The developing compass of emergency arbitration in India

Shaneen Parikh
​​​​​​​Cyril Amarchand Mangaldas, Mumbai
shaneen.parikh@cyrilshroff.com

Radhika Bishwajit Dubey
Cyril Amarchand Mangaldas, Delhi
radhika.dubey@cyrilshroff.com

Sanskriti Sidana
Cyril Amarchand Mangaldas, Delhi
sanskriti.sidana@cyrilshroff.com​​​​​​​

Over the last decade, emergency arbitration (EA) proceedings have increasingly been recognised and adopted by several jurisdictions and arbitral institutions around the world. Emergency arbitration has recently come under the spotlight in India with courts scrutinising the award passed in favour of Amazon in the EA proceedings against the Future Group. The Arbitration and Conciliation Act, 1996 (Indian Arbitration Act), as it currently stands in India, does not expressly include any provisions for EA – whether for recognition of an emergency arbitrator or for enforcement of EA awards.[1]

It is now left to the judiciary to decide how emergency orders/awards are to be treated. In this article, we will dive deep into the dynamic nature of EA proceedings and their status with respect to enforcement of EA orders and awards in India.

Nature of EA proceedings

In the pre-EA era, parties only had recourse to national courts to obtain any kind of interim relief prior to the constitution of an arbitral tribunal. With the innovation of the EA platform, parties now have the option of maintaining confidentiality and seeking urgent interim relief from an ‘emergency arbitrator’ rather than from a court, notwithstanding the fact that an arbitral tribunal has not yet been constituted. The powers of an emergency arbitrator are usually commensurate with the powers given to an arbitral tribunal under the curial law applicable: they would include the power to issue, for instance, asset freezing orders, prohibitive (or prohibitory) and mandatory injunctions, orders for the preservation and inspection of evidence, anti-suit injunctions, etc.

The entire process, from the time of making an application for EA to the appointment of the emergency arbitrator and the rendering of the award, is usually completed within a matter of weeks, if not days. While the standards for the grant of relief may vary across jurisdictions and applied on a case-by-case basis, generally, most emergency arbitrators in international arbitration require that the party seeking relief establish:

• a risk of serious or irreparable harm to the party seeking relief;
• an element of urgency;
• That there is no prejudgment on the merits, and
• that the balance of convenience weighs in its favour.[2]

Owing to the fact that the emergency arbitrator is not the finally constituted tribunal, orders/awards passed are purely interim in nature and may be modified by the arbitral tribunal that is eventually constituted.

International trends

Major international arbitration institutions around the world such as the International Centre for Dispute Resolution (ICDR),[3] the Stockholm Chamber of Commerce (SCC),[4] the International Chamber of Commerce (ICC),[5] the Singapore International Arbitration Centre (SIAC)[6] and the Hong Kong International Arbitration Centre (HKIAC)[7] have incorporated a mechanism in their arbitration rules for EA, on an ‘opt-out’ rather than an ‘opt-in basis’, thus making it applicable unless otherwise agreed by the parties.

Jurisdictions such as Singapore[8], Hong Kong[9], New Zealand[10], and Switzerland[11] have given statutory recognition to EA in order to ensure a harmonious adaptation of international arbitral practices into their domestic regimes. While the United Kingdom[12] and United States[13] have not enacted specific legislation in this regard, several judicial rulings have recognized and allowed enforcement of emergency awards and orders.

In India, following best practices, various arbitration institutions such as Indian Council of Arbitration,[14] the Delhi International Arbitration Centre,[15] the Nani Palkhivala Arbitration Centre,[16] and Mumbai Centre for International Arbitration[17] have also incorporated express provisions for EA in their arbitration rules.

The UNCITRAL Rules, which are often used in international arbitrations conducted on an ad hoc basis, are a notable exception to this trend.

Enforcement of EA orders and awards

Some scholars have taken the view that EA awards are unenforceable under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NY Convention) – which provides the mechanism for enforcement of awards in contracting states –  as the convention is (1) silent on the issue as to whether interim orders and EA awards  constitute an ‘award’ under the convention and (2) does not recognise awards rendered by emergency arbitrators, since these awards are subject to modification by the arbitral tribunal ultimately appointed in the arbitration.[18]

Even in India, while an award under Section 2(c) of the Indian Arbitration Act includes interim awards, these are to be distinguished from interim orders issued by an arbitral tribunal. The primary difference between the two is that the former conclusively/finally determines, on merits, certain aspects of the lis between the parties, whereas the latter does not.[19] An interim order is merely a stop-gap arrangement which is only prima facie in nature.

