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Growth of Emergency Arbitration: An Analysis With Respect to Indian Way of Resolving Dispute

In this time of pandemic, every sector changed its pattern of working. This change of pattern is also encountered in the field of law. Arbitration is regarded as one of the efficient way of resolving disputes in the commercial world. To maintain its efficiency, there was a change in its working too as in the commercial world each minute counts. Emergency relief in the world of arbitration is regarded as 'Achilles' Heel'.[1]

Emergency Arbitration comes into play when there is no time for establishment of arbitral tribunal for the disputed parties and heavy price is at stake. In these types of cases, urgent relief are important to be granted as time is an essence. It is also preferred over regular procedure of establishing arbitral tribunal as is suited in the case where parties wants to protect the evidence and assets that have a chance of being lost in regular procedure. The emergency arbitration proceedings are commenced on the consensus of disputed parties or through the agreement between them.

In India, Arbitration and Conciliation Act, 1996 do not recognize emergency arbitration. For the present time it has been left to judiciary to decide on the cases as to how emergency relief/awards are granted. The powers vested to an emergency arbitrator/s is similar to that of powers granted to arbitration under the Arbitration Act i.e. granting reliefs, injunctions, order for investigation of evidence, etc.[2]

Though, in recent times, there have been crucial developments in the way emergency award/relief are granted. In this article, we will discuss the essential characteristics and its functions, status of emergency arbitration trend before and amid pandemic, related case laws, and will infer the conclusion accordingly.

Principle and Power of Emergency Arbitration

The main function of emergency arbitration is faster addressal of the dispute between the concerned parties where time is an essence. Emergency arbitration revolves around two principles of two legal maxims.
  • Fumus boni iuris:
    Reasonable possibility that the requesting party will succeed on merits.
  • Periculum in mora:
    if the measure is not granted immediately, the loss would not and could not be compensated by the way of damages.[3]
The essence of the emergency arbitration is to provide interim relief in the urgent matters. In India, emergency arbitration is said to manifest potential because there many defects in the Indian judicial system especially when it comes to litigation cost, speedy readdressal, maintaining confidential matters, and leakage of evident evidences.

As, emergency arbitration, provides interim relief on emergency basis to the parties but it only provides for a temporary period of time. It has same functions as that of a ad hoc arbitration which gives their decision regarding disputes and dissolves immediately. Different countries in their arbitration legislation provides for different policies as according to their policies if there is an exclusion of emergency arbitration agreement then the provisions of emergency will not apply. Emergency arbitration has certain functions which they exercises while granting such interim relief.
  • Emergency arbitration provides remedy as soon as possible but within two days of appointment
  • All the international arbitral institutions have different timelines and provides the award to the party within the time span of eight to ten days.
  • It provides remedy on the main matter in hand i.e. on the basis of prima facie documents and evidences, and gives their decision accordingly.
  • It has the power to provide interim relief in the form of prohibitive and mandatory injunction and also provide freezing of assets.[4]
Though the decision of emergency arbitration are not binding on arbitration tribunal on the question and issue determination but its helps in providing remedy in a quick manner.

Status of Emergency Arbitration in India

In India, emergency arbitration is not recognized as to bring amendment in Arbitration and Conciliation Act, 1999. According to Section 2 (1) (d) of the Arbitration and Conciliation Act, 1999 states the provision of recognisition of sole arbitrator or panel of arbitrator by the arbitral tribunal. In the year 2014, a report was issued by the Law Commission of India in their 246th report in which they proposed of bringing amendment in the above-mentioned section i.e. S. 2 (1) (d), to include emergency arbitration and while proposing of the Singaporean arbitration in which emergency arbitration is included in the definition of arbitration.

This proposal of arbitration was not considered by the Government of India and when in the year 2015, when Government of India proposed the amendment in Arbitration and Conciliation, 1999, the recommendation of the 246th of including emergency arbitration was not taken into consideration.[5]

Some objections were raised on the legal position of the emergency arbitration. These objections are:
  • Despite the Law Commission's recommendation that section 2(1)(d) be amended to specifically include an emergency arbitrator, the Indian government did not include this proposal in the wording of the draught to alter the A&C Act in 2015 [4].
     
  • The authority of an emergency arbitrator is temporary, and it expires once the arbitral panel is established. As a result, parties will appoint different arbitrators at different times. The A&C Act prohibits the appointment of interim arbitrators, hence this is wrong.

Landmark Cases in India Reated to Emergency Arbitration

India takes an auxiliary enforceability approach to an EA order. There are few judicial decisions on emergency arbitration. These cases have shown a bright future of approach towards Emergency Arbitration. Some of such cases are:
  • HSBC v. Avitel:

    The case involved an arbitration agreement in which the parties reserved their right to seek interim relief in India's national courts, notwithstanding the fact that the arbitration was held outside of India. The parties went to the EA in Singapore, where the party seeking to enforce the order in India received a favorable ruling.

