Recognition Of Emergency Arbitrators Under The Indian Legal System
Author: LawSphereX
Category: Banking & Finance
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RECOGNITION OF EMERGENCY ARBITRATORS UNDER
THE INDIAN LEGAL SYSTEM
Nishtha Kumar, Hidayatullah National Law University, Raipur
ABSTRACT
The arbitration mechanism is fundamentally based on speed. Litigation in India takes a lot of years and money to resolve disputes. Arbitration on the other hand is a method of resolution for the parties where they have the most autonomy and the amount of time and money involved is much less than litigation. Emergency arbitration is another facet of the arbitration mechanism that enhances these advantages of the dispute resolution method. It is particularly helpful in complex arbitrations where protection of subject matter is paramount and interim relief is necessary. Therefore, for India to become a global arbitration centre, it needs to incorporate emergency arbitration and arbitrators in the arbitration regulatory framework.
INTRODUCTION
One of the defining advantages of the arbitration process that place it above the litigation process is its speed in resolving the dispute between the parties. Litigation as a dispute resolution mechanism has long been fraught with problems. The amount of time a dispute takes to be resolved in the courts has often made headlines for all the wrong reasons. For complex commercial disputes involving involve considerable financial and manpower investment, the process taking longer is almost guaranteed. Therefore, arbitration is the dispute resolution process that dominates commercial disputes. Practically however, arbitrations also take considerable time. Urgent interim relief in such cases where the dispute is complex and will take considerable time is an important consideration.
Interim relief as per the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) can be sought from the court and from the arbitral tribunal. However, when the tribunal is not constituted, the only method of obtaining interim relief is to approach the courts. People who have specifically chosen a private method of dispute resolution would more often than not be hesitant to approach the courts. The role of the emergency arbitrators comes in here. Until the full arbitral tribunal is assembled, an emergency arbitrator can decide the issue and provide temporary relief. This not only relieves the parties of the need to seek temporary relief from the courts, but also cuts down the time taken to pass an interim relief.
It is an undeniable truth that when approaching the courts, it is impossible for the courts to allocate all their time to one dispute no matter how much its value or urgency. The courts are mandated to give adequate time required for each dispute presented before them. However, an emergency arbitrator does not have such constraints. The arbitrator can dedicate her entire time to adjudicate the dispute and pass an order for interim relief. Therefore, allowing parties to appoint an such an arbitrator can prove to be a game changer for commercial disputes in India. Even though the concept is getting popular, the legal status of the orders passed by an emergency arbitrator and its enforceability is far from settled. In Singapore, emergency arbitrators have been given statutory recognition but that is not true for other nations. In India, the position is unsettled and not clear.
The Act is silent on the concept. Whatever splash that has taken place on this issue is through judicial decisions, mainly the dispute between Amazon. com NV Investment Holdings LLC and Future Retail Ltd1 (hereinafter referred to as Amazon and Future respectively).
1 Amazon NV Investment Holdings LLC v Future Retail Ltd, (2022) 1 SCC 209
REVIEW OF LITERATURE
Vijayendra Pratap Singh, Abhijnan Jha, Arnab Roy, The Emergency Arbitrator in India – Status and Enforceability: The authors discuss the recognition of an emergency arbitrator’s award and its enforceability under the current arbitration laws of the country. It also discusses the Law Commission’s recommendation for emergency arbitrators. The development of the stance of the courts in the country regarding the issue has been discussed but not in enough detail. The article does not provide any suggestions however, for the future. Shivam Kumar, Emergency Arbitration – Its Advantages, Challenges and Legal Status in India: It provides a very brief introduction to the concept, its advantages, mechanism, challenges, and legal status. To understand the concept further reading is required as the article goes briefly in each of the above-mentioned aspects.
Nusrat Hassa, Sameer Thakur, Emergency Arbitration under Indian Law: Navigating a complicated maze: The article provides a bird’s eye view of the concept, the law commission’s report, status of enforceability, the judgement and also some ideas for the future. The article also talks about the Supreme Court’s decision on the matter and summarises the ruling in regards to the two issues that came before the court.
RESEARCH OBJECTIVE
To analyse the legal recognition and enforceability of emergency arbitrators in India.
RESEARCH QUESTION
1. What is the legal enforceability of emergency arbitrators in India?
METHODOLOGY
The researcher has adopted doctrinal methodology of research. The concept under study herein is still in development stage currently in India. The available sources in India are judgements from high courts and the Supreme Court along with the statutes of other countries and report from the Law Commission of the country. Therefore, the most appropriate methodology is doctrinal for conducting this study.