Pursuant to Section 17(2) of the Indian Arbitration Act (applicable only to domestic arbitrations), an interim order passed by the tribunal is deemed to be an order of the court and is enforceable in accordance with the provisions of the Code of Civil Procedure 1908. In contrast, the definition of ‘foreign award’ under Section 44 of the Indian Arbitration Act appears to only include partial/final awards. Therefore, under the prevailing legislative scheme, it is unclear whether an award/order of an emergency arbitrator in a foreign-seated arbitration is directly enforceable in India as it does not involve the final disposal of an issue in the arbitration on its merits.

Despite the widespread efforts to innovate and include EA provisions, international practice for enforcement of such awards lacks consistency. Therein lies the controversy.

Treatment of EA orders/awards in India

The Indian Arbitration Act empowers both courts (Section 9) and arbitral tribunals (Section 17) to grant interim relief on application by a party. Most parties approach a court for urgent interim relief prior to the constitution of the arbitral tribunal, as there is no specific provision for emergency arbitration in the Indian Arbitration Act or clarity on whether an emergency arbitrator would be treated as an arbitrator under the Indian Arbitration Act – which appears to only recognise the arbitral tribunal ultimately constituted to determine the dispute.[20]

Although the Indian court system is plagued by significant delays, interim relief may be obtained in a matter of days – including on an ex parte basis which is one reason parties may choose to approach an Indian court, unless confidentiality is a consideration. Pursuant to the 2015 amendments to the Indian Arbitration Act, recourse to Indian courts for interim relief is available even in foreign seated arbitrations. Although having been amended in 2015, 2019 and 2021, the Indian Arbitration Act as it stands today provides no clarity on whether (even if the arbitration is seated in India), orders/awards of an emergency arbitrator are enforceable in India. We deal with the case of Amazon.com NV Investment Holding LLC v Future Retail Limited below, where this issue will ultimately be decided by India’s apex court.

As stated above, while proposals – in order to keep up with developing international practices[21] – have been made in the past to suitably amend the Indian Arbitration Act to recognise awards rendered by emergency arbitrators, such proposals have not come to fruition. Either one considers this as a deliberate exclusion of EA from the ambit of the law, or that there is no need for amending the law as EA awards are already recognised under the present statutory regime.

There is minimal judicial guidance on this point. All prior rulings concerned emergency awards issued in foreign seated arbitrations. On the assumption that, (1) interim orders (whether by foreign courts, emergency arbitrators, or arbitral tribunals), are not enforceable in India, and/or (2) emergency awards are not directly enforceable in India, parties are left with one of two options. 

The first is to file a fresh suit for enforcement of the emergency award. This however is not practical given that (1) formal court procedure would have to be followed and (2) the length of time required for obtaining any meaningful relief. This obviously defeats the entire purpose of obtaining urgent relief by resorting to EA.

The second, which has met with some success, is to apply for identical interim relief from an Indian court, using the emergency arbitrator’s order/award in support.[22] This route effectively amounts to a substitute for strict ‘enforcement’ of the emergency award by a court. That said, there is nothing that requires the court to grant the same reliefs as granted by the emergency arbitrator and it may well refuse, or modify the reliefs earlier granted. 

Some cases that have dealt with this issue include Raffles Design International India Pvt. Ltd.& Anr. v Educomp Professional Education Ltd.& Ors.[23] where the Delhi High Court granted interim relief to the applicant in whose favour the emergency award had been issued. That said, the court’s findings were largely independent of the findings in the award rendered in the EA. In HSBC PI Holdings (Mauritius) Ltd. v Avitel Post Studioz Ltd.[24] The Bombay High Court granted relief similar to that granted in the emergency arbitrator’s award (in a Singapore seated EA), and the applicant accordingly succeeded in enforcing it.

Recently, the Delhi High Court rendered a notable ruling in the case of Ashwani Minda and Ors. v U-Shin Ltd. and Ors.[25], rejecting a party’s request for interim relief under the cover of a petition under Section 9 of the Indian Arbitration Act, when this party had failed to obtain the same relief at first instance before the emergency arbitrator. In doing so, the court in effect recognised the outcome in the EA. Notably, the court held that ‘having invoked the mechanism of the emergency arbitrator and invited a detailed and reasoned order, it is not open for the applicants to take a second bite at the cherry. There has been no change of circumstance after the said order as none has been pleaded or even argued.’

These rulings undoubtedly showcase the persuasive value of awards issued by emergency arbitrators when parties approach courts for interim relief. However, the issue of direct enforcement of emergency awards/orders remains unresolved.

