PublicationsEmergency Arbitrator – The Concept & its Implications in Indian Diaspora

May 18, 20210
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Introduction

In order to protect one’s assets and evidence which have probable chances of being misplaced or altered, the novel concept of Emergency Arbitration has emerged. It usually acts as an emergency relief while resolving disputes via Arbitration.

Where disputes are pertaining to determination of legal rights, it is essential that the same is decided timely and without any delay. Or else, such delay may cause irreparable damage to the aggrieved party and at times, render them remediless. This is more so when parties decide to amicably settle disputes through Arbitration as the procedure for the same has been decided by the parties themselves.

Hence, from the past few years, provisions for Emergency Arbitration have become necessary in solving disputes between parties.

Emergency Arbitration means the mode of dispute resolution wherein a party/applicant approaching the emergency arbitrator has some urgent and immediate interim relief to be granted which may not be possible until the composition of arbitral tribunal. The reasons may be manifolds but to mention a few, the party/applicant may face resultant permanent loss or damages if the emergency reliefs are not granted, the party/applicant may face permanent loss or damages which may not be recoverable even upon the composition of an arbitral tribunal, the party/applicant is seeking for emergency reliefs which may not at all be list of the dispute upon the composition of an arbitral tribunal etc., upon many other emergency reliefs a party/applicant to dispute may be entitled to.

In order to recognize emergency arbitration, which has been a matter of much long and controversial debate in the Indian Arbitration scenario, it was in its 246th Report of the Law Commission[1] with respect to amendments in Arbitration and Conciliation Act, 1996, that the Law Commission proposed insertion of Section 2(d) of the Act. This insertion purported to add “and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator” within the ambit of an ‘arbitral tribunal’. For the benefit of the readers, the proposed amendment read as under:

“Section 2(d): ‘Arbitral tribunal’ means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of arbitrator, includes such emergency arbitrator.”

 Thus, in the Indian Arbitration scenario, the legislative and statutory intent and recommendation has always been present, just that its implications and enforceability has always been a matter of grave concern. Probably that’s why, to date, The Arbitration and Conciliation Act, 1996 (included 2015 Amendments), lacks the applicability of an ‘emergency arbitrator’ or ‘emergency arbitration’. The proposed amendments of the noted Law Commission’s 246th Report were rejected and therefore, the Arbitration and Conciliation Act, 1996 continues to not provide provisions pertaining to ‘emergency arbitration’.

Need for an Emergency Arbitrator

When parties from different jurisdictions enter into an international agreement, it becomes difficult to determine the court that has jurisdiction to grant interim injunction. This difficulty is resolved with the help of Emergency Arbitration. It is an immediate measure in cases where there is an imminent risk of irreparable damage. It essentially helps in maintaining status quo during the pendency of a dispute.

The effectiveness of an Emergency Arbitration is based on two fundamental determinants:

  1. Fumus boni iuris-Reasonable possibility that the requesting party will succeed on merits;
  2. Periculum in mora– if the measure is not granted immediately, the loss would not and could not be compensated by way of damages.

The parties to the dispute may refer the same for emergency arbitration before notice of arbitration is issued and the tribunal is constituted. The award is enforceable like an order of the court in jurisdictions that recognise emergency awards.

Apart from being an instant remedy, an emergency arbitration also acts as a means to reach an amicable settlement which is ideal for both the parties to an arbitration agreement.

Institutional Arbitration and Emergency Arbitrator

However, notwithstanding the rejection of the Law Commission’s 246th Report, institutional arbitration bodies such as- NPAC, ICA, MCIA, DAC (“Delhi International Arbitration Centre”), Court of Arbitration of the International Chambers of Commerce-India, MHAC (“Madras High Court Arbitration Center (“MHAC”) have all incorporated the provisions in relation to emergency arbitration, thereby, given at least ‘institutional recognition’ to applicability and operations of such provisions in India Arbitration scenario.

Several esteemed arbitral institutions like HKIAC, SIAC, LCIA and ICC have included provisions for Emergency Arbitration as a remedy in cases where parties to a dispute cannot wait till the arbitral tribunal gets constituted. Emergency Arbitration further helps in enabling the parties in seeking speedy reliefs than local courts and arbitral tribunals.

