Amazon v. Future: A creature called ‘Emergency Arbitrator’

Sep 22, 2022
  • Author(s) : Naresh Thacker , Harshvardhan Nankani
  • Introduction
    The status of an ‘Emergency Arbitrator’ and that of an ‘award’ passed by him has been a point in issue on the Indian arbitration landscape for a while now. In its recent decision, the Supreme Court of India in NV Investment Holdings LLC v. Future Retail Ltd. & Ors.[1] (Amazon v. Future) held that the ‘award’ passed by an Emergency Arbitrator in an arbitration seated in India is enforceable under Section 17(2) of the Arbitration and Conciliation Act, 1996 of India (the Act) as an interim order of an arbitral tribunal made under Section 17(1) of the Act.

    This has, for the moment, settled the position of law with regard to the status of Emergency Arbitrators and the enforcement of their decision in India, in the context of an India-seated arbitration governed by Part-I of the Act.

    The creature and its creation
    Before we dive headlong into analyzing the decision and its implications under Indian law and for arbitrations generally in India, it is important to understand the genesis of an ‘Emergency Arbitrator’, first under the rules of various arbitral institutions.

    The Emergency Arbitrator presents an efficacious alternative to a court when seeking interim relief in arbitrations before a merits-tribunal has been constituted. It is important to note that the Emergency Arbitrator steps in, as the name itself suggests, in an “emergency”. It is an arrangement, which addresses issues requiring urgent injunctive relief, that cannot await formation of the merits-Tribunal. Once the “emergency” has been addressed whether by redressing it or by refusing intervention, the job of the Emergency Arbitrator ceases, and he cedes ground to the merits-Tribunal.

    The Emergency Arbitrator much like a merits-Tribunal, is born out of the consent of the parties, more particularly their assent to the rules of a particular arbitral institution. Emergency Arbitrators are generally appointed by an arbitral institution, for example under Schedule-I of the Singapore International Arbitration Centre (SIAC) Rules 2016. Their appointment is legitimized by the consent of the parties to the institution’s rules. In that sense they are unlike most tribunals to which arbitrators are either appointed by consent of the parties or the decision of a national court. These institutions, which administer arbitrations, have played an instrumental role in streamlining, standardizing and popularizing arbitration as a means of dispute resolution. They may be headquartered in a particular jurisdiction but have virtually no barriers to entry in other jurisdictions. Resort to the rules of an arbitral institution headquartered in Paris or Singapore for instance, can be had by parties situated anywhere in the world, that too without the obligation to treat Paris or Singapore as the juridical seat. This has allowed them to be fore-runners of arbitration law in many jurisdictions by ushering new developments in procedure, rooted in the legitimacy granted by the central tenet of arbitration law, i.e., party-autonomy. The concept of an Emergency Arbitrator is one such development.

    It must be noted that ‘Arbitrator’ is a genus, whereas an ‘Emergency Arbitrator’ is a species within this genus. The Emergency Arbitrator has evolved from its lesser-known cousin, the ‘Pre-Arbitral Referee’ that was first introduced to the world by the International Chamber of Commerce (ICC) in 1990. This ‘referee’ was pitched as an alternative to local courts for emergency relief before a tribunal is constituted. However, recourse to this mechanism was far from easy. Parties were required to expressly opt-in for resort to be had to this procedure. Owing to this and a general lack of awareness, the Pre-Arbitral Referee is extinct today.

