Emergency Arbitration: Concept and Indian Scenario
Keywords: Emergency arbitration, Interim measures, Injunction, Essential measures.
Subodh Singh and Swati Singh*
This article aims to introduce the concept of emergency arbitration by first defining it and second, by elaborating on the different domestic legislations of various countries that have included it in their arbitral process. Emergency arbitration has arisen from the need for urgent relief. The first half of the article explains this need while the latter half analyses the Indian scenario with respect to emergency arbitration. The absence of concrete legislation providing for emergency arbitration in India has been dealt with in the latter section using certain judgments rendered by the Indian courts. Finally, the need for comprehensive legislation to the effect has also been elaborated upon.
In international arbitration, emergency arbitration is an up and coming concept which has been devised to provide urgent relief to the parties that cannot await the formation or constitution of an arbitration tribunal. It is a tool designed to save time that is wasted in setting up a new tribunal and also saves the resources utilized in approaching conventional judicial options to resolve disputes. Under the domestic laws of most countries, emergency arbitration plays the role of awarding interim measures to the aggrieved parties. The essential requisites that need to be satisfied by a party opting for emergency arbitration are as follows:
1. Fumus boni iuris: It is a Latin phrase which is used in European and South American Courts. It means implies the likelihood of succeeding on merits. Parties opt for emergency arbitration when they have a “reasonable probability of succeeding on merits”.[i] This means that emergency arbitration is usually opted for by parties who can demonstrate that they are likely to succeed.
2. Periculum in mora: It is a Latin maxim which means the danger in delay. This maxim connotes that emergency arbitration is necessary in cases where the measures sought through the proceedings are essential in nature. In other words, if the measures/awards sought are not provided, it would not be possible to compensate the aggrieved party for the loss they make.
Emergency arbitration can result in granting interim measures or injunction which can reflect the fate of the ultimate arbitration proceedings and also prevent irreparable losses. The award of an emergency arbitration is enforceable in all those jurisdictions where emergency awards are recognized. Thus, in essence, emergency arbitration is a new and novel judicial recourse that mitigates the delay in dispensing of justice caused due to an inefficient and red-tape bound judiciary.
The ICC Arbitration Rules in Article 29 and Appendix V have included provisions for urgent interim measures for parties who cannot await the constitution of an arbitration tribunal. Emergency arbitration takes place in presence of an emergency arbitrator who deals with the application of interim measures before the appointment of an arbitral tribunal.
Emergency Arbitration in India and enforceability of awards
Even though Indian arbitral institutions are not statutorily forceful, they have outlined certain provisions inclusive of emergency arbitration, like the Delhi International Arbitration Centre has included provisions reflective of the concept of emergency arbitration. Further, the International Commercial Arbitration as well as the Mumbai Centre of International Arbitration (Rules) have sections that enumerate the provisions with respect to emergency arbitration and emergency arbitrators. The 246th report of the Law Commission proposed an amendment to Section 2(d) of the Arbitration and Conciliation Act, 1996 (“the Act”) to inculcate the provisions enumerated in various rules such as the ICC Rules, the SIAC Arbitration Rules, the HKIAC Rules, that provide for the appointment of an emergency arbitrator. However, the Arbitration and Conciliation (Amendment) Act, 2015 (“the 2015 Amendment”) did not include the proposal of the Law Commission report to provide statutory recognition to the position of emergency arbitration. To this day, India lacks a clear law that regulates emergency arbitration.
However, it is pertinent to note that an interim award passed by an arbitral tribunal that is seated in India is enforceable in accordance with section 17 of the Act since after the 2015 amendment, domestic interim awards are enforceable. The position as to the enforcement of a foreign seated award in India is uncertain as there is no express provision in the Act that expresses its enforceability. Enforcement of such awards can only be governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”). As the New York Convention does not define “arbitral award” whether an award given by the emergency arbitrator could be recognized depends on the national legislation of each country. Article 17H of the United Nations Commission on International Trade Law (UNCITRAL) Model law provides for enforcement of interim awards irrespective of the country in which it was issued. Hence many countries have incorporated similar provisions in their laws to recognize emergency arbitration awards under the category of interim international arbitration awards. But the Indian Arbitration Act does not include any provision regarding the same and hence any award passed by a foreign seat remains unenforceable. The only recourse left for the parties is to file an application under section 9 of the Arbitration Act to seek interim relief from Indian Courts.