Arbitral institutions in India such as Mumbai Centre for International Arbitration (MCIA), Nani Palkhivala Arbitration Center (NPAC), Indian Council of Arbitration (ICA), Delhi Arbitration Centre have accorded recognition to emergency arbitration and provided for specific procedure in this regard within their rules. The definition of the term “Award” as per the MCIA rules reads as under:

“Award” includes a partial or final award and an award of an Emergency Arbitrator

Scenario in India

As opposed to various jurisdictions, the concept of Emergency Arbitration and award had not found its place in the Indian Legislation.

However, in 2014, the Law Commission of India in its 246th report recommended that the definition of “arbitral tribunal” under Section 2(1)(d) of the Arbitration Act must be changed to a definition as follows:

“Section 2(d): “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator.”

The intent behind such change was to broaden the scope of the “arbitral tribunal” so as to include an emergency arbitrator. This would also accord statutorily recognition to the rules of arbitration institution which provide for an emergency arbitrator. However, the said recommendation was not given effect to and not considered in the subsequent amendments of the Arbitration Act.

Thereafter, in a Report of a High-Level Committee set up under the chairmanship of Justice B.N. Srikrishna (Retd.) dated 30 July 2017, the significance of emergency arbitrator was appreciated and amendments to the Arbitration and Conciliation Act, 1996 were also recommended. These recommendations included insertion of provisions for emergency arbitration. The Committee stated that India should be in consonance with the international standards and emergency awards are fundamental in providing legislative support to rules of arbitral institutions which provide for emergency arbitration.

Emergency Arbitrator v Interim Measures u/s. 9 of the Arbitration and Conciliation Act, 1996

Emergency arbitration provisions can sometimes be confused as being emergency arbitrator’s orders pursuant to Section 9 i.e., Interim measures, etc., by Court. However, these two provisions are not inter-related and are very distinct from one another. As can be argued that, under both, emergency arbitration and Section 9 petitions, both are to be filed and adjudicated prior to the composition or start of mandate of an arbitrator or arbitrators, however, the law as per the Arbitration and Conciliation Act, 1996 mandates a particular timeline for filing of Section 9 petitions whereas, the same cannot be said for emergency arbitration provisions. Another distinct feature of emergency arbitrator’s order is its lack of statutory recognition in enforceability, especially in the Indian Arbitration scenario wherein a party may or may not be able to seek recognition subject to the Court and Tribunal’s jurisdiction as applicable, whereas the interim measures as ordered by Court of competent jurisdiction are recognized and enforceable as per law as being ‘judicial orders’ having precedential value or principle of stare decisis.

The only similarity in terms of both the provisions is that, under both, parties to dispute cannot seek for final determination of substantive dispute in consideration i.e., the merits of the dispute cannot stand to be ‘finally adjudged’. What stands to be adjudicated by emergency arbitrator and Section 9 Court is order in the nature of ‘preliminary’ substance wherein applicant’s rights can be safeguarded, put to status quo against possible intervention by the respondent to the dispute or a stay order may be levied on such grounds in accordance with law.

Case Laws

Bombay High Court and Delhi High Court have considered the aspect of emergency arbitration while deciding various cases. Some have been discussed herein below:

  1. HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Limited and Ors. (HSBC)[2]

The Bombay High Court, vide its Order dated 22 January 2014, granted interim reliefs to the Petitioner under Section 9 of the Arbitration Act according to the award passed by the Emergency Arbitrator appointed by SIAC. As the HSBC judgment dealt with a pre-BALCO agreement, the Bombay High Court gave effect to the award passed by the emergency arbitrator by granting similar reliefs to the Petitioner under Section 9 of the Arbitration Act.

  1. Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors. (Raffles)[3]

The Delhi High Court, in its Order dated 7 October 2016, held that the emergency award passed by the emergency arbitrator cannot be enforced under the Arbitration Act. However, it further held that it is open to a party to approach the Court under Section 9 of the Arbitration Act to seek interim reliefs. The said court may, thereafter, grant interim reliefs to the party without considering the order passed by the emergency arbitrator.

  1. Future Retail Ltd. v. Amazon.com Investment Holdings LLC & Ors. (Future)[4]

 The Delhi High Court, in its Order dated 21 December 2020, pronounced its judgment in the captioned matter. This landmark judgment calls for a separate paper altogether as having dealt with multiple issues and propositions in law, however, with regards to the topic of this article as ‘emergency arbitration’, following was the issue germane to the dispute between parties – On validity of Emergency Arbitration (since the concept of emergency arbitration is lacking in Arbitration & Conciliation Act, 1996). On the validity of emergency arbitration, the court held that where the parties exercising autonomy expressly, in writing vide an agreement have chosen different procedural rules governing an arbitration, they have deemed have assumed that they are aware of the procedural provisions of such rules, including the procedure for obtaining interim relief, and the fact that such arbitration provides for the provisions of emergency arbitration by appointment of an emergency arbitrator before the appointment of an arbitral tribunal. In the present case at hand, the parties had with all intention and knowledge, had left it upon themselves, to choose between availing interim relief from the emergency arbitrator on one hand, or the Courts under Section 9 of the Arbitration and Conciliation Act, 1996 on the other hand. Therefore, the Respondent i.e., Amazon, had thought it fit to avail the remedy via the first mode of redressal i.e., interim relief through appointment of emergency arbitration by emergency arbitrator. In this particular instance, the Hon’ble High Court of Delhi, of Single Judge bench of J.Mukta Gupta proceeded with the analogy that since the parties had an option to choose forum for remedy of  seeking interim relief, the parties are free to choose whichever remedy is best suited to them and on the contrary also, nothing in the Arbitration and Conciliation Act, 1996 prohibits the party from doing so. Thus, with the current analogy and interpretation of provisions of emergency arbitration in the Indian Arbitration scenario is concerned, since the Arbitration and Conciliation Act, 1996 does not speak anywhere on emergency arbitration and appointment of such emergency arbitrators under Section 2 i.e., arbitral tribunals, it may not also mean that such statutes prohibits their application if the parties have so chosen in an International Commercial Arbitration, after all ‘party autonomy’ is what must prevail in any arbitration.  It was also held that the conduct of such emergency arbitration’s is not against the ‘public policy interests’ of the law of the land i.e., India and parties by virtue of arbitration agreement in International Commercial Arbitration, choose to do away with the provisions and applicability of Section 9 of the Arbitration and Conciliation Act, 1996.

Finally, it was held that the ‘emergency arbitrator’ prima facie is not a coram non judice and the consequential emergency arbitration order is not invalid in this count.

Conclusion

Irrespective of the fact that Emergency Arbitration is a revolutionary step vis-a-vis Injunctions in Arbitration procedures across the globe, a formal legal acknowledgment of the awards passed by an Emergency Arbitrator has not become a reality in India as it lacks legitimacy and recognition within the domain of Indian jurisprudence and also, clearly lacks intent with the Legislature and even Judiciary. However, the present Amazon judgment is a path breaking judgment in its own respect that the Hon’ble High Court of Delhi has intended to mean that the provisions of emergency arbitration it not corom non judice in terms of Indian Arbitration scenario, as the Arbitration and Conciliation Act, 1996 does not speak on such emergency arbitration provisions, but it does not even do anything to prohibit the applicability of the same. In this juncture, it will be safe conclude that, with the latest line of judgment and now principle of precedent as set in India on emergency arbitration, ‘the silence of an Act on such provisions has not meant inapplicability of the same’, rather such parties have locus standi and such provisions are valid lis before Courts.

It looks like the recommendation of Law Commission’s 246th Report on inclusion of emergency arbitration provisions as Section 2 (d) of the Act will be a recommendation which will echo on the ears of the Indian arbitration community, the decision makers and decision implementers, at least for now.

REFERENCES

[1] The Law Commission’s 246th Report dated August 5, 2014

[2] Arbitration Petition No. 1062/2012 dated January 22nd, 2014.

[3] O.M.P (I) (Comm.) 23/2015 dated October 7th, 2016.

[4] CS(COMM) 493/2020 dated 21st December, 2020

CITE THIS WORK

Legal Maxim (June 22, 2021) Emergency Arbitrator – The Concept & its Implications in Indian Diaspora. Retrieved from https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/.
Emergency Arbitrator – The Concept & its Implications in Indian Diaspora.” Legal Maxim – June 22, 2021, https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/
Legal Maxim May 18, 2021 Emergency Arbitrator – The Concept & its Implications in Indian Diaspora., viewed June 22, 2021,<https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/>
Legal Maxim – Emergency Arbitrator – The Concept & its Implications in Indian Diaspora. [Internet]. [Accessed June 22, 2021]. Available from: https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/
Emergency Arbitrator – The Concept & its Implications in Indian Diaspora.” Legal Maxim – Accessed June 22, 2021. https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/
Emergency Arbitrator – The Concept & its Implications in Indian Diaspora.” Legal Maxim [Online]. Available: https://www.legalmaxim.in/emergency-arbitrator-the-concept-its-implications-in-indian-diaspora/. [Accessed: June 22, 2021]
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