Contributed by: P&A Law Offices
A very popular offering of arbitration institutions around the globe is a provision for appointment of an ‘emergency arbitrator’ in their respective rules, who can award interim measures to protect the interests of one of the arbitrating parties. An emergency arbitrator is typically appointed even before the arbitral tribunal (in terms of the agreement between the parties) is constituted. While this measure has gained acceptance in a lot of countries, enforcement of such ‘emergency measures’ still remain a challenge in India.
II. Emergency Arbitration under International Arbitration Institutions
The following is based on a comparison of the main features of the emergency arbitrator procedures found in the arbitration rules of international arbitral institutions such as Stockholm Chamber of Commerce (“SCC”), International Chamber of Commerce (“ICC”), Singapore International Arbitration Centre (“SIAC”), American Arbitration Association (“AAA”), International Centre for Dispute Resolution (“ICDR”), Swiss Arbitration Rules and London Court of International Arbitration (“LCIA”).
a. Opt-in or Opt-out Approach and the Issue of Retroactive Application
According to the old regime for urgent reliefs under specific arbitration rules, an opt-in procedure was adopted where the parties expressly included the conditions for urgent relief in the agreement. Contrary to the old regime, the provisions of emergency arbitration are automatically applied, and the parties can opt-out of it by expressly agreeing to exclude it.
The automatic opt-in is beneficial in the sense that parties while choosing a set of particular arbitration rules may not know the possibility of inclusion of a special provision into their arbitration clause. Similarly, in compliance with the Swiss Arbitration Law, the applicability of an emergency relief clause is determined by the date on which the arbitration notice is sent and not by the date on which the arbitration agreement is concluded.
A broad approach has been adopted by SIAC and Swiss Arbitration Rules, wherein provisions in respect of emergency arbitration are made to be applicable retrospectively. On the contrary, ICC Arbitration Rules and LCIA Arbitration Rules exempt provisions of emergency arbitration for agreements entered before the said rules were incorporated.
Article 29 of the ICC Rules of Arbitration states that a party that needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal may make an application for such measures. However, Article 29 of the rules of the ICC does not apply, i.e. prior to 01 January, 2012, to agreements signed before the commencement of the rules. Unless the agreement expressly opts out, Article 29 is applicable to agreements for ICC arbitration concluded after January 01, 2012.
It is imperative to note that Article 29 only provides temporary and conservative relief that is dispensed prior to the constitution of an Arbitral Tribunal. The application must be made before the file is sent to the arbitral tribunal and irrespective of whether the party making the request has already submitted its request for arbitration.
b. Appointment of Emergency Arbitrator
The emergency arbitrator is generally a sole arbitrator and is appointed at the request of a party by the relevant body of the arbitration institution. The SCC Board will “seek to appoint the emergency arbitrator within twenty-four hours”, the Chairman of the SIAC appoints the emergency arbitrator “within one business day”, the President of the ICC Court will appoint an emergency arbitrator “within as short a time as possible”, normally within two days, the ICDR administrator within one business day, the Swiss Chamber’s Arbitration Institution will appoint the emergency arbitrator “as soon as possible after receipt of the Application, the Registration Fee, and the deposit for emergency relief”, and the LCIA Court shall appoint the emergency arbitrator “within three days of the Registrar’s receipt of the application (or as soon as possible thereafter)”.
c. Emergency Arbitration Proceedings
Under the ICC Arbitration Rules, only signatories and their successors to arbitration agreements can refer its dispute or invoke the provisions pertaining to emergency arbitration. This shall ensure that only respondents who have agreed with the applicant to ICC arbitration can initiate the proceedings of emergency arbitration.
Pursuant to the SIAC Rules, parties can make an application for emergency arbitration concurrent with or following the notice of arbitration prior to the constitution of the arbitral tribunal. Likewise, a party can make an application under the LCIA Rules at the time of filing for arbitration, or at any time before the Arbitral Tribunal is established. In fact, LCIA has made a conscious effort to provide an expeditious proceeding considering the circumstances under which an arbitrating party may have applied for interim relief. The Emergency Arbitrator is not required to hold any hearing with the parties (whether in person, by telephone or otherwise) and may decide the claim for emergency relief on available documentation. The SCC Rules and the ICC Arbitration Rules provide some flexibility for parties to apply for interim relief before initiation of arbitration. A request for the arbitration shall then be made by the parties within a certain amount of time following the request for interim relief.
