[The guest post is authored by Veddant Majumdar, fifth year law student at Amity Law School, Delhi, GGSIP University]
The demand for codification of emergency arbitration has created a frenzy in the international arbitration jurisprudence, owing to the numerous benefits it has to offer. Emergency arbitration is a mechanism which allows parties to arbitration to apply for an urgent interim relief, prior to the constitution of the arbitral tribunal.The grant of an Emergency Award (‘EA’) is premised on two tiers, namely ‘Fumus boni iuris’ meaning that there ought to be a reasonable possibility that the applicant will succeed on merits, and ‘Periculum in mora’, meaning that if such an award is not granted immediately, the loss thus caused would be irreparable.
EAs offer numerous benefits over interim orders of municipal courts. Firstly, by ensuring confidentiality, unlike court orders, arbitral awards are not public documents. In addition, arbitrators are generally subject matter experts in the domain in which the award is sought, thereby ensuring a highly informed and relevant decision. Finally, EAs are granted more expeditiously than interim orders of courts, due to the latter being already clogged with other cases.
Jurists and key stakeholders in international arbitration concur over the recognition and enforcement of EAs. The 2021 International Arbitration Survey by Queen Mary University revealed that the International Chamber of Commerce (‘ICC’), Singapore International Arbitration Centre (‘SIAC’), Hong Kong International Arbitration Centre (HKIAC’), and London Court of International Arbitration (‘LIAC’) are the most favoured arbitral institutions in the world, and all these institutions have rules recognising relief by emergency arbitrator.
In the Indian context, the Justice Srikrishna Committee report of 2017 and the 246th Report of The Law Commission of India, both suggested an amendment to Section 2(1)(d) of the Arbitration and Conciliation Act, 1996 (‘the Act’) to include emergency arbitrators within the definition of “arbitral tribunal”.
The elephant in the room is the enforcement of EAs in India, in the absence of which, EAs would be futile. Fortunately, the enforcement of EAs in India seated arbitrations has been upheld by the Supreme Court of India in Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others. It laid down that EAs in India seated arbitrations are enforceable under Section 17(2) of the Act. However, a case for enforcement of EAs in foreign seated arbitrations still needs to be made out.
With the Supreme Court upholding the enforcement of EAs in India seated arbitrations, half the battle is won. The following article shall attempt to make a case for winning the other half of the battle, i.e., the enforcement of EAs in foreign seated arbitrations, by way of structured analysis and derivation of inferences from the available authorities and legal literature.
Fortunately, the abovementioned judgement has kindled the debate for enforcement of EAs in in foreign seated arbitrations. In furtherance of the said debate, some authorities are vital to be analysed to determine the current status of enforcement of EAs in foreign seated arbitrations.
The Delhi High Court, in Mr. Ashwani Minda & Anr. v. U-Shin Ltd. & Anr, held that interim relief under Section 9 of the Act could not be granted to the applicant on the premise that the applicant had already availed the option of an EA, wherein the applicant was denied remedy. The court said that the applicant is taking “two bites at the cherry”.
The noteworthy fact here is that the remedy under Section 9 was denied to the applicant on the premise of him already having availed the remedy of EA in a foreign seated arbitration. Thus, the clear implication of this judgment being that the court is recognising the EA in a foreign seated arbitration as an effective/enforceable remedy in India, thereby, disallowing a second remedy in the shape of an interim award by the court under Section 9 of the Act.
Apart from the recognition of EAs, a high degree of reliance is placed on the correctness of EAs. In HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors, though the award of the emergency arbitrator in foreign seated arbitration was not directly enforced by the Bombay High Court, it granted relief under Section 9 of the Act to the applicant by reproducing the EA verbatim. It is therefore, submitted that the enforcement of EAs in foreign seated arbitrations is highly warranted as that would have also led to the same outcome minus the current procedural delay.
