Emergency Arbitration In India And Contentious Issues

However, there are several issues surrounding Emergency Arbitration that still remain unanswered in India. The present article is an effort to delineate such issues and bring them to light.

What is Emergency Arbitration?

The concept of Emergency Arbitration is a tool that comes into play when a party is in need of urgent interim or conservatory measures. Depending on the rules of the concerned Arbitral Institution, an arbitral tribunal may be constituted by the concerned institution within a period of 24 hours to decide the request for interim measures. After the constitution of the emergency arbitral tribunal, written submissions are made by the concerned parties within a specific timeframe as per the rules of the institution (generally a period of one to two weeks). The arbitrator hears both the parties after the written submissions are filed and passes an order rejecting or accepting the prayer of interim relief.

For example, as per the rules of the Singapore International Arbitration Centre (“SIAC”), an emergency arbitrator is appointed by SIAC within 24 hours of receiving a request in this regard. Thereafter, the emergency arbitrator is mandated to pass an order granting or rejecting the prayer for interim measures.

Similarly, as per the rules of the Delhi International Arbitration Centre (“DIAC”), the concerned party seeking interim relief must apply to the DIAC explaining the nature of the urgent relief sought and the circumstances and reasons due to which the relief is required on an urgent basis. Upon receiving such an application, the chairperson / sub-committee of the DIAC shall appoint an emergency arbitrator within a span of 2 days (excluding holidays). After their appointment, the emergency arbitrator has a period of 14 days within which the arbitrator has to pass an order on the application for interim relief. If the emergency arbitrator fails to act within the aforesaid timeframe, they shall not be entitled to any fee.

Similar to the rules of the DIAC, the Mumbai Centre for International Arbitration (“MCIA”) mandates for the appointment of an emergency arbitrator within a period of one day and further provides that the mandate of the emergency arbitrator shall come to an end after a period of fourteen days from the date of appointment. However, unlike the DIAC rules, the MCIA allows for the extension of time of by written agreement of parties or by the council in exceptional circumstances.

In a situation where the aforesaid tool of emergency arbitration does not exist, the parties are forced to approach the concerned courts under section 9 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) seeking urgent interim or conservatory relief. Thus, in the absence of the provision of emergency arbitration the parties would have to undergo the rigors of the Indian judicial system, for seeking urgent and necessary reliefs, the denial of which may cause irreparable loss to the parties. The latter process is cumbersome and does not address the need of a party seeking urgent relief.

Therefore, as opposed to the above, statutory provision under section 9 of the A&C Act, the parties seeking urgent relief prefer engaging an emergency arbitrator. However, despite its benefits the tool of emergency arbitration, the Indian parliament is yet to give the same statutory recognition. Nevertheless, the concept of Emergency Arbitration has been recognized by the Supreme Court of India in Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors. [(2022) 1 SCC 209] (“Amazon vs. Future”).

How has the Apex Court recognized Emergency Arbitration?

Prior to the subject matter of emergency arbitration coming before the Supreme Court, the same had previously been decided by the Delhi High Court in the case of Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors. [2016 SCC Online Del 5521]. In the aforesaid judgment passed by the Delhi High Court it was held that the award of the emergency tribunal is not enforceable in India, moreover, it was held that the decision of the emergency arbitral tribunal need not be considered while adjudicating upon an application filed under section 9 of the A&C Act.

The Supreme Court of India changed the aforesaid position by its judgement in Amazon vs. Future (Supra). Succinctly put, in the said case amazon had entered into a contract with the companies of the Biyani Group whereby it was stipulated that one of the companies of the Biyani Group, namely “FRL” will be restricted from encumbering/transferring/selling/divesting/disposing of its retail assets to certain “restricted persons”. Subsequently, it was discovered by Amazon that FRL was margining with one of the “restricted persons” under the contract, namely, Mukesh Dhirubhai Ambani Group (Reliance Industries Group). Therefore, SIAC rules providing setting up of an emergency arbitral tribunal were invoked by Amazon. After hearing the parties concerned, the emergency arbitral tribunal passed an order of injunction, injuncting the FRL from taking further steps to materialize the prospective merger. FRL ignored the aforesaid order of the Emergency Arbitrator on the ground that the emergency arbitrator was coram non judice i.e., heard by an arbitrator without jurisdiction.

Subsequently, Amazon sought to enforce the award of the emergency arbitrator by filing a petition before the Delhi High Court under section 17 (2) of the A&C Act. The said petition was allowed by the Ld. Single Judge of the High Court, whereafter, the order of the Single Judge was stayed by the Ld. Division Bench of the Delhi High Court. Subsequently, the same was challenged before the Supreme Court of India and the proceedings in the High Court were stayed and the matter was set for final disposal.