    Emergency arbitration is now widely recognized in various institutional rules as an ‘opt-out’ feature, i.e., parties have to expressly opt-out of its application where they so choose. This ‘opt-out’ variant emerged in the 2006 rendition of the international arbitration rules of the International Centre for Dispute Resolution (ICDR) and has made its way into Stockholm Chamber of Commerce (SCC) Arbitration Rules in 2010, SIAC Rules 2010, ICC Rules 2012, Hong Kong International Arbitration Centre (HKIAC) Rules 2013 and London Court of International Arbitration (LCIA) Rules 2014. Subsequent iterations of these institutional rules have retained this procedure. The Mumbai Centre for International Arbitration (MCIA) Rules, 2016 also provide for resort to be had to emergency arbitration proceedings.[2]

    The ruling of the Emergency Arbitrator, i.e., an ‘Emergency Award’ has entered common parlance but is in effect a misnomer and must be used with due regard to the surrounding factors. An award must necessarily resolve the dispute between parties to an arbitration agreement conclusively. However, when examined from this standpoint, it is apparent that the decision rendered by an Emergency Arbitrator does not resolve any disputes between parties definitively. It provides interim relief/protection to the aggrieved party until such time as the merits-Tribunal constituted in accordance with the requirements of the agreement comes into being. It is important to consider that such decision is based on a prima facie view and not premised on a full-length trial, thus clearly incapable of rendering a final view on any issue at hand. The decision of the Emergency Arbitrator is generally revisited by the merits-Tribunal once it is constituted, which may then uphold or over-rule such a decision.[3] Afterall, the Emergency Arbitrator is a creature of institutional rules, devised to be a quick ‘first port of call’ for parties that have consented to resolve their disputes through arbitration. Its widespread adoption has led to the recognition of an Emergency Arbitrator under the curial law of states such as Singapore, which are popular arbitration destinations.

    The creature comes to India
    A similar arrangement was observed in the case of Amazon v Future, where the arbitration agreement envisaged arbitration under the SIAC Rules 2016, with the seat of arbitration being New Delhi, India.

    Amazon, a global retail behemoth, invested in Future Coupons (P) Ltd.(FCPL) and obtained an indirect interest in the shareholding of Future Retail Ltd. (FRL), which are both part of the Future Group, a formidable conglomerate in the Indian retail sector. The money invested flowed down to FRL as per the Share Subscription Agreement (SSA). FRL and the promoters of Future Group had entered into a Share Holders Agreement (FRL-SHA), the terms of which were mirrored in another Share Holders Agreement amongst Amazon, the promoters of Future group and FCPL (FCPL-SHA), to which FRL was not a party. As per these agreements, FRL was restrained from transferring its retail assets without the assent of FCPL, and which assent could not be accorded without Amazon’s approval. FRL was prohibited from encumbering/transferring/selling/divesting/disposing of its retail assets to any “restricted person”. Reliance Industries Ltd., one of the largest listed companies in India, (Mukesh Dhirubhai Ambani Group) was one such “restricted person”.

    So, when the Mukesh Dhirubhai Ambani Group entered into a transaction envisaging an amalgamation with FRL, a dispute arose and Amazon initiated arbitration proceedings seated in New Delhi under the SIAC Rules, 2016 under the arbitration clause contained in the FCPL-SHA. Upon their request, an Emergency Arbitrator was appointed. The decision of the Supreme Court of India in Amazon v Future emanates from the controversy around the enforcement of the Emergency Arbitrator’s “interim award” dated 25 October 2020. When the issue erupted, proceedings were filed before the Delhi High Court. Questions such as, what ought to be the nature of proceedings, of jurisdiction, et. al., arose. Suffice to say that the prime question of whether this “interim award” was an interim order passed by an “arbitral tribunal” under Section 17(1) of the Act, and whether it could be enforced under Section 17(2) of the Act, came up before the Supreme Court.