In this context, the battle between Future Retail Limited and Amazon Investment Holdings LLC before the courts in India emerges as a seminal case, having already garnered much interest. Amazon holds a 49 per cent share in Future Coupons Private Limited which, in turn, holds 9.82 per cent of Future Retail. Amazon invoked arbitration against, inter alia, Future Retail, in respect of the proposed acquisition of the Future Group by Reliance Retail, alleging a violation of its contractual rights. In an India-seated arbitration conducted in accordance with SIAC Rules, Amazon succeeded in obtaining from the emergency arbitrator an injunction against Future Retail prohibiting it from taking any steps to complete its transaction with Reliance Retail, including but not limited to filing or pursuing any application before any regulatory bodies or agencies in India. In turn, Future Retail commenced an action in the Delhi High Court and filed an application seeking an injunction against Amazon prohibiting it from interfering in its transaction with Reliance Retail by misusing the EA order.

In the suit filed by Future Retail, a single judge of the Delhi High Court[26] recognised the validity of the EA order. The court went on to note that the parties had agreed to arbitrate under the SIAC Rules, which allowed parties to approach an emergency arbitrator for grant of any interim relief and that accordingly, an emergency arbitral order/award would be valid and enforceable, unless it was against India’s public policy or the mandatory requirements of the Indian Arbitration Act.

In the second round of litigation in this case, relying on the observations of the single judge, Amazon sought to enforce the EA order under Section 17(2) of the Indian Arbitration Act, pursuant to which, another single judge of the Delhi High Court directed the parties to maintain the status quo pending his pronouncement of orders (which were reserved). The court nevertheless made a prima facie observation to the effect that the EA order was enforceable as an order of the court under Section 17(2).[27]

Without waiting for a detailed order, Future Retail filed an appeal in a Division Bench of the Delhi High Court. By way of an interim order pending final disposal of the appeal, the Division Bench stayed the single judge’s status quo order – effectively staying also the enforcement of the EA order and in doing so observing that one effect of the injunction granted was to restrain other regulatory authorities (such as the Securities and Exchange Board of India and National Company Law Tribunal) from discharging their statutory duties with regards to the transaction: this should not be allowed.[28]

Amazon in turn filed an application before the Supreme Court for special leave to appeal the order of the Division Bench. Unsurprisingly, given the important questions of law arising, the Supreme Court issued notice and directed that no final orders be made in proceedings before the National Company Law Tribunal for approval of the proposed transaction between Future Retail and Reliance Retail.[29]

In the meantime, the single judge of the Delhi High Court passed a detailed order on 18 March 2021 in the enforcement application filed by Amazon. In another impetus to the enforcement of EA awards/orders in India, the single judge categorically held that the current legal framework is sufficient to recognise EA in India.[30] The single judge, inter alia, imposed costs of INR 2m on the Future Group, and held that:

• they have deliberately and wilfully violated the EA order;
• directed attachment of their assets;
• issued a notice on the respondents to show cause why they be not detained in civil prison for up to three months for violation of the EA order; and
• directed them to not to take any further action in violation of the EA order.

In an appeal preferred by the Future Group against such order, a Division Bench of the Delhi High Court stayed the decision of the single judge till the next date of hearing.[31] Against this order of the Division Bench of the Delhi High Court, Amazon approached the Supreme Court which has now stayed all proceedings before the High Court.[32]​​​​​​​

It is evident that the Amazon v Future saga has a long way to go. Nevertheless, the aforementioned rulings of the Delhi High Court which indicate that emergency orders/awards are valid and enforceable in India highlight once again, the pro-arbitration trend that has and is developing in Indian jurisprudence. We look therefore forward to an authoritative ruling on the issue of enforcement of EA orders/awards in India from India’s apex court shortly.

Realising the full potential of EA

The utility of EA is undeniable in the face of the alternative – namely, where parties are only left with the option to seek interim relief from the courts in India. The expeditious nature of EA proceedings is the primary attraction for parties to a commercial dispute and much preferred to a judicial system marred with several shortcomings including: a lack of confidence in the courts to grant urgent relief, lack of expertise, leakage of confidential information, exaggerated litigation costs and so on.

However, in the absence of a clear domestic legal regime for swift enforcement of such EA awards/orders, the efficacy of the process remains questionable, as is evident from the Amazon v. Future battle. The most straightforward way to address this and to realise the full potential of the EA process is to amend the Indian Arbitration Act. This will not only promote efficiency in the arbitration process but also reduce the caseload on the courts in the country.