Emergency Arbitration: To be or not to be (Enforced)

Introduction

Indian arbitration landscape has seen exceptional growth in recent times. The legislature and judiciary in India have continued to show a pro-arbitration stance in the past decade. However, in view of new concepts like ‘emergency arbitration proceedings’, ‘third party funding’ et.al., the Indian legal landscape for international arbitration still has a lot of catching up to do. Indian Law still does not have an express provision recognizing an Emergency Arbitrator (“EA”) proceeding or decision. Given that Emergency Arbitration proceedings are becoming increasingly popular, especially in International Commercial Arbitration, it becomes imperative to ascertain if Indian legal system provides the means to keep pace with such provisional measures. This article seeks to analyze the Indian Legislative and Judicial landscape for “emergency arbitration”, particularly in reference to foreign seated institutional arbitrations. 

Emergency Arbitration: A subset of Interim Reliefs

Arbitration to be truly effective as an alternative dispute resolution mechanism is expected to have all the aspects of a conventional judicial system. Arbitration, akin to litigation, is accompanied by various procedural safeguards to ensure compliance with principles of natural justice. This may often result in delaying the resolution of dispute, thus necessitating protection of subject matter and interest of the parties in the meanwhile. The arbitration law in majority of jurisdictions envisages grant of interim or provisional reliefs designed to safeguard parties’ interest during the pendency of dispute, both by courts and tribunals. 

Conventionally speaking, the Court’s and Tribunal’s role in granting provisional relief could be differentiated based on the stage at which the interim relief was sought, i.e. pre or post the constitution of Tribunal respectively. Although the courts generally have the power to grant interim reliefs at any stage of the proceedings, i.e. before invocation of arbitration, during pendency of arbitration and even after the disposal (to safeguard the parties’ interest pending enforcement). Emergency arbitration proceedings aim to grant interim reliefs at the stage where the arbitration has been invoked, but the tribunal has not yet been constituted.  

Position under Indian Law

Parties can approach Indian Courts under Section 9¹  of the Act of the to seek interim measures pending constitution of the tribunal. The 2015 amendments to the Act rectified the impediment arising out of decision in Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Service Inc² , which held that Part I of the Act (which contains Section 9) does not apply to foreign seated arbitrations. Under the amended Arbitration Act, the jurisdiction of Indian Courts to grant interim measures has been extended to to International Commercial Arbitration even if the seat of arbitration is outside India, unless parties to the arbitration agreement have agreed to the contrary. This has been done by adding a proviso to section 2(2)³  of the Act. Section 2(2) provides for the general rule that Part I of the Act only applied to arbitrations seated in India. By virtue of the proviso to Section 2(2) of the Act, Section 9, Section 27 and some provisions under Section 37 of Part 1 have also been extended to foreign seated arbitrations. The Courts in India have even subjected third parties to interim reliefs sought by parties under Section 9 of the Arbitration and Conciliation Act, 1996 (“the Act”)⁴.  

Are Emergency Arbitration (EA) Proceedings recognized under the Indian Arbitration and Conciliation Act, 1996?

The Act does not explicitly recognize Emergency Arbitrator proceedings. Under the Act, the definition of an arbitral award includes an interim award⁵ , but the definition is silent about the status of decisions passed in EA proceedings. The Law Commission of India in its 246th report had recommended the recognition of Emergency Arbitration in India by suggesting an amendment of the definition of an “Arbitral Tribunal”⁶  to include an “Emergency Arbitrator”⁷.  This recommendation however was not effectuated in the 2015 Amendment. Thereafter, a High Level Committee to Review the Institutionalization of Arbitration Mechanism in India also reiterated the need for recognition of Emergency Arbitration in it’s report submitted to the Government of India. The High Level Committee went a step further and recommended amendments in definition of an arbitral award and insertion of definition of an “Emergency Award”⁸.  

This also calls for a wider debate on the nature of an EA decision and the implications of categorizing it as an “order” or an “award”. For instance, under SIAC Rules, the EA decision is categorized as an “award”⁹.  On the contrary, under the ICC Rules, an EA decision is categorized as an “order”¹⁰.  One might argue that the EA decisions are subject to modification and rescindment by the Arbitral Tribunal and hence are not conclusive determination of issues between the parties, the same are akin to interim measures and should not be accorded the status of an award. The requisite clarity on the said aspect is essential from the point of view of the enforcement of an EA decision when the party refuses to comply, i.e. will such a decision be enforced as an award or an interim measure by the national courts. So, the question of enforcement of an interim “order” as against an “award” passed under EA proceedings will still not be addressed by proposed amendments, which is another lacuna under the Indian Arbitration law as will be discussed in the next section.

The Indian Arbitration Institutes like Delhi International Arbitration Center (DAC)¹¹ ; Indian Council of Arbitration (ICA)¹² ; Madras High Court Arbitration Center (MHCAC)¹³ and Mumbai Center for International Arbitration (MCIA)¹⁴  have adopted the EA provisions in their Rules. 

Enforceability of EA Decisions in India

India is a signatory to the New York Convention and the enforcement of foreign awards is governed by the Part II of the Act, which is based on the New York convention. The Act in consonance with the New York convention provides that an arbitral award in order to be enforced must be “binding” on the parties. It may be argued that this does not require the award to be “final” in order to be enforced, as long as it is “binding” and hence would cover an EA award, even though the same is the nature of interim relief, subject to modification by the Tribunal. 