    The Supreme Court of India noted that the seat being New Delhi, Part-I (containing Section 17) of the Act would apply. There being no interdict to the application of institutional rules, an Emergency Arbitrator under those rules would qualify as an ‘arbitrator’ under the definition of an “arbitral tribunal” where the context permits, such as for the purposes of Section 17 of the Act. This is because the definition of an “arbitral tribunal” under Sec. 2(1)(d) is preceded by the words “unless the context otherwise requires.” The interpretation would therefore have to be contextualized against the institutional rules subscribed to. In this case, under Rule 3.3 of the SIAC Rules, 2016, the arbitration is deemed to commence once the Registrar receives the complete Notice of Arbitration. Thus, the arbitration already having commenced, the expression “during the arbitral proceedings” in Section 17 of the Act would be satisfied and the ‘interim award’ of the Emergency Arbitrator would, (i) tantamount to an order under Section 17(1) and (ii) be enforceable under Section 17(2) of the Act. Therefore, an Emergency Arbitrator in an arbitration governed by Part-I of the Act has been held to be an ‘arbitral tribunal’ capable of passing an order under Section 17 of the Act, where the institutional rules permit.

    Adapting to new landscapes
    Some landscapes are more welcoming than others. To efficiently accommodate such a novel ‘creature’, express recognition under the curial law is preferable. Among the jurisdictions that have enacted amendments to explicitly recognize an Emergency Arbitrator are Singapore[4], Hong Kong[5] and New Zealand.[6]

    Proposed Legislative Amendments to accommodate Emergency Arbitrators

    The 20th Law Commission of India (Law Commission) in its 246th Report published in 2014 suggested an amendment to the definition of “arbitral tribunal” contained in Section 2(1)(d) of the Act.[7] The Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment Act), unfortunately, did not feature this suggested amendment, which led many to interpret it as a tacit rejection of the Emergency Arbitrator by Parliament. It garnered attention once again in 2017 when the ‘High-Level Committee to Review Institutionalization of Arbitration Mechanism in India’ recommended that the 246th Law Commission Report be adopted on this aspect.[8] Once again, it was to no avail. The Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment Act) did not explicitly introduce the Emergency Arbitrator into the Act, reinforcing the belief that Parliament did not intend an Emergency Arbitrator to fall within the definition of an “arbitral tribunal”.

    The Act does not define “arbitrator”; it defines “arbitral tribunal” to mean a sole arbitrator or a panel of arbitrators. One view that has emerged is that an emergency arbitrator is, per se, neither. An Emergency Arbitrator is not an “arbitrator” under the Act because an “arbitral tribunal” is yet to be constituted. This, according to those who take the opposite view to that in Amazon v. Future, is more evidence of the fact that an Emergency arbitrator is a separate species of arbitrator to accommodate which, explicit mention in Section 2(1)(d) would ideally be required. Notwithstanding this, the ability of the judiciary to interpret the statute in a way that recognizes an Emergency Arbitrator is in no way circumscribed. Amazon v Future cites Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd.[9] in holding that “the mere fact that a recommendation of a Law Commission Report is not followed by Parliament, 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.”

    The question germane to our analysis is therefore, where does an Emergency Arbitrator derive its legitimacy from? The Supreme Court of India seems to have sanctified in Amazon v Future that an Emergency Arbitrator’s legitimacy, much like that of a merits-Tribunal, is derived from parties’ consent to certain procedural rules. Party autonomy being the grundnorm of arbitration, the concept of an Emergency Arbitrator was read into the law by the judiciary rather than added to it by the legislature. This has left some lingering issues.

    Emergency Arbitration without jurisdiction

    In India, no appeals lie to a court from the order of an arbitral tribunal holding that it has jurisdiction to entertain a dispute. The contentions in a positive ruling on jurisdiction can only resurface after the award has been delivered, in the form of a Section 34 challenge to set-aside the award. One of the perils of a procedure involving an Emergency Arbitrator is that they operate as a sui generis entity whose jurisdiction is not amenable to challenge – ever. Afterall, the challenge to jurisdiction under Section 16 of the Act is the merits-Tribunal’s cross to bear. The fine details of, and objections to, the appointment of an Emergency Arbitrator are therefore incapable of scrutiny. Nevertheless, this can be categorized as a teething-issue brought about by an attempt to accommodate a new phenomenon into an existing legal framework that was not created bearing an Emergency Arbitrator in mind.

