Knowledge Highlights 18 January 2023
Indian Supreme Court enforces SIAC’s emergency arbitrator order in India-seated arbitration: Impact and consideration for foreign investors
Knowledge Highlights 22 September 2021
On 6 August 2021, the Indian Supreme Court issued its decision in Amazon.com NV Investment Holdings LLC v Future Retail Limited & Ors where it allowed the enforcement of an order passed by an emergency arbitrator under the Singapore International Arbitration Centre (“SIAC”) Arbitration Rules (“SIAC Rules”) in an arbitration seated in New Delhi, thereby clarifying that India does recognise emergency arbitration notwithstanding the lack of express recognition of the concept in Indian arbitration legislation.
This is a significant pro-arbitration decision providing parties to an India seated arbitration an additional avenue to seek urgent interim relief and potentially paving the way for greater judicial support in the enforcement of emergency arbitrator awards rendered in foreign arbitrations.
The dispute at issue was between Amazon.com NV Investment Holdings LLC (“Amazon”), Future Retail Ltd (“FRL”), India's second-largest offline retailer, and FRL’s shareholders including Future Coupons Private Limited (“FCPL”) and the members of the Biyani family (together, “Biyani Group”). Amazon agreed to invest a sum of approximately US$190 million in FCPL, on the condition that FRL could not transfer its retail assets to certain “restricted persons” (including the Ambanis, the owners of the Reliance Group) without Amazon’s consent. The present dispute arose when the Biyani Group entered into a transaction for the amalgamation of FRL with the Ambani Group without Amazon’s consent (“transaction”). The transaction documents were governed by Indian law providing for all disputes to be resolved by arbitration pursuant to the SIAC Rules with New Delhi as the seat of the arbitration. On 5 October 2020, Amazon commenced the arbitration and sought urgent interim relief by filing an emergency arbitrator application. On 25 October 2020, the emergency arbitrator issued an interim award (“interim award”) in favour of Amazon, restraining the transaction from proceeding. Amazon then sought to enforce the interim award under section 17(2) of India’s Arbitration and Conciliation Act, 1996 (“ACA”). Orders enforcing the interim award were granted by a single judge of the Delhi High Court (“Judge”) who held that the interim award was an order under section 17(1) of ACA (interim measures ordered by arbitral tribunal) and was enforceable by the court under section 17(2) of ACA (“initial judgment”). Section 17(2) provides that, subject to certain exceptions, an order of the arbitral tribunal shall be deemed to be an order of the court and is enforceable as such.FRL filed separate appeals against the interim award as well as the initial judgment before the appellate bench of the Delhi High Court. The court stayed the executions of the interim award and the initial judgment. Amazon appealed to the Supreme Court.
The Supreme Court identified the issues before it as follows:
(a) Whether an “award” delivered by an emergency arbitrator under the SIAC Rules can be said to be an order under section 17(1) of ACA; and
(b) Whether an order passed under section 17(2) of ACA in enforcement of the award of an emergency arbitrator by a learned single Judge of the High Court is appealable.
The Supreme Court stated that it was “wholly incorrect” to say that ACA does not recognise emergency arbitrator orders, noting that ACA recognises full party autonomy to have a dispute decided in accordance with institutional rules, including provisions relating to emergency arbitrators. The Supreme Court went on to explain that orders of emergency arbitrators are an important aid in decongesting the civil courts and affording expeditious interim relief to the parties. In addressing emergency arbitrator orders specifically, the court said that emergency arbitrator awards are exactly like an order of an arbitral tribunal, with parties being heard and reasons given in support.
Section 17(1) empowers an arbitral tribunal to order interim measures on a party’s application during arbitral proceedings. As the arbitral proceedings at issue had commenced as per Rule 3.3 of the SIAC Rules with the receipt of Amazon’s Notice of Arbitration by SIAC, an order made by an emergency arbitrator in accordance with the SIAC Rules would be covered under sections 17(1) and would therefore be enforceable under section 17(2). This interpretation is confirmed by the absence of any express or implied bar against emergency arbitration proceedings in ACA.
The Supreme Court opined that a party cannot argue after participating in an emergency arbitration, having agreed to the relevant institutional rules, that it will not then be bound by the ruling given. In a telling endorsement of the principles of party autonomy, the Supreme Court observed that “it cannot lie in the mouth of a party to ignore an emergency arbitrator’s award by stating that it is a nullity when such party (Future Group) expressly agrees to the binding nature of such award from the date it is made and further undertakes to carry out the said interim order immediately and without delay”. The court noted that the Law Commission had advocated amendments to ACA to include provisions relating to emergency arbitration. The Indian Parliament did not make such amendment at the time but the court found that this in itself would not necessarily lead to the conclusion that what has been suggested by the Law Commission cannot form part of the statute as properly interpreted.
In relation to the issue set out in 2(b) above, the court held that an appeal against an order enforcing an emergency award under section 17(2) would not be maintainable under section 37 of ACA as the latter provides for appeals only from orders made by an arbitral tribunal in relation to interim measures under section 17(1), not against orders by an Indian court under section 17(2) for the enforcement of a tribunal’s interim order.
For these reasons, the Supreme Court allowed Amazon’s appeal.
In respect of arbitrations, ACA has two parts - Part I is applicable to India-seated arbitrations and Part II is applicable to foreign-seated arbitrations. The Amazon SIAC Arbitration was seated in New Delhi, India and accordingly was governed by Part I of ACA. Therefore, the decision and accompanying observations of the Supreme Court in the present matter are limited to the provisions of Part I of ACA that are applicable in cases of India-seated arbitrations only.
Unlike section 17, there is no provision in Part II of ACA which provides for the enforcement of interim measures granted by an arbitral tribunal or emergency arbitrator in a foreign-seated arbitration. In the absence of a specific provision under ACA, parties have taken recourse to section 9 to seek interim measures from courts, wherever applicable. Through this route, parties have been able to successfully obtain “indirect enforcement” of emergency arbitrator orders made in foreign-seated arbitrations. It must be understood that in obtaining such “indirect enforcement”, the Indian courts have nevertheless taken the view that they will exercise their jurisdiction independently to decide if interim relief ought to be granted and if so, whether in similar terms as an emergency arbitrator order. However, experience suggests that there is great benefit in considering an existing order of an emergency arbitrator. To read more about such examples, please see an article titled “The SIAC emergency arbitrator enforcement experience” by Allen & Gledhill Partner (Foreign Law) Vivekananda Neelakantan.
Nevertheless, the decision in Amazon is a watershed. The Indian Supreme Court’s endorsement of the emergency arbitrator process and support for enforcement of such orders on the basis of party autonomy augur well for future applications to Indian courts seeking enforcement of emergency arbitrator decisions, even where such decisions are rendered in foreign-seated arbitrations.
Knowledge Highlights 25 January 2023