Emergency Arbitrator Awards: Valid & Enforceable Under the Indian Arbitration Act
In a pro-arbitration decision granting urgent interim relief, the Indian Supreme Court, in its judgement handed down on August 6, 2021, has upheld an emergency arbitrator (EA) award of the Singapore International Arbitration Centre as binding and enforceable under Section 17(2) of the Indian Arbitration & Conciliation Act 1996 pertaining to interim measures. The decision followed a claim filed by e-commerce giant Amazon Group, which sought to restrain Indian company Future Retail Ltd from merging with Reliance Infrastructure Group, an entity which was considered a restricted person under a Shareholders Agreement ie an entity whose assets Future Retail Ltd was prohibited from transferring, disposing of or encumbering. The EA award in favour of Amazon was initially confirmed by the single bench of the Delhi High Court, then stayed by a two-judge bench of the same court in appeal and finally appealed to the Supreme Court.
In its decision, the Supreme Court settled certain legal issues, which have gained considerable significance in the enforcement of foreign awards. This is because, unlike other jurisdictions, the Indian Arbitration Act does not contain any provision for appointment of an emergency arbitrator. Firstly, is an EA award enforceable as an interim award under Section 17 of the Arbitration Act? Secondly, can an EA Award enforcement order made under Section 17(2) be subject to an appeal under Section 37 of the Arbitration Act? The Supreme Court upheld the EA award as valid and enforceable, and ruled that appeals cannot be lodged against such orders. The decision rightly emphasised the concept of party autonomy, a pro-arbitration statutory construction, and the legislative intent to reduce court intervention in arbitration matters. The validity of the EA award is also relevant for the provision of urgent interim relief to parties, a quintessential facet of arbitration.
To answer the first question affirmatively, the Court reasoned that nothing could prevent parties from agreeing to appoint an emergency arbitrator through an arbitration agreement to resolve urgent disputes. Placing reliance on the scheme of the Arbitration Act and past judgements of the Court such as Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd. (2014), Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2016) and Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. (2017), the Supreme Court reaffirmed party autonomy in the choice of applicable arbitration rules as a central pillar of the Act.
The Supreme Court interpreted the Arbitration Act in favour of dispute resolution to hold that ‘arbitral proceedings’ do not exclude proceedings with an emergency arbitrator. It was reasoned that Section 17(1) which deals with interim measures, when read together with the other provisions of the Arbitration Act, does not limit the definition of ‘arbitral proceedings’ and, in fact, includes interim awards granted by emergency arbitrators within the scope and ambit of the definition. More importantly, a party that has participated in emergency arbitration proceedings cannot claim thereafter that it shall not be bound by the outcome of such proceedings. The Court went on to state that the main objective behind the introduction of Sections 9(2) and 9(3) of the Act, which prevent courts from passing interim measures once a tribunal is constituted, was to ease the burden on courts, and for arbitral tribunals to provide justice in a timely manner. The decision handed down by an emergency arbitrator gives the parties urgent relief and swift access to justice and, therefore, furthers such an objective. In response to an argument raised by the counsel for Future Retail Ltd on the premise that an EA is different from a properly constituted three-member arbitral tribunal, and the former does not intend to bind the parties through its decision, it was emphatically clarified by the Supreme Court that for the purposes of the Arbitration Act, an arbitral tribunal does not necessarily consist a three-member tribunal, but can also be a single emergency arbitrator. This was a contentious issue, for which a decision was keenly awaited. This judgement clarifies the position of the Supreme Court on the legality and enforceability in India of awards passed by an emergency arbitrator in a foreign country.
Besides the legal issues it settles, the judgment also significantly contributes to making India an arbitration-friendly jurisdiction that allows for quick interim relief and respects the decisions of arbitration centres like the Singapore International Arbitration Centre. In this regard, the decision furthers the object of previous amendments in the Arbitration Act (in 2019 and 2021) which empowered arbitral centres with the appointment of arbitrators (in the absence of unanimous decision by the parties) and limited the grounds for judicial review. This helped maintaining the integrity of the proceedings and, at the same time, decongested courts. With this new judgment of the Supreme Court, India’s arbitration practice further aligns with those of Singapore, Hong-Kong and the UK.
Shivani Vij is a lawyer practising civil and commercial law in Delhi.
Utsav Mitra is an Associate at a law firm in Mumbai.