Picking battles and battlefields: Are emergency arbitrator awards enforceable at or outside the arbitral seat?

Summary

The Delhi High Court’s decision in Amazon.com NV Investment Holdings LLC v Future Coupons Private Limited & Ors O.M.P. (ENF) (COMM) 17/2021 (Amazon.com) issued on March 18, 2021 enforced a SIAC emergency arbitrator’s award in a SIAC arbitration seated in India as an order of the Indian courts under the Indian Arbitration and Conciliation Act 1996. Amazon.com highlights the efficacy of emergency arbitrator proceedings in obtaining urgent interim relief and the need for careful selection of an appropriate seat of arbitration to ensure that the emergency arbitrator’s award is swiftly enforced. This update compares the Indian position with the Singapore position on the recognition (as a court order) or enforcement of an emergency arbitrator’s award. Depending on whether there is convergence between the seat of arbitration and the place of enforcement or recognition, this may mean that an emergency arbitrator’s award is not so easily enforced.

Background

Amazon.com Investment Holdings LLC (Amazon) had in 2019 entered into a transaction with the Future Retail Group and its owners, members of the Biyani family (the Biyani Family). That transaction led to the conclusion of a suite of contracts involving various parties:

• Future Coupons Retail Limited (FCPL), one of the Future Retail Group’s companies, would first acquire assets from another Future Retail Group company, Future Retail Limited (FRL), under a Shareholders’ Agreement between FCPL, FRL and the Biyani Family (the FRL Shareholders Agreement) that established the rights and obligations of shareholders of FRL. FRL was owned by the Biyani Family and FCPL.
• Amazon would provide INR 1431 Crores (approximately USD 200m on currently prevailing exchange rates) of capital injection into FCPL in return for a 49 per cent stake in the company, in accordance with a Share Subscription Agreement concluded between Amazon, FCPL and the Biyani Family (SSA). The SSA required all of Amazon’s capital injection to flow into FRL.
• A separate shareholders agreement was concluded between FCPL, Amazon and the Biyani Family (the FCPL Shareholders Agreement), prescribing the rights and obligations of FCPL’s shareholders.

It is understood that the FRL Shareholders Agreement contained a restriction that is central to the dispute: FRL could not without FCPL’s consent transfer its shares to a list of pre-identified “Restricted Persons”. This list included members of the Mukesh Dhirubhai Ambani Group (the Ambani Group), one of India’s largest conglomerates. In turn, the FCPL Shareholders Agreement is understood to have provided that certain of FCPL’s rights, including the right to permit to prohibit the transfer of FRL’s shares to “Restricted Persons”, would be exercised jointly by Amazon and the Biyani Family.

In August 2020, the Biyani Family announced a transaction which would involve the transfer of FRL’s shares to another entity and, ultimately, to the Ambani Group. Amazon’s position was that this transaction was not previously disclosed to or approved by Amazon, which as Amazon argued was required under the terms of the FCPL Shareholders Agreement.

Taking the view that the Biyani Family had breached the FCPL Shareholders Agreement, Amazon commenced an arbitration against FCPL, FRL and the Biyani Family under that contract. That arbitration was seated in New Delhi and administered under the Singapore International Arbitration Centre’s (SIAC) arbitral rules (SIAC Rules). On October 5, 2020, Amazon requested that an emergency arbitrator be appointed under the SIAC Rules to hear Amazon’s application for an interim injunction restraining FRL from proceeding with its prospective transaction with the Ambani Group. Amazon succeeded in its application, and the emergency arbitrator issued an award granting the interim relief sought by Amazon on October 25, 2020 (the Emergency Award).

Issues addressed by the Delhi High Court in Amazon.com

Eventually, Amazon commenced proceedings before the Indian courts to enforce the Emergency Award under s 17 of the Indian Arbitration and Conciliation Act 1996 (Arbitration Act), on the basis that FCPL, FRL and the Biyani Family took steps to progress the transaction with the Ambani Group, in breach of the Emergency Award.

FRL, FCPL and the Biyani Family (the Respondents) challenged the validity of the Emergency Award on various grounds, including by arguing that the emergency arbitrator was not an “arbitral tribunal” recognized under s 2(1) of the Arbitration Act, and so the Emergency Award was not enforceable as an order of an “arbitral tribunal” under s 17(2) of the Arbitration Act.¹ A premise of the argument was that the SIAC Rules apparently distinguished between a “Tribunal” and an “Emergency Arbitrator”, recognized their separate constitution and allocated distinct powers to each respective body.