The powers of emergency arbitrator are synonymous to that of an ordinary arbitral tribunal in respect of granting interim reliefs. All examined rules in the regulation follow a minimal approach, and any interim measure that it considers necessary can be taken by the emergency arbitrator. Emergency arbitrators can therefore have greater autonomy in comparison to a regular court that is normally able to make directions in situations that require emergency measures.
An Emergency Arbitrator, akin to an arbitral tribunal, can choose to avoid oral arguments, subject to an agreement between the parties and can adjudicate on an emergency relief application based on documentation submitted. The entire system has been formulated to ensure that justice is rendered expeditiously, in an equitable manner, by providing both the parties an opportunity to be heard.
The deadline for passing an order on interim measures is short and varies from 5 to 15 days, as stipulated in the respective rules of arbitration institutions. Pursuant to the LCIA and SIAC Rules “as soon as possible and by no later than 14 days from appointment”, under the Swiss Arbitration Rules and ICC Rules the emergency arbitrator ought to render a decision “within 15 days from the date on which the file was transmitted to it”, and the SCC Rules require a decision to be made “not later than five days from the date when the application was referred to the emergency arbitrator”. The time limits may be extended by the consent of the parties or upon a reasoned request by the emergency arbitrator towards the relevant arbitration institution or its body.
d. Enforcement of Emergency Arbitrator’s Decisions
Orders or awards of the emergency arbitrator are binding on the parties to the proceeding. However, it is not binding on the subsequently constituted arbitral tribunal. The tribunal is empowered to reconsider, modify, terminate or annul the order or award. The issue of recognition and the enforcement of emergency measures will depend on applicable national arbitration laws and international conventions.
The awards passed by the emergency arbitrator will not be enforceable under the New York Convention. However, the jurisdictions which have adopted or will adopt the revised UNCITRAL Model Law, 2006, including Article 17H and 17I, are likely to recognize and enforce orders issued by the emergency arbitrators. Separately, all the arbitration rules compared, require that the parties comply with the emergency arbitrator's order. Any failure to comply will therefore constitute a breach of the contract and arbitral tribunals are empowered to reflect it in the final judgment on damages.
III. The Regime for Interim Measures in India
The regime for ‘interim protection’ or ‘interim measures’ in India in arbitration disputes can be broadly classified into two parts, i.e., pre-arbitration and post-constitution of the arbitral tribunal. Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) provides for approaching the competent court (which in case of an international commercial arbitration is the High Court of a particular state) for seeking interim measures or ‘urgent’ reliefs in the circumstances set out therein. After constitution of an arbitral tribunal, Section 17 of the Arbitration Act provides for grant of interim measures by the tribunal so constituted and Section 9 is usually not invoked, though it can be invoked during or after arbitral proceedings as well. Prior to 2015, there was no time limit for commencement of arbitration and constitution of a tribunal after passing of interim measures by a court. However, a major set of amendments was introduced in 2015 to expedite arbitral process in India and accordingly, the timeline for initiating arbitration once a party becomes a beneficiary to an interim order, is now capped at 90 days. Although a court has the power to extend the time period of 90 days to ‘such further time as the court may determine’, the timeline was a welcome change.
While there is a time-line for the currency of an interim order passed by a court, there is not timeline as to when an application seeking interim measures gets ‘listed’ before a court. Different High courts and lower courts have different procedures for listing of such matters and a lot depends on the ‘urgency’ that is being shown by an applicant. For instance, an application seeking an interim stay on encashment of a bank guarantee, termination of a contract, blacklisting of a contractor or any such measure which may cause immediate detriment to an applicant, is likely to be heard expeditiously, but again, there is no set time-line or rules which provide for the manner of listing of these ‘urgent matters’. There have been occasions when matters have been heard on the same day or the next day of the Applicant making an application for interim reliefs. Courts do tend to circumscribe the indulgence it grants in such matters and a lot depends on the bonafides of the applicant and the situation one is faced with.