The Delhi High Court in Raffles Design International India Pvt Ltd. v. Educomp Professional Education Ltd. held that any emergency arbitration award passed by a tribunal outside of India cannot be enforced in India. In this case, the question presented before the Court was that of the enforceability of an emergency award passed by an emergency arbitrator seated in Singapore. While holding that section 9 of the Arbitration and Conciliation Act did not provide for enforceability of foreign awards, the Court also reaffirmed the judgment of HSBC PI Holdings (Mauritius) Ltd. v. Avital Post Studioz Ltd. in which it was held that section 9 gives parties the option to approach a court for interim measures after obtaining an emergency award in a foreign tribunal.[ii]
So far, the position of Indian courts has been to expressly deny the enforceability of foreign awards under section 17(1) or any other section of the Act. The only recourse for the parties is to apply for interim measures under Section 9 of the Act for the indirect enforcement of a foreign award. Raffles Design highlights the oversight of the Indian courts in implementing the recommendation given by the Law Commission of India. However, this recommendation would have not been fruitful with respect to the enforcement of a foreign award as it only includes provisions for domestic seated emergency awards. A way forward towards global integration of dispute resolution would be to make a provision on the lines of UNCITRAL Model Law that allows the enforceability of interim awards irrespective of the country they have been passed in. Emergency arbitration is a useful pre-arbitral mechanism and the induction of this concept with respect to foreign awards would help India become a global arbitration hub like Singapore and Hong Kong. The recommendations contained in the 246th report of the Law Commission of India was reiterated by the High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India (HLC) under the chairmanship of Justice B.N. Srikrishna (Retd.) in its Report dated 30 July 2017. The HLC observed that considering the international practice of allowing enforcement of emergency awards, India should also take steps to allow enforcement of emergency awards under the Arbitration Act.[iii] The recently incorporated MCIA also brings forth the concept of emergency arbitration in India.
Emergency arbitration is a very relevant judicial tool in today’s time when the legal system around the world is marred by pendency and long delays in dispensing of justice. Indian court judges have for a long time complained that the workload is a lot for the justice system to proceed at a smooth pace. In such conditions, speedy alternate dispute resolution mechanisms are the need of the hour and emergency arbitration definitely qualifies to be one. Thus, it is high time that India attune its arbitration laws to international standards so that it can be recognized as an arbitration-friendly country globally.
*Subodh Singh and Swati Singh are third year students of ILS Law College, Pune. Any discussion on the topic can be made via mail to firstname.lastname@example.org.
[i] Madhu Sweta and Kanika Tandon; India: Emergency Arbitration In India: Concept And Beginning, Mondaq ( Nov. 25 , 2016 ) , https://www.mondaq.com/india/Litigation-Mediation-Arbitration/547970/Emergency-Arbitration-In-India-Concept-And-Beginning
[ii] Kartikey Mahajan and Sagar Gupta, Uncertainty of enforcement of emergency awards in India, Kluwer Arbitration Blog (Dec. 7, 2016), http://arbitrationblog.kluwerarbitration.com/2016/12/07/uncertainty-of-enforcement-of-emergency-awards-in-india/?print=print ; HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. & Ors. (MANU/MH/0050/2014)
[iii] India- Emergency Arbitration and its enforceablilty in Indian context, Coventus Law (17th April 2020), http://www.conventuslaw.com/report/india-emergency-arbitration-and-its-enforceability.
This article was coedited by Arnav Maru (Co-founder and Managing Editor) and Shruti Dhonde (Associate Editor).
Preferred Citation: Subodh Singh and Swati Singh, “Emergency Arbitration: Concept and Indian Scenario”, Arbitration & Corporate Law Review, Published on 29th June 2020.