Should parties seeking urgent interim relief consider invoking EA or would they be better served approaching Indian courts for such relief?
An emergency arbitration (EA) is an arbitration mechanism where parties can seek urgent interim relief prior to the formation of the arbitral tribunal. It is a time-bound process, with the ‘emergency arbitrator’ expected to pass an ‘emergency award’ within a specified period (typically around 14-15 days from the date of the appointment of the emergency arbitrator).
EA has become very popular over the past decade, with almost all major arbitral institutions having incorporated EA provisions in their rules. In India, the EA mechanism gained significant limelight during the Amazon v. Future Retail dispute where, for the first time, an emergency award was held to be enforceable by the Supreme Court of India. However, despite the said judgment, is EA an effective mechanism in India-related disputes (disputes involving Indian parties or having India as the seat of arbitration)? Should parties seeking urgent interim relief consider invoking EA or would they be better served approaching Indian courts for such relief? These are the questions that this article seeks to answer.
EA under Indian Law
The Arbitration and Conciliation Act, 1996 does not provide for EA. Therefore, it can be invoked only if the parties agreed to institutional arbitration providing the option of EA. Also, until the Amazon case, there was no clarity on the enforcement of an emergency award in India. This is because the Act only defines an award to include an interim award. It does not specifically provide for the requirements that are to be fulfilled for an order of an arbitrator to be declared an award. Given this lack of clarity, courts in India interpreted an award to mean an order which ‘finally’ determines some part of the dispute or issue between the parties in an arbitration.
However, most EA rules provide that an emergency award may be confirmed, modified or revoked by the arbitral tribunal (once it is appointed) and, therefore, it is difficult to say that an emergency award finally determines an issue or some part of the dispute in an arbitration. Also, Section 17 of the Act (prior to its amendment in 2015), which provides an arbitral tribunal with the power to grant interim relief, did not expressly provide for such interim relief to be enforceable as an order of the court.
That being said, Indian courts, when faced with having to consider emergency awards, have tried to uphold their sanctity. The Bombay High Court and the Delhi High Court in the cases of HSBC v. Avitel and Raffles Design v. Educomp respectively, granted parties relief similar to those granted in the EA, in Section 9 proceedings initiated subsequent to the EA. However, in the case of Raffles Design, the Delhi High Court observed that a court under Section 9 would consider the request for interim relief independent of the emergency award.
The Delhi High Court in the case of Ashwani Minda v. U-Shin Ltd refused to grant interim reliefs under Section 9 of the Act in line with the order of the emergency arbitrator. One of the grounds for refusing the interim relief was that once a party had failed in its attempt to get interim relief in an EA, it was not open for that party to use Section 9 proceedings to get a ‘second bite at the cherry’. As is evident from the above, despite the challenges in enforcing emergency awards, courts have respected EAs and emergency awards. However, they were all in subsequent proceedings for interim relief under Section 9 of the Act. It is pertinent to note that the above judgments were all passed in the context of foreign-seated arbitrations. The Amazon case considered the issue of enforcement of an emergency order in an India-seated arbitration. In this case, an emergency award was secured by Amazon against Future Retail in a Singapore International Arbitration Centre (SIAC) administered, India-seated arbitration. Future Retail failed to comply with the emergency award and Amazon filed for enforcement of the same. The Supreme Court in its judgment held that an emergency award can be referred to and are made under Section 17 of the Act, thereby giving emergency awards the status of interim orders passed by an arbitral tribunal. Section 17 has been amended in 2015 to make interim orders enforceable like an order of a civil court. Therefore, an emergency award in an India-seated arbitration would be akin to an interim order passed by an arbitral tribunal and similarly enforceable. The principle laid down in this judgment would be applicable only to India-seated arbitrations as Section 17 is not applicable to arbitration seated outside India.
Two propositions therefore emanate from the above analysis:
1. Emergency awards passed in India-seated arbitration are enforceable like orders passed by Indian civil courts.
2. In foreign-seated arbitration, emergency awards passed therein are unenforceable and, therefore, subsequent Section 9 proceedings would necessarily have to be filed in the relevant Indian courts seeking interim relief. The said courts would then consider the request of the applicant on its own merits.
The Indian Perspective
For all its popularity, the enforcement of an emergency award remains a challenge in India. An emergency award passed in a foreign-seated arbitration is not enforceable. A party with an emergency award is compelled to file a Section 9 proceeding under the Act requiring the relevant Indian court to independently assess whether interim relief ought to be granted to the party seeking it. The emergency award will merely provide some persuasive value to the party seeking interim reliefs. While enforcement of an emergency award passed in an India-seated arbitration is now possible, it is more likely that in practice, parties respect and abide by a court order rather than an order passed by an arbitrator. By getting an order from a court under Section 9 of the Act, a party could possibly avoid the need to enforce the order as was done in the case of Amazon. Therefore, in an India-related dispute, whether to choose to invoke emergency arbitration or not should be considered based on what a party seeks to achieve. For instance, if a party seeks relief which may have to be enforced in multiple jurisdictions, then invoking EA may be the preferred mechanism. However, if the interim relief is eventually going to be enforced only in India, it may be prudent for a party to consider approaching Indian courts under Section 9 of the Act, irrespective of whether the arbitration is seated in India or not.
Ayush Agarwala is a Partner at
Krishnamurthy & Co.
Courtesy: Bar and Bench