Why the ‘emergency’ in arbitration

For the first time in India, the Supreme Court, in the Amazon vs Future Retail dispute, held that the award of an emergency arbitrator was enforceable. Emergency arbitration (EA) — a time-bound process where the ‘emergency arbitrator’ has to pass an ‘emergency award’ within a specified period, typically a fortnight — has become popular globally in recent times, with most arbitral institutions incorporating it in their rules. Until the Amazon vs Future Retail case, there was no clarity on the enforcement of an emergency arbitration award. This is because the Arbitration and Conciliation Act, 1996, does not provide for an EA. Therefore, an EA can be invoked only if the parties agree to institutional arbitrations providing for it. Also, the Act only defines an award to include an interim award. It does not specifically provide for the requirements 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 empowers an arbitral tribunal to grant interim reliefs, did not expressly provide for such interim reliefs to be enforceable as an order of the court.

That said, Indian courts, when having to consider emergency awards, have tried to uphold their sanctity. The Bombay High Court and the Delhi High Court in the HSBC vs Avitel and Raffles Design vs Educomp cases, respectively, granted reliefs similar to those granted in the EA. These reliefs were granted in Section 9 (which empowers civil courts to grant interim reliefs) proceedings, under the Act, and were initiated subsequent to the EA.

However, in the case of Raffles Design, the Delhi High Court observed that a court would consider the request for interim reliefs under Section 9, independent of the emergency award. The Delhi High Court in the case of Ashwani Minda vs 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 reasons for the refusal was that once a party had failed to get interim reliefs in an EA it cannot 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, all the reliefs were granted in subsequent proceedings, under Section 9 of the Act.

India-seated proceeding

Note that these 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 an SIAC-administered India-seated arbitration. Future Retail failed to comply with the emergency award and Amazon filed for its enforcement. The SC in its judgment effectively gave emergency awards the status of interim orders passed by an arbitral tribunal under Section 17 of the Act.

Also read

Welcome amendments to the Competition law

Don’t assume powers, SC tells High Court

Money laundering: SC upholds ED’s powers

Section 17 has been amended in 2015 to make interim orders enforceable like an order of a civil court, making interim orders passed by arbitral tribunals enforceable. 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 arbitrations seated outside India.

Two propositions therefore emanate from the above analysis. First, EA awards passed in India-seated arbitrations are enforceable like orders passed by Indian civil courts. Second, in foreign-seated arbitrations, emergency awards are unenforceable and, therefore, subsequent Section 9 proceedings would have to be filed in Indian courts for interim reliefs. The courts would consider the request on its own merit.

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 Indian court to independently assess whether interim relief ought to be granted. The emergency award will merely provide some persuasive value in 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 abide by a court order rather than an order passed by an arbitrator. With a court order, 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, the decision to invoke emergency arbitration should be based on what a party seeks to achieve. For instance, if a party seeks reliefs 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 to consider approaching Indian courts under Section 9 of the Act, irrespective of whether the arbitration is seated in India or not.

The writer is Partner, K Law, a Mumbai-based law firm