Resolving the Issues Arising from Emergency Arbitration

[Aanchal Jain is a 4th year B.A.L.L.B. (Hons.) student at Dr. Ram Manohar Lohiya National Law University, Lucknow, India]

Introduction

Foremost among the new developments in the field of arbitration stands the concept of emergency arbitration.  Although emergency arbitration is a relatively new phenomenon, it has gained significant traction. This is reflected in both the number of institutional rules that allow the parties to appoint emergency arbitrators and the frequency with which the parties use this mechanism.

In an emergency arbitration, an application for relief is generally to be made to an arbitrator appointed by the arbitral institute (institutional arbitration), which is prior to the constitution of an arbitral tribunal in the usual way. For example, article 29(1) of the ICC Rules provide that, “[a] party that needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal may make an application for such measure to the emergency arbitrator.

In many jurisdictions, arbitration legislations have been amended to expressly include within its ambit an ‘emergency arbitrator’, for example rule 1.3 of the Singapore International Arbitration Centre Rules, 2016. In India, the 246th Law Commission Report suggested widening the scope of the term ‘arbitral tribunal’ by incorporating the term ‘emergency arbitrator’ within its definition. However, this was not incorporated into the Arbitration and Conciliation (Amendment) Act, 2015 and did not find its way into the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). As such, for now, India remains a step behind (in this respect, at least) other countries in developing itself as an arbitration friendly country.

This post considers the impact of the enforceability of an emergency arbitral award in a hypothetical situation wherein the above provision would have been made a part of the Arbitration Act, thereby limiting the jurisdiction of the court to deal with the matter of interim measures in detail.

According to article 17 of the UNCITRAL Model Law on International Commercial Arbitration 1985, the arbitral tribunal has the power to order interim measures. Article 17H of the UNCITRAL Model Law provides for recognition and enforcement of interim measures granted by the arbitral tribunal to be binding, with the exception of the grounds specified in article 17I. One of the major hurdles in the successful implementation of the provisions of emergency arbitration is in deciding whether an emergency arbitrator’s decision is in the form of an ‘award’ or an ‘order’. Furthermore, is such an interim measure ordered by an emergency arbitrator enforceable, when it is in fact not ‘final’?

Both the Paris Cour d’Appel and US Federal Court of Appeals have classified certain arbitral decisions entitled ‘orders’ by tribunals as ‘awards’.[1] This makes them susceptible to annulment and/or recognition and enforcement proceedings in the national courts. However, this is not the case in every jurisdiction.

In case of domestic arbitration in India

In accordance with section 2(c) of the Arbitration Act, an arbitral award includes an interim award as well. Therefore, any interim award given by the emergency arbitrator would have been enforceable in India. An interim order that is passed by the arbitral tribunal, shall be binding as an order of the court, in accordance with section 17 of the Arbitration Act.In context of the second question, as per section 35 of the Arbitration Act, an arbitral award shall always be final and binding upon the parties. Hence, any arbitral award (even an interim award) would be binding and enforceable in India.

For example, in India, the Mumbai Centre for International Arbitration (MCIA) Rules lay down the provisions for emergency arbitration. Rule 14.7 in very simple terms puts the controversy of whether an interim measure is in the nature of an ‘order’ or an ‘award’ to rest. It states that any interim relief ordered by the emergency arbitrator can be in the form of an ‘order’ or an ‘award’ which will be binding on the parties just like an interim measure ordered by a Tribunal. If at all the Parliament decides to make the necessary changes in the Arbitration Act, 1996 in the future with regards to emergency arbitration, it would be appropriate to do so in accordance with the provisions of the MCIA Rules and other International Arbitration Rules, for example, Singapore International Arbitration Centre Rules.

When we come to the question of an arbitral tribunal granting interim measures, section 17 of the Arbitration Act comes into play. Earlier, the tribunal was neither conferred with the power to enforce its order nor with any judicial enforcement of such order. But the 2015 Amendment to section 17 of the Arbitration Act clarified that an order of the tribunal would be enforceable like any other order of the court in cases of interim relief granted by arbitral tribunals.

Conflict between sections 9 and 17 of the Arbitration Act

The applicability of section 17 must be perused and comprehended in light of section 9, since they are corresponding in nature. In M.D., Army Welfare Housing Organisation v. Sumangal Services (P) Ltd., the Supreme Court conceded the restricted extent of section 17 and held that the section does not bestow any power upon the arbitral tribunal to implement its order or even for judicial enforcement of the same. This is where section 9 comes to the rescue of the parties even during the continuation of the arbitral proceedings, thereby enhancing court intervention.

With the amendment to section 17, the intervention of the court can now be minimized and the pre-referral form of arbitration can take the front seat. The Court should be allowed to grant any interim measures in case of ‘urgency’ only when the provisions of emergency arbitration are not available.[2]

International Arbitration

When it comes to an interim order which is given in a seat of arbitration abroad, there is no provision in the Arbitration Act that addresses its enforceability. On the other hand, an interim award which is given by a seat of arbitration abroad (“foreign interim award”), the enforceability of such awards would be governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

If the relief is obtained in the form of an ‘order’ or ‘award’, that emergency ‘order’ or ‘award’ will not be enforceable under the New York Convention. Since, the decision of the emergency arbitrator can be reviewed and modified by the arbitral tribunal, an ‘order’ or ‘award’ of an emergency arbitrator will never attain finality.

The UNCITRAL Model Law under article 17H specifies that interim measure issued by an arbitral tribunal would be recognised as binding and enforced upon an application to the competent court, irrespective of the country in which it was issued. This validates the enforcement of an interim measure even when it is not given in the country where the arbitration took place (lex arbitri). However, the essence of the same has not been incorporated by the legislators in the Arbitration Act. One of the alternatives available to the parties is to seek interim relief before the national courts of the seat of the arbitration.

In a decision of the Delhi High Court in Raffles Design International v. Educomp Professional Education,  the Court held that merely because section 9 cannot be used for enforcing an arbitral award, this does not preclude the court from independently granting interim relief. The Court further propounded that due to absence of a similar provision like section 17 in Part II of the Arbitration Act, the enforcement of emergency or interim award issued in a foreign seated arbitration would be unenforceable in India. Therefore, an application under section 9 is probably the only recourse left for the parties to seek interim measures of protection in India, for foreign seated arbitrations.

But this only enhances the intervention of the courts in the arbitration proceedings and defeats the whole purpose of the concept of emergency arbitration, which was to avoid recourse to the national courts. For the enforceability of any award given in a foreign seat of arbitration, a provision such as section 17 which is based on article 17H of UNCITRAL Model Law will have to be inserted in Part II of the Act as well.

Conclusion

Emergency arbitration is an effective means of avoiding court intervention and it should be promoted even more. Countries can amend their arbitration laws to allow for the enforcement of emergency arbitration awards, as Singapore and Hong Kong have already done.[3] At the same time, arbitral institutions could amend their rules to specify a penalty for failure to complying with an emergency arbitration award, such as a fixed amount payable for each day in which the award has not been complied with, as in the CPR Rules for Administered Arbitration of International Disputes. 

– Aanchal Jain

[1] Redfern and Hunter on International Arbitration 504 (6th ed. Oxford University Press 2015).

[2] See, Gerald Metal S.A. v. Timis & Ors, (2016) EWHC 2327 (Ch).

[3] Ben Giaretta, The practice of Emergency Arbitration, B- Arbitra, Belgian Review of Arbitration, 105 (2017).

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