Emergency Arbitration - India and the Global Scenario

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Emergency Arbitration - Emergence and Relevance

Whenever a dispute arises, the most important consideration for the parties is: how to obtain an immediate interim relief to preserve the status quo or to prevent the other side from continuing the breach in question. Before, the concept of Emergency Arbitration was introduced in International Commercial Arbitration, the party requiring an interim relief could either approach the National Court of opposite party or could move an application for interim relief only after the constitution of the Arbitral Tribunal. Such processes lead to complexity and time consumption which dilute the essence of arbitration per se.
Accordingly, to simplify the process of obtaining interim relief, emergency arbitration was first introduced by International Centre for Dispute Resolution, the international division of American Arbitration Association in the year 2006 followed by major Arbitration Intuitions including International Chambers of Commerce (ICC), Singapore International Arbitration Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC) and in India by Mumbai Centre for International Arbitration (MCIA), Nani Palkhivala Arbitration Center (NPAC), Indian Council of Arbitration (ICA) and most recently by Delhi International Arbitration Centre (DIAC).
Emergency Arbitration, is a procedural innovation in international arbitration to secure the assets and evidence that might otherwise be altered or lost, before the constitution of the Arbitral Tribunal. Generally, the party requiring interim relief has to make an application to the institution for appointment of emergency arbitrator. The institution has to appoint the emergency arbitrator within one or two days and the Emergency Arbitrator has to dispose of the interim dispute within 14-15 days, as per the rules specified by the Arbitration Institution . The success of an EA, which a party invokes, depends on the following two factors:
1.Fumus boni iuris – Reasonable possibility that the requesting party will succeed on merits.
2.Periculum in mora – If the measure is not granted immediately, the loss would not and could not be compensated through damages
What is the relevance and advantage of emergency arbitration in Arbitration?
The time bound procedure, assurance of confidentiality and party’s autonomy make Emergency Arbitration most efficacious recourse for obtaining an immediate relief.
What can be done to improve the process of Emergency Arbitration?
Ø  It suffers from various lacunas like absence of ex-parte orders and the high costs. However, the major drawback is the enforceability of the Emergency Award as the same being deprived of finality are not enforceable under the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958.
Ø  Therefore, inclusion and recognition of Emergency Arbitration in the National Laws of the country, as done in Singapore and Hong Kong, has become indispensable.
Does the Arbitration and Conciliation, 1996 contain provisions for Emergency Arbitration?
Arbitration and Conciliation Act, as of now, does not expressly recognize Emergency Arbitration. However, in the 246th Report of the Law Commission[1] recommendations have been made to the Government of India, to amend the Arbitration and Conciliation Act, 1996 by including Emergency Arbitrator in the definition of Arbitral Tribunal under Section 2(1)(d) of the Act. Unfortunately, the said amending Act of 2015 did not accept the recommendation of the Law Commission.
Considering the current status of the Indian Laws with respect to Emergency Arbitration:
a)   An emergency arbitrator is not even recognized under the Indian Arbitration       Act as an arbitral tribunal.
b)   No urgent enforceability in an emergency arbitrator’s interim order.
c) India’s initiative towards EA:  Indian arbitral institutions have framed rules largely synonymous to leading international arbitration institutional rules such as the Delhi International Arbitration Centre, the International Commercial Arbitration, the Madras High Court Arbitration Center Rules, 2014, and the Mumbai Centre for International Arbitration (Rules) 2016.
d)  Other than law and the issue of enforceability, two more issues which can come in the successful implementation of EA are :
·  Impossibility of invoking a single arbitration agreement for constituting two different tribunals
·  Impossibility of an arbitral tribunal overriding the decision of the emergency arbitrator.
Despite the above hurdles, Indian Courts are granting interim reliefs under Section 9 of Arbitration Act, 1996 in sync with the order of the Emergency Arbitrator. The Hon’ble High Court of Bombay and the Hon’ble High Court of Delhi are the torch bearers in passing such interim reliefs.
How have the Indian Courts shaped the jurisprudence with respect to emergency arbitration in India?
1. HSBC PI Holdings Mauritius Limited Vs Avitel Post Studioz Ltd.[2] (post BALCO[3]and pre-2015 Amendment), (Bombay High Court)
FACTUAL SCENARIO
·  The arbitration clause that provided for an international arbitration seated in Singapore, specifically allowed the parties to approach Indian Courts for seeking interim orders under Section 9 of the Arbitration and Conciliation Act,1996.
