A Proposed Enforcement Mechanism for Foreign-Seated Interim Orders in India

[Abhisar Vidyarthi is a BCL student at the University of Oxford and Pragya Agarwal is an advocate practising in New Delhi]

Arbitration law in India is gearing towards another round of reforms as the Indian government has set up a high-level expert committee to recommend reforms to the [Indian] Arbitration & Conciliation Act, 1996. The terms of reference of the Expert Committee, among other issues, include recommending statutory means to minimise recourse to judicial authorities in arbitration matters. While the Expert Committee’s report is still pending, it is expected that the report will endeavour to supplement the pro-arbitration amendments made in 2015 and 2019, and further align India’s practice with other pro-arbitration jurisdictions.

An issue that has remained unaddressed in earlier amendments, and may warrant consideration of the Expert Committee, is the lack of an enforcement mechanism in India for interim orders passed by foreign-seated tribunals. The Act presently creates a disparity between interim orders passed by India-seated arbitral tribunals and foreign-seated arbitral tribunals. While the former has a direct enforcement mechanism provided under section 17(2) of the Act, there is no enforcement mechanism provided for the latter. This disparity has also been acknowledged by the Delhi High Court in Raffles Design v Educomp (see para 98).

This post proposes that the Expert Committee should recommend appropriate amendments to the Act to empower Indian courts to enforce interim orders made by foreign-seated tribunals as if it were an order of an Indian court.

Introduction of Section 17(2) of the Act in 2015

Section 17(1) of the Act delineates the power of an India-seated arbitral tribunal to grant interim relief to the parties. Section 17(2) of the Act allows Indian Courts to enforce interim orders passed by arbitral tribunals under section 17(1) like an order of the Court.  Section 17(2) of the Act was introduced by the 2015 Amendment Act pursuant to the recommendations made by the 246th Law Commission Report. The underlying objective behind the introduction of section 17(2) was to accord sanctity to interim orders passed by arbitral tribunals and provide the necessary remedy against infractions of such orders (see para 49 of the Report). This amendment has ensured that interim orders passed by India-seated arbitral tribunals are treated with the same deference, and have the same legal status, as that of interim orders passed by Indian courts.

No Enforcement Mechanism for Interim Orders Passed by Foreign-Seated Tribunals

At present, interim orders passed by foreign-seated tribunals do not enjoy the same status as interim orders passed by India-seated tribunals. The Act does not contain a provision similar to section 17(2) in part II of the Act, which applies to foreign seated arbitrations.

Though based on the UNCITRAL Model Law (“Model Law”), the Act does not contain any provision which is in pari materia to article 17H of the Model Law, enabling enforcement of interim orders passed by arbitral tribunals irrespective of the country in which they are issued.

In the absence of a direct enforcement mechanism under the Act, parties must approach an Indian court by filing an application under section 9 of the Act to seek relief in terms of the interim orders granted by the foreign seated tribunal (HSBC v. Avitel Post). Although such an application under section 9 may place reliance on the pro tem measures granted by the arbitral tribunal, the interim order of the arbitral tribunal, in and of itself, is neither binding nor enforceable by the Indian court. For instance, recently, the Calcutta High Court has held that a foreign-seated emergency award may be considered as a supplemental factor under section 9 of the Act but is not directly enforceable due to the absence of a provision akin to section 17(2) in part II of the Act (Uphealth Holdings v Glocal Healthcare Systems). This cannot be equated to an action for enforcement but constitutes an independent action in aid of arbitration.

Need for an Amendment

In view of the above, there is no parity between interim orders passed by India-seated arbitral tribunals and foreign-seated arbitral tribunals, even with respect to emergency awards. The present position can result in an anomaly. Firstly, while foreign awards are directly enforceable under part II of the Act (which enforces the New York Convention in India), interim orders passed by foreign-seated tribunals in aid of such final awards are not enforceable. This position defeats the object of granting interim relief by foreign seated tribunals, which is to ensure protection of the property which is the subject matter of arbitration; or to ensure that the arbitration proceedings do not become infructuous and the final award does not become a paper award of no real value. In the absence of effective and enforceable interim measures, a claimant may face the risk of a respondent dissipating assets, destroying evidence or otherwise taking action to prejudice the value of any award which an arbitral tribunal may grant.

