Emergency Arbitrations: A Sprint Away From Legal Marathons

Key Takeaways

• Emergency arbitration is a method that allows a disputing party to seek an urgent interim remedy prior to the formation of an arbitration tribunal.
• The legal position in India is ambiguous because the Indian Arbitration and Conciliation Act 1996 does not clearly provide for emergency arbitration.
• The Law Commission of India presented its 246th Report in 2014, suggesting modifications to the Actto specifically include an emergency arbitrator.

Introduction

Arbitration has received increasing attention over the last fifty years as commercial parties work to reduce the possible uncertainties of domestic litigation systems. In an effort to improve the overall functioning and practical advantages of its rules, arbitral institutions have lately begun establishing accelerated or emergency procedures to help parties in situations when they require urgent interim relief prior to the formation of an arbitral tribunal. Prior to the introduction of these processes, parties would have had to petition to domestic courts for emergency relief or await the tribunal to be established.

Under their different regulations governing the arbitration, institutional arbitrators such as the ICC and SIAC offer litigants the choice of emergency arbitration. Emergency Arbitration allows the parties to seek urgent interim remedies before forming an arbitral tribunal. In circumstances when the parties are unable to jointly choose an arbitral tribunal, the formation of an arbitral tribunal may take some time. However, an injunction or other temporary remedy may be necessary to guarantee that the subject matter of the conflict, etc., is preserved while the arbitral tribunal is being formed. As a result, parties may seek such remedy before an Emergency Arbitrator.

Because the Indian Arbitration and Conciliation Act 1996 does not clearly provide for emergency arbitration, the legal position in India is ambiguous.

Object of an Emergency Arbitrator

The premise of emergency arbitration is similar to the notion of ad-interim injunction, which is presented in Section 37 of the Specific Relief Act, 1963 and governed by the Code of Civil Procedure, 1908, in that the primary measure in both circumstances is to preserve the subject in status quo until the dispute is heard on its merits. The goal of an EA is to give immediate pro tem or conservatory solutions to a party or parties who cannot wait for an Arbitral Tribunal to be formed. The effectiveness of a party-initiated Emergency Arbitration rides on two wheels:

1. Fumusboniiuris- A reasonable chance that the petitioning party will prevail on the merits;
2. Periculum in mora - If the remedy is not given right away, the loss will not and cannot be repaid via damages.

The major purpose of Emergency Arbitration comes into the equation when there is no arbitration tribunal in existence or when establishing one up would take too long, based on the criteria of an arbitration agreement or the institutional regulations. It attempts to address several additional flaws in the system, such as a lack of trust in national courts to award quick relief, leaking of sensitive information, inflated litigation costs, and so on. It also eliminates the possibility of separate courts in different jurisdictions issuing different orders, further complicating matters for the parties, resulting in consistency in the order, with tribunals in different jurisdictions solely responsible for enforcing it within their jurisdiction.

Powers of an Emergency Arbitrator

For all intents and purposes, the EA performs similar, if not identical, tasks to that of an ad hoc tribunal that was formed for a specific reason and would be disbanded after that purpose was completed. After the Interim Order is issued, the Emergency Arbitrator is rendered functus officio, however, their powers during the proceedings include the following:

• The Emergency Arbitrator shall prepare a timeline for examination of the application for emergency relief as quickly as feasible, but in any case, within two business days after appointment.
• This schedule must provide all parties a sufficient opportunity to be heard. As an alternative to a traditional hearing, it may arrange for procedures by teleconference or written submissions.
• Due to time constraints, the emergency arbitrator may never actually hear or interact with the parties, with the exception of some significant clarifications, and may only issue an order based on the records and written submissions presented before him.
• Timelines vary depending on the International Arbitration rules; however, an emergency arbitration typically takes 8 to 10 days from the date of application to the date of the award.
• The Emergency Arbitrator shall have all of the powers granted to the Arbitral Tribunal by these Rules, along with the power to rule on their own jurisdiction, and may order whatever party to take any provisional measure of protection that the arbitrator deems necessary in light of the subject matter of the dispute.
• Asset freezing orders, both deterrent and obligatory injunctions, orders for the retention and examination of evidence, preventative measures to avoid abuse of intellectual property or sensitive information, and anti-suit injunctions are among the types of interim orders EA's can pass.

Although the emergency arbitrator's order is not binding on the tribunal with regard to any inquiry, issue, or dispute resolved, the interim order must be definitively varied, disposed, or revoked by a subsequent order or award made by an Arbitral Tribunal on the application of any party or on its own venture.