The Bombay High Court in HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. & Ors¹⁵.  impliedly recognised an EA award as enforceable under Section 48¹⁶  of the Act and granted interim relief akin to the one passed in EA proceedings under Section 9 of the IAA. The Court observed that:

“In so far as judgment of this court in case of Jindal Drugs (supra) relied upon by Mr. Rohatgi, learned senior counsel that unless petitioner files an application for enforcement of foreign award in this court, respondents cannot challenge the validity of such award is concerned, in my view, since present application filed under section 9 of the Arbitration Act by the petitioner is not for enforcement of the interim award or jurisdictional award rendered by the arbitral tribunal but the petitioner seeks interim measures against the respondents, independently, parties by agreement having excluded the applicability of part I of the arbitration Act except section 9, the petitioner is thus entitled to invoke section 9 for interim measures. In my view petitioner has not bypassed any mandatory conditions of enforceability required by section 48 of the Act.”

Thus the Court impliedly recognised that the party could have gone for the enforcement of the EA award, instead of an application of interim relief under Section 9 of the Act. The Delhi High Courts seems to have an opposite view. The Delhi High Court in Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd¹⁷  observed that in absence of any provisions pari materia to Article 17H¹⁸  (which contains express provisions for enforcement of interim measures) of the UNCITRAL Model Law, in relation to foreign seated arbitrations, the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for Petitioner to file a suit. It is pertinent to mention here that both these decisions relate to EA decisions passed under the SIAC Rules, where an EA decision is recognised as an “award”.

The position with respect to enforcement of interim orders passed by tribunals in foreign seated arbitrations is another challenge under the Act. For Indian seated arbitrations, one may argue that an emergency award/ order is in the nature of an interim relief by the tribunal in terms of Section 17 of the Act. Section 17(2) of the Act stipulates that any interim order passed by a tribunal, shall have the same effect as an order passed by a Court and is enforceable under the provisions of the Code of Civil Procedure, 1908. But there is no such provision in Part II of the Act, to enable enforcement of interim orders (not in the nature of interim awards), passed by a tribunal in a foreign seated arbitration (“foreign interim award”). 

The Supreme Court in Alka Chandewar vs. Shamshul Ishrar Khan¹⁹ gave an indirect route to seek such enforcement by holding that a party not complying with an interim order of a tribunal can be held liable for contempt of court under Section 27(5)²⁰ of the Act. This decision, though rendered in relation to a domestic arbitration can be extended to an interim order passed in a foreign seated arbitration, by virtue of the 2015 amendment which makes Section 27 of the Act applicable to foreign seated arbitrations. 

Conclusion

To sum up, there is a legislative lacuna under the Indian law with respect to emergency arbitration proceedings. Having said that, there are indirect ways to enforce the decisions rendered by emergency arbitrator, which are as follows:

Indian seated arbitration: 

• As an interim award/ order under Section 17 of the Act to be enforced under provisions of CPC akin to order by court.
• Through contempt proceedings under Section 27(5) of the Act.

Foreign seated arbitration:

• Through contempt proceedings under Section 27(5) of the Act.
• By filing an application under section 9 for interim measures from court in India. 
• By initiating enforcement proceedings under Part II of the Act (still to be tested).

¹Interim measures etc. by Court.—2 [(1)] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court- (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely:- (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. (2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under subsection (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. (3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.

²(2012) 9 SCC 649.

³This Part shall apply where the place of arbitration is in India. Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

⁴See Value Advisory vs. ZTE Corporation and Ors: 2009(3)ArbLR315(Delhi).of the Act d above, ategorised  depending upon the facts and circumstances of each case.balance of convenience; and 3) irreparab

⁵Section 2(1)(c) 

⁶Section 2(1)(d)

⁷The Commission has, therefore, recommended the addition of Explanation 2 to section 11(6A) of the Act with the hope that High Courts and the Supreme 10 Court, while acting in the exercise of their jurisdiction under section 11 of the Act will take steps to encourage the parties to refer their disputes to institutionalised arbitration. Similarly, the Commission seeks to accord legislative sanction to rules of institutional arbitration which recognise the concept of an “emergency arbitrator” – and the same has been done by broadening the definition of an “arbitral tribunal” under section 2(d). 

⁸Recommendations 1. Clause (c) of sub-section (1) of section 2 of the ACA may be amended to add the words “an emergency award” after the words “an interim award”. 2. Clause (d) of sub-section (1) of section 2 of the ACA may be amended to add the words “and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator;” after the words “…panel of arbitrators”. 3. An emergency award may be defined as “an award made by an emergency arbitrator”.

⁹Rule 1.3: “Award” includes a partial, interim or final award and an award of an Emergency Arbitrator;

¹⁰Rule 29.2: “The emergency arbitrator’s decision shall take the form of an order. The parties undertake to comply with any order made by the emergency arbitrator.”

¹¹Part III of the Rules; Section 18A of the DAC Rules. 

¹²Section 33 r/w Section 36(3) of the ICA Rules.

¹³Part IV, Section 20 r/w Schedule A and Schedule D of the MCAC Rules, 2014.

¹⁴Section 3 of the MCIA Rules, 2016.

¹⁵Arbitration Petition No. 1062 of 2012, decided on 22.01.2014 - BOMHC) 

¹⁶Section 48: Enforcement of Foreign Awards

¹⁷O.M.P.(I) (Comm.) 23/2015, CCP(O) 59/2016 and IA Nos. 25949/2015, 2179/2016

¹⁸“Article 17H. Recognition and enforcement

(1)An interim measure issued by an arbitral tribunal shall be recognized as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the competent court, irrespective of the country in which it was issued, subject to the provisions of article 17I.

(2) The party who is seeking or has obtained recognition or enforcement of an interim measure shall promptly inform the court of any termination, suspension or modification of that interim measure.

(3) The court of the State where recognition or enforcement is sought may, if it considers it proper, order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties.”

¹⁹S.L.P.(Civil) No.3576 of 2016

²⁰27. Court assistance in taking evidence

(5) Persons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.”