Top
Begin typing your search above and press return to search.
Law Firm Articles

Recognition Of Emergency Arbitration In India

Ashima Obhan & Shivam Patanjali
19 April 2021 8:05 AM GMT
Recognition Of Emergency Arbitration In India
x

The Delhi High Court recently had the opportunity to examine the issue whether an emergency arbitrator is an arbitrator under the Arbitration and Conciliation Act, 1996 ("Act"). The High Court further examined the issue of whether the interim order of the Emergency Arbitrator is an order under Section 17 (1) and is enforceable under 17(2) of Act[1]. Emergency Arbitration The concept...

Your free access to Live Law has expired
To read the article, get a premium account.
    Your Subscription Supports Independent Journalism
Subscription starts from
599+GST
(For 6 Months)
Premium account gives you:
  • Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.
  • Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.
Already a subscriber?

The Delhi High Court recently had the opportunity to examine the issue whether an emergency arbitrator is an arbitrator under the Arbitration and Conciliation Act, 1996 ("Act"). The High Court further examined the issue of whether the interim order of the Emergency Arbitrator is an order under Section 17 (1) and is enforceable under 17(2) of Act[1].

Emergency Arbitration

The concept of emergency arbitration, though while not expressly present in the Act or even in the Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Amendment") is an unique procedure found in many arbitral institution rules. Arbitral institutions' rules such as the SIAC Rules[2] and the International Chambers of Commerce Rules of Arbitration ("ICC Rules")[3] have laid down elaborate emergency arbitration procedures. This concept can even be found in domestic arbitral institutes such as the Delhi International Arbitration Centre ("DIAC")[4]; Mumbai Centre for International Arbitration ("MCIA")[5]; Nani Palkhivala Arbitration Centre ("NPAC")[6] to name a few.

In an emergency arbitration procedure, an emergency arbitrator is appointed by an arbitral institution before the constitution of an arbitral tribunal on an urgent basis to deal with an application for emergency interim relief. The types of relief sought through these applications include preservation orders, freezing orders, mareva injunctions and general injunctive relief.

The powers of the emergency arbitrator are similar to the powers of an arbitral tribunal to decide interim measures. While the order/award of the emergency arbitrator is binding on all the parties, they do not bind the subsequently constituted arbitral tribunal and the arbitral tribunal is empowered to reconsider, modify, terminate or annul the order/award of the emergency arbitrator.

Under an emergency arbitration, the entire procedure, from the appointment of the arbitrator to the delivery of the emergency arbitration award, is time bound. The rules governing the emergency arbitration procedure permit the emergency arbitrator to set his/her own procedure. Such procedures may include the timelines for exchange of submissions, a hearing (if any), the scope of the reply submissions, the mode of communications between the parties and evidence which can be adduced. For example, under the SIAC Rules, an emergency arbitrator is required to be appointed within a day of the receipt of the emergency arbitration application[7], prepare a schedule for the emergency arbitration within two days of his/her appointment[8] and pass an award within 14 days of his/her appointment[9].

The Law Commission Suggestion

The 246th Report of the Commission on 'Amendment to the Arbitration and Conciliation Act, 1996' ("Law Commission") sought to accord legislative sanction to rules of institutional arbitration such as the SIAC Rules that recognized the concept of an "emergency arbitrator". It aimed at doing so by amending the definition of arbitral tribunal. Under the Act, an arbitral tribunal means "a sole arbitrator or a panel of arbitrators"[10]. The Law Commission wished to expand this definition and add the words after the phrase "panel of arbitrators" the words "and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator"[11]. However, despite the recommendations of the Law Commission, this suggestion was not implemented even in the 2019 Amendment, or any subsequent amendments to the Act. As a result, it has often been argued in India that any other person other than a sole arbitrator or a panel of arbitrators are not vested with any powers as granted under the Act.

Non-Enforceability: The Argument

The Delhi High Court in Raffles Design International India Pvt. Ltd. Versus Educomp Professional Education Ltd. ("Raffles Decision") had held that "the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for the petitioner to file a suit."[12]

According to the Raffles Decision, a party may file a petition seeking interim reliefs under Section 9 of the Act and the courts would then independently apply their minds and grant interim relief in cases where it is warranted. The Raffles Decision noted that a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order. This finding of the Raffles Decision has been relied upon by parties in India to argue that an order of an emergency arbitrator is not valid under Indian law.

Parties not only rely upon the Raffles Decision, but also on the Law Commission suggestion to amend the definition of an arbitral tribunal. The term "arbitral tribunal" has defined under the Act to mean either a sole arbitrator or a panel of arbitrators[13]. The argument then usually advanced is that an emergency arbitrator is distinct from an arbitral tribunal, which is evidenced from a reading of arbitral institute rules. Under the SIAC Rules, an "Emergency Arbitrator" has been defined as an arbitrator appointed in accordance with Schedule 1[14], whereas a "Tribunal" includes a sole arbitrator or all the arbitrators where more than one arbitrator is appointed[15].

To further buttress the argument that an "Emergency Arbitrator" is distinct from a "Tribunal", if one examines Schedule 1 of the SIAC Rules, it is explicitly clear that a party may seek emergency interim reliefs prior to the constitution of the "Tribunal" by filing an application for emergency interim relief[16].

Schedule 1 of the SIAC Rules further state that an "Emergency Arbitrator" may not act as an arbitrator in any future arbitration relating to the dispute, unless otherwise agreed by the parties[17] and that such an arbitrator would not have any power to act once the "Tribunal" is constituted[18]. Schedule 1 further states that the "Tribunal" may reconsider, modify or vacate any interim order or award issued by the "Emergency Arbitrator" and that any interim order or award issued by the "Emergency Arbitrator" would cease to be binding if the "Tribunal" is not constituted within 90 days of such order or award[19].

