The Conundrum of Enforceability of Awards issued by Emergency Arbitrators in India

The Author & Co-Author of this blog are Mr. Tejas Sateesha Hinder and Ms. Vagmita Singh respectively.

Mr. Tejas Sateesha Hinder is a student of the Second Year of B.A. LLB at The National Law Institute University, Bhopal. He is an avid reader of International and Domestic Dispute Resolution, mainly Arbitration and Mediation, and looks forward to make a career out of the same.

Ms. Vagmita Singh is a student of the Second Year of B.A. LLB at the National Law Institute University, Bhopal. She loves mooting and debating, and has a keen interest in International Commercial Arbitration. She looks forward to work as an accredited arbitrator across different arbitration centres around the world. 

 

Introductory Remarks

Despite its four fold development in many nations since its emergence, Emergency Arbitration, till date has not been able to develop a strong ground for itself in the jurisdiction of many nations, including India. Off late, many arbitral institutions have begun to roll out rules with regard to emergency arbitration, which provide the parties an opportunity to seek interim relief before the constitution and formation of an arbitral tribunal. These rules have been formulated for the purpose of assisting parties that require an urgent issuance of grant of an interim relief or an interim award.[1] The issuance of the same plays an important role in ascertaining the outcome of the arbitral proceedings. The need for emergency arbitration arises in nations, whose arbitral institutions do not contain or provide provisions for emergency arbitration, thus forcing individuals and parties to seek immediate relief from national courts.

In the Indian legislative framework, powers are conferred upon national courts and arbitral tribunals to grant interim reliefs to parties to a dispute, by Sections 9 and 17 of the Arbitration and Conciliation Act, 1996. The relevant provisions make it clear that arbitral tribunal can, under all circumstances, grant interim relief to parties only during the conduct of the arbitral proceedings. Thus, a party seeking the grant of an interim relief prior to the arbitral proceedings, is forced to approach a national court having jurisdiction over the subject matter of the dispute. Hence, it is here that the concept of emergency arbitration is needed and thus becomes of significant relevance.[2]

The Issue of Enforceability

Despite having the authority to grant interim reliefs, which are contractually binding upon parties, emergency arbitrators lack the power to compel the parties against whom the decision is passed or award is issued to comply with the same. There also does not exist any mechanism for keeping a check over the compliance or adherence to decision passed or award issued, and hence, with the absence of an effective system of redressal in case of non-compliance, the question of enforceability of award passed by emergency arbitrators continues to remain one of concern.

The enforceability of interim reliefs pronounced by emergency arbitrators is largely dependent on the domestic laws of the jurisdiction where such is sought. As stated earlier, India has still not recognized emergency arbitration, and the status quo is such that The Act does not permit the enforceability of interim reliefs granted by an emergency arbitrator, seated inside or outside India, conducted under prescribed institutional rules.[3] In addition to this, urgent interim reliefs passed by an arbitrator seated outside India cannot be enforced within India. This is because no provision lies in the Act for enforcement of interim reliefs or awards granted by a foreign-seated arbitral tribunal. Thus, it parties to a dispute are left with no choice but to resort to domestic courts within the territory of India by filing an application under Section 9 of The Act, seeking similar interim relief as granted by the foreign seated arbitral tribunal or emergency arbitrator.

The Bombay High Court, in the Avitel Case[4], in which a petition was filed under Section 9 of the Act, ordered relief ordered the same relief on the basis of the same cause of action as was brought before the Emergency Arbitrator. The Court, while permitting such relief under Section 9 of The Act, clarified that, “recourse to Section 9 of The Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the court cannot independently apply its mind and grant interim relief in cases where it is warranted.”[5]

In the Raffles Design case[6], an interim order, similar to that granted by a SIAC emergency arbitrator was issued by the Delhi High Court, but it clarified that emergency awards issued by a foreign seated Arbitral tribunal are not enforceable in India.

Conclusion

Thus, considering the fact that the need of the hour is to bring in statutory provisions in order to make enforceable, relief granted by emergency arbitrators seated outside India, in India, and the same becomes necessary as there is an absence of statutory provisions or a conclusive Supreme Court precedent in this regard. Hence, this will correct the present situation, which only allows parties to indirectly enforce such interim reliefs granted, by making an application under Section 9 of The Act. This does not stand to be a viable option, as it requires re-agitation of the issue of interim relief before Indian Courts, even though all the detail and intricacies of the matter might have been considered previously by the emergency arbitrator. A key disadvantage associated with this process is that, it adds to the potential delay caused to a party in utilizing the interim relief granted by the foreign emergency arbitrator. Another disadvantage associated with this process is that it may further increase the risk of dissipation of assets by a recalcitrant party.

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[1] Rishab Gupta, Aonkan Ghosh, Choice between Relief from Indian Courts and Emergency Arbitrator, KLUWER ARBITRATION BLOG (May 10, 2017)

[2] J Brian Johns, ICDR Emergency Arbitrations, THE ICDR INTERNATIONAL ARBITRATION REPORTER (Fall 2016)

[3] Tejas Karia, Ila Kapoor & Ananya Agarwal, Post Amendments: What Plagues Arbitration in India? 5 INTERNATIONAL JOURNAL OF ARBITRATION LAW, 230-241 (2016).

[4] Avitel Post Studioz Limited and Others v. HSBCPI Holdings (Mauritius) Limited Arb. P. 1062 of 2012 Jan. 22, 2014 (Bombay High Court) (India).

[5] Ibid

[6] Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors., O.M.P. (I) (COMM.) 23/2015 & CCP (O) 59/2016, IA Nos. 25949/2015 & 2179/2016