An application for interim relief that cannot wait for the creation of an arbitral tribunal to handle the parties’ substantive dispute may be addressed through emergency arbitration (or “EA”), which is a binding arbitration conducted by an arbitrator appointed by an arbitral institution due to a lack of time or urgency about the subject matter of the dispute. Arbitral procedures, whether local or international, are handled by an arbitral tribunal following the parties’ agreement. According to well-established legal principles, a court or arbitral tribunal may only give interim relief in furtherance of ultimate comfort.
To get interim relief, the party requesting it must demonstrate to the arbitral tribunal that its claim against the opposing party has a substantial basis. That failure to obtain temporary relief will result in grave and irreparable harm. An EA allows a party to get urgent interim relief for a set time. The emergency arbitrator(s) perform similar, if not identical, tasks as an ad hoc tribunal, which is likewise formed for a specific reason and is quickly dissolved once that purpose is completed or the time window in which such matters must be resolved expires.
APPLICABILITY OF PART 1: FOREIGN SEATED ARBITRATION
A Constitution Bench of the Hon’ble Supreme Court overturned the Bhatia International three-judge bench decision in the BALCO case, establishing that international commercial arbitrations are exempt from Part I of the Arbitration & Conciliation Act, 1996 (the “Act”), except for those held in India. As a result, only Part II of the Act applies to arbitral awards from foreign-seated tribunals. These awards would be enforceable by national courts in India under Section 49, subject to conformity with the provisions of Sections 44, 46, and 48 of the Act, whether they ultimately settle disputes at the intermediate or final stage.
With the addition of the Provision, Section 2(2) of the act by the 2015 Amendment, this stance has undergone some alteration. Part I of the Act is still reserved for domestic arbitration. Still, the addition to Section 2(2) makes Part I’s Sections 9, 27, 37(1)(a), and 37(3) applicable to foreign-seated arbitrations unless the parties agree otherwise. The most prominent of them is Section 9, which grants the court the authority to impose temporary orders at any moment before, during, or following the creation of the arbitral judgment. This means that parties to a foreign-seated arbitration can approach Indian courts to get interim relief, mainly where the counterparty’s assets are in India.
A FOREIGN AWARD FOR ENFORCEMENT
An emergency award may even be enforced as a foreign award under certain conditions following Part II of the Arbitration Act. Under SIAC Rules, 2016, Rule 1.3, the meaning of “Award” includes a decision issued by an Emergency Arbitrator. Rule 9.9 of the DIFC-LCIA Arbitration Centre Arbitration Rules, 2021, provides that an emergency award shall have the same effect as an award. “The term “arbitral awards” is likely wide enough to encompass an “emergency award” within the meaning of Article I section 2 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”).”
Therefore, a foreign-seated “emergency award” may come under the broad meaning of a “foreign award” under Section 44 of the Arbitration Act, depending on the type of relief issued by the emergency tribunal. Even though an interim award is only meant to be effective while the final decision is pending, that award may still qualify as an “interim award” based on its terms. An interim award may also refer to equitable relief awarded by the emergency arbitrator. (Satwant Singh Sodhi v. State of Punjab)
An order may appear finality and be enforceable as an award if the arbitral tribunal grants an equitable emergency award to stop irreparable harm to the petitioner. These criteria were used by the New York District Court in Yahoo Inc. v. Microsoft Corp. to validate an emergency award and uphold it. Although there have been instances in the United States where an emergency award has yet to be enforced, the court may consider a case-by-case analysis and lean in favor of an enforcement strategy to avoid making the emergency award useless.
JUDICIAL PRECEDENTS
- Avitel Post Studioz Limited and Others v. HSBC PI Holdings (Mauritius) Limited (HSBC)
Following the decision made by the emergency arbitrator chosen by SIAC, the Bombay High Court awarded temporary reliefs to the petitioner under Section 9 of the Act in its order dated January 22, 2014. The deal in question was signed before the Supreme Court of India’s decision in Bharat Aluminium Co. v. Kaiser Aluminium Technical Service Inc. (“BALCO”), which was handed down on September 6, 2012, was announced. The BALCO case is a significant turning point in Indian arbitration law.
In BALCO, the Supreme Court overturned its own decisions in the cases of Bhatia International v. Bulk Trading SA and Venture Global Engineering v. Satyam Computer Services Ltd. by holding that Part I of the act isn’t relevant to international commercial arbitra[i]tion. Since the HSBC decision dealt with a BALCO agreement, the Bombay High Court implemented the emergency arbitrator’s verdict by giving the petitioner comparable reliefs following Section 9 of the Act.
- Raffles Design International India Private Limited &Ors. Vs. Educomp Professional Education Limited & Ors.
The Delhi High Court was handling a Section 9 of the Act plea in the case mentioned above that asked for preliminary injunctions along the lines of an award made by the Emergency Arbitrator chosen by SIAC. According to the Delhi High Court’s order from October 7, 2016, the emergency arbitrator’s decision cannot be implemented under the Arbitration Act. “However, it further ruled that a party may approach the court under Section 9 of the Act to request interim reliefs and that the court may award those reliefs to the party without considering the emergency arbitrator’s ruling”[ii]
- Amazon NV Investment Holdings (“Amazon”) Versus Future Coupons Limited
In addition to acquiring a 49% investment in Future Coupons, Amazon also purchased a call option that allowed them to buy all or a portion of the promoter and Future Retail Limited stakes in the company. Reliance Retail Ventures Limited (“Reliance”) announced on August 29, 2020, that it has reached an agreement to buy the assets of Future Retail Limited (“Future”), with the transaction’s value estimated to be Rs 24,713 crore. Because of this, Amazon declared that the trade mentioned above was against a shareholders’ agreement between the Future Group’s promoters and that it had thus been broken. While Amazon went on to initiate arbitration procedures before the SIAC on this deal between Reliance and Future, it also requested urgent relief from an emergency arbitrator chosen following the SIAC Rules.