Position in India

Because the Indian Arbitration and Conciliation Act 1996 does not clearly provide for emergency arbitration, the legal position in India is ambiguous. The Arbitration and Conciliation Act 1996 defines an arbitral tribunal as a single arbitrator or a panel of arbitrators as per Section 2(1)(d). The Section, which is premised on the UNCITRAL Model Law on International Commercial Arbitration 1985, has remained unchanged since the Act was introduced by the Indian Parliament in 1996, when the notion of emergency arbitration was virtually unknown. The Law Commission of India presented its 246th Report in 2014, suggesting modifications to the Act. It proposed amending section 2(1)(d) of the Act to specifically include an emergency arbitrator.

The Arbitration and Conciliation (Amendment) Act, 20153 was intended to recognize this international shift and include provisions for the appointment of an Emergency Arbitrator. The 2015 Amendment, on the other hand, ignored the Law Commission's proposal and made no mention of Emergency Arbitration.

Although the Indian arbitral institutions are not statutorily adequate, some of them have created rules that are broadly equivalent to the main international arbitration institutional norms.

Some noteworthy institutions and their regulations include:

• The Delhi International Arbitration Center (DAC4) of the Delhi High Court includes "Emergency Arbitration" in Part III of its Arbitration Rules. Section 18A also defines 'Emergency Arbitrator' and describes the appointment, method, time duration, and powers of an Emergency Arbitrator.
• The terms of EA and Emergency Arbitrator are enumerated in Part IV, Section 20 r/w Schedule A and Schedule D of the Madras High Court Arbitration Center (MHCAC) Rules, 2014.
• Section 3 of the Mumbai Center for International Arbitration (Rules) 2016, enumerates the terms of EA and Emergency Arbitrator.
• The requirements of EA and Emergency Arbitrator are enumerated in Article 29 of the 'Arbitration and ADR Rules' r/w Appendix V of the International Chambers of Commerce-India Court of Arbitration.
• International Commercial Arbitration (ICA), 2014, summarizes the requirements of EA and Emergency Arbitrator under Section 33 r/w Section 36(3).

Enforceability Of India-Seated Emergency Arbitration Awards

In Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors. [SLP(C)1669-1670/2022], the Supreme Court of India recently issued a landmark ruling affirming that an award granted by an emergency arbitrator in an arbitration located in India is valid and enforceable in Indian courts. The judgement offered much-needed light on these issues in the context of an award given by the Emergency Arbitrator in an India-seated arbitration under the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules").

The Court had to determine whether an EA award in an India-seated arbitration might be considered an "order" under section 17(1) of the Act and hence enforceable. FRL said that it couldn't since the Act is silent on emergency arbitrations, and so EA awards couldn't be covered by section 17. FRL said that the Law Commission's recommendations were not incorporated into the Act's 2015 modifications. The Court rejected these concerns, holding that the Act gives parties complete power to have a dispute resolved according to institutional standards, which can include the delivery of interim rulings by EAs.

It was held that:

• An emergency arbitrator's award is an order made under Section 17(1) of the Arbitration Act and can be enforced by Indian courts under Section 17(2);
• No appeal under the Arbitration And conciliation act would lie against an order issued under Section 17(2) of the Arbitration Act for enforcement of an emergency arbitrator's award.

The Supreme Court's ruling in Amazon v. Future establishes an important precedent by elevating party sovereignty as one of the cornerstones of Indian arbitration. In the setting of an arbitration located in India, the decision legitimizes an emergency award rendered under the norms of an arbitral institution (such as SIAC) by recognizing it as an interim ruling made by an arbitral tribunal seated in India.

Conclusion

By maintaining the enforceability of EA awards in India, although only in the context of India-seated arbitration procedures, the Court has reaffirmed the Indian judiciary's pro-arbitration stance. Furthermore, because the decision for enforcement of such an emergency award would be decisive and non-appealable, parties might anticipate that the enforcement processes will be more efficient and less time consuming looking forward. Parties that choose to arbitrate in India should consider this judgement as a positive move that aligns the Indian approach with international practice regarding the recognition and execution of emergency awards. While emergency arbitration is a defining moment in the global landscape, India is still waiting for complete statutory recognition of EA. E-Arbitration is a need that serves the interests of both parties and is one of the goals of alternative dispute resolution.