LEGAL STATUS OF EMERGENCY ARBITRATORS
Evolution The concept of emergency arbitration began in the 1990s by the International Chamber of Commerce which identified the inability of the courts/arbitral tribunals to arrive at binding decisions in urgent situations, and then acted upon it to become the maiden arbitral institution which provided the option of pre arbitral emergency measures. Later on, many international institutions including the Singapore International Arbitration Centre (hereinafter referred to as SIAC) also adopted emergency arbitration measures considering their significance. It must be emphasized that to initiate emergency arbitration, the essentials of a valid arbitration agreement must be fulfilled. Additionally, a party is entitled to seek emergency arbitration unless they have explicitly opted out of this option.
It is also noted that parties can seek recourse to the courts since the emergency tribunal does not have the authority to grant relief against third parties. The Act when defining arbitral tribunal refers to either a sole arbitrator or a panel of arbitrator usually having odd number of arbitrators2. This provision is based on the UNCITRAL Model law on International Commercial Arbitration when the concept of emergency arbitrators was unknown. The fundamental statute about arbitration does not refer to emergency arbitration and arbitrators at all. Therefore, the legal recognition and enforceability of emergency arbitrators is dicey. But that does not mean that there is absolutely no legal basis for emergency arbitrators and emergency arbitration process in India. The Law Commission of India in its 246th report in the year 2014 recommended some changes.
Noting the rise of emergency arbitration, it proposed that Section 2(1)(d) be amended to include expressly for appointment of emergency arbitrators when the arbitral institution rules provide for the same. The law commission was following the example of Singapore where emergency arbitrators were included statutorily in the definition of arbitral tribunal via amendment3. When the Act was amended in 2015 as per report, this recommendation was not followed. It can be deduced that even though the recommendation for emergency arbitrators was not followed, considering the fact that the Law Commission recognised emergency arbitration process, some legal basis for 2Arbitration and Conciliation Act, 1996, § 2(1)(d), No. 26, Acts of Parliament, 1996 (India). 3International Arbitration Act, 2012, § 2(1) (Sing. ).
validity and recognition of the process does exist in India. Since the situation is ambiguous, arguments exist from both sides for recognition of emergency arbitrators. Judicial recognition The main judicial decision that brought the discussion of emergency arbitrators to the forefront is the Amazon and Future dispute. Before this case, Indian courts may have encountered the issue of emergency arbitrators in the context of foreign seated arbitrations and foreign arbitral awards, essentially part II of the Act. In the context of domestic arbitration, the courts did not deal with this issue until the amazon case. The first opportunity arose before the Bombay Hight Court in the case of HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd.
Here, the seat of arbitration was Singapore, the parties were governed by SIAC rules and emergency arbitration was invoked by the petitioner, who also got a favourable order, and then filed a Section 9 petition under the Act to get the same enforced in India. The issue here was regarding the applicability of Section 9, which was enshrined in Part I, to foreign seated arbitrations. The Court held that as the entire Part I except Section 9 was excluded from being applicable, they had consented to be subjected to Section
9. The Court did not go into the question of recognition of Emergency Arbitration under the
Act, it passed a similar order to that of the emergency arbitrator, implying the recognition and the deemed relevancy of such orders. The Delhi High Court in a case decided that Section 17 does not allow for the enforcement of an emergency arbitrator's order in an arbitration with a foreign seat, diluting any order made by an emergency arbitrator and forcing the parties to seek recourse under Section 94. In Ashwani Minda v. U-Shin Limited and Plus Holdings v. Xeitgeist Entertainment Group, the Delhi High Court and Bombay High Court rendered conflicting decisions, holding that if an emergency arbitrator had already been chosen in compliance with institutional regulations, action was not required. The conflicting decisions led to murky waters which was finally cleared by the Amazon and Future dispute. 4Raffles Design v Educomp, (2016) SCC Online Del 5521.
Amazon – Future Dispute The Delhi High Court and the Supreme Court have rendered a number of rulings, including the pertinent one pertaining to emergency arbitrators all of which are a part of the conflict that played out in multiple forums. The larger dispute was an arbitration initiated by Amazon against Future. The arbitration was initiated under the rules of SIAC and an interim award was passed in favour of Amazon by the emergency arbitrator which it tried to enforce in India through a petition under Section 17(2) of the Act. An order by the single judge bench of the Delhi High Court that the award should be enforceable under recognised the emergency arbitrator as an arbitrator. The same bench reiterated this order once more. Future against this order filed an intra-court appeal and got a stay from a division bench of the same court.
Amazon appealed against this stay order to the Supreme Court, which compiled its numerous appeals and rendered a decision. The first legal question answered by the court in this judgement was whether an emergency arbitrator’s award can be enforced under the Indian law. The court ruled that the laws do not prohibit the parties from making rules permitting the appointment of an emergency arbitrator. The ruling made it clear that an emergency arbitrator is covered under the definition of Arbitral Tribunal under Indian law. Therefore, if the institutional rules give an emergency arbitrator the authority, an award made by the same may be enforced. The Supreme Court emphasized that parties have the freedom to choose the institutional rules for their arbitration and to be governed by.
