Emergency arbitration and Amazon-expanding idea of an arbitrator

Emergency arbitration and Amazon-expanding idea of an arbitrator
Image credit: https://commons.wikimedia.org/wiki/File:Inside_the_Supreme_Court_of_India._11.jpg

On 6 August 2021, the Supreme Court of India handed down its decision in Amazon.com NV Investment Holdings LLC v Future Retail Limited & Others. This concerned the enforcement of an emergency arbitrator’s order. The emergency arbitrator had ordered that the sale of one of India’s largest retail businesses must be suspended while an arbitration takes place, to determine whether the sale is in breach of a shareholders’ agreement.

The case is highly significant both for Indian business and for arbitration in India, as illustrated by the fact that almost 80 lawyers appeared in the Supreme Court proceedings (in total, on both sides). But it is also important for an understanding of emergency arbitration worldwide.

Division of labour between courts and tribunals

The system of international arbitration around the world is built on a clear (for the most part) division of labour between national courts and arbitral tribunals. Tribunals decide on cases referred to arbitration and courts enforce those decisions. Tribunals determine whether they have jurisdiction to hear cases and the courts review this. Courts are available to support arbitrations while tribunals are being appointed, for example by issuing orders to prevent the sale of disputed assets; and the courts mostly drop out of the picture once the arbitrators are in place. The major international treaties, such as the New York Convention, and national laws are based on this division.

Around twenty years ago, however, it was felt that the support given by courts before the appointment of tribunals was inadequate in several respects. First, in some countries, such as Indonesia, national courts do not have the power to issue interim measures of protection in support of arbitration. Secondly, the need to go to a court for such support might mean that the parties end up in precisely the place that the parties wanted to avoid when they agreed to refer their disputes to arbitration. The result of this was the creation of a new system of ‘emergency arbitration’ which allows arbitral institutions to appoint a sole arbitrator after the start of the arbitration but before the appointment of the tribunal. The emergency arbitrator’s sole job is to decide on any application for interim measures.

But this upset the balance between tribunals and courts. Now there was an overlap between what the courts were doing and what the arbitrators were doing; and the architecture of the laws and treaties had not been designed for this.

Is an emergency arbitrator an arbitrator?

This difficulty is illustrated most clearly by the existential question of whether an emergency arbitrator is in fact an ‘arbitrator’ under laws and treaties; which leads in turn to the question of whether an emergency arbitrator’s award is an ‘arbitration award’. These are not idle philosophical musings but issues of real practical importance.

So, for example, many countries have included in their arbitration laws powers for the local courts that can be exercised in support of an ‘arbitral tribunal’. The phrase ‘arbitral tribunal’ is often defined, like in the UNCITRAL Model Law on International Commercial Arbitration, as referring to “a sole arbitrator or a panel of arbitrators” – which might cover an emergency arbitrator. But the Model Law then goes on to talk about the arbitral tribunal as the entity that takes steps, such as issuing the final award, which are not things that an emergency arbitrator does; while arbitration rules themselves, such as the rules of the Singapore International Arbitration Centre (SIAC), draw a distinction between ‘the emergency arbitrator’ and ‘the tribunal’.

Does this then mean that an emergency arbitrator is not an ‘arbitrator’ or an ‘arbitral tribunal’ as identified in arbitration laws, and as a result do national courts have no powers in relation to them? Recognising this problem, some countries, including Singapore and Hong Kong, have amended their arbitration laws so that the definitions of ‘arbitrator’ and ‘arbitral tribunal’ expressly cover an emergency arbitrator.

The Indian solution

For some time now it has been thought that the Arbitration and Conciliation Act 1996 in India, which is based on the UNCITRAL Model Law, does not encompass emergency arbitration. There have been two major reports on reform of that Act in recent years which, among the various recommendations made, have suggested that the Act should be amended along the lines of the Singapore and Hong Kong laws, to expressly recognise emergency arbitration.

This was the argument made by Future Retail in the Amazon case. Section 17(2) of the Act allows for the enforcement in India of an interim measure made by an arbitral tribunal seated in India, in the same manner as an order of an Indian court. However, Future Retail said that the emergency arbitrator’s decision that had been made against it could not be enforced under this section because an emergency arbitrator is not an “arbitral tribunal” as contemplated by the Act. Future Retail highlighted the various parts of the Act where equating an emergency arbitrator with an arbitral tribunal would not make sense.

The Supreme Court came up with a new way of looking at this problem. First, it recognised that the parties had signed up to arbitration rules (the SIAC Rules) which include emergency arbitration, and the Court observed that Future Retail should not be permitted to avoid an emergency arbitrator’s decision that it was not happy with; while there is a strong public interest in India to have disputes resolved via alternative means because of the huge backlog in the Indian courts. Then the Supreme Court noted that the definitions section of the Act contains the wording “unless the context otherwise requires”, which in its view permitted a more flexible approach to interpreting the defined terms in the Act, giving them different meanings depending on the context. Also, the SIAC Rules expressly identifies an emergency arbitrator as “an arbitrator” (albeit there is a distinction in those Rules, as noted above, between an emergency arbitrator and a tribunal). As a result, the Supreme Court decided that the reference to “an arbitral tribunal” in section 17(2) could apply to all arbitrators, including an emergency arbitrator, regardless of the meaning of that phrase in other parts of the Act. The emergency arbitrator’s decision in this case could therefore be enforced under that section.

Implications

This judgment means that emergency arbitration awards made in arbitrations seated in India are enforceable like court orders there; and for this purpose an emergency arbitrator is equated with the arbitral tribunal. This is significant for parties that do business in India and agree to India-seated arbitration clauses. It is also likely to be a boost for institutional arbitration in India (emergency arbitration is only available in institutional arbitration, not in ad hoc arbitration).

It does not necessarily mean that emergency arbitrators will be equated to arbitral tribunals in other parts of the Arbitration and Conciliation Act 1996, but an argument to that effect might be available in relevant cases. It also does not mean that emergency arbitration awards made in other countries are enforceable in India; previous cases have held that they are not, although this point might be reassessed in the future, following the Amazon case.

Further, the Amazon case might not be referred to in other countries because the wording “unless the context otherwise requires” is not found in the UNCITRAL Model Law, but was added when the Model Law was enacted in India as the Arbitration and Conciliation Act 1996. However, the case does add significant weight to the argument that an emergency arbitrator should not be viewed as a creature apart but as another species of arbitrator, meaning that the existing framework of arbitration laws and treaties might be able to cope with this invention without needing to be redesigned.

Related Stories

No stories found.
FICL
www.ficl.org.in