    Foreign Seated Emergency Arbitrations

    The judgment in Amazon v Future has resolved much of the controversy regarding India-seated emergency arbitrations. But questions still surround the enforceability of orders of foreign-seated Emergency Arbitrators. Orders of Emergency Arbitrators in foreign seated arbitrations have, in the past, been enforced in India by obtaining identical relief under Section 9 of the Act, which empowers courts to provide interim relief and which orders are then enforceable in India.

    The Section 9 Route

    In such cases, courts in India found a novel method where interim relief was granted by Indian courts under a Section 9 application on same terms and on the basis of the Arbitrator/Emergency Arbitrator’s order. This was indeed the case in Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors.[10] and in Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd.[11].

    This ‘Section 9 Route’ was often used before the 2015 Amendment Act which introduced sub-Section (3) whereby a court would not ordinarily entertain an application for interim relief if an arbitral tribunal already stood constituted. An interesting question that now arises is whether this route under Section 9 is yet accessible to parties post the 2015 Amendment Act? This is because, if an Emergency Arbitrator is considered to be an arbitral tribunal, then an Indian court would not ordinarily entertain an application for interim relief.

    This issue is more nuanced now in light of the changes brought about post introduction of proviso to Section 2(2) of the Act by the 2015 Amendment Act. The proviso was introduced to address the difficulties being faced by parties in an international commercial arbitration seated outside India when seeking interim relief from Indian Courts. But for the proviso, since Section 9 fell within Part 1 of the Act, the same applied solely to an arbitration where the place of arbitration was India. This issue was highlighted by the Supreme Court in Bharat Aluminium Co v. Kaiser Aluminium Technical Services.[12] While the legislature has addressed the issue with the introduction of proviso to Section 2(2), the question that we are presently concerned with becomes more pronounced and acute because the provisions of Section 17, in its entirety, and Section 37 (2)(b) do not find a place in the amended proviso to Section 2(2). Simply put, when strictly read, the provisions of Section 17 (more particularly that of sub-Section 2 thereto relating to enforcement of an interim order) in case of a foreign seated arbitral tribunal, would have no application at all. Equally well, an interim order by a foreign seated tribunal would not be appealable before Indian courts. It is in these circumstances that the question posed above assumes significance.

    Emergency Arbitrator or Section 9 Court: Is it necessarily one or the other?

    In the case of Ashwani Minda v. U-Shin Ltd. & Ors.[13] a question that arose was whether, in the context of a foreign seated arbitration, a proverbial ‘second bite at the cherry’ is permissible under Section 9 once the Emergency Arbitrator refuses the interim relief prayed for. The single Judge, after a detailed hearing held that having invoked the mechanism of the Emergency Arbitrator and invited a detailed and reasoned order, it is not open for the applicant to seek a conflicting order from the Court under Section 9.[14] The Judge went on to add it is not necessary that the parties exclude the applicability of Section 9 by an express agreement and the exclusion can even be inferred or implied. Once so inferred, the jurisdiction of a Court under Section 9 of the Act was ousted as the parties have agreed to be governed by different Rules and procedures.

    The Division Bench of the Delhi High Court agreed with the view of the Single Judge to the extent that the Single Judge had disallowed a party from seeking the same relief from a court, having failed in the first instance to obtain such relief from the Emergency Arbitrator. The Division Bench went on to hold that an application under Section 9 would be maintainable in connection with a foreign seated arbitration only in those situations where the applicant demonstrates that it does not have an efficacious remedy before the tribunal. It left the issue concerning the examination of the correctness of the finding of the Single Judge that the provision of foreign seat and rules itself evince the intention of the parties to exclude Part I of the Act, to be decided in an appropriate case.

