EMERGENCY ARBITRATION: THE FUTURE OF INTERIM RELIEFS

Bhavya Sangri | July 20, 2021

Introduction
Arbitration is a form of dispute resolution that emerged, inter alia, to provide for a legal mechanism that saves time and resources for the parties. To achieve this, an upcoming concept of Emergency Arbitration(EA)emerged. Emergency Arbitration, as the name suggests, provides emergency relief to those who wish to approach the arbitration institution before the arbitral tribunal is constituted to obtain interim relief. There are two legal principles that form the genesis of Emergency Arbitration. The first being Fumus boni iuris meaning the reasonable possibility that the claimant would succeed on merits. The second is periculum in mora which means that the claimant would suffer irreparable harm if the measure is not granted immediately.1
An Emergency Arbitrator is able to grant interim measures only for a definite period of time and after passing the interim award, becomes functus officio. This means that once the Emergency Arbitrator has rendered a decision, he lacks any power to re-examine that decision.

EMERGENCY ARBITRATION IN THE INTERNATIONAL PERSPECTIVE
The UNCITRAL Model Law does not contain any provisions for Emergency Arbitration. However, the amendment to the UNICTRAL Model Law in 2006 introduced Articles 17 which lays down the power of the arbitral tribunals to grant interim reliefs to parties.2 After this amendment, several arbitration institutions like the Singapore International Arbitration Centre (SIAC)3, The Stockholm Chamber of Commerce (SCC)4, The Mexico City National Chamber of Commerce (CANACO)5, The London Court of International Arbitration (LCIA)6, The Hong Kong International Arbitration Centre (HKIAC)7, and The International Chamber of Commerce (ICC)8 have also sought to amend their rules to provide for Emergency Arbitration.

SCOPE OF EMERGENCY ARBITRATION IN INDIA
In India, Section 9 of the Arbitration and Conciliation Act, 1996 entails that parties may apply for interim reliefs to the concerned court at any time before the enforcement of the arbitral award. Obtaining interim relief through Emergency Arbitration is not included within the ambit of Section 9.
In order to rectify this lacuna, in 2014, the Law Commission’s 246th Report recommended an amendment to the definition of an “arbitral tribunal” to provide for an Emergency Arbitrator. However, this recommendation did not transpire when the Arbitration and Conciliation (Amendment) Act, 2015 came into force. Regardless, the Delhi (Arbitration Proceedings) Rules 2018 in its Section 14, the Mumbai Centre for International Arbitration (Rules) 2016, under Section 3 and The Madras High Court Arbitration Centre Rules, 2014, under Section 20 are some institutions that provide for Emergency Arbitration in their rules.

INDIAN CASE LAWS
While Emergency Arbitration is not recognized by the Act of 1996, the Indian Courts have deliberated upon this issue. The first case that dealt with Emergency Arbitration was HSBC PI Holdings (Mauritius) Ltd. v. Avital Post Studioz Ltd &Ors.9 The case involved an arbitration agreement by which the parties reserved their right to seek interim reliefs before the national courts of India. The parties resorted to Emergency Arbitration in Singapore and sought to enforce the same in India. The Bombay High Court vide its order in 2014 upheld the award of the Emergency Arbitrator and while granting interim relief observed that the “Petitioner has not bypassed any mandatory conditions of enforcing ability since it was not trying to obtain direct enforcement of the interim award”. It is appropriate to point out that this judgment was passed before the Supreme Court passed its judgment in Bharat Aluminum Co. (BALCO) v. Kaiser Aluminum Technical Service Inc.10 In the BALCO case, it was stated that Part I of the Arbitration Act, 1996 would not apply to international commercial arbitration. Since the HSBC judgment dealt with a pre-BALCO agreement, the Bombay High Court gave effect to the award passed by the Emergency Arbitrator by granting similar reliefs to the petitioner under Section 9 of the Arbitration Act.

Another case came up before the Delhi High Court in Raffles Design International India Private Limited &Ors. v. Educomp Professional Education Limited &Ors.11 This case involved an arbitration agreement that was governed by the laws of Singapore. The parties resorted to an Emergency Arbitrator in Singapore, wherein an interim order was passed, which was later enforced in the High Court of Singapore. The party who obtained the favorable order later filed an application under the amended Section 9 seeking interim reliefs. The Delhi High Court, while allowing the maintainability of such petitions, highlighted the relevancy of the amended Section 2(2) of the Act and the widened powers vested in the Court to grant interim reliefs. The court mentioned that Section 9 now applies to international commercial arbitrations, even if the place of arbitration is outside India.