By placing a reliance on the distinction created between an arbitral tribunal and an emergency arbitrator, it has been argued in the past that the power of an arbitral tribunal under Section 17 of the Act to grant interim measures cannot be extended to include an emergency arbitrator under the Act, when there is a clear distinction between an arbitral tribunal and an emergency arbitrator. Further, Section 17 may be invoked by a party anytime during the arbitral proceedings by approaching the arbitral tribunal. Therefore, for an interim order to be enforceable under Section 17 (2) of the Act, an arbitral tribunal is required to be constituted.

Through this distinction sought to be created between an arbitral tribunal and an emergency arbitrator, it has also been argued that the order of an emergency arbitrator is not appealable under Section 37 of the Act as it is not an order passed by an arbitral tribunal.

It has been argued that merely because Indian arbitral institutes provide for emergency arbitration, does not simply imply that emergency arbitrations are recognized under the Act. Arbitral institutes such as the MCIA and DIAC may be used as foreign arbitral institutes and the emergency arbitration procedure may be permitted if it is in consonance with the law of the seat of the arbitration. However, the Act does not expressly provide for emergency arbitrations and the rules of these arbitral institutes expressly state that in the event that any of their rules are in conflict with a mandatory provision of law applicable to the arbitration / arbitration agreement from which the parties cannot derogate, the mandatory provision would prevail.

Enforceability: The Law

The arguments mentioned above are now less likely to be accepted. Arbitration under the Act refers to an arbitration whether or not administered by permanent arbitral institution[20]. This definition is considered inclusive and includes both ad hoc as well as institutional arbitration. The Act also considers interim awards passed by an arbitral tribunal as an arbitral award[21].

An examination of Section 2 (6) of the Act, makes it explicitly clear that party autonomy is given the utmost importance under the Act. Section 2 (6) acknowledges that the parties have the autonomy to determine issues relating to the arbitration between them, or even authorise any person including an institution, to determine that issue. Section 2 (6) of the Act reads as follows:

"6) Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue."

Upon a reading of this Section, it is clear that the parties under the Act may arbitrate under the rules of an arbitral institution. Further, Section 2 (8) of the Act expressly states that an agreement between the parties, would also include the arbitration rules referred to in the parties' agreement. Section 2 (8) reads as follows:

"(8) Where this Part.—

(a) refers to the fact that the parties have agreed or that they may agree, or

(b) in any other way refers to an agreement of the parties,

that agreement shall include any arbitration rules referred to in that agreement."

The aspect of party autonomy is even found in Section 19 (2) of the Act, whereby parties are allowed to determine the arbitral procedure to govern the arbitration proceedings, which can include rules of an arbitral institute that provide for emergency arbitration.

Section 17 of the Indian Arbitration Act 1996, which empowers an arbitral tribunal to grant interim reliefs, does not preclude or intimate that parties cannot agree to institutional rules which allow recourse to emergency arbitration. These interim orders are deemed to be an order of the Court and can be enforceable as an order of the Court.

The Delhi High Court in Amazon.com NV Investment Holdings LLC vs. Future Coupons Private Limited and Ors., upon a careful analysis of the law recognized that if an arbitral institute's rules provide for emergency arbitration and if the parties have agreed to arbitrate under those rules under Section 2 (8) of the Act, then the parties would be deemed to have agreed to the provisions relating to emergency arbitration. Further, upon a careful reading of Sections 2 (1) (d), 2 (6), 2 (8), 19 (2) of the Act and the arbitral institute's rules which were part of the arbitration agreement by virtue of Section 2 (8), the High Court came to the conclusion that an emergency arbitrator would be an arbitrator for all intents and purposes and held that Section 2 (1) (d) is wide enough to include an emergency arbitrator.

The Delhi High Court observed that the procedure of emergency arbitration is an effective and expeditious mechanism to deal with the emergency interim relief application and has added a new dimension to the protection of the rights of the parties. The procedure of emergency arbitration provides a litigant relief in a short time bound manner, which would not be possible in Courts. However, if the order of the Emergency Arbitrator is not enforced, it would make the entire mechanism of emergency arbitration redundant. The High Court even went on to state that the current legal framework is sufficient to recognize emergency arbitration in India and there is no need for a specific amendment as suggested by the Law Commission.

Ashima Obhan is a Partner and Shivam Patanjali is an Associate at Obhan and Associates. Views are personal.



[1] MANU/DE/0508/2021

[2] Rule 30.2 of the SIAC Rules.

[3] Article 29 of the ICC Rules.

[4] Rule 14 of the DIAC Rules.

[5] Rule 14 of the MCIA Rules.

[6] Rule 20 A of the NPAC Rules.

[7] Rule 3 of Schedule 1 of the SIAC Rules.

[8] Rule 7 of Schedule 1 of the SIAC Rules.

[9] Rule 9 of Schedule 1 of the SIAC Rules.

[10] Section 2 (1) (d) of the Act.

[12] 2016 (6) ARBLR 426 (Delhi)

[13] Section 2 (1) (d) of the Act

[14] Rule 1.3 of the SIAC Rules.

[15] Rule 1.3 of the SIAC Rules.

[16] Rule 1 of Schedule 1 of the SIAC Rules.

[17] Rule 6 of Schedule 1 of the SIAC Rules.

[18] Rule 10 of Schedule 1 of the SIAC Rules.

[19] Ibid

[20] Section 2 (1) (a) of the Act.

[21] Section 2 (1) (c) of the Act.


Next Story
Share it