Obtaining Emergency Arbitral Relief in India for Foreign Seated Arbitrations: Judicial Innovation

[Ragini Agarwal and Aditya Singh Chauhan are B.A. LL.B. (Hons.) students at National Law University Jodhpur]

The concept of emergency arbitration, though useful for the protection of assets or evidence, has not gained much traction legislatively in India. Despite recommendations of the 246th Report of the Law Commission of India and the Srikrishna Committee Report, the provisions to recognise the concept of “emergency arbitrators” were not incorporated in India. In this post, the authors argue that it is high time that, following the international practice of enforcing emergency arbitral awards and taking note of the current situation of COVID-19 pandemic in which this relief will be increasingly resorted to (as was done in a recent case before the Delhi High Court), India also follow suit. Currently, foreign seated arbitrations have no direct enforcement measures for their emergency awards.

Emergency Arbitration: Meaning and Concept

Emergency arbitration is a conservatory measure available to the parties before the formation of the arbitral tribunal. In such cases, two principles are taken into account – first, the requesting party must have a reasonable possibility of succeeding on merits, i.e., fumus boni iriuris and, second, the requesting party must be under the threat of irrecoverable loss if such a measure is not granted, i.e., periculum in mora. The emergency arbitrator gives an interim order on the basis of the principles, i.e., an urgent measure to prevent the “imminent risk of irreparable damage.”

It is also important to note that many arbitral institutions in India, including the Indian Council of Arbitration (article 33), the Delhi International Arbitration Centre (rule 14), the Nani Palkhivala Arbitration Centre (rule 20(A)), Mumbai Centre for International Arbitration (rule 14) contain provisions for an emergency arbitrator. However, the provisions of the Indian Arbitration and Conciliation Act, 1996 [the“Arbitration Act”] fall woefully short of recognising such a measure, making the enforcement of such awards onerous.

Lacuna in Indian Law for Enforcement of Emergency Arbitral Awards

The emergency arbitrator’s decision can be in the form of an award or order, depending on which of the previously mentioned rules have the parties agreed for the arbitration. This distinction is crucial as regards the enforcement under the New York Convention, which defines “arbitral awards” as “not only awards made by arbitrators appointed for each case[,] but also those made by permanent arbitral bodies[.]” (article I(2)). Classification as an award allows the arbitral decision to be subject to recognition or annulment in national courts. Additionally, the “substance over form” approach is relevant in this regard, as the courts may look into the substance of the award to determine whether it is an award or order, rather than its form or designation given by the tribunal [p. 39].[1]

Additionally, experts agree that the definition of arbitral awards in the New York Convention envisages final awards [pp. 240-242]. The provisions for emergency arbitrations in most institutional rules generally allow for the decision of the emergency arbitrator to be modified once the tribunal is formed. As a result, the decision of the emergency arbitrator would lack finality.

The 246th Report recommended broadening the definition of “arbitral tribunal” under section 2(1)(d) of the Arbitration Act by addition of words: “in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator” [pp. 10, 37]. This change would have made the orders passed by emergency arbitrators enforceable as the orders of the arbitral tribunal under Part II of the Arbitration Act.

The 2015 Amendment, however, did not accept this recommendation. The Srikrishna Committee Report again recommended addition of “emergency award” to the definition of “arbitral award” under section 2(1)(c), and addition of “emergency arbitrator” to the definition of “arbitral tribunal” under section 2(1)(d) of the Arbitration Act [pp. 76-77]. This topic, however, was again was left altogether untouched by the 2019 Amendment.

Notably, article 17H of the UNCITRAL Model Law contains provisions for enforcement of interim measures, “irrespective of the country in which it was issued”. However, having a pari materia provision is not an available option for India, as section 17 of the Arbitration Act only has application for India-seated arbitrations. It is important to note that even in case of India-seated arbitrations, section 17 only has application to “interim measures ordered by arbitral tribunal,” and not emergency arbitrator. The courts should afford same treatment to order of the emergency arbitrator as it would to an order of the arbitral tribunal, as the parties consent to provisions pertaining to emergency arbitration. Such an approach would allow direct enforcement of India-seated emergency awards.

Thus, the emergency awards passed by foreign seated arbitral tribunals cannot be enforced directly in India. However, the courts in India have come up with innovative measures and principles for the enforcement of such emergency awards in India, which are discussed in the next section.

Judicial Innovation for Enforcement of Emergency Arbitral Awards

Recourse to enforcement under Arbitration Act is done through an application under section 9 for court regulated interim measure (see, Raffles Design International India Pvt. Ltd. v. Educomp Professional Education, at paragraph 99). Primarily, two principles emerge from a perusal of the scant cases on obtaining or enforcing emergency arbitral reliefs in India. The first one has its basis in party autonomy and states that the applicability of section 9 must not be specifically excluded by the parties. The second one has its basis in respecting the law governing the arbitration proceedings which must not deny the possibility of interim relief/measures.

Principle (a): The applicability of Section 9 of the Arbitration Act for obtaining interim reliefs from courts must not be specifically excluded by the parties.

