Royzz & Co
Emergency Arbitration (Future-Amazon Dispute)
Recently, the Supreme Court of India introduced clarity regarding the enforceability of foreign emergency awards in India. It had the opportunity to settle this long-ambiguous position in arbitration law in the dispute between Amazon and the Future Group (‘Future’), wherein Amazon sought to enforce an emergency award passed by the Singapore International Arbitration Centre (‘SIAC’) in India.
The dispute stemmed from a contractual violation alleged by Amazon. It alleged that by virtue of a contract entered into by Future Retail Limited (‘FRL’) and Amazon, Amazon had the pre-emptive right to buy shareholding in one of Future’s subsidiaries. Subsequent to this contract, Future decided to sell another part of its subsidiaries to Reliance Industries Limited (‘RIL’), allegedly depriving Amazon of its contractual right to hold stock. As agreed to between the parties, Amazon approached the SIAC, which passed an emergency award in favour of Amazon directing FRL to not dispose off or transfer any assets in the interim.
However, Future decided to approach Indian regulators for approving the deal with RIL, and was also granted approval by the Competition Commission of India to this effect. Amazon then approached Indian courts, asking enforcement of the SIAC emergency award, which Future argued was not recognizable as per Indian arbitration law.
The legislative provisions in the Arbitration and Conciliation Act, 1996 (‘Act’) are ambiguous as to the enforcement of foreign enforcement awards in India. The term ‘emergency award’ has not been mentioned in the Act at all. The Act provides for interim measures ordered by court under section 9 and interim measures to be ordered by an arbitral tribunal under section 17, but does not explicitly mention the enforcement of a foreign interim award. Nevertheless, Amazon approached the Delhi High Court under Section 17(2) of the Act to enforce the SIAC award. The single judge of the Delhi High Court held that the award was in fact, an order under Section 17(1) of the Arbitration Act and was enforceable by the court under Section 17(2) of the Arbitration Act. Thereafter, this order was successfully stayed by the two-judge appellate bench of the Delhi High Court.
Amazon then approached the Supreme Court who had to determine the legal status of the foreign emergency award under the Act. It found that the single judge’s order was correct, and the foreign emergency award could be enforceable under Section 17(2) of the Act. It also held that there could be no appeal against an order made under Section 17(2) of the Arbitration Act for enforcement of an emergency arbitrator's award. The Court found that both the parties’ intention (as seen through the contract) as well as the Act’s legislative history demonstrated a pro-enforcement approach of the emergency awards. The 246th Law Commission Report had recommended that the definition of “arbitral tribunal” under Section 2(1)(d) of the Arbitration Act be widened to also include emergency arbitrator. Thus, the Supreme Court could offer relief to Amazon and provide necessary clarity to a long-standing lacuna in arbitration law.
With this decision, the Supreme Court also expressed its hope that it will reduce the pending arbitration proceedings before courts and introduce certainty for parties in and outside India. It has provided legitimacy to foreign-seated arbitrations and will encourage foreign investors and companies to do business in India. They can be guaranteed a strong enforcement in arbitration law which is a necessary element to consider when entering into contracts in foreign jurisdictions. Given that the enforcement of the emergency award would be non-appealable, it signifies India’s insistence on the ease of doing business and offering effective remedies for investors and companies alike. The Supreme Court’s approach is in alignment with the practice of other countries when considering foreign enforcement awards.