Emergency Awards passed in Foreign-seated Arbitration - Enforceable or not

A recent award passed by an Emergency Arbitrator at the instance of Amazon.com NV Investment Holdings in relation to Reliance Retail Ventures Limited’s (RRVL) ongoing acquisition of Future Group’s retail, wholesale, logistics, and warehousing arm, has once again brought into sharp focus a gap in India’s aspirations to improve Ease of Doing Business in the country and create a conducive environment for enforcement of awards passed in foreign seated arbitrations.

Although the said Emergency Award directed Future Group to maintain status quo with regard to the transaction[1], recent news reports have confirmed that Future Group has already approached the Hon’ble Delhi High Court by way of a suit seeking to restrain Amazon from preventing the ₹24,713 crore deal from going through.[2]

The ongoing saga highlights various issues surrounding international commercial arbitration in India, specifically (a) the enforceability of awards made in foreign-seated arbitrations; and (b) the enforceability of orders/ awards of an Emergency Arbitrator (“EA”).

Applicability of Part I to foreign seated arbitrations

In 2012, a Constitution Bench of the Hon’ble Supreme Court in the BALCO case[3] overturned the three-judge bench judgment in Bhatia International[4], thereby establishing that Part I of the Arbitration & Conciliation Act, 1996 (the “Act”) does not apply to international commercial arbitrations, save for those seated in India. Thus, the enforcement of foreign seated arbitral awards are subject exclusively to Part II of the Act, and such awards, whether finally deciding issues at the interim or final stage, would be enforceable by national courts in India under Section 49, subject to fulfilment of the requirements under Sections 44, 46, and 48 of the Act.

This position has seen some change with the introduction of the Proviso to Section 2(2) of the Act by the 2015 Amendment. While Part I remains the preserve of domestic arbitration, the amendment to Section 2(2) allows Section 9, 27, 37(1)(a), and 37(3) of Part I of the Act to become applicable to foreign-seated arbitrations, unless excluded by agreement of the parties. The most notable of these is Section 9, which vests in the court the power to issue interim orders at any time before, during, or after the making of the arbitral award. By virtue of this, it will be open to parties to a foreign-seated arbitration to approach Indian courts to seek interim relief, primarily when the assets of a counterparty are in India.

Emergency Arbitrators and Their Orders

Arbitral institutions have added a new dimension to international commercial arbitration with the concept of “Emergency Arbitration”. Created as a means to secure immediate interim relief prior to the commencement of the arbitral proceedings, Emergency Arbitration is now a common feature in institutional arbitrations, as seen in the rules of the Singapore International Arbitration Centre (SIAC)[5], the Mumbai Centre for International Arbitration (MCIA)[6], and others.

As far as institutions such as SIAC and others are concerned, the order made by an EA is considered an “award” akin to an award made by an Arbitral Tribunal in a non-emergency setting.[7] There are even provisions requiring mandatory compliance by the parties to the order of the EA[8].

In terms of enforceability, however, the legal position is not clear. The concept of Emergency Arbitration is distinct from the regular process of arbitration, and it is this distinction that also emerges as its limitation. First, the EA is not appointed by the parties, but rather by the arbitral institution administering the arbitration, in terms of the parties’ agreement.[9] Second, the mandate of the EA is a limited one, as they are appointed for the sole purpose of granting interim relief.[10] Third, this limited mandate ends as soon as the award of an EA is made (subject to any clerical revisions). Once an award is made, the EA becomes functus officio[11], and cannot be a part of the Arbitral Tribunal adjudicating the disputes under the agreement.[12] Finally, the award of an EA is only ‘interim-binding’, i.e. it is subject to modification by the Arbitral Tribunal that is constituted by the parties in terms of the arbitration agreement.[13] Thus, at any point during the proceedings, an award passed by the EA may be amended or even vacated. All these features point to the same limitation – a lack of finality.

While some countries such as Singapore have amended their national rules to ensure effective enforcement of awards made by an EA[14], India has not done so. In fact, although various arbitral institutions in the country provide for appointment of an EA and making of an emergency award in their rules, the Act has no express recognition of the concept since Section 2(1)(d) – the definition of “arbitral tribunal” under the Act – does not include an emergency arbitrator.

