Enforcing Foreign Emergency Orders: Plugging the lacunae in the Indian Arbitration law
Tasha Bluewin Joseph[i]
The recent dispute involving Amazon.com Inc. and Reliance Retail Venture Limited (“RRVL”) has again highlighted the legislative lacunae of Emergency Arbitration (“EA”) in India. It has specifically brought out the importance of recognizing and enforcing foreign EA orders, and the need to incorporate provisions on the same within the Arbitration and Conciliation Act, 1996 (“ACA”). The dispute in concern pertained to the acquisition of assets and business within the Future Retail Limited by RRVL, a subsidiary of Future Coupons Ltd. This was opposed by the Amazon group of shareholders on grounds of it being in contravention of a shareholding agreement with the parent, Future Coupons Ltd. In order to prevent this transaction from taking effect, the Amazon group made an application for EA in the Singapore International Arbitration Centre (SIAC). Upon receiving this application, an EA was appointed, who passed interim EA orders in favour of the Amazon group. In a recent development, the RRVL has chosen to go ahead with its transaction despite the EA interim order passed against it. Amazon.com Inc. would need to accordingly try and enforce the EA order in India with great hurdles in its path. The question that remains, however, is regarding the provision of EA in India and the recognition and enforcement of foreign EA orders in India.
This article gives a general understanding, of the need and purpose of EA. It discusses the existing legal ambiguities regarding EA within the ACA. It presents the status of EA in India as well as highlights the lacunae in the ACA with respect to EA and the recognition and enforcement of foreign EA orders. Further, the article discusses why some necessary steps need to be taken in order to include EA and enforce foreign EA orders in India which will fulfil its aspirations of being an Arbitration Hub to the world.
Emergency Arbitration: Need and Purpose
The application for EA could be seen as similar to a claim of anticipatory breach in Contract law. An EA award or order is used by a a party to an agreement, when it anticipates a possible action/omission on the part of the other party/parties. In order for obtaining a successful EA Award/order, the action or omission should be of such a nature, that passing an order against it would prevent grave and irreparable harm to the claimant. The EA order, in effect, acts as an injunction on the other party/parties from causing this irreparable harm. The application for EA is relevant provided ‘time is of essence’ to the party seeking interim relief and applying for EA has been provided for in the contract between the parties concerned.
Half-baked amendments and the existence of ambiguities on Emergency Arbitration
The 246th Law Commission Report made by the High level Committee headed by Justice B.N. Srikrishna had made several recommendations on amending the ACA as it stood back then. One of those recommendations pertained to provision and recognition of EA in the ACA. Several amendments were made in the form of the 2015 Amendment and 2019 Amendment. At present, however, the ACA still does not explicitly provide for and include EA within its ambit. The amendments have allowed the application of Section 9 to foreign seated arbitration and have also amended Section 17 which deems any interim relief/order passed by arbitral tribunals to be a court order for enforcement. The lacunae that remain pertain to the definition of arbitral tribunal under Section 2(1) (d) and absence of a provision on the lines of Section 17(2) in Part II.
a) Ambiguity created due to absence of the term ‘emergency arbitrator’ under section 2(1)(d)
Due to the lack of including an Emergency arbitrator within the definition clause of section 2(1) (d), there arises confusion regarding the position of an Emergency arbitrator. The confusion pertains on the categorization of such an arbitrator as an arbitral tribunal. This is important to determine considering the legal sanctity attached to the position of the arbitrator results in legal recognition of any orders passed by him/her. For these orders to be enforceable, the position of the Emergency arbitrator needs to be definitively ascertained. At present this section defines an arbitral tribunal as a sole arbitrator or panel of arbitrators only. This lack of clarity on the position of an Emergency Arbitrator has resulted in divisive opinions on the enforceability of orders passed by such arbitrators. Some courts have taken the broad approach of allowing enforcement of such orders while some courts have ruled against this approach altogether.
b) Ambiguity created due to lack of a provision similar to section 17(2) in Part II of the ACA
Usually when interim orders are passed, they are enforceable in India under section 17 of the ACA, as long as the arbitration is seated in India. In a foreign seated arbitration, the same cannot be enforced under Section 17. As seen in the dispute between Amazon.com Inc. and RRVL, the order was passed in Singapore and the same would not be enforceable in India. While some suggest that these EA orders should be considered as ‘awards’ in order to be enforceable under Part II of the ACA, this argument may fail considering the ‘finality’ nature of an award and temporary nature of the orders. Thus, while domestic EA orders can be said to be recognized under section 17(2), the Legislature has not incorporated a similar provision in Part II pertaining to foreign arbitration orders in India. This ambiguity around foreign seated EA, presents itself as an unnecessary lacunae and an obstacle in the alternative dispute resolution mechanisms offered in India, posing other complexities in legal relationships between parties.