    While upholding the Emergency Arbitrator's award and granted interim relief, the Bombay High Court noted that the '...petitioner has not bypassed any mandatory requirements of enforceability, because it was not seeking direct implementation of the interim award. It is important to note that the parties entered into the subject agreements prior to the BALCO judgment, so the ratio decidendi of BALCO did not apply in this case.[6]
     
  • Ashwani Minda and Ors v. U-Shin Ltd. And Ors:

    The case involved an arbitration agreement governed by the Japan Commercial Arbitration Association (JCAA) Rules' emergency arbitration provisions. The applicants sought to prevent the Respondents from acquiring shares purchased in an open offer until the dispute was resolved, and they sought interim relief by filing an EA. The emergency arbitrator denied the applicants' request for relief, which prompted them to file a Section 9 application in the Delhi High Court seeking similar relief.

    The Court examined the maintainability of a Section 9 application seeking similar interim relief that had already been denied by the Emergency Arbitrator and concluded that the Court cannot sit as a Court of appeal to review the order of the Emergency Arbitrator in an application under Section 9 of the Act. The applicants cannot take a second bite at the cherry after invoking the emergency arbitrator mechanism and requesting a detailed and reasoned order.[7]
     
  • Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others:

    This is the most recent case that cleared the status of emergency arbitration and showed its bright future in India. In this case, Amazon sought the interim relief against the Future Retail through the arbitration agreement between them governed by SIAC rule. Amazon applied for interim relief for a transaction disputes between them under schedule 1 of the SIAC rule and was successful in obtaining it.

    Simultaneously, Amazon filed for enforcing a relief under S. 17 (1) of the Arbitration and Conciliation Act, 1999. Through this two main issue rose before Apex court, first was whether the emergency arbitration comes under the ambit the A/C Act, 1999, and second was whether it can be considered as the order under S. 17(1) of the Act.

    The court while examining both issues scrutinizes the definition of arbitral tribunal mentioned under S. 2(1) (d) to check whether it constrains S. 17(1) by allowing only arbitral tribunal that can give final awards by way of interim or final awards and does not allow an emergency arbitration.

    The SC held that S. 2(1) (d) does not contain emergency arbitration as such but S. 2 of the Act commence with the words "unless the context otherwise requires" and when it is read with S. 2(1) (a) provides whether or not permanent arbitral institutions and with S. 2(6) and S. 2(8) of the Act, it can be said to be clear that interim relief ordered by emergency arbitration comes under ambit of S. 17(1) of the Act. Thus it was cleared by the court that granting interim relief under emergency arbitration comes under principle of party autonomy. [8]

Conclusion
The future of emergency arbitration still lies in the grey area. Though there have been recent cases amid pandemic that showed the importance of emergency arbitration in India i.e. speedy trial of the dispute and importance of essence of time in a dispute. To add the provision of emergency arbitration, it is necessary to mold it in a way that it maintains the spirit of Arbitration and Conciliation Act, 1999, without being inconsistent with its other clause and provide a more efficient way of dispute resolution.

The onus of deciding the fate of emergency arbitration in India lies with the parliament that must clarify the position of emergency arbitration in the legal regime[9] as soon as possible as other countries have already recognized the emergency arbitration and have made their way of dispute resolution more efficient and stronger.

End-Notes:
  1. Madhu Sweta and Raveena Dewan, Emergency arbitration in India: Concept and Beginning, (October 4, 2021). https://singhania.in/blog/emergency-arbitration-in-india-concept-and-beginning
  2. Madhu Sweta and Raveena Dewan, Emergency arbitration in India: Concept and Beginning, (October 4, 2021). https://singhania.in/blog/emergency-arbitration-in-india-concept-and-beginning
  3. Jyotika Thakur, Emergency Arbitration in India - Need for a statutory legislation. https://www.gravitaslegal.co.in/articles/Emergency%20Arbitration%20in%20India%20-%20Need%20for%20a%20statutory%20legislation.pdf
  4. Madhu Sweta and Raveena Dewan, Emergency arbitration in India: Concept and Beginning. https://www.mondaq.com/india/arbitration-dispute-resolution/1118268/emergency-arbitration-in-india-concept-and-beginning#:~:text=An%20Emergency%20Arbitration%20is%20capable,a%20stipulated%20period%20of%20time.&text=The%20Emergency%20Arbitrator%20shall%2C%20as,the%20application%20for%20emergency%20relief.
  5. Madhu Sweta and Raveena Dewan, Emergency arbitration in India: Concept and Beginning. https://www.mondaq.com/india/arbitration-dispute-resolution/1118268/emergency-arbitration-in-india-concept-and-beginning#:~:text=An%20Emergency%20Arbitration%20is%20capable,a%20stipulated%20period%20of%20time.&text=The%20Emergency%20Arbitrator%20shall%2C%20as,the%20application%20for%20emergency%20relief.
  6. Avitel Post Studioz Limited & Ors. v. HSBC PI Holdings (Mauritius) Limited, 2020 SCC OnLine SC 656.
  7. Ashwani Minda v U-Shin Ltd 2020 DEL 1266, OMP (I) (COMM) 90/2020.
  8. Gunjan Chhabra & Utsav Saxena, Emergency Arbitration in India: Recent Trends, October 22, 2021. https://www.arbitrationcorporatelawreview.com/post/emergency-arbitration-in-india-recent-trends
  9. Gunjan Chhabra & Utsav Saxena, Emergency Arbitration in India: Recent Trends, October 22, 2021. https://www.arbitrationcorporatelawreview.com/post/emergency-arbitration-in-india-recent-trends

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