The Delhi High Court’s order providing for the enforcement of the emergency arbitrator’s interim award was overturned on the ground of violation of the principle of natural justice. The decision to overturn on the grounds of natural justice had no bearing on the legal findings, and it was not implied that the ruling was a bad law. Thus, it is evident that the Supreme Court's stance is that an emergency arbitrator may be regarded as an Arbitral Tribunal, and its ruling may be upheld in India. 5 On the contrary, it was observed that a harmonious interpretation will be helpful in incorporating institutional rules into arbitration agreements. Specifically, as per the court the entire idea of emergency arbitration would be become moot if the orders of an emergency arbitrator were not followed.
This ruling supports the idea that the Act gives parties considerable autonomy over the procedural rules to be applied during the arbitral process. Additionally, it gives users of 5Nusrat Hassan, Sameer Thakur, Emergency Arbitration under Indian Law: Navigating a complicated maze, IAMC Hyderabad, April 22, 2023, https://iamch. org. in/emergency-arbitration-under-indian-law-navigating-acomplicated-maze.
institutional arbitration the assurance that swift enforcement of emergency arbitrator’s award can happen in India. This all-encompassing strategy fortifies India's arbitration system and opens the door for India to develop into a global centre for arbitration. This ruling is also consistent with Article 5 of UNCITRAL Model Law goal of minimal court involvement in arbitration procedures. Objections: - The most obvious objection is that the act does not recognise emergency arbitrators at all. Although the Law Commission did recommend inclusion of the term in the definition for arbitral tribunal, the same was ignored by the government in the 2015 amendments brought about. The legislature’s intent can be deciphered that it was not in favour of recognising emergency arbitrators in India. 6 - The authority and term of emergency arbitrators is too brief.
The mandate of the emergency arbitrator exists only because a proper arbitral tribunal is not in existence yet. When the tribunal is constituted as per the agreement, the emergency arbitrator will no longer have any authority. Essentially, this will result in appointment of different arbitrators at separate stages during the entire arbitration process. Challenge to the validity and authority of the arbitral tribunal is already a big problem that impedes the arbitration process in India and increases the time and financial burden of the parties. Legitimising the mandate of emergency arbitrators would give another leeway to the party that wants to delay the arbitration process. 7 - It is uncertain what would happen if the emergency arbitrator’s order is not followed.
Even if parties are successful in obtaining interim reliefs in their favour, they will still require the assistance of the courts to enforce them, which means they are being drawn litigation and court proceedings without their choice. 8 Support: - The emergency arbitrators gain their sanctity from the most basic tenet of arbitration 6Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, The Emergency Arbitrator in India – Status and Enforceability
7 Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, supra note 3.
8Shivam Kumar, Emergency Arbitration — Its Advantages, Challenges and Legal Status in India, SCC Online (Mar. 26, 2022), https://www.scconline.com/blog/post/2022/03/26/emergency-arbitration/.
law, namely party autonomy. This tenet is baked into the UNCITRAL Model law and therefore is also the essence of the Indian Arbitration act. This has been established repeatedly by the courts9. This principle therefore gives the parties the power to protect the subject matter by requesting temporary relief from an emergency arbitrator. The Act does not expressly prohibit the mandate of an emergency arbitrator. The parties are free to decide how the arbitral tribunal will be established and the decide the eligibility, grounds, etc. to challenge the arbitral tribunal among themselves. Section 2(6) read with section 2(8) provides that the parties are free to decide on arbitral institutional rules in the arbitration agreement itself.
Since arbitration is a method of private dispute resolution where party autonomy is paramount, then recognition of emergency arbitrators should not be a problem. 10 - Even though emergency arbitrators are not mentioned in section 2(1)(d) of the statute, the provision's test is whether or not the authority is an arbitrator. An arbitrator must be able to carry out judicial duties in order to be recognized under Indian law. An emergency arbitrator is unquestionably an arbitrator by this criterion. She provides relief by carrying out adjudicatory duties. An arbitral tribunal make decisions about its jurisdiction. Therefore, an emergency arbitrator can decide his own jurisdiction whether he can provide interim relief and when his mandate ends. The emergency arbitrator is chosen by the parties as a normal arbitrator would.
His authority can be challenged just like a normal arbitrator’s authority. There is nothing inherently different from the authority of a norma arbitrator. 11 - Just because the Parliament did not follow the Law Commission’s recommendation to amend the section in its 2015 amendments, does not make the suggestion useless. It might be that the Parliament did not feel the need for inclusion of emergency arbitrators then. That does not indicate that the Parliament would hold the same opinion now. The Supreme Court has ruled that Parliament cannot halt the advancement and development of law by courts12. - Objection based on argument that recognising the mandate of an emergency arbitrator 9Centrotrade Mineral v Hindustan Copper Limited, (2017) 2 SCC 228.
