An Urgent call on 'Emergency Arbitration'
The concept of ‘Emergency Arbitration’ (hereinafter, ‘EA’) was introduced by the various arbitral institutions throughout the world with a motive to provide urgent relief to the prospecting party, the need for which may arise at any interim stage till the time an arbitral tribunal is appointed for regular arbitration proceedings. An effective implementation of EA still after years of its introduction in the arbitration regime is paralyzed on account of the fact of ‘non-recognition’ by most of the states in their relevant domestic legislation. The stated unfortunate fact in conjunction with the disparities among curial laws concerning the EA procedure of various arbitral institutions across the world, have come to create an undesirable and absurd situation in the international arbitration regime. The present article particularly discusses the effect of ‘non-recognition’ in India in the light of litigation relating to EA, including the case of Ashwini Minda & Anr. V. U-shine Ltd & Anr., recently decided by the Delhi High Court.
The lacuna with existing Legislative Scheme
‘Arbitral tribunal’ means a sole arbitrator or a panel of arbitrators, as defined under S.2(1)(d) of the Indian Arbitration Act 1996 (hereinafter, the ‘Act’). The Law Commission in its 246th report had suggested an amendment in the aforesaid definition so as to include the ‘Emergency Arbitrator’. (hereinafter, ‘EAr’) However, legislature while incorporating some of its other recommendations, had deliberately ignored this particular suggestion.
Now the repercussion being that neither the interim award passed by the EAr is recognized nor can be it enforced under the Act. Hence, such emergency award may, in the absence of legal recognition, be rendered ineffective at the hands of the non-complying party, although such cases of non-compliance are rare and discussed briefly under the next head.
Litigation: An unwanted repercussion-
The first case ‘HSBC Holding wherein, the Bombay High Court, besides discussing ‘arbitrability’ of the matter, also addressed the maintainability of a petition under S.9 for interim relief which previously had been obtained from EAr. The court while upholding the maintainability & rejecting the respondent’s contention that S.9 could not be used for enforcement of the EA award, held that the case for interim relief under the said provision was made out independently from the proceedings in EA. The said ruling was carried forward by the Delhi High Court in Raffles Case, the second instance, with a similar factual matrix. Although, in the Raffles case, the position w.r.t the emergency award being unenforceable under S.9 was settled.
What is factually witnessed in both the cases is intriguing as the parties after having obtained EA award, found no efficacious way of enforcing the award in India against the non-cooperating party, and were left with the only option of initiating the entire proceeding under S.9 of the Act before Indian civil courts. The happening of such instances is very unfortunate & undesirable and has given rise to an absurd circumstance where the ‘time’ & ‘confidentiality’ which the parties must have intended to protect through the agreement on EA, goes in vain. So, when the concept of EA is not recognized under domestic law, & party is compelled to resort to S.9, the very spirit behind the introduction of the agreement on EA gets defeated.
After having dwelled upon the existing jurisprudence, it becomes imperative to talk about the very recent case of Mr. Ashwani Minda & Anr. V. U-Shine Ltd. & Anr, where a prospecting party after having unsuccessfully exhausted the remedy of EA, approached Delhi High Court under S.9. Unlike the previous cases, this time court rejected the petition mainly on the two factual grounds: firstly, parties have agreed to be bound by the JCAA rules; secondly, that article 77(5) of the said rule deems the EA award to be the award of the ‘arbitral tribunal’. In light of these facts, the Hon’ble Court held that parties can be said to have impliedly agreed to exclude the application of S.9[ii] & thus petition under the provision is not maintainable. Moreover, since this case as against the previous ones did not involve the issue of non-compliance on the part of the respondent but the petitioner’s failure in making out the case for interim relief on merits in the EA, the luck being tried under S.9 as the second opportunity should not be considered as a bona fide option remaining with the party. The application under S.9 in the present matter seems to be in the nature of ‘appeal’ & be rather termed as the ‘misuse of the process of law’.
In this context, a principle laid down in Gerald metal Case by the English court deserves an appreciation, as it held that the EA provisions under the LCIA Rules are intended to reduce the requirement of court's assistance in urgent circumstances & only where these powers were inadequate or inefficacious, that the court could act under S.44 of the English Act. Hence, where the applicant, whose application for the appointment of EAr has been turned down by the arbitral institution, on account of the applicant’s failure in making out a case of ‘urgency’, cannot approach the court for the urgent relief.
The disparity among Curial laws of various international arbitral institutions
Now, having done the comparative analysis of the Ashwini Minda case, on account of factual differences from other mentioned two cases, let’s move further on to the ‘Applicability of different curial laws’ as the other legitimate factor for analysis. Factually, the present case differs from other two discussed cases, also on account of different curial laws being applied, as in the present case, Japanese Arbitration i.e. JCAA rules were applicable, while in previously mentioned two cases i.e. Raffles & HSBC, it was the SIAC rules which applied. The significant, if not sole reasoning in the present Ashwani Minda Case, was based on the ‘deeming fiction’ provided under the JCAA rules, which deems the ‘Emergency Arbitrator award’ to be the award of the ‘Arbitral Tribunal’ for the purpose of Lex Arbitrai, nothing similar to which could be found under SIAC rules. Due to such deeming fiction, those incorporating JCAA rules as a curial law, in the arbitration agreement would be deemed to have impliedly excluded the application of S.9 of the Indian Act for interim relief, while the case may not be same for those adopting SIAC rules or other institutional rules which do not contain any such similar provision with a similar effect as that of deeming fiction under JCAA.
Hence, while deciding the maintainability of the application under S.9 in foreign seated arbitration, interpretation by the court of ‘implied exclusion of S.9’ as envisaged under S.2(2) of the Act, differs from the application of one institutional rule as a curial law to another, on account of procedural differences.
The unwanted circumstances as witnessed so far makes the principle of Gerald Metal case & the recommendation of the law commission w.r.t the inclusion of EA within the definition of ‘Arbitral Tribunal’, very significant & should be given the legislative effect to have the following desired effects:
To enforce EA award under S.48;
To bar the filing of a petition seeking interim relief by the virtue of Section 9 (3) of the Act.
These effects would further inevitably cure the issues arising from the non-uniformity of the curial laws of the various arbitral institution across the globe as noted above. Although, the enforceability of emergency award under S.48 may not be smooth due to the standards laid down therein which relates to the eligibility of the ‘final award’ for the enforcement & same may not be the appropriate for the ‘emergency award’ too, by the virtue of its very nature of being ‘interim’. Hence, legislative wisdom in addition to the Law Commission’s recommendation needs to be employed while incorporating appropriate additions so as to make S.48 suitable for enforcement of emergency awards as well. The legislature may perhaps put lower level scrutiny & standard for making emergency awards eligible for the enforcement.
[i] Lubhanshi Rai is a final year law student at Amity Law School Delhi (GGSIP University), who is currently working as a research intern with an NGO, named LAAbh. [ii] The arbitration & Conciliation Act, Section 2(2), Provisio, as after the Amendment Act 2015, No. 3 of 2016. Preferred Citation: Lubhansi Rai, An Urgent Call on "Emergency Arbitration", Arbitration & Corporate Law Review, Published on 29th August 2020.
This article was reviewed by Aditya Prakash and Utsav Saxena.