The Viewpoint: Emergency Arbitration – An Absent Concept

The Viewpoint: Emergency Arbitration – An Absent Concept

Nishant Nigam and Anjali Dwivedi

In a dispute concerning legal rights, a delayed remedy may render the aggrieved party unaided and consequently, in a situation which is irreparable especially in a procedure like Arbitration where procedures are determined by the parties to the dispute. Thus, the aspect of emergency Arbitration has become critically important in the past few years.

In a scenario, wherein the arbitral tribunal is not constituted and enough time will be wasted in constituting a tribunal the parties may exercise only two options to avail an instantaneous relief. The parties can either apply for interim measures in the local courts or wait for the arbitral tribunal to be constituted. Interim measures can be relevant in predicting the fate of the parties in arbitration. In a conventional judicial dispute settlement system, the parties have always sought an interim measure to protect and secure either an amount or property which is the subject matter of the dispute.

Further, international arbitration between parties from different jurisdictions creates a jurisdictional dilemma in seeking an interim injunction from the courts. Emergency arbitration resolves this jurisdictional conundrum in arbitration. Emergency arbitration is an urgent measure where there is an imminent risk of irreparable damage. These measures essentially seek to maintain status quo during the pendency of the dispute.  The parties to the dispute can refer such dispute for emergency arbitration before the notice of arbitration is issued and the tribunal is constituted. The award is enforceable like an order of the courts in jurisdictions that recognise emergency awards. Emergency arbitration is not merely an instant remedy but also can be used as a facilitator for arriving at an amicable settlement pertaining to a dispute which is ideal for the parties to an arbitration agreement.

Many arbitral institutions have acknowledged emergency arbitration as a means to provide instant interim relief to the parties wherein a prima facie case exists requiring immediate relief which if not granted will lead to irreparable damages. The most prominent and sought after arbitral institutions like HKIAC, SIAC, LCIA, ICC have included a provision for emergency arbitration as a remedy in disputes where in the parties cannot await for the arbitral tribunal to be constituted. It is no longer a ‘midnight clause’, included at the last moment in contract negotiations.

A provision to this effect was initiated in the year 2006 by the American Bar Association. Various other countries have also implemented this provision in their dispute resolution laws. To support and encourage emergency arbitration in Singapore and Hong Kong, the respective jurisdictions have also incorporated provisions in their corresponding state legislations and acknowledged emergency award in the definition of award. Arbitral institutions in India such as Mumbai Centre for International Arbitration (MCIA), Nani Palkhivala Arbitration Center (NPAC), Indian Council of Arbitration (ICA), Delhi Arbitration centre and the like, recognize emergency arbitration and have provided for specific procedure in that regard within their rules. The definition of the term “Award as per the MCIA rules reads as under:

““Award” includes a partial or final award and an award of an Emergency Arbitrator;

Though, the institutions have recognised and incorporated the concept of Emergency Arbitration, however, unfortunately, the concept of emergency arbitration and award is absent in the Indian legislation. The definition of award under Section 2(c) of the Arbitration and Conciliation (Amendment) Act, 2015 even after the much appreciated amendments does not cover “emergency award” within its ambit and scope. In order to cope with the lack of immediate relief in Arbitration and Conciliation Act, 1996, the High Level Committee Report to Review the Institutionalisation of Arbitration Mechanism in India had suggested an amendment in the Act.

The need for fast track arbitration and the various amendments in 2015 is a testimony to the growth and need of arbitration in India. However, the availability of interim relief cannot always be a feasible solution in a dispute requiring immediate measures. Though, interim measures and emergency measures might be two sides of the same coin, however, their importance has to be weighed on different scales.

The High Level Committee in its report also appreciated the significance of emergency arbitrator and recommended amendments to the Arbitration and Conciliation Act, 1996 by including the provisions for emergency arbitration. The Committee proposed that India should be in consonance with the international standards. The need to recognise an emergency award is primal to provide legislative support to rules of arbitral institutions that presently provide for emergency arbitration.

An emergency award for arbitrations seated in India is likely to be enforced as per Section 17(2) of the Act subject to judicial intervention and interpretation. So far as the enforcement of emergency awards in international arbitration is concerned, the Delhi High Court in Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors. held that an emergency award in arbitration seated outside India is not enforceable in India. An emergency award if recognised in India will specifically be beneficial for parties if the parties against whom the claim is made have their assets in a different jurisdiction which recognises emergency awards.

Emergency Arbitration can eliminate the hassle of applying before numerous forums in different jurisdictions for obtaining a single instant relief. It is more time efficient than local court proceedings and the proceedings in front of an arbitral tribunal are more trusted than ones in a local jurisdiction. It also sets a behavioural standard for the parties. The parties are more likely to abide by an emergency award, since the award also becomes precedence once the arbitral tribunal is constituted. It has in fact in a variety of circumstances substantiated the claim of a party seeking instantaneous reprieve. In the case of HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Ltd., the Bombay High Court also gave an interim relief to the party on the lines of the emergency arbitrator in SIAC. Thus, emergency arbitration can aid and hasten further reliefs for the parties from the local courts and the arbitral tribunal.

The findings of the High Level Committee as well as the 246th Report of the Commission on ‘Amendment to the Arbitration and Conciliation Act, 1996’ have established the significance of incorporating a provision for ‘emergency arbitration’ in the Arbitration & Conciliation Act, 1996. With the judicial convergence of the Act and the Arbitration & Conciliation (Amendment) Act, 2015, India took a progressive step towards arbitration. Hence, an emergency arbitration provision will be a curative to disputes requiring prompt relief in arbitration proceedings. It will strengthen the development of arbitration in India and decrease judicial intervention in arbitration.  It will also be a step towards encouraging India to strive for becoming a global hub for Arbitration by harmonizing the prevalent laws and rules with the international arbitral rules.

Nishant Nigam is a Principal Associate and Anjali Dwivedi is an Associate at Karanjawala & Company.

Bar and Bench - Indian Legal news