbitration institutions, besides SIAC, have made accommodations in their rules to provide for the appointment of an EAr, intending to provide interim relief. While on one hand the SIAC, Stockholm Chamber of Commerce, Swiss Chambers Arbitration Institution, Netherlands Arbitration Institute, Mexico City National Chamber of Commerce, provide for both the expedited formation of the Arbitral tribunal and EA, on the other hand, the institutions including the London Court of International Arbitration, the International Centre for Dispute Resolution of the American Arbitration Association, Hong Kong International Arbitration Centre, and the International Chamber of Commerce provide solely for EA. The UNCITRAL Model Law also indirectly covers EA under the definition of ‘arbitration’ provided thereunder.
While formal recognition of EA under the A&C Act by the legislature is recommended, the decision by the Hon’ble Delhi High Court is a positive development that helps strengthen the arbitration set up in India. The desirability of recognizing the legality of EA lies in the fact that it would help accord legal sanctity to the Rules relating to EA and the emergency awards under the international arbitration institutions and this gives momentum to the party autonomy. It would ensure quick relief for the parties to the arbitration seeking interim relief and help decrease judicial intervention. Thus, the act ought to be amended to give statutory recognition to the status of EA in India to ensure certainty in the law.
* The authors are students at Maharashtra National Law University, Aurangabad.