Secondly, there is no legitimate reasoning behind discriminating between interim orders passed by India-seated arbitral tribunals and foreign-seated arbitral tribunals. Interim orders in both situations serve the purpose of decongesting clogged court systems and granting parties urgent relief in cases which deserve such relief. The objectives behind the introduction of section 17(2) of the Act, i.e. to give teeth to the orders of the arbitral tribunal and bring it at par with orders of a court under section 9 of the Act, should stand true for foreign-seated arbitration as well. This is particularly so as section 9 of the Act is equally applicable to foreign-seated arbitrations.

Lastly, where in an arbitration seated outside India, assets of one of the parties are situated in India and interim orders are required with respect to such assets, the Act permits an Indian court to pass such orders under section 9 of the Act. Similarly, foreign-seated tribunals may also pass orders to preserve assets of the parties situated in India. In such circumstances, the remedy before the arbitral tribunal must be equally efficacious and enforceable as the remedy available before the Indian Courts, in line with the principles enshrined under section 9(3) of the Act. This is imminent especially since the Supreme Court has allowed two Indian parties to choose a foreign seat of arbitration (discussed here).

Practice in Other Pro-Arbitration Jurisdictions

Introducing an enforcement mechanism for interim orders passed by foreign seated tribunals would not only be in line with article 17H of the Model Law, but also be consistent with the practice in other pro-arbitration jurisdictions. For instance, section 61 of the Arbitration Ordinance in Hong Kong is modelled on article 17H of the Model Law and provides that “An order or direction made, whether in or outside Hong Kong, in relation to arbitral proceedings by an arbitral tribunal is enforceable in the same manner as an order or direction of the Court that has the same effect, but only with the leave of the Court.” Section 22A of the Arbitration Ordinance is a similar provision for enforcement of emergency awards.

In Singapore, the definition of “arbitral award” under section 27(1) of the Singapore International Arbitration Act, 1994 includes orders or directions made or given in respect of any of the matters set out in sections 12(1)(c) to (i) by the arbitral tribunal. Section 12(1)(i) includes “an interim injunction or any other interim measure”. Therefore, interim orders passed by foreign seated tribunals can be enforced as an arbitral award in Singapore. In CVG v CVH, the Singapore High Court recently confirmed that an interim award made by an emergency arbitrator in a foreign seated arbitration is enforceable in Singapore.

In the UK, courts have the power to enforce peremptory orders passed by the arbitral tribunal by requiring a party to comply with it. While this provision is directly applicable to arbitrations seated in the UK, courts may exercise this power even when the seat is outside UK when “(a) no seat of the arbitration has been designated or determined, and (b) by reason of a connection with England and Wales or Northern Ireland the court is satisfied that it is appropriate to do so.” While reviewing Section 42 of the [English] Arbitration Act, 1996, the Law Commission has noted that this approach may not require an amendment and may also be extended to emergency arbitration awards. In particular, it was noted that “11.30….Under section 42, the court can make an order requiring a party to comply with a peremptory order. This seems to us an appropriate regime, and we have not yet been persuaded of what might replace it. In particular, articles 17 H and I of the UNCITRAL Model Law, although structured differently, seem to us to produce a similar outcome.”

Further, section 17L of the [New Zealand] Arbitration Act, 1996 which is also based on article 17H of the Model Law, provides for enforcement of interim orders passed by the arbitral tribunals irrespective of the country in which they are issued.

Conclusion

The Expert Committee may consider the above and propose that appropriate amendments may be carried out to empower Indian Courts to enforce interim orders made by foreign-seated tribunals like an order of the Court. This objective may be achieved through extending the applicability of section 17(2) of the Act to interim orders passed by foreign-seated tribunals. This may be achieved through an amendment to the proviso to section 2(2) or an amendment to section 17(2) itself in terms of article 17H of the Model Law; or introducing a provision similar to section 17(2) in part II of the Act; or expanding the definition of a foreign award under section 44 of the Act to include interim orders of the arbitral tribunal.

– Abhisar Vidyarthi & Pragya Agarwal