IndiaCorpLaw

Time for Indian Courts to Make Way For Emergency Arbitrators?

[Abhisar Vidyarthi is an Associate at AZB & Partners, New Delhi]

Over the last decade, emergency arbitration has been increasingly recognised and adopted by most national and international arbitral institutions. In India, emergency arbitration received a significant push on 6 August 2021, when the Supreme Court of India (‘Supreme Court’) rendered a monumental decision in Amazon.com Nv Investment Holdings LLC v. Future Retail Limited, (‘Amazon Case’) holding that an award passed by an emergency arbitrator is equivalent to an interim order of a tribunal under section 17(1) of the Arbitration & Conciliation Act, 1996 (‘Act’), and therefore can be enforced under section 17(2) of Act like an order of the court. This decision was not only significant for the legitimacy of emergency arbitration in India, but will also act as a lodestar for other jurisdictions, where the question of enforceability of emergency awards remains unsettled. In fact, this decision was symbolic of the fact that India is no more a mere spectator to favourable developments in international arbitration, and is ready to play a more active and integral role in shaping the contemporary narratives of the field.

The Supreme Court’s decision in the Amazon Case was also a testament of its steadfast commitment to upholding party autonomy as the grundnorm of arbitration in India. The Supreme Court notably adopted a contextual and purposive approach to fit emergency arbitration into the existing scheme of the Act, without the requirement of an amendment to give it express statutory recognition like in the cases of Singapore, Hong Kong and New Zealand. In unequivocal terms, the Supreme Court held that an emergency arbitrator, like a tribunal, is fully clothed with the same powers as a court to grant interim reliefs in India, and parties are strictly bound by emergency awards.

Implications of Emergency Arbitrators on Section 9

In this context, this post analyses whether Indian courts should now be dissuaded from exercising their power to grant urgent interim relief under section 9 of the Act, prior to the constitution of the tribunal, in circumstances where timely and effective interim relief could instead be granted to the parties by an emergency arbitrator under their chosen institutional rules. Interestingly, this question was touched upon but left undecided by the Delhi High Court in Ashwani Minda and Jay Ushin Ltd. v. U-Shin Limited (¶¶ 35-36), noting that the facts of the case did not require its determination. With the salient judgment in the Amazon Case, this question beckons reconsideration as emergency arbitrators can now provide an equally efficacious remedy under section 9 of the Act, while allowing parties to remain within the contractual framework of their arbitration agreements. Emergency arbitration, therefore, furthers the very objectives that encourage parties to opt for arbitration and oust jurisdiction of national courts in the first instance. 

Section 9 of the Act recognises the power of Indian courts to grant urgent interim reliefs upon an application by a party. This power is expected to be exercised, not as an instrument to interdict remedy available within the contractual framework of an arbitration agreement, but rather in aid of arbitration, i.e., to protect the substratum of disputes in situations, wherein timely relief in pursuance of the arbitration agreement is either not available or not efficacious. In fact, since the power of Indian courts under section 9 of the Act is in aid of arbitration, an application under section 9(1) ought to only be entertained in circumstances when the application cannot wait the constitution of the tribunal, and hence seeking interim measures under section 17 of the Act before such tribunal is not possible. Emergent necessity, of ordering interim measures, ought to therefore be a sin-qua-non to be satisfied before an Indian court proceeds to grant relief under section 9 of the Act.

The aforesaid legislative intent is also evidenced in Section 9(3) of the Act, which provides that once the tribunal has been constituted, Indian courts should not entertain an application for interim relief, unless circumstances exist which may render the interim relief provided by the tribunal under section 17(1) of the Act inefficacious. In the Amazon Case, the Supreme Court extended the same rationale to emergency arbitration, holding that the term ‘arbitral tribunal’ in the context of section 17(1) as well as section 9(3) would, when institutional rules apply, also include an emergency arbitrator. Further, noting that section 17 of the Act is at par with section 9 for all purposes, the Supreme Court held that emergency awards serve the purpose of decongesting clogged court systems and granting parties urgent interim relief in cases which deserve such relief.