·   The Petitioner approached SIAC seeking appointment of an Emergency Arbitrator and the said emergency arbitrator passed an interim award in favour of the Petitioner.
·    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.
FINDINGS OF THE COURT 
·   The Hon’ble High Court of Bombay passed an interim order in sync with the Emergency Award directing the respondent to not to withdraw USD 60 million from its account holding that since the parties by agreement excluded the applicability of Part I of the Act except Section 9, the Petitioner is thus entitled to invoke Section 9 for interim measures.
·  Being aggrieved, the opposite party preferred an appeal before the Division Bench of Bombay High Court which was partly allowed directing the petitioners herein to deposit the short-fall in the Corporation Bank Account of the petitioners so as to maintain the balance of US $ 30 million within four weeks from the date of the said order and upheld rest of the directions in the impugned order.
·   The opposite party has impugned the said order and judgment of the Division Bench before the Supreme Court of India and the said Special Leave Petition is pending. 
2.  Raffles India International Private Limited Vs Educomp Professional education Limited[4] (Post Amendment). (Delhi High Court)
FACTUAL SCENARIO
·    In this case, also parties did not try to enforce the emergency arbitrator award in India, instead filed an application under Section 9 under the 2015 Amended Act.
·    The parties had expressly agreed that arbitration shall be governed by the SIAC rules. The main issues that were considered while deciding the maintainability of the Petition were; (i) whether Section 9 will be applicable in the present case considering the amended Section 2(2) of the Act and the arbitration agreement in question; (ii) whether recourse to Section 9 can be taken considering that the interim award has already been obtained from the Emergency Arbitrator.
FINDINGS OF THE COURT
·   It was held that the SIAC Rules are clearly in conformity with the UNCITRAL Model Law and permit the parties to approach the Court for interim relief. The UNCITRAL Model Law expressly provides for courts to grant interim orders in aid to proceedings held outside the State. Further, the proviso to Section 2 (2) of the Act also enables a party to have recourse to Section 9 of the Act notwithstanding that the seat of arbitration is outside India.
·   Thus, the inescapable conclusion is that since the parties had agreed that the arbitration be conducted as per SIAC Rules, they had impliedly agreed that it would not be incompatible for them to approach the Courts for interim relief.
·    This would also include the Courts other than Singapore. Further, with regard to enforceability of interim award passed by emergency arbitrator outside India it was held that the Indian Arbitration and Conciliation Act,1996 pari materia 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 suit seeking to enforce the emergency arbitrator award.
How the Emergency Arbitration is Invoked in India ?
Arbitral institutions in India such as Mumbai Centre for International Arbitration (MCIA),Nani Palkhivala Arbitration Center (NPAC), Indian Council of Arbitration (ICA), Delhi Arbitration Center, recognize emergency arbitration and have provided for a specific procedure in that regard within their rules. In cases of exceptional urgency, any party may apply to the Registrar in writing for emergency interim relief prior to the constitution of the Tribunal. The application shall contain together with all relevant documentation:
Ø   a statement briefly describing the nature and circumstances of the relief sought
Ø   and the specific reasons why such relief is required on an emergency basis;
Ø   the reasons why the party is entitled to such relief;
Ø   a statement certifying that all other parties have been notified or an explanation  of the steps taken in good faith to notify other parties; and
Ø   confirmation that any fees set by the Registrar for proceedings brought pursuant to this Rule 14.1 have been paid (without which the application shall be treated as not having been received by the Registrar).
What is the future of Emergency Arbitration in India?
Despite various challenges, most importantly enforceability of Emergency Award, Indian Arbitration Institutions as well as Indian Courts have been seen adopting the concept.
However, for a more logical utilization of the new recourse available for obtaining in interim relief, recognition of Emergency Arbitration in Indian laws is indispensable. The laws must deal with the nature of the award and the enforceability.
The emergency arbitrator’s order shall take the form of an interim award which the parties undertake to comply with. In the event that a party fails to comply with such order, it may be enforceable in nature under the provisions of various national laws depending upon the discretion of national courts and national laws which may or may not include Emergency Arbitration provisions.
Aditya Jain is Advocate on Record at Supreme Court of India and Partner at J&G Advocates
Neha Gyamlani is an Advocate at Rajasthan High Court/Supreme Court and Partner at J&G Advocates
[1] The Law Commission’s 246th report dated 05.08.2014.
[2] LNIND 2014 BOM 367
[3] LNIND 2012 SC 1181
[4] LNIND 2016 DEL 4636

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