Future Retail v. Amazon – Legality of Emergency Arbitrators in India

By: Abhi Udai Singh Gautam (National Academy of Legal Studies and Research, Hyderabad)


Recently, the Delhi High Court in Future Retail v Amazon.com Investment Holdings handed down a key ruling providing legitimacy to a Delhi-seated emergency arbitrator’s award issued under the SIAC Rules, and consequently upheld its validity under Indian law.

The dispute arose from a Share Holders’ Agreement (“SHA”) signed between the respondent (“Amazon”) and the petitioner (“Future Holdings”). It prohibited the sale of Future Holdings’ assets to certain entities listed in the SHA. The SHA contained an arbitration clause for the conduct of arbitration proceedings under the aegis of the Singapore International Arbitration Centre (“SIAC”), and its applicable rules. The seat of the arbitration was decided to be New Delhi. Later, a dispute arose under the SHA and Amazon invoked the arbitration clause.

Pursuant to an application under Rule 30.2 of SIAC rules of procedure by Amazon, SIAC appointed an emergency arbitrator under the Schedule 1 of the rules. Subsequently, the emergency arbitrator passed an emergency order (“EA order”) preventing Future Holdings from alienating its assets to Reliance.

Aggrieved by the EA order, the petitioners approached the Delhi High Court to injunct Amazon from enforcing it. The court reasoned that the rules of procedure chosen by the parties would be accepted and enforced, unless they were in conflict with the mandatory rules of the Arbitration and conciliation Act, 1996 (“Arbitration Act”). This is because, according to Sumitomo Heavy Industries v ONGC, the arbitral seat, in the absence of any agreement to the contrary, is determinative of the curial law. This means that it provides a mandatory framework within which the arbitration must take place. The parties, however, are free to choose what rules would govern them, provided they remain within the permissible limits of the curial law. Indeed, this position has been reflected in Centrotrade v Hindustan Copper (discussed below).

The court upheld the validity of the EA order and refused to injunct the respondent from enforcing it, thereby treating it as an interim award under Section 17 of the Arbitration Act.

CHARACTERIZING SIAC EMERGENCY ARBITRATORS’ AWARDS

SIAC Rule 30.2 allows a party to seek interim relief before the constitution of the arbitral tribunal. For this purpose, SIAC appoints an emergency arbitrator subject to Schedule 1 to the SIAC Rules. As the author attempts to establish hereinbelow, the validity of the order of a SIAC emergency arbitrator is contentious because it exists as a separate tribunal, while issuing only interim relief with respect to a dispute submitted to the main arbitral tribunal.

Emergency Arbitrator is Separate From the Arbitral Tribunal

The task of the emergency arbitrator is to decide on the grant of the requested interim relief. For this purpose, Schedule 1 provides them with all the powers of an arbitral tribunal constituted under the SIAC Rules, including the power to decide on their own jurisdiction.

However, the Rules provide for the Emergency Arbitrator’s seat. According to Paragraph 4 of Schedule 1, in the absence of an express selection, the seat of the emergency arbitrator is Singapore.  This creates a possibility that an emergency arbitrator will be subject to a different seat. In the absence of express selection, the tribunal (when constituted) would exercise its powers under SIAC Rule 21, to determine the seat of arbitration.  This may lead to a situation wherein the seat of the emergency arbitrator differs from the seat of the arbitral tribunal. This is relevant because the seat determines the curial law applicable to the arbitration. According to the Supreme Court in Enercon v Enercon, the selection of a seat is akin to an exclusive jurisdiction clause.

Therefore, the emergency arbitrator constitutes a separate tribunal, which can be subject to a different curial law.

Emergency Arbitrator’s Award is Interim Relief

As per Schedule 1, the emergency arbitrator’s mandate is restricted to grant interim relief. Schedule 1 dictates that Any order of the emergency arbitrator does not prejudice the determination of the same issue by the arbitral tribunal. More importantly, as per Paragraph 10 of Schedule 1, an emergency arbitrator’s award loses force if the tribunal is not established within ninety days of their award. Separately, its award merges into the final award of the tribunal. Therefore, an emergency order is an interim order tied to the arbitral tribunal. It cannot be final, and is dependent upon the constitution of the tribunal.

ISSUE SURROUNDING EMERGENCY AWARDS

In light of the aforementioned discussion on SIAC emergency arbitrators, the primary objection to enforcement of emergency awards lies in the averment that it does not constitute an arbitral tribunal under the Arbitration Act. Section 17 of the Arbitration Act empowers an “arbitral tribunal” to order interim relief, and have that interim relief enforced as an order of a court. Therefore, if the Arbitration Act does not recognise emergency arbitrators as an arbitral tribunal, its orders cannot be enforced.

Consequently, the task before the court was to decide whether the Emergency Arbitrator would be considered an arbitral tribunal. In this respect, the definition of an arbitral tribunal in Section 2(1)(d) of the Arbitration Act is unclear. It merely provides that an arbitral tribunal refers to both sole arbitrators and a panel of arbitrators.

On this note, while the Delhi High Court has ruled in favour of the validity of emergency arbitrator orders, the definition of an arbitral tribunal in Section 2(1)(d) may need to be altered to include emergency arbitrators, following the recommendation of the Law Commission in its 246th Report. This change would not alter the legal position, because the arbitration act itself does not prohibit emergency arbitration. However, it would provide certainty to structure of the Arbitration Act and settle the issue of Emergency Arbitrators definitely.

