This article is written by Sanjay M Jawle, pursuing a Certificate Course in International Commercial Arbitration and Mediation from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Ruchika Mohapatra (Associate, LawSikho).
Table of Contents
Introduction
Emergency arbitration is a mechanism that allows the disputing parties to apply for emergency interim relief before the appointment of a formal arbitration tribunal. A party may be required to seek interim relief, at any time after the making of an arbitral award but before it is enforced. In India, the provisions of Section 17 of the Arbitration & Conciliation Act, 1996 empower the arbitral tribunal to grant interim relief after it is constituted. However, the formation of an arbitral tribunal can be time-consuming. Even when the parties agree on the number of arbitrators to be appointed, and the party seeking reference designates his/her choice of an arbitrator in his notice for arbitration, the respondent has 30 days to designate a preferred arbitrator from the date of the said notice. The two party-appointed arbitrators have another 30 days to select the third or the presiding arbitrator. In case any of the parties fail to appoint an arbitrator, or if the two arbitrators fail to appoint a presiding arbitrator, or if there is a challenge to the appointment of an arbitrator, the process gets delayed still further. So, if a party wants to get interim relief on priority it is left with just one option, i.e. to approach the courts.
The provisions of Section 9 of the Act empower the courts to grant interim relief before the arbitral tribunal is constituted or after the Award is made but before it is enforced. Section 9 also gives restricted power to the court to grant interim relief after the arbitral tribunal has been constituted only if the remedy given by the tribunal under Section 17 is inefficacious.
However, it has been observed that in spite of the powers granted to the courts to grant interim relief, the courts do take a lot of time to grant interim relief. The concept of Emergency arbitration and emergency arbitrator stems from the above-mentioned shortcoming of the Court. Also, the aspect of confidentiality does not exist in the courts. Emergency arbitration is a concept that is increasingly becoming popular across the globe to overcome the aforesaid limitations.
Legal status of emergency arbitration
Section 2(1)(d) of the Arbitration & Conciliation Act, 1996, which defines arbitral tribunal to mean a sole arbitrator or a panel of arbitrators, has not defined or expressly included the term emergency arbitrator.
An emergency arbitrator only has temporary authority and his authority ceases once the arbitral tribunal is constituted. Several questions have been raised as to whether an interim relief granted by an emergency arbitrator can be binding in India?
Generally, the rules of various institutions provide that the decisions of the Emergency Arbitrator are binding only for an interim period. i.e. they can later be modified or suspended by the tribunal once it is formed. The International Chambers of Commerce ICC Rules provide that the order of the emergency arbitrator can be revisited by the arbitral tribunal once it is constituted. Some institutional rules also provide that such interim relief may expire by default after a certain period of time.
Depending on the applicable arbitral rules of the institute, read along with the laws of the country, an emergency arbitral tribunal, generally comprising of a sole arbitrator, may grant interim relief in a number of ways;
- in the form of a preliminary order,
- a procedural order,
- a directive, or
- an interim or partial award.
In India, the Act also does not provide for the appointment of temporary or Emergency Arbitrators. UNCITRAL also does not provide any provisions for the appointment of an Emergency Arbitrator for seeking emergency interim relief.
However, across the globe, leading arbitral institutions such as SIAC, LCIA, ICC, ICDR, JCAA etc have amended their rules to meet the interim relief requirements of their clients by incorporating a procedure for the appointment of an emergency arbitrator.
Such procedures, amongst other routine checks, like checking for the existence of an arbitration agreement, check that the parties did not ‘opt out’ of the interim relief or emergency arbitration procedure or did not agree to a different procedure for obtaining interim measures. The procedures also include procedures for the expedited appointment of emergency arbitrators, notification of emergency procedure, timelines for the respondent for emergency response, expedited challenge procedure with the challenge being decided expeditiously by the institution.
The emergency arbitrator has to necessarily meet the criteria of impartiality and neutrality and make the disclosures as per the rules of the arbitral institution. On his appointment, the emergency arbitrator prima facie first checks the jurisdiction of the emergency arbitral tribunal.
Criteria for granting interim relief
There are three fundamental principles that must be met before granting any interim relief. These are:
i) There must be a prima facie case for interim relief. ie at first appearance there must appear to be a sufficient cause or presumption to establish a fact unless rebutted or disproved.
ii) The balance of convenience must be in favour of the claimant. i.e. it is fairly likely that the dispute will be adjudicated in favour of the plaintiff.
iii) Perilum in mora i.e. there is danger in delay or irreparable loss may be inflicted on the claimant if no protection is given. There has to be such urgency for grant of interim measure that cannot wait for the appointment of the Arbitral Tribunal. The burden of proof here lies on the plaintiff.
While granting interim relief the emergency arbitrator has to ensure the proportionality of the interim measure sought. The relief granted should be sufficient to protect the interests of the plaintiff in case the dispute is adjudicated in his favour without being unfavourable to the respondent.
Tenure of the emergency arbitrator
The tenure of the emergency arbitrator is limited to the time required for granting or refusing to grant interim relief. The jurisdiction of the emergency arbitrator comes to an end once the Award or Order is delivered by the tribunal and thereafter the tribunal becomes functus officio.