Unfortunately, not all judgements have concurred on giving recognition to the EAs in foreign seated arbitrations. The Delhi High Court in Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd. denied the enforceability of the EA and instead insisted on filing of a fresh application under Section 9 of the Act. It held that the court did not have the authority to enforce an EA in a foreign seated arbitration, nevertheless, it had the authority to entertain a separate application for interim relief.
An alternate way for establishing the enforceability of EAs in foreign seated arbitrations could be through the route of contempt of court. The Supreme Court of India in Alka Chandewar v. Shamsul Ishrar Khan held that parties not complying with the interim orders of the arbitral tribunal are to be held liable for contempt of court under Section 27(5) of the Act and that the court is empowered to deal with such persons as if such persons stand guilty of contempt of court, either under the Contempt of Courts Act, 1971 or under Order XXXIX, Rule 2A of the Civil Procedure Code, 1908. The said rule has also been upheld by the Delhi High Court in Sri Krishan v. Anand and Indiabulls Financial Services v. Jubilee Plots.
The argument to be made herein is that as per the 2015 amendment to the Act, Section 27 of the Act is also applicable to Part II of the Act and thus, even to foreign seated arbitrations. Therefore, parties not complying with the EAs in foreign seated arbitrations are to be held guilty for contempt of court under Section 27 of the Act. Hence, even EAs in foreign seated arbitrations are enforceable in India in consonance with the abovementioned ratio.
Speaking of part II of the Act, as per Section 44, India is under an obligation to enforce at least those foreign arbitral awards in India, which are delivered in arbitrations seated in countries signatories to Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (‘New York Convention’). This is so because India itself is a signatory to the New York Convention.
Article 1(2) of the New York Convention states, “The term ‘arbitral awards’ shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted”
As per the said provision, it can be argued that the New York Convention is wide enough to involve not just arbitral awards made by arbitrators, but also interim awards made by the emergency arbitrators who are appointed by the concerned arbitral institution. EAs are indeed made by the arbitral institutions only, as it is the arbitral institution who appoints the emergency arbitrator. For instance, it is stated in Schedule 1(3) of the SIAC Rules, 2016 that it is the president of the SIAC who shall appoint the emergency arbitrator, once an application has been made to the SIAC for appointment of the emergency arbitrator.
Another example could be Article 2(1) of Appendix V of The ICC Rules, 2021, which also provides for the appointment of the emergency arbitrator by the President of the ICC, normally within two days of the filing of the application for appointment with the secretariat.
Thus, in both cases, it is the President of the concerned arbitral institution who ultimately appoints the emergency arbitrator. The list of arbitral institutions appointing the emergency arbitrator is virtually endless, and for the sake of brevity, a conclusion is made out from the abovementioned two examples, that it is the arbitral tribunal who appoints the emergency arbitrator and thus, such awards are made by the arbitral institutions only and are recognised under Article 1(2) the New York Convention.
Moreover, part II of the Act, which is in consonance with the New York Convention, lays down that for an award to be enforceable, it needs to be “binding” and not necessarily “final”, under Section 46 of the Act. Therefore, though EAs are not final as they are subject to modification by the final award, they are binding on the parties, and are thus, enforceable.
The Delhi High Court expressed its helplessness when it could not enforce the EA in a foreign seated arbitration, owing to the lack of legislative backing, in Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd. The court in the said judgment also laid down that Article 17H of the UNCITRAL Model Law on International Commercial Arbitration provides for enforcement of EAs, but for the lack of a domestic provision, it was unable to enforce the said EA.
It is pertinent that the preamble of the Act also mentions that the Act is based on the UNCITRAL Model Law on International Commercial Arbitration, thus, in consonance with article 17H of the latter, a reciprocal provision ought to be added in the Act. Therefore, it is now upon the legislature to enact a provision for enforcement of EAs in India in foreign seated arbitrations, and until then, it is for the judiciary to apply a wide interpretation of various provisions of the Act, as explained in part III of the article, to let the parties in foreign seated arbitrations enjoy the fruits of EAs, which would also lead to an increase in the ease of doing business in India.