IV. Emergency Arbitration under Indian Law
The arbitration proceedings in India are governed under the Arbitration Act. The 246th Law Commission Report dated August 05, 2014(“Law Commission Report”), in its recommendations proposed an amendment to Section 2(d) of the Arbitration Act. The proposed amendment read as under:
“Section 2(d): 'Arbitral Tribunal “means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of arbitrator, includes such emergency arbitrator.”
However, the proposed amendment was not incorporated in the Arbitration and Conciliation Amendment Act, 2015. Notwithstanding the rejection of the proposed amendment, arbitration institutions in India such as Delhi Arbitration Centre, Court of Arbitration of the International Chambers of Commerce-India, Indian Council of Arbitration, Madras High Court Arbitration Center have incorporated provisions governing emergency arbitration.
V. The Question of Enforcement of Foreign Measures
Part II of the Arbitration Act deals with ‘Enforcement of Certain Foreign Awards’ and covers within its scope, the awards passed under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) and the Geneva Convention on the Execution of Foreign Arbitral Awards (“Geneva Convention”). While Part-II deals with foreign awards under these two conventions and the conditions of enforceability of these awards are set out in Sections 48 and 57 respectively, it does not explicitly cover an ‘interim order’ or ‘interim award’ or ‘interim measure’ passed by a foreign arbitral tribunal, including an institution. The term ‘Interim Award’ is also used with respect to grant of provisional relief. In this sense, an award is ‘interim’ because it is subject to subsequent revision by the tribunal (either in the final award or in a revised decision on provisional measures). In this usage, ‘interim award’ is distinguishable from a ‘partial award’, because the former does not provide final resolution of part of the dispute and instead resolves all of a claim for provisional relief (subject to later revision).
This means that, while it may not be difficult to execute a ‘domestic order’ passed by an arbitral tribunal in India, it is extremely difficult to execute an ‘interim measure’ passed by an institutional emergency arbitrator in an arbitration which is seated outside India. There would be no consequences of ‘non-compliance’ of such an interim measure. Under such circumstances, one of the options for the beneficiary of such an order passed by an emergency arbitrator is to explore the option of filing an application under Section 9 of the Arbitration act for enforcement. Although, on account of the uncertainties and the timelines involved, the process becomes ‘two-tiered’ and cumbersome as against the very idea of its invocation of arbitration proceedings. However, there have been judicial precedents in the recent times where courts have encouraged enforcement of such orders.
VI. Judicial Trends in India
In this recent judgment by Bombay High Court, an Emergency Arbitration Award was passed in Singapore to hold the release of movie ‘Hotel Mumbai’ by Netflix, in India. The High Court while providing an ad-interim relief granted a restraint on release of the movie in sync with the award passed by the Emergency Arbitrator.
b) HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studio Limited and Ors. (Bombay High Court, Appeal No. 196 of 2014 in Arbitration Petition No. 1062 of 2020)
The Petitioner had sought for an order from an emergency arbitrator under the rules of Singapore International Arbitration Centre. The emergency arbitrator granted the said relief and passed an Order, freezing the bank accounts of the Respondent. Since neither emergency arbitration award nor any other type of interim award can be enforced in India, under Section 48 of the Act, the petitioner without seeking enforcement, sought for a similar Order under Section 9 of the Act. The Hon’ble High Court of Bombay granted the interim relief, sought by the Petitioner, by restraining the Respondent from withdrawing the amounts retained by the Corporation Bank in the Respondents' account to the extent of USD 60 Million and in the event the balance in the said account with the Corporation Bank is less than USD 60 Million, a further direction was made to the Respondent to deposit the short fall in the said account, so as to maintain the balance of USD 60 Millions. However, being aggrieved by the said Order, the Respondent, sought for an appeal before the Division Bench of the Hon’ble Bombay High Court, which was partly allowed, directing the Petitioner herein to deposit the shortfall in the Corporation Bank Account of the petitioners so as to maintain the balance of USD 30 million within four weeks from the date of the said Order and upheld rest of the directions in the impugned order. A Special Leave Petition, against the Order of the Division Bench is pending before the Supreme Court of India.
