The aspect of Emergency Arbitration has become vital in the past few years, especially in the light of the fact that in a dispute, a delayed relief may leave the aggrieved party high and dry and in an irreparable situation. This is especially important in the case of arbitration where procedures are determined by the parties to the dispute.
The need for emergency arbitration arises when a party is constrained to seek interim relief before the arbitral tribunal has been constituted. Therefore, the objective of an emergency arbitration is to provide urgent pro tem or conservatory relief measures to a party or parties that cannot await the formation of an arbitral tribunal. The efficacy of an Emergency Arbitration, invoked by a party, depends on the following two principles:
- Fumus boni iuris- Reasonable possibility that the requesting party will succeed on merits;
- Periculum in mora - If the measure is not granted immediately, the loss would not and could not be compensated by way of damages.1
Since the amendment to the UNICTRAL Model Law (Model Law) in 2006 empowering arbitral tribunals to grant interim reliefs to parties, a number of arbitration institutions such as the International Centre for Dispute Resolution (ICDR), Stockholm Chamber of Commerce (SCC), International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC) have amended their rules to provide parties with the remedy of emergency arbitration. The Singapore International Arbitration Centre (SIAC), in fact, was a pioneer in this regard as it was the first Asian institution to introduce Emergency Arbitration provision in July 2010.
EMERGENCY ARBITRATION AND INDIA
There was an expectation that the Arbitration and Conciliation (Amendment) Act, 2015, would incorporate the concept of emergency arbitration, but that did not happen. The recommendation of the Law Commission's 246th Report to amend Section 2(d) to include emergency arbitrator was rejected in the 2015 amendment.
However, despite the above, arbitration institutions in India such as Delhi International Arbitration Centre (DAC), Court of Arbitration of the International Chambers of Commerce-India, International Commercial Arbitration (ICA), Madras High Court Arbitration Center (MHCAC), Mumbai Center for International Arbitration (MCIA) have incorporated provisions in relation to Emergency Arbitration Provisions.
EMERGENCY ARBITRATION AND THE VIEW OF COURTS
Most arbitration institutious (both Indian and International) provide for an Emergency Arbitrator in their rules. Therefore, instead of filing a petition under Section 9 of the Arbitration and Conciliation Act, the parties can approach the Emergency Arbitrator for relief. However, the enforcement of interim relief passed by emergency arbitrators, particularly in case of foreign seated arbitrations, is unclear, especially because judicial decisions regarding interim orders of Emergency Arbitrators are few and far in between. The issue of emergency arbitration has been considered by the Bombay High Court and the Delhi High Court in two judgements which we shall discuss in brief herein below:
HSBC PI HOLDINGS (MAURITIUS) LIMITED V. AVITEL POST STUDIOZ LIMITED AND ORS.2
The case involved an arbitration agreement in which the parties reserved their right to seek interim reliefs before the national courts of India, even though the arbitration was conducted outside the country. The parties resorted to EA seated in Singapore, where a favorable order was given to the party under the SIAC Rules of Arbitration. The party sought to enforce the same in India. The claimant filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, in view of the order of the Emergency Arbitrator. The Bombay High Court while upholding the award of the Emergency Arbitrator and granting interim relief observed that the '...petitioner has not bypassed any mandatory conditions of enforceability' since it was not trying to obtain a direct enforcement of the interim award.
It is important to note that the agreements in the present case were entered into between the parties prior to the Supreme Court of India's judgement in Bharat Aluminum Co. v. Kaiser Aluminum Technical Service Inc. (BALCO)3 thus the ratio decidendi of BALCO did not apply to this case. It is significant as in the BALCO judgement, the Supreme Court held that Part I of the Arbitration Act would not be applicable to international commercial arbitrations.
RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED & ORS. V. EDUCOMP PROFESSIONAL EDUCATION LIMITED & ORS.4
The case involved an arbitration agreement which was governed and construed in accordance with the laws of Singapore. The parties resorted to EA seated in Singapore, wherein an interim order was passed, which was later enforced in the High Court of the Republic of Singapore. The party who obtained the favorable order later filed an application under the amended Section 9 of the Arbitration and Conciliation (Amendment) Act, 2015, seeking interim reliefs alleging that the other party is acting in contravention to the orders passed in the Emergency Award. The Delhi High Court held that the emergency award passed by the emergency arbitrator cannot be enforced under the Arbitration Act. However, the Delhi High Court while allowing the maintainability of such petitions highlighted the relevancy of the amended Section 2(2) of the Act. The proviso to Section 2(2) of the amended act has widened the ambit of the powers invested in the court to grant interim reliefs, as Section 9 shall now apply to international commercial arbitrations, even if the place of arbitration is outside India (effectively overriding the BALCO judgement).
Recently, this issue arose again before the Delhi High Court in the case of Ashwani Minda & Ors. vs U-Shin Ltd. & Ors.5 . After failing to obtain any interim relief from the Emergency Arbitrator appointed under the Japan Commercial Arbitration Association (JCAA) Rules, the petitioner in this case approached the Delhi High Court under Section 9 seeking the same relief. The Delhi High Court held that the Section 9 petition was not maintainable since the parties had excluded the provisions of Part I of the Act, including Section 9. It further held that even otherwise, having consciously elected to approach the emergency arbitrator, it was no longer open to the petitioner to approach the court under Section 9 merely because it was unsuccessful before the emergency Arbitrator; and that the court in a petition under Section 9 of the Act cannot sit as a court of appeal to examine the order of the EA. The Court also distinguished the Raffles judgment, stating: "61. two factors distinguish the said case from the present one. Firstly, in that case, there was no Clause in the Dispute Resolution Mechanism by which the parties had excluded the applicability of Section 9 of the Act and secondly, unlike in the present case, the Rules governing the Arbitration were SIAC Rules, which permit the parties to approach the Courts for interim relief. Parties had agreed that it would not be incompatible for them to approach the Courts for interim relief."
The Ashwani Minda judgement has cleared the air slightly over the enforceability of the Emergency Arbitrator's interim order, wherein now the practice of first approaching the Emergency Arbitrator and then filing a Section 9 petition (even in cases where Section 9 is not excluded), may no longer be permissible.
In case of India-seated arbitrations, there is no precedent since orders passed by the arbitral tribunal can be enforced like the order of a court. It is, therefore, likely that orders passed by emergency arbitrators may also be enforceable. In conclusion, we can say that the provisions of Section 9 of the Arbitration and Conciliation Act remain an important and essential remedy in arbitration proceedings.
The advantages, however, of emergency arbitrations as opposed to Indian Courts are numerous. Mutual agreement of subjecting the dispute to a neutral jurisdiction so that the juridical seat of the tribunal can be decided in a way that both the parties are comfortable with it, far outweigh filing petitions before the court of appropriate jurisdiction. Further, even an emergency arbitration would take place within a stipulated timeframe, as opposed to timeframe of obtaining interim reliefs from a court which is usually uncertain. More importantly, in a COVID-19 affected world where courts are shut down across the country and courts and arbitral tribunals are functioning through video conferencing, the convenience and importance of emergency arbitrations can no longer be ignored. Therefore, it is high time that the legislature incorporates emergency arbitration into the Arbitration and Conciliation Act and gives the concept a legal backing.
3. (2012) 9 SCC 552
Originally published by INDIAN LEGAL IMPETUS® on JULY 2020. Vol. XIII, Issue VII
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.