Reliance Retail Ventures’ Limited’s (RRVL) open defiance of the interim order granted by the Emergency Arbitrator in an SIAC Arbitration initiated by Amazon.com Inc (Amazon) against certain entities within the Future Group, brings to sharp focus the limitations inherent to an Emergency Arbitrator process and the murky waters of enforcement of such orders in India. The present position in India appears to be that: such orders cannot be passed against non-parties; and orders passed by Emergency Arbitrators, especially in non-India seated arbitrations, are not directly enforceable. However, despite this significant limitation, Emergency Arbitrators’ orders have been quite popular and useful.
In August this year, RRVL announced that it had entered into a deal for the acquisition of the assets and business of Future Retail Limited for approx. $3.38 billion. Amazon alleged that the transaction was violative of a shareholders’ agreement entered into with the promoters of the Future Group. It is reported that Amazon proceeded to initiate arbitration proceedings before the Singapore International Arbitration Centre (SIAC) against this transaction. Amazon also sought interim relief from an Emergency Arbitrator appointed under the SIAC Rules to prevent completion of this transaction. RRVL has categorically stated that, despite the order, it will proceed to complete the transaction without any delay.
An emergency arbitrator is an actor unique to institutional arbitration. He/she is appointed pending the constitution of the actual arbitral tribunal, to consider applications for urgent relief that cannot wait until the constitution of the actual tribunal. Under Schedule 1 of the SIAC Rules, an Emergency Arbitrator is appointed within one day of the receipt of request with relevant fees, and the application for interim order sought is ordinarily considered within 14 days.
Challenges to Enforcement
In the event RRVL and the Future Group refuse to voluntarily comply with the Emergency Arbitrator’s order (as appears likely), then Amazon is likely to face an uphill task in seeking enforcement of such an order in India. The Arbitration and Conciliation Act, 1996 (“Arbitration Act”) of India does not specifically recognise interim orders passed by emergency arbitrators. Despite a specific suggestion made by the Law Commission in its 246th Report, legislative amendments that followed in 2015 and 2019 have not included emergency arbitrators within the scope of the Act. This presents the following complications:
a) Arbitral Tribunal
It is unclear whether an emergency arbitrator’s is an “arbitral tribunal” for the purposes of the Arbitration Act. This question is crucial because an action/order of a person not recognised as an “arbitral tribunal” would have no legislative sanctity.
The definition under 2(1)(d) of the Arbitration Act is not sufficiently clear since it only says that an “arbitral tribunal” means a sole arbitrator or a panel of arbitrators and does not envisage an arbitrator who is vested with powers to grant only interim relief. Therefore, one possible argument is that any person not vested with the power to finally decide the issues arising between the parties to the dispute is not an “arbitral tribunal” for the purposes of the Arbitration Act. Such an argument would have particular merit in the context of the SIAC Rules where the Emergency Arbitrator:
(i) is specifically prohibited from acting as an arbitrator on the matter, unless otherwise agreed by the parties, and
(ii) cannot exercise any powers after the Tribunal is constituted.
Since a clear distinction is made in the SIAC Rules between a “Tribunal” and the “Emergency Arbitrator”, there are good grounds to argue that an “arbitral tribunal” as used in the Arbitration Act only refers to the “Tribunal” as defined in the SIAC Rules and not to an “Emergency Arbitrator”.
We do not yet have an authoritative precedent interpreting this issue in the context of an Indian enactment. On the one hand, there are cases where courts have afforded due respect and regard to the Emergency Arbitrator process and have even gone so far as to limit the scope of their own interim reliefs, so as to give room to the Emergency Arbitrator to provide such reliefs as are appropriate (see for instance Steer Engineering Pvt. Ltd. v Glaxo Smithkline Consumer Healthcare Pte. Ltd., O.M.P.(I) (COMM.) 146/2019 (Del HC); Ashwani Minda v U-Shin Ltd, O.M.P.(I) (COMM.) 146/2019 (Del HC)). On the other hand, there are decisions where courts have clearly set out that an Emergency Arbitrators’ orders are not enforceable under Indian law (see for instance Raffles Design Int'l India Pvt. Ltd. v. Educomp Professional Education Ltd. & Ors., (2016) 234 DLT 34).
