Emergency Arbitration: A Climax for ADR in India

By Kashish Khurana & Aaradhy Shrivastava [1]

INTRODUCTION

The dispute resolution techniques have been emerged as a saviour for the lengthy time-consuming judicial procedures in India. The technique of Emergency Arbitration is one such interim dispute resolution technique that has been evolving for providing an effective resolution to the parties. Emergency Arbitration is like a ray of sunshine in the field of arbitration for those who want to protect their assets and evidence that might otherwise be altered or lost. Both the parties themselves usually agree upon such arbitration even before the constitution of a Tribunal for Arbitral hearings. The proceedings are generally carried according to the terms agreed upon by the parties and are carried on by an Arbitrator, known as Emergency Arbitrator.

This procedure of Emergency Arbitration differs from other dispute resolution techniques on the point of its speedy resolution and interim relief features. Though not protected status in our country’s legislation, this dispute resolution technique has been attempted to include within the existing legislation concerning dispute resolution techniques by the judiciary.

CONCEPT AND ROLE OF EMERGENCY ARBITRATION

Emergency Arbitration is a concept that is similar to that of seeking interim relief in ordinary judicial proceedings. Emergency Arbitrations are primarily conducted in pursuance of an agreement that has been made between the parties in disputes, where there is a scarcity of time and urgency of the relief sought.

Over the past decade and a half, the concept of Emergency Arbitration has developed as a tool for many to seek some relief at the earliest. Emergency Arbitration as a practice was introduced by several arbitration institutions worldwide in the form of rules and provisions in their nation’s legislation. The role of Emergency Arbitration becomes vital where there is the absence of an arbitral tribunal or any other institution that fails in providing speedy resolution along with interim relief to the parties to the dispute. It includes brief and rapid hearings conducted by arbitral institutions for hearing matters which mandate an urgent interim relief. The effectiveness of Emergency Arbitration, invoked by a party, rests on two essential wheels, namely – [2]

  • Fumus Boni Iuris— It states that emergency arbitration gives birth to reasonable and just possibilities that the party requesting for such mechanism will succeed on merits;
  • Periculum In Mora states that if there is no direct grant of measures, their loss could not be compensated through damages.

In Pre-Emergency Arbitration times, parties were required to go to courts to obtain any interim relief, which was complex, expensive, and time-consuming. With the emergence of this new concept of Emergency Arbitration, parties now have a chance to seek some relief even before the constitution of an arbitral tribunal. Maintenance of confidentiality of the dispute and early relief comes as an added advantage with this innovation of Emergency Arbitration. [3] An Arbitrator appointed for Emergency Arbitration is known as an Emergency Arbitrator. The powers vested with an Emergency Arbitrator are equivalent to the powers provided to an arbitral tribunal working under the applicable laws. It includes the power to issue orders such as an order freezing assets, temporary, prohibitive, or mandatory injunctions, orders for the preservation and inspection of the evidence, anti-suit injunctions. [4]

Since the parties seeking Emergency Arbitration wants urgent relief in their matter, the proceeding of Emergency Arbitration generally gets completed within weeks, if not days. In most cases, Emergency Arbitrator require from the party seeking Emergency Arbitration to establish – [5]

  • Risk of severe harm or any harm which would be irreparable to the party seeking relief;
  • An element of urgency;
  • That there is prejudgment on the merits and
  • That the balance of convenience weighs in its favour.

It is pertinent to note that the awards of Emergency Arbitrator are not binding on the arbitral tribunals. The final decision can differ from the interim award.

STATUS OF EMERGENCY ARBITRATION AT GLOBAL LEVEL

With the increasing shift of people towards arbitration, the enforceability and acceptance of Emergency Arbitration at the global level are ever-increasing. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). [6] Is among the laws on enforcement of a foreign arbitral award. However, an award passed by an emergency arbitrator is not recognized by the Convention as it only recognizes final awards, and an interim award cannot be considered as final under law. [7]

Apart from this Convention, several arbitration-friendly jurisdictions have realized the importance of Emergency Arbitration and have recognized it under their respective municipal laws. Singapore and Hong-Kong are the two examples who have recognized Emergency Arbitration under their municipal statutes to enable parties to enforce interim awards passed by an Emergency Arbitrator. [8]

Emergency Arbitration and emergency arbitral awards are duly recognized in the USA as well. The United States Court of Appeals, in 1994, in the matter of Island Creek Coal Sales Company v. City of Gainsville, Florida., [9] has under the American Arbitration Association (AAA) Commercial Arbitration Rules recognized the authority of interim reliefs provided to the parties, granted by an arbitral tribunal.

