Emergency Arbitration is recognised by current legal framework under the Arbitration and Conciliation Act and no amendment in the laws is necessary
March 19, 2021
Emergency Arbitration is recognised by current legal framework under the Arbitration and Conciliation Act and no amendment in the laws is necessary
The Delhi High Court while hearing Amazon.com NV Investments Holdings LLC -vs- Future Coupons Pvt Limited & Ors on March 18, 2021 have held that emergency arbitration is with the current legal framework under the Arbitration and Conciliation Act and no amendment in the laws is necessary.
The law relating to the Group of Companies doctrine is well settled by the Supreme Court which is binding on all the parties. In Cheran Properties, the Supreme Court invoked Group of Companies doctrine to enforce an award against an entity which was neither a signatory to the arbitration agreement nor a party in the arbitration proceedings, meaning thereby, even if the Emergency Arbitrator had not impleaded respondent, the interim order of the Emergency Arbitrator is enforceable against respondent.
One of the three important question had arisen for consideration before the court- What is the legal status of an Emergency Arbitrator i.e. whether the Emergency Arbitrator is an arbitrator and whether the interim order of the Emergency Arbitrator is an order under Section 17 (1) and is enforceable under 17(2) of the Arbitration and Conciliation Act?
"The Emergency Arbitration is a very 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 advantage of the Emergency Arbitration mechanism is that a litigant is able to get the justice within 15 days, which is not 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 Emergency Arbitrator is an Arbitrator for all intents and purposes;order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act'.
Legal status of Emergency Arbitrator.
The Emergency Arbitrator is a sole arbitrator appointed by the Arbitration Institution to consider the Emergency Interim Relief Application in cases where the parties have agreed to arbitrate according to the Rules of that Arbitration Institution which contain provisions relating to Emergency Arbitration. The status of the Emergency Arbitrator is based on party autonomy as the law gives complete freedom to the parties to choose an arbitrator or an Arbitral Institution. The powers of the Emergency Arbitrator are the same of those of a Arbitral Tribunal to decide the interim measures. The order/award of the Emergency Arbitrator is binding on all the parties. However, 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.
The important characteristics of an Emergency Arbitration are that the Emergency Arbitrator has power to deal only with Emergency Interim Relief Application; the Emergency Arbitrator has to decide the Emergency Interim Relief Application within a fixed time frame of about 15 days; the Emergency Arbitrator cannot continue after formation of the Arbitral Tribunal; the Emergency Arbitrator?s order/award can be reviewed/altered by the Arbitral Tribunal; the Emergency Arbitrator order/award can be challenged where seat of arbitration is located; and ordinarily the Emergency Arbitrator will not be a part of the Arbitral Tribunal. Institutions like SIAC appoint an Emergency Arbitrator within 24 hours of the request by a party and the Emergency Interim Relief Application is decided within 15 days.
The Emergency Arbitration was first adopted by International Centre for Dispute Resolution of American Arbitration Association (AAA) in 2006, followed by Singapore International Arbitration Centre (SIAC) in 2010; Stockholm Chambers of Commerce (SCC) in 2010; International Chamber of Commerce (ICC) in 2012; and Hong Kong International Arbitration Centre in 2013. Swiss Chambers‘ Arbitration Institution; London Court of International Arbitration (LCIA); International Institute for Conflict Prevention and Resolution; China International Economic and Trade Arbitration Commission; Australian Centre for International Commercial Arbitration; Kigali International Arbitration Centre; Asian International Arbitration Centre and Dubai International Finance Centre have also incorporated the provisions relating to the Emergency Arbitration in their Rules.
In our country, the provisions relating to Emergency Arbitration have been incorporated by Delhi International Arbitration Centre (DIAC); Mumbai Centre for International Arbitration (MCIA); Madras High Court Arbitration Centre (MHCAC); Nani Palkhivala Arbitration Centre; Indian Council of Arbitration; Indian Institute of Arbitration & Mediation; and Bangalore International Mediation, Arbitration and Conciliation Centre.