b) Seat of Arbitration
S. 17 of the Arbitration Act elevates an interim order passed by an arbitral tribunal to the status of a court decree and makes them enforceable. S. 17 however only applies to arbitrations seated in India and not to orders passed outside India. Some commentators have explored the possibility of overcoming this hurdle by treating such interim orders, including Emergency Arbitrator orders as “Awards” and therefore enforceable under Part 2 of the Arbitration Act. However, while there is no authoritative decision on this issue, it would appear that such an argument is likely to fail, sincethe term “award” as used in the Arbitration Act contemplates a final determination on merits. In the present case, newspaper reports suggest that the SIAC Arbitration initiated by Amazon is seated in Singapore. If so, then even if Amazon was able to persuade the courts to treat an Emergency Arbitrator as an “arbitral tribunal” under the Arbitration Act, they would still not be able to enforce that order in India.
c) Parties to the Arbitration
An inherent limitation to any interim order granted by an arbitral tribunal is that it only binds the parties to the arbitration. Reliefs necessitating compliance by a third party, require an application in this regard. This is one of the key reasons why a carve out has been made in S. 9(3) of the Arbitration Act which permits a court to grant interim relief even after constitution of an arbitral tribunal, if a tribunal cannot grant relief that is efficacious.
In the present case, newspaper reports indicate that RRVL is not a party to the arbitration initiated by Amazon. Therefore, RRVL does not appear to be bound by an interim order passed by the Emergency Arbitrator. In fact, if there are Future Group entities who are not parties to the arbitration proceedings, and they are able to act independently , then they are also not bound by the decision of the Emergency Arbitrator. In these circumstances, there does not appear to be any legal bar to the continuation of such aspects of the transaction that do not require the consent of persons/entities who are a party to the SIAC arbitration.
Relevance of Emergency Arbitrator Orders
Against the background, the obvious question then is, why would Amazon, advised by the very best in the industry, spend time, energy and resources getting such an order in the first place? The following factors may have played some role:
a) Persuasive Value
The biggest advantage to getting an Emergency Arbitrator’s order in your favor, even in a country like India where these are not enforceable, is their persuasive value . The position under Indian law, as set out in Raffles Design is that, even if there is an order by an Emergency Arbitrator, a Court approached under S. 9 of the Arbitration Act will examine issues independently while considering grant of relief.
However, courts have recognised that the Emergency Arbitrator’s order can have a certain persuasive value. Indian courts have passed interim orders that have largely mirrored the findings of the Emergency Arbitrator (see for instance HSBC v Avitel, Arb. Pet. 1062/2012 (Bom HC), Plus Holdings, Comm Arb Pet 339/2019 (Bom HC)). Specifically,, in Ashwani Minda, the Delhi High Court rejected a prayer for interim relief that had already been rejected by an Emergency Arbitrator under the JCAA Rules, Japan on grounds that a party cannot have two bites at the cherry.
This deference is hardly surprising since proceedings before an Emergency Arbitrator, especially those under reputed institutional rules, are quite elaborate and intensive, even at an interim stage. Additionally, this is also used as a starting point to obtain similar reliefs before Indian courts.
b) International Enforcement
Enforcement of Emergency Arbitrator’s orders is by no means a universally well-established practice. There are only a handful of countries where such orders can be directly enforced. However, where parties find that enforcement in these jurisdictions is helpful in their specific case, then an Emergency Arbitrator’s order may prove to be a lot of more cost effective and efficient that initiating multiple proceedings across multiple fora seeking similar reliefs.
c) Voluntary Compliance
Statistical evidence published by a number of arbitration institutions worldwide indicates that Emergency Arbitrator’s orders have usually been voluntarily complied with by the Parties. This is unsurprising because non-compliance is not likely to be viewed kindly by the Tribunal which ultimately rules on the merits and may even resulting an adverse costs order against a party. A number of institutional rules even require voluntary compliance, illustratively including Article 12 of Schedule 1 of the SIAC Rules.
The authors are Vikas Mahendra, a Partner and Alefiyah Shipchandler, an Associate, at Keystone Partners.