Strictly speaking, section 9(3) of the Act only comes into play once the tribunal has been constituted (Arcellor Mittal v. Essar Bulk Terminal, ¶ 88). However, to apply the same understanding to emergency arbitrators may not be in line with the underlying legislative intent of section 9(3). The reason being that unlike tribunals, which often take some time to be constituted, thereby exposing parties to a substantial risk of their rights being rendered nugatory or meaningless in the interim, emergency arbitrators are institutionally appointed within 1-3 days of the application for emergency relief being filed with the chosen arbitral institution (See 9B(9.6), LCIA Rules; Paragraph 2, Schedule 1, SIAC Rules; Article 2, Appendix V, ICC Rules). The expedient nature of appointment of emergency arbitrators also strikes the emergent necessity criterion under section 9(1) of the Act as an application under section 9 would ordinarily be able to await the appointment of an emergency arbitrator.

In the context of emergency arbitration, the true intent of section 9 of the Act may therefore be purposively interpreted as requiring Indian courts to see, when approached for interim relief, whether parties can avail the same relief in a timely and efficacious manner before the emergency arbitrator, pursuant to their arbitration agreements. This understanding is also furthered by section 2(8) of the Act, which provides that institutional rules chosen by parties, which includes emergency arbitration provisions, are adopted into, and form part of, the arbitration agreement between the parties. In this regard, the scheme of the Act embodies the rule of priority in favour of arbitrators, and requires parties to an arbitration agreement to honour the undertaking to submit any dispute covered by such an agreement to arbitration. This may entail Indian courts adopting self-imposed limitations against entertaining applications for urgent interim relief under section 9 of the Act, unless the matter is so urgent that the time taken to appoint an emergency arbitrator would be excessive, or the reliefs granted by the emergency arbitrator would not be efficacious.

Deciding whether the remedy before an emergency arbitrator would be efficacious or not would turn upon the facts and circumstance of each case. In making this assessment, the manner in which the applicant has framed the relief sought may not be determinative, and rather the more appropriate test would be to see whether the emergency arbitrator is sufficiently empowered to grant interim measures which would safeguard the applicant against any attempts to erode the substratum of the dispute. In this regard, a primary concern often raised by parties is that unlike national courts, emergency arbitrators may not be empowered to grant effective interim measures in relation to third parties. This concern may, however, be mitigated in light of the Supreme Courts ruling in the Amazon Case that an emergency arbitrator is “fully clothed with the same power as national courts” to grant interim reliefs.

In this regard, a reference may also be drawn to Gerald Metals SA v Timis (¶¶ 7-8) (‘Gerald Metals’), wherein the English High Court took a similar position and held that where there is sufficient time for an applicant to obtain relief from an emergency arbitrator under the chosen institutional rules (LCIA in this case), national courts do not have the power to grant urgent relief. This decision was rendered in the context of section 44(5) of the Arbitration Act, 1996 [United Kingdom], which embodies the same principle as section 9(3) of the Act, and provides that courts may only act to the extent that the tribunal (or any other person or body vested with power in that regard) has no power or is unable for the time being to act.

Conclusion

It may, however, be clarified that Indian courts cannot be completely usurped of their power to grant interim relief, owing to the availability of a remedy before an emergency arbitrator. Such an interpretation may not be consistent with the Act. In fact, most institutional arbitral rules, including the LCIA Rules which were amended subsequent to the decision in Gerald Metals, themselves provide that emergency arbitration provisions do not prevent, substitute or impliedly waive the rights of parties to apply to a competent state court for any interim or conservatory measures (SeeArticle 9.13, LCIA Rules; Rule 30.3, SIAC Rules; Article 29(7), ICC Rules). Therefore, an interpretation consistent with section 9 of the Act, as well as institutional arbitral rules, would be that while the power under section 9 to grant interim relief remains unhindered, Indian courts should accord primacy to the timely and effective interim remedy available to parties through emergency arbitration. This approach would also serve the purpose of decongesting clogged court systems, which, as noted in the Amazon Case, is the underlying intention of sections 9(3) and 17 of the Act.

– Abhisar Vidyarthi