Exclusion: Implied or Express

Section 9 constitutes a provision in Part I of the Arbitration Act which does not apply in cases of international commercial arbitration where the seat of arbitration is outside India (see Bharat Aluminum and Co. v. Kaiser Aluminium and Co., at paragraphs 194 to 196). However, the Arbitration and Conciliation (Amendment) Act, 2015 inserted a proviso to section 2(2) of the Arbitration Act, by which provisions of sections 9, 27, and 37 (1)(a) and 37 (3) were made applicable to foreign seated arbitrations wherein award is enforceable under Part II of the Act. Unless the parties specifically (explicitly or impliedly) exclude the applicability of section 9, application may be made under this provision to obtain emergency arbitral relief.

In the recent case of Ashwani Minda v. U-Shin Ltd. (May 2020) before the Delhi High Court concerning breach of certain clauses of joint venture agreement and license and technical agreement, the Court held that on a perusal of arbitration clauses, the intention of the parties to exclude the applicability of Part-I of the Arbitration Act was clearly visible. On the basis of the same, relief under section 9 could not be granted because the “ethos and annals of party autonomy which is the foundation of the pyramid of Arbitration” must be respected. Before the 2015 Amendment allowed applicability of section 9 to foreign seated arbitration proceedings, when the parties had specifically allowed applicability of Part I of the Act to the arbitration agreement,  the Bombay High Court held that relief could be granted. Party autonomy, thus, becomes the decisive factor for determining applicability.

Ambit of Decision Making

In its seminal opinion in Raffles Design), the Delhi High Court had held that the decision under section 9 of the Act is independent of the orders passed by the arbitral tribunal. The court must independently apply its mind and grant relief in cases where it is warranted (at paragraph 100). In a slight variation from the above decision, the Bombay High Court in Plus Holdings Limited v. Xeitgeist Entertainment Group (Mar. 2019, modified by speaking order) noted that the rights of the applicant with regards to the film in question had been adequately recognised in the SIAC emergency award and would have a persuasive value, even if the application under section 9 had to be considered de novo.

Where the applicant had already invoked the measure of emergency arbitration, the courts in a section 9 application could not sit in an appeal over the award. Moreover, while recourse to this method would be permissible irrespective of an effective alternative remedy under the relevant arbitral institution rules (in this case, the ICC Rules), the applicant must still satisfy his case on merits that deserve court interference with arbitral proceedings.

Principle (b): The institutional arbitral rules must not be incompatible with obtaining interim measures.

Most institutional arbitral institution rules today provide for emergency relief provisions. The International Chamber of Commerce [“ICC”] (article 29), Hong Kong International Arbitration Centre (schedule 4), Singapore International Arbitration Centre [“SIAC”] (schedule 1), Stockholm Chamber of Commerce (appendix II), Swiss Chambers of Arbitration Institution (article 15(7)) and London Court of International Arbitration (article 9B), all contain provisions regulating appointment and decision making of the emergency arbitrator. However, there may be cases where the rules prohibit obtaining interim measures outside the specified bounds.

In Ashwani Minda, the seat of arbitration was Japan and the rules applicable were Japan Commercial Arbitration Association Rules. Article 77(5) of the same clearly provided that the emergency measures would be deemed to be interim measures of the arbitral tribunal (once it was constituted). Such interim measures would remain in effect until suspended, modified or terminated. Since the applicant in this case had already invoked the jurisdiction of emergency arbitrator unsuccessfully once and there had been no change in circumstances, the applicants could not take a second bite at the cherry by appealing to the national courts. Petition was held to be non-maintainable after distinguishing it from Raffles Design wherein the SIAC Rules permitted the parties to approach the courts for interim relief.

Conclusion

To conclude, legislative recognition for enforcement of emergency awards in a foreign-seated arbitration is still a distant possibility. However, parties can apply to the courts for interim relief under section 9 of the Arbitration Act. To be successful under this method, the parties must ensure that the applicability of the said section, or the provision of interim relief is not prohibited either contractually or under the terms and conditions of the rules of the arbitral institutions.

The parties have the alternative of seeking an interim measure from the relevant court at the seat of arbitration as well, if permitted by the lex loci arbitri, and hope for voluntary compliance. If the losing party does not comply with the foreign order, contempt proceedings can be initiated in the foreign courts, if permitted by the domestic law of that country. The decision of the court would then become enforceable in India under the provisions of the Code of Civil Procedure, 1908 since it would be a decree or a judgment.

However, this alternative is a long and time-consuming process which would defeat the very purpose of requesting an interim measure in the first place. Application under section 9 is a practical recourse. At the same time, since courts grant independent reliefs in such cases, one might question why not simply bypass the emergency arbitrator route and go for an interim relief measure under section 9.  The innovative respite by courts to emergency arbitral awards is a temporary one and without an amendment in the Arbitration Act, the effectiveness of emergency arbitral awards will remain at bay.

– Ragini Agarwal & Aditya Singh Chauhan

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[1] Braspetro Oil Services Co. v. The Management and Implementation Authority of the Great Man-Made River Project, Cour d’appel, Paris, July 1, 1999 (Fr.).