The legal status of Emergency Arbitration has recently been brought to the forefront by the Delhi High Court in the case of Future Retail Ltd. v. Amazon. Com NV Investment Holdings LLC and Ors.12

FACTS OF THE DISPUTE: In this case, Amazon adduced the arbitration clause in the Shareholders Agreement between Amazon and Future Coupons Pvt. Ltd. along with the promotors of Future Retail Ltd. (FRL) after learning about the acquisition of the assets of FRL by Reliance Retail Ventures Ltd. The arbitration clause was invoked which stated that-
(i) Any dispute would be referred to arbitration in accordance with the arbitration rules of the SIAC,
(ii) The seat and venue of the arbitration would be New Delhi, and
(iii) The choice of jurisdiction and venue shall not prevent either Party from seeking injunctive reliefs in any appropriate jurisdictions.

After the arbitration was invoked, Amazon made an application to SIAC for conducting Emergency Arbitration and it obtained an injunction against FRL from going forward with its acquisition. Relying on this order of the Emergency Arbitrator, Amazon made representations to various statutory and regulatory bodies in India and attempted to thwart the approval procedures in India that are necessary for the transaction of acquisition. FRL filed a suit and an interim application therein, to seek a permanent and temporary injunction against Amazon.
The primary contentions made by FRL were that –
(i) The Emergency Arbitration is outside the scope of the Arbitration Act, and therefore, the award passed by the Emergency Arbitrator is in nullity,
(ii) The SIAC Rules take away the right of the parties to approach the Courts in India, and
(iii) The Emergency Arbitrator is not an arbitral tribunal under Section 2(1)(d) of the Arbitration Act as the Parliament did not amend the definition of ‘arbitral tribunal’ despite the recommendation made by the Law Commission in that regard.

HELD: A single-judge bench of Justice J.R.Midharejected the contentions of FRL and held that –
i. Party autonomy is the backbone of arbitration. Therefore, as the parties to the agreement had chosen the curial law being the SIAC Rules, the arbitration arising out of that agreement would be governed by the procedure as prescribed under those rules, subject to the public policy of India and the mandatory provisions of the Arbitration Act. Further, the Arbitration Act, under Section 2(8), allows parties to choose a procedural law different from the proper law of contract, and therefore, there is nothing in the Arbitration Act that prohibits the contracting parties from obtaining emergency relief from an emergency arbitrator;
ii. The SIAC Rules, under Rule 30.3, make provisions for a party to approach a judicial authority for a grant of interim relief. Therefore, the said rules themselves recognize and uphold the right of a party to avail interim relief under Section 9 of the Arbitration Act. Thus, the SIAC Rules do not take away the substantive right of the parties to approach the Courts in India for interim relief;
iii. Emergency Arbitration is not outside the scope of Section 2(1)(d) of the Arbitration Act, because the Parliament did not accept the Law Commission’s recommendation to include an EA in the definition of an “arbitral tribunal”. The development of the law cannot be thwarted merely because a certain provision recommended by Law Commission is not enacted by the Parliament. Therefore, it cannot be held that an Emergency Arbitration is outside the scope of Section 2(1)(d).
iv. Due to the aforesaid reasons, the Emergency Arbitration is not a ‘Coram non-judice’, and the consequential Emergency Arbitration order is not invalid.
CONCLUSION

Emergency Arbitration is thus an upcoming provision receiving much traction. This is because the process promotes party autonomy as Emergency Arbitration is agreed to by the parties themselves. It is also consistent with the parties’ intention to avoid the hassles of litigation. The Arbitration and Conciliation (Amendment) Act, 2019, has promoted institutional arbitration by including separate provisions for arbitral institutions. The Judiciary has also endeavored to provide for relevant precedents to remain in consonance with international standards. This validation received by Emergency Arbitration makes it clear that this field is bound to grow in India.

1Yadav, Dr Vikrant, Emergency Arbitration under Institutional Arbitration Rules: A Comparative Study, International Journal of Law, Volume 3; Issue 3; May 2017 (Available at https://ssrn.com/abstract=3621191)
2UNCITRAL Model Law on International Commercial Arbitration, 2006 available at https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf
3SIAC Rules (2016), Schedule 1.
4SCC Rules (2010), Expedited Rules and Appendix II.
5CANACO Rules (2008), Articles 36 and 50.
6LCIA Rules (2014), Article 9.
7HKIAC Rules (2018), Article 38.
8ICC Rules (2017), Article 29(1) and Appendix II.
92014 SCC OnLine Bom 102.
10(2012) 9 SCC 552.
112016 (234) DLT 349.
122021 SCC OnLine Del 412.

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