Similarly, in England, the England and Wales High Court has in the matter of Gerald Metals SA v. Timis [10] denied to provide any interim relief to the parties because it does not have the authority to grant urgent relief in this case. The Court further directed the parties that in such matters, interim relief is to be provided by an emergency arbitrator under the London Court of International Arbitration (LCIA) Rules. Thus, through this decision, the High Court highlighted the powers of the emergency arbitrator vested in them under the LCIA Rules.

Below is the list of International Bodies that have special provisions dedicated to conducting emergency arbitrations or procedures similar to emergency arbitration –

  1. Hong Kong International Arbitration Centre (HKIAC) [11]
  2. Netherlands Arbitration Institute (NAI) [12]
  3. Singapore International Arbitration Centre (SIAC) [13]
  4. International Chamber of Commerce (ICC) [14]
  5. Stockholm Chamber of Commerce (SCC) [15]
  6. Swiss Chambers’ Arbitration Institute (SCAI) [16]
  7. American Arbitration Association (AAA) [18]
STATUS OF EMERGENCY ARBITRATION IN INDIA

In India, all the matters related to arbitration are governed by The Arbitration and Conciliation Act, 1996. [18] Unfortunately, the legislation mentioned above provides no explicit provision that deals with the concept of Emergency Arbitration. Even though, the Law Commission of India in its 246th report [19] recommended the inclusion of provisions related to Emergency Arbitration in the Arbitration and Conciliation (Amendment) Act of 2015, [20] the recommendations were not made a part of the Act. [21]

In the absence of such provisions in the legislature, the judicial interpretation of the existing provisions plays a vital role in providing a broader connotation to the concepts. The judiciary of our country has, on similar lines, attempted to grasp the essence of emergency arbitration into the existing provisions of the Act. Sec. 9 [22] and Sec. 17 [23] of the Act lay down the provisions for the interim relief to the parties on the order of the Court and arbitral tribunal respectively. [24] However, the parties to the arbitration are allowed to pray such interim relief from the Court but only when the tribunal cannot furnish the appropriate remedy.

ENFORCEABILITY OF INTERNATIONAL EMERGENCY ARBITRATION AWARD IN INDIA

Part II of the Arbitration and Conciliation Act deals with the enforcement of foreign arbitral awards. However, this part of the Act only permits the enforceability of the final awards of the Courts in India. However, recognition of any interim award arising from Emergency Arbitration has not been mentioned. There have been various instances that have come to light that revolve around the issue of enforceability of international emergency arbitral awards in India. However, due to the lack of specific provisions in India’s arbitration legislation, there has been great uncertainty on the subject mentioned above matter for a long time.

Recently, the decision of Hon’ble Apex Court in the case of Amazon.COM NV Investment Holdings LLC v. Future Coupons (P) Ltd [25] has resolved the fundamental ambiguity of the issue. The Hon’ble Court in the present matter upheld the decision of the Delhi High Court, which stated that the Emergency Arbitral Award Passed by the Arbitrator at Singapore International Arbitration Centre is enforceable in India. [26] In the present case, the applicants moved to the Delhi High Court in March 2021 under Sec 17(2) of the Arbitration and Conciliation Act to enforce the emergency arbitration award dt. 25th Oct. 2020 against the respondents. The single bench of the Delhi High Court ruled in favour of the applicants and observed that such Emergency Arbitral Award is an order under Sec 17(1) of the Act.

The respondents challenged this decision through the first appeal to the division bench of the High Court. The Court put a stay on the order of the single bench. As a result, an appeal was further filed by the Amazon group before the Hon’ble Supreme Court of India. The Hon’ble Court upheld the order of the single bench of the Delhi High Court and ruled in favour of the Amazon group. [27]

The Court further observed that the institutional rules laid down under Sec 17(1) of the Act shall include an Emergency arbitrator within the meaning of ‘Arbitral Tribunal.’ [28] This decision overruled the decision of the Delhi High Court in the case of Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors. [29] which observed that the emergency award passed by the emergency arbitrator could not be enforced under the Arbitration Act. [30] The Court also relied upon the judgment of Avital Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd. [31] Moreover, it has been held that the mere fact that the recommendations of the Law Commission have not been made part of a statute could not lead to the conclusion that such provision cannot be made part of such legislation.