    It remains to be seen whether orders of an Emergency Arbitrator seated in India are enforceable in other jurisdictions. It also remains to be seen whether orders of foreign-seated Emergency Arbitrators will be enforced by Indian Courts, and the course that will be adopted to do so. An order of an Emergency Arbitrator in a foreign-seated emergency arbitration can certainly not be enforced in India as a New York Convention ‘award’ considering the judgment of the Supreme Court of India in Amazon v Future, which clearly recognizes them as ‘interim orders’ and not ‘awards’.

    Given that Amazon v. Future has been decided in the context of an India-seated arbitration it would be a tenuous proposition to deploy this judgment on all fours in the context of a foreign-seated arbitration.

    An Emergency Arbitrator is relatively new to the scene of arbitration law in India. Like any alien species that is transplanted into a new environment, either it or its environment must give way. In this metaphor the environment represents the legal terrain of a jurisdiction, having many other actors such as legislative bodies, courts and even parties. Yet, the Emergency Arbitrator is not as ‘alien’ a species as one might believe. Rather, it is the outcome of evolution. It has evolved from the existing idea of an arbitrator in an attempt to fill the need for speedy relief outside of court. It will therefore put up a formidable fight for its existence and eventual adoption into the legal landscape of jurisdictions such as India.

    Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

    [1] (2022) 1 SCC 209
    [2] Rule 14 of the Mumbai Centre for International Arbitration Rule 2016.
    [3] For example, item no. 10 appearing in Schedule I of the SIAC Rules 2016, as was applicable in the dispute between Amazon and Future, states:
    “The Emergency Arbitrator shall have no power to act after the Tribunal is constituted. The Tribunal may reconsider, modify or vacate any interim order or Award issued by the Emergency Arbitrator, including a ruling on his own jurisdiction. The Tribunal is not bound by the reasons given by the Emergency Arbitrator. Any interim order or Award issued by the Emergency Arbitrator shall, in any event, cease to be binding if the Tribunal is not constituted within 90 days of such order or Award or when the Tribunal makes a final Award or if the claim is withdrawn.”
    [4] Section 2(1) of Singapore International Arbitration Act (ch. 143A), as amended by [Act 12 of 2012 w.e.f. 1 June 2012] reads as: § 2 (1) — In this Part, unless the context otherwise requires — “arbitral tribunal” means a sole arbitrator or a panel of arbitrators or a permanent arbitral institution, and includes an emergency arbitrator appointed pursuant to the rules of arbitration agreed to or adopted by the parties including the rules of arbitration of an institution or organization.
    [5] Section 22A of Hong Kong Arbitration Ordinance, reads as: § 22A Interpretation — In this part — emergency arbitrator means an emergency arbitrator appointed under the arbitration rules (including the arbitration rules of a permanent arbitral institution) agreed to or adopted by the parties to deal with the parties’ applications for emergency relief before an arbitral tribunal is constituted. Also see, § 22B of Hong Kong Arbitration Ordinance dealing with enforcement of emergency relief granted by emergency arbitrator
    [6] Section 2(1) of New Zealand Arbitration Act 1996, as amended by Arbitration Amendment Act 2016 (2016 No. 53), reads as: § 2(1) Interpretation — In this Act, unless the context otherwise requires, — arbitral tribunal — (a) means a sole arbitrator, a panel of arbitrators, or an arbitral institution; and (b) includes any emergency arbitrator appointed under— (i) the arbitration agreement that the parties have entered into; or (ii) the arbitration rules of any institution or organisation that the parties have adopted.
    [7] Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996, (246th Report) (August 2014)
    [8] Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, (July 2017, Report-HLC.pdf
    [9] (2021) 4 SCC 713, [27]-[29] and [32]
    [10] 2016 SCC Online Del 5521
    [11] 2014 SCC Online Bom 102, affirmed at [57] of Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. (2021) 4 SCC 713.
    [12] (2012) 9 SCC 552
    [13] 2020 SCC Online Del 721
    [14] 2020 SCC Online Del 1648