The Delhi High Court found that the emergency arbitrator was an “arbitral tribunal” within the meaning of the Arbitration Act. In reaching this conclusion, it placed weight on the following observations:

• The Arbitration Act respects the parties’ freedom to agree to authorise any person or institution to determine their dispute, and specifically provides that any such agreement will incorporate the arbitral rules of the chosen arbitral institution.
• By adopting the SIAC Rules in the arbitration agreement, the parties had agreed to the provisions of the SIAC Rules that provided for the conduct of emergency arbitration proceedings and the appointment of an emergency arbitrator. In particular, Rule 1.3 of the SIAC Rules specifically identified an “Emergency Arbitrator” as an “arbitrator”.
• Given the wide and inclusive definition of an “arbitral tribunal” under s 2(1) of the Arbitration Act, and taking that together with the Parties’ agreement to the SIAC Rules, an emergency arbitrator qualifies as an “arbitral tribunal” under the Arbitration Act.

Commentary

The Delhi High Court’s decision in Amazon.com marks a further step by the Indian courts in support of India’s arbitration regime. A central pillar of the court’s decision is the notion that parties should be bound by the terms of their agreement – specifically, a party that has agreed to arbitral rules that recognize an emergency arbitrator as an arbitrator and that provide for the possibility of emergency arbitration should be bound by the outcome of that proceeding.² Those arbitral rules are incorporated by reference as part of the parties’ arbitration agreement and are thus valid and enforceable. As a possible nod to a general inclination towards validating emergency arbitrator orders, the Delhi High Court in Amazon.com was mindful of and noted that a refusal to enforce an emergency arbitrator’s determination would render the entire emergency proceeding redundant.

A useful point of comparison can be drawn against the position for arbitrations seated in Singapore. Following the introduction of the emergency arbitrator procedure under the 2010 version of the SIAC Rules, Singapore’s legislators amended the International Arbitration Act (Cap 143A) (IAA), which governs Singapore-seated arbitrations, in June 2012 to make clear that the term “arbitral tribunal” in the IAA includes “an emergency arbitrator appointed pursuant to the rules of arbitration agreed to or adopted by the parties including the rules of arbitration of an institution or organisation”.³ This statutory clarification was specifically designed to preclude the type of arguments advanced by the Respondents before the Delhi High Court.⁴ A party can therefore enforce an order obtained from a Singapore-seated emergency arbitration in Singapore, since such an order would qualify as an “order[] or direction[] made or given by an arbitral tribunal” and would therefore “be enforceable in the same manner as if they were orders made by the court” under s 12(6) of the IAA.⁵

The preceding analysis considers attempts by a party to enforce an emergency arbitrator’s decision under statutory provisions that apply only where the seat of the arbitration and the place of enforcement are one and the same jurisdiction. Different considerations apply where the seat of the arbitration and the place of enforcement differ.

With respect to arbitrations seated outside of Singapore, the Singapore courts will only recognize and enforce foreign “awards” under Part III of the IAA. Under that framework, a party seeking to enforce an emergency arbitrator’s orders may face at least two additional obstacles.

• First, although the definition of foreign “awards” under Part III of the IAA is wide enough to include orders for interim relief from a foreign-seated arbitration,⁶ that order has no effect until it is recognized through the enforcement regime for arbitral awards generally. The implication is that the interim relief order would be susceptible to challenge under the grounds for refusal of enforcement of arbitral awards under s 31(1) of the IAA. This potentially generates substantive vulnerability for the applicant and delays to enforcement of the interim relief order. In contrast, an order for interim relief enforceable under s 12(6) of the IAA is not open to challenge on the grounds set out in s 31(1) of the IAA.
• Second, the applicant will not have the benefit of the statutory clarification under s 2(1) of the IAA (that emergency arbitrators qualify as an arbitral tribunal), which applies only to Part II of the IAA (governing arbitrations seated in Singapore) and not to Part III of the IAA (governing arbitrations seated outside of Singapore). Thus, a party seeking to enforce an emergency arbitrator’s orders under Part III of the IAA is susceptible to the objection that it is not a decision by an “arbitral tribunal” that can be enforced under Part III of the IAA.⁷

A potential alternative, but arguably circuitous, route is for a party to file an application to the Singapore courts for interim relief in aid of a foreign arbitration under s 12A of the IAA, and produce the emergency arbitrator’s order as supporting evidence for the application. The difficulty with this approach, however, is that the Singapore courts are entitled to exercise their discretion independently and are not bound to adopt the findings made in the emergency arbitrator’s orders. It is also unclear whether the emergency arbitrator’s orders will undermine an application under s 12A of the IAA. An essential criteria for the Singapore court’s intervention under that provision is that the “arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively”, and the very existence of an emergency arbitrator order could be seen as negating the requisite disability in the arbitral framework.⁸ There is room to argue, however, that where a party can be shown to have actively disobeyed the emergency arbitrator’s order, that is precisely a situation where “the court’s coercive powers of enforcement are required”⁹ under s 12A of the IAA.