By suspending the transactions totaling Rs 24,713 crore, the SIAC Panel provided Amazon with temporary protection. It was revealed on October 25, 2020, that the emergency arbitrator had prohibited the Future Group from proceeding with the acquisition of Reliance in any way, including but not limited to submitting or pursuing any applications before anybody or any agency in India (“Award”). The award explained how Amazon claimed Future had violated agreements that prevented it from transferring retail assets to parties on the “restricted persons” list, including Reliance. To prevent Amazon from abusing the SIAC interim ruling and interfering with the underlying transaction, Future has launched a case against Amazon in the Delhi High Court. The enforceability of the SIAC interim award has also been contested by Future, who asserts that Indian law precludes enforcement of the decision and that Future is not subject to it.
FACTS
A share subscription agreement was entered among Amazon, Future Coupons Private Limited, FRL, etc. The deal does not have a “basic understanding” that FRL can divest/dispose of its retail assets without Amazon’s prior consent, nor can it deal with “restricted persons” like Mukesh Dhirubhai Ambani (MDA) Group. Despite this agreement, FRL entered into a “transaction” with the MDA Group on August 29, 2020, for the amalgamation/complete disposal of its retail assets in the latter’s favor. Owing to this, Amazon dragged the Future Group before the SIAC, wherein the EA’s order ruled in favor of Amazon and restrained the transaction. After that, Amazon approached the Delhi HC, urging the EA’s order be enforced. Future Group challenged the validity of EA’s order before the national court.
ISSUES
Half of the fight has been won since the Supreme Court upheld the implementation of EAs in India-seated arbitrations. The following paper will build a case for achieving the second half of the goal, namely the enforcement of EAs in arbitrations with foreign seats, by organized study and drawing conclusions from the relevant legal literature and authorities.
OBSERVATION OF COURT
The case encapsulates an arduous journey. It was more like a tussle between the Single Bench and the Division Bench of the Delhi HC. The Single Judge Bench twice upheld the validity of the EA’s order, restraining the FRL-Reliance deal on February 2 and March 18, respectively. However, it was continually stayed by the Division Bench of the HC successively on February 18 and March 22. Finally, Supreme Court stayed the proceeding of the Division Bench on April 19 and decided to take up the case itself.
After much deliberation, the Division Bench of Justices R. F. Nariman and B. R. Gavai quashed the order that passed the Delhi High Court on February 6, allowing the Future Group to go ahead with the deal. With this, the Hon’ble SC upheld the decision of the Singapore panel’s ruling against the Reliance-Future retail agreement. Specific crucial observations were made by the court. For instance,
- EA’s award can never be characterized as a nullity. It must be duly obeyed.
- The Nature of the EA’s order is akin to section 17(1) of the act.
- It further observed that no appeal lies for the order passed by the Delhi HC before the court under section 37 of the act against the EA’s order. This is laudable progress as it gave India much-awaited recognition in the arbitration world.
A WAY FORWARD
- In international practice, emergency arbitration is becoming more prevalent, and many cases in this field are motivated by issues involving India. The Supreme Court’s decision indirectly acknowledges the significance of this function and permits the implementation of emergency awards where the arbitration is domestically seated. One can only hope that the Indian Supreme Court will soon have the opportunity to rule on the performance of foreign-seated emergency awards, hopefully in the same manner. “This amplifies the worldwide application of the rule of law by openly reflecting the parties’ consent to an arbitration agreement, providing for emergency arbitrators.[iii] The parties are left with the previously outlined “indirect” alternative until such a decision is made and should enforcement in India is required.
- As confirmation of the Supreme Court’s recent pro-arbitration stance, the Supreme Court’s decision would also positively impact the growth of institutional arbitration in India. Ad hoc arbitrations are still ordinary; however, unlike the regulations of organizations that offer arbitration, such as SIAC, LCIA, MCIA, and ICC, they do not give possibilities for emergency arbitrators. In light of this, parties engaged in business with India may find that choosing institutional arbitration is safer.
[i] “Switzerland, Vietnam : Switzerland, VN Share Law Building Experience.” MENA Report, Albawaba (London) Ltd., June 2018.
[ii] The Transitional Difference Between the Interim Measures of Court and …. https://ijlpp.com/the-transitional-difference-between-the-interim-measures-of-court-and-arbitral-court-under-the-indian-arbitration-and-conciliation-act1996/
[iii] Enforcement of Emergency Awards – India takes a leap. https://www.jdsupra.com/legalnews/enforcement-of-emergency-awards-india-3040455/
[iv] Admissibility of DNA in Indian legal system – The Law Brigade …. https://thelawbrigade.com/criminal-law/admissibility-of-dna-in-indian-legal-system/
Name- AKHILESH PATRO
College Name- XAVIER LAW SCHOOL, XIM UNIVERSITY, BHUBANESWAR, ODISHA
Semester Name – 6th Semester (3rd Year Completed) (5- Years Course)