Rule 2.1(c) of the Rules of Delhi International Arbitration Centre (DIAC) defines =Arbitral Tribunal‘ to include an Emergency Arbitrator. Rule 14 contains similar provisions for appointment of an Emergency Arbitrator as contained in Rules of SIAC. Rule 14.8 provides that an order or of an award of an Emergency Arbitrator shall be enforceable in the manner as provided in the Act. The Rules of Mumbai Centre for International Arbitration (MCIA) and Madras High Court Arbitration Centre (MHCAC) also contain similar provisions for appointment of an Emergency Arbitrator.
The Emergency Arbitration is a very 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 advantage of the Emergency Arbitration mechanism is that a litigant is able to get the justice within 15 days, which is not possible in Courts. However, if the order of the Emergency Arbitrator is not enforced, it would make the entire mechanism of Emergency Arbitration redundant.
In the present case, the arbitration agreement is contained in Clause 25.2.1 of the Shareholder?s Agreement dated 22nd August, 2019 according to which, all disputes between the parties have to be referred to and resolved by arbitration in accordance with the Rules of Singapore International Arbitration Centre (SIAC). The seat of arbitration is New Delhi and the Courts at New Delhi have exclusive jurisdiction. The Rules of Singapore International Arbitration Centre contain provisions for appointment of an Emergency Arbitrator to consider the Emergency Interim Relief. Rule 1.3 defines an “Emergency Arbitrator” as an arbitrator appointed in accordance with Schedule I. Rule 7 of Schedule I empowers the Emergency Arbitrator to exercise all powers of an Arbitral Tribunal.
Section 2(6) of Arbitration and Conciliation Act gives complete freedom to the parties to authorise any person including an institution to determine the disputes between the parties. Section 2(8) of the Arbitration and Conciliation Act provides that where the parties have authorised an institution, the agreement shall include the Arbitration Rules of that institution. Section 19(2) of the Arbitration and Conciliation Act gives complete freedom to the parties to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings.
Section 2(1)(a) of the Arbitration and Conciliation Act defines “arbitration” as any arbitration whether or not administered by permanent arbitral institution. Section 2(1)(a) is an inclusive definition which includes ad hoc as well as institutional arbitration. Section 2(1)(c) defines “arbitral award” to include an interim award. Section 2(1)(d) defines “arbitral tribunal” to mean a sole arbitrator or a panel of arbitrators.
Section 17 of the Arbitration and Conciliation Act empowers the arbitral tribunal to pass an interim order and Section 17(2) provides that the interim order passed by the Arbitral Tribunal shall be deemed to be an order of the Court and shall be enforceable as an order of the Court. By virtue of Section 2(8) of the Arbitration and Conciliation Act, the Rules of Singapore International Arbitration Centre are incorporated in the arbitration agreement between the parties. By incorporating the Rules of SIAC into the arbitration agreement, the parties have agreed to the provisions relating to Emergency Arbitration.
Delhi High Court is of the view that the Emergency Arbitrator is an Arbitrator for all intents and purposes, which is clear from the conjoint reading of Sections 2(1)(d), 2(6), 2(8), 19(2) of the Arbitration and Conciliation Act and the Rules of SIAC which are part of the arbitration agreement by virtue of Section 2(8). Section 2(1)(d) is wide enough to include an Emergency Arbitrator.
Under Section 17(1) of the Arbitration and Conciliation Act, the Arbitral Tribunal has the same powers to make interim order, as the Court has, and Section 17(2) makes such interim order enforceable in the same manner as if it was an order of the Court. The Interim Order is appealable under Section 37 of the Arbitration and Conciliation Act.
The current legal framework is sufficient to recognize the Emergency Arbitration and there is no necessity for an amendment in this regard. In that view of the matter, reference to 246th Law Commission Report does not help the respondents.