Recently, the Supreme Court of India deliberated on a significant aspect of arbitration law and gave a landmark decision in the case of Amazon v Future Coupons. The case brought up before the apex court dealt with the enforceability of Emergency Arbitration. Its validity with respect to Indian law was the point of contention between both the parties and was treated as a substantial question of law by the apex court. This article seeks to explain the factual matrix of the case and the implications of the decision.
This case holds significance for various reasons. Firstly, it adds to India's voluminous interpretation of the jurisprudence on international commercial arbitration. Secondly, it answers a relatively new and less examined aspect of arbitration in light of previously held decisions. Thirdly, it explains how the decision is reflective of India’s stance of minimal judicial intervention in matters of arbitration, thereby inducing confidence and certainty in foreign investors.
In this case, two major companies i.e. Amazon (Amazon.com NV Investment Holdings LLC) and Future group (Future Retail Ltd -FRL and Future Coupons Private Ltd -FCPL) entered into a series of agreements. These agreements entitled Amazon to the exclusive rights in the retail assets of Future group and obliged Future Group to receive written consent from Amazon before delineating the assets. The agreements also prohibited Future Group from the transfer of its retail assets to 'restricted persons’. The Reliance Industries Group, which was listed under the category of ‘restricted persons’, thereafter entered into a transaction with Future group for a future amalgamation transferring the retail assets to the Reliance group. This transfer was the disputed transaction that led to arbitration proceedings between Amazon and Future group.
Amazon initiated arbitration against Future Group under the SIAC Rules (Rules of Singapore International Arbitration Centre ) as per the arbitration clause in the agreement. Also, it was pre-decided that the seat of arbitration would be New Delhi, India. An emergency arbitrator rendered an Interim Relief on October 25, 202 in favor of Amazon. However, as Future Group did not comply with the emergency award, Amazon initiated proceedings in the Delhi High Court to enforce the emergency award. The case was later forwarded by way of appeal to the Supreme Court to decide on the issues mentioned below.
Major Issues before the SC
The SC formulated, among others, the following issues which are noteworthy:
Whether an emergency arbitrator is an arbitrator under the Arbitration & Conciliation Act, and Whether an "award" delivered by an Emergency Arbitrator appointed under Schedule 1 of the SIAC Rules can be considered as an order under Section 17(1) of the Act?
Whether an order passed under Section 17(2) of the Act in the enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable?
Supreme Court’s Decision
The Arbitration and Conciliation Act (A&C Act) does not consist of the words ‘Emergency Arbitrator’ or ‘Emergency award’ for that matter. However, the Court noted that the parties have the freedom to agree to a set of Arbitral Institutional Rules. This implies that the parties have the right to use provisions of emergency arbitration present in the rules chosen by them. The following sections from the A&C Act denote this:
Section 2(6)- Authorizes the parties to decide an arbitral institution for the determination of issues that arise between the parties.
Section 2(8)- Parties can agree on the arbitration rules to be applied.
Section 19(2)- they can also agree on the procedure that shall be followed by the tribunal for the proper conduct of its proceedings.
In light of the above-mentioned provisions, the Supreme Court stated that the core idea behind this was to respect party autonomy during the arbitration. It further noted that choosing an emergency arbitrator and carrying proceedings for interim relief as per the institutional rules do not violate the A&C Act as there is no provision mentioned in it that prohibits such a practice.
The second major issue was with the definition of the arbitral tribunal and whether or not it encapsulates an emergency arbitrator. The literal interpretation of Section 2(1)(d) of the A&C Act does not include an emergency arbitrator and here, ‘arbitral tribunal’ includes either a sole arbitrator or a panel of arbitrators. The Supreme Court, however, widened the scope of this section to include emergency arbitration as well. It referred to the term ‘unless the context otherwise requires' mentioned within the section and by reading it along with Section 2(1)(a) (that allows for “any” arbitration), the SC made it clear that any interim award passed by an emergency arbitrator would fall under the umbrella of orders passed by the ‘arbitral tribunal'. It further went on to say that there was no difference between an order passed by an arbitral tribunal and an emergency arbitrator and both the orders could be enforced before the high court.
Impact on Arbitration Law
The case has resulted in the Supreme Court re-emphasizing the central idea of arbitration i.e. ‘party autonomy’. and calling it the ‘guiding principle’ in all cases. Arbitration grants parties an indefeasible right of choice and an emergency arbitration is also to be considered one such choice.
Time and again, the Supreme Court has expressed its concerns surrounding the bulk of cases pending before the courts. In such a scenario, an emergency award seeks to decongest the court system and give urgent relief to parties.
This gains more importance as it makes India a pro-arbitration jurisdiction for international dispute resolutions and makes it a hotspot by embracing principles of modern arbitral jurisprudence. However, to make India an arbitration powerhouse, a provision for emergency arbitration must be explicitly mentioned in the Act itself. This will provide a much-needed boost to India’s arbitration potential.
Also, courts must follow a set of procedures while adjudicating upon matters of interim measures. As applicable to any other arbitrator, the emergency arbitrator shall ensure confidentiality and efficiency in the process.
The limitation that still needs to be addressed is with regard to the procedure on enforcing an emergency award in a foreign seated arbitration. It has been established that an emergency arbitral award that is passed in an Indian seat is enforceable in the Indian courts. However, there is no precedent that has yet clarified the question of whether an emergency arbitration passed in a foreign seat is enforceable in India or not. Due to this reason, it is generally advised that foreign parties to the arbitration agreement should choose India as the seat of arbitration so that in an event where an emergency arbitral award is made, the Indian courts cannot deny the lawful enforcement of such award. We can hope that with the outcome of this case, the position on emergency arbitration in an ad hoc setting will soon be clarified by India.