Courts in India have, however, attempted to provide the necessary relief to parties seeking enforcement of emergency awards in foreign-seated arbitrations, despite the absence of express statutory recognition for the same. In HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd[15], the Plaintiff received a favourable order from an EA in Singapore, but thereafter sought interim injunctive relief under Section 9 of the Act against the defendant. The Hon’ble Bombay High Court chose to grant relief to the Plaintiff, but did so independent of the findings of the EA.

Similarly, a Single Judge Bench of the Hon’ble Delhi High Court in Raffles Designs[16] categorically held that while S. 17 of the 1996 Act does not apply to arbitral proceedings held outside India, meaning thereby that an EA’s award cannot be enforced, it will be open for the parties to file a petition under Section 9 of the Act for seeking interim measures. It was also held that the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for the petitioner to file a suit.

Recently, the Division Bench of the Hon’ble Delhi High Court in Ashwani Minda[17] gave due regard to the proceedings of the EA by holding that an applicant who was unsuccessful before the EA cannot have a second chance by asking for the same interim relief from the national court.

Thus, parties to foreign-seated arbitrations seeking enforcement of emergency awards in India must keep certain salient points in mind. First, where Section 9 of Part I has not been expressly excluded by the parties, a Section 9 petition may be filed for seeking interim measures. Second, where Section 9 of the Act has been expressly excluded (Proviso to Section 2(2) of the Act), the party may file a civil suit under the relevant provisions of the Code of Civil Procedure, 1908, in order to seek the same reliefs that are the subject matter of the emergency award before the EA (eg, suit for recovery for monies, etc).  It is pertinent to note that neither of these options above amounts to “enforcement of the emergency award”. The third option is for the party to approach the national courts of the seat for enforcement.

Further, while exercising the second option, the party may likely overcome the mandate contained in Section 8[18] of the Act and any challenge on maintainability, by asserting that (a) the matter is already in arbitration (b) the suit is in aid of, and is to strengthen the arbitration process, and (c) the party will be remediless if the suit is held to be not maintainable at the behest of a party who is a party respondent in arbitration.

While it remains to be seen whether Amazon takes any steps to enforce the said Emergency Award in India’s national courts, Future Group’s refusal to comply with the said award will likely impact global perceptions of India’s enforcement landscape, and RVVL’s fortunes in the arbitration proceedings itself.

[1] https://www.barandbench.com/news/amazon-future-deal-singapore-arbitration-award

[2] https://www.telegraphindia.com/business/future-retail-files-suit-in-delhi-high-court/cid/1796896

[3] Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552

[4] Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105

[5] Rule 30.2 read with Schedule I, SIAC Rules, 2016

[6] Rule 14, MCIA Rules, 2017

[7] Rule 1.3 SIAC Rules, 2016; Rule 1.3 read with Rule 14.7 and 14.8, MCIA Rules, 2017

[8] Clause 12, Schedule I, SIAC Rules, 2016

[9] Clause 3, Schedule I, SIAC Rules 2016; Rule 14.2, MCIA Rules, 2017

[10] Rule 30, SIAC Rules, 2016; Rule 15, MCIA Rules, 2017

[11] Expiry of the mandate of an officer due to fulfilment of official function

[12] Clause 10, Schedule I, SIAC Rules, 2016; Rule 14.9, MCIA Rules, 2017

[13] Supra n19

[14] Definition of “award” under Section 2(1), Singapore Arbitration Act, 2001 (amended vide Act 12 of 2012 w.e.f. June 1, 2012)

[15] HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. MANU/MH/0050/2014 (Bombay High Court, decided on January 22, 2014)

[16] Raffles Design International India Private Limited v. Educomp Professional Education Limited (2016) 234 DLT 349 (Para 103-106)

[17] Ashwani Minda & Ors. v. U-Shin Limited & Ors. MANU/DE/1348/2020 (Delhi High Court, decided on July 7, 2020)

[18] Power to refer parties to arbitration where there is an arbitration agreement