The present case also dealt with a further issue that concerned whether the decision of the Single Judge Bench for the enforcement of the emergency arbitral award is appealable or not. The Hon’ble Apex court further observed that no appeal lies against the decision of the Single bench judge of the Court under sec 37 [32] of the Act against such order of enforcement of Emergency Arbitral Award made under Sec 17(2) of the Act.

CONCLUSION

The mechanism of Emergency Arbitration is an internationally recognized form of dispute resolution in the arena of arbitration. It aids in the speedy resolution of disputes that may tend to take longer and impose financial and mental burdens upon the parties to the dispute. However, this mechanism has not been recognized through legislation, unlike other forms of dispute resolution in India. This non-recognition of the concept led to the interference of the judiciary at different points of time, which as a result, formed a positive approach towards its enforcement in India. Further, the judiciary has not just included the emergency awards passed by the Indian Emergency Arbitrator. However, it has also recognized the enforceability of a foreign emergency award in the nation.

The position of emergency arbitration can be further improved by including the provision in the legislation on lines of the judgment of the Hon’ble Supreme Court and report of the Law Commission of India.

[1] 7th semester, B.A. L.L.B (Hons.), Faculty of Law, Jagran LakeCity University, Bhopal.

[2] Singhania & Partners LLP, India: Emergency Arbitration in India: Concept and Beginning, India: Arbitration, Litigation and Conciliation.

[3] Shaheen Parikh, The developing compass of emergency arbitration in India, International Bar Association (June 3, 2021).

[4]  S.      Ravi      Shankar,      Indian      Law      relating      to        Emergency    Arbitrator,  LAW  SENATE.

[5] Id.

[6] The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York Convention).

[7] Moonmoon Nanda, Worldwide: Emergency Arbitration Procedure, Singh and Associated (Jan 10, 2020).

[8] Ibid.

[9] Island Creek Coal Sales Company v. City of Gainsville, Florida 729 f.2d 1046 (6th Cor. 1984).

[10] Gerald Metals SA v. Timis, [2016] EWHC 2327 (Ch).

[11] Schedule 4, 2018 HKIAC Administered Arbitration Rules.

[12] Rule 9, NAI Arbitration Rules, 2015.

[13] Schedule 1, SIAC Rules 6th Edition.

[14] Article 29, ICC Rules of Arbitration.

[15] Appendix II, Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

[16] Article 6, International Rules of the Arbitration Court of the SCAI.

[17] Part E, DIAC (Arbitration Proceedings) Rules 2018.

[18] The Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).

[19] https://lawcommissionofindia.nic.in/reports/report246.pdf.

[20] The Arbitration and Conciliation (Amendment) Act, No. 3, Acts of Parliament, 2016 (India).

[21] Astha Ojha, India: Status of Emergency Arbitration in India: From The Perspective of Domestic Arbitrations, L&L Partners (Aug 14, 2020).

[22] Ibid at 19, §9.

[23] Ibid, §17.

[24] Raffles Design International India Private Limited & Ors v. Educomp Professional Education Limited & Ors. (2016) 234 DLT 349.

[25] Amazon.com VN Investment Holdings LLC v. Future Coupons (P) Ltd., LL 2021 SC 357.

[26] Pooja Tidke, India: Amazon v. Future Retail – The Supreme Court of India Upholds the Validity of Emergency Arbitral Awards, Parinam Law Associates (Aug 12, 2021).

[27] Future Retail Ltd v Amazon.com Investment Holdings & Ors, CS (Comm) 493/2020.

[28] Manu Sebastian, Emergency Arbitration Award Enforceable in Indian Law: Supreme Court Rules in Favour of Amazon in Case Against Future Retail [Updated with Judgment], LiveLaw.in (Aug 6 2021, 10:37 am).

[29] Supra at 23.

[30] Amit Vyas, The Viewpoint: Enforceability of Emergency Award in India, Passed in Foreign Seated Arbitration, BarandBench (Apr, 15, 2021, 11:12am).

[31] Avitel Post Studioz Ltd. &Ors. v. HSBC PI Holdings (Mauritius) Ltd, 2020 SCC OnLine SC 656.

[32] Supra at 19, §37.

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