10 Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, supra note 3.
11 Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, supra note 3.
12Avitel Post Stodioz Limited v HSBC PI Holdings (Mauritius) Limited and Ors (2020) SCC Online 656
would lead to separate arbitral tribunals adjudicating separate stages of the dispute cannot stand as the same is contemplated under the act without recognising the emergency arbitrator. Section 15 contemplates that the mandate of the tribunal can end at any time by way of agreement between the parties. Therefore, with or without recognising emergency arbitrators, it is possible for two separate tribunals to adjudicate two stages of the dispute. 13 Looking Ahead Even if arbitration is supposed to be quick in nature, it is not instantaneous enough to mitigate risks like refusal to share documents or destruction of evidence, which could have severe delays and render the arbitration meaningless. Emergency arbitration is the alternative in such a scenario.
Thus, it is necessary to have a strong foundation of emergency arbitration in India as it aims to transform itself into a global arbitration hub. The first step would obviously be the legislature recognising emergency arbitration. There are two ways to achieve this recognition. Either a separate statute can be made dealing with emergency arbitration like Hong Kong or arbitral tribunal’s definition can be amended to explicitly include emergency arbitration, making it subject to the same law, just like the normal arbitrations, like Singapore. The latter is the recommendation of the Law Commission of India. The B. R. Srikrishna Committee also suggests that the scope of arbitral awards should be expanded to include emergency awards and the same should also be defined in the Act.
Another step that can be taken by the legislature is to recognise and enforce the awards of emergency arbitrations that are seated outside India. This would provide great relief as parties would not have to go through litigation for urgent reliefs which can be granted to them by the emergency arbitrator and it would be directly enforceable in India. A caveat for is that it requires the parties to be bound by an institution’s rules for conducting
their arbitration. This means that an institution has not been chosen, the option of emergency arbitration would not be vested with the parties resulting in parties being left out of the ambit of emergency arbitration. To remedy this situation the law can allow emergency arbitration for such situations, and the role of the Arbitration Council of India can be enhanced to appoint emergency arbitrators when the application for the same is submitted before it. There can be a
13 Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, supra note 3.
specific set of rules which would deal with all the intricacies of the procedure and timelines to be followed for such situations. A rosy view that the parties will voluntarily comply with the emergency arbitrator’s order cannot be assumed. Any non-compliance must be punished with contempt of court if the award is given the same sanctity as that of a court order. Further, just like the Courts, the power to provide ex-parte relief can be extended to emergency arbitrators in India to maximize the benefit of emergency arbitration. Thus, the implementing these suggestions would help in increasing the confidence of the stakeholders in the Indian arbitration system.14
SUMMARY OF FINDINGS
The Supreme Court has finally showed interest in incorporating emergency arbitrators in the Indian arbitration ecosystem. The strategy would strengthen India's arbitration system and illuminate the country's potential to develop into a global centre for arbitration. This would also encourage minimal intervention by the judiciary in arbitration proceedings, as envisaged in Article 5 of the UNCITRAL Model Law and Section 5 of the Act. Furthermore, the recognition and enforcement of such rulings will relieve the heavy workload of Indian courts.15 14Tanish Arora, The Way Forward for Emergency Arbitration in India, NLIU Law Review Blog (2024), https://nliulawreview.nliu.ac.in/blog/the-way-forward-for-emergency-arbitration-in-india/.
15 Shivam Kumar, supra note 7.
REFERENCES
Amazon NV Investment Holdings LLC v Future Retail Ltd, (2022) 1 SCC 209 • Avitel Post Stodioz Limited v HSBC PI Holdings (Mauritius) Limited and Ors (2020) SCC Online 656 • Centrotrade Mineral v Hindustan Copper Limited, (2017) 2 SCC 228 • Nusrat Hassan, Sameer Thakur, Emergency Arbitration under Indian Law: Navigating a complicated maze,
IAMC
Hyderabad, April 22, 2023, https://iamch.org.in/emergency-arbitration-under-indian-law-navigating-acomplicated-maze. • Raffles Design v Educomp, (2016) SCC Online Del 5521. • Shivam Kumar, Emergency Arbitration — Its Advantages, Challenges and Legal Status in India,
SCC
Online (Mar. 26, 2022), https://www.scconline.com/blog/post/2022/03/26/emergency-arbitration/. • Tanish Arora, The Way Forward for Emergency Arbitration in India, NLIU Law Review Blog (2024), https://nliulawreview.nliu.ac.in/blog/the-way-forward-foremergency-arbitration-in-india/. • Vijayendra Pratap Singh, Abhijnan Jha, Arnab Ray, The Emergency Arbitrator in India – Status and Enforceability.