c) Raffles India International Private Limited v. Educomp Professional education Limited (Delhi High Court, O.M.P.(I)(COMM.) 23/2015 & CCP(O) 59/2016, IA Nos.25949/2015 & 2179/20106)
In this case, parties did not try to enforce the emergency arbitrator award in India, instead filed an application under Section 9 of the Arbitration Act, 1996. The parties had expressly agreed that arbitration shall be governed by the rules of Singapore International Arbitration Centre. Further, in respect of enforceability of interim award passed by an emergency arbitrator outside India, it was held that the Indian Arbitration and Conciliation Act, 1996, does not have any provision similar to Article 17(H) of the UNCITRAL model law, which provided for the enforcement of the interim award passed in a foreign seat. Hence, it was held that the emergency arbitrator’s award cannot be enforced as it is, and parties must file a separate proceeding seeking to enforce the emergency arbitrator award.
d) Orangefish Entertainment Pvt. Ltd. vs. NGC Network (India) Pvt. Ltd. (Delhi High Court, O.M.P.(I) (COMM.) 326/2018)
The Petitioner sought interim relief under Section 9 of the Arbitration Act. The parties agreed to govern the disputes between them to be adjudicated under the aegis of Delhi International Arbitration Centre. Considering the nature of the circumstances, the Respondent had applied for the appointment of an emergency arbitrator before the constitution of the arbitral tribunal. However, due to the delay in receipt of consent of the sole arbitrator, the Respondent was left with no choice but to file a Section 9 application subsequently. Two questions of jurisdiction were urged - firstly, with respect to the maintainability on the ground that since the Tribunal was constituted, there was a bar to the exercise of power of the court to grant interim relief under Section 9(3) and secondly, that instead the Respondent should have approached the Tribunal. The court while upholding the decision of the single judge, held that application filed under Section 9 of the Act was well within jurisdiction since it was filed prior to the formal appointment of the sole arbitrator.
The response to emergency arbitration mechanism has been positive up till now. The use of these provisions is increasing due to automatic inclusion within the arbitration rules through the opt-out approach. While there also exist enforcement restrictions due to the absence of provisions in respect of emergency arbitral proceedings, the holistic goal is to extend party autonomy and reduce the court's interference in arbitral proceedings. The above-mentioned international arbitral institutions have been successful in incorporating provisions governing emergency arbitration under their respective rules and regulations.
India, through its various amendments in 2015 and 2019, is moving forward to become a hub for international arbitrations. However, despite a recommendation from the Law Commission Report, the Government of India did not incorporate a provision pertaining to emergency arbitration in the Act. The underlying issue is the finality of the award, as an emergency relief is not final in nature as per the New York Convention and cannot be enforced under the Part II of the Act. The advantages of emergency arbitration can be seen through different international arbitration institutions, as it proves that a arbitrating party can obtain urgent relief, to avoid any irreparable harm or damage, by making an application before such arbitration institution for the appointment of a sole arbitrator on a temporary basis, to address a particular point in contention. Thus, emergency arbitration enables parties to safeguard its rights and interest in the subject matter of the dispute until the ordinary arbitral tribunal is constituted. It is needless to state that such process would be a lot more time efficient as compared to filing a Section 9 application before a Court, considering the existing burden and the constant burgeon of litigation on the Courts in India. Emergency arbitration aims to provide an expedited solution to an aggrieved party who may bear loss or injustice due to delay in getting interim relief.
Recent judicial trend indicates that direct enforcement of any emergency award passed in an international arbitration is difficult in India, however, an application under Section 9 of the Act can be sought on similar grounds. Though the judgments discussed above indicate that courts in India have indirectly accepted emergency arbitrator awards, it is about time that India adopts a formal statutory recognition of the awards passed by an emergency arbitrator, consequently, reducing judicial intervention in arbitral proceedings, which would be a step forward in fulfilling the objectives of the Arbitration Act.
Contributed by: P&A Law Offices
The above article has been authored by Mr. Vijay Purohit MCIArb, Associate Partner and Faizan Mithaiwala ACIArb, Associate.