The avenues for enforcing a foreign-seated emergency arbitrator’s orders in India might be narrower. In contrast with the IAA, the Arbitration Act does not expressly provide that interim orders can be treated as a foreign award and enforced as such in India under Part II of the statute. Whilst there is no universal definition of what constitutes an “award”, its natural meaning under the Arbitration Act should arguably follow the concept of an award under the New York Convention.¹⁰ There is strong academic weight behind the view that a New York Convention award must be “final” in the sense that it is not subject to subsequent variation,¹¹ a quality that is inherently opposed to the nature of interim relief orders. Accordingly, the prospect of enforcing interim relief orders under this particular mechanism is uncertain.

Another route available to a party is to apply to the Indian courts for interim relief under Section 9 of the Arbitration Act, which broadly mirrors s 12A of the IAA. Two fairly recent decisions by the Indian courts are of interest here.

The Delhi High Court’s decision in Raffles Design International India Private Limited v Educomp Professional Education Limited (Raffles Design) made clear that enforcement of interim orders under s 17 of the Arbitration Act is inapplicable to orders granted in arbitrations seated outside of India. A party to such an arbitration can, however, make a fresh application for interim relief under Section 9 of the Indian Arbitration Act,¹² and that party is not barred simply because it had successfully obtained interim relief from an emergency arbitrator.¹³ Some limits to that position were laid down in the Delhi High Court’s later decision in Ashwani Minda v U-Shin Limited (Ashwani), which refused to entertain a section 9 application by a party that had previously sought but failed to obtain interim relief in a foreign-seated arbitration.¹⁴ There, the Delhi High Court emphasized that curial intervention under Section 9 of the Arbitration Act was limited to situations where “the arbitral tribunal is either not constituted or otherwise unable to grant efficacious relief”,¹⁵ a requirement mirroring that in s 12A(6) of the IAA. The Court further reasoned that because the applicant had “chosen the tribunal, the seat, the applicable rules and the forum from which to seek interim measures” the applicant could not “revise that choice at this juncture”.¹⁶ While this statement appears on its face to collide with the holding in Raffles Design, the Court in Ashwani explained that Raffles Design was correctly decided because the applicant in that case had successfully obtained an interim order from an emergency arbitrator and was faced with a situation of non-compliance by the counterparty. A harmonious reading of Ashwani with Raffles Design suggests a less absolute position than what was expressly articulated in either case:

• Although a party is not barred from a Section 9 application simply because he had obtained a decision on interim relief in the arbitration, the existence of that decision would ordinarily mean that a key requirement of a Section 9 application – that the tribunal was not constituted or was unable to grant efficacious relief – is not met.
• An exception to this general position is that, notwithstanding the existence of a decision on interim relief from the arbitration, the tribunal’s inability to “grant efficacious relief” may subsequently arise if there is non-compliance by a party of the interim relief order granted in the arbitration.

On this reading of Ashwani and Raffles Design, the prospect of obtaining interim relief under Section 9 of the Arbitration Act would be similar to those of obtaining interim relief under s 12A of the IAA.

The discussion above illustrates an important point of practical utility: that the choice of the arbitral seat – effectively picking the battlefield – directly affects the ease with which interim orders, including those of an emergency arbitrator, can be enforced. It is said that parties often choose an arbitral seat for reasons of neutrality, a key indicia being the absence of the seat’s connection to the contracting parties or the geographical centre of the transaction in question. A pursuit of neutrality in that particular sense, however, should be weighed against the potential benefits of choosing as a seat a jurisdiction where enforcement of interim relief can be facilitated by that choice. Indeed, prudence might commend the selection of precisely the place of a counter-party’s home jurisdiction or the place where the transaction is performed as the arbitral seat, if only to improve the prospect of prompt and effective enforcement of interim relief there. Naturally, parties should also bear in mind countervailing considerations such as the objectivity of the courts of the prospective seat and whether the courts are supportive of arbitration. In both respects, the Delhi High Court’s decision in Amazon.com provides further evidence of India as an attractive arbitral seat, particularly from the perspective of enforcing interim relief obtained in an arbitration.