Important case laws related to emergency arbitration in India
- In Raffles Design International India Pvt Ltd v. Educomp Professional Education Ltd, the Emergency Arbitrator in Singapore granted certain interim relief to the petitioner. When the respondent acted in contravention of the emergency arbitral award, the petitioner approached the Delhi High Court, wherein the Court, in October 2016, observed that the Act does not contain any provisions for enforcement of an emergency/interim award issued in a foreign seated arbitration, and therefore, the emergency award was unenforceable in India. However, it further added that since enforcement of emergency arbitral awards was not possible in India, making an application under Section 9 was the only option left to the parties to seek interim relief in the case of foreign seated arbitrations.
- In HSBC Pl Holdings (Mauritius) v. Avitel Post Studioz Ltd, where the Claimant had obtained an Interim Award from an Emergency Arbitrator, the Claimant had also applied for Interim Relief u/s 9 of the A&C Act, 1996. Though the Bombay High Court could determine the Interim Relief independent of the Emergency Award, on the basis of the Indian Law, the Court took a note of the content of the Emergency Award in granting Interim Relief. However, the Bombay High Court while granting relief under Section 9 of the A&C Act, 1996, held that a Section 9 application was not equivalent to the enforcement of an emergency award.
On appeal, the Supreme Court in its judgment on 6th August 2021, had to decide on the question as to whether an Award delivered by an emergency arbitrator under SIAC rules qualifies as an order under Section 17(1) of the A&C Act, 1996. The Court held that Interim Awards of India-seated emergency arbitrators would be enforceable in India. However, in this case, as the seat of arbitration was in India, the Supreme Court was not required to deal with emergency arbitration in foreign seated arbitration.
The Supreme Court also said that Section 37 of the A&C Act, 1996 does not cover enforcement proceedings and hence no appeal would lie against the order of the emergency arbitrator. The methodology of the Bombay High Court in HSBC Pl Holdings (Mauritius) v. Avitel Post Studioz Ltd of granting interim relief on the basis of the Emergency Award was again adopted by the Bombay High Court in the case of Plus Holdings Ltd v. Xeitgeist Entertainment Group Ltd & Ors.
- In Ashwini Minda v. U-Shin Ltd, the Claimant appealed under Section 9 against the Emergency Award. The Delhi High Court clarified that the courts will not pass an order contrary to the emergency arbitrator simply because a party has failed to obtain such reliefs from the emergency arbitrator and that there is no substantial change in the circumstances from the time the Emergency Award was passed.
Thus, in the Ashwani Minda case, the Court did not interfere with the Order of the Emergency Arbitrator and thus virtually accepted the order of the emergency arbitrator. From the above case laws, it is apparent that from an initial refusal to emergency arbitration, the Indian Judiciary is now beginning to accept emergency arbitration. However, the process is slow and the judgments of the courts are, at times, uncertain and unpredictable. In order to overcome this difficulty and to speed up the process, it would be in the larger interest of the country’s judicial system to make suitable amendments to the Arbitration & Conciliation Act, 1996. Some of the provisions that need to be added are given below:
- Definition of emergency arbitrator.
- Process of appointment of emergency arbitrator.
- Notification of emergency procedure,
- Timelines for the respondent for emergency response
- Jurisdiction of emergency arbitrator.
- Expedited challenge procedure for the appointment of emergency arbitrator.
- Jurisdiction – Who shall have the power to decide on the challenge to the emergency arbitrator.
- Award/Order of the emergency arbitrator
- Enforcement of emergency arbitration Award / Order.
- Appeals against emergency arbitration Award / Order.
Conclusion and the way forward
It is clear from all of the above that emergency arbitration is a trend in International Commercial Arbitration that is increasingly becoming popular across the globe due to the shortcomings of the Courts of Justice of many countries. The main advantages of the emergency arbitral Award or Order over the rulings of the court are confidentiality, time, and costs. The enforceability of the emergency award in India has been a question mark though. There is no provision in the Arbitration & Conciliation Act, 1996 which provides for the appointment of an emergency arbitrator and its Award or Order. However, the recent trend of the High Courts and the Supreme Court of India has been towards accepting the Award or Order of the emergency arbitrator is indeed heartening in keeping with the global trend.
To avoid litigation relating to emergency arbitration and its enforceability in India some amendments are required to be made in the Arbitration & Conciliation Act, 1996 & the same should be done expeditiously. Further, for the parties to be able to steer clear of any fresh litigation arising out of emergency arbitration and its enforcement, the parties should also have their stand pertaining to emergency arbitration clearly stated in the contract or arbitration agreement itself.
References
- Emergency Arbitration: by Mr Arthur Lauvaux & Dr Kabir Duggal – 2nd August 2021.
- Global Arbitration Review: Asia Pacific Arbitration Review; India – Vijayendra Pratap Singh, Abhijnan Jha & Arnab Ray, AZB & Partners, 7th July 2021.
- Corporate Counsel – 15th July 2015; Rules for Appointing an Emergency Arbitrator Drafting the International Arbitration Clause, Part 3 of 4. From the Experts – Ann Ryan Robertson, Derrick Carson and David E. Harrell Jr.
- Enforceability of interim measures and emergency arbitrator decisions. Authors: Martin J. Valasek Jenna Anne de Jong. – Norton Rose Fulbright – Global Publication. May 2018
- Settlement of commercial disputes Issues relating to expedited arbitration Note by the Secretariat – United Nations Commission on International Trade Law Working Group II (Dispute Settlement) Sixty-ninth session New York, 4–8 February 2019
- Emergency Arbitration Procedures – What should a practice note of best practices consider. By Stephanie Khan Clayton & Benson Lim. 11th January 2019.
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