The Need for inclusion of EA and enforcement of foreign EA orders in India
a) Prevent irreparable harm to a parties to a contract
As seen in many cases, including the present dispute between Amazon.com Inc. and Future Group, the proceedings of EA offer an immediate relief/remedy and prevent the claimant from facing irreparable harm. ‘Time is of essence’ in these situations, which conveys that delay would cause harm to, and affect the interests of the party seeking the EA. It will help in reducing the delay in waiting for the constitution of an arbitral tribunal and will also set the course for the actual proceedings and other reliefs before the final arbitral tribunal. In such a situation, it is inconvenient to even consider waiting for the constitution of an arbitral tribunal or applying for the 6 month long proceedings of the Fast Track Arbitration (FTA) provided by the ACA. The recognition and enforcement of orders passed in a foreign seated EA would help in facilitating a.pro-arbitration stance in India as it will provide speedy and efficient remedy for the claimant. It will prevent the claimant from suffering irreparable harm and instances that adversely affects its commercial interests. Recognition will also bring down instances of non-compliance of the orders by the party or parties against whom the orders were passed.
b) Emergency Arbitration within the ACA will be in line with International Standards and will bring consistency between rules of arbitral institutions in India and domestic legislation
Being the leading legislation on foreign arbitral orders, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York Convention) at present does not provide for EA. This is on account of the fact that such an award has not been attributed the status of ‘finality’. This idea is reflected in Part II of the ACA where only final awards are recognized and enforceable. However, ever since the UNCITRAL Model Law was amended to permit interim reliefs being given by arbitral tribunals, several arbitration institutions have incorporated rules that permit the same, one provision being that of an EA within their rules. For instance, the prominent and sought after arbitral institutions like Hong Kong International Arbitration Centre (HKIAC), SIAC, London Centre for International Arbitration (LCIA), International Chamber of Commerce (ICC) have included a provision for emergency arbitration where the parties are unable to wait for the constitution of an arbitral tribunal. Accordingly, respective pro-arbitration jurisdictions like Hong Kong and Singapore have provided for EA within their domestic legislations. Including EA within their domestic legislation facilitates the smooth recognition and enforcement of interim orders passed by an arbitrator in an EA. India needs to incorporate provisions on EA to ensure it is on par with what other international jurisdictions offer and promote it as a hub for Arbitration.
A point to note is that arbitration institutions in India such as Mumbai Centre for International Arbitration (MCIA), Nani Palkhivala Arbitration Centre (NPAC), Indian Council of Arbitration (ICA), Delhi Arbitration Centre (DAC), also recognize EA and provide for a specific procedure with respect to it. India has to include EA provisions to ensure consistency between rules of arbitral institutions in India and domestic legislation. It can do so by including an Emergency arbitrator within section 2(1)(d) and by providing a similar provision as section 17 (2) in Part II of the ACA. In addition to legislative changes, the government can also create an ecosystem for EA in India. India would need to create a special pool of Emergency arbitrators who, can be trained and certified for their appointment to EA proceedings.
Thus, by legally providing EA in the domestic legislation, the ACA will be in line with International Standards and the interim orders passed in EA proceedings at the MCIA, NPAC and DCA, will be recognized and enforced.
c) Elimination of confusion on enforcement of foreign seated EA orders in India
Without clear provisions within our domestic law on EA, there is less impetus given to pro-arbitration stance taken by India. In fact, parties are susceptible to rulings passed in the Raffles Design where, the Delhi High Court held that foreign seated EA orders were not enforceable in India but permitted the seeking of interim reliefs by a court without acknowledging the extant foreign EA award. The Court, in essence, while keeping its doors open for seeking interim reliefs, had approved judicial intervention in the arbitration proceedings. It is thus important for India to eliminate this confusion and avoid divided opinions with respect to enforcing such foreign emergency orders.
The push for inclusion of EA within the ACA and the recognition and enforcement of foreign EA orders, have been irascibly persistent in the Indian Arbitration scenario. Academia, experts and constituted committees have highlighted this lacunae within the ACA. Yet, the 2015 and 2019 amendments have been half-baked and haven’t adequately addressed the gaps within the law. This has resulted in the repetitive nature of cases coming to courts and the division of opinion on treatment of such orders among the judicial experts. It is indeed the need of the hour for the Legislature to plug the gaps pertaining to EA within the ACA and resolve these discrepancies issues once and for all.
[i] Tasha Bluewin Joseph is a Graduate from Jindal Global Law School and an incoming Associate at Cyril Amarchand Mangaldas. She has a keen interest in legal writing about developments in Corporate and Arbitration laws. For any discussion related to the article, she can be contacted via mail: email@example.com..
Preferred Citation – Tasha Bluewin Joseph, “Enforcing Foreign Emergency Orders: Plugging the lacunae in the Indian Arbitration law”, Arbitration & Corporate Law Review Blog, Published on 10th November, 2020.