EXISTING CASE LAW ON EMERGENCY ARBITRATORS

Till date, Indian courts had not had the opportunity to deal with the enforceability of emergency arbitrator’s awards rendered in domestically seated arbitrations. However, it is clear that foreign-seated emergency arbitrator’s awards cannot be enforced in India. Instead, they are enforced through identical interim measures secured from the court under Section 9 of the Arbitration Act.

In HSBC v. Avitel, the Bombay High Court enforced a Singapore-seated SIAC emergency arbitrator’s award ordering the respondent to deposit securities through an interim award under section 9. In Raffles Design v Educomp, the Delhi High Court ruled that emergency arbitrator’s awards rendered in foreign-seated arbitrations were not per se enforceable in India. The court categorised emergency arbitrator’s award as an interim award. Following this categorisation, emergency arbitrator’s awards from a foreign seat could not be enforced in India because Section 17 of the Arbitration Act did not apply to foreign-seated arbitrations. However, the court had the power to evaluate the case for interim relief based on the emergency relief.

The Delhi High Court in Ashwani Minda v U-shin Ltd clearly pointed out that emergency relief would not be enforceable in India in arbitrations where Section 9 of the Arbitration Act has been excluded. The court was beset with an application for interim relief where the emergency arbitrator had refused such request. The court held that since the Arbitration Act did not recognise emergency arbitrators, it could not intervene in cases where Section 9 had been contracted out of.

Therefore, recognition of emergency arbitrator’s awards rendered in foreign seated arbitrations has been squarely rejected by Indian courts. Instead, they have resorted to Section 9 of the Arbitration Act to grant, or reject, the same reliefs by themselves. Still, these cases have not decided the validity of emergency arbitrator’s awards in the context of India-seated arbitrations. Rather, the court in Raffles Design v Educomp had alluded towards the enforcement of arbitral awards in the manner laid down in Section 17 in the case of a domestic emergency order.

The judgement in Raffles Design points to a lacuna in the Arbitration Act. As the court has pointed out, Section 17 of Arbitration Act is related to Article 17 of the  UNCITRAL Model Law on International Commercial Arbitration. Article 17H of the Model Law imposes a duty to enforce interim measures imposed by arbitral tribunals. Therefore, if emergency arbitrators’ orders are to be considered interim awards, they would enjoy enforcement under Article 17H.

Article 17H enforces interim awards regardless of where such interim orders are issued. However, Section 17 of the Arbitration Act does not apply to foreign seated arbitrations. This means that the structure of the arbitration act itself prohibits the enforcement of foreign seated emergency arbitrator orders.

On a side note, it is submitted that the solution to the lacuna can be found in the Model Law itself. Article 1(2) of the Model Law applies Article 17H irrespective of the seat of arbitration, which allows foreign seated arbitral interim orders to be enforced. A similar solution has been implemented by the addition of a proviso to section 2(2) of the Arbitration Act with respect to the applicability of Sections 9, 27, 37(3) and 37(1)(a) to foreign-seated arbitrations. These Sections are therefore applicable to foreign-seated arbitrations despite being in Part I of the Arbitration Act. This, at least in the case of section 9, is self-evident from the discussion of aforementioned case law. Therefore, it is submitted that the applicability of Section 17 in enforcing the foreign seated emergency orders can only be invoked if a similar proviso is added to Section 2(2). The Arbitration Act, as it stands at the moment, cannot allow the enforcement of foreign seated emergency orders.

PARTY AUTONOMY, TWO-STAGE ARBITRATIONS AND RECOGNITION OF EMERGENCY ARBITRATORS

As observed above, the emergency arbitrator effectively serves as a separate tribunal. This means that once SIAC Rule 30.2 is invoked by one of the parties, the arbitral process becomes similar to a two-stage arrangement. In this arrangement, an initial tribunal with a limited mission to issue emergency orders is appointed. The dispute, then is brought before the main SIAC tribunal. This arrangement subjects the same dispute to two different tribunals.

A two-stage arbitral arrangement was upheld by the Supreme Court in Centrotrade Minerals v Hindustan Copper Limited[1] (2016). Even arbitral awards which were subject to appeal, or review, according to statute or the parties’ agreement could be considered enforceable.

This is because party autonomy serves as the basis for the arbitral process. The parties cannot renege from what they have already agreed. Therefore, unless prohibited by the mandatory provisions of the Arbitration Act, any arbitral arrangement duly consented to must be held to be binding upon the parties.

As the Delhi High Court noted, the SIAC Rules recognised the Emergency Arbitrator as a separate arbitral tribunal, and accorded it with powers similar to that of the arbitral tribunal. Therefore, there was no ground to restrain Amazon from enforcing the EA order.

The decision paves way for the enforcement of emergency arbitrator orders in India. Although this is the first time an Indian court has dealt with the issue, the court in Raffles Design alluded to enforcement of emergency arbitrator’s awards under Section 17 of the Arbitration Act. The judgement in Future Retail stands as a clear stamp of approval for emergency arbitration in India, so far as it remains within the limits of the mandatory provisions of the Arbitration Act.

[1] Centrotrade Minerals v Hindustan Copper Limited, (2017) 2 SCC 228.


(The author is a Third-year Student at National Academy of Legal Studies and Research, Hyderabad. He would welcome feedback, and can be reached on abhiudaisingh@nalsar.ac.in)

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