The Supreme Court of India in its judgement in Amazon vs. Future Group (Supra) held that the scheme of the A & C Act (especially section 2(1)(a) and 2(6)) clearly recognizes arbitrations conducted by permanent institutions as well as ad-hoc arbitrations. As per section 2(1)(a) arbitration can mean any arbitration including institutional arbitration. As per section 2(6) the parties are free to authorise an institution to decide the disputes arising between them. Most pertinently, as per section 2(8) the terms of any agreement between the parties is to be construed to include any arbitration rules referred therein (for example SIAC Rules, DIAC Rules etc.). It is also noteworthy that the none of the provisions of the A&C Act explicitly disallow emergency arbitrations.

Section 17 (1) of the A&C Act, envisages a provision for interim measures to be granted by the arbitral tribunal. As per section 17(2) any order passed under section 17(1) is deemed to be an order of a court under the Code of Civil Procedure, 1908 and the same is enforceable in the same manner as a court order. The Supreme Court in its decision held that in light of section 2(1) (a), section 2 (6) and section 2(8) and the fact that there is no implicit or explicit prohibition against emergency arbitration, there is no reason to believe that enforcement of an award passed by an emergency arbitrator is not possible.

The need for codification of the concept of Emergency Arbitration

Despite the aforementioned inclusion of the concept of Emergency Arbitration within the fold of A & C Act by judicial intervention by the Supreme Court in the case of Amazon vs. Future (Supra), there are some issues that still remain contentious.

The option of availing the facility of an emergency arbitrator is limited to parties that engage in institutional arbitration. The parties in the arbitration agreement agree that in case a dispute arises, they would have the same adjudicated in accordance with the rules of the concerned arbitral institution and the arbitration shall be held in the said institution. Thus, once a dispute arises and a need for interim measures is felt by one of the parties, an emergency arbitrator is appointed in accordance with the rules of the institution. However, such rules are neither envisioned nor are applicable in cases of ad-hoc arbitrations.

It may be noteworthy that as per a survey conducted by PricewaterhouseCooper (“PwC”), around 47% of the companies that took recourse to arbitration for resolving disputes preferred institutional arbitration over ad-hoc arbitration, while 40% preferred ad-hoc arbitration and only 12% indicated a neutral approach. Thus, a majority of the companies still prefer ad-hoc arbitration over institutional arbitration and cannot avail the provision of an emergency arbitrator.

Moreover, it is a well-known fact that institutional arbitration can be more expensive as compared to ad-hoc arbitration, and the same may be a factor why institutional arbitration has not gain much traction in India. In light of the same one wonders whether provisions such as that of Emergency Arbitration are only tailored for the people who can afford the same. This leaves parties who cannot afford institutional arbitration at a disadvantage as they cannot avail the benefit of Emergency Arbitration.

Another contentious issue that still persists is whether a party can approach the Court under section 9 of the A&C Act, seeking interim relief if the rules of the institution provide for interim relief through an emergency arbitrator. On the one hand it may be contended that if the parties have already agreed by consensus to invoke the provision of Emergency Arbitration at the appropriate event then the need for entertaining an application under section 9 does not arise. On the other hand, it can be contended that the right to approach the Court under section 9 is a statutory right and the same cannot be extinguished by way of an agreement.

In addition to the above issues, another issue pertaining to the applications under section 9 still persists. As per section 9(3) of the A&C Act, the court cannot entertain an application seeking interim relief if an arbitral tribunal has been constituted. In light of the judgement of the Supreme Court of India in Amazon vs. Future group it can be concluded that the same is applicable in the case of emergency arbitration, meaning thereby, that a section 9 application cannot be entertained by a Court if an emergency arbitral tribunal has been constituted. However, question arises as to whether the aforementioned bar still applies if an emergency arbitrator has passed the interim award, and the mandate of the emergency arbitrator has expired and the arbitral tribunal has not yet been constituted.

The above issues can be authoritatively resolved either by way of judicial pronouncements as and when such issues come before the Court or by way of legislative action. Before the Supreme Court of India passed its judgment in Amazon vs. Future Group, the 246^th Law Commission report had already recommended the inclusion of the concept of emergency arbitration under the A&C Act, however, despite the above suggestion, the concept of Emergency Arbitration was not included in the A&C Act in the subsequent amendments.

Thereafter, a High-Level Committee was constituted by the Government of India under the Chairmanship of B.N. Srikrishna to review the institutionalisation of arbitration mechanism. The Srikrishna Committee noted that the general trend among developed arbitration jurisdictions is to adopt the concept of emergency arbitration. The Committee in its report also noted that several countries have recognized the concept of Emergency Arbitration and codified the same.

In light of the above issues that still persist, the recommendations of the Law Commission and the recommendations of the B.N. Srikrishna Committee, and the general trend among developed arbitration jurisdictions, it can be concluded that the above conundrums pertaining to Emergency Arbitration should be put to rest by an amendment to the A&C Act passed by the parliament.

The author is an Advocate on Record at Supreme Court of India. Views are personal.