Branching of Emergency Relief: A Big Leap Forward
The article 'Branching of Emergency Relief: A big leap forward' by Renuka Bhalerao & Lizansha Birla would cover aspects regarding the sustainability of emergency arbitration along with provisions of the Indian Arbitration and Conciliation Act 1966.
The article 'Branching of Emergency Relief: A Big Leap Forward' would cover aspects regarding the sustainability of emergency arbitration along with provisions of the Indian Arbitration and Conciliation Act 1966. Emergency arbitration acts like a quick fix in an alternative dispute resolution process, being just a decade old it has not yet gained any statutory recognition as far as India is concerned.
The aim of this research is to unfold the recent developments in the process of emergency arbitration for the arbitration law enthusiast to make them aware of the legal clasps that are involved in the enforcement of such interim awards. The Indian Arbitration and Conciliation act is silent on the issue of enforceability of an emergency award, the Supreme Court has addressed this issue exquisitely in the case of Amazon v. Future Retails.
Prevalent since the medieval period and highly acknowledged in recent times arbitration is the process conducted without knocking doors of the court, amicably between the parties of them working together and resorting to the differences in front of a third party, an arbitrator. The legal matter when extends beyond a single jurisdiction, internationally within internal contracts then comes into the picture of international commercial arbitration. Being an efficient and confidential method where the parties get autonomy and choice, this method sets a higher advantage over litigation in spite of this edge over litigation, arbitration stands on the backfoot in terms of offering remedies in cases requiring emergency relief.
Lies a question in dispute as to the concerns related to the enforceability of the relief granted under emergency provisions and jurisdictional risks between the national courts and the emergency arbitrators appointed in granting interim relief prior to the tribunal's formation. As not being a perfect substitute for litigation, arbitration required remedies in the situation of emergency even prior to the formation of a tribunal and expedited procedures for providing assistance to the parties involved in cases of prioritized need for interim relief.
These developments observed in various institutions in recent times have made ICA prosper with the provisions introduced for emergency appointment of arbitrators and quickly formed tribunals. The revised UNCITRAL Model Law on International Commercial Arbitration'1985 included interim remedy measures in the year 2006 and today most of the international arbitration rules have incorporated the provisions for emergency relief. This concept of emergency arbitration introduced in the rules of SIAC in the year 2010, permitted the party to pursue an emergency arbitrator in order to deal with the request for urgent interim relief before constituting an arbitral tribunal.
These provisions of emergency arbitration are contained in schedule 1 of SIAC rules. The concept is relatively simple in nature if a party urgently needs interim relief and that need is of such emergent nature that it cannot wait for an arbitral tribunal to be constituted then the party may turn to the arbitration institution and such institution as a matter of hours or in shortest time period appoint an emergency arbitrator to grant interim relief to the party.
With the need of providing urgent measures, emergency arbitration is necessitated when a delay may cause losses irrecoverable by way of damages. The main agreement between Tier 1 and Tier 2 suppliers is set by the ICC arbitration clause where the two MNCs are tied in a contract agreement of delivery along with a few other affiliate companies and these suppliers are seated over the areas of Asia and Europe respectively.
During the continuance, a supplier raises dissatisfaction with the prices agreed upon and asks for a readjustment of the prices. In response to the above supplier the latter objects, later on, leading to threats and breach by the 1st supplier of stopping the delivery if the re-adjusted prices were not agreed to within a specified time period. Situations like these would cause enormous damage to the 1st supplier leading to hampered production sites thus asking for effective immediate relief. Here, the supplier's belief in the Emergency Arbitrator of having a confidential way out to avoiding high litigation costs is the ineludible source the party agrees to pursue.
Defined in section 2(1)(f) of the arbitration act international commercial arbitration, the term commercial was first given the widest possible interpretation by the Apex Court in the case of R.M. Investment & Trading Co. (P) Ltd. v. Boeing Co. also the clause talks of the legal relationship under the Indian law that too between an individual who is a national of or normally resides in a country other than India. Section 9 of the Act acts as an indirect mechanism for emergency awards where parties cannot enforce an interim emergency award through section but they can definitely approach local courts through an application filed under section 9 of the Act.
A foreign seated award and its enforcement in our country are not so likely as the powers vested in by the Indian Courts are prospectively barred from granting interim remedy in foreign-seated arbitrations as laid down in the case of Balco v. Kaiser Aluminum Technical Services. The high court of the capital city, Delhi in the case of Raffles Design issued an interim order similar to that granted by an emergency arbitrator of SIAC but held that the award cannot be enforced in India under the Act.
The parties have to bridge the gap between enforcement of remedy awarded by the emergency arbitrator in an arbitration proceeding conducted outside India in the absence of definitive Apex Court precedent. The parties appear to be left with the option of enforcing the interim relief granted in a foreign seated arbitration in India by filing an application under Section 9 of the Act.
An emergency arbitrator usually has the following things to do while granting interim relief to the party which includes determining whether or not the arbitrator has jurisdiction over the matter in hand. Secondly, the arbitrator will then ascertain the admissibility of the application made by the party. The claimant for availing the interim measure has to satisfy the trinity principle i.e., the balance of convenience, irretrievable damage, and prima facie matter. Moving towards the heart of the process, the arbitrator will then check whether the application is justified.
In simple words, he/she will decide whether or not to grant that interim relief. In the general approach, the substantive standards will apply to the arbitral interim relief. However, it is notable that there is no prescribed test expressly regulated to determine the just or unjust nature of the application.
In a recently decided case of Ashwani Minda and Ors. v. U-Shin Ltd. and Ors. The Delhi high court put forward that section 9 of the Indian Arbitration act will be applicable to international commercial arbitration unless the contrary is not given in the agreement. Here, in this case, the agreement between Ashwani Minda and U-Shin Ltd. was silent upon approaching the local courts and taking up another mechanism for the resolution of the dispute.
The agreement expressly mentioned that the arbitration would be an institutional arbitration and the goings-on would be governed by the rules established by JCAA. The court also analyzed the intent of the party in order to determine the sustainability of section 9. It was held that the intent to approach the court was absent as there was no mention of section 9 in the arbitration clause of the agreement hence, it was implied that the applicability of section 9 is excluded in this case, said the court.
The high court further laid down its view on the enforcement of the emergency awards in India by referring to the case of Raffles Design, it was perspicuous that once the parties seek an emergency arbitrator for interim relief the parties then have no authority to approach the domestic court for seeking the same relief, as it amounts to the doctrine of election of remedies. But in the case of Raffles's design, the court decided to review the application on the basis of its creditability and then settle whether or not to accept or deny the application for interim relief.
Even after the case of Ashwani Minda, there was no conclusive judicial pronouncement in regards to the enforcement of an emergency award in India, until Apex Court in the case of Amazon v. Future Retail ruled that the award passed by the emergency arbitrator of a foreign country is enforceable in Indian law. It is wholly incorrect to say that Section 17(1) of the Act would exclude an Emergency Arbitrator's orders", the Court said. Indian Arbitration and conciliation Act 1996, has no explicit provisions as to the enforcement of an interim order passed in a foreign seated arbitration. This ruling is a big leap forward for the Indian arbitration act as the Apex Court has bestowed statutory recognition on the concept of emergency arbitration.
The Apex Court has reinforced the underpinning principle of party autonomy which is indeed fundamental for parties adopting arbitration as an Alternate Dispute Resolution mechanism. Looking at the rise in international Commercial arbitration at play, recognition of emergency arbitration is dream come true for businesses that always look for the speedy resolution of disputes. This decision by the Apex Court has started the ball rolling toward flourishing the Indian arbitration regime in the upcoming years.
The ICC 2019 released the Report of the "ICC Commission on Arbitration and ADR task force on Emergency Arbitrator Proceedings", the report found that the rules of the ICC have given emergency arbitrators a significant amount of degree and flexibility. Given the nature of interim measures and emergent circumstantial situations which require urgent relief, the relief has not often been granted to the parties. It was observed through the report that despite the above mention scenario parties worldwide continue to seek emergency arbitration. Further, it was found that the in majority of cases the parties obeyed the award provided by the emergency arbitrator.
In the light of injunctions in the Arbitration process, it is seen as a speedy and efficient way of answering pivotal issues which concludes the rise of the process. Emergency Arbitration has emerged to be a turning point in the bigger global picture but our nation still awaits a formal statutory acknowledgment of the Emergency Arbitrator's rulings. Being an emerging field of law there lies a great deal of uncertainties relating to the granting of interim awards by the judicial system in various countries and ambiguity lying in the implementation of the awards out of emergency arbitration. A resort to it is seen with the institutions putting the forefront in making parties understand the benefits and consequences of seeking emergency relief outside the courts rather than the judicial system.
For emergency arbitration to be more appealing than expedited relief through the legal system a number of emergency relief procedures must be in place and a clearer view of choosing emergency arbitration over the courts and understanding of ramifications is necessary for the parties. Parties entering into emergency arbitration see this mode to be more appealing with the continuing development here and a choice over litigation.
1. Emergency Arbitration and India - A Long Overdue Friendship, Available Here
2. Legal Status of the Emergency Arbitrator Under the SIAC 2010 Rules, Available Here
4. R.M. Investment & Trading Co. (P) Ltd. v. Boeing Co,1994 AIR 1136, 1994 SCC (4) 541
5. The Arbitration and Conciliation Act, 1996, Available Here
6. Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd., (2016) SCC onLine Del 5521
7. Emergency Arbitration in India, Available Here
8. Ashwani Minda v. U-shin Ltd., (2020) SCC online SC 1123
9. Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., (2022) 1 SCC 209
10. ICC Arbitration Rules, Available Here
Law Library: Notes and Study Material for LLB, LLM, Judiciary, and Entrance Exams