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The Way Forward For Emergency Arbitration in India

Introduction

Even though arbitral tribunals are appreciated for providing quick relief,  they may not be able to provide urgent relief for protecting the subject matter of the arbitration as the constitution of tribunals is a time taking process. This is where emergency arbitration comes to the rescue, offering a quick decision on the case if the parties choose this option. This is because the concerned institution, following its rules, will appoint a tribunal within twenty-four hours of the application. The parties must then file their written statements within a specified timeline, and the emergency arbitrator will make a decision accordingly. The entire process is concluded within just 14-20 days, providing a much-needed lightning-fast alternative to seeking relief through national courts.[i] This article seeks to offer an insight into the evolution, benefits, and challenges of emergency arbitration, then it discusses the Indian Jurisprudence on emergency arbitration, and lastly, it proffers suggestions for the necessary reforms to be implemented to strengthen the mechanism of emergency arbitration and to tread firmly to reach the ultimate goal of transforming India into a global arbitration hub.

Evolution, Benefits, and Challenges

The foundational steps behind the concept of emergency arbitration were taken in 1990 by the International Chamber of Commerce, which identified the inability of the courts/arbitral tribunals to arrive at binding decisions in urgent situations, and then acted upon it to become the maiden arbitral institution which provided the option of pre arbitral emergency measures. Later on, many international institutions like SIAC, LCIA, HKIAC, etc. also adopted emergency arbitration measures considering their significance. It must be emphasized that to initiate emergency arbitration, the essentials of a valid arbitration agreement must be fulfilled. Additionally, a party is entitled to seek emergency arbitration unless they have explicitly opted out of this option. It is also noted that parties can seek recourse to the courts since the emergency tribunal does not have the authority to grant relief against third parties. .[ii]

Emergency arbitration is beneficial because it maintains the confidentiality of the parties, provides quick relief, and saves money and time by avoiding the need to file applications in different jurisdictions. Additionally, it ensures uniformity and efficiency since the relief is granted solely by the emergency arbitrator, eliminating the risk of conflicting decisions in various jurisdictions.

However, it also faces various challenges, the most significant being the one of recognition and enforcement due to the lack of legislation on the same. There is no streamlined procedure to enforce the order passed by the emergency arbitrator, hence distinct jurisdictions confer legitimacy on the same in distinct ways. Further, there is a lack of clarity in the Indian law regarding emergency arbitration as the term itself finds no mention anywhere. Moreover, the type of interim relief granted by the emergency arbitrator, be it orders or awards has different levels of ease for being enforced. Also, the award in emergency arbitration is “interim binding” as it can be set aside or varied upon the constitution of an arbitral tribunal, and another major roadblock is the uncertainty regarding the consequences of non-compliance with the directions of the emergency arbitrator.

Indian Jurisprudence

The Arbitration & Conciliation Act, 1996 (“A&C Act”) provides for interim measures under Sections 9 & 17. Section 9 deals with interim measures like appointment of next friend of a minor or person with unsound mind or for passing an injunction, preservation or security of the disputed amount, which can be awarded by courts, and it states that the same can be done at any stage of arbitration or prior to it, but the determining factor for granting relief post the constitution of the arbitral tribunal. Section 17(1) provides for the interim measures which can be awarded by arbitral tribunals, namely appointment of next friend of a minor or person with unsound mind or for passing an injunction, preservation or security of the disputed amount; and Section 17(2) confers the status of a civil court to the tribunal.

On the flip side of the coin, the Indian Courts have had limited opportunities to deal with the concept of emergency arbitration. The first opportunity arose before the Bombay HC in the case of HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. Here, the seat of arbitration was Singapore, the parties were governed by SIAC rules and emergency arbitration was invoked by the petitioner, who also got a favourable order, and then filed a Section 9 petition under the Arbitration & Conciliation Act, 1996 (hereinafter “A&C Act”) to get the same enforced in India. The issue here was regarding the applicability of Section 9, which was enshrined in Part I, to foreign seated arbitrations. The Court held that as the entire Part I except Section 9 was excluded from being applicable, they had consented to be subjected to Section 9. The Court did not go into the question of recognition of Emergency Arbitration under the A&C Act, it passed a similar order to that of the emergency arbitrator, implying the recognition and the deemed relevancy of such orders.

Then, in 2016, the Delhi HC got its chance in Raffles Design International India (P) Ltd. v. Educomp Professional Education Ltd. Here also, the seat and the applicable rules were Singapore and SIAC respectively, but the parties had not consented to be subject to Section 9. The Court though, made Section 9 applicable in the instant case by  virtue of the 2015 Amendment to the A&C Act, which in Section 2(2) conferred the applicability of Section 9, along with other provisions to international commercial arbitrations, irrespective of where the seat is. Since this Section was not made inapplicable by the parties, they had left open the option to move to Court for relief for urgent matters. It was decided that a Court will adjudicate upon a Section 9 petition  by applying its discretion and judicial mind, independent of the order given by the emergency arbitrator. This decision had the impact of nullifying the relevance and derecognition of the decision of the emergency arbitrator in  cases where the seat of arbitration was in a foreign nation.

Finally, in Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., the SC adjudicated a case wherein the seat of arbitration was Delhi, but the parties went for emergency arbitration as per SIAC rules. The petitioner contended that the award was enforceable under Section 17(2), while the respondent contended the opposite as the definition of “tribunal” under Section 2(1)(d) did not include emergency arbitrators, and that the award was not enforceable under Section 17(2) as Section 17(1) does not recognise an order passed by the emergency arbitrator. The Court laid down that an order passed by the emergency arbitrator is an interim order of an arbitral tribunal as per Section 17(1), hence, it can be enforced under Section 17(2) of the A&C Act. This judgement has provided much-needed clarity on the status of domestic seated arbitration, but the grey clouds of uncertainty still hover over foreign seated arbitrations.

The Way Forward

Despite the quick nature of arbitration, it is not  instantaneous enough to mitigate the risks like refusal to share documents or destruction of evidence, which could have severe repercussions like delays or worse, render the arbitration meaningless.[iii] The only alternative in the sphere of arbitration in such a scenario is opting for emergency arbitration. Thus, it is necessary that India has a strong foundation for emergency arbitration, which is a prerequisite for achieving the target of transforming India into a global arbitration hub.

The initial step is the recognition of emergency arbitration by the legislature, and the same can be achieved in two ways. Either there can be a separate statute to deal with emergency arbitration like Hong Kong which has passed an ordinance about the same and the current definition of an arbitral tribunal can be amended to explicitly include emergency arbitration, making it subject to the same law, just like the normal arbitrations, a path which has been trodden on by Singapore. Moreover, the latter method has been recommended by the Law Commission of India in its 246th report and also the B.R. Srikrishna Committee Report. Both of these reports bat for the inclusion of an emergency arbitrator under the definition of an emergency tribunal. Moreover, the B.R. Srikrishna Committee also suggests that the scope of arbitral awards should be expanded to include emergency awards and the same should also be defined in the Act. Another step that the legislature must take is to recognise and enforce the awards of emergency arbitrations that are seated outside India. Adopting this measure would be a great relief to the concerned parties as they would not have to go through the risks, uncertainties, costs, and delays involved in litigation, instead, the urgent reliefs granted to them by the emergency arbitrator would be directly enforceable in India.

A bottleneck in the concept of emergency arbitration is that it can only be chosen if the parties agree to be bound by the rules of an arbitral institution for conducting their arbitration. This means that if no institution has been chosen for arbitration, the option of emergency arbitration would not be vested with the parties, hence, a great number of parties will be left out of the ambit of emergency arbitration. The remedy for this situation is that the law should allow emergency arbitration for such situations, and the role of the Arbitration Council of India must be enhanced to impose an additional duty on it to appoint emergency arbitrators when the application for the same is submitted before it. There can be a specific set of rules adopted for such emergency arbitrations, which would deal with all the intricacies of the procedure and timelines to be followed.

There exists a common perception involving emergency arbitration that the parties who are a part of the process, will voluntarily comply with the verdict of the emergency arbitrator, but such a rosy view cannot be assumed to be the reality every time. Thus, it is suggested that any non-compliance must be treated strictly, and such violators should be punished with contempt of court. Further, as the Courts have the power to provide ex-parte relief, the same power must also be extended to emergency arbitrators in India, just like the Swiss rules do, to maximize the benefit of emergency arbitration. Lastly, these reforms should be enforced with retroactive effect and the date of the arbitration agreement should not be a bar to opting for emergency arbitration as only then, there would be increased conferment of the benefits of emergency arbitration and the parties would avoid litigation, which was the very intent of the parties when they had decided to enter into an arbitration agreement. Thus, the implementation of these suggestions would go a long way in increasing the confidence of the stakeholders in the Indian arbitration system.

[i] Emergency Arbitrators: Role And Powers By Abhinav Bhushan and Omar Ahmed, Arbitrator’s Handbook, Shashank Garg, Lexis Nexis, 2022.
[ii] ibid.
[iii] ibid.

The post is written by Tanish Arora, a